Dudley (Liquidator) v RHG Construction Fitout & Maintenance Pty Ltd

• Jurisdiction: Australia Federal only
• Judge: JACKSON J
• Judgment Date: 28 August 2019
• Neutral Citation: [2019] FCA 1355
• Date: 28 August 2019
• Court: Federal Court

FEDERAL COURT OF AUSTRALIA

Dudley (Liquidator) v RHG Construction Fitout & Maintenance Pty Ltd [2019] FCA 1355

File number:	WAD 238 of 2019
Judge:	JACKSON J
Date of judgment:	28 August 2019
Catchwords:	PRACTICE AND PROCEDURE - application by defendants to cease being party to proceedings under r 9.08 Federal Court Rules 2011 (Cth) - 'mothership' unfair preference proceedings against multiple unrelated defendants - relief claimed does not arise out of same transaction or event or series of transactions or events under r 9.02(b) - irregularity in proceedings may be cured by s 51 Federal Court of Australia Act 1976 (Cth) - application successful in part
Legislation:	Corporations Act 2001 (Cth) ss 588FA, 588FC, 588FE, 588FF, 588M Federal Court of Australia Act 1976 (Cth) ss 37M, 51 Federal Court (Corporations) Rules 2000 (Cth) rr 1.3, 2.2 Federal Court Rules 2011 (Cth) rr 1.34, 9.02, 9.05, 9.07, 9.08
Cases cited:	Australian Consumer and Competition Commission v Launceston Superstore Pty Ltd [2013] FCA 297 Bendir v Anson [1936] 3 All ER 326 Berowra Holdings Pty Ltd v Gordon [2006] HCA 32; (2006) 225 CLR 364 Bishop v Bridgelands Securities (1990) 25 FCR 311 Cerche v Commissioner of Taxation [2001] FCA 1146; (2001) 48 ATR 17 Crayford Freight Services Ltd v Coral Seatel Navigation Company (1998) 82 FCR 328 Dean-Willcocks v Air Transit International Pty Ltd (2002) 55 NSWLR 64 Dickinson v Motor Vehicle Insurance Trust (1987) 163 CLR 500 Emanuele v Australian Securities Commission (1997) 188 CLR 114 Fernance v Nominal Defendant (1989) 17 NSWLR 710 General Steel Industries Inc v Commissioner for Railways (NSW) (1964) 112 CLR 125 Johnston v Vintage Developments Pty Limited [2006] FCAFC 171 Lois Nominees Pty Ltd v Hill [2011] WASC 53 Lord v Agreserves Australia Ltd [2006] FCA 598 Martin Bruce Jones as Liquidator of Forge Group Ltd (Receivers and Managers Appointed) (In Liquidation) v Sun Engineering (Qld) Pty Ltd [2017] WASC 195 Payne v Young (1980) 145 CLR 609 Qantas Airways Ltd v AF Little Pty Ltd [1981] 2 NSWLR 34 Re Bias Boating Pty Ltd [2017] NSWSC 1524 Smurthwaite v Hannay [1894] AC 494 Vintage Developments Pty Limited v GHD Pty Limited [2006] FCA 531
Date of hearing:	16 August 2019
Registry:	Western Australia
Division:	General Division
National Practice Area:	Commercial and Corporations
Sub-area:	Corporations and Corporate Insolvency
Category:	Catchwords
Number of paragraphs:	60
Counsel for the Plaintiff:	Mr JB Waterman
Solicitor for the Plaintiff:	Mendelawitz Morton
Counsel for the Fourth Defendant:	Mr RJ Price
Solicitor for the Fourth Defendant:	Equity & Advisory Corporate Services Pty Ltd
Counsel for the Sixth Defendant:	Mr SD Majteles
Solicitor for the Sixth Defendant:	Results Legal

ORDERS

		WAD 238 of 2019
BETWEEN:	GREGORY BRUCE DUDLEY & NEIL RAYMOND CRIBB AS JOINT AND SEVERAL LIQUIDATORS OF PRECISION CATERING & EQUIPMENT PTY LTD (IN LIQ) (ACN 126 255 936) Plaintiff
AND:	RHG CONSTRUCTION FITOUT & MAINTENANCE PTY LTD FORMERLY KNOWN AS RHG CONTRACTORS PTY LTD (ACN 159 703 349) First Defendant ; MTS ELECTRICAL CONTRACTING PTY LTD (ACN 136 656 829) Second Defendant ; WESCO ELECTRICS (1966) PTY LTD (ACN 008 700 025) (and others named in the Schedule) Third Defendant

JUDGE:	JACKSON J
DATE OF ORDER:	28 AUGUST 2019

THE COURT ORDERS THAT:

1. Pursuant to r 9.08 of the Federal Court Rules 2011 (Cth), the fourth defendant and the sixth defendant will each cease to be a party to these proceedings.

2. The operation of paragraph 1 of these orders is suspended so that it does not take effect until 4.00 pm (WST) on 27 September 2019.

3. There is liberty to apply in relation to paragraphs 1 and 2 of these orders.

4. The matter is listed for mention at 9.45 am on 11 September 2019.

5. Costs reserved.

Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

REASONS FOR JUDGMENT

JACKSON J:

1. The plaintiffs are the liquidators of Precision Catering & Equipment Pty Ltd (in liq). They have commenced these proceedings against 17 corporate defendants seeking repayment of what are alleged to be unfair preferences paid at a time when the company was insolvent.

2. The proceedings were commenced by way of a single originating process under r 2.2 of the Federal Court (Corporations) Rules 2000 (Cth). The claims have been resolved in relation to four of the defendants, but they remain on foot against 13 parties. They are proceedings of the kind that is sometimes called a 'mother proceeding' (Dean-Willcocks v Air Transit International Pty Ltd [2002] NSWSC 525; (2002) 55 NSWLR 64 at [14]; Martin Bruce Jones as Liquidator of Forge Group Ltd (Receivers and Managers Appointed) (In Liquidation) v Sun Engineering (Qld) Pty Ltd [2017] WASC 195 at [62]) or a 'mothership proceeding' (Re Bias Boating Pty Ltd [2017] NSWSC 1524 at [18]). That is, they are unfair preference claims in respect of the same insolvent company (or group of companies) that have been commenced against multiple defendants in relation to separate payments made by the company to each defendant.

3. The claims are at an early procedural stage. The originating process was supported by an affidavit that the first‑named plaintiff, Mr Dudley swore. The court ordered the plaintiffs to file a statement of claim, and on 3 July 2019 they did so. No defences have yet been filed.

4. These reasons concern an application brought by each of the fourth defendant, Tasman Power WA Pty Ltd, and the sixth defendant, GCO Electrical Pty Ltd (together, the applicants), seeking orders under r 9.08 of the Federal Court Rules 2011 (Cth) that they be removed as parties to the proceedings. The liquidators oppose the applications. This raises issues of how and to what extent the rules of this court accommodate mothership proceedings.

5. The outcome of the applications will not just have procedural implications. It is common ground that the winding up of Precision Catering commenced on 2 May 2016, and that this was the relation‑back day for the purposes of the Corporations Act 2001 (Cth). As a result, the three year limitation period under s 588FF(3)(a)(i) of that Act started on that day. The liquidators lodged the originating process on 26 April 2019, nearly three years after 2 May 2016. If the claims were to be commenced now, they would be out of time. The applicants say that if they are removed as parties, any order joining them to the proceedings would have effect no earlier than the time of the order. The result would be that the liquidators would be out of time for their claims against the applicants.

The rules of court

6. It was common ground that the Federal Court (Corporations) Rules do not deal specifically with the issues that arise on the applications, but that, by reason of r 1.3(2) of those rules, the Federal Court Rules 2011 apply.

7. The rules that are relevant are as follows

9.02 Joinder of parties - general

An application may be made by 2 or more persons, or against 2 or more persons, if:

(a) a...