In the matter of Bias Boating Pty Ltd

1. [1]

   The first plaintiff Ian James Purchase was appointed administrator of the second plaintiff Bias Boating Pty Ltd on 25 August 2014 pursuant to (CTH) Corporations Act 2001, s 436A, and became its liquidator consequent upon a resolution of the creditors at the second meeting of creditors on 29 September 2014. In those circumstances, the relation-back day – whether or not the amended definition of that term now contained in Corporations Act, s 91, by operation of (CTH) Insolvency Law Reform Act 2016 is applicable, and by operation of the transitional provision in s 1635(4) it is not – is 25 August 2014. On 22 August 2017 – a few days before the expiry of the period of three years after the relation-back day – the plaintiffs filed an originating process under Corporations Act, s 588FF, claiming relief in respect of alleged voidable transactions, against 23 named defendants. By interlocutory process filed on 13 October 2017, the plaintiffs seek leave under UCPR r 6.19 to join all 23 defendants in the one proceeding. Leave is required because, although the issue of the company’s insolvency is common to the claim against every defendant, it cannot be said that the claims arise out of or are in respect of the same transactions, so that the requirements for joinder as of right are not satisfied. [1] Six of the defendants opposed the application for leave; [2] the others either consented to or did not oppose it.

2. [2]

   The argument of the opposing defendants commenced with the indisputable proposition that proceedings for relief under s 588FF must be commenced within three years after the relation back day (or such longer period as the court orders on application made within that period). [3] The court would not grant leave under rule 6.19 if the proceedings would be statute-barred, because it would be an act of futility. The key and contentious propositions are that (1) in the absence of leave under rule 6.19, no claim under s 588FF was validly made before the 3-year limitation period expired on 25 August 2017; and (2) if leave were granted, r 6.28 means that the proceedings will be taken to be commenced on the date of the order granting leave, which would necessarily be outside the limitation period. For the reasons set out below, each of those propositions is misconceived.

Rule 6.19

1. [3]

   UCPR r 6.19 makes provision for the joinder of multiple parties in an originating process where there are common questions of law or fact:

2. [4]

   The rule is concerned with joinder in the originating process, as distinct from addition of a party subsequently (which is addressed by UCPR r 6.24). Joinder under r 6.19 is an act of the plaintiff, not of the court.

3. [5]

   Rule 6.19 addresses two situations. The first is where the requirements of paragraphs (a) and (b) of sub-rule (1) are satisfied; in those circumstances, the joinder is as of right. The second is where either (or both) of those requirements are not met; in such a case, the leave of the court for the joinder is required. However, sub-rule (2) plainly contemplates that such leave may be granted after the originating process has been filed. In this, it is identical to its neighbour in rule 6.18(2), which makes similar provision in respect of joinder of causes of action:

4. [6]

   The purpose of r 6.19 is to control the constitution of proceedings, not to impose a precondition to their institution. The leave referred to is not leave to commence proceedings, but to join multiple defendants in them. In this respect, there is an analogy with provisions such as Corporations Act, s 471B and s 500(2), which provide that proceedings must not be commenced or continued against a company in liquidation without the leave of the court. Because the purpose of that provision is to protect the liquidation rather than to impose a precondition on the institution of proceedings, it has routinely been held that proceedings commenced without leave are not a nullity, although they are liable to be stayed, and leave can be granted retrospectively [4] – including after a limitation period has expired, in respect of proceedings commenced without leave before its expiry. [5] The availability of retrospective leave is all the clearer under rule 6.19 (and rule 6.18), because in each case sub-rule (2) makes explicit provision to that effect.

5. [7]

   Thus it would not be a nullity, nor an abuse of process, for a plaintiff to file an originating process joining multiple defendants in circumstances where leave was required, without first obtaining that leave. The proceedings would be irregular unless and until leave was granted, but not invalid. [6]

6. [8]

   An additional reason for holding that the filing of an originating process which joins multiple defendants without prior leave, where leave is required, is not a nullity, is provided by UCPR r 6.23, which provides that misjoinder does not defeat proceedings:

7. [9]

   Accordingly, proceedings in which multiple defendants are joined in the originating process before the requisite leave is granted are irregular unless and until leave is granted, but not invalid. It follows that when the originating process herein was filed on 22 August 2017, claiming relief under s 588FF, within the 3-year limitation period, an application under s 588FF(1) was validly made against each of the 23 defendants.

Rule 6.28

1. [10]

   UCPR r 6.28 makes provision in respect of the date of commencement of proceedings against a defendant who is joined to proceedings after their institution:

2. [11]

   The rule is engaged where the court orders that a person be joined as a party. It is concerned with joinder by order of the court after proceedings have been instituted, and not with joinder by the plaintiff in the originating process. A grant of leave under r 6.19 is not an “joinder by order” within r 6.28: it is not the grant of leave, but the act of the plaintiff in pursuance or anticipation of that leave, that effects the joinder. That is to be distinguished from the position under r 6.24, where it is the order of the court that effects the joinder.

3. [12]

   This rule and its equivalents were introduced because there was controversy as to whether, where a party was added after proceedings were commenced, the joinder operated, like other amendments, with effect from the date of institution of proceedings, or only from the date of joinder. [7] This was of significance because if it were the former, statutes of limitation could be circumvented. The rules reflect the reality that the added defendant becomes a party to proceedings only from the date of joinder, and until so joined, there are no proceedings against it. That rationale has no application where a defendant has already been named as such in the originating process.

4. [13]

   This construction of rule 6.28 is supported by the history of the rules. Their predecessors were in Supreme Court Rules 1970, Part 8, and are extracted in the judgment of the Court of Appeal in Fernance v Nominal Defendant; [8] cross-references to the relevant predecessor rule are included in historical notes in the UCPR equivalents, and have been incorporated where those rules are set out above. SCR Pt 8 r 1 was the predecessor of UCPR r 6.18(1); Pt 8 r 2 of UCPR r 6.19(1), and Pt 8 r 4 was the equivalent of UCPR r 6.18(2) and 6.19(2). Pt 8 r 8 was the predecessor of UCPR r 6.24. Pt 8 r 10 empowered the court to add parties where the interest or liability of a party passed by assignment, transmission or devolution to another person.

5. [14]

   SCR Pt 8 r 11(3) was the predecessor of UCPR r 6.28, and provided as follows:

6. [15]

   Thus SCR Part 8 r 11(3) explicitly referred only to rules 8 (the predecessor of rule 6.24) and 10, both of which provided for joinder by order of the court. There was no corresponding provision in respect of rules 1 and 2, the predecessors of 6.18 and 6.19. Joinder under those rules plainly took effect from the date of the originating process in which they were joined, with or without prior leave. Although UCPR r 6.28 contains no similar express reference, its context, and its use of the words “If the court orders that a person be joined as a party”, indicate that it was intended to have the same effect as its predecessor.

7. [16]

   It follows that rule 6.28 is not engaged by a grant of leave under rule 6.19.

Discretion

1. [17]

   In Dean-Willcocks, Austin J explained that proceedings of this kind had special features which may justify the granting of leave under UCPR r 6.19. [9]

2. [18]

   Since then, and certainly in more recent times, it has been the policy of the Corporations court that such proceedings should ordinarily be brought under the umbrella of a so-called “mothership” proceeding, as the single proceeding against all defendants has come to be known. Indeed, the court has recently consolidated proceedings commenced separately, including by removing separate proceedings commenced in the District Court, to achieve that result. There is inevitably a common issue of insolvency, and it is highly desirable that that question be litigated, if at all, once only, and that all parties be bound by the decision. There are considerable efficiencies, for liquidators and for courts, in conducting and managing one proceeding rather than multiple proceedings – and they are not limited to the saving of multiple filing fees. Moreover, it is historically conventional that all proceedings in a liquidation are conducted in the one file. And this approach does not prejudice the ability of the court, after the question of insolvency is resolved, to order that aspects of the proceedings which are peculiar to an individual defendant be determined separately – for example where the cases arise out of different transactions, or a good faith defence which is inherently peculiar to the individual defendant is raised. In that way, any additional cost to individual defendants of becoming entwined in the wider litigation can be minimised.

3. [19]

   No reason why those considerations would not apply, or for departing from that practice, and no detriment to any defendant from adhering to it, is apparent here.

Conclusion

1. [20]

   My conclusions may be summarised as follows.

2. [21]

   Proceedings in which multiple defendants are joined in the originating process before the requisite leave is granted are irregular unless and until leave is granted, but not invalid. It follows that when the originating process herein was filed on 22 August 2017, claiming relief under s 588FF, within the 3-year limitation period, an application under s 588FF(1) was validly made against each of the 23 defendants. UCPR r 6.28 is not engaged by a grant of leave under rule 6.19, and the proceedings against each defendant were commenced on the date of filing of the originating process, which was within time. The general policy and practice of the court favours the bringing of a single liquidator’s recovery proceeding joining all defendants in the one “mothership” proceeding, because of the commonality of the insolvency issue and the efficiencies gained; and no reason for departing from that practice, and no detriment to any defendant from adhering to it, appears here.

3. [22]

   The Court orders that:

   1. (1)

      Pursuant to UCPR r 6.19, leave be granted to the plaintiff to join in the originating process each of the 23 defendants named in it.

   2. (2)

      The fourth, eleventh, twelfth, seventeenth, nineteenth and twenty-second defendants pay the plaintiff’s costs of the interlocutory process filed 13 October 2017.

   3. (3)

      The proceedings continue on pleadings.

   4. (4)

      The plaintiffs file and serve a statement of claim by 24 November 2017.

   5. (5)

      The defendants file and serve their defences by 22 December 2017.

   6. (6)

      The proceedings be adjourned to 29 January 2018 in the Corporations Judge directions list for further directions.

   7. (7)

      The plaintiff give notice of these orders by email or in writing to those defendants not present when these orders are pronounced, within 48 hours.