Allstate Exploration NL v Ryan
[2008] TASSC 79
•10 December 2008
[2008] TASSC 79
CITATION: Allstate Exploration NL v Ryan [2008] TASSC 79
PARTIES: ALLSTATE EXPLORATIONS NL
(ACN 000 679 023)
MATTHEWS, William Harry Carne
MATTHEWS, Lidia Joan
v
RYAN, Michael
WOODINGS, Antony
TITLE OF COURT: SUPREME COURT OF TASMANIA
JURISDICTION: ORIGINAL
FILE NO/S: 218/2008
DELIVERED ON: 10 December 2008
DELIVERED AT: Hobart
HEARING DATE: 27 November 2008
JUDGMENT OF: Tennent J
CATCHWORDS:
Procedure – Supreme Court procedure – Tasmania – Practice under Rules of Court – Commencement of proceedings: originating process – Renewal of writ – Application out of time.
Supreme Court Rules2000 (Tas), rr52, 107 and 168.
Corporations Act2001 (Cth), s237.
Rich v Long [2008] NSWSC 487; Bond v Tasmania [2003] TASSC 35; Verdich v McKechnie [1981] Tas R 91; South Johnstone Mill Ltd v Dennis and Scales (2007) 163 FCR 343; National Mutual Life Association of Australasia Limited v Victor Huddlestone and Michael Taylor [1997] TASSC 72, referred to.
Aust Dig Procedure [266]
REPRESENTATION:
Counsel:
Applicant: M B J Lee
Respondent: No appearance
Solicitors:
Applicant: PWB Lawyers as agents for Piper Alderman
Judgment Number: [2008] TASSC 79
Number of paragraphs: 27
Serial No 79/2008
File No 218/2008
ALLSTATE EXPLORATIONS NL (ACN 000 679 023),
WILLIAM HARRY CARNE MATTHEWS and LIDIA JOAN MATTHEWS
v MICHAEL RYAN and ANTONY WOODINGS
REASONS FOR JUDGMENT TENNENT J
10 December 2008
On 19 March 2008, a writ was filed in this Court by which Allstate Explorations NL and William Harry Carne Matthews ("Matthews") and Lidia Joan Matthews as plaintiffs, sought relief from Michael Ryan and Antony Woodings as defendants. The statement of claim attached to the writ comprised 88 paragraphs and substantially dealt with issues of negligent misrepresentation. The writ has not been served. Matthews and his wife were at all relevant times shareholders in Allstate. The writ incorporated claims by Matthews on behalf of Allstate, and claims on behalf of he and his wife personally.
On the same day, an originating process was also filed with the Court. That application was filed on behalf of Matthews. By it, he sought leave pursuant to the Corporations Act 2001 (Cth) ("the Act"), s237, to pursue on Allstate's behalf that part of the claim contained in the writ which he sought to bring on behalf of Allstate ("the s237 application"). Without leave, the proceedings commenced by the writ, insofar as they purported to have been commenced by Matthews on behalf of Allstate, could not proceed. That application has not to date been heard.
The Supreme Court Rules 2000 ("the Rules"), r107, provides that a writ remains in force for a period of six months commencing on, and including, the date of its issue. The same rule permits a plaintiff to apply to the court to renew the writ provided that the defendant has not been served, and further provides that any such application is to be brought prior to the date upon which the writ becomes stale. In the present case, the writ ceased to be in force on 18 September 2008. No application was made prior to that date to renew it.
On 20 October 2008 an interlocutory application was filed by Matthews. By that application he sought the following orders:
"1An order that the time within which the applicant may apply to renew the Writ filed in these proceedings pursuant to rule 107(2) be extended to the date of this order and that this application be deemed to be such an application.
2An order that the Writ filed in these proceedings be extended for a period of six months after the date of hearing of the Originating Process filed in proceedings no 220 of 2008 on 19 March 2008.
3In the alternative to order 2, an order that the Writ filed in these proceedings be renewed for a period of six months from the date of these orders."
The wording of the orders sought is inelegant. In effect, what Matthews is seeking from the Court is an extension of the period within which he may apply to renew the writ and consequentially an order renewing the writ.
Prior to this matter coming on for hearing, the matter went before the learned associate judge. He raised certain preliminary matters with the parties which also need to be determined. Those preliminary issues are:
(a)whether the interlocutory application filed 20 October 2008 may be dealt with ex parte, and
(b)whether the interlocutory application should, in any event, be dealt with prior to the hearing of the s237 application.
The only party represented at the hearing was Matthews. The defendants have not been served with any papers relating to the matter. At the commencement of the hearing I indicated to counsel that I held a preliminary view that the interlocutory proceedings could be dealt with ex parte. However, I also indicated that I would not proceed with the matter at all unless I could be satisfied that Allstate had notice of certain documents relating to both the interlocutory proceedings and the s237 application, and that they did not wish to be heard on the interlocutory application. As a consequence, a number of documents were provided to the Court. Some of those documents satisfied me that Allstate had received the documents I had identified and had indicated it neither consented to, nor opposed, the interlocutory application. The hearing proceeded on the basis that both the preliminary and substantive issues would be argued and would be the subject of my decision.
Counsel for the applicant read into evidence an affidavit by Matthews sworn 16 October 2008, an affidavit of Amanda Kim Banton, the Sydney solicitor for Matthews, sworn 17 October 2008 and a further affidavit by Matthews sworn 19 March 2008 in proceedings numbered 220/2008. Because of the state of the documents filed in both sets of proceedings, it became necessary to seek certain documents from counsel. As a consequence, a number of documents were both filed in Court and tendered. They were as follows:
(a)exhibit WHCM-1, the exhibit to the affidavit of Matthews sworn in proceedings numbered 218/2008 on 16 October 2008, it not having been filed with the body of the affidavit filed 20 October 2008, was filed in Court;
(b)exhibit WHCM-1, the exhibit to the affidavit of Matthews sworn in proceedings numbered 220/2008 on 19 March 2008, it not having been filed with the body of the affidavit, was filed in Court;
(c )letter Piper Alderman, solicitors for Matthews, to Corrs, Chambers Westgarth dated 29 July 2008 (exhibit P1); and
(d)bundle of correspondence between Piper Alderman, Allstate and Corrs, relating to s237 application (one folder) (exhibit P2).
Background
On a date in 2001, Allstate went into voluntary liquidation and the defendants were appointed administrators pursuant to the Act. The writ asserts that the defendants, in their capacity as administrators, engaged in misleading and deceptive conduct in contravention of the Trade Practices Act 1974 (Cth) and other legislation, and, in their capacity as officers of Allstate, breached their duties as officers. The writ also asserts claims in negligence. It is alleged the relevant misrepresentations and negligence occurred during the course of the administration of Allstate. At all relevant times, Matthews was a shareholder in Allstate. To advance any claim on behalf of Allstate, he must have leave pursuant to the Act, s237. In practical terms, the substantive proceedings in the form of the writ were filed without that leave first being obtained.
The reason advanced by Matthews for taking this course of action was that he had reason to believe that the causes of action canvassed in the writ would become statute barred were the writ not issued immediately. He also was concerned that Allstate may have provided a release to the defendants, in relation to their conduct of the administration of the company. Had such a release been given, clearly action on behalf of Allstate would be potentially useless. Matthews took steps to establish whether or not such a release had been provided. As at 19 March 2008, he had been unable to establish whether such a release had been provided and, further, it appeared evident that Allstate did not intend to commence any proceedings itself against the defendants. This last matter was apparent from the fact that Allstate had not in fact instituted any such proceedings, notwithstanding the possibility any proceedings might become statute barred. Matthews, in the circumstances, took the view that a writ needed to be filed to protect not only his own interests, but also potentially those of all other shareholders of Allstate and the company itself.
By virtue of the Rules, any writ filed by Matthews was required to be served on the defendants on or before 18 September 2008. It was not and still has not been. Nor has any attempt been made to serve the writ. On the date the writ was filed, the solicitors for Matthews wrote to Allstate forwarding to it a copy of the s237 application and Matthews' supporting affidavit. A copy of the writ was attached to the application. Allstate was asked by that letter whether it intended to bring any proceedings against the defendants. Correspondence was then entered into between those solicitors and Allstate, and subsequently its solicitors, about the matter. Late in July 2008, Allstate's solicitors were provided with, by way of service, the s237 application, the affidavit of Matthews filed in support, and the writ with attached statement of claim. The solicitors for Matthews had advised the solicitors for Allstate, during the course of the exchange of correspondence, that it was waiting for a decision from a judge of the Supreme Court of the Australian Capital Territory in defamation proceedings commenced by Macquarie Bank. Those proceedings, it appears, dealt with the same broad factual matrix as the proceedings encompassed by the writ. It was believed by Matthews that the outcome of those proceedings might have a bearing on the prospects of success of the claims contained in the writ. The solicitors for Matthews had taken a number of steps to access material put before the court in the Australian Capital Territory proceedings, but had been unsuccessful because the decision was still pending. For that reason, the solicitors for Matthews preferred to wait for the decision in that matter and have access to findings made and documents tendered, before finalising their position in relation to the proceedings commenced by the writ and the s237 application. It was agreed between the solicitors for Allstate and Matthews' solicitors that the s237 application would be deferred for a few months to await the outcome of the defamation proceedings.
On or about 7 October 2008, the solicitors for Matthews realised that the writ had become stale. The solicitor having carriage of the matter was under the misapprehension that that matter was being handled by Hobart agents along with the management of the s237 application. The present interlocutory application and supporting affidavit were prepared and filed on 20 October 2008. On 22 October 2008, the solicitors for Matthews forwarded a copy of the interlocutory application to the solicitors for Allstate asking to be advised of their position in respect of the application. By letter dated 28 October 2008, the solicitors for Allstate advised that its client neither opposed nor consented to the application.
Preliminary issue – should the interlocutory application be dealt with ex parte?
I have formed the view that it is appropriate that the interlocutory application be dealt with ex parte.
The Rules, r107(2), provides:
"On the application of the plaintiff made whilst a writ is in force, the Court or a judge may order that the original writ and any concurrent writ be renewed for such period as the Court or judge thinks fit if a defendant named in the writ has not been served."
The rule makes it clear that such an order may only be made if the defendant has not been served and hence, usually, is not aware of the proceedings. It would seem anomalous that such a defendant should be notified of an interlocutory application in circumstances where the application may only be made where they have not been previously notified of the proceedings generally and where, if the application is unsuccessful, they will never be notified.
It is not a situation where the capacity of a defendant to challenge the validity of the writ is lost if they are not notified of an application to renew. The Rules, r168, permits a defendant, once served, to enter a conditional appearance and apply to set aside an originating process.
As to the issue of whether an application such as the present should be dealt with ex parte, counsel for the applicant referred me to a decision of Rich v Long [2008] NSWSC 487. Young CJ canvassed, at pars18 - 25, a number of English cases which dealt with what he described as the English Procedure. He determined that that procedure was too firmly entrenched to be altered. It provided for applications such as the present to be dealt with ex parte. Counsel indicated that there appeared to be at least one decided case in Tasmania where an application to renew a writ was heard ex parte and he referred to a matter of Bond v Tasmania [2003] TASSC 35. That was a decision of the learned Master (as he then was), where he dealt with an application to renew a writ ex parte and where the course of action was not challenged. There is, however, an earlier decision of this Court in a matter of Verdich v McKechnie [1981] Tas R 91. In that case a plaintiff applied ex parte to renew a writ. The Acting Master found good reason existed and renewed the writ. The defendant subsequently appealed that decision on two bases, one being that the proceedings should not have been dealt with ex parte and the other being that the writ had become stale prior to the application being made. Neasey J determined that the application had properly been made ex parte and coincidentally also determined that an application to extend could be made after a writ had become stale.
There is nothing in the present matter which would suggest that that approach should be departed from.
Preliminary issue – should the interlocutory application be dealt with prior to the s237 application?
I am satisfied that the interlocutory application should be dealt with prior to the s237 application. There are a number of reasons for this view. Firstly, if the interlocutory application is unsuccessful, the s237 application is unlikely to be required. The only basis upon which it could be of any use is if Matthews were subsequently able to file a fresh writ and successfully defend any response by the defendants that it was statute barred. Further, the time involved in dealing with the interlocutory application, given the position taken by the solicitors for Allstate in relation to it, has been short, involving nothing more than submissions on the papers. On the other hand, Allstate will be entitled to be heard in respect of the s237 application because it potentially directly affects it. If it opposes the application, there is likely to be cross-examination of witnesses and the hearing could be relatively lengthy. This would however be unnecessary if the writ is not renewed.
For the same reasons, the defendants in the substantive proceedings would not be prejudiced by the order of the hearing of various applications.
If there is any question that proceeding in this manner could constitute an abuse of process because the writ should not have been issued in any event prior to a leave application, I am satisfied that neither the Act, s236 nor s237, mandates that a grant of leave must be had prior to the institution of proceedings, and that such an application may be dealt with before or after the commencement of those proceedings. (South Johnstone Mill Ltd v Dennis and Scales (2007) 163 FCR 343).
Extension of time to apply to renew writ/ Application to renew
The Rules, r52, provides that:
"(1) The Court or a judge may extend or abridge the period for doing any act or taking any proceedings allowed or limited by these rules or by any order of the Court or a judge on any terms the Court or judge considers just.
(2) An extension of any period may be ordered although the application is made after the expiration of the period originally allowed or limited. "
There is therefore no doubt this application may be made even though the time for the application has expired.
In National Mutual Life Association of Australasia Limited v Victor Huddlestone and Michael Taylor [1997] TASSC 72, the court dealt with the same applications being dealt with here, save that the rules pursuant to which the applications were made were slightly different. Crawford J, with whom Zeeman and Wright JJ agreed, said at 5:
"The parties accept that the nature of the discretion to be exercised is as I stated in Lapham v Wood, A66/1995 at 4:
'In order to succeed the plaintiff requires a favourable exercise of two separate discretions. The first order which she seeks is one pursuant to the Rules of the Supreme Court, O79, r7(1) enlarging the time within which an application under O8, r1(1) may be made. The second order which she seeks is one for leave to renew the writ pursuant to O8, r1(1), which order may not be made unless time is first enlarged. Nevertheless each of the applications raises the same general question as to how I should exercise the power to order renewal of the writ. There would be no occasion to enlarge the time for the making of the application if it is not appropriate to grant leave for the renewal of the writ. If the justice of the case requires that the writ be renewed it would be appropriate to enlarge the relevant time. It follows that primarily my attention is to be directed to the question whether it is appropriate to grant leave for renewal. The power to grant such leave only exists if I am satisfied that reasonable efforts have been made to serve the defendant or that there is some other good reason for making the order."
It follows that the real question is whether the respondents have established that the justice of the case requires that the writ be renewed. It is not possible to state exhaustively the categories of reasons which may result in good reason being established to order a renewal … .
The matters which, it was accepted in argument, are relevant to the question of whether good reason has been established, and therefore relevant to the justice of the case, include the nature of the attempted service, the length of the delay in attempting service, the length of the delay in making the application for an extension of time, the reasons for the delays, the conduct of the parties and hardship or prejudice caused to a party by refusing or granting renewal.
In addition, I consider that the merits of a plaintiff's claim may also be relevant. It is not incumbent upon an applicant for renewal to establish a prima facie cause of action or a cause of action which has reasonable prospects of success. However, matters concerning the merits of a plaintiff's claim ought not to be put aside as having no possible relevance."
The views of the Court in this matter have been adopted in a number of cases since.
In the present case, no attempts at all have been made to serve the writ. The reasons for this are logical. Firstly there is no point in doing so until the s237 application has been dealt with, because, if that application fails, neither Matthews nor Allstate can proceed with the proceedings commenced by writ insofar as they relate to claims on behalf of Allstate. There is no point at all in putting the defendants to any cost in relation to proceedings which may never go further. One may ask why the s237 application has not been pursued. The explanation for this, which I accept is reasonable, is that the litigation commenced by Mathews is being funded by a litigation funder. There is presently pending in another court a decision which may impact on the utility of the proceedings commenced by writ in this matter. Attempts have been made to gain access to documents submitted in those proceedings, without success. The view has quite properly been taken that it is appropriate to wait for that decision and assess its impact, before embarking on costly proceedings of any description which may ultimately be futile. As a consequence, the s237 application has not been pursued with any vigour.
The fact that the writ had become stale became known to the solicitors for Matthews on 7 October 2008, that is, approximately 3 weeks after it had become so. The application to renew the writ was filed 13 days later. The reason for the writ having been allowed to become stale was clearly a breakdown in communication between the solicitors for Matthews in Sydney and their Hobart agents. Both were dealing with, not only the proceedings initiated by the writ, but also the s237 application. It was the latter application which appears from the correspondence to have been at the forefront of all parties' consideration during the period from March 2008 to October 2008.
I can see no prejudice accruing to the defendants in permitting the renewal of the writ. There have been a number of steps taken over the years since Allstate went into administration directed to investigation of the defendants' conduct as administrators. As a consequence, documents will be readily available for use in any proceedings. This case, having regard to the nature of the allegations, will predominantly be one conducted by reference to documentation. However, the defendants will, if they think fit once they have been served, have the opportunity to challenge the renewal of the writ by reference to the Rules, r168.
I am satisfied in all the circumstances that it is appropriate to extend the time within which an application to renew the writ may be brought and to renew the writ issued 19 March 2008.
Orders to be made
I expressed the view to counsel that, in the event his client was successful, I had some concerns about the breadth and wording of one of the orders he was seeking. This was that the writ be renewed until six months after the hearing of the s237 application. Given that that application was filed over eight months ago and no steps have been taken to pursue it, the potential existed for an open-ended order. However, given the reasons why the application has not been pursued, I can understand why an order in those terms has been sought. To do otherwise would potentially mean another application to renew. However there must be some incentive to bring the derivative proceedings to a conclusion at the earliest opportunity.
In the circumstances the orders of the Court will be as follows:
(a)that the period within which the application to renew the writ filed 19 March 2008 is to be made, be extended to 21 October 2008.
(b)that the writ be renewed for a period of 12 months from 18 September 2008.
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