Efektiv Pty Ltd v Madgwicks

[2022] VSCA 72

SUPREME COURT OF VICTORIA

COURT OF APPEAL

S EAPCI 2020 0003

EFEKTIV PTY LTD (ACN 625 719 566)	Applicant
v
MADGWICKS (A FIRM) (ABN 82 199 611 971)	Respondent

---

JUDGE:	BEACH JA
WHERE HELD:	MELBOURNE
DATE OF HEARING:	On the papers
DATE OF JUDGMENT:	20 April 2022
MEDIUM NEUTRAL CITATION:	[2022] VSCA 72
JUDGMENT APPEALED FROM:	[2019] VSC 802 (Sifris J); [2020] VSC 7 (Sifris J)

---

PRACTICE AND PROCEDURE – Application for leave to appeal decisions by primary judge to decline to recuse himself from further hearing winding up proceeding or declining to hear an application seeking that he do so – No substantive steps taken in relation to application by either liquidator on behalf of applicant or respondent since 24 January 2020 – Former director of applicant company objected to proceeding being dismissed for want of prosecution – No application made for approval of the Court for former director to pursue application for leave to appeal – Application for leave to appeal dismissed for want of prosecution – Supreme Court (General Civil Procedure) Rules 2015, r 64.46(1)(d), Corporations Act 2001 (Cth) s 198G.

---

REPRESENTATION:	Counsel	Solicitors
For the Applicant	New Edge Law
For the Respondent	Madgwicks Lawyers

BEACH JA:

1. On 23 January 2020, Efektiv Pty Ltd filed an application for leave to appeal from four decisions made by Sifris J (as his Honour then was) sitting in the Trial Division in December 2019 and January 2020. The primary proceeding from which the application for leave to appeal arises was an application by Madgwicks to wind up Efektiv following its failure to comply with a statutory demand. By its application for leave to appeal, Efektiv seeks to appeal decisions made by his Honour declining to recuse himself from further hearing the winding up proceeding, or declining to hear an application that he recuse himself. The decisions were variously made on 5, 16 and 20 December 2019 and 2 January 2020. The reasons for the first decision were given on 9 December 2019,[1] and reasons for the second, third and fourth decisions were given on 24 January 2020.[2]

   [1]In the Matter ofKornucopia Pty Ltd [No 2] [2019] VSC 802.

   [2]In the Matter ofKornucopia Pty Ltd [No 4] [2020] VSC 7, [406]–[407], [409]–[413], [432]–[444] (‘Principal Reasons’).

1. On 24 January 2020, Sifris J ordered that Efektiv be wound up in insolvency.  On the same day, Efektiv made two unsuccessful applications to this Court[3] in an attempt to prevent the winding up:  one before the winding up order was made;  and one (on the application of Shivesh Kuksal), after the winding up order was made.  Mr Kuksal was the sole director of Efektiv until he resigned on 29 January 2019.  In the proceeding before Sifris J, he described himself as the ‘beneficial owner’ of Efektiv.  As Sifris J put it, while the precise corporate structure involving Efektiv had not been explained to him, it appeared that Mr Kuksal (at least at the time of the trial before his Honour) owned the shares of the holding company which in turn held the shares in Efektiv.[4]

   [3]Constituted by Whelan JA.

   [4]Principal Reasons, n 15.

1. No substantive steps have been taken in relation to Efektiv’s application for leave to appeal in this Court, by either Efektiv or Madgwicks, since 24 January 2020.  It is apparent from communications between the parties and the Court that Madgwicks do not intend to file any responsive material in Efektiv’s application for leave to appeal;  and that the liquidator does not intend for Efektiv to continue with the application.

1. Rule 64.46 of the Supreme Court (General Civil Procedure) Rules 2015 relevantly provides:

(1) The Court of Appeal constituted by one or more Judges of Appeal may make an order dismissing an application, including for leave to appeal, or appeal for—

…

(d) want of prosecution.

(2)       An order under paragraph (1) may be made—

(a)       of the Court of Appeal’s own motion; or

(b)       on the application of a party.

(3)If an application or appeal is dismissed pursuant to this Rule, the applicant or appellant shall pay each other party’s costs of the application or appeal on an indemnity basis, unless otherwise ordered by the Court of Appeal.

1. On 4 February 2022, the Deputy Registrar (Legal) sent an email to the liquidator of Efektiv, Madgwicks, and New Edge Law (a firm of solicitors who had filed a notice of change of solicitor on 20 July 2021 saying that they now acted on behalf of Efektiv). In his email, the Deputy Registrar set out the history of the proceeding; noted that no substantive steps had been taken by either Efektiv or Madgwicks since 24 January 2020; noted that it appeared that neither party intended to continue with the proceeding; observed that r 64.46(1) gave the Court power to dismiss the proceeding for want of prosecution; and sought responses from the parties about whether the proceeding should be dismissed by the Court, ‘whether pursuant to r 64.46(1) or otherwise’.

1. No response to the Deputy Registrar’s email was received from either the liquidator or Madgwicks.  The only responses received were two emails from Erudite Legal on behalf of Mr Kuksal.

1. By an email sent by Erudite Legal to the Court on 11 February 2022, Erudite Legal stated:

·Mr Kuksal objects to the proceeding being dismissed ‘pursuant to his residual rights as a director’;

·Mr Kuksal had ‘previously entered into discussions with the liquidator about their position with respect to the appeal’, but ‘those discussions could not be concluded at the time’;  and

·Mr Kuksal had instructed them to resume discussions and they would advise the Court of Mr Kuksal’s position by 18 February 2022.

1. By an email sent by Erudite Legal to the Court on 18 February 2022, Erudite Legal stated:

It would seem that though the liquidator is potentially open to our client taking over the conduct of the appeal, the conditions that they are presenting are unreasonable from our client’s perspective.  It is our client’s position that they have also failed to cooperate with our client’s request with respect to their other rights under the Corporations Act 2001 (Cth).

We have been instructed to negotiate with them further and in the event that no common ground may be reached, our client would apply to the Court to take over the conduct of the appeal.

1. The final line of Erudite Legal’s 18 February 2022 email was, ‘Please advise how the Court would like us to proceed’.  I interpolate here that this was not a proper request.  It is not, and has never been, a matter for the Court to give any advice to a solicitor about how they could or should proceed in legal proceedings.

1. Since 18 February 2022, no further communications have been received by the Court from anyone in relation to this proceeding.  The issue that now falls for determination is whether this Court, on its own motion, should dismiss Efektiv’s application for leave to appeal for want of prosecution.

Procedural history in more detail

1. On 2 December 2019, Efektiv filed a summons applying for Sifris J to recuse himself.  That application was dismissed by his Honour on 5 December 2019.  On 16 December 2019 (the first day of the trial), Efektiv made a second recusal application.  His Honour refused that application on the day on which it was made.  On 20 December 2019 (the fifth and last day of the trial), Efektiv made a third recusal application, orally at the conclusion of its closing submissions.  His Honour did not entertain that application.  On 2 January 2020, R M Legal Consultants, the lawyers for Efektiv, sent an email to his Honour’s chambers foreshadowing a further recusal application.  His Honour did not entertain that application. 

1. Madgwicks’ application to wind up Efektiv was listed for judgment on 24 January 2020 at 12:00 pm.  On 23 January 2020, Efektiv filed the application for leave to appeal from Sifris J’s four decisions made on 5, 16, and 20 December 2019 and 2 January 2020.  On 24 January 2020 at 10:42 am, Efektiv filed an application in the Court of Appeal seeking a stay of the winding up application before the delivery of judgment.[5]  During the morning of 24 January 2020, Whelan JA heard and dismissed Efektiv’s application for a stay.  Consequently, Sifris J went ahead and delivered judgment at 12:00 pm, ordering that Efektiv be wound up in insolvency and appointing Brent Leigh Morgan of Rodgers Reidy as liquidator. 

   [5]For completeness, I note that a filing fee of $919.70 was not paid and remains outstanding.

1. In the afternoon of 24 January 2020, Mr Kuksal made an urgent oral application to the Court of Appeal for the winding up order to be stayed. That application was also heard by Whelan JA. His Honour granted Mr Kuksal leave to bring the application in the name of Efektiv pursuant to s 198G of the Corporations Act 2001 (Cth), but dismissed the application.

1. In April 2020 there were email communications between the Deputy Registrar, R M Legal Consultants (the solicitors who had filed the application for leave to appeal on 23 January 2020) and Madgwicks.  In these communications, R M Legal Consultants asserted that Mr Kuksal ‘will be pursuing the matter (in keeping with his residual powers) in the event that the liquidator does not’.  Madgwicks responded by saying that the liquidator had informed them that he had not instructed R M Legal Consultants to continue to act for Efektiv;  he had not engaged another lawyer for Efektiv;  and he did not wish to continue with the proceeding. 

1. Between April 2020 and July 2021, the Court did not receive any further communications from any party in relation to the proceeding.  On 20 July 2021, New Edge Law filed a notice of change of solicitor for Efektiv.  On 27 July 2021, the Deputy Registrar sent an email to New Edge Law, copied to Madgwicks, asking whether Efektiv was still in liquidation.  The Deputy Registrar also sought confirmation as to who the notice of change of practitioner had been served upon;  the identity of the person who was providing New Edge Law with instructions;  and details of any further steps New Edge Law intended to take in the proceeding (noting that there had been no communication from any party for over 12 months).

1. On 29 July 2021, New Edge Law responded by saying that they would ‘get back … with the details requested later today’.  No further communication, however, was received from New Edge Law or anyone else until the Deputy Registrar wrote again on 4 February 2022 in the terms referred to in [5] above.

Should the proceeding be dismissed for want of prosecution?

1. Ordinarily, when one contemplates whether a proceeding should be dismissed for want of prosecution, one considers whether there have been intentional and contumelious failures to comply with court orders or specified time limits, or inordinate and inexcusable delay (giving rise to prejudice) on the part of the plaintiff/applicant.[6]  The present case, however, is not of that kind.  It is more akin to a case of the kind described by Johnson J in Udowenko and Ors v Chief Executive Officer & Board of Directors of St Georges Bank — a Division of Westpac Banking Corporation and Ors [No 2]:[7]  namely, a proceeding that has, at best, barely moved to first base, let alone beyond it.[8]  What is plain is that the parties (or those who are entitled to progress the proceeding) have no intention of taking any further step in the proceeding — the proceeding having been allowed to lie dormant for in excess of two years.

   [6]See generally Allen v Sir Alfred McAlpine& Sons Ltd [1968] 2 QB 229; Birkett v James [1978] AC 297; Department of Transport v Chris Smaller (Transport) Ltd [1989] AC 1197; Bishopsgate Insurance Australia Ltd v Deloitte Haskins & Sells [1999] 3 VR 863.

   [7][2011] NSWSC 1122, [115]–[124] (‘Udowenko’).  See also Knorr v CSIRO [No 2] [2012] VSC 268, [44]; Knorr v CSIRO [No 3] [2012] VSC 529, [5], [29].

   [8]Udowenko [2011] NSWSC 1122, [117].

1. Mr Kuksal objects to the proceeding being dismissed for want of prosecution.  His objection is said to be made, ‘pursuant to his residual rights as a director’.  The following points may be made in relation to this assertion:

(1)       Mr Kuksal resigned as a director almost one year before Efektiv was wound up.

(2) Any residual power in a director to appeal against a winding up order was abrogated by s 471A of the Corporations Law (as adopted in the Corporations Act 2001 (Cth) — see now s 198G of the Corporations Act).[9]

(3) In the more than two years since the application for leave to appeal was filed in this Court, no application has been made pursuant to s 198G(3)(b) of the Corporations Act2001 (Cth) for the approval of the Court for Mr Kuksal to pursue Efektiv’s application for leave to appeal.

[9]Brolrik Pty Ltd v Sambah Holdings Pty Ltd (2001) 164 FLR 91, 93–96 [7]–[19] per Barrett J (as his Honour then was). See also, Buckland Products Pty Ltd v Deputy Commissioner of Taxation [2003] VSCA 85, [15]–[16] (Phillips JA, with whom Chernov and Eames JJA agreed); Perovich & Anor v ASIC [2005] QCA 456, [8] (McPherson JA); Xu v Megaward Pty Ltd [2018] NSWCA 232, [23]–[24] (McColl, Meagher and Leeming JJA).

1. If Mr Kuksal has any basis upon which he contends that he should be permitted to pursue Efektiv’s application for leave to appeal, his delay in making an appropriate application to the Court to permit that to occur is inordinate.  He cannot expect that this Court would permit a proceeding to remain on foot indefinitely, in circumstances where none of the present parties to it have any interest in taking any step in relation to it.  Plainly, it is not in the interests of justice to allow for such a situation to continue without end — if for no other reason than the continued existence of the proceeding consumes court resources from time to time when Registry staff review the status of cases and the Court’s current workload. 

1. When one looks at the full background circumstances of this litigation,[10] it is clear that this proceeding, in which no steps have been taken for more than two years (and in which there is no basis for thinking that any step might be taken in any reasonable timeframe in the future), should be dismissed for want of prosecution.

   [10]Principal Reasons, [2]–[15], [189]–[208].

Conclusion

1. Pursuant to r 64.46 of the Supreme Court (General Civil Procedure) Rules 2015, Efektiv’s application for leave to appeal filed 23 January 2020 will be dismissed for want of prosecution.

- - -