09
Jan 2017

Liquidators’ Late Amendment Upheld by Court of Appeal

The decision of the New South Wales Court of Appeal in Sydney Recycling Park Pty Ltd v Cardinal Group Pty Ltd (in liq) [2016] NSWCA 329 will be warmly received by liquidators.

The case confirms a liquidator’s ability, in certain circumstances, to amend a claim for the recovery of unfair preference payments to include further claims relating to transactions not known at the time the claim was filed, even though the statutory time limit for commencing proceedings has subsequently expired.

By way of background, the Liquidators of Cardinal Group Pty Ltd (Cardinal Group) commenced proceedings to recover preference payments made to Sydney Recycling Park Pty Ltd (SRP) totaling $280,000 pursuant to sections 588FF, 588FA, 588FC and 588FE of the Corporations Act 2001 (Cth) (the Act)

The claim was brought within the relevant limitation period prescribed by s 588FF(3) of the Act, however subsequent to the proceedings being commenced and after the limitation period had expired, the Liquidators discovered additional payments bringing the total claim to $494,000.  The Liquidators understandably amended their claim pursuant to sections 64 and 65 of the Civil Procedure Act 2005 (NSW) (CPA) to include those additional payments.

The case comprised an appeal from the decision of Justice Black of the Supreme Court of New South Wales to grant leave to the Liquidators to file their amended claim.

Decision

In the appeal, SRP contended that the Liquidators’ new claim for the additional payments fell outside the time limit prescribed by section 588FF(3) of the Act. SRP based its argument on two High Court cases handed down in 2015, one being Grant Samuel Corporate Finance Pty Ltd v Fletcher [2015] HCA 8 (Grant Samuel) in which the Court held, inter alia, that s 588FF prevailed over state laws and as such an extension of time could not be supplemented or varied by procedural rules of a particular state court.

In the original decision, Justice Black distinguished the facts from the authority in Grant Samuel and looked to policy considerations in rejecting SRP’s arguments. Black J noted that the decision in Grant Samuel should not overrule other longstanding decisions, such as in Rodgers v Commissioner of Taxation (1998) 88 FCR 61 (Rodgers) which have been correctly relied upon by liquidators in the past to amend a claim that was brought within the limitation period to include additional transactions that would otherwise be out of time.

Ultimately, the Court of appeal determined unanimously that that the time limit prescribed by s 588FF(3) should not be construed as applying to each individual transaction that the liquidator seeks to impugn, rather it should be construed to apply to the commencement of the relevant proceedings (which had been commenced in time).  Accordingly, the claim could be validly amended to include the claims for the additional payments.

Takeaway

This case confirms that in certain circumstances, provided the relevant proceeding has been commenced within the statutory time limit, Liquidators will be entitled to amend claims brought for the recovery of unfair preferences (and other voidable transactions) even though the amendment is sought after the statutory time limit for commencing a proceeding has expired.

For more information, please contact us.