Category Archives: Traps for Young Players

Does it Matter? Identifying Parties Using ACNs and ABNs

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Australian Business Numbers (ABN) and Australian Company Numbers (ACN) are often used interchangeably in legal proceedings. I attribute this to the fact that most lawyers on the local circuit are innumerate (author included) and their eyes glaze over as soon as they are presented with anything that an accountant may have ever touched.

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ABNs and ACNs

An ABN is an identifier issued by the Australian Taxation Office and is issued to every entity hoping to engage in business all the way from sole trader to partnership to corporations. An ABN is issued under the A New Tax System (Australian Business Number) Act 1999 (Cth).

An ACN is an identifier issued by the Australian Securities and Investments Commission (ASIC) and unlike an ABN is issued only to companies.

Well that was easy

Yep, simple right? You know I wouldn’t set you up just to rip the rug out from under you right? Well, wrong on both counts.

As far as process documents go, ACNs should be used when they exist unless the company is being sued as a trustee. In any event, the Corporations Act 2001 (Cth) does allow for leeway. Section 1344 of the Corporations Act allows for companies to be identified by either their ACN or ABN when required. As businesses don’t necessarily have ACNs this essentially means that an accurate description with either ABN or ACN will be sufficient for court documents.

Pro tip: An often ignored aspect of suing under an ACN is that the process is supposed to be accompanied by an affidavit attaching a search of the ASIC records. This is required by rule 2.4(2) of the Corporations Rules incorporated in Schedule 6 of the Court Procedures Rules 2006 (ACT).

Wait, that’s still pretty easy

Yep, that is unless you’ve met my friend the Personal Property Securities Register (PPSR).

In January 2017, a leasing finance company lost a $23m ore crusher all because they identified a company with its ABN instead of its ACN.

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In 2009, the Australian Personal Property Securities Act 2009 (Cth) was passed. The act set up a register of security interests that was designed to simplify the registration and identification of security interests.

The act has not simplified things. Instead, we are now almost a decade into a post-apocalyptic hellscape ruled over by technocrats and bad bond villains (As far as registering security interests goes that is). Errors are common and the scheme is still poorly understood even by those who have studied it extensively.

Catch me if you can

In the matter of OneSteel Manufacturing Pty Limited (administrators appointed) [2017] NSWSC 21 concerned Alleasing, a leasing finance company, seeking to recover their $23m asset and prevent it from being applied by the administrators for the benefit of all of Onesteel’s creditors.

Alleasing had registered their interest under Onesteel’s ABN and later corrected it to the company’s ACN but only after the administrators had been appointed.

The Court was required to consider whether using the ABN created a “seriously misleading” defect as set out in section 164 of the PPSA.

Alleasing attempted to rely on section 1344, set out above, to allow them to use either identifier, but this was swatted away as that provision only applies to laws administered by ASIC, which the PPSA is not.

The Court found that using the wrong identifier was a serious defect as anyone searching the register using the ACN would not be able to identify the relevant security interest. In the case of Onesteel, the defect didn’t cause prejudice to any creditors or the company, but the defect remained nonetheless.

Alleasing also sought to rely on the Corporations Act (s588FL) to extend their time to amend the registration, but the property had already vested with the administrators so it would not be possible. The crusher was available for distribution to all of the creditors of Onesteel and Alleasing would simply have to wait in line with everyone else.

As with all things PPSR, this, of course, is not a consistent or clear position, even when the same judge is involved. In 2013, in Future Revelation Ltd v Medica Radiology & Nuclear Medicine Pty Ltd [2013] NSWSC 1741 the same defect was found to not be serious and the property was returned to the claiming party. The common thread though is how easily the interest can be identified despite the defect.

 

When Are Your Pleadings Embarrassing?

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If a Judge or practitioner ever refers to your pleadings as embarrassing don’t necessarily take it personally. Embarrassing pleadings is a defined term and refers more to the intention of the pleading instead of the skill of the person drafting it.

Embarrassing Pleadings

A pleading is embarrassing where it is “unintelligible, ambiguous, vague or too general, so as to embarrass the opposite party who does not know what is alleged against him” Meckiff v Simpson [1968] VR 62 at 70.

In Shelton v National Roads & Motorists Association Limited [2004] FCA 1393 at [18], Tamberlin J explained the concept of “embarrassment” with respect to pleadings:

“Embarrassment in this context refers to a pleading that is susceptible to various meanings, or contains inconsistent allegations, or in which alternatives are confusingly intermixed, or in which irrelevant allegations are made that tend to increase expense. This is not an exhaustive list of situations in which a pleading may be embarrassing: see Bartlett v Swan Television & Radio Broadcasters Pty Ltd (1995) ATPR 41-434.”

Pleadings can be embarrassing even when they do contains an adequate cause of action if the facts they rely upon are expressed in such a way as to leave difficulties or doubts about figuring out what they are exactly referring to. This can be through generalities, vagueness or any other framing of the proceedings that prevents the defendant from knowing in advance the case it is required to meet.

Remedy

If the court considers pleadings to be embarrassing then the appropriate remedy is to strike out the pleading rather than to order the provision of particulars. This may seem harsh, but the reality is that it is not the function of particulars to replace the necessary components of a pleading, simply to augment them.

Pleadings are everything. Actions are often commenced with insufficient pleadings with too many lawyers thinking that they can simply amend at a later date if the pleadings are found to be insufficient. Unfortunately, for the client, this will normally be accompanied with a big costs order if the court allows it at all.

The Slip Rule…or how I learned to stop worrying and love common sense

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The recent decision of Brennand v Hartung handed down by the Supreme Court has a nice detailed analysis and history of Rule 6906, commonly known as the “Slip Rule”. 

The slip rule exists in most jurisdictions in various forms but essentially allows for the correction of orders or court certificates. In the ACT the correction can be made by application or on the court’s own initiative and practice allows for the correction to be made in chambers.

Whether or not a Court has the power to correct and effectively alter a final judgment in order to correct a mistake arises frequently and there is a common law power in addition to the rule. As stated by the High Court in Achurch v The Queen [2014], quoting Smith v New South Wales Bar Association:

“It has long been the common law that a court may review, correct or alter its judgment at any time until its order has been perfected” [17]

Although it has been pointed out in Norman v Norman (1992) 6 WAR 372 at 375 that the precise time when an order or judgment is perfected is not entirely clear.

An order is considered made under r 1605 once it is either formally recorded (in chambers or otherwise) or upon pronouncement (as soon as it is spoken by the judicial officer). In an ex tempore decision the formalisation of the order is left to the associate or registry. Keeping in mind that Judges or Magistrates may not always have a chance to confer prior to or after the making of the order, it is understandable that the recording of the order, or even the reasons, can be mis-recorded to an extent that ambiguity or error exists.

The decision in Brennard examined an order made by Master Harper ruling that “The statement of claim filed by the plaintiffs on 7 September 2012 be struck out.”  despite being filed on a separate date and the resulting order for costs incorrectly awarded to the plaintiff instead of the defendants as clearly intended.

Refshauge J concluded that the error was obvious and the defendants were entitled to the usual presumption of costs following the event, but questioned what to actually do about it. Having reviewed the transcript and helped by the fact the application was not opposed the Court found that as the order had been clearly expressed in court (therefore: made) it was amenable to apply the slip rule to correct the official orders as they were recorded.

There are other interesting applications of the rule particularly in relation to Bankruptcy proceedings, noting that bankruptcy rules are considered a harsh mistress to be applied even in situations that may not seem reasonable or fair. See for example Flint v Richard Busuttil for applying the slip rule to retrospectively extend the time for compliance with a creditors petition or Soil and Contracting Pty Ltd v Boban from W.A. for the equivalent in winding up applications.

 

If you require an order remade it is a simple enough process. An email to the Registry cc’ing in all parties, outlining the mistake and the proposed corrected version should be enough. Other parties will have a chance to comment this way and the registry can check the record or simply check with the judicial officer. The order can then be made in chambers, or if absolutely necessary listed at the officer’s convenience.