Court of Appeal Supreme Court New South Wales Medium Neutral Citation: Fletcher and anor as liquidators of Octaviar Administration Pty Ltd v Anderson [2014] NSWCA 450 Hearing dates: 28 October 2014 Decision date: 19 December 2014 Before: Beazley P at [1]; McColl JA at [2]; Barrett JA at [9] Decision: 1. Grant leave to appeal. 2. Direct that a notice of appeal in the form of the draft in the white folder be filed within seven days. 3. Vary the order made by Young AJ on 14 June 2013 (as corrected on 12 August 2013) in respect of Order 1 of the orders made by Ward J on 19 September 2011by adding at the end thereof the following: "in respect of any proceeding brought against the Commissioner of Taxation in 'the Court' (as defined by s 58AA(1) of the Corporations Act 2001 (Cth)) under s 588FF of that Act to the extent that the proceeding is brought because of the payment of an amount in respect of a liability referred to in s 588FGA(1) of that Act." 4. Appeal otherwise dismissed. 5. Remit to the Equity Division for determination the application upon which the order of Ward J of 19 September 2011 was made insofar as that application remains undetermined and is lawfully capable of being determined as to the matter in respect of which the order of Ward J was set aside by the order made by Young AJ on 14 June 2013 (as corrected on 12 August 2013 and varied by this Court). 6. Order that the applicants pay the costs of the first and second respondents (David Mark Anderson and Craig Robert White) in this Court and that there be no order for costs in favour of or against the third respondent (Commissioner of Taxation). [Note: The Uniform Civil Procedure Rules 2005 provide (Rule 36.11) that unless the Court otherwise orders, a judgment or order is taken to be entered when it is recorded in the Court's computerised court record system. Setting aside and variation of judgments or orders is dealt with by Rules 36.15, 36.16, 36.17 and 36.18. Parties should in particular note the time limit of fourteen days in Rule 36.16.] Catchwords: CORPORATIONS - winding up - winding up in insolvency - voidable transactions - time limit for bringing of proceedings by liquidators under Corporations Act 2001 (Cth) s 588FF in respect of voidable transactions - time extended upon liquidators' ex parte application by a "shelf" order under s 588FF(3)(b) applying to all proceedings against all persons - that "shelf" order later set aside as it relates to proceedings brought against Commissioner of Taxation - finding that directors of the company who would be liable under statutory indemnity to indemnify the Commissioner for loss or damage suffered through voidable transaction order were denied opportunity to be heard on the extension application and that there was a breach of the duty of candour to the court - liquidators challenge the order setting aside the "shelf" order as against the Commissioner - whether the relevant directors were entitled to an opportunity to be heard - nature of the "right", "interest" or "expectation" giving rise to right to be heard discussed - nature and implications of s 588FGA liability of directors discussed - PROCEDURE - miscellaneous procedural matters - ex parte application - setting aside on application of a person denied an opportunity to be heard Legislation Cited: Corporations Act 2001 (Cth) Evidence Act 1995 (NSW) Income Tax Assessment Act 1936 (Cth) Taxation Administration Act 1953 (Cth) Supreme Court Act 1970 (NSW) Taxation Administration Act 1953 (Cth) Uniform Civil Procedure Rules 2005 (NSW) Cases Cited: Barclays Bank v Tom [1923] 1 KB 221 Binetter v Deputy Commissioner of Taxation [2011] HCA 46; 282 ALR 607 BP Australia Ltd v Brown [2003] NSWCA 216; 58 NSWLR 322 Cameron v Cole [1944] HCA 5; 68 CLR 571 Carter, in the matter of Spec FS NSW Pty Ltd [2013] FCA 1027 Commissioner of Taxation v Moodie [2014] NSWCA 59; (2014) 282 FLR 453 Commissioner of Taxation v Sims [2008] NSWCA 298; 72 NSWLR 716 Condon v Commissioner of Taxation [2004] NSWSC 481; 185 FLR 27 Crosbie v Commissioner of Taxation [2003] FCA 922; 130 FCR 275 Deloughery v Weston [2010] NSWCA 148; 79 ACSR Deputy Commissioner of Taxation v Australian Securities and Investments Commission [2013] FCA 594 Duncan v Commissioner of Taxation [2006] FCA 885; 58 ACSR 555 Fortress Credit Corporation (Australia) II Pty Ltd v Fletcher [2014] NSWCA 148; 285 FLR 287 Gordon v Tolcher in his capacity as liquidator of Senafield Pty Ltd (in liq) [2006] HCA 62; 231 CLR 334 Green v Chiswell Furniture Pty Ltd [1999] NSWSC 608 Greig v Stramit Corporation Pty Ltd [2003) QCA 298; [2004] 2 Qd R 17 Hall (as liquidators of Reynolds Wines Ltd) v Commissioner of Taxation [2004] NSWSC 985; (2004) 186 CLR 111 In the matter of Liverpool Hotels Pty Ltd (in liq) [2010] NSWSC 72 John Alexander's Clubs Pty Ltd v White City Tennis Club Ltd [2010] HCA 19; 241 CLR 1 JPMorgan Chase Bank, National Association v Fletcher (as liquidator of Octaviar Ltd) [2014] NSWCA 31; 85 NSWLR 644 Kassem v Zhang [2008] NSWSC 1287 Kioa v West [1985] HCA 81; 159 CLR 550 Lofthouse v Commissioner of Taxation [2001] VSC 326; 164 FLR 106 McCann (as liquidator of Events R US Pty Ltd) v Commissioner of Taxation [2006] QSC 374 Miltonbrook Pty Ltd v Westbury Holdings Kiama Pty Ltd [2008] NSWCA 38; 71 NSWLR 262 Moschi v LEP Air Services Ltd [1973] AC 331 Mulvaney v Commissioner of Taxation [2004] SASC 166 News Ltd v Australian Rugby Football League (1996) 64 FCR 1710 Oates v Williams [1998] FCA 775; 84 FCR 348 Pegang Mining Co Ltd v Choong Sam [1969] 2 MLJ 52 Re Locktronic Systems Pty Ltd (No 1) [2008] VSC 626 Re Minister for Immigration and Multicultural Affairs; Ex parte Miah [2001] HCA 22; 206 CLR 57 Scott v Commissioner of Taxation [2003] VSC 50; 53 ATR 652 Taylor v Taylor [1979] HCA 38; 143 CLR 1 Thomas A Edison Ltd v Bullock [1912] HCA 72; 15 CLR 679 Category: Principal judgment Parties: Willliam John Fletcher and Katherine Elizabeth Barnet as Liquidators of Octaviar Limited and Octaviar Administration Pty Limited - First Appellant Octaviar Limited - Second Appellant Octaviar Administration Pty Limited - Third Appellant David Mark Anderson - First Respondent Craig Robert White - Second Respondent Commissioner of Taxation - Third Respondent Representation: Counsel: Mr B A J Coles QC/Mr P J Dowdy/Mr A K Flecknoe-Brown - Appellant Mr M K Condon SC/Ms A Hawkins First Respondent Submitting Appearance - Second Respondent Submitting Appearance - Third Respondent Solicitors: Henry Davis York - Appellant Dibbs Barker - First Respondent Bartley Cohen - Second Respondent Australian Government Solicitor - Third Respondent File Number(s): 2013/210905 Decision under appeal Date of Decision: 2013-06-14 00:00:00 Before: Young AJ File Number(s): 2011/153330 Judgment 1BEAZLEY P: I have had the advantage of reading in draft the reasons of Barrett JA. I agree with his Honour's reasons and with the orders he proposes. 2McCOLL JA: I agree with Barrett JA's reasons and the orders his Honour proposes. 3I would add the following observations. 4In Commissioner of Taxation v Moodie [2014] NSWCA 59; (2014) 282 FLR 453 ("Moodie") (at [90] - [91]) I explained the inter-relationship between a liquidator's application against the Commissioner of Taxation pursuant to s 588FF of the Corporations Act 2001 (Cth) for an order directing the Commissioner to pay to the company an amount that has been paid under a voidable transaction and the Commissioner's right pursuant to s 588FGA, where a s 588FF order is made, to seek to be indemnified in respect of any loss or damage resulting from the order by each person who was a director of the company when the payment was made. 5As I explained in Moodie (at [91] - [92], the liquidator has no interest in the controversy between the Commissioner and the director, is not "in suit" with the director the Commissioner is pursuing for indemnity and it is the Commissioner who recasts the liquidator's proceedings by pursuing the s 588FGA indemnity: Hall (as liquidators of Reynolds Wines Ltd) v Commissioner of Taxation [2004] NSWSC 985; (2004) 186 CLR 111 (at [22]). 6Nevertheless there is a considerable body of jurisprudence to the effect that a court considering making a s 588FF order against the Commissioner even by consent, must be mindful of the rights of third parties, such that a consent order made without notice to directors from whom the Commissioner proposes to enforce the statutory indemnity may be set aside as an irregularity: Moodie (at [52] ff). Thus directors against whom the Commissioner pursued the s 588FGA indemnity in the s 588FF proceedings are accorded the status of third parties, on the basis that they would be prejudiced if denied the opportunity to contest the liquidator's claim: Moodie (at [55] -[56]). 7In those circumstances, an identifiable or identified director of the company the subject of a liquidator's application for s 588FF(3) relief, in my view, falls into the category of a necessary party who ought to be joined: see John Alexander's Clubs Pty Ltd v White City Tennis Club Ltd [2010] HCA 19; (2010) 241 CLR 1 ("John Alexander") (at [131]). Failure to do so means the non-party "is entitled to have the order set aside, and is not limited merely to seeking the favourable exercise of a discretion, whether or not the person in question becomes a party": John Alexander (at [137]). 8Generally speaking, the setting aside of the order "leaves the field open for a real trial": John Alexander (at [137]). However, I accept that in this case, for the reasons Barrett JA has given, it is appropriate to remit the matter to the Equity Division for redetermination of the s 588FF(3) application. 9BARRETT JA: The liquidators of Octaviar Administration Pty Ltd ("OA") contend that orders made by a judge of the Equity Division (Young AJ) on 14 June 2013 (as corrected under the slip rule on 12 August 2013) should be set aside. 10Principal among those orders is an order which itself set aside, as against the present respondents (Mr Anderson, Mr White and the Commissioner of Taxation), an order made on 19 September 2011 by another judge of the Equity Division (Ward J, as she then was). Order 1 made by Ward J on 19 September 2011 was in the following terms: "Order under s 588FF(3)(b) of the Corporations Act 2001 (Cth) that the time for the making of the application in respect of Octaviar Administration under s 588FF(1) be extended to 3 April 2012." 11Young AJ's principal order, as corrected, is: "Order 1 of the orders made on 19 September 2011 by her Honour Justice Ward in this proceeding on 19 September 2011 [sic] be set aside in so far as they [sic] affect the first applicant (David Mark Anderson), the second applicant (Craig White) and the Commissioner of Taxation (or any of them)." 12Section 588FF(1) of the Corporations Act 2001 (Cth) empowers a competent court to make orders of specified kinds if, on the application of a company's liquidator, the court is satisfied that a transaction of the company "is voidable because of section 588FE". Among the orders that may be made is an order directing a person to pay money to the company (s 588FF(1)(a)). The section is commonly resorted to by liquidators in respect of so-called "voidable preferences" arising from payments made by a company within six months before day that is the "relation back day" in relation to its insolvent winding up. 13Section 588FF(3) provides: "An application under subsection (1) may only be made: (a) during the period beginning on the relation-back day and ending: (i) 3 years after the relation-back day; or (ii) 12 months after the first appointment of a liquidator in relation to the winding up of the company; whichever is the later; or (b) within such longer period as the Court orders on an application under this paragraph made by the liquidator during the paragraph (a) period." 14The purpose and effect of s 588FF(3) were considered by the High Court in Gordon v Tolcher in his capacity as liquidator of Senafield Pty Ltd (in liq) [2006] HCA 62; 231 CLR 334. It was there said (at [40]) that s 588FF(3) addresses, as "an essential aspect of the regime it creates", the period within which the application must be made; also (at [37]) that s 588FF(3) is "of the essence of the provision made by s. 588FF" and not merely a time stipulation of a procedural kind. It follows that failure to commence an action within the specified period means that an essential ingredient of the right of action the section creates is lacking, with the result that an application purportedly made after the end of the period is incompetent and must be dismissed: Kassem v Zhang [2008] NSWSC 1287 at [12]. 15The order made by Ward J on 19 September 2011 is accepted by the parties as an order under s 588FF(3)(b) that operates upon and in relation to each and every application that the liquidators of OA might make under s 588FF(1) after the making of the order. That characteristic causes the order to be referred to as a "shelf" order. It is also accepted (although, in the case of Mr Anderson and Mr White, with a reservation of rights in case a pending High Court appeal might succeed) that, in light of the decision of this Court in Fortress Credit Corporation (Australia) II Pty Ltd v Fletcher [2014] NSWCA 148; 285 FLR 287, the circumstance that the order of 19 September 2011 is a "shelf" order not referring to any particular s 588FF(1) application involving a particular defendant does not detract from its efficacy in relation to any s 588FF(1) proceedings affecting the present respondents that the liquidators have commenced or may commence. 16The order made by Young AJ to which the present proceedings relate were interlocutory orders. An appeal therefore lies only by leave: Supreme Court Act 1970 (NSW), s 101(2)(e). Argument as if on appeal was heard together with argument on the liquidators' application for leave to appeal. 17Mr Anderson and Mr White are former directors of OA. They opposed the grant of the relief sought by the liquidators in this Court. The Commissioner of Taxation filed a submitting appearance except as to costs. Circumstances 18On 2 April 2012 (that is, a little more than six months after Ward J made the "shelf" order of 19 September 2011), the liquidators of OA commenced proceedings in the Supreme Court under s 588FF(1) against the Commissioner of Taxation. They allege in those proceedings that OA made a number of payments to the Commissioner in circumstances which rendered the payments "insolvent transactions" within s 588FC and "unfair preferences" for the purposes under s 588FA, with the result that the transactions are "voidable" transactions under s 588FE. 19The fact that proceedings were thus brought against the Commissioner of Taxation causes s 588FGA to be relevant. Section 588FGA(1) commences: "This section applies if the Court makes an order under section 588FF against the Commissioner of Taxation because of the payment of an amount in respect of a liability: (a) under any of the following provisions: . . . " 20Then follow references to certain provisions of the Income Tax Assessment Act 1936 (Cth) and the Taxation Administration Act 1953 (Cth). Several of the payments relevant to the proceedings commenced by the liquidators on 2 April 2012 were made by OA in respect of liabilities incurred by it under provisions of taxation legislation referred to in s 588FGA(1). It follows that, by force of s 588FGA(1), s 588FGA as a whole will apply if "the Court" makes a s 588FF order against the Commissioner in respect of any of the relevant taxation payments made by OA. Section 588FGA goes on to provide as follows: "(2) Each person who was a director of the company when the payment was made is liable to indemnify the Commissioner in respect of any loss or damage resulting from the order. (3) An amount payable to the Commissioner under subsection (2): (a) is a debt due to the Commonwealth and payable to the Commissioner; and (b) may be recovered in a court of competent jurisdiction by the Commissioner, or a Deputy Commissioner of Taxation, suing in his or her official name. (4) The Court may, in the proceedings in which it made the order against the Commissioner, order a person to pay to the Commissioner an amount payable by the person under subsection (2). (5) A person who pays an amount under subsection (2) has the same rights: (a) whether by way of indemnity, subrogation, contribution or otherwise; and (b) against the company or anyone else; as if the payment had been made under a guarantee: (c) of the liability referred to in subsection (1); and (d) under which the person and every other person who was a director of the company as mentioned in subsection (2) were jointly and severally liable as guarantors." 21It is alleged by the liquidators that Mr Anderson and Mr White were directors of OA when certain payments within the s 588FGA(1) description were made by OA to the Commissioner. That being so, a liability of the two individuals to indemnify the Commissioner will exist by operation of s 588FGA(2), subject to any defences they may establish. 22On or about 13 July 2012, the Commissioner filed a defence in the s 588FF(1) proceedings brought by the liquidators. The Commissioner also filed an interlocutory process in those proceedings claiming, by reference to s 588FGA(2), indemnity by Mr Anderson and Mr White in respect of any order made against the Commissioner in respect of certain of the payments. The making of the order of 19 September 2011 23Ward J heard two applications on 19 September 2011. One was an application by the liquidators of OA upon which the "shelf" order subsequently challenged before Young AJ was made. The other was an application by the same persons, as liquidators of another company, Octaviar Limited ("OL"), for a "shelf" order further extending the s 588FF(3) limitation period for s 588FF(1) proceedings in respect of OL (there had already been an extension of that period to 3 October 2011 by a "shelf" order made by Hammerschlag J on 20 May 2011). 24The applications that came before Ward J (one in respect of OA and the other in respect of OL) were made ex parte but, as will be seen presently, certain potentially interested persons were put on notice that the liquidators proposed making the applications. No person sought to be joined as a party to either application or to be heard in relation to it. 25On the hearing of the applications, four affidavits were read. They were an affidavit of Ms Barnet, one of the liquidators, sworn on 10 May 2011, an affidavit of Ms Row, solicitor, of 30 May 2011, an affidavit of Ms Barnet sworn on 8 September 2011 and an affidavit of Ms Merrick, solicitor, affirmed on 19 September 2011. The first two had earlier been read before Hammerschlag J. 26Matters deposed to by Ms Barnet in her first affidavit as relevant to the questions before this Court, are as follows: 1. OL is the ultimate holding company of a group of companies (including OA) which, at the time of the liquidators' appointment, numbered more than 70 but had, at earlier times, numbered more than 400. 2. The group had a "complex organisational structure". 3. OA's main function within the group was to operate the group's bank accounts, employ staff and act as the group treasury. 4. The "relation back day" for OA is 3 October 2008, the day on which Mr Greig and Mr Harwood were appointed administrators of OA under Part 5.3A of the Corporations Act 2001 (Cth). The voluntary administration ended when a deed of company arrangement was executed but, on 31 July 2009, that deed was set aside by order of the Supreme Court of Queensland and Mr Greig and Mr Harwood were appointed liquidators. 5. By order made on 9 September 2009, Mr Greig and Mr Harwood were removed as liquidators of OA and Mr Fletcher and Ms Barnet were appointed in their place. 6. Mr Fletcher and Ms Barnet received from the former liquidators of OA "very little" information about any investigation of potential voidable transactions. Investigation "had not extended beyond the preliminary stages". 7. The period September 2009 to May 2011 had proved to be "an inadequate period to permit a sufficiently comprehensive and conclusive investigation into all potential voidable transactions". 27The affidavit just mentioned was sworn for the purposes of an application extending time under s 588FF(3) in respect of OL so that the deadline for commencement of voidable preference proceedings in respect of OL would correspond with that applying in the ordinary course of events in respect of OA, namely, 30 October 2011. The evidence in the affidavit was supplemented by the content of Ms Barnet's second affidavit which was sworn for the purposes of both the initial extension application in respect of OA and the application for further extension in respect of OL. 28In the second affidavit, Ms Barnet stated that investigations had progressed since she swore her first affidavit. She deposed that "[s]everal demands" had been issued and that "without prejudice discussions are continuing with some parties". She then said, giving explanations, that ongoing investigations had revealed "a number of very complex intercompany accounting issues" on the question of "which, or whether both, of OA and OL is the proper plaintiff" and "the manner in which the voidable transaction claims are pleaded". The explanations, in turn, referred to "significant issues", "very complex accounting arrangements" and "complex issues in respect of the intercompany loan position of the Octaviar Group". There was also reference to the need for an insolvency report - no doubt of the kind that could be tendered in evidence pursuant to s 79 of the Evidence Act 1995 (NSW). 29The affidavits of the solicitors (Ms Row and Ms Merrick) referred principally to persons who "may have been involved in transactions which may be the subject of recovery proceedings under s 588FF(1) of the Corporations Act 2001" (this form of words is used in each affidavit) and to steps that had been taken to put the identified persons on notice of the applications to the court that, at the time the affidavits were affirmed, were pending. Ms Row's affidavit was prepared for the application heard by Hammerschlag J and Ms Merrick's for the application heard by Ward J. 30Ms Merrick's affidavit, dealing with the pending application that, in due course, came before Ward J, also referred to notification of the application by letters dated 13 September 2011 sent to members of the committee of inspection in the windings up of both OL and OA. She referred to committee members representing named creditors, including the Commissioner of Taxation. 31The form of letter sent to committee members referred to ongoing investigations into potential voidable transaction claims in respect of both OL and OA and the intention to seek an extension of time (or, in the case of OL, a further extension) until 3 April 2012 for the commencement of s 588FF(1) proceedings. Reasons for needing the extension were set out. The return date of the application (19 September 2011) was given and an expectation that the application would be heard on that day was stated. 32Ms Merrick referred in her affidavit to responses received from some of the persons to whom the letter of 13 September 2011 had been sent. No response from the Commissioner of Taxation is mentioned. Ward J accurately summarised the position by saying that each response was to the effect that the notified person consented, or neither consented nor opposed, or did not consent and otherwise took no position. 33Ward J, in short ex tempore reasons, outlined the evidence before her, the principles applicable to the applications and the submissions made by counsel for the liquidators and expressed herself satisfied that a case had been made out for exercise of the relevant discretion in favour of the making of the orders sought. The decision of Young AJ 34Three applications came before Young AJ for hearing on 5 March 2013. They were an application by Mr Anderson, an application by Mr White and an application by the liquidators. 35Each of Mr Anderson and Mr White sought, by interlocutory process filed on 31 August 2012 (that is, soon after the liquidators commenced proceedings against the Commissioner on 31 July 2012), an order pursuant to rule 36.16(2)(b) or rule 36.15(1) of the Uniform Civil Procedure Rules 2005 (NSW), or in exercise of the Supreme Court's inherent jurisdiction, varying Ward J's order of 19 September 2011 by excluding from its operation the applicant himself and the Commissioner of Taxation. 36The liquidators, for their part, filed an interlocutory process on 25 October 2012 seeking a range of orders designed to preserve the position created by Ward J's orders. It is unnecessary to refer to the details of that application. 37Mr Anderson relied on two affidavits of his solicitor, Mr Guthrie, who deposed on information and belief that Mr Anderson became aware of the orders of Hammerschlag J and Ward J in April 2012 when his solicitors received information from the liquidators' solicitors. His solicitors received copies of the orders on 19 April 2012. Mr Guthrie also gave evidence about Mr Anderson's receipt of the interlocutory process and points of claim filed against him by the Commissioner on 31 July 2012. Evidence to generally the same effect concerning Mr White was given on affidavit by Mr White's solicitor. 38Mr Anderson and Mr White submitted before Young AJ that Ward J's order should be set aside, as regards the Commissioner and themselves, because (a) a "shelf" order should not have been made in the circumstances; (b) at the time they approached Ward J, the liquidators had already determined to proceed against the Commissioner and, in breach of an obligation of candour requiring them to do so, did not inform her Honour of that fact; and (c) Mr Anderson and Mr White, as persons clearly affected by the order sought, should have been afforded an opportunity to be heard before the order was made. 39A factual matter that received attention before Young AJ was whether the liquidators had informed the Commissioner of their intention to seek the orders that were eventually made by Ward J. Young AJ had before him an affidavit sworn on 18 October 2012 by Ms Knight, an employee of the liquidators' firm, who deposed that, at a meeting of the committee of inspection on about 9 September 2001, she spoke certain words to Mr Craig Morelande, an officer of the Commissioner who was present at the meeting as representative of the Commissioner. Ms Knight's evidence was that she said to Mr Morelande: "Craig, we are about to send you a letter regarding an extension of time to commence voidable transaction proceedings. The letter is to notify creditors that may be subject of a claim that an extension application is going to be made. The claim against the ATO predominately relates to PAYG. We will send this letter early next week." 40Ms Knight deposed that Mr Morelande replied: "Sure, that's fine. Send it through." 41However, no such letter was sent. 42Young AJ saw as the "key matter" before him the question whether Mr Anderson and Mr White were persons likely to be relevantly affected. He answered that question in the affirmative, referring to the circumstance that, in preference recovery proceedings brought by the company's liquidators against the Commissioner, directors to whom s 588FGA applies occupy a position equivalent to that of statutory third parties. It followed, in the judge's view, that Mr Anderson and Mr White had a right to be heard in relation to the application, that notice of it should have been given to them and that, in the absence of such notice, they were entitled ex debito justitiae to have Ward J's order set aside as it affected the Commissioner and them. 43Young AJ also took the view that, at the time the liquidators' application came before Ward J, they had a settled plan to institute s 588FF(1) proceedings against the Commissioner and that failure to inform the court accordingly involved breach of the duty of candour to which every ex parte applicant is subject. There was accordingly a second basis on which Mr Anderson and Mr White were entitled to the relief they sought. 44As to the first basis on which the application was put, Young AJ noted the submission of counsel for the liquidators that the mere fact that s 588FGA provides that directors are liable to indemnify the Commissioner does not mean that they are relevantly to be regarded as "likely" to be "affected" by the liquidators s 588FF(1) claim, given that the Commissioner's statutory indemnity is independent of and separate from the cause of action against the Commissioner. And it was for the Commissioner alone to decide whether to seek indemnity, either by joining the directors as third parties to the s 588FF(1) proceedings brought by the liquidators or in a separate and subsequent action involving the liquidators and the directors alone. 45His Honour also noted the submission that the statutory right of indemnity under s 588FGA puts the directors in a position analogous to that occupied by a guarantor - an analogy that makes relevant "the famous dictum" of Scrutton LJ in Barclays Bank v Tom [1923] 1 KB 221 at 223-224, that the matter between the defendant and the guarantor is something "with which the plaintiff has obviously nothing to do" - is relevant. 46Young AJ referred to the argument on behalf of the liquidators that the relevant question (based on the formulation in News Ltd v Australian Rugby Football League (1996) 64 FCR 1710 which in turn drew on what was said by the Privy Council in Pegang Mining Co Ltd v Choong Sam [1969] 2 MLJ 52 at 55-56) is: "Will his rights ... be directly affected by any order which may be made in the action?" 47Young AJ concluded that when one looked at "the practical realities of the Commissioner of Taxation being sued for a large amount of money and knowing that he has a statutory indemnity", it was "far more likely" the Commissioner would then seek to enforce his statutory indemnity against the directors, that being the course consistent with the Commissioner's "own self interest"; and that the possibility that the Commissioner might sue separately and subsequently was "very slim". His Honour's conclusion was: "Accordingly, it seems to me that when a liquidator is contemplating taking proceedings against the Commissioner of Taxation the directors are persons who are directly affected by that proposed action." 48The point was then made that, because the question whether the directors should have been given notice was different from the question whether the Commissioner should have been given notice, it was immaterial whether the Commissioner was informally notified or not. However, the judge took the view that the inference to be drawn from Ms Knight's evidence was that, as at September 2011 when she spoke with Mr Morelande, there was "a strong provisional conclusion by the liquidators that the Commissioner would be targeted under s 588FF". It followed, in the judge's opinion, that the liquidators had, by their conduct, conceded that "the Commissioner was a person likely to be affected (or directly affected) by the proposed application" and that each director, as "a person against whom almost certainly a claim will be made for indemnity" stood in the same position as the Commissioner. 49Having thus decided that the directors were persons whose right to be heard had been denied them, the judge turned to the second contention, that is, that the liquidators, in advancing their application before Ward J, had breached the duty of frankness owed by them as applicants ex parte. In relation to that, his Honour was of the opinion that the "strong provisional conclusion by the liquidators that the Commissioner would be targeted under s 588FF" was a material matter that should have been put before the judge. 50An order that Ward J's order of 29 September 2011 be set aside was then made. Upon subsequent realisation that that order was too wide (in that, given its general terms, it went beyond what was necessary to vindicate the rights of the particular applicants), the slip rule order of 12 August 2013 was later made. The case in this Court 51The draft notice of appeal on which the liquidators wish to rely alleges error of the primary judge in: (a)(a) finding that, when a liquidator is contemplating s 588FF(1) proceedings against the Commissioner, the directors of the company in liquidation are persons directly affected by the contemplated action; (b)(b) concluding that a person against whom a claim for indemnity may be made under s 588FGA is "in the same plight" as the Commissioner and should be notified of an extension application under s 588FF(3)(b); (c)(c) failing to find that the liquidators were under no requirement to notify Mr Anderson and Mr White of the proposed s 588FF(3)(b) application; (d)(d) finding that, before the hearing before Ward J, the liquidators had "reached the strong provisional view that" the Commissioner would be targeted under s 588FF(1); (e)(e) failing to find that the liquidators had disclosed to Ward JA the fact that the Commissioner was a prospective defendant to proceedings under s 588FF(1); and (f)(f) finding that the "principal, if not only, attack" that the liquidators had made within the extended period was upon the Commissioner and that the fact that the Commissioner was a prospective defendant was a material fact that should have been conveyed to Ward J. 52It is accepted that the primary judge mistook the position when he said that the "principal, if not only, attack" was on the Commissioner (item (f) above). But that of itself is insufficient to warrant any conclusion that his Honour's decision miscarried. 53There are two issues for consideration. The first is whether, in the particular circumstances, a right to be heard accrued to Mr Anderson and Mr White in the sense that the liquidators' admitted failure to give them notice of the application that came before Ward J had the consequence that they were denied natural justice and, on that ground, were entitled to have Ward J's order set aside to the extent that it affected them. The second issue is whether the evidence and submissions that the liquidators placed before Ward J omitted matter material to her Honour's informed consideration of the matter she was required to adjudicate. The right to be heard 54In Cameron v Cole [1944] HCA 5; 68 CLR 571, Rich J said (at 589): "It is a fundamental principle of natural justice, applicable to all courts whether superior or inferior, that a person against whom a claim or charge is made must be given a reasonable opportunity of appearing and presenting his case." 55That observation was made in relation to a person in respect of whom the bankruptcy court had made a sequestration order even though he had not been given notice of the adjourned hearing date and was therefore absent. The circumstances in Taylor v Taylor [1979] HCA 38; 143 CLR 1 were similar: an order dissolving a man's marriage was made in circumstances where, although he had been served with the petition, he had not been told by his lawyer that the hearing had been appointed and was accordingly absent. In both those cases, the person subjected to the order was a party to the proceedings and the relief granted in his absence affected him in a direct and material way. He was entitled to have the order set aside. 56In John Alexander's Club Pty Ltd v White City Tennis Club Ltd [2010] HCA 19; 241 CLR 1, reference was made (at [137]) to a different situation, that is, where an order is made that affects a person "who should have been joined as a necessary party" but was not. Such a person, it was said, is entitled to have the order set aside if it was made without the person's having been afforded an opportunity to be heard. A person "who should have been joined as a necessary party" stands in a somewhat remoter position than that occupied by the respondent debtor in Cameron v Cole and the respondent husband in Taylor v Taylor. Each of them had been made a party to the relevant proceeding and was, in Rich J's words, "a person against whom a claim or charge is made" (my emphasis). The statement in John Alexander's Club Pty Ltd, by contrast, was concerned with a person who is not a party but should have been made a party - because, most commonly, the right to the relief sought is alleged to lie against the person. Where it is sought to have the positive or negative compulsion of the court's order brought to bear upon a particular person, that person will obviously be a necessary party. 57The case of Pegang Mining Co Ltd v Choong Sam (above) to which the primary judge referred was concerned with the question of sufficient grounds to entitle a person to be added as a party. That, of course, is the connection with the relevant subject matter to which reference was made in the John Alexander's case. Their Lordships saw as the relevant question: "[w]ill his rights against or liabilities to any party to the action in respect of the subject matter of the action be directly affected by any order which may be made in the action?" (emphasis added). 58A decision whether to allow particular proceedings to be commenced against a particular person after a limitation period has expired is one that generally attracts a right of that person to be heard before the decision is made. It is the circumstance that time has run so as create in the person concerned a defence in the form of ability to plead the time bar that causes the right to arise: see, for example, Oates v Williams [1998] FCA 775; 84 FCR 348. 59In certain kinds of case, a court order does not affect, in any direct way, a person's "rights against or liabilities to any party to the action in respect of the subject matter of the action". This will be so where the order does not exert compulsion upon any particular person and its effect is, rather, to alter the legal environment or prevailing state of affairs. An example is the kind of order considered in both Miltonbrook Pty Ltd v Westbury Holdings Kiama Pty Ltd [2008] NSWCA 38; 71 NSWLR 262 and Binetter v Deputy Commissioner of Taxation [2011] HCA 46; 282 ALR 607, that is, a statutory order for the reinstatement of the registration of company so that the legal entity that was non-existent before the making of the order comes into existence again through effectuation of the order. 60In Miltonbrook Pty Ltd v Westbury Holdings Kiama Pty Ltd, such an order under s 601AH(2) of the Corporations Act 2001 (Cth) for reinstatement was made in respect of a deregistered company called Churnwood which, before its deregistration, had become the grantee of an option to purchase certain land owned by Miltonbrook. After deregistration, a director of Churnwood purported to cause that company to nominate Westbury to exercise the option. Thereafter while Churnwood remained deregistered, Westbury took steps towards the initiation of proceedings against Miltonbrook in which it asserted rights in respect of the land as against Miltonbrook that were dependent on dealings between itself and Churnwood. Westbury also made an ex parte application for a reinstatement order in respect of Churnwood in order that a party essential to its proposed proceedings against Miltonbrook should again exist. No notice of that application was given to Miltonbrook. The reinstatement order was made. A subsequent application by Miltonbrook to have that order set aside was dismissed but, on appeal by Miltonbrook, the reinstatement order was set aside. 61This Court held that Miltonbrook was entitled to and had not been given "a reasonable opportunity to be heard" on the application for the reinstatement order in respect of Churnwood. Spigelman CJ (with whom Tobias and Campbell JJA agreed) said (at [85]), referring to both Cameron v Cole and Taylor v Taylor: "It is axiomatic that when a statutory power like s 601AH(2) is conferred on a court, the legislature intends that procedural fairness will be accorded to all who may be affected by the order, unless there is a clear statement to the contrary. The denial of procedural fairness by a court is a 'fundamental irregularity' which would entitle a person aggrieved to set aside an order as a matter of unconditional right." 62The persons to whom the obligation to accord procedural fairness was owed were thus identified as "all who may be affected by the order". That formulation is very similar to that which Spigelman CJ had earlier adopted in BP Australia Ltd v Brown [2003] NSWCA 216; 58 NSWLR 322. He said in that case (at [136]): "Perhaps there will be circumstances in which it is not appropriate to give all who may be affected by an order under s 588FF(3)(b) an opportunity to make submissions prior to the order being made. It is not necessary to determine this question. Here there was a clearly identified party with a substantial interest in the question to be determined. Nothing appeared by way of urgency or otherwise to require an ex parte order to be made." 63In BP Australia Ltd v Brown, the order was similar to that in Miltonbrook Pty Ltd v Westbury Holdings Kiama Pty Ltd in that it was not an order operating directly upon any person. Rather, it was a s 588FF(3)(b) "shelf" order creating a state of affairs in which the liquidators could initiate s 588FF(1) proceedings against anyone they chose after the expiration of the generally applicable limitation period. The order under consideration in Greig v Stramit Corporation Pty Ltd [2003) QCA 298; [2004] 2 Qd R 17 was of the same kind. It was there said by Jerrard JA (at [109]) that a particular person (Stramit) had had a right to be heard on a s 588FF(3)(b) application because "Stramit was known by the liquidators to be a person whose rights and interests would be very much capable of being affected adversely by the ex parte order sought." 64As this last statement implies, the class of persons having a right to be heard where an order is not directed to any particular person cannot extend beyond those who, according to a reasonable assessment of known and readily available facts, are identifiable by the applicant as potentially affected. Assume that, in circumstances of the kind discussed in the Miltonbrook case, there had existed some potential defendant against whom the deregistered company had a viable cause of action that the company's non-existence caused to remain dormant. If the applicant for reinstatement did not know of those circumstances, that applicant could obviously not be under a duty to put the potential defendant on notice. The position is otherwise, however, where a reinstatement application is made ex parte by a liquidator with a view to commencement of recovery proceedings against identified persons: see, for example, In the matter of Liverpool Hotels Pty Ltd (in liq) [2010] NSWSC 72 (Austin J) and note the observation of Gordon J in Deputy Commissioner of Taxation v Australian Securities and Investments Commission [2013] FCA 594 that the defendants in an action proposed to be brought by the reinstated company may have no right to be heard on the reinstatement application if the court considers the claims against those defendants to be hopeless. The hopelessness of the claim against them means that the persons, in reality, have no interest. 65Finally, in relation to the relevant principle, it is apposite to quote what was said by this Court (Giles JA and Handley AJA, Spigelman CJ concurring) in Deloughery v Weston [2010] NSWCA 148; 79 ACSR 180 at [36]: "The right to be heard by a judicial officer before an order is made depends on the existence in fact of a relevant right, interest, or expectation that would or might be affected by the order. Where this is doubtful a judicial officer may err on the side of caution and allow the party or parties concerned to be heard. However, if the judicial officer decides, correctly, that such a party has no relevant right, interest or expectation that partly [sic; scil; party] has no right to be heard. The right depends on the existence in fact of a relevant right, interest or expectation. There is no such thing as a free standing right to be heard." 66The reference here to "a relevant right, interest or expectation" as the factor giving rise to a right to be heard calls to mind formulations used in administrative law cases. Thus, in Re Minister for Immigration and Multicultural Affairs; Ex parte Miah [2001] HCA 22; 206 CLR 57, for example, McHugh J said (at [126]): "It is now settled that, when a statute confers on a public official the power to do something which affects a person's rights, interests or expectations, the rules of natural justice regulate the exercise of that power 'unless they are excluded by plain words of necessary intendment': Annetts v McCann [1990] HCA 57; 170 CLR 596 at 598." 67In the same field of discourse, a distinction is drawn between a decision which affects "the rights, interests and expectations of the individual citizen in a direct and immediate way" and one which "indirectly affects the rights, interests or expectations of citizens generally": Kioa v West [1985] HCA 81; 159 CLR 550 at 584. The former attracts a duty to act fairly; the latter does not. 68I mention these analogous contexts only because the "right, interest or expectation" test is there elaborated. For courts, of course, the requirements of natural justice and procedural fairness are an essential part of the judicial function. The scope and effect of s 588FGA 69The first of the issues for determination in this matter goes to the identification and appraisal of any "right, interest or expectation" that Mr Anderson and Mr White had in relation to the liquidators' application under s 588FF(3)(b) for a "shelf" order extending to 3 April 2012 the time for the making of s 588FF(1) applications in respect of OA. Any such right, interest or expectation had its source in s 588FGA. It is to that section that I now turn. 70Section 588FGA(1) makes it plain that s 588FGA as a whole "applies" only "if the Court makes an order under s 588FF against the Commissioner of Taxation because of the payment of an amount in respect of a liability under" any one of the provisions of taxation legislation specified in s 588FGA(1). The making of such an order by "the Court" is thus the event that causes liability to indemnify under s 588FGA(2) to be imposed on a person there described so that, in terms of s 588FGA(3), there is "an amount payable to the Commissioner under" s 588FGA(2). 71It is curious that s 588FGA operates only if the s 588FF order made against the Commissioner is made by "the Court", that is, in terms of s 58AA(1), the Federal Court of Australia, the Supreme Court of a State, the Supreme Court of a Territory, the Family Court of Australia or a court proclaimed for the purposes of s 41 of the Family Law Act 1975 (Cth). Proceedings brought by a liquidator under s 588FF need not be commenced in "the Court" so defined. Section 588FF(1) confers jurisdiction on a "court" (lower case) which, under s 58AA(1), means "any court". It follows that a liquidator may, if he or she chooses, proceed under s 588FF against the Commissioner in an inferior court of appropriate jurisdiction and that, if that court makes an order against the Commissioner, s 588FGA does not operate. The Commissioner, of course, has no control over the choice of court in which any s 588FF action is initiated by a liquidator. 72In Scott v Commissioner of Taxation [2003] VSC 50; 53 ATR 652, Dodds-Streeton J confessed herself unable to discern any reason for the distinction drawn by s 588FGA between a case where the s 588FF(1) order against the Commissioner is made by "the Court" and one where it is made by "a court". That observation is cogent - as is her Honour's further observation that the reference in para (i) of s 588FF(1) itself to "the Court" (when the section empowers any "court") is inexplicable except as a typographical error. 73A practical consequence of the aspect of the legislation just mentioned is illustrated by Mulvaney v Commissioner of Taxation [2004] SASC 166. In that case, a liquidator brought a s 588FF proceeding against the Commissioner in the District Court of South Australia (which is, in s 58AA(1) terms, a "court" but not "the Court"). The Commissioner made an application to the District Court for an order transferring the liquidator's proceeding to the Supreme Court of South Australia. The application was made because, unless any order ultimately made against the Commissioner under s 588FF were an order of "the Court" (an expression comprehending the Supreme Court of South Australia), liability of the directors to indemnify the Commissioner would not arise under s 588FGA(2). The Commissioner's ability to claim against directors under the statutory indemnity, if subjected to a s 588FF(1) order, was wholly dependent on that s 588FF(1) order being an order of 'the Court" not merely "a court". For reasons not elaborated in the Supreme Court judgment, the District Court ordered that the proceeding be transferred. A similar procedure appears to have been followed in Lofthouse v Commissioner of Taxation [2001] VSC 326; 164 FLR 106 where the liquidator's action was commenced in the County Court of Victoria. 74If and when an order against the Commissioner is made by "the Court" under s 588FF at the suit of a liquidator, the directors are, by s 588FGA "liable to indemnify the Commissioner". In Lofthouse v Commissioner of Taxation (above), Warren J (as she then was) held (at [39]) that s 588FGA was the source of a potential liability in the nature of a contingent liability arising upon the contingency of "the effectuation of a legal liability on the part of the Commissioner to pay the liquidator". It can thus be said that, if a liquidator brings s 588FF proceedings against the Commissioner in respect of a payment of the kind referred to in s 588FGA(1), a person who was a director of the company when it made that payment has, by reason of s 588FGA(2), a potential liability in the nature of a contingent liability. That potential liability arises through a combination of the making of the payment by the company and the person's status as director at the time it was made. If "effectuation of a legal liability on the part of the Commissioner to pay the liquidator" occurs through the making of a s 588FF order by "the Court", that combination of circumstances alone is sufficient to cause s 588FGA(2) to subject the director to liability to indemnify the Commissioner. 75Such liability to indemnify may be enforced by the Commissioner by any procedure appropriate to the enforcement of an indemnity created by statute. Two particular procedures are provided by s 588FGA itself. First, an amount payable to the Commissioner under s 588FGA(2) is, under s 588FGA(3), a debt due to the Commonwealth and payable to the Commissioner and may be recovered in any court of competent jurisdiction. Alternatively, s 588FGA(4) permits "the Court" to make, "in the proceedings in which it made the order against the Commissioner" (that is, the s 588FF order), an order that a person "pay to the Commissioner an amount payable by the person under subsection (2)". 76It has been held in a number of first instance decisions (noted with approval by this Court in Commissioner of Taxation v Moodie [2014] NSWCA 59; 282 FLR 453) that, if the Commissioner chooses the course made available by s 588FGA(4), a procedure must be adopted that causes the person against whom the s 5888FGA(4) order is sought to become a party to the proceeding in which the liquidator sues the Commissioner under s 588FF. This is because a s 588FGA(4) order can only be made "in" the proceeding in which "the Court" made the s 588FF order against the Commissioner: see Condon v Commissioner of Taxation [2004] NSWSC 481; 185 FLR 27; Hall (as liquidators of Reynolds Wines Ltd) v Commissioner of Taxation [2004] NSWSC 985; 186 FLR 111; McCann (as liquidator of Events R US Pty Ltd) v Commissioner of Taxation [2006] QSC 374. In addition and as those and other cases confirm (see, for example, Crosbie v Commissioner of Taxation [2003] FCA 922; 130 FCR 275), the interests of justice require that a person against whom the Commissioner seeks a s 588FGA(4) order must be able to participate in the proceeding between the liquidator and the Commissioner, particularly where the Commissioner will not take steps to dispute his liability to the liquidators. In Commissioner of Taxation v Sims [2008] NSWCA 298; 72 NSWLR 716, Ipp JA (Beazley and Macfarlan JJA concurring) endorsed the finding of Young J in Duncan v Commissioner of Taxation [2006] FCA 885; 58 ACSR 555 that the authorities recognise that directors against whom a s 588FGA(4) order is sought "should be able to contest the liquidator's claims against the Commissioner". 77Once the director becomes, by appropriate means, a party to the proceeding "in" which the liquidator seeks a s 588FF order against the Commissioner, matters relevant to the position of a third party in proceedings by a plaintiff against a defendant arise for consideration. In that respect, the decision of Robson J in Re Locktronic Systems Pty Ltd (No 1) [2008] VSC 626 is instructive. In that case, liquidators proceeded against the Commissioner under s 588FF and the Commissioner, by third party notice, claimed to be indemnified by three directors under s 588FGA in the event that the Commissioner was found liable on the liquidators' claim. The directors, by their pleading, put in issue a central element of the liquidators' claim against the Commissioner, namely, the company's insolvency at the relevant time. That matter was not disputed by the Commissioner. In due course, two of the directors withdrew their defence and were held thereby to have admitted all relevant allegations made by the liquidators. The third director (Walsh) continued alone as a party not admitting insolvency. His position was described by Robson J in these terms (at [20]): "The consequences are that if Mr Walsh does not withdraw his defence to the plaintiffs' statement of claim, then his defence to paras 6, 7 and 8 remain and the plaintiffs will have to prove their case against the defendant. It follows that I would not be entering judgment against the defendant on the consent of the defendant because, as the authorities establish, that is a matter of [sic] in which Mr Walsh has an interest." 78In reaching that conclusion, Robson J referred to rules of court allowing a third party to serve a defence to the plaintiff's claim. His Honour also quoted what had been said about third party procedure by Scrutton LJ in Barclays Bank Ltd v Tom (above). In Commissioner of Taxation v Moodie (above), McColl JA (at [58]) referred to Scrutton LJ's explanation of the tripartite position of plaintiff, defendant and third party as "illuminating". Scrutton LJ said (at 223-224): "Now I think it is important to keep clearly in mind what the third party procedure is. The plaintiff has a claim against the defendant. The defendant thinks if he is liable he has a claim over against a third party. With that matter between the defendant and the third party the plaintiff has obviously nothing to do. He is not concerned with the question whether the defendant has a remedy against somebody else. His remedy is against the defendant. But the defendant is much interested in getting the third party bound by the result of the trial between the plaintiff and himself or otherwise he might be at a great disadvantage if having fought the case against the plaintiff and lost he had then to fight the case against a third party possibly on different materials with the risk that a different result might be arrived at. The object of the third party procedure is then in the first place to get the third party bound by the decision between the plaintiff and defendant. In the next place it is directed to getting the question between the defendant and the third party decided as soon as possible after the decision between the plaintiff and the defendant, so that the defendant may not be in a position of having to wait a considerable time before he establishes his right of indemnity against the third party while all the time the plaintiff is enforcing his judgment against the defendant, And thirdly, it is directed to saving the extra expense which would be involved by two independent actions. With these objects in view the third party order usually provides that the third party may appear at the trial between the plaintiff and defendant. When the third party has so appeared as party to proceedings, various questions arise as to what he can do. Can he counterclaim against the plaintiff? The answer is no, for such a counterclaim would have nothing to do with the issue in the action to which he is admitted as a party. Can he interrogate the plaintiff? The answer is yes if the objects of the interrogatories is to show that the plaintiff's claim against the defendant cannot be supported (citations omitted)." 79A particular dimension of the position occupied by directors as parties "in" the liquidators' proceeding when the Commissioner takes the course made available by s 588FGA(4) is illustrated by the decision of Wigney J in Carter, in the matter of Spec FS NSW Pty Ltd [2013] FCA 1027. The plaintiffs in that case were the liquidators of six companies in a group of companies all of which were in liquidation. They brought s 588FF proceedings against the Commissioner in respect of relevant taxation payments made by certain of the companies. The Commissioner filed an interlocutory process seeking s 588FGA(4) orders against the companies' directors, Willett and Wentworth. The Commissioner also filed a defence to the effect that some of the payments had been made by companies in the group other than those by which the liquidators' originating application alleged them to have been made. Some of the companies said by the Commissioner to have made relevant payments were companies additional to those originally identified by the liquidators That prompted the liquidators to file an application for leave to amend the claim to encompass payments to those additional companies. The directors sought to oppose the application for leave to amend. One of their contentions was that s 588FF proceedings against the additional companies were time barred by s 588FF(3). The liquidators challenged the directors standing in relation to the amendment application. The judge, after referring to authority, held that the directors should be heard. He said (at [29]-[30]): "For the reasons given by both Barrett J in Hall and Finkelstein J in Crosbie, the interests of justice require that the directors be permitted to defend or contest the proceeding between the Liquidator and the Commissioner and the issues that arise therein where the Commissioner has proceeded against the directors under s 588FGA by taking the route provided in s 588FGA(4). It necessarily follows, in my opinion, that in this matter, Messrs Willett and Wentworth have standing to oppose the amendment of the originating process and statement of claim. That is because one of the effects of the amendments is to potentially increase the amount of the indemnity sought against them. The adequacy of the proposed amended pleadings also has direct implications for their defence to the claims made against them. If Messrs Willett and Wentworth are able to contest and raise defences to the Liquidator's action against the Commissioner, I can see no reason why they are not able to take issue with the proposed amended pleadings." 80In the light of the not inconsiderable case law that s 588FF and s 588FGA have generated, the following propositions about their combined scope and effect may be stated: 1. If a liquidator obtains from "the Court" a s 588FF order against the Commissioner in respect of a payment made by the company as referred to in s 588FGA(1), a statutory liability to indemnify the Commissioner attaches immediately to every person who was a director of the company when the payment was made. 2. The accrual of the statutory liability is not produced by or dependent on any decision or action of the Commissioner. It occurs by operation of law upon the making of the s 588FF order by "the Court". 3. A person who becomes subject to the statutory liability to indemnify created by s 588FGA(2) may, however, plead a defence as provided for in s 588FGB if sued on the statutory indemnity. 4. If a liquidator obtains a s 588FF order against the Commissioner from a "court" other than "the Court", no question of directors' liability to indemnify the Commissioner arises. 5. In a case where the s 588FF claim is, because of its amount, cognisable in either "the Court" or some other "court", the initial choice of forum rests with the liquidator alone. 6. However, if, in such a case, the liquidator chooses a forum other than "the Court", the Commissioner, with a view to resort to s 588FGA(4), may seek transfer of the proceedings to "the Court" and, subject always to provisions of general application governing transfer of proceedings, the application is very likely to be successful. 7. If a s 588FF claim by the liquidator against the Commissioner and a s 588FGA(4) claim by the Commissioner against directors are together pending in "the Court", a procedure must be followed that enables the directors to contest the claim made by the liquidator against the Commissioner. 8. If a liquidator commences a s 588FF proceeding against the Commissioner in "the Court" and the Commissioner does not seek to make directors parties for the purpose of seeking against them orders under s 588FGA(4), success by the liquidator against the Commissioner will leave any relevant directors exposed to subsequent action by the Commissioner under s 588FGA(3) in any court of competent jurisdiction; and directors subjected to such subsequent action will have no ability to contest the liquidator's claim against the Commissioner. 81Every person who was a director at the time the company made a payment to the Commissioner of the s 588FGA(1) kind in respect of which the liquidator subsequently commences s 588FF proceedings against the Commissioner in "the Court" incurs, immediately and by reason of the commencement of those proceedings, a potential or contingent obligation to indemnify the Commissioner pursuant to s 588FGA(1). At the time the potential or contingent obligation arises (and at all earlier times after his or her appointment), the liquidator will, in the ordinary course of events, be in a position to identify the persons who were the directors of the company at the time the payment was made. The source of the potential or contingent obligation - a statutory provision - will also be known to the liquidator. The right to be heard - discussion 82The primary judge expressed an opinion that where, as in the case before him, the Commissioner was "being sued for a large amount of money and knowing that he has a statutory indemnity", it was "far more likely" that the Commissioner would assert the right of indemnity under s 588FGA by way of an immediate cross-claim than that the Commissioner would elect not to seek indemnity or would later do so by separate debt action (his Honour was obviously contemplating that the liquidator's action against the Commissioner would be brought in "the Court" and that the operation of s 588FGA would therefore be attracted). 83The liquidators say that the primary judge made this finding without evidence. They therefore challenge the judge's conclusion based on the finding, that is, the conclusion that, because there was "a strong provisional conclusion by the liquidators that the Commissioner would be targeted under s 588FF", the directors were persons directly affected by the proposal to extend the period within which s 588FF proceedings could be brought. 84The liquidators further say that it was wrong for the primary judge to lay down a rule that requires a liquidator to predict, anticipate or pre-empt the Commissioner's decision not only whether to seek to enforce any s 588FGA indemnity but also as to which of the several methods of enforcement might be adopted. All that, they say, involves the Commissioner and the directors only; and a liquidator, in Scrutton LJ's words, has "nothing to do" with matters between those parties. Furthermore, they point to the observation of Lord Diplock in Moschi v LEP Air Services Ltd [1973] AC 331 at 348 that a guarantor is not entitled to notice from the creditor of the debtor's failure to perform an obligation which is the subject of the guarantee. 85The liquidators do not challenge the proposition (advanced by counsel for Mr Anderson and Mr White before the primary judge) that the Commissioner was a person likely to be affected by the application that came before Ward J and should therefore have been notified of that application. The liquidators contend that the obligation to notify the Commissioner was satisfied by the oral statement made by Ms Knight to Mr Morelande and acknowledged by him (see [39]-[40] above). The Commissioner has never sought to say that there was no notification. In fact, in a letter of 8 October 2012, the Commissioner's solicitor accepted that prior notice of the application had been given and confirmed that the Commissioner had not informed the directors thereof. The Commissioner maintains that there was no requirement or expectation that the Commissioner inform the directors. 86Mr Anderson and Mr White accept that a liquidator's rights against the Commissioner and the Commissioner's rights against directors are different and separate rights. But, they contend, the interests of the directors clearly extend to questions of the ability of a liquidator to maintain the s 588FF cause of action against the Commissioner. In the context of the present case, Mr Anderson and Mr White also draw attention to some important factual matters. 87First, of course, there is, as the liquidators accept, the fact that they saw fit to put the Commissioner on notice of the application that ultimately came before Ward J. They did this by means of Ms Knight's conversation with Mr Morelande. 88Secondly, the liquidators were, by that time, aware of numerous payments that had been made by OA to the Commissioner in the period relevant to s 588FF recovery claims, that is, the period of six months immediately before the commencement of the voluntary administration that preceded winding-up. Extensive documentation on that subject had been provided by the Commissioner to the liquidators in 2009. That documentation related to various payments made by OA to the Commissioner, including payments within categories referred to in s 588FGA(1). By letter dated 1 August 2011, the liquidators asked the Commissioner for further information concerning the period 9 September 2007 to 9 September 2008. Ms Barnet accepted in cross-examination before Young AJ that, as at 13 September 2011, she had been provided with all the information that the Commissioner held that was necessary to a determination of what the Commissioner knew about the financial position of OA. She also accepted that she was aware that OA was the only employer in the group and was the entity "predominantly" liable to remit to the Commissioner PAYG withholding payments (one of the s 588FGA(1) categories). 89Thirdly, the liquidators had, as at April 2011, issued a letter of demand to one party (SPTCom) seeking recovery by reference to the voidable transaction provisions. The relevant payment to that party was made in August 2008 and was said in the letter of demand to be a payment that "satisfies the requirements of Part 5.7B of the Corporations Act", including that it "was made at a time when OA was insolvent". The liquidators' report to the committee of inspection dated 15 April 2011 said that "investigations and examinations support a date of insolvency of at least 30 November 2007". Ms Barnet accepted in cross-examination that this reflected her thinking as at April 2011. 90Fourthly, the liquidators' solicitors said in a letter of 28 November 2012 to Mr Anderson's solicitors and Mr White's solicitors, referring to the application that had been before Ward J: "The liquidators' application for an extension of time in which to bring voidable transaction proceedings was not made on the basis that the liquidators did not possess the relevant information necessary to identify the facts of the unfair preference claims against the Commissioner of Taxation (ATO Preference Claim), nor on the basis that the liquidators had not identified the ATO Preference Claim." 91The letter goes on to explain that the extension application was made for reasons set out in Ms Barnet's affidavit read before Ward J and mentioned above. 92It is, to my mind, clear that, as at 19 September 2011, the liquidators had assembled information sufficient to warrant the conclusion that a viable s 588FF claim could be brought against the Commissioner in respect of payments by OA that included payments within s 588FGA(1) categories. They may not have been quite ready to file proceedings - in particular, because they had not received a report from an expert witness on the question of insolvency. That, however, had not prevented their making formal demands upon other persons and foreshadowing s 588FF proceedings if the demands were not met. The allegations conveyed by the formal demands included an allegation of insolvency in August 2008. That was consistent with the opinion in the report of 15 April 2011 that insolvency had existed since "at least 30 September 2007". The liquidators did not dispute that the state of their intentions and preparedness as against the Commissioner were such as to give rise to a right, interest or expectation in the Commissioner concerning the s 588FF(3)(b) application that caused the Commissioner to have a right to be heard. It is the liquidators' contention that they recognised and accommodated the Commissioner's right to be heard by means of the conversation between Ms Knight and Mr Morelande. 93That being so, the real issue regarding the giving of notice of the application that was heard on 19 September 2011 is whether Mr Anderson and Mr White, being the only directors of OA at times within the period relevant to s 588FF recovery, were persons in respect of whom there existed a like right, interest or expectation. The liquidators' contention that they were not rests on the abstract propositions that, in a proceeding involving a plaintiff, a defendant and a third party joined by the defendant, the plaintiff "obviously has nothing to do" with the matter in issue between the defendant and the third party (Barclays Bank v Tom); and that, in the case of a contractual guarantee, the guarantor is not entitled to notice from the creditor of the debtor's failure to perform the guaranteed obligation (Moschi v LEP Air Services Ltd). 94Those abstract propositions are not relevant to the present issues. The statement in Barclays Bank v Tom is no more than a generalisation in relation to a matter of procedure. The statement in Moschi v LEP Air Services Ltd is a corollary of the obligation of a guarantor to see to it that a debtor performs his own obligations to the creditor. No analogous obligation is at work in the particular statutory context. Indeed, any analogy at all with principal and surety is of very limited utility in that statutory context. It is true that s 588FGA(5) causes a director who pays pursuant to the s 588 FGA(2) indemnity to have "the same rights" in certain respects, "as if" that payment had been made under a guarantee of a certain description. Otherwise, however, any parallel with guarantees is by no means obvious. 95I say this because the statute does not create primary and secondary liabilities akin to those that arise in a case of principal and surety. There is no concept of being answerable for the debt or default of another on the footing "if he does not pay you, I will". The liability of directors under s 588FGA(2) is a statutory liability that is in no way referable to anything done or not done by the Commissioner or the directors themselves. If "the Court" makes a s 588FF(1) order against the Commissioner in respect of a payment by the company of a kind referred to in s 588FGA(1), the making of that order causes two obligations to arise: first, the Commissioner's obligation to obey the order; and, second, each relevant director's statutory obligation to indemnify the Commissioner under s 588FGA(2). As Warren J pointed out in Lofthouse v Commissioner of Taxation (above), the bringing of s 588FF proceedings against the Commissioner in respect of a payment of the kind referred to in s 588FGA(1) causes a person who was a director of the company when it made that payment to be immediately subject to a potential liability in the nature of a contingent liability. If and when a s 588FF(1) order is made, that order itself has the immediate and direct effect of subjecting such a director to financial liability; and this is so whether or not the Commissioner has indicated an intention of seeking to recover from the director. The liquidator's application to "the Court" for such an order is an application for an order that, once made, will have that immediate and direct effect upon the director. 96Except in cases of deficiencies in company record keeping and cases of "shadow" or "de facto" directors, a liquidator knows (or has ready means of discovering) the identities of persons who were the company's directors at all relevant times. The liquidator is therefore able to identify persons for whom s 588FGA(2) liability will in all probability result if the liquidator brings a s 588FF action against the Commissioner in respect of relevant payments made by the company to the Commissioner at relevant times. It is not to the point that the Commissioner may or may not seek to enforce that liability if it arises. The legal obligation of the directors to indemnify is created regardless of any decision or action of the Commissioner. The right to be heard - decision 97In the present case, for the reasons I have stated, the liquidators had, as at 19 September 2011, well developed plans to institute s 588FF proceedings against the Commissioner in respect of payments made by OA that are within s 588FGA(1) categories. The liquidators correctly acknowledged that the Commissioner was therefore a person who had a relevant right, interest, or expectation that would or might be affected by the extension order under s 588FF(3)(b) for which they moved before Ward J on that day. 98Given the distinct likelihood that any such s 588FF proceedings would be brought in "the Court" and the statutory liability that would accrue automatically under s 588FGA(2) if such proceedings were successful, the persons who were directors of OA when the payments in question were made (Mr Anderson and Mr White) also had a relevant right, interest, or expectation that would or might be affected by that extension order. Their identities were known to the liquidators. 99Failure of the liquidators to give Mr Anderson and Mr White notice of the application that came before Ward J therefore rendered the extension order, once made, liable to be set aside as it affected them. The primary judge was correct so to conclude. Furthermore, there was no scope for his Honour to exercise his discretion otherwise than by ordering that the order be set aside to the extent necessary to protect the rights of Mr Anderson and Mr White. It is relevant to quote again from the judgment of Spigelman CJ in Miltonbrook Pty Ltd v Westbury Holdings Kiama Pty Ltd (above) at [85]-[87]: "It is axiomatic that when a statutory power like s 601AH(2) is conferred on a court, the legislature intends that procedural fairness will be accorded to all who may be affected by the order, unless there is a clear statement to the contrary. The denial of procedural fairness by a court is a fundamental irregularity which would entitle a person aggrieved to set aside an order as a matter of unconditional right. (See Cameron v Cole (at 591); Taylor v Taylor (1979) 143 CLR 1 at 16). The exercise of the discretion under r 36.15 must be similarly clear cut. The respondents' submission that the circumstances of this case do not constitute an irregularity or 'sufficient cause' within r 36.15 should be rejected. In my opinion, the fundamental nature of the irregularity flows through to the exercise of the discretions under s 1322(4)(b) and under r 36.15. This Court must not be, nor appear to be, an instrument for procedural unfairness." 100In this case too, to allow to stand an order that was made in circumstances where rights of Mr Anderson and Mr White were denied would be to cause the court to be an instrument for procedural unfairness. 101But the order Young AJ made (even after the adjustment made under the slip rule) was too wide. The order recognised that, because liability of the individuals could flow directly from the making of a s 588FF(1) order against the Commissioner, preservation of their position required that the s 588FF(3)(b) order be set aside not only as it affected them but also as it affected the Commissioner. That approach was too broad in two respects. First, it caused the order to be set aside in respect of proceedings that the liquidators might commence in a court other than "the Court" which would not trigger any s 588FGA(2) liability of the individuals. Secondly, it caused the order to be set aside in respect of proceedings concerning payments to the Commissioner outside the s 588FGA(1) categories. 102Subject to revision to deal with those two matters, the order made by Young AJ (as corrected on 12 August 2013) was correctly made and should stand. The obligation of candour 103The duty of candour owed to the court by a plaintiff who moves ex parte is that referred to by Isaacs J in Thomas A Edison Ltd v Bullock [1912] HCA 72; 15 CLR 679. Such a plaintiff is subject to the "most serious responsibility" and must "bring under the notice of the court all facts material to the determination of" the claim pursued without notice to an affected person. As Isaacs J made clear, however, the duty is a corollary or reflection of the affected person's right to be heard on the claim. Isaacs J said (at 681): "There is a primary precept governing the administration of justice, that no man is to be condemned unheard." 104Then followed these words: "and therefore, as a general rule, no order should be made to the prejudice of a party unless he has the opportunity of being heard in defence". 105Isaacs J continued: "But instances occur where justice could not be done unless the subject matter of the suit were preserved, and, if that is in danger of destruction by one party, or if irremediable or serious damage be imminent, the other may come to the Court, and ask for its interposition even in the absence of his opponent, on the ground that delay would involve greater injustice than instant action. But, when he does so, and the Court is asked to disregard the usual requirement of hearing the other side, the party moving incurs a most serious responsibility." 106The starting point in the analysis was thus the general rule that no order should be made to the prejudice of a person unless that person has had an opportunity to oppose the making of the order. An exception is then recognised where "instant action" is necessary and no such opportunity is in fact given. It is in circumstances where the need for "instant action" causes the general rule not to be observed (so that no opportunity to be heard is given) that the "most serious responsibility" arises according to Isaacs J's formulation. 107In the present case, on my assessment, the liquidators were required to afford to Mr Anderson and Mr White an opportunity to be heard on the application that came before Ward J on 19 September 2011. Their failure to do so means that the order should be set aside as it relevantly affects them. That being so, there is no occasion to consider separately the question whether an additional ground for taking that course is provided because the liquidators did not "bring under the notice of the court all facts material to the determination of" the application. 108That said, it is not at all clear to me that the duty of candour required elaboration of the liquidators' intentions or state of resolve or preparedness regarding proceedings against the Commissioner (involving, in a derivative sense, potential liability of Mr Anderson and Mr White). Once it was made clear that s 588FF proceedings were in contemplation against a number of persons and that identified potential defendants had been given notice of the hearing and an opportunity to oppose the grant of the extension sought, there was, to my mind, no occasion for any special explanation to be given of the steps that were in train in relation to the identified persons or the precise point that planning and preparation in relation to them had reached. Outcome 109The matters before the Court are of general importance. Leave to appeal is therefore warranted. The liquidators have, however, failed to establish a basis for concluding that Young AJ's order should be set aside although, as I have said, that order does require minor revision. 110A question then arises as to consequences. Young AJ's order (with the minor revision to which I have referred) excludes from the operation of the "shelf" order made by Ward J all s 588FF proceedings brought by the liquidators against the Commissioner which, if successful, will involve s 588FGA(2) liability of Mr Anderson or Mr White. The application entertained by Ward J might therefore be regarded as undetermined as to s 588FF proceedings of that kind. If that is the correct view, it is necessary to decide whether this Court should proceed to decide the application as it relates to such proceedings. 111The liquidators submit that this Court should proceed in that way; and it may be noted that, in Miltonbrook Pty Ltd v Westbury Holdings Kiama Pty Ltd (above), the Court (at [88] and following) proceeded on the footing that it had power to determine the application that, as it were, came back to life once the reinstatement order affected by want of natural justice was set aside. The setting aside of the affected order "lays the ghost of the simulacrum of a trial, and leaves the field open for a real trial": Cameron v Cole (above) per Rich J at 589. 112I am not persuaded that, in the particular circumstances of this case, it is appropriate that this Court address the question whether Ward J's order should be reinstated in relation to the matters excluded from its operation by Young AJ's order (as adjusted). I say this for three reasons. First, there is, in the particular statutory context, at least a potential question whether the application upon which Ward JA's order was made was revived pro tanto upon the making of Young AJ's order (see JPMorgan Chase Bank, National Association v Fletcher (as liquidator of Octaviar Ltd) [2014] NSWCA 31; 85 NSWLR 644). That potential question should not be pre-empted. Secondly, it is by no means clear to me that Mr Anderson and Mr White, in their submissions to this Court, engaged sufficiently with the possibility that there might be a determination of the ultimate merits of their position as regards extension of time. Thirdly, the case put in opposition to the liquidators' appeal concentrated on matters relevant to the absence of an opportunity of Mr Anderson and Mr White to be heard before Ward J and the duty of candour without also encompassing matters relevant to the exercise of the s 588FF(3)(b) discretion that would have arisen specifically in relation to the individuals had their right to be heard been recognised and satisfied when the matter was before Ward J. 113As to the third aspect, it may be noted that, in Green v Chiswell Furniture Pty Ltd [1999] NSWSC 608 at [15], Austin J identified Issues to be addressed on an application for extension of time under s 588FF(3)(b) as follows: "Considerations relevant to the exercise of the Court's discretion under s 588FF(3) were stated by Finn J in Taylor v Woden Constructions Pty Ltd (Federal Court, 23/8/98, unreported). The following propositions, with which I respectfully agree, emerge from that case: (a) ordinarily, the issues raised on an extension application are threefold: (i) the explanation for the delay in bringing proceedings; (ii) a preliminary review of merits of the foreshadowed proceedings - that is, an investigation as to whether such proceedings would be so devoid of prospects that it would be unfair, by granting an extension, to expose the other party to the continuing prospect of suit; (iii) whether the likely actual prejudice resulting from the grant of an extension is sufficiently substantial to outweigh the case for granting an extension; (b) where the liquidator's purpose in seeking the extension of time is simply to put himself into a position where he can properly decide whether or not to bring proceedings, a preliminary inquiry into the merits of any consequent proceedings may not always be necessary. 114On this basis, a material issue in relation to any extension of time affecting Mr Anderson and Mr White will be whether, at the time the application was heard before Ward J, a s 588FF action against the Commissioner implicating them via s 588FGA lay in the realm of possibility envisaged by Austin J's paragraph (b) or the realm of more concrete reality comprehended by paragraph (a). That question is not necessarily the same as that raised by the principles concerning a right or opportunity to be heard. Particularly if the action was of the paragraph (a) kind, questions of prejudice to the individuals would arise. That is something on which they would deserve an opportunity to adduce evidence in an orderly way, if minded to do so. 115In my opinion, orders should be made as follows: 1. Grant leave to appeal. 2. Direct that a notice of appeal in the form of the draft in the white folder be filed within seven days. 3. Vary the order made by Young AJ on 14 June 2013 (as corrected on 12 August 2013) in respect of Order 1 of the orders made by Ward J on 19 September 2011by adding at the end thereof the following: "in respect of any proceeding brought against the Commissioner of Taxation in 'the Court' (as defined by s 58AA(1) of the Corporations Act 2001 (Cth)) under s 588FF of that Act to the extent that the proceeding is brought because of the payment of an amount in respect of a liability referred to in s 588FGA(1) of that Act." 4. Appeal otherwise dismissed. 5. Remit to the Equity Division for determination the application upon which the order of Ward J of 19 September 2011 was made insofar as that application remains undetermined and is lawfully capable of being determined as to the matter in respect of which the order of Ward J was set aside by the order made by Young AJ on 14 June 2013 (as corrected on 12 August 2013 and varied by this Court). 6. Order that the applicants pay the costs of the first and second respondents (David Mark Anderson and Craig Robert White) in this Court and that there be no order for costs in favour of or against the third respondent (Commissioner of Taxation). ********** Amendments 22 December 2014 - typo Amended paragraphs: 85 22 December 2014 - DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 22 December 2014