Federal Court of Australia

Modco Residential Pty Ltd (in liq) v Nextruss Steel Pty Ltd [2025] FCA 518

ORDERS

THE COURT ORDERS THAT:

1.    Pursuant to r 9.02(1)(c) of the Federal Court Rules 2011 (Cth), leave be granted, and be taken to have been granted on 9 December 2024, for the plaintiffs to proceed in this one action against each of the parties joined in the originating process as a defendant (save for the third defendant).

2.    The plaintiffs pay the costs of the second, sixth and ninth defendants of and incidental to the interlocutory application filed 28 March 2025 fixed in the sum of $750 (in aggregate and exclusive of GST).

3.    Liberty to apply.

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

REASONS FOR JUDGMENT

BANKS-SMITH J:

1    This is an application for leave for joinder in proceedings pursuant to r 9.02 of the Federal Court Rules 2011 (Cth). I have been asked to deal with it on the papers.

2    The liquidators of Modco Residential Pty Ltd (in liq) commenced this proceeding, naming nine defendants. Subsequently the proceedings have been dismissed by consent in relation to the fourth and seventh defendants. The proceedings against the third defendant, a company in liquidation, are not pursued and leave to proceed against it has not been obtained.

3    The plaintiffs allege that Modco made payments to the first defendant which constituted unreasonable director-related transactions of the company within the meaning of s 588FDA of the Corporations Act 2001 (Cth).

4    The plaintiffs also relevantly allege that the other remaining defendants, being the second, fifth, sixth, eighth and ninth defendants, received an unfair preference payment within the meaning of s 588FA of the Corporations Act, being payments that are voidable pursuant to s 588FE.

5    By pursuing all such claims in the one proceeding, the plaintiffs have commenced a 'mothership' or 'mother' proceeding but without addressing the operation of r 9.02 of the Federal Court Rules.

6    That rule, which was amended by the Federal Court Legislation Amendment Rules 2022 (Cth), now provides:

9.02    Joinder in proceedings involving common questions etc.

(1)    Two or more persons may be joined (as applicants or respondents) in any proceeding:

(a)    if separate proceedings by or against each of them would give rise to a common question of fact or of mixed fact and law; or

(b)    if all rights to relief claimed in the originating application are in respect of, or arise out of, the same transaction or series of transactions; or

(c)    by leave of the Court.

(2)    Leave under paragraph (1)(c) may be granted before or after the originating application is filed.

(3)    If 2 or more persons are joined under subrule (1), the Court may at any stage of the proceedings order that proceedings by or against any party or parties be conducted separately.

7    The plaintiffs claim unfair preference payments were received by the second, fifth, sixth, eighth and ninth defendants. Unsurprisingly, the circumstances by which each of those defendants is alleged to have received unfair preference payments from Modco differ. Therefore, as is apparent from the statement of claim, all rights to relief claimed in the proceeding do not arise out of the same transaction or events, albeit that common issues arise. Therefore, r 9.02(1)(b) is not satisfied.

8    It can be accepted for present purposes that there is a common issue in each of these unfair preference claims as to the date of insolvency of Modco, such that r 9.02(1)(a) is otherwise satisfied: Dudley (Liquidator) v RHG Construction Fitout & Maintenance Pty Ltd [2019] FCA 1355 at [11]. However, as noted, the claim brought against the first defendant is on a different basis, being a claim for an unreasonable director-related transaction. The plaintiffs accept that insolvency is not an element of a claim under s 588FDA of the Corporations Act: Aviation 3030 Pty Ltd (in liq) v Lao, in the matter of Aviation 3030 Pty Ltd (in liq) [2022] FCA 458 at [286].

9    Therefore, r 9.02(1)(a) is not satisfied insofar as all present claims are concerned, and leave is required to pursue all claims in the one proceeding under r 9.02(1)(c).

10    The second, fifth, sixth and ninth defendants have confirmed that they neither consent to nor oppose leave being granted under that rule. The first defendant has not participated in the proceeding, and I am informed that the plaintiffs intend to bring a separate summary dismissal claim against the first defendant, so that, if successful, there is a prospect that the proceeding will otherwise continue only in relation to the unfair preference claims.

11    I consider it appropriate that leave be granted. There remain sufficient overlapping factual issues relating to the liquidation of Modco to justify as a matter of efficiency the claims against the remaining defendants proceeding together. There will, however, be liberty to apply so that the question of the proceedings continuing separately against the first defendant might be revisited should it or another party wish to bring any application.

12    The second, sixth and ninth defendants sought their costs relating to the application. As they have participated in the case management to date, including attending a hearing which was in effect adjourned because of the identification of the need for the plaintiffs to retrospectively seek leave, and as they raised relevant questions for consideration by the plaintiffs and the Court, I consider it appropriate that they have their costs. They were willing to consent to an order that the plaintiffs pay to them a conservative amount ($750 in aggregate excluding GST) and in all the circumstances, I consider such an order is appropriate.

13    There will be orders accordingly.

Associate:

Dated:    19 May 2025