Peter David Rodgers v Commissioner of Taxation [1998] FCA 489 (11 May 1998)

Last Updated: 12 May 1998

FEDERAL COURT OF AUSTRALIA

PRACTICE & PROCEDURE - application for leave to amend amounts claimed in proceeding - power of Federal Court to allow amendments where period of limitation governing the making of claims has expired - rule in Weldon v Neal - whether additional claims arise out of the same facts or substantially the same facts as those already pleaded.

CORPORATIONS LAW - liquidator seeking orders that respondent pay to company amounts said to be voidable under s 588FE Corporations Law - whether s 588FF(3) time limitation for bringing of such applications is procedural or substantive in character.

Corporations Law, ss 9, 588FE, 588FF(1), 588FF(3)

Federal Court of Australia Act 1976 (Cth), ss 59, 59(2B), 59(3)

Federal Court Rules, O 13 r 2

Harris v Western Australian Exim Corporation (1994) 56 FCR 1, considered

Brook v The Flinders University of South Australia (1988) 47 SASR 119, cited

Weldon v Neal (1887) 19 QBD 394, considered

Grundy v Lewis (1995) 62 FCR 567, cited

Matthews v Ross Neilson Investments Pty Ltd (Kiefel J, 14 December 1995, unreported), cited

Lidden v Composite Buyers (1996) 67 FCR 560, cited

Elna Australia Pty Ltd v International Computers (Aust) Pty Ltd (No 2) [1987] FCA 230; (1987) 16 FCR 410, distinguished

State of Western Australia v Wardley Australia Ltd (1991) 30 FCR 245, distinguished

Wardley Australia Ltd v State of Western Australia [1992] HCA 55; (1992) 175 CLR 514, distinguished

PETER DAVID RODGERS v

COMMISSIONER OF TAXATION

NG 3130 of 1997

BRANSON J

SYDNEY

11 MAY 1998

IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY	NG 3130 of 1997

BETWEEN:	PETER DAVID RODGERS Applicant
AND:	COMMISSIONER OF TAXATION Respondent
JUDGE:	BRANSON J
DATE OF ORDER:	11 May 1998
WHERE MADE:	SYDNEY

THE COURT ORDERS THAT:

1. The notice of motion dated 10 February 1998 be dismissed.

2. The applicant pay the respondent's costs.

Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY	NG 3130 of 1997

BETWEEN:	PETER DAVID RODGERS Applicant
AND:	COMMISSIONER OF TAXATION Respondent

JUDGE:	BRANSON J
DATE:	11 may 1998
PLACE:	SYDNEY

REASONS FOR DECISION

In this proceeding the liquidator of Sands & McDougall Wholesale Pty Limited (In Liquidation) ("the Company") seeks an order of the Court under s 588FF(1) of the Corporations Law for the payment to the Company of a sum representing the aggregate of the moneys that the Company has paid to the respondent under certain transactions said by the applicant to be voidable pursuant to s 588FE of the Corporations Law. The applicant has recently identified additional transactions by which the Company paid moneys to the respondent which he contends are voidable pursuant to s 588FE of the Corporations Law ("the additional transactions"). The applicant wishes to increase the amount claimed in the proceeding to reflect the additional transactions.

The issue of whether the applicant is entitled to leave to make the necessary amendments to his application and statement of claim involves consideration of s 588FF of the Corporations Law and O 13 r 2 of the Federal Court Rules.

Section 588FF of the Corporations Law provides, so far as is here relevant, as follows:

"(1) Where, on the application of a company's liquidator, a court is satisfied that a transaction of the company is voidable because of section 588FE, the court may make one or more of the following orders:

(a) an order directing a person to pay to the company an amount equal to some or all of the money that the company has paid under the transaction;

...

(3) An application under subsection (1) may only be made:

(a) within 3 years after the relation-back day; or

(b) within such longer period as the Court orders on an application under this paragraph made by the liquidator within those three years."

It is accepted that the application to amend the pleadings to make claims in respect of the additional transactions was not made within three years after the relation-back day. However, the proceeding itself was commenced within three years after the relation-back day. If the applicant obtains leave to amend his pleadings, any amendments made pursuant to that leave will relate back to the date on which the proceeding was instituted, unless the Court otherwise orders as a term imposed on the grant of leave (Harris v Western Australian Exim Corporation (1994) 56 FCR 1 at 5; Brook v The Flinders University of South Australia (1988) 47 SASR 119 at 125).

Order 13 rule 2 of the Federal Court Rules, which was made in its present form in 1994, gives to the Court wide powers to allow amendments to pleadings. So far as is here relevant, O 13 r 2 provides as follows:

"(1) Subject to the following provisions of this rule, the Court may, at any stage of a proceeding, on application by any party or of its own motion, order that any document in the proceeding be amended, or that any party have leave to amend any document in the proceeding, in either case in such manner as the Court thinks fit.

(2) All necessary amendments shall be made for the purpose of determining the real questions raised by or otherwise depending on the proceeding, or of correcting any defect or error in any proceeding, or of avoiding multiplicity of proceedings.

(3) Where an application to the Court for leave to make the amendment mentioned in subrules (4), (5), (6) or (7) is made after any relevant period of limitation current at the date of commencement of the proceeding has expired, the Court may, nevertheless, grant such leave in the circumstances mentioned in that subrule if it thinks it is just to do so.

...

(7) An amendment may be made notwithstanding that the effect of the amendment will be to add or substitute a new claim for relief or another foundation in law for a claim for relief if the new claim for relief or foundation in law for that claim arises out of the same facts or substantially the same facts as those already pleaded to support existing claims for relief by the party applying for leave to make the amendment."

The power of the judges of the Court to make the Federal Court Rules derives from s 59 of the Federal Court of Australia Act 1976 (Cth) ("Federal Court of Australia Act"). Section 59(1) authorizes the making of rules "not inconsistent with this Act, making provision for or in relation to the practice and procedure to be followed in the Court". Section 59(2B), which was introduced into the Act in 1994, provides as follows:

"The Rules of Court may make provision for:

(a) the amendment of a document in a proceeding; or

(b) leave to amend a document in a proceeding;

even if the effect of the amendment would be to allow a person to seek a remedy in respect of a legal or equitable claim that would have been barred because of the expiry of a period of limitation if the remedy had originally been sought at the time of the amendment."

The relevant explanatory memorandum confirms that s 59(2B) was introduced into the Federal Court of Australia Act to "overcome the question of the rule in Weldon v Neal".

The rule of practice known as the rule in Weldon v Neal (see Weldon v Neal (1887) 19 QBD 394) assumes the relation back theory of amendments. The rule in Weldon v Neal requires that a party not be allowed to amend a proceeding to set up a fresh claim in respect of a cause of action which, since the date of the initiating proceeding, has become statute barred. The rule is concerned with judicial practice, not judicial power (Harris v Western Australian Exim Corporation (1994) 56 FCR 1 at 4-5).

Although O 13 r 2 of the Federal Court Rules discloses an intention to overcome the operation of the rule in Weldon v Neal, it does so only in limited circumstances. Where a relevant period of limitation current at the date of commencement of the proceedings has expired, the wide terms of O 13 r 2(1) are to be read subject to O 13 r 2(3) and (7). Order 13 r 2(7) significantly limits the circumstances in which an amendment may be made to substitute a new claim for relief, or another foundation in law for a claim for relief, after the expiry of a period of limitation. It is necessary that the new claim for relief, or the new foundation in law for a claim for relief, arises out of the same facts, or substantially the same facts, as those already pleaded to support existing claims for relief (Grundy v Lewis (1995) 62 FCR 567; Matthews v Ross Neilson Investments Pty Ltd (Kiefel J, 14 December 1995, unreported); and Lidden v Composite Buyers Limited (1996) 67 FCR 560).

O 13 r 2 of the Federal Court Rules does not, in my view, disclose an intention to do more than regulate the procedure and practice of the Court so far as amendments of documents in a proceeding are concerned. This limited scope of operation of the rule is consistent with the nature of the rule making power contained in s 59 of the Federal Court of Australia Act. The terms of s 59(2B) of the Federal Court of Australia Act 1974 are not apt, in my view, to authorize the making of rules of court pursuant to which a time limit which forms an element of a cause of action may be extended, or a statutory barrier to the bringing of a cause of action after the expiration of a certain period of time is overridden. A time limit of one or other of these kinds is not a limitation period of a procedural character; it is a time limit of a substantive character or, possibly, a condition precedent to the court's jurisdiction. The conclusion that s 59(2B) is not intended to authorize the making of rules of this wider kind is reinforced by the terms of s 59(3) of the Federal Court of Australia Act. Section 59(3) is in the following terms:

"Rules of Court under this Act have effect subject to any provision made by another Act, or by rules or regulations under another Act, with respect to the practice and procedure in particular matters." (emphasis added)

I am of the view that the final words of s 59(3), namely, "with respect to the practice and procedure in particular matters" are probably intended to qualify the expression "by rules or regulations under another Act" only and not the expression "another Act". However, even if I am wrong in this, it would not affect my view of the extent of the rule making power conferred by the Federal Court of Australia Act.

The question thus arises of whether s 588FF(3) of the Corporations Law sets a procedural limitation period or rather creates an element of the cause of action identified in s 588FF(1), or amounts to a statutory barrier to the bringing of an action under s 588FF(1) after the expiration of a certain period of time.

I am not aware of any direct authority on this aspect of s 588FF(3) of the Corporations Law. It is necessary, therefore, to seek guidance from the approach taken by the courts to comparable statutory provisions. Section 82(2) of the Trade Practices Act (Cth) ("the TPA") may be seen as a comparable, although it is not an identical, provision. Section 82 provides as follows:

"82(1) A person who suffers loss or damage by conduct of another person that was done in contravention of a provision of Part IV or V may recover the amount of the loss or damage by action against that other person or against any person involved in the contravention.

(2) An action under sub-section (1) may be commenced at any time within 3 years after the date on which the cause of action accrued.

(3) [not here relevant]"

Gummow J observed in Elna Australia Pty Ltd v International Computers (Aust) Pty Ltd (No 2) [1987] FCA 230; (1987) 16 FCR 410 at 415 that the weight of authority is in favour of s 82(2) of the TPA providing a defence (ie. fixing a procedural limitation period in the traditional sense).

Since Gummow J made the above observation, the Full Court of this Court has concluded in State of Western Australia v Wardley Australia Limited (1991) 30 FCR 245 that s 82(2) of the TPA is of a procedural character, that is to say, "a condition of the remedy rather than an element in the right and a prerequisite to jurisdiction" (at 259). The Full Court consequently concluded that the need for compliance with s 82(2) may be waived by a respondent. However, as the Full Court itself acknowledged at 265, it was unnecessary for it to determine whether the Court had power to allow an amendment which would introduce a fresh cause of action which would otherwise have been statute barred as at the date of the amendment.

In the High Court in Wardley Australia Ltd v State of Western Australia [1992] HCA 55; (1992) 175 CLR 514 ("Wardley's Case") the majority of the Court, comprised of Mason CJ, Dawson, Gaudron and McHugh JJ, found it unnecessary to consider the power of a judge of the Federal Court to allow an amendment which would add a cause of action to a statement of claim when that cause of action is otherwise statute barred. Brennan J also found it "unnecessary to consider the question whether the Rules of the Federal Court leave no room for the operation of the rule in Weldon v Neal" (at 539). It is to be noted that the Rules of the Federal Court under consideration in Wardley's Case were in a different form from the present O 13 r 2. However, Toohey J at 562, with whom Deane J agreed on this point, characterized s 82(2) of the TPA as "a statutory barrier to any new cause of action". He described the sub-section as "a clear statutory prohibition on the bringing of an action after a period of years".

In Harris v Western Australian Exim Corporation, Hill J considered the power of the Court to allow an amendment to raise a claim pursuant to s 79 of the Fair Trading Act 1987 (WA) which would otherwise be out of time. The terms of s 79 of the Fair Trading Act 1987 (WA) are, for present purposes, indistinguishable from those of s 82 of the TPA. Hill J formed the view that the time limitation in s 79 is procedural in character. However, his Honour indicated that if he had formed the view that s 79 is substantive in character, he would have concluded that s 59 of the Federal Court of Australia Act would be seen as operating to amend it. His Honour noted that any inconsistency argument pursuant to s 109 of the Constitution had been disclaimed. He did not expressly refer to s 59(3) of the Federal Court of Australia Act.

It is to be noted that s 588FF(3) of the Corporations Law is expressed in more pre-emptory language than either s 82(2) of the TPA or s 79 of the Fair Trading Act 1987 (WA). Previous decisions concerning s 82 of the TPA and s 79 of the Fair Trading Act 1987 (WA), while providing guidance on the issue before me, are therefore distinguishable.

In my view, the better construction of s 588FF(3) of the Corporations Law is that it does not merely set a limitation period in the sense of providing a defence to a claim brought outside the periods of time there specified. It seems to me that s 588FF(3) is properly to be understood, in the words of Toohey J in Wardley's Case at 562, as "a clear statutory prohibition on the bringing of an action" outside the time periods there specified. Section 59(2B) of the Federal Court of Australia Act does not, in my view, authorize the making of rules of court which would allow the overriding of such a clear statutory prohibition. In any event, I consider that s 59(3) of the Federal Court of Australia Act stands in the way of O 13 r 2 of the Federal Court Rules being given an effect which would circumvent this clear intention.

Even if I am wrong in my interpretation of s 588FF(3), I am of the view that the applicant is not able to bring his proposed amendments within the terms of O 13 r 2. Section 588FF authorizes a court to make an order or orders where the court "is satisfied that a transaction of the company is voidable because of s 588FE" (emphasis added). That is, s 588FF is concerned with individual transactions. The definition of "transaction" for the purposes of Part 5.7B of the Corporations Law contained in s 9 of the Corporations Law reinforces the conclusion that an application must be made under s 588FF in respect of each transaction challenged by the liquidator. The relevant definition is as follows:

"`transaction', in Part 5.7B, in relation to a body corporate or Part 5.7 body, means a transaction to which the body is a party, for example (but without limitation):

(a) a conveyance, transfer or other disposition by the body of property of the body; and

(b) a charge created by the body on property of the body; and

(c) a guarantee given by the body; and

(d) a payment made by the body; and

(e) an obligation incurred by the body; and

(f) a release or waiver by the body; and

(g) a loan to the body;

and includes such a transaction that has been completed or given effect to, or that has terminated".

In this case the application, in its present terms, claims an order that the respondent pay to the Company an amount which it is conceded is calculated on a basis which involves no reference to the additional transactions. The statement of claim, in its present terms, particularizes certain payments made by cheque by the Company to the respondent. The date of each of the cheques is listed in the statement of claim, as is the cheque number and the date on which the cheque was presented for payment. The statement of claim goes on to plead as follows:

"6. At the time at which each of the Payments was made by the Company to the Defendant the Company was not able to pay all its debts as and when they became due and payable.

7. The payments and each of them resulted in the Defendant receiving from the Company in respect of an unsecured debt which the Company owed to the Defendant more than the Defendant would receive from the Company in respect of the debt if the payments and or each of them were set aside and the Defendant were to prove for the debt in the winding up of the Company."

In the circumstances, I am unable to accept the argument advanced on behalf of the applicant that the effect of the proposed amendments is to add a new claim or claims for relief which arise out of the same facts or substantially the same facts as those already pleaded to support existing claims for relief. The facts already pleaded are specific to the transactions particularised in the statement of claim. The additional transactions do not, either wholly or substantially, arise out of such facts. It is not sufficient for the purposes of O 13 r 2(7), in my view, that substantially the same facts could be pleaded in respect of the proposed new claims, or that the statement of claim could have been drawn in more general terms than it in fact was drawn.

The applicant tentatively contended that his claims in respect of the additional transactions might not be out of time as he was able to recover a voidable preference by way of an action for money had and received at common law. The limitation period for such an action is six years. However, the applicant did not utilize leave granted to him to expand on this contention by way of written submissions. Nor has he sought to amend his application to make such a common law claim. I regard the contention as having been abandoned.

SUMMARY OF CONCLUSION

I conclude that O 13 r 2 does not authorize the Court to grant to a party leave to amend a document in a proceeding where the effect of such amendment would be to override the prohibition contained in s 588FF(3) of the Corporations Law against the making of an application under s 588FF(1) outside the time periods specified in s 588FF(3). If I am wrong in this, I nonetheless conclude that O 13 r 2 does not authorize the making of the amendments which have sought to be made by the liquidator, as the proposed new claims for relief do not arise out of the same facts, or substantially the same facts, as those already pleaded to support the existing claims for relief made by the liquidator.

The motion for leave to amend the application and statement of claim will be dismissed with costs.

I certify that this and the preceding eight (8) pages are a true copy of the Reasons for Decision herein of the Honourable Justice Branson.

Associate:

Dated:

Counsel for the Applicant:	M Condon
Solicitor for the Applicant:	Kemp Strang
R Quinn, instructed by Australian Government Solicitor, appeared for the Respondent.
Date of Hearing:	20 April 1998
Date of Judgment:	11 May 1998