This week's TGIF considers a NSW Court of Appeal
decision which confirms that liquidators who bring a claim for
preference payments within the limitation period may amend that
claim to capture additional transactions otherwise subject to a
Sydney Recycling Park (SRP) provided
"tipping services" to Cardinal Group
(Cardinal), who were in the business of
"waste management". Cardinal ran into some financial
difficulties and on 1 February 2012, it was placed into
On 11 December 2014 the liquidators of Cardinal commenced
recovery proceedings seeking orders pursuant to s 588FF(1) of the
Corporations Act 2001 (Cth) (the Act)
that payments to SRP totalling $280,000 were unfair preferences (s
588FA), insolvent transactions (s 588FC) and voidable (s
The claim was brought within the limitation period imposed by s
588FF(3)(a) of the Act, which provided, relevantly, that an
application for orders under that section may be made within three
years of the relation back day or 12 months after the first
appointment of the liquidator, whichever is later.
A number of additional transactions were uncovered after the
commencement of proceedings during investigations into
Cardinal's affairs and finances and on 8 September 2015, after
the limitation period had expired, the liquidators sought leave to
file an amended statement of claim to include these additional
transactions (increasing the quantum sought by $214,000).
The application to amend the originating process was made under
ss 64 and 65 of the Civil Procedure Act 2005 (NSW)
(CPA) which provides that a plaintiff may amend a
pleading outside of the relevant 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 in the originating process.
SRP opposed the application on a number of basis, including that
an amendment was subject to a statutory bar under s 588FF(3)(a) of
AT FIRST INSTANCE
At first instance, Black J granted leave to amend the statement
Relevantly, Black J drew on existing authority and a distinction
between the making of an application and the amendment of an
existing application, noting that the limitation stipulated in s
588FF(3) applied only to the former.
SRP appealed the decision of Black J on two grounds and argued
making an "application" for orders under s 588FF
within the time limit was an essential pre-condition in respect of
each particular transaction (Ground 1); and
s 588FF(3) precludes an amendment to include new
"transactions" after the expiration of the time specified
by s 588FF(3) such that the powers to amend in the CPA were not
"picked up" (Ground 2).
Ultimately, the Court of Appeal unanimously dismissed the
In relation to Ground 1, the court rejected
SRP's arguments that an application made within time had to be
made with respect to each particular transaction or must
particularise the transaction in respect of which it is made.
The Court also rejected an argument that policy considerations,
namely, the need for commercial certainty with respect to those who
might be the subject of proceedings, required the application of
the limitation period. In doing so, the court noted the balance
between creditor interests and those that might be the subject of
Ultimately, the court followed the line of reasoning in
Rodgers v Commissioner of Taxation (1998) 88 FCR 61 and
the cases that followed, drawing a distinction between:
the making of an application under s 588FF(1) of the
Corporations Act; and
the amendment of an application including the addition of
further transactions arising from "the same or
substantially the same facts" as those already pleaded in
the original application.
In doing so, the Court rejected an argument that a number of
recent High Court decisions had effectively overturned this
Given the Court drew the same distinction as was the case in
Rodgers, the court ultimately rejected Ground
2 noting that the Federal statutory regime did not
preclude the operation of ss 64 and 65 of the CPA.
This decision provides comfort to liquidators when faced with an
impending statutory deadline, and incomplete books and records,
that a Court may allow further transactions in a series of dealings
to be added to a pleading after the expiry of time
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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