Sydney Recycling Park Pty Ltd v Cardinal Group Pty Ltd (in liq)

BATHURST CJ AND PAYNE JA: This case raises a question about the extent of the Court’s power to grant leave to amend a pleading in proceedings commenced within the limitation period provided by s 588FF(3) of the Corporations Act 2001 (Cth), after the expiry of that period.

Specifically, the issue is whether the power in ss 64 and 65 of the Civil Procedure Act 2005 (NSW) to grant leave to amend a pleading, which would otherwise be “picked up” and applied in New South Wales in cases conducted in federal jurisdiction by s 79 of the Judiciary Act 1903 (Cth), does not apply in the extant case because s 588FF(3) “otherwise provides” for the purposes of s 79 of the Judiciary Act.

The answer to this question requires consideration of whether the decision of the Full Federal Court in Rodgers v Commissioner of Taxation (1998) 88 FCR 61 and decisions of other intermediate courts of appeal which have followed Rodgers are “clearly wrong” and should no longer be followed in the light of two High Court cases delivered in 2015 on the same day, Fortress Credit Corporation (Australia) II Pty Limited v Fletcher (2015) 254 CLR 489; [2015] HCA 10 and Grant Samuel Corporate Finance Pty Limited v Fletcher; JPMorgan Chase Bank, National Association v Fletcher (2015) 254 CLR 477; [2015] HCA 8.

The first respondent, Cardinal Group Pty Limited (in liq) (the Company), provided waste management and skip bin services. Messrs Stone and Marsden, in their capacity as the Company’s joint and several liquidators, are the second respondents.

The appellant, Sydney Recycling Park Pty Ltd (SRP), supplied tipping services to the Company. An associated company of SRP had previously sold a business to the Company.

These proceedings arise out of the attempted recovery by the liquidators of the Company of payments made by the Company to SRP.

On 11 December 2014, the Company and the liquidators filed an originating process, as required by the Supreme Court (Corporations) Rules 1999 (NSW), in the Equity Division of the Supreme Court seeking orders pursuant to s 588FF of the Corporations Act. A statement of claim was subsequently filed on 10 February 2015. On 13 March 2015 SRP filed a defence.

The Company and the liquidators alleged that between 17 June 2011 and 2 December 2011 the Company made payments totalling $280,000 to SRP, and sought declarations that those payments constituted:

On those bases, the Company and the liquidators sought an order pursuant to s 588FF that the appellant pay the respondents the sum of $280,000.

Section 588FF(3)(a) provides that an “application” for orders under that section may only be made within three years of the relation-back day or 12 months after the first appointment of the liquidator, whichever is later, unless an order extending time under s 588FF(3)(b) is made.

It was common ground that the relation-back day in the present case was 15 December 2011. There was no issue in the proceedings that, as the originating process was filed on 11 December 2014, the time limit in s 588FF(3)(a) was complied with.

On 8 September 2015, after the expiry of the period fixed by s 588FF(3)(a), the respondents filed a notice of motion seeking leave to file an amended statement of claim. The amendments sought to be made to the statement of claim were as follows:

By affidavit dated 8 September 2015 in support of the notice of motion to amend the statement of claim, Mr Stone, one of the liquidators, said that the three additional transactions were uncovered during the course of further investigations into the Company’s affairs and finances. In a separate affidavit dated 24 September 2015, Mr Stone said that the liquidators had commenced twenty court proceedings in respect of the liquidation, and otherwise referred to the extent of the work undertaken by the liquidators in the liquidation.

By further affidavit dated 7 October 2015, Mr Stone said that the omission of the additional payments was due to the bulk of documentation that the liquidators were required to review, the lack of funding available to them, the destruction of Company documents prior to the liquidators’ appointment and the reliance of the liquidators on MYOB records and supplier ledgers.

Mr Giles SC, who appeared with Ms Granger for the appellant on this appeal, accepted that each of the amendments sought to be made arose from the same (or substantially the same) facts as those giving rise to an existing cause of action and claim for relief set out in the originating process and the statement of claim. There was no challenge on this appeal to the respondents’ claim, recorded by the primary judge at [11], that the omission of each of the transactions the subject of the amendment application from the original statement of claim was “inadvertent”.

By affidavit dated 28 September 2015, Mr Wanless, the sole director of the appellant, said that after receiving the liquidators’ claim for $280,000, the appellant invested in new plant and equipment and after 16 December 2014 took on loans of $1.687m to finance that acquisition.

Mr Wanless said that in making the decision to invest and obtain loan finance, he took into account the appellant’s potential liability to pay up to $280,000 together with interest and costs. He said that if he had known the liquidators would bring an enlarged claim:

Mr Wanless also said that if SRP were ordered to pay $494,000 plus interest and costs rather than $280,000 plus interest and costs:

The primary judge commenced his analysis by identifying that s 588FF(3) is not merely a time stipulation of a procedural character; it is a time stipulation which is of the essence: Grant Samuel at [17], referring to the earlier decision of Gordon v Tolcher in his capacity as liquidator of Senafield Pty Ltd (in liq) (2006) 231 CLR 334; [2006] HCA 62 at [37], [40].

However, his Honour concluded that s 588FF(3) as construed by the High Court in Grant Samuel was “focussed on the bringing of the application”, whereas the present case related to the amendment of pleadings after the application was brought.

The primary judge found that a State law which extended a limitation period fixed by s 588FF(3) would not be “picked up” and applied by s 79 of the Judiciary Act.

However, his Honour concluded that s 65 of the Civil Procedure Act does not extend the limitation period in s 588FF(3) because sub-s 65(3) provides that, subject to complying with the requirement that, relevantly, the amendment “arises from the same (or substantially the same) facts as those giving rise to an existing cause of action and claim for relief set out in the originating process”, the amendment is treated as having been commenced when the application was first commenced.

The primary judge proceeded on the basis that each of the additional payments that the amendments sought to introduce was a separate “transaction”. The primary judge found that the policy informing s 588FF(3) reflects a balancing of the competing interests of creditors and those who have had past dealings with the company. His Honour found that the policy consideration that he had identified did not militate against granting leave to amend.

His Honour examined the decision of the Full Federal Court in Rodgers and a number of other cases which had followed it around Australia, including a series of first instance decisions from NSW. His Honour was not persuaded that Rodgers was clearly wrong and concluded that he should therefore follow it.

Turning to the particular facts of the case, the primary judge found that the amendments arose out of substantially the same facts as those disclosed in the originating process and statement of claim and that there were no discretionary considerations which persuaded him that leave to amend should not be granted. This last aspect of the primary judge’s decision is not challenged.

The decision of the primary judge was an interlocutory one and thus leave to appeal was required. There was no opposition to the grant of leave from the respondents. The question is obviously one of public importance and leave to appeal should be granted.

The grounds of appeal were as follows:

Section 588FF of the Corporations Act provides, relevantly, as follows:

The relevant provisions here in issue relating to the power to permit an amendment are contained in ss 64 and 65 of the Civil Procedure Act. Pursuant to those sections the plaintiff may amend a pleading at a time after the expiry of a limitation period in order to add or substitute a new cause of action that “arises from the same or substantially the same facts” as those already pleaded. Section 65(3) provides that an amendment is taken to have had effect as from the date on which the proceedings were commenced (unless the court otherwise orders).

Section 64, which provides for the amendment of documents generally, relevantly says:

Section 65 provides:

Section 79 of the Judiciary Act, which provides the legislative warrant to “pick up” and apply State and Territory procedural provisions in federal jurisdiction, relevantly provides:

Rodgers involved claims that eight payments of group tax by a company to the Commissioner of Taxation were voidable transactions. The liquidator commenced proceedings, within time, seeking orders under s 588FF of the then Corporations Law.

After the expiry of the period fixed by s 588FF(3), the liquidator became aware of two further payments, one being another group tax payment and the other being a group tax penalty payment made by the company, and applied for leave to amend the original application. The amendments sought to add these two further payments.

The proceedings took place in the Federal Court. As such, the statutory provision governing the amendment of pleadings was not s 65 of the Civil Procedure Act, but the now repealed O 13 r 2 of the Federal Court Rules 1979 (Cth) which provided, relevantly, at that time:

In Rodgers the primary judge had refused the application to amend. The Full Court permitted the amendment. In reaching that conclusion the Full Court said at 66-67:

The Full Court continued at 67:

The key passage in the reasoning of the Full Court at 67-68 explained that s 588FF(3) was concerned with the making of an application to the court, that is, the commencement of the proceeding itself, and did not prohibit the subsequent amendment of a pleading commenced within time:

As to whether in Rodgers the amendments arose out of the same facts or substantially the same facts as those already pleaded, the Full Court concluded at 70:

In Greig v Stramit Corporation Pty Ltd [2004] 2 Qd R 17; [2003] QCA 298 the Queensland Court of Appeal referred to Rodgers with approval. At [88] Williams JA (with whom Jerrard JA agreed) drew a distinction between:

The Queensland Court of Appeal explained that Rodgers concerned the first situation which was permissible, whereas in Stramit the amendment application arose in the second situation. Williams JA held that in that second situation, the time stipulation in s 588FF(3)(a) provided an “insurmountable boundary” which could not be overcome by recourse to a general statutory power to amend: at [89]. Jerrard JA agreed with Williams JA’s analysis: at [126].

Rodgers was also followed by the Full Court of the Supreme Court of South Australia in Davies v Chicago Boot Co Pty Ltd (No 2) (2007) 96 SASR 164; [2007] SASC 12.

In Davies liquidators of two related companies commenced proceedings in the Supreme Court for orders under s 588FF of the Corporations Law in respect of preferential payments made by the two companies. The proceedings were commenced within the s 588FF(3) time limitation.

The claim in relation to one of the companies was subsequently transferred to the District Court. The pleading in the Supreme Court was amended to reflect that transfer. Later, after the expiry of the s 588FF(3) limitation period, the liquidators sought leave to:

The judgment of Gray J (Sulan and Anderson JJ agreeing) records at [37] that counsel opposing the amendments conceded that if Rodgers were to be followed, the Full Court had jurisdiction under the South Australian amendment rules (rule 53.01 of the Supreme Court Rules 1987 (SA)) to consider and, if appropriate, allow the amendments.

The South Australian Full Court set out the reasoning of Rodgers at length and referred to cases which have followed it, including Stramit. At [45] Gray J held that the authorities have adopted a “consistent approach” and concluded at [46] that Rodgers was not plainly wrong. Gray J also referred at [49] to the High Court decision in Gordon v Tolcher and said that that case was consistent with the reasoning in Rodgers and did not suggest that Rodgers was incorrectly decided. The South Australian Full Court followed and applied Rodgers and allowed the amendments.

Before turning to a consideration of the present dispute, it is appropriate to consider the critical decisions of the High Court relied upon by the appellant.

The issue in Gordon v Tolcher arose in the following way. On 2 May 2003 a statement of liquidated claim was filed within the time fixed by s 588FF(3). The statement of liquated claim was not served within the time required and, by operation of Pt 18 r 9 of the District Court Rules 1973 (NSW), the action was “taken to be dismissed”. On 3 May 2005, long after the expiry of the period fixed by s 588FF(3), this Court ordered that the time specified in Pt 18 r 9 of the District Court Rules be extended nunc pro tunc up to and including 60 days after making of the order.

The affected party who only became aware of the application long after the expiry of the s 588FF(3) period appealed. At [38] the High Court referred to the following passage in the Australian Law Reform Commission’s General Insolvency Inquiry (Report No 45, 1988 – commonly known as the “Harmer Report”) which provided an important impetus for the introduction of s 588FF (paragraph 688):

The High Court continued at [40]:

Accordingly, it was held that the time to serve proceedings commenced within the time stipulated by s 588FF(3) could be extended by operation of NSW provisions “picked up” and applied by s 79 of the Judiciary Act.

The issue in Grant Samuel was whether an order providing for an extension of time within which to bring proceedings under s 588FF(3)(b) could be varied utilising NSW procedural provisions. In Grant Samuel an extension order had been made under s 588FF(3)(b). An order was subsequently made under r 36.16(2)(b) of the Uniform Civil Procedure Rules 2005 (NSW) varying the s 588FF(3)(b) extension order by changing the date before which the liquidators of a company could make an application under s 588FF(1).

In Grant Samuel the High Court explained (at [23]):

The High Court also reaffirmed that “the bringing of an application within the time required by s 588FF(3)(a) or (b) is a precondition to the court’s jurisdiction under s 588FF(1)”: Grant Samuel at [17]; applying Gordon v Tolcher.

Accordingly, the High Court determined that r 36.16(2)(b) of the Uniform Civil Procedure Rules was not “picked up” and applied by s 79 of the Judiciary Act as s 588FF(3) “otherwise provides” within the meaning of that section.

The issue in Fortress Credit was whether the practice of allowing an extension of time under s 588FF(3)(b) for commencing proceedings in general form, without identifying any particular transaction or transactions, known as a “shelf order”, was permissible. The High Court concluded at [24] that:

Accordingly, the High Court held that the making of “shelf orders” under s 588FF(3)(b) which do not identify a particular transaction or transactions was a permissible application of the power conferred by the section.

The appellant accepted that the effect of the amendments sought was to add a new cause of action arising “from the same (or substantially the same) facts as those giving rise to an existing cause of action and claim for relief set out in the originating process”, pursuant to s 65(2)(c) of the Civil Procedure Act.

The appellant submitted that making an “application” within the time limit provided in s 588FF(3) was an essential precondition to the court’s jurisdiction to make an order under s 588FF(1) in respect of each particular “transaction” sought to be impugned. The appellant made this submission on a number of bases.

First, the appellant submitted that s 588FF(1) concerned an “application” in relation to “a transaction”. It was submitted that the language of the section as a whole, in ss 588FF(1)(a)-(h), suggested that an “application” in sub-s (3) was an application in respect of “the transaction”. Accordingly, s 588FF(3) provided a jurisdictional time condition which was satisfied, and only satisfied, by an “application” made within time in respect of each individual “transaction”.

Second, it was submitted that s 588FF conferred power in relation to voidable transactions, which in turn directed attention to ss 588FA to 588FDA. Those sections, with the exception of s 588FD, operated by reference to “a transaction” or “the transaction”. The “application” referred to in each of ss 588FF(1) and (3) was the “application” in relation to a particular “transaction” with the characteristics specified in s 588FE.

Third, it was submitted that the reasoning in Fortress at [20] required that an “application” must particularise the “transaction” in respect of which it was made. An application which was subsequently amended and particularised a new or additional transaction did not satisfy that requirement. The appellant submitted that the reasoning in Fortress at [20] was inconsistent with the proposition that the commencement of proceedings in respect of a particular transaction “in effect, stops time running in relation to all “transaction[s]” between the Company and the creditor” for the purpose of s 588FF(3).

Fourth, it was submitted that the purpose of s 588FF(3) favoured commercial certainty, and the construction advanced by the appellant better reflected that purpose.

Fifth, it was submitted that Rodgers, and the cases that follow it, either did not survive Grant Samuel and Fortress or did not compel the construction adopted by the primary judge.

The relevant principles of statutory construction were not controversial on this appeal. In Alcan (NT) Alumina Pty Ltd v Commissioner of Territory Revenue (Northern Territory) (2009) 239 CLR 27; [2009] HCA 41 at [47], the plurality emphasised that construction must begin with a consideration of the text itself and while the language employed is the surest guide, its meaning may require consideration of the context, which includes the general purpose and policy of the provision, in particular the mischief it is seeking to remedy: see also Board of Bendigo Regional Institute of Technical and Further Education v Barclay (2012) 248 CLR 500; [2012] HCA 32 at [41]; Federal Commissioner of Taxation v Consolidated Media Holdings Ltd (2012) 250 CLR 503; [2012] HCA 55 at [39].

Determination of the purpose of a statute or of a particular provision may be based not only on an express statement of purpose in the statute itself but also by inference from its text and structure and where appropriate, by reference to extrinsic materials. However, this process does not involve a search for what those members of the legislature who promoted or passed the law had in mind: Project Blue Sky Inc v Australian Broadcasting Authority (1998) 194 CLR 355; [1998] HCA 28 at [78]; Certain Lloyd's Underwriters Subscribing to Contract No IH00AAQS v Cross (2012) 248 CLR 378; [2012] HCA 56 at [23]-[26].

It is appropriate then to commence with a consideration of the text itself and the language employed.

A “transaction” is defined broadly and inclusively (as recommended by the Harmer Report) in s 9 of the Corporations Act as follows:

A series of dealings may constitute a “transaction” if they are connected in being directed to bring about a change in the company’s rights, liabilities or property: Re Emanuel (No 14) Pty Ltd (in liq); Macks v Blacklaw & Shadforth Pty Ltd (1997) 147 ALR 281; 24 ACSR 292 at 299; Tosich Construction Pty Ltd (in liq) v Tosich (1997) 78 FCR 363; 15 ACLC 1402; Campbell Street Theatre Pty Ltd (Rec and Mgr appointed) (in liq) v Commercial Mortgage Trade Pty Ltd [2012] NSWSC 669 at [13].

While in the present case the parties conducted the case on the assumption made by the primary judge that each of the separate payments was identified as a separate “transaction” in the statement of claim, it is clear that this was not required by the language of the definition in s 9 of the Corporations Act. The primary judge correctly concluded, at [15], that the numerous individual payments by the Company to the appellant, each directed to reducing the Company’s debt on the same basis, could properly be treated as a single “transaction” and that the Contra Payments, in adopting a different mechanism for the same purpose and in the same period, could arguably also be treated as part of the same “transaction”. This is consistent with the statement made by the High Court in Fortress Credit at [18], to the effect that the definition extends to the ordinary meaning of transaction, which includes having dealings or any business with another and extends to arrangements which require difficult evaluative judgments as to its definition and characteristics. It is also consistent with the provisions of s 588FA(3) of the Corporations Act.

An “application” is not defined in the Corporations Act. The form and content of an “application” under the Corporations Act is left to rules of court in all jurisdictions invested with federal jurisdiction to hear and determine matters under the Corporations Act. The conferral of jurisdiction to the NSW Supreme Court relevantly engaged in this case is under s 1337B(2) of the Corporations Act.

The arguments advanced by the appellant in favour of its construction of s 588FF have real force. The text of s 588FF is open to the construction that it provides a jurisdictional time condition which is satisfied, and only satisfied, by an “application” commenced within time in respect of a particular identified “transaction”.

The appellant ultimately accepted that the construction it advanced was that s 588FF(1) should be read as meaning “where on the application of a company’s liquidator in relation to a particular transaction the court is satisfied that a transaction of the company is voidable because …”.

The text of s 588FF(3), however, is also open to the interpretation that the section is concerned and only concerned with the time limit to make an application, the form of which application is left to the relevant law of the jurisdiction where the proceeding is commenced. Section 588FF(1) is open to the construction that the “application” referred to in sub-s (1) is to be understood as the application, including the application as subsequently amended.

Support for this constructional choice is provided by the fact that the Corporations Act leaves the form of the “application” required or permitted under that Act to the rules of the State or Territory where the proceeding is commenced.

The relevant requirements for an “application” under sub-ss 588FF(1) and 588FF(3) of the Corporations Act in the present case are those contained in an originating process under the Supreme Court (Corporations) Rules. The only requirements of an originating process under those Rules are the identification of the parties, the section of the Corporations Act relied upon, the relief sought and, at least at some level of generality, identification of the claims made by the plaintiff, which are in turn based on facts stated in a supporting affidavit “if appropriate”.

The appellant’s construction of s 588FF(1) requires an “application” under the section to contain particular content, in circumstances where an “application” is not otherwise defined in the Corporations Act and the form and content of an originating process is otherwise left to rules of court and State and Territory legislation.

Section 588FF(1) does not deal with the form of the application at all. This is left to the rules of court which set out the relevant requirements. These requirements, to which we have referred in [76] above, are sufficient to identify the fact that the application is one brought under s 588FF(1), the nature of the claim and the relief sought. There is nothing in s 588FF(1) or any other section of the Corporations Act which otherwise provides so as to prevent those rules being picked up by s 79 of the Judiciary Act. Even if the appellant was correct in contending that s 588FF(1) requires the identification of a particular transaction in a manner other than provided by the rules, the question remains whether the amendment powers conferred by the Civil Procedure Act are inconsistent with s 588FF(3) such that the latter section leaves no room for their operation. For the reasons set out below, particularly in paragraph [87] and following and in relation to ground 1(b) of the grounds of appeal, we are of the opinion that this is not the case.

The appellant’s second submission is that the “application” referred to in each of sub-ss 588FF(1) and (3) is the application in relation to a particular “transaction” with the characteristics specified in s 588FE. To the extent that more is required than the identification of a particular transaction as submitted by the appellant in its first submission, the submission suffers from further difficulties.

This construction would have the effect that if any error was made in the proper particularisation of the impugned transaction in the originating process, no amendment would be possible after the expiry of the s 588FF period. There is nothing to suggest that as a matter of policy this effect was intended.

The language of sub-ss 588FF(1) and (3) does not require such a construction, which gives effect to an unexpressed premise of those sections to make mandatory the form and content of an “application” where that term is not defined in the Corporations Act and those requirements are otherwise left to rules of court and State and Territory legislation.

The appellant’s third submission, that the reasoning in Fortress at [20] requires that an “application” must particularise the “transaction” in respect of which it is made, requires close consideration of the High Court’s decision.

The appellant in the present case relies heavily on paragraphs [20]-[21] of the judgment of the High Court:

The appellant’s submission, that the reasoning in Fortress at [20] requires that an “application” within the meaning of s 588FF(3) must particularise all of the matters identified in paragraph [20] at the time that application is made, in our view goes too far. We do not read the High Court in Fortress Credit at [20]-[21] as mandating the form and content of an originating process under s 588FF(1).

Fortress Credit at paragraph [20] addresses the proposition that “an application under s 588FF(1) must seek orders for which that subsection provides”. The court then sets out the specific matters that must be addressed before a court could make an order under that section. The High Court was not addressing the point in time at which all necessary particulars needed to be provided to enliven the court’s jurisdiction to make “orders for which that subsection provides”, much less was it addressing whether once commenced an “application” could be amended.

In paragraph [21] of Fortress Credit the High Court addressed “the class of applications which can be made by liquidators under s 588FF(1) in relation to a transaction alleged to be voidable”. This is a reference to an application by a company’s liquidators for the kind of orders that can be made pursuant to s 588FF. It is not in our view a prescription of the matters which must be contained in an originating process.

The appellant’s fourth submission was that the purpose of s 588FF(3) favours commercial certainty, and the construction advanced by the appellant better reflects that purpose. There are a number of issues to address.

First, s 588FF(3) involves a statutory balancing of competing interests between, on the one hand, creditors and, on the other, those who might be the subject of s 588FF(1) proceedings. That balance was recognised by the High Court in Fortress Credit at [24] as set out above at [56].

Second, s 65 of the Civil Procedure Act gives effect to an established policy which allows amendments to pleadings arising from the same or substantially the same facts, where the defendant has been put on notice of the claim at the time the application to amend is brought.

Third, Fortress Credit determined that a shelf order was permissible. A “shelf order” does not particularise any “transaction” and permits an extension of time, in the discretion of the court, to make an application under s 588FF(1). This reflects the balance struck by the section.

Fourth, Senior Counsel for the appellant accepted that certain types of amendments to an application could be made after the expiry of the period provided for by s 588FF(3). If a proceeding was commenced within time relating to an unfair preference, Senior Counsel accepted that an amendment could be made, via ss 64 and 65 of the Civil Procedure Act, which would be “picked up” and applied for this purpose, to plead that the transaction was also an unreasonable director related transaction. This, it was said, flowed from the fact the “transaction” was the same.

The breadth of the inclusive definition of the word “transaction” will be recalled. There is no reason why as a matter of policy, having regard to the breadth of that definition, a case pleaded as a very broadly described “transaction” involving multiple payments could effectively be amended by adding additional particulars to a claim whereas a more closely described pleading which attacked the same payments pleaded out as separate “transactions” could not be amended.

Fifth, Senior Counsel for the appellant properly conceded that if a proceeding was commenced within the time nominated and, after the s 588FF(3) period had expired, it was discovered that there was a “typographical slip in the amount”, ss 64 and 65 of the Civil Procedure Act would be “picked up” and applied by s 79 of the Judiciary Act for this purpose to permit an amendment.

We can see no reason in the text of s 588FF, the nature, scope and purpose of the Corporations Act more generally or in relation to the particular time limit in s 588FF(3) that would preclude an amendment being made, subject to the usual protections in ss 64 and 65 of the Civil Procedure Act and subject to the principles in Aon Risk Services Australia Limited v Australian National University (2009) 239 CLR 175; [2009] HCA 27, to correct a “typographical slip in the amount”, even if that typographical error related to a significant sum of money. This conclusion is consistent with the reasoning of the High Court in Gordon v Tolcher at [40].

The appellant’s fifth submission, that Rodgers and the cases that follow it, either do not survive Grant Samuel and Fortress Credit or do not compel the construction adopted by the primary judge, should not be accepted.

First, in Rodgers, in the key passage in the reasoning of the Full Court at 67-68, it was held that s 588FF(3) was concerned with the making of an application to the court, that is, the commencement of the proceeding itself, and did not prohibit the amendment of a pleading itself commenced within time.

This Court should not depart from decisions of other intermediate appellate courts in another jurisdiction on the interpretation of Commonwealth legislation unless convinced that the interpretation is plainly wrong: Farah Constructions Pty Ltd v Say-Dee Pty Ltd (2007) 230 CLR 89; [2007] HCA 22 at 152 [135].

We do not consider that Rodgers is “plainly wrong”. The construction of the section by the Full Court in Rodgers to which we have referred was open and, as we have said, nothing in the trilogy of subsequent High Court cases compels the conclusion that Rodgers should no longer be followed. Whilst, as we have said, the appellant’s construction of s 588FF has much to commend it, we do not consider that the construction adopted in Rodgers was incorrect.

Second, the High Court in Grant Samuel and Fortress did not address the power of amendment the subject of Rodgers or any of the cases which have followed Rodgers. If anything those two decisions do not favour the appellant’s position. The High Court did not conclude in either case that the “satisfaction” of the court of the matters relating to a “transaction” in s 588FF(1) required that an “application” containing all of the necessary particulars underpinning that state of satisfaction be filed within the time limit prescribed by s 588FF(3).

We have addressed paragraphs [20]-[21] of Fortress Credit above. Grant Samuel concerned the question of whether a UCPR rule permitting variation of an extension order impermissibly extended time in a manner inconsistent with s 588FF(3). That question does not arise in the present case because s 65(3) of the Civil Procedure Act does not extend a time limit fixed by s 588FF(3).

Third, the presumption of re-enactment addressed in Fortress Credit at [15] tends against the appellant’s submission. The ability to amend a proceeding commenced within time, after that time had expired, using powers conferred by rules of court and State and Territory legislation was well known following the decision in Rodgers and the cases which followed it, including Davies v Chicago Boot in 2007.

Section 588FF(3) was amended in 2007 by the Corporations Amendment (Insolvency) Act 2007 (Cth). This amendment followed a report by the Australian Government’s Corporations and Markets Advisory Committee published in October 2004. There was no suggestion in the report that there was any perceived issue with amendments to applications. No change was made to s 588FF or the Corporations Act more generally in the 2007 Act to address any perceived issue in amendments being permitted to an “application” once commenced in the way explained in Rodgers.

For these reasons we would dismiss ground 1(a) of the notice of appeal.

The appellant submitted that the relevant sources of the power to amend here in issue, ss 64 and 65 of the Civil Procedure Act, were not picked up and applied in federal jurisdiction as s 588FF(3) “otherwise provides” for the purposes of s 79 of the Judiciary Act.

It was submitted that if s 588FF(3) applies to each “transaction”, s 588FF(3) read with s 79 of the Judiciary Act precludes an amendment to include new “transactions” after the expiration of the time specified by s 588FF(3). That is, if the appellant was correct about the first question, the court had no power to allow the amendment.

In support of these conclusions the appellant’s submissions involved a close analysis of the reasons of the primary judge and the way he dealt with Rodgers and asserted error in:

As to the first submission, that Rodgers was a decision of the Federal Court and thus “cannot be applied” in the instant case, we disagree.

It is of course correct that Rodgers involved the application of the Federal Court Rules in the context of the Corporations Law and no question of those rules being “picked up” and applied by s 79 of the Judiciary Act arose.

Nevertheless, the ratio of Rodgers at 67-68, that the Federal Court Rules were concerned with making an amendment to a pleading in an existing proceeding and s 588FF(3) was concerned with fixing the time limit for the commencement of a proceeding, is directly applicable. If the appellant’s submissions were correct that s 588FF(3) “otherwise provides” within the meaning of s 79, there would, as a matter of construction have been an inconsistency between the amendment power in the Federal Court Rules and s 588FF(3). No such inconsistency was discerned by the Full Court in Rodgers. To the contrary, the court expressly found, at 68, “There is no inconsistency between O 13 r 2 and s 588FF(3)”.

Further, Rodgers has been followed by intermediate State courts in Stramit and Davies v Chicago Boot where the question of s 79 of the Judiciary Act was directly engaged.

As to the second submission, that the primary judge did not address a “critical ambiguity” in Rodgers so far as a decision referred to in the critical reasoning, Quick v Stoland, is concerned, that “ambiguity” does not on analysis arise here.

It will be recalled that the key passage in the reasoning of the Full Court at 67-68 stated:

The reservation by the Full Court concerning cases where “that amendment does not involve a new cause of action” can be put to one side here. The reference to Quick v Stoland makes it clear that what the Full Court was concerned with was carving out cases where the then Corporations Law provided a specific mechanism which needed to be complied with before any proceedings could be commenced. Quick v Stoland was a case involving the meaning of the word “proceedings” in the former s 588R(1) of the Corporations Law. In that case, the Full Court of the Federal Court dealt with the question of whether an amendment of a claim to add a cause of action under s 588M of the former Corporations Law to an existing claim under s 592 of the Law constituted “proceedings” for the purposes of s 588R(1). It was held that “proceedings” are taken to include both the commencement of an action at law and any step in that action (at 388). That conclusion was reached in that case, as Finkelstein J explained, on the basis that under s 588R(1) it was a requirement that the liquidator of the company concerned consent to the commencement of proceedings. In Quick v Stoland, proceedings under s 592 were commenced in 1992. Almost five years later, in 1997, the liquidator’s consent was obtained to commence proceedings under s 588R(1). The original (s 592) proceedings were amended to add the s 588R(1) claims. That was held to be impermissible. It is in that sense that the Full Court is to be understood as carving out an amendment which “does not involve a new cause of action”.

The reservation concerning Quick v Stoland does not apply to the present case which is relevantly identical to the amendment allowed in Rodgers, being two further payments, one being another group tax payment and the other being a group tax penalty payment made by the company, added by amendment after the expiry of the period fixed by s 588FF(3).

As to the third submission, that Rodgers did not address the question of whether time “stopped running” under s 588FF(3) after an application had been filed and in failing to conclude that Rodgers was inconsistent with Fortress Credit at [20], we have addressed that submission at [83]-[86] above.

As to the fourth submission that Davies v Chicago Boot turned on an erroneous concession that s 79 picked up and applied the South Australian amendment rules, it is correct that counsel for the affected party in Chicago Boot conceded that s 79 “picked up” and applied the South Australian amendment rules, but we consider that the Full Court nevertheless considered the concession was correctly made: at [37] and [47].

As to the fifth submission, that the “policies identified by the High Court” in Fortress Credit and Grant Samuel required that an “application” be brought by reference to each individual transaction, we have set out at [87]-[92] above why we disagree.

Further, Gordon v Tolcher at [40] tends against acceptance of that submission:

We have concluded that s 588FF(3) does not preclude an amendment to include additional “transactions” in an application properly commenced within the time limited by s 588FF(3), after the expiration of the time specified by that section. That is because, “an application may be made only to a court invested with federal jurisdiction by one or other of the provisions of Pt 9.6A. Thereafter, and subject to any other relevant provision of the Corporations Act, the conduct of the litigation is left for the operation of the procedures of that court”.

For these reasons we would dismiss ground 1(b) of the notice of appeal.

In our view, the conclusion in Rodgers (at 67-68) that the amendment provision in the Federal Court Rules “[O 13 r 2] is to be contrasted with s 588FF(3), which is concerned with the making of an application to the Court; that is, the commencement of the proceeding itself” and that s 588FF(3) “is not directed to an amendment of an existing claim”, is not plainly wrong. Accordingly, it should be followed by this Court. There is nothing in the trilogy of High Court cases concerning s 588FF which obliges this Court to conclude that the decision in Rodgers is plainly wrong.

For the foregoing reasons we propose the following orders:

BEAZLEY P: I have had the opportunity to read in draft the reasons of the Chief Justice and Payne JA with which I agree. I add the following to indicate my own reasoning on the issues raised on the appeal.

I should state at the outset that this matter raises important questions as to the proper construction of the Corporations Act 2001 (Cth), s 588FF, and the status of three decisions of intermediate appellate courts in light of subsequent High Court authority. The issues raised have a high degree of significance to the liquidation of insolvent corporations. Further, the sums claimed in the proceedings are not insubstantial. Accordingly, leave to appeal should be granted and the applicant will from here on be referred to as the appellant.

The primary judge observed, at [14], that the term “transaction” may encompass a series of sub-transactions or events in a course of dealings: Capital Finance Australia Ltd v Tolcher [2007] FCAFC 185 at [120]–[121]; Re Employ (No 96) Pty Ltd (in liq) (2013) 93 ACSR 48; [2013] NSWSC 61 at [15]. In such circumstances, provided the original application was commenced in time additional “sub transactions” may be added to a pleading after the expiry of time limited by s 588FF(3). However, as his Honour observed, at [15], the pleading in this case did not purport to plead a single transaction and his Honour therefore treated the matter, at least for the purposes of the amendment application, as concerning separate transactions.

The appellant submitted that, on its proper construction, the time limit prescribed by s 588FF(3)(a) must be satisfied in respect of each “transaction”. The appellant advanced a number of arguments in support of this construction.

First, reliance was placed upon the text of s 588FF(3) which refers to “an application under s 588FF(1)”. The appellant submitted that the language of s 588FF(1) expressly contemplates an application in relation to a particular transaction as is apparent from the terms of s 588FF(1)(a)-(h), which each refer to “the transaction”, and from the text of ss 588FA-588FDA, which employ the terminology of “a transaction” and/or “the transaction”.

Secondly, it was submitted that the approach adopted by the primary judge was inconsistent with the reasoning of the High Court in Fortress Credit Corporation (Australia) II Pty Limited v Fletcher (2015) 254 CLR 489; [2015] HCA 10 at [20] and [21].

Finally, it was submitted that the appellant’s preferred construction was consistent with the policy of s 588FF(3), particularly with the emphasis placed on commercial certainty by the High Court: see, for example, Fortress Credit at [24]; Grant Samuel Corporate Finance Pty Ltd v Fletcher (2015) 254 CLR 477; [2015] HCA 8 at [17].

The respondents submitted that, on the proper construction of s 588FF, “it is enough that a claim is made according to the relevant law of jurisdiction within the prescribed period”. Counsel for the respondents advanced a number of arguments in support of this proposition.

The respondents contended that s 588FF(1) is directed to “the occasion of the final hearing of the liquidator’s application”, a point in time distinct from the concern of s 588FF(3) with the time for the commencement of proceedings. This submission should be rejected.

The respondents alternatively submitted that the reference in s 588FF(3) to “an application under subsection (1)”, and the words “on the application of a company’s liquidator” in s 588FF(1) should not be read so as to contemplate an application “in relation to a particular transaction”. Rather, the words “on the application of a company’s liquidator” draw attention to the moving party, and are to be read as meaning “on the application by the liquidator for orders under the section”. This submission is considered below.

The respondents also submitted that the term “application” as used in s 588FF(3) assumes the co-existence of state and federal law, and recognises that the Corporations Act does not impose a uniform federal procedural regime. This submission is clearly correct: see, for example, Gordon v Tolcher (2006) 231 CLR 334; [2006] HCA 62.

Section 588FF(1) provides that “[w]here, on the application of a company's liquidator, a court is satisfied that a transaction of the company is voidable”, the court may make one or more of the orders for which that subsection provides. Section 588FF(3) provides that “[a]n application under subsection (1) may only be made” in accordance with the time limits prescribed by paras (a) and (b) of subs (3). Relevantly for this case, an application under s 588FF(1) may be made during the period beginning on the relation-back day and ending three years after the relation-back day: s 588FF(3)(a)(i).

Thus, there are two preconditions to the power of the court to make orders under s 588FF(1). As was explained in Gordon v Tolcher at [34]:

As the title to Pt 5.7B highlights, the purpose of this Part of the Corporations Act is to facilitate the recovery of property by the liquidator “for the benefit of creditors”. Section 588FF is not concerned with the procedural formalities of the application. As already noted at [133] above, the Corporations Act does not impose a uniform procedural regime and assumes the co-existence of state and federal law.

Nor is there, contrary to the appellant’s submission, anything in the text of s 588FF that requires that the “application” on which the court’s power to make orders is conditioned relate to an individual transaction. The references in s 588FF(1)(a)-(h) to “the transaction”, and to “a transaction” and “the transaction” in ss 588FA-588FDA, are directed to whether the Court is empowered to make orders in relation to that transaction, provided that all the pre-conditions to the making of an order are met.

It should also be noted that both ss 588FH(3) and 588FI(2) employ the broader language “an application relating to the transaction”. Further, the s 588E definition of the term “recovery proceeding” includes “an application under section 588FF by the company’s liquidator”.

I also disagree with the appellant’s reading of the reasons of the High Court in Fortress Credit at [20]. That passage is set out above at [83] in the reasons of the Chief Justice and Payne JA. In the first sentence, the High Court sets out the first of the two conditions to the making of an order under s 588FF(1), viz, the relevant state of satisfaction on the application of a company’s liquidator. The words “which concern a transaction alleged to be voidable” in the second sentence are clearly a reference to the kinds of orders the court is empowered to make. The remainder of the paragraph contains observations of what will generally be required in order to obtain relief under s 588FF. For example, in the second last sentence, the High Court refers to what will be “necessary” to a contention that a transaction constitutes a “voidable transaction”.

It is also telling that the High Court in Fortress Credit at [20] referred not to an application in relation to a particular transaction, but rather to an application seeking orders for which s 588FF(1) provides. This is further emphasised in Fortress Credit where the Court stated, at [21]:

This approach accords with the statement in the Explanatory Memorandum to the Corporate Law Reform Bill 1992, which indicates that s 588FF(3) was intended to operate to confine the time period in which a liquidator can seek relief from the courts under s 588FF(1), as opposed to operating in relation to each individual transaction:

Section 588FF(3) was amended by the Corporations Amendment (Insolvency) Act 2007 (Cth) to introduce the alternative time limit in s 588FF(3)(a)(ii), viz, of 12 months after the first appointment of a liquidator in relation to the winding up of the company. The Explanatory Memorandum to that amendment also described s 588FF(3) as concerned with the time period in which a liquidator must exercise their powers of challenge to alleged voidable transactions:

It remains to consider whether the policy underlying s 588FF compels the construction advanced by the appellant. It was submitted that the appellant’s preferred construction better achieves the purpose of s 588FF(3) as a provision concerned with commercial certainty. In this regard, counsel for the appellant made the following remarks during oral argument:

As the primary judge correctly noted at [27], s 588FF(3) reflects a balancing of competing interests as between the general body of creditors and those who have had previous dealings with the company. The High Court in Fortress Credit observed, at [24], that one purpose of s 588FF(3) “is to favour certainty for those who have entered into transactions with the company”. In a similar vein, Spigelman CJ made the following remarks in BP Australia Ltd v Brown (2003) 58 NSWLR 322; [2003] NSWCA 216 at [112]:

The decision of the legislature to limit, by s 588FF(3), the time in which a liquidator may begin an application under s 588FF(1) undoubtedly reflects the desirability of commercial certainty. However, it should be borne in mind, as Spigelman CJ observed in BP Australia at [98], that “[t]he overriding principle in Pt 5.7B is one of fairness”. As Spigelman CJ went on to observe at [101], “[w]here the underlying principle is one of fairness, it is easy to appreciate that the passage of time affects the balance of fairness”.

The competing interests were aptly conveyed by Spigelman CJ in BP Australia:

It is difficult to accept, however, that the balance of fairness compels the degree of precise certainty for which counsel for the appellant contended. If that were the case, the making of “shelf orders” would not be permissible. In that regard, in upholding the permissibility of such orders under s 588FF(3)(b), the High Court in Fortress made the following remarks, at [24]:

BP Australia was concerned with the power of the courts under s 588FF(3)(b), on the application of a liquidator, to extend the period of time within which an application for orders under s 588FF(1) may be brought. In this case, the application was brought within time. As the primary judge, Black J, observed at [27], where an application commenced within time has put the defendant on notice that orders under s 588FF(1) are sought, it does not seem to me that the policies identified by the High Court require that the liquidator be shut out from challenging additional transactions by amendment when they come to light.

I would conclude, therefore, that there is nothing in the text of s 588FF, the extrinsic materials that accompany it, or the relevant High Court authorities that compels the construction for which the appellant contended. Subject to the question of amendment, I would not construe the time limit in s 588FF(3) as applying in relation to each individual transaction that the liquidator seeks to impugn.

That leads to the question whether s 588FF(3) “otherwise provides” such that the Civil Procedure Act 2005 (NSW), ss 64 and 65 are not picked up by the Judiciary Act 1903 (Cth), s 79. In light of the reasons I have expressed above, this issue can be resolved relatively shortly.

The appellant stressed, by reference to Grant Samuel, that s 588FF(3)(b) provides the only source of power to vary the time limit in s 588FF(3)(a) and submitted that the powers of amendment under the Civil Procedure Act are not picked up by s 79 of the Judiciary Act because s 588FF(3) “otherwise provides”.

The respondent submitted that s 588FF(3) has nothing to say about an attempt to amend an existing application, and that s 65 of the Civil Procedure Act does not “purport to extend time; on the contrary, it stipulates that the amendment has effect within the prescribed period”.

As has already been noted, s 588FF(1) is “silent respecting the procedures to be adopted by the court exercising federal jurisdiction”: Gordon v Tolcher at [32]. It is also clear that s 588FF(3)(b) constitutes an exhaustive provision as to the power of the courts to extend the time in which an application for orders under s 588FF(1) may be made: see Grant Samuel at [23] set out above at [53].

Accordingly, ss 64 and 65 of the Civil Procedure Act will be picked up by s 79 of the Judiciary Act unless s 588FF(3)(b) “otherwise provides”, that is, unless those provisions would, in effect, facilitate the extension of time within which to commence an application for orders under s 588FF(1).

A central aspect of the reasoning in Rodgers v Commissioner of Taxation (1998) 88 FCR 61 was the distinction between the amendment of existing proceedings and the extension of time within which to commence proceedings. As the Full Court explained in Rodgers, at 67-68:

The Full Court cited the following remarks of Clarke JA in Fernance v Nominal Defendant (1989) 17 NSWLR 710 at 733 in support of that proposition:

It was in relation to this distinction that the Full Court of the Supreme Court of South Australia in Davies v Chicago Boot Co Pty Ltd (No 2) (2007) 96 SASR 164; [2007] SASC 12 followed the reasoning in Rodgers. As Gray J explained, at [45]:

This distinction was also accepted by two members of the Queensland Court of Appeal in Greig v Stramit Corporation Pty Ltd (2004) 2 Qd R 17; [2003] QCA 298. As Williams JA observed, at [88]:

Likewise, Jerrard JA commented at [126]:

I see no reason for this Court to reject this distinction, nor for it to reject the reasoning of the Federal Court in Rodgers.

Accordingly, I would conclude that the primary judge correctly concluded there was power to allow the proposed amendment. In the circumstances here in question, an application for orders under s 588FF(1) against the appellant was commenced within the time limit imposed by s 588FF(3). The proposed amendment introduced transactions between the same parties which, although accepted to constitute a new cause of action, were acknowledged to arise from substantially the same facts as the transactions originally pleaded. No new defendant was introduced and no fault was identified on the part of the respondents in failing to identify the original transactions at the outset. On the analysis I have adopted in relation to the first issue, it follows that there was no attempt to extend the time for the commencement of proceedings. Thus, s 588FF(3)(b) did not “otherwise provide” and the powers of amendment were picked up by the Judiciary Act, s 79.

It follows that, in my view, the primary judge did not err in finding that there was power in the court below to allow the amendment. It follows that I agree with the orders proposed by the Chief Justice and Payne JA.

WARD JA: I agree, for the reasons given jointly by Bathurst CJ and Payne JA, that the appeal should be dismissed and with the orders their Honours have proposed.

BERGIN CJ in EQ: I have had the benefit of reading the draft joint judgment of Bathurst CJ and Payne JA. I agree with their Honours’ reasons and the proposed orders.