Arogen v Leighton
[2013] NSWSC 1099
•19 July 2013
Supreme Court
New South Wales
Medium Neutral Citation: Arogen v Leighton [2013] NSWSC 1099 Hearing dates: 18/07/2013 Decision date: 19 July 2013 Jurisdiction: Equity Division - Technology and Construction List Before: McDougall J Decision: Time for service of evidence to be extended on conditions. Declaration, that plaintiff's cross-claim against defendant in other proceedings, to be made if plaintiff complies with orders to be made.
Catchwords: CORPORATIONS - ORDERS & DIRECTIONS - application for declaration that cross-claim does not stand dismissed - where court orders that proceedings will stand dismissed if cross-claimant fails to file and serve evidence by a particular date - where cross-claimant fails to file and serve evidence - where cross-claimant goes into administration - whether appointment of voluntary administrator has the effect of staying court orders - whether s440D of the Act applies to cross-claim brought by a company in administration - orders not stayed by appointment of administrator - Corporations Act 2001 (Cth) s440D
CORPORATIONS - INTERPRETATION - Corporations Act 2001 (Cth) s440D - meaning of "in relation to" - meaning of "a proceeding" - meaning of "property"
PRACTICE & PROCEDURE - ORDERS & DIRECTIONS - NSW Supreme Court - NSW Supreme Court Rules - application for declaration that cross-claim does not stand dismissed - where court orders that proceedings will stand dismissed if cross-claimant fails to file and serve evidence by a particular date - where cross-claimant fails to file and serve evidence - whether court can extend time for compliance with order - court may extend time for compliance unless order dismissing cross-claim precludes it - whether court should exercise discretion to extend the time for compliance - relevant principles - Uniform Civil Procedure Rules 2005 (NSW) ss 1.12; 36.16; 56Legislation Cited: Civil Procedure Act 2005 (NSW)
Corporations Act 2001 (Cth)
Uniform Civil Procedure Rules 2005 (NSW)
Supreme Court Rules 1970 (NSW)Cases Cited: Australian Securities Commission v Marlborough Coal Mines (1993) 177 CLR 485
Aon Risk Services Australia Limited v Australian National University (2009) 239 CLR 175
Bailey v Marinoff (1971) 125 CLR 529
Biala Pty Ltd v Mallina Holdings Ltd (1989) 2 WAR 381
Douglas v John Fairfax & Sons Ltd [1983] 3 NSWLR 126
FAI General Insurance Co Ltd v Southern Cross Exploration NL (1988) 165 CLR 268
Foxcroft v The Ink Group Pty Ltd (1994) 15 ACSR 203
Hutchinson v Nominal Defendant [1972] 1 NSWLR 443
Larkden Pty Ltd v Lloyd Energy Systems Pty Ltd (2011) 285 ALR 207
Leighton Contractors v Arogen [2012] NSWSC 1323
Leighton v Arogen [2012] NSWSC 1370
Mead Corporation v Carbonless Papers (Australia) Pty Ltd [2002] WASC 268
MG Corrosion Consultants Pty Ltd v Gilmour (2012) 88 ACSR 170
Travelex Limited v Commissioner of Taxation (2010) 241 CLR 510
Uvanna Pty Limited v Tsang Chi Ming (1997) 15 ACLC 443Category: Procedural and other rulings Parties: Arogen Pty Limited (Administrator Appointed) (Plaintiff)
Leighton Contractors Pty Limited (Defendant)Representation: Counsel:
N A Nicholls / R Bianchi (Plaintiff)
M G Rudge SC (Defendant)
Solicitors:
Moray & Agnew Lawyers (Plaintiff)
Gadens Lawyers (Defendant)
File Number(s): 2013/223127
Judgment (EX TEMPORE - REVISED 19 july 2013)
HIS HONOUR: The plaintiff (Arogen) seeks a declaration that its cross-claim in other proceedings against the defendant (Leighton) does not stand dismissed, and ancillary relief. It will be convenient to refer to those other proceedings as "the principal proceedings".
Background
The dispute between Arogen and Leighton arises out of a subcontract between them made in March 2011 and varied in January 2012. Under that subcontract, Arogen agreed to perform horizontal directional drilling services in connection with a head contract made by Leighton with Ausgrid. That head contract was an extremely substantial one, relating to the upgrade of the electricity supply system to the southern suburbs of Sydney.
There have been previous disputes between Leighton and Arogen in relation to the subcontract between them. I have given two judgments bearing on aspects of those disputes. One related to the determination of an adjudicator: Leighton Contractors v Arogen [2012] NSWSC 1323. Another related to an application by Leighton for mandatory interlocutory injunctive relief requiring Arogen to hand over the site and other things: Leighton v Arogen [2012] NSWSC 1370.
In those earlier judgments, I describe, to the extent necessary, how the disputes between the parties arose; I will not repeat what I said on that topic.
The principal proceedings have moved forward, to the extent that Leighton has filed an amended summons and an amended list statement and Arogen has filed a cross-claim. However, of present relevance, Arogen has failed to comply with this court's orders in relation to the service of evidence in support of its cross-claim.
The cross-claim
The claim that Arogen wishes to bring against Leighton by way of cross-
claim in the principal proceedings, is one for moneys said to be payable under, or alternatively damages for breach of, the sub-contract between them. A substantial part of that cross-claim relates to variations for delay and disruption. The amount claimed is of the order of $12 million.
The 8 March orders
For present purposes, attention needs to be focused on orders made on 8 March 2013 (the 8 March orders) in the principal proceedings. Leaving aside orders as to Leighton's application for security for costs, the following relevant orders were made:
6. The time within which the defendant is to file and serve any lay evidence in support of its defence and cross-claim is extended to 5th April 2013 and the time within which it is to serve any expert evidence intended to be relied upon in its defence and cross-claim is extended to 30th April 2013.
7. I note that the directions for filing of any evidence in reply by the plaintiff will be made at some future point.
8. In the events that the defendants file no lay evidence and also file no expert evidence by the dates earlier mentioned, its cross-claim will stand automatically dismissed.
9. The defendant will not be entitled to rely on any evidence not served in accordance with these directions.
10. Within 7 days the defendant is to provide security for the plaintiffs costs of the Motion for Security for Costs in the amount of $10,000.00.
In addition (order 11), the Court ordered Arogen to pay Leighton's costs of the day on the indemnity basis assessable forthwith and payable immediately on assessment.
Non-compliance and its consequences
Arogen did not serve any evidence, either in purported compliance with order 6 or at all. Thus, in terms of order 8, this cross-claim must be taken to stand "automatically dismissed".
In these proceedings, Arogen raises two reasons as to why that consequence should be deflected. First, it says, s 440D of the Corporations Act 2001 (Cth) has effect because, after the 8 March orders were made but before 5 April 2013, Arogen went into voluntary administration. Thus, Arogen says, the statutory stay effected by s 440D operates to deflect the consequences of what otherwise would be non-compliance with order 6 of the 8 March orders.
Alternatively, Arogen says the Court has power "nunc pro tunc" to extend the time limited by order 6 for the service of its evidence, and in the circumstances of this case should do so.
Originally, those matters were sought to be agitated through a notice of motion (and amended notice of motion) filed in the principal proceedings. However, Mr Nicholls of counsel, who appeared for Arogen, took the view that it was better for those questions to be determined in separate proceedings, and by consent filed in court a summons intended to effect that. To my mind, it was appropriate to do so given that (amongst other things) Arogen seeks a declaration that its cross-claim in the principal proceedings does not stand dismissed.
The issues
Against that background, the issues for decision can be stated as follows:
(1) In the events that have happened were the 8 March orders stayed on the appointment of Mr Paul Gibley as voluntary administrator of Arogen on 19 March 2013?
(2) If those orders were not stayed, does the Court nonetheless have power to vary order 6 made on 8 March 2013?
(3) If the Court does have that power, should the order be varied?
First issue: s 440D
I start by setting out the section:
440D Stay of proceedings
(1) During the administration of a company, a proceeding in a court against the company or in relation to any of its property cannot be begun or proceeded with, except:
(a) with the administrator's written consent; or
(b) with the leave of the Court and in accordance with such terms (if any) as the Court imposes.
(2) Subsection (1) does not apply to:
(a) a criminal proceeding; or
(b) a prescribed proceeding.
It was common ground that subs (2) has no present relevance. It was also common ground that s 440D should be construed taking into account, amongst other things, the objects of Pt 5.3A of the Corporations Act (in which part s 440D is found). Those objects are stated in s 435A:
435A Object of Part
The object of this Part is to provide for the business, property and affairs of an insolvent company to be administered in a way that:
(a) maximises the chances of the company, or as much as possible of its business, continuing in existence; or
(b) if it is not possible for the company or its business to continue in existence-results in a better return for the company's creditors and members than would result from an immediate winding up of the company.
I note at this stage that nothing in the language of s 435A suggests that it was intended to restrict administrators from, if they saw fit, continuing with a "proceeding" brought by the company. Indeed, one could say that that course of action could well be consistent with the statutory object: for example, by permitting an administrator to finalise a proceeding brought by the company, and getting in the fruits of success.
Thus, on a first impression, s 440D seems to say nothing about a cross-claim brought by the company in administration. The concerns of the section, again on first impression, appears to be:
(1) to stay proceedings against that company; and
(2) to stay proceedings relating to the property of that company.
However, Mr Nicholls submitted that Arogen's cross-claim was, adapting the language of s 440D, "a proceeding in a court in relation to any of Arogen's property." He relied on the decision of Hasluck J in Mead Corporation v Carbonless Papers (Australia) Pty Ltd [2002] WASC 268 at, in particular [23] and [84] to [85].
Mr Nicholls supported this submission by reference to statements as to the purpose or object underlying Pt 5.3A in a number of cases, including Foxcroft v The Ink Group Pty Ltd (1994) 15 ACSR 203 at 204 and Larkden Pty Ltd v Lloyd Energy Systems Pty Ltd (2011) 285 ALR 207 at [37] to [38].
In the former case, Young J said at 204 to 205:
The provisions of Pt 5.3A, as exemplified in sections such as 437C, 437F, 440C and 440D, provide that there shall be a complete freeze of proceedings against the company during the administration so that the administrator can have time to assess the situation, and the company's creditors have an opportunity to work out the net position and adopt an attitude under s 439C which will be in their common interest. To allow one creditor or potential creditor to proceed would not only take the administrator's attention from what he needs to do under the division in a relatively short period of time, but it would also involve costs in running the legal action on behalf of the administrator, as well as perhaps giving the claimant some advantage over the other creditors or potential creditors.
In the latter of those cases, Hammerschlag J said, in the paragraphs to which I have referred:
The policy underlying Pt 5.3A, as evinced by s 435A, is to maximise the chances of the beleaguered company staying alive.
Mr Nicholls elaborated his submissions as follows. First, he said, the cross-claim in the principal proceedings was a "proceeding" for the purposes of s 440D. He relied on the definition of "civil proceedings" in s 3 of the Civil Procedure Act 2005 (NSW), and on s 22 of that Act, dealing with cross-claims.
3 Definitions
...
civil proceedings means any proceedings other than criminal proceedings.
...
22 Defendant's right to cross-claim
(cf Act No 52 1970, section 78; Act No 11 1970, section 15; DCR Part 20, rule 1)
(1) Subject to subsection (2), the court may grant to the defendant in any proceedings (the first proceedings) such relief against any person (whether or not a plaintiff in the proceedings) as the court might grant against that person in separate proceedings commenced by the defendant for that purpose.
(2) Relief may not be granted under this section against a person who is not a plaintiff in the first proceedings unless the relief relates to, or is connected with, the subject of the first proceedings.
(3) A person against whom a defendant makes a claim for relief under this section:
(a) has the same rights in respect of his or her defence against the claim as he or she would have in separate proceedings commenced against the person by the defendant, and
(b) if not already a party to the first proceedings:
(i) becomes a party to the first proceedings, and
(ii) unless the court otherwise orders, is bound by any judgment (including a judgment by consent or by default) or decision (including a decision by consent) on any claim for relief in the proceedings (including a claim for relief in any cross-claim in the proceedings).
Mr Nicholls relied by analogy on what Barker J said on this topic in MG Corrosion Consultants Pty Ltd v Gilmour (2012) 88 ACSR 170 at [6].
[6] The term "proceeding" does not appear to be defined relevantly in the Corporations Act but it is defined in s 4 of the Federal Court Act 1976 (Cth) (the FCA Act) to mean "a proceeding in a court, whether between parties or not, and includes an incidental proceeding in the course of, or in connexion with, a proceeding, and also includes an appeal". In my view, in the present circumstances, the FCA Act definition of "proceeding" should be adopted for the purposes of the Corporations Act, not on the basis that the FCA Act definition applies as a matter of incorporation, but rather on the basis that the broad definition given in the FCA Act accords with the ordinary meaning of the word and there is nothing in the context of the Corporations Act to suggest it has a different or narrower meaning of the word for the purposes of s 440D.
Secondly, Mr Nicholls relied on the definition of "property" in s 9 of the Corporations Act to support the proposition that Arogen's cross-claim was "a thing in action" and hence property for the purposes of s 440D.
9 Dictionary
...
property means any legal or equitable estate or interest (whether present or future and whether vested or contingent) in real or personal property of any description and includes a thing in action, and:
(a) in Part 5.3A (administration)-has a meaning affected by section 435B; and
(b) in Part 5.4B (winding up in insolvency or by the Court)-has a meaning affected by section 465; and
(c) in Part 5.5 (voluntary winding up)-has a meaning affected by section 489F; and
(d) in Part 5.6 (winding up generally)-has a meaning affected by section 513AA; and
(e) in Part 5.7B (recovering property or compensation for creditors of insolvent company)-has a meaning affected by section 588C; and
(f) in Part 5.8 (offences relating to external administration)-has a meaning affected by subsection 589(5); and
(g) in Part 5A.1 (deregistration, and transfer of registration, of companies)-has a meaning affected by section 601; and
(h) in Part 5B.2 (registrable bodies)-has a meaning affected by section 601C.
Note: A reference in this Act to the property of a corporation does not include a reference to any PPSA retention of title property of the corporation, unless provided otherwise expressly or by necessary implication (see section 51F). The sections mentioned in paragraphs (a) to (h) extend references to property of a corporation in Parts of this Act to PPSA retention of title property (or to certain PPSA retention of title property).
Mr Nicholls referred to what Barker J had said in MG Corrosion at [11] to [13]:
[11] The expression "a thing in action" is not itself defined in the Corporations Act, although it has a long lineage in corporations' legislation, both in Australia and the United Kingdom. Another expression well known to the law, which would appear to be the very same expression, is "chose in action". In Krishell Pty Ltd v Nilant (2006) 32 WAR 540 ; 60 ACSR 410 ; [2006] WASCA 223 at [73] (Krishell), McLure JA (with whom Wheeler JA agreed) considered that the expression "things in action" means "choses in action". Buss JA (at [100]) took the same view.
[12] In Krishell, McLure JA noted that a chose in action has been considered a personal right of property that can only be claimed or enforced by action as distinct from taking physical possession: Loxton v Moir (1914) 18 CLR 360 at 379. Thus, choses in action include shares, debts, judgment debts, negotiable instruments and rights enforceable by action (or causes of action). Her Honour referred to J G Starke, Assignments of Choses in Action in Australia, Butterworths, 1972, at p 3, where the learned author stated that an essential criterion of a chose in action is that the right be proprietary in character; a purely personal right is not a chose in action because it is not property. Her Honour also observed that assignability is not an essential characteristic of a right of property but a proprietary right must be capable in its nature of assumption by third parties and referred to R v Toohey; Ex parte Meneling Station Pty Ltd (1982) 158 CLR 327 at 342-3 ; 44 ALR 63 at 74-5 ; [1982] HCA 69.
[13] At [75], McLure JA also recognised that some bare rights to litigate, including a bare right to litigate a cause of action in tort, are not capable of being assigned under the general law: Poulton v Commonwealth (1952) 89 CLR 540 at 602 ; [1954] ALR 1 at 8 (Poulton). Her Honour considered it would seem to follow that such bare rights to litigate are not property and thus are not choses in action. Her Honour noted, however, that R P Meagher, J D Heydon and M J Leeming in Meagher, Gummow and Lehane's Equity Doctrines & Remedies, 4th ed, Butterworths, Sydney, 2002 suggest at [6-480] that all bare rights to litigate are choses in action regardless of whether or not they are property. Her Honour suggested that a partial reconciliation of the position might be that bare rights that are incapable of being assigned in isolation are in fact property because they are capable of being assigned when annexed or ancillary to other property. Her Honour accepted that other bare rights to litigate (such as a right of action arising under a contract) are capable of being assigned, and so are considered property and choses in action. At [78], McLure JA also noted that in Equity Doctrines & Remedies, at [6-480] it is said that a sufficient interest in the right to litigate is at the root of the distinction between rights of action that are property and capable of being assigned and those that are not.
Thirdly, Mr Nicholls submitted the words "in relation to", although no doubt they required a real connection between the "proceeding" and the "property", would be satisfied by an indirect connection. He relied on what French CJ and Hayne J said in Travelex Limited v Commissioner of Taxation (2010) 241 CLR 510 at [25] (omitting citations):
[25] It may readily be accepted that "in relation to" is a phrase that can be used in a variety of contexts, in which the degree of connection that must be shown between the two subject matters joined by the expression may differ.21 It may also be accepted that "the subject matter of the enquiry, the legislative history, and the facts of the case"22 are all matters that will bear upon the judgment of what relationship must be shown in order to conclude that there is a supply "in relation to" rights.
It followed, Mr Nicholls submitted fourthly, that the subject cross-claim was a proceeding in a court relating to the property of Arogen, namely, its claim for payment under or damages for breach of its subcontract with Arogen.
I am disposed to accept the first steps in Mr Nicholls' reasoning. It seems to me that, at the level of principle and bearing in mind what Barker J said on this topic in MG Corrosion, a cross-claim in a proceeding (or for the purposes of the UCPR, proceedings) should be regarded as a "proceeding" in its own right.
Likewise, I am disposed to accept the proposition that a claim which is enforceable by action may be a thing in action or, in the old phrase, a chose in action, and thus property for the purposes of s 440D.
Again, I think it may be accepted that in the context of s 440D, the degree of connection required by the words "in relation to" may be satisfied by a real even though indirect link between the subject matters which those words connect: namely, "a proceeding" and "property".
However, in my view, Mr Nicholls' argument breaks down at the fourth and final stage.
To understand why that is so, it is necessary to go to the reasoning of Hasluck J in Mead and to look at those other cases dealing with this question to which I was referred.
Mead was a case, like this, where the defendant advanced a cross-claim which, if made good, would outweigh the claim made against it by the plaintiff (if that claim were made good), and would leave a substantial balance owing to the defendant. Thus, as Hasluck J observed at [23], if those two events occurred, the defendant would "be left with a substantial amount in hand." His Honour observed that "[o]n one view of the matter, this prospective right of recovery under the counterclaim could be regarded as a form of property."
It is to be noted that his Honour did not appear to express a concluded view on this point, at least at [23].
Hasluck J stated at [57] what appeared to him to be the scheme of Pt 5.3A of the Corporations Law (as it then was). His Honour expressed himself in terms that seem to me to be consistent with the observations of Young J in Foxcroft and Hammerschlag J in Larkden.
[57] Put shortly, it seems that the scheme of this Part of the Corporations Law as it applies to the period of administration is that of creating a moratorium period for a company which is or is likely to become insolvent. During the moratorium period creditors are afforded the opportunity in meeting to decide the company's future and claimants against the company or its property are held at bay.
After looking at some further authorities, Hasluck J turned his attention to the words "in relation to any of [the company's] property" in s 440D. In that context, his Honour had been referred to what Wilcox J had said in Uvanna Pty Limited v Tsang Chi Ming (1997) 15 ACLC 443 at, in particular, 444. It will be necessary to return to the observations of Wilcox J. It is sufficient to note at this stage that his Honour said that he did not regard an appeal brought by the company against a judgment entered against it could be said to be a proceeding in relation to any of its property.
Against that background, Hasluck J said, no doubt correctly, that s 440D must be interpreted broadly. In the circumstances of the case before his Honour, he decided that it applied to the cross-claim so as to require it to be stayed. His reasons are at [84]:
[84] Having reviewed these authorities, I am of the view that s440D must be interpreted broadly and in the circumstances of the present case extends to the CPA counterclaim so as to operate as a stay of the same. In my view, the provision must be related to the objects of the Corporations Law which require that there be an orderly assessment of the company's position. Further, in the absence of clear language, I am not persuaded that the provision was intended to confer special procedural advantages on a party to litigation which would be the case if a company in administration was able to press a counterclaim against a third party while sheltering behind the temporary immunity afforded to it by a stay of the third party's claim pursuant to s440D.
I have to say that I do not understand the last sentence of that paragraph. If a company in administration pressed a counterclaim while sheltering behind the statutory stay, that is a matter in which the Court in which the application was being heard could deal with readily, by exercise of its general powers to stay. I do not think it was necessary to construe s 440D as Hasluck J did to achieve that result.
Be that as it may, Hasluck J said at [85] that it followed that:
... the reference in s 440D to leave being required in respect of a "proceeding" should be regarded as a reference to the various matters embraced by the proceeding in question, including the counterclaim.
It is, I think, apparent from this that his Honour did not regard the cross-claim as being a separate proceeding which was stayed by s 440D. Rather, as I understand it, his Honour's view was that the whole of the proceeding was stayed and thus the subject of the stay embraced the cross-claim.
In this Court, Black J looked at the question in Inthe matter of Oliver Brown Pty Limited [2012] NSWSC 957 at [13]. That was also a question of a stay under s 440D and of the interaction between the statutory stay and a cross-claim. On this topic Black J said at [13] that it was at least arguable that the cross-claim was stayed on one of the two bases identified by Hasluck J in Mead. Black J identified those bases as follows:
(1) Denying the "special procedural advantage" of enabling a company in administration to proceed with a cross-claim whilst the action against it was stayed;
(2) The cross-claim could be regarded as relating to property of the company, namely, the contractual claim for the amounts said to be owing.
For the reasons I have indicated, I do not agree that the "special procedural advantages basis" is an appropriate stepping stone to the construction of s 440D adumbrated by Hasluck J in Mead.
In any event, it is clear from what Black J said that he was not deciding that the conclusion of Hasluck J was correct but, rather, regarded it as being "at least arguable".
I return to the decision of Wilcox J in Uvanna. As I have noted, that was a case where the company had instituted an appeal. Wilcox J held, not surprisingly, that an appeal brought by a company was not a proceeding against it for the purposes of s 440D. That is clear as a matter of language, if I may say so with respect.
However, it was also argued that the appeal was a proceeding in relation to the company's property. On this topic his Honour said, although it could be said "in a loose sense, that an appeal involving the question whether certain people are entitled to recover damages against a company affects the company's property", that was not "a correct understanding of the application of [s 440D(1)]." Wilcox J said those words "were intended to refer to litigation over a property owned by the company - an item of property in relation to which it can prove title."
His Honour said that the words were not appropriate to include a mere claim for damages where the award of damages would not effect a charge against property.
Mr Nicholls submitted that what Wilcox J said on this topic was obiter. I do not think this is correct. There are two aspects of the statutory stay effected by s 440D. One concerns a proceeding against a company. That aspect was one which Wilcox J disposed of by saying that an appeal was a proceeding by the company, not one against it.
However, the second and distinct aspect of s 440D relates to a proceeding in relation to the company's property. For Wilcox J to conclude that s 440D had no application, it was necessary for his Honour to deal also with this basis for the statutory stay. That is what his Honour did by the reasoning from which I have quoted.
Although Hasluck J referred to the decision of Wilcox J in Uvanna, his Honour did not state that there was any basis for concluding that it was wrong, let alone plainly so (compare Australian Securities Commission v Marlborough Coal Mines (1993) 177 CLR 485 at 492).
Of course, the question which Wilcox J had to decide was whether an appeal could be said to be a proceeding in relation to any of the company's property, whereas the question for Hasluck J was whether a cross-claim brought by the company could be characterised in that fashion. Thus, strictly speaking, his Honour's decision is not on all fours, or directly in point. But it does not seem to be that the denotation to be given to the statutory language, "a proceeding...in relation to any [of the company's] property", should vary according to whether the context is a claim against the company, a cross-claim by the company or an appeal by the company.
Thus, it seems to me, because, as I perceive it, Hasluck J did not deal with what Wilcox J had said, I must look at the matter for myself.
That leads back to the decision of Barker J in MG Corrosion. His Honour does not appear to have been referred to the decision in Mead. However, he was referred to, and did apply, the reasoning of Wilcox J in Uvanna.
In MG Corrosion, at [20] Barker J referred to what Wilcox J had said, and set out the relevant passage. At [21], Barker J stated his agreement with those observations. He said:
[21] I agree with the observations of Wilcox J. It seems to me that when one takes into account the various provisions falling within Div 6 of Pt 5.3A of the Corporations Act, the expression "proceeding in a court ... in relation to any of its property" is simply not intended to encompass an action by the company where it seeks to act on, in court proceedings, a thing in action that it has. Rather, it is important to read the expression "in relation to any of its property" in the context of the complete expression, "a proceeding in a court against the company or in relation to any of its property". There may be some circumstances where there is a proceeding against the company, but not in relation to its property and there may be proceedings against the company in relation to its property, but not directly against the company. The point of s 440D(1) is to ensure that where the company is the target of a proceeding or in some relevant way its property is the target of a proceeding, then that proceeding may not be begun or proceeded with, except with the administrator's written consent or with the leave of the court. This ensures that, in the first instance, the administrator has the opportunity to view the continuance of such proceedings and the court has a final say as to whether or not the proceeding may proceed. Where, however, the company is an applicant or plaintiff in a proceeding then different considerations apply. In such circumstances the administrator does not need the benefit of a provision such as s 440D(1) to decide whether or not to proceed with the proceeding. The approval of the court in those circumstances would not be required.
Those paragraphs need to be read against the background of what Barker J had said at [19]:
[19] But even if the primary proceeding could be considered a thing in action belonging to the plaintiff I struggle to see how the proceeding can properly be characterised as one "in relation to" the thing in action. In my view, the relevant words include only a proceeding which relates to some property of the company, for example an application for an injunction or specific performance. A proceeding brought by a company related to its own property should not be considered to fall within the expression. If it were otherwise, s 440D(1) would apply to a proceeding by or against the company. This would have an effect unintended by parliament.
I agree with the approach to construction taken by Barker J at [19].
Returning to Uvanna, Wilcox J was dealing with the Corporations Law as it stood in 1997. His Honour's references to the two immediately preceding sections before 440D were to ss 440B and 440C. Equivalents of those sections are found, if not in identical terms then with no substantial changes, in ss 440B and 440C of the Corporations Act.
To my mind, as Wilcox J said, the word "property" should be given a consistent construction throughout Pt 5.3A, where it appears. Thus, the meaning to be given to the word "property" in s 440D should be informed by its obvious denotation in those preceding sections. That denotation catches property owned by the company or in which it has some legal (or perhaps, equitable) interest.
If s 440D did apply to all proceedings brought by a company which went into administration then, as Barker J said in MG Corrosion at [22], "it would operate so as to require an administrator to give himself or herself consent in writing or to obtain the Court's leave before causing the company to begin or proceed with the proceedings - a nonsensical outcome." I agree. It is a nonsensical outcome which can be avoided by restricting the operation of s 440D to proceedings against the company (as the section says) and proceedings in relation to property that the company owns or in or over which it has some identified legal, or perhaps equitable, interest.
The situation that I am confronted with is that there are conflicting decisions at first instance in the interpretation of a uniform statutory scheme. In the ordinary way, if the first instance decisions were all one way, I would need to find they were plainly wrong before declining to follow them (see Marlborough Coal Mines at 492). But in circumstances where there are conflicting decisions, it seems to me that I am free to take the approach to construction which in my view is correct without needing to find that the other approach is plainly wrong.
In the circumstances of this case, where one of the earlier decisions does not indicate why an even earlier decision was wrong, and where a later decision does not refer to the intermediate decision, it seems to me that the liberty thus given is one which should be exercised in the hope of, if not avoiding confusion, at least setting out a reasoned approach to construction, including taking into account the conflicting views.
I accept, as Hasluck J said, that s 440D must be interpreted in accordance with the object of Pt 5.3A. That does not of itself justify the conclusion that his Honour reached. It is still necessary to give proper consideration to the language of s 440D and to construe and apply that language, paying due regard to the object set out in s 435A, and constraining the language so that, as far as possible it gives effect to that object.
For those reasons, I conclude:
(1) Arogen's cross-claim in the principal proceedings, although it may be a "proceeding" for the purposes of s 440D(1) of the Corporations Act, is not a "proceeding ... ... in relation to [Arogen's] property"; and
(2) Accordingly, that cross-claim was not stayed when Arogen went into voluntary administration on 19 March 2013.
Second issue - Can the Court extend time?
This aspect of the debate revolves around UCPR r 1.12 and r 36.16
1.12 Extension and abridgment of time
(cf SCR Part 2, rule 3; DCR Part 3, rule 2; LCR Part 4, rule 2)
(1) Subject to these rules, the court may, by order, extend or abridge any time fixed by these rules or by any judgment or order of the court.
(2) The court may extend time under this rule, either before or after the time expires, and may do so after the time expires even if an application for extension is made after the time expires.
36.16 Further power to set aside or vary judgment or order
(cf SCR Part 40, rule 9)
(1) The court may set aside or vary a judgment or order if notice of motion for the setting aside or variation is filed before entry of the judgment or order.
(2) The court may set aside or vary a judgment or order after it has been entered if:
(a) it is a default judgment (other than a default judgment given in open court), or
(b) it has been given or made in the absence of a party, whether or not the absent party had notice of the relevant hearing or of the application for the judgment or order, or
(c) in the case of proceedings for possession of land, it has been given or made in the absence of a person whom the court has ordered to be added as a defendant, whether or not the absent person had notice of the relevant hearing or of the application for the judgment or order.
(3) In addition to its powers under subrules (1) and (2), the court may set aside or vary any judgment or order except so far as it:
(a) determines any claim for relief, or determines any question (whether of fact or law or both) arising on any claim for relief, or
(b) dismisses proceedings, or dismisses proceedings so far as concerns the whole or any part of any claim for relief.
(3A) If notice of motion for the setting aside or variation of a judgment or order is filed within 14 days after the judgment or order is entered, the court may determine the matter, and (if appropriate) set aside or vary the judgment or order under subrule (1), as if the judgment or order had not been entered.
(3B) Within 14 days after a judgment or order is entered, the court may of its own motion set aside or vary the judgment or order as if the judgment or order had not been entered.
(3C) Despite rule 1.12, the court may not extend the time limited by subrule (3A) or (3B).
(4) Nothing in this rule affects any other power of the court to set aside or vary a judgment or order.
Consideration and application of those rules, in the circumstances of this case, requires the Court to bear in mind the command of s 56(1) of the Civil Procedure Act.
56 Overriding purpose
(cf SCR Part 1, rule 3)
(1) The overriding purpose of this Act and of rules of court, in their application to civil proceedings, is to facilitate the just, quick and cheap resolution of the real issues in the proceedings.
...
Mr Rudge of Senior Counsel, for Leighton, submitted that the Court had no power under r 36.16 to reopen the orders of 8 March 2013. That was so, he submitted, because the cross-claim had been dismissed. He relied on the decision of the High Court of Australia in Bailey v Marinoff (1971) 125 CLR 529. However, as Wilson J, with whom Brennan, Deane and Dawson JJ agreed and pointed out in FAI General Insurance Co Ltd v Southern Cross Exploration NL (1988) 165 CLR 268 at 283, the ratio of Bailey appears to be limited to the proposition that when an appeal has been finally disposed of in a court of appeal by an order duly entered, that court has no inherent power thereafter to re-open the case.
Gaudron J, who agreed in the result, in FAI General, but gave separate reasons, confined the authority of the decision in Bailey likewise (see her Honour's reasons at 222).
Again, the Full Court of the Supreme Court of Western Australia recognised and applied this interpretation of the reasoning in Bailey. See Biala Pty Ltd v Mallina Holdings Ltd (1989) 2 WAR 381 at 390 (Malcolm CJ) and 397 (Brinsden J, with whom Franklyn J agreed).
In FAI General at 283 to 284, Wilson J said that even once a self-executing order for dismissal had operated (because something had not been done by a time fixed under an order of the Court), nonetheless the Court retained the power to extend that time under the then Pt 2 r 3 of the Supreme Court Rules 1970 (NSW).
3 Extension and abridgment
(1) The Court may, on terms, by order, extend or abridge any time fixed by the rules or by any judgment or order.
cf RSC (Rev) 1965, O 3, r 5 (1).
(2) The Court may extend time under subrule (1) as well after as before the time expires whether or not an application for the extension is made before the time expires.
cf RSC (Rev) 1965, O 3, r 5 (2).
(3) The period within which a person is required by rules or by any order to serve, file or amend any pleading or other document may be extended by consent without an order for extension.
cf RSC (Rev) 1965, O 3, r 5 (3).
I note that this rule is not materially distinguishable from UCPR r 1.12.
At 284, Wilson J dealt with the submission that SCR Pt 40 r 9 meant that the power to extend time was not available. That rule read as follows:
9 Setting aside or varying judgment or order
(1) The Court may set aside or vary a judgment where notice of motion for the setting aside or variation is filed before entry of the judgment.
cf RSC (Rev) 1965, O 13, r 9; O 19, r 9; O 35, r 2 (1).
(2) The Court may set aside or vary a judgment:
(a) where the judgment has been entered pursuant to Part 17 (which relates to default judgment), or
(b) where the judgment has been entered after judgment has been given in the absence of a party, whether or not the absent party had notice of trial or of any motion for the judgment,
(c) where the judgment has been entered in proceedings for possession of land after judgment has been given in the absence of a person and the Court decides to make an order that the person be added as a defendant.
(3) The Court may, on terms, set aside or vary an order:
(a) where the order has been made in the absence of a party, whether or not the absent party is in default of appearance or otherwise in default, and whether or not the absent party had notice of motion for the order, or
(b) where notice of motion for the setting aside or variation is filed before entry of the order.
(4) In addition to its powers under subrules (1), (2) and (3), the Court may, on terms, set aside or vary any order (whether or not part of a judgment) except so far as the order determines any claim for relief or determines any question (whether of fact or law or both) arising on any claim for relief and excepting an order for dismissal of proceedings or for dismissal of proceedings so far as concerns the whole or any part of any claim for relief.
(5) Nothing in this rule affects any other power of the Court to set aside or vary a judgment or order.
I accept that Pt 40 r 9 is neither identical to nor materially indistinguishable from UCPR r 36.16. Nonetheless, for present purposes, those two rules appear to me to be of equivalent effect.
As I understand what Wilson J said on this point at 284, it was that the rule had no application because an extension of time would not set aside or vary an order for dismissal. Thus, it did not come within subr (5) of Pt 40 r 9. Further, as his Honour pointed out, if it did not set aside or vary an order for dismissal then it did not come within subr (4).
It is necessary to return to the 8 March orders, and to understand what is sought. Arogen seeks an extension of time to comply with order 6. It does not seek to set aside or vary order 8. Thus, one effect of a "nunc pro tunc" variation of order 6, to extend with effect from 8 March 2013 the time for service of lay and expert evidence to a date beyond today, would be to extend the time at which (if at all) the automatic dismissal effected by order 8 would operate.
There is no doubt that, at least in general:
(1) the Court may extend the time for doing something required to be done under an earlier order of the Court by a specified date. (UCPR r 1.12(1));
(2) the Court may do so even if that earlier fixed time has elapsed before the application for extension of time was made (r 1.12(2));
(3) the Court may set aside or vary interlocutory procedural orders even once entered, where it is appropriate to do so (Hutchinson v Nominal Defendant [1972] 1 NSWLR 443; Douglas v John Fairfax & Sons Ltd [1983] 3 NSWLR 126; compare ss 56, 58 and 61 of the Civil Procedure Act); and
(4) the Court may direct that a judgment or order take effect earlier or later than the date fixed by UCPR 36.4(1) or (2) (r 36.4(3)).
Thus, unless the dismissal of the cross-claim precludes it, the Court may now extend, if necessary with effect from 8 March 2013, the time for Arogen to serve its lay and expert evidence. And, as I have pointed out, thus to vary order 6 made on 8 March 2013 would not set aside or vary order 8 made the same day.
There are two ways of characterising the order for extension of time that is sought:
(1) it operates by its own force and does not set aside or vary the earlier order; or
(2) it does vary that earlier order.
If the second characterisation is correct (and for the reasons I have given, I think that an appropriately framed order extending time could be so characterised), then, because the rules allow retrospective and out of time variation, r 36.16(4) would apply.
If, as Wilson J assumed, but did not decide, in FAI General at 284, the first characterisation be correct, then r 36.16 (3) is not engaged, simply because, by hypothesis, the earlier order is not set aside or varied.
The other relevant point to note about rule 36.16 (3)(b) is that its speaks of a judgment or order that "dismisses proceedings, or dismisses proceedings so far as concerns the whole or any part of any claim for relief". It speaks in the present tense: of an order that, when made, has the described consequence or effect.
Order 8 did not operate, when made, thereupon to dismiss the cross-claim. It was both prospective and contingent. Had the specified conditions been met, the order would have been spent. Thus, in my view, it is at least open to question whether r 36.16 (3) has any application to order 8 when made. That, if correct, would constitute another reason why a variation (let alone a variation nunc pro tunc) of order 6 would not have the effect of setting aside or varying order 8.
I conclude that the Court's power to extend time under UCPR r 1.12 is available. That leads to the third issue.
Third issue: discretion
Mr Rudge pointed to what he said (and I accept) has been the extremely unsatisfactory performance to date, on the part of Arogen, of its obligations under the Court's orders (let alone, I would add, its obligations under s 56 of the Civil Procedure Act).
On 16 November 2012, Stevenson J ordered, among other things, that Arogen serve its evidence on its cross-claim by 31 January 2013. After allowing a reasonable time for the Christmas/New Year break, Arogen was given at least eight weeks for that purpose.
On 15 February 2013, Hammerschlag J ordered Arogen to serve its evidence by 8 March 2013. That allowed a further three weeks. His Honour directed that without the leave of the Court, Arogen should not be permitted to rely on evidence not served by that date.
On 8 March 2013, the orders now in question were made.
The upshot of all that is that Arogen has been given from 16 November 2012 to 5 April 2013 (for lay evidence) and 30 April 2013 (for expert evidence) to prepare its case. That is a period of about five months, although as I have said interrupted by the Christmas/New Year break.
It should also be noted that the times fixed under the 8 March orders were effectively those proposed by Arogen, which was then represented by (among others) Senior Counsel of great experience in matters of this kind. Indeed, he proposed those orders even though Hammerschlag J had suggested that, until the question of security for costs (of the cross-claim) were dealt with, the simplest course would be to vacate all then existing directions.
Arogen points to a number of exculpatory factors. First, for some period of time, nothing was done in relation to this case because of a family struggle over the control of Arogen. In those circumstances, the solicitor then acting for Arogen in these proceedings took the view (not unreasonably, I think) that he was without instructions on which he could rely.
Secondly, of course, the voluntary administration of Arogen (even though brought about by its director at the time) must have been a significant impediment to preparation of its case.
Even making every allowance for those and the other factors pointed to in the evidence, and on which Mr Nicholls relies on, Arogen's performance of its obligations could most kindly described as lethargic and inadequate. A more accurate description might be "woeful".
Further, I accept the thrust of Mr Rudge's criticisms of the depth of Arogen's explanations. However, because I do not regard that as dispositive, I will not deal with those criticisms.
I do accept (and I do not think that Mr Rudge submitted to the contrary) that Arogen acted promptly once it became aware, through Mr Gidley and the lawyers retained on his instructions, of the terms of (and hence, non compliance with) the 8 March orders.
The starting point seems to me to be that the power to extend time is to be exercised in the interests of justice in the particular case, taking into account the dictates of s 56 of the Civil Procedure Act. If the Court decides not to extend time, that is to be done giving due regard to s 56 and, qualified in that way, the interests of justice as between the parties. I stress of course that the interests of justice must take account of the interests of all (in this case both) parties. A decision not to extend time should not be made simply to punish the tardy and non-compliant party.
The next matter to note is that, as has been recognised time and again, it is a very serious matter indeed to shut a litigant out of advancing an arguable case - to deny it a hearing on the merits - on procedural grounds. Mr Rudge submitted (as one would except) that Leighton was confident that Arogen's cross-claim would fail. He did not submit that the cross-claim was unarguable, or so tenuous as to justify in effect summary dismissal.
Next, and in my view of greater significance, is that Leighton has not pointed to any prejudice (save as to costs) that it would suffer if the extension of time sought were granted. Nor, to my mind, is there any real risk of prejudice other than in terms of costs.
The events that underlie the various disputes occurred recently. I have no doubt that there is available a vast mass of documents bearing on the likely issues (and if those documents do not exist, that cannot be because of the effluxion of time). To the extent necessary, the relevant witnesses could refresh their recollections from those documents. This is not a case where so much time has passed that evidence is likely to have been lost, and the quality of recollection diminished. Thus, it is unlikely to be a case where the delays that have occurred could be seen to diminish the quality of the Court's decision, because of the unavailability and poverty of evidence.
Nor, in similar vein, is this a case of the kind of which French CJ wrote in Aon Risk Services Australia Limited v Australian National University (2009) 239 CLR 175 at [35]. His Honour spoke of delay undermining confidence in the administration of civil justice. I set out the relevant part of that paragraph:
... It is true that a punitive response to the substance of a late amendment application is not appropriate. But neither is a party to be rewarded by weighing in its favour the disruptive consequences of its own application. In any event the granting of the amendment in this case, at the time it was granted, meant that there would still be further delay while interlocutory processes flowing from the new claims were put in place. Aon had to prepare a new defence. The further delay, in the circumstances of this case, would be such as to undermine confidence in the administration of civil justice. ...
His Honour was speaking of an application for leave to amend. But in my view, the underlying policy considerations are equally applicable in this case.
Looking at the matter in the way I have outlined, it seems to me that the proper exercise of discretion is in principle to grant the relief sought (save, at this stage for the declaration - a matter to which I shall return) but on strict terms.
Before I consider the terms which might be imposed, I should note that Mr Rudge submitted, as a factor telling against the relief sought, that Arogen had indicated that it wished to amend its cross-claim.
Mr Rudge submitted, correctly, that the amendments sought were very substantial. Indeed, Mr Rudge submitted, Arogen was now seeking to make out a new case. I do not wholly accept this last submission. Undoubtedly, Arogen wishes greatly to revise its case, including by dropping a claim of fraud. The bulk of the amendments otherwise, seem to me to be intended to spell out a claim for payments due under, or equivalent damages for breach of, the subcontract.
That last claim is one made in the cross-claim as it stands, although "pleaded' in an utterly inadequate fashion. The proposed amendments seek to plead it properly. I do not think that Arogen is to be criticised for this. On the contrary, it seems to me to be a good thing that Arogen now wishes to set out in detail the basis of its monetary claims. Thus, I do not think that the indicated desire to replead bears on the exercise of the discretion to extend time.
Conditions
I turn to the question of the conditions on which any relief should be granted. I note that I have not heard from counsel, and hence what I am about to say should be regarded only as expressions of tentative views on my part.
In principle, I think that Arogen should have a reasonable extension of time to comply with order 6 of the 8 March orders. Orders 8 and 9 should remain in place, so that (absent any further order of the Court) the consequences contemplated by those orders would follow if Arogen does not comply with its obligations under order 6 as extended.
However, any order extending time should be conditional on a number of matters.
First (and again, I stress that this is a tentative view, not one formed after hearing from counsel), Arogen should pay Leighton's costs of the directions hearing of 15 February 2013 and of the notice of motion, amended notice of motion and fresh proceedings with which I am dealing in these reasons. I should note that the costs of the directions hearing on 8 March have been dealt with.
The second condition would be that those costs, to be assessed on the indemnity basis, should be assessed forthwith.
The third condition should be that Arogen pay, within a time to be fixed by the Court (if the parties cannot agree) an amount to be fixed by the Court (again, if the parties cannot agree) on account of those costs. That amount should be fixed or agreed without prejudice to the right of other party to contend for a different sum on assessment.
If that payment is not made as fixed then it should follow that the notice of motion, amended notice of motion and fresh proceedings should be dismissed, each with costs, again on the indemnity basis. If that happens, the consequence would be that the cross-claim would remain dismissed.
If the first three conditions were complied with then the extension of time would start to run and the declaratory relief sought would be granted.
Arogen and its administrator should undertake to the Court to co-operate with Leighton to enable the assessment of the costs ordered to be paid to proceed as expeditiously as possible.
If on completion of the assessment any balance due in favour of the Leighton is not paid within a time to be fixed (or agreed), the cross-claim, if not heard and determined, should be stayed; and Leighton should have liberty to move to dismiss it.
In any event, the parties should have general liberty to apply in relation to the implementation or variation of the orders to be made to give effect to these reasons.
I propose to delay making the declaration because I want it to be clear that, at least from my perspective, this is Arogen's last chance to get its house in order. I do not want Arogen to have the benefit of a declaration of right until it has fully earned that benefit by complying with the orders to be made. In this context, I am sufficiently unsure of the effect (if any) of "staying" a declaration as to regard that as an unsafe alternative.
As I have said, I will hear the parties on the precise form of the orders to be made. That is something probably best done once the parties have had some time to consider these reasons. Accordingly, I propose to stand the matter over to a date convenient to counsel to enable the parties to agree, so far as they can, on orders to be made and to enable any extant disagreements to be resolved. If there is to be a dispute (for example, as to the quantum of the sum to be paid on account) that, obviously enough, is something to be dealt with on proper evidence in the usual way.
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Decision last updated: 14 August 2013
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