Horne v Retirement Guide Management Pty Ltd

SUPREME COURT OF VICTORIA

COURT OF APPEAL

S APCI 2016 0019

STIRLING LINDLEY HORNE and PETR VRSECKY (in their capacity as joint and several liquidators of AUSTRALIAN PROPERTY CUSTODIAN HOLDINGS LIMITED (ACN 095 474 436) (RECEIVERS AND MANAGERS APPOINTED) (CONTROLLERS APPOINTED) (IN LIQUIDATION)) & ORS (according to the attached schedule)	Applicants
v
RETIREMENT GUIDE MANAGEMENT PTY LTD (ACN 125 225 390) & ORS (according to the attached schedule)	Respondents

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JUDGES:	WARREN CJ, TATE and BEACH JJA
WHERE HELD:	MELBOURNE
DATE OF HEARING:	14 April 2016
DATE OF JUDGMENT:	16 March 2017
MEDIUM NEUTRAL CITATION:	[2017] VSCA 47
JUDGMENT APPEALED FROM:	[2015] VSC 745 (Judd J)

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CORPORATIONS – Corporations Act 2001 (Cth) s 588FF – Supreme Court (Corporations) Rules 2013 rr 1.10 and 2.7 – Supreme Court (General Civil Procedure) Rules 2015 r 3.02.

PRACTICE AND PROCEDURE – Extension of time for service – Whether Court has power under Supreme Court (General Civil Procedure) Rules 2015 r 3.02 to extend time for service in Supreme Court (Corporations) Rules 2013 r 2.7 – Interpretation of Supreme Court (Corporations) Rules 2013 rr 1.10 and 2.7 – Does Supreme Court (Corporations) Rules 2013 r 2.7 'otherwise provide' (within the meaning or r 1.10) for the extension of time for service to preclude reliance on Supreme Court (General Civil Procedure) Rules2015 r 3.02?

PRACTICE AND PROCEDURE – Discretion to extend time for service – Whether judge erred in exercise of discretion.

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APPEARANCES:	Counsel	Solicitors
For the Applicants	Mr A C Archibald QC with Mr N Evans	Johnson Winter & Slattery
For the First and Third to Ninth Respondents	Mr N J Young QC with Mr T Woodward SC and Dr O Bigos	Minter Ellison
For the Second Respondent	Mr M S Osborne QC with Mr J P Tomlinson	SBA Law

WARREN CJ
TATE JA
BEACH JA:

TABLE OF CONTENTS

Introduction
The relevant legislation and rules
The history of the proceeding
Commencement of proceedings
Application for extension of time (Randall AsJ)
Subsequent events
Respondents’ awareness of the Voidable Transactions Proceeding
Respondents’ application to set aside extension orders (Efthim AsJ)
Appeal from Efthim AsJ (Judd J)

Summary of principles
Decision on power
Decision on discretion

The grounds of appeal
Nature of appeals
The question of power
Parties’ submissions

Applicants’ submissions
Lend Lease respondents’ submissions
Second respondent’s submissions

Analysis
The question of discretion
Parties’ submissions

Applicants’ submissions
Lend Lease respondents’ submissions
Second respondent’s submissions

Analysis

Conclusion

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The central issue in this application for leave to appeal is whether time could and should have been extended for the service of an originating process under the Supreme Court (Corporations) Rules 2013 (‘Corporations Rules’) by reference to the Supreme Court (General Civil Procedure) Rules 2015 (‘GeneralCivil Procedure Rules’). Ultimately, we conclude that the Court has power under the General Civil Procedure Rules to grant an extension of time to effect service arising under the Corporations Rules. We consider that Judd J was in error in concluding that there was no such power under the General Civil Procedure Rules. However, we consider, and the parties accepted, that the pivotal question in this matter is whether his Honour properly exercised the relevant discretion by refusing to extend time in the circumstances of the case. We conclude that Judd J correctly exercised his discretion and that while leave to appeal should be granted in respect of proposed grounds 1 and 3, leave to appeal should be refused on the other grounds and the appeal should be dismissed.

Introduction

The applicants are the joint and several liquidators of Australian Property Custodian Holdings Ltd (‘APCH’) and 19 other companies, which formerly conducted business as owners and operators of retirement villages around Australia. On 17 October 2013, one day prior to the expiration of the relevant limitation period, the applicants commenced proceedings against the respondents challenging certain transactions in 2007 concerning the management rights of the villages. The applicants alleged that the transactions were voidable.

The applicants’ originating process was returnable before an associate judge on 15 November 2013. The applicants had not served the originating process prior to 15 November 2013, and on that day the application was adjourned to 20 December 2013. On 19 December 2013 the applicants filed an interlocutory process seeking an extension of the time in which they were permitted to serve the originating process. The following day, after an ex parte hearing, Randall AsJ extended the time for service on the respondents until 1 December 2014.

The originating process together with the extension orders were served on some of the respondents on 28 November 2014, and on the remaining respondent on 1 December 2014. Subsequently, in applications heard by Efthim AsJ on 18 March 2015, the respondents sought to have the extension orders made by Randall AsJ set aside. Efthim AsJ dismissed the respondents’ applications on 10 July 2015. The respondents successfully appealed the decision of Efthim AsJ. On 18 December 2015 Judd J held that the Court did not have power to extend the time for service of the originating process, and even if it did have power, the power ought not have been exercised in the circumstances of this case.

The applicants now seek leave to appeal from the decision of Judd J.

The relevant legislation and rules

Under s 588FF of the Corporations Act 2001 (Cth) (‘Corporations Act’), a liquidator can apply to a court for a wide range of relief in respect of voidable transactions.[1] The provision relevantly states:
[1]The circumstances in which a transaction will be voidable are set out in Corporations Act s 588FE.

(1)Where, on the application of a company’s liquidator, a court is satisfied that a transaction of the company is voidable because of section 588FE, the court may make one or more of the following orders:
[(a)–(j) set out various orders, including orders for a person to pay money or transfer property to the company, and orders discharging debts incurred by the company.]

(2)       Nothing in subsection (1) limits the generality of anything else in it.
(3)       An application under subsection (1) may only be made:
(a)during the period beginning on the relation-back day and ending:
(i)        3 years after the relation-back day; or
(ii)12 months after the first appointment of a liquidator in relation to the winding up of the company;

whichever is the later; or
(b)within such longer period as the Court orders on an application under this paragraph made by the liquidator during the paragraph (a) period.

In the Supreme Court, applications pursuant to s 588FF are subject to the Corporations Rules. The object of those Rules is ‘to provide for rules in relation to Corporations matters in harmony with like rules in all other States and Territories’.[2] On 12 November 1999 the Council of Chief Justices of Australia and New Zealand announced that it had completed its work towards harmonising rules with respect to corporations proceedings. The Council’s media release of the same day said it was ‘hoped that the adoption of harmonised Rules will simplify litigation under the Corporations Law, especially where legal practitioners conduct litigation in a court outside their State or Territory of residence’.
[2]Corporations Rules r 1.1(2).

The Corporations Rules apply to any proceeding in the Supreme Court under the Corporations Act or the Australian Securities and Investments Commission Act 2001 (Cth) (‘ASIC Act’).[3] Rule 1.3 relevantly provides:
[3]Ibid r 1.3(1)(a).

(1) Unless the Court otherwise orders—
(a) these Rules apply to a proceeding in the Court under the Corporations Act or the ASIC Act; …

(2) The other Rules of the Court apply, so far as they are relevant and not inconsistent with these Rules—
(a)to a proceeding in the Court under the Corporations Act or the ASIC Act; …

Rule 1.10 then states:

Unless the Corporations Act, the ASIC Act, or these Rules otherwise provide, the rules of this Court that provide for the extension or abridgment of a period of time fixed for the doing of any act or thing in relation to a proceeding apply to a proceeding to which these Rules apply.

It is clear from rr 1.3 and 1.10 that the Corporations Rules do not cover the field when it comes to practice and procedure in Corporations Act and ASIC Act proceedings. The rules governing a Corporations Act or ASIC Act proceeding will therefore ordinarily be the Corporations Rules, which are harmonious among the jurisdictions, and any local rules that apply by reason of r 1.3 and/or r 1.10. Those local rules are not necessarily fully harmonious among the jurisdictions.

Rule 2.2 of the Corporations Rules sets out the procedure for commencing a proceeding in accordance with the Rules — namely, by filing an originating process or interlocutory process. An originating or interlocutory process must be supported by affidavit.[4] Rule 2.7 sets out the requirements for service of an originating or interlocutory process. It states:
[4]Ibid r 2.4.

(1)As soon as practicable after filing an originating process and, in any case, at least 5 days before the date fixed for hearing, the plaintiff must serve a copy of the originating process and any supporting affidavit on—
(a) each defendant (if any) to the proceeding; and
(b)if the corporation to which the proceeding relates is not a party to the proceeding—the corporation.

(2)As soon as practicable after filing an interlocutory process and, in any case, at least 3 days before the date fixed for hearing, the applicant must serve a copy of the interlocutory process and any supporting affidavit on—
(a)each respondent (if any) to the application in the interlocutory process; and
(b)if the corporation to which the application in the interlocutory process relates is not a party to the application in the interlocutory process—the corporation.

The two rules from the General Civil Procedure Rules that are in issue are rr 3.02 and 5.12. Before the associate judges, the matter proceeded with regard to the Supreme Court (General Civil Procedure) Rules 2005. Those Rules have since been replaced by the 2015 General Civil Procedure Rules. Rules 3.02 and 5.12 are in substance identical in the 2005 and 2015 Rules.

Rule 3.02 (as at 2015) provides:

(1)The Court may extend or abridge any time fixed by these Rules or by any order fixing, extending or abridging time.
(2)The Court may extend time under paragraph (1) before or after the time expires whether or not an application for the extension is made before the time expires.
(3)Unless the Court otherwise orders, any time fixed by these Rules or by any order fixing, extending or abridging time may be extended by consent without an order of the Court.

Rule 5.12 (as at 2015) provides:

(1)A writ or an originating motion shall be valid for service for one year after the day it is filed.
(2)Where a writ or originating motion has not been served on a defendant, the Court may, from time to time, by order extend the period of validity for such period from the day of the order as the Court directs, being not more than one year from that day.

(3) An order may be made under paragraph (2) before or after expiry.
(4)The plaintiff may apply under paragraph (2) without notice to the defendant, but if the Court considers that the defendant ought to be heard, the Court shall—
(a) adjourn the further hearing; and
(b)direct the plaintiff to give notice to the defendant by summons or otherwise.

(5)Where an order is made under paragraph (2), the Prothonotary shall stamp any sealed copy originating process for service with the date of the order and the extended date of validity.

The history of the proceeding

On 18 and 19 October 2010, the applicants were appointed as joint and several administrators of APCH and a number of other companies (collectively referred to as ‘the Prime Group’). Those other companies were mostly subsidiaries of APCH in its capacity as responsible entity of the Prime Retirement and Aged Care Property Trust (‘Prime Trust’). The primary assets of the Prime Trust were a number of retirement villages around Australia.

On 23 November 2011, the applicants were appointed joint and several liquidators of APCH and the other entities in the Prime Group.

Prior to this, a secured creditor of the Prime Group had appointed Craig Shepard and Mark Korda as receivers and managers (on 15 October 2010) and as controllers (on 3 November 2010) over various assets within the Prime Group. Mr Shepard and Mr Korda will be described as ‘the receivers’.

The events that have given rise to the present proceeding are complex. In simplified form, they relate to various transactions concerning the ownership of the management rights for the retirement villages within the Prime Trust. In around 2004, APCH entered into a number of agreements with the second respondent, Retirement Guide Pty Ltd, pursuant to which the latter would manage the retirement villages. Then, in 2007, the management rights were restructured through a series of lease, loan and management agreements between APCH and the respondents (‘the Management Rights Restructure’). Through a series of subsequent share transactions, the first and third to ninth respondents became subsidiaries of Lend Lease Primelife Ltd in 2009. They will be referred to as ‘the Lend Lease respondents’. The second respondent, Retirement Guide Pty Ltd, is separately represented.

In March 2012, the applicants instructed lawyers to send letters of demand to each of the respondents and three other parties.[5] These letters demanded the payment of approximately $90 million and a full account of the dealings relating to management rights. If the demands were not met, the letters indicated the applicants would commence proceedings. At the end of March 2012, lawyers for the respondents replied noting that they were in the process of obtaining instructions from their clients about the complex and long-past transactions involved but at that stage ‘[their] clients [knew] so little about the subject matter of the Letters that they [were] not in a position to do anything other than not admit any of [the applicants’] allegations or claims’.
[5]The other parties to whom letters were sent were William Lewski, APC RV Holdings Pty Ltd and Wickgold Investments Pty Ltd.

Commencement of proceedings

A year later, on 18 March 2013, the receivers commenced proceedings by way of writ against various parties involved in the Management Rights Restructure (‘the Management Rights Proceeding’).

On 17 October 2013, one day before the expiry of the limitation period under s 588FF of the Corporations Act, the applicants filed an originating process seeking declarations that various transactions in the Management Rights Restructure were voidable transactions pursuant to s 588FE, and also seeking consequential orders pursuant to s 588FF (‘the Voidable Transactions Proceeding’). This is the proceeding out of which the current application for leave to appeal emerges. The originating process was supported by an affidavit sworn by one of the applicants, the liquidator Stirling Lindley Horne, on 17 October 2013 (‘the first Horne affidavit’). Exhibited to the first Horne affidavit was a statement of claim which set out particulars of the allegations in respect of each of the impugned transactions raised by the originating process.

The Prothonotary fixed the time and date for the hearing of the application in the Voidable Transactions Proceeding for 10.30am on 15 November 2013. The originating process was not served prior to the date fixed for hearing. On that day an associate judge adjourned the hearing to 20 December 2013. A lawyer, acting only as an observer for the Lend Lease respondents, was present in court that day.[6]
[6]See [40] below.

Application for extension of time (Randall AsJ)

A day earlier, on 19 December 2013, the applicants filed an interlocutory process which stated:

This application is made ex parte, under Rules 1.3(2), 1.8, 1.10 and 2.2 of the Supreme Court (Corporations) Rules 2013, and under Rules 1.15, 3.02 and 5.12(2) of the Supreme Court (General Civil Procedure) Rules 2005 (Vic).
On the facts stated in the supporting affidavit of Jason Stone sworn on 18 December 2013, the Plaintiffs apply for the following interlocutory relief:
1 The Hearing be adjourned to a date not before 19 December 2014.
2Further, or alternatively, the time for service of the Originating Process dated 17 October 2013 be extended under 12 December 2014.
3Further, or alternatively, the period of the validity of the Originating Process dated 17 October 2013 for service be extended so that the Plaintiffs may serve the Originating Process on the Defendants until 12 December 2014.
4The costs of this application be reserved.
5Such further or other orders as the court deems appropriate.

The application was supported by an affidavit of Jason Glen Stone sworn 18 December 2013 (‘the Stone affidavit’). The Stone affidavit set out the background to the external administration and liquidation of APCH. It set out the grounds upon which the applicants sought an extension of time for service of the originating process. These grounds were summarised in the applicants’ written outline of submissions before Randall AsJ as follows:

First, because the Receivers and Managers have filed but not served a related proceeding — the Management Rights proceeding — which arises from substantially the same factual matrix and seeks a similar compensatory remedy as the current proceeding.
Secondly, the plaintiffs are presently without funds to prosecute the proceeding, notwithstanding a preliminary inquiry by the plaintiffs to obtain funding. However, there are a number of possibilities in the next 12 months that may enable the plaintiffs to come into funds.

In relation to the Management Rights Proceeding, the Stone affidavit stated that the lawyers for the receivers had advised the applicants that the receivers did not intend to serve the writ until they had concluded further investigations. The Stone affidavit continued: ‘As at the date of this affidavit, the Receivers have not advised us whether they have completed their investigations, or whether they intend to continue the proceeding’. It was noted that the receivers had until March 2014 in order to serve their writ.

The Stone affidavit stated that the liquidation was without funds. The affidavit identified three possible sources of future funds: (1) the sale of a property, the Ashton Gardens retirement village; (2) a possible successful outcome in ‘the Listing Fee Proceeding’, a claim brought by the liquidators relating to amendments made to the constitution of the Prime Trust to provide for a substantial payment by the Trust to APCH; and (3) a possible successful outcome in ‘the Daytree Proceeding’, concerning whether certain property of APCH was property charged by creditors of APCH. The Stone affidavit stated that the applicants’ lawyers had had preliminary discussions with a litigation funder about obtaining funding, but that the funder would require a pleading settled by and an advice from senior counsel on prospects before the funding application process could continue. The Stone affidavit concluded:

The further extension of time will enable the Liquidators to obtain funding, from the sale of Ashton Gardens, a successful outcome from the Daytree Proceeding, and/or a successful outcome in the Listing Fee proceedings. Those funds will enable us to complete further investigations that may assist us in obtaining funding for this proceeding; and … to enable us to obtain funding, from a litigation funder, for this proceeding.

The applicants’ written outline of submissions before Randall AsJ noted that r 2.7(1) of the Corporations Rules requires an originating process to be served at least five days before the date fixed for hearing. The applicants submitted to Randall AsJ that if he was minded to adjourn the proceeding, this could obviate the need for the Court to consider further or alternative orders sought in the interlocutory process. If this was not the case, the applicants submitted to Randall AsJ that he had the power to extend the time for service or the period of validity for service of the originating process. The applicants identified the sources of this power as:

a.the powers of the Court to extend time (as provided by rule 3.02 of the Supreme Court Rules and/or as extended to proceedings under the Act by the operation of rule 1.10 of the Corporations Rules); or
b.the general powers of the Court to determine the procedure to be adopted and to give directions (rule 1.8 of the Corporations Rules and rule 1.15(1) of the Supreme Court Rules).

On r 5.12, the applicants submitted to Randall AsJ that:

It is clear that rule 5.12 does not, on its face, limit the validity of an originating process issued under the Corporations Rules (as such process is neither a writ nor an originating motion). Neither does rule 5.12 directly empower the Court to extend the time for service of such process. While the plaintiffs do not concede the [originating process] is stale, for the avoidance of any doubt, they wish to avoid an argument in the future that the process is invalid because they have not sought an order from the Court extending the time for service, or extending the validity of the [originating process] for service.

It should be observed that the outline of submissions before Randall AsJ does not make reference to the first part of r 2.7(1) of the Corporations Rules, which states that the originating process should be served ‘as soon as practicable after filing’.

The transcript reveals that the hearing before Randall AsJ on 20 December 2013 was brief. His Honour stated that he had read the applicants’ outline of submissions and considered that he had the power to extend time as sought by the applicant. There was no substantive discussion of the relevant rules in the Corporations Rules and General Civil Procedure Rules, or of the grounds upon which the applicants sought the extension of time. Again, no reference was made to the words ‘as soon as practicable after filing’ in r 2.7(1).

Counsel for the applicants submitted to Randall AsJ that there were matters in the affidavit material that the associate judge should be cautious about disclosing publicly, namely confidential matters as between the receivers and the liquidators and communications with potential litigation funders. In response, Randall AsJ suggested that the whole affidavit be kept confidential. Counsel for the applicants indicated that this had occurred in other cases. Again, as occurred previously, the Lend Lease respondents had a lawyer as an observer in court.[7]
[7]See [40] below.

Randall AsJ subsequently made orders on 20 December 2013 that:

1. The hearing is adjourned to 19 December 2014 at 10.00am …
2.The period of the validity of the originating process dated 17 October 2013 for service be extended so that the Plaintiffs may serve the originating process on the Defendants until 1 December 2014.

3. The costs of this application is reserved.
4.The affidavit of Jason Stone sworn 18 December 2013 be kept confidential and not be available for inspection by any person or party other than [the] Plaintiff.

Subsequent events

On 25 February 2014, the applicants wrote to the receivers requesting confirmation of whether the receivers intended to proceed with the Management Rights Proceeding.[8] On 28 February 2014, the receivers responded to the applicants, proposing that the applicants have sole carriage of the Management Rights Proceeding.[9] Negotiations ensued about the precise terms upon which the applicants would take control of the proceeding. On or around 19 March 2014, a deed was executed under which the applicants took over carriage of the Management Rights Proceeding.[10]
[8]Re APCH Ltd (in liq) [2014] VSC 190 [52].
[9]Ibid [53].
[10]Ibid [54]; Re APCH Ltd (in liq) [No 3] [2014] VSC 456 [8], [81].

Meanwhile, by an originating process dated 13 March 2014, the applicants applied to the Supreme Court for an order under r 5.12 of the General Civil Procedure Rules extending the time for service of the writ and general endorsement in the Management Rights Proceeding. That proceeding had been commenced on 18 March 2013 and thus in the absence of an extension of time, the writ would become stale on 18 March 2014. The application came before Robson J for hearing ex parte on 17 March 2014. His Honour granted an extension of one month to 19 April 2014 to allow APCH (as the plaintiff) to file material and submissions in support of the application for an extension of time. The matter returned before Robson J on 2 April 2014, on which day his Honour reserved his decision. On 15 April 2014, Robson J decided to exercise the discretion to extend the time for service of the writ and general endorsement until 30 June 2014.[11] Subsequently, by orders on 26 June 2014, the time for service was further extended to 21 July 2014.[12]
[11]Re APCH Ltd (in liq) [2014] VSC 190.
[12]Re APCH Ltd (in liq) [No 3] [2014] VSC 456 [3], [10].

In June 2014, the applicants secured a funding agreement with a commercial litigation funder. The litigation funder agreed to fund the Management Rights Proceeding, the Voidable Transactions Proceeding and a third proceeding against the former auditors of APCH. Mr Horne, the applicant liquidator, deposed in an affidavit sworn 6 February 2015 (‘the second Horne affidavit’) that from that time, the applicants instructed their lawyers to examine the available records of APCH to investigate the merits of the proposed causes of action in the three proceedings. Further, at various times in June and July 2014, the writ was served on the defendants in the Management Rights Proceeding.

In July 2014, the defendants in the Management Rights Proceeding applied to the Court to have service of the writ set aside in that proceeding.[13] On 17 September 2014, Robson J granted the defendants’ applications.[14] His Honour held that APCH had failed to advance a good reason for an extension of time for service of the writ. Robson J set aside service of the writ and general indorsement in the Management Rights Proceeding.
[13]Ibid [11].
[14]Re APCH Ltd (in liq) [No 3] [2014] VSC 456.

The consequence of Robson J’s orders on 17 September 2014 was that any contractual or statutory causes of action in the Management Rights Proceeding became statute barred. Consequently, the applicants instructed their lawyers to draw a fresh writ and statement of claim in the Management Rights Proceeding, pleading only equitable causes of action. This fresh writ was filed on 17 December 2014.

On or about 13 November 2014, the applicants secured approval from a litigation funder to serve the originating process in the Voidable Transactions Proceeding. The originating process, the first Horne affidavit and the orders of Randall AsJ were served on the Lend Lease respondents on 28 November 2014, and on the second respondent on 1 December 2014.

Respondents’ awareness of the Voidable Transactions Proceeding

The Lend Lease respondents first became aware of the Voidable Transactions Proceeding through litigation searches conducted on or around 22 October 2013. Through these litigation searches, the lawyer for the Lend Lease respondents obtained a copy of the originating process filed by the applicants on 17 October 2013 and a copy of the first Horne affidavit.

A lawyer from Hall & Wilcox, acting on behalf of the lawyer for the Lend Lease respondents, attended the Supreme Court as an observer on 15 November 2013, on which date Efthim AsJ adjourned the hearing to 20 December 2013. The lawyer from Hall & Wilcox again attended the hearing before Randall AsJ on 20 December 2013 as an observer. The Hall & Wilcox lawyer apparently informed the lawyer for the Lend Lease respondents that an order had been made in response to the ex parte application by the applicants. However, at that time the Lend Lease respondents were not able to access the Stone affidavit because the file of the proceeding had been made confidential. The Lend Lease respondents were ultimately provided with a copy of the Stone affidavit on 16 December 2014, a year later.

The lawyer for the second respondent has deposed that the second respondent first became aware of the Voidable Transactions Proceeding on 7 May 2014, when the lawyer and the director of the second respondent were provided with a copy of the judgment of Robson J of 15 April 2014.[15] That judgment referred to the Voidable Transactions Proceeding and the orders of Randall AsJ made on 20 December 2013.[16] The lawyer for the second respondent subsequently searched the court file in the Voidable Transactions Proceeding and on 14 May 2014, obtained copies of the originating process, the statement of claim, the first Horne affidavit, and the orders of Randall AsJ made on 20 December 2013. As already noted, the second respondent ultimately obtained a copy of the Stone affidavit on 16 December 2014.
[15]Re APCH Ltd (in liq) [2014] VSC 190.
[16]Ibid [57]–[61].

Respondents’ application to set aside extension orders (Efthim AsJ)

By interlocutory processes filed on 19 and 22 December 2014, the respondents in the present proceeding applied to have the orders of Randall AsJ made on 20 December 2013 set aside or, alternatively, the proceeding against them permanently stayed. In the second Horne affidavit, Mr Horne foreshadowed an amendment to the originating process in the Voidable Transactions Proceeding to introduce an ‘unreasonable director-related transactions’ claim relying on s 588DA of the Corporations Act.

The respondents’ applications were heard before Efthim AsJ on 18 March 2015. The nature of that hearing was a re-hearing rather than an appeal.[17]
[17]Savcor Pty Ltd v Cathodic Protection International APS (2005) 12 VR 639 (‘Savcor’).

The applicants filed new supporting material before Efthim AsJ. Some of the circumstances surrounding the liquidation of APCH had progressed since the hearing before Randall AsJ. In large part, however, the reasons for the extension of time relied upon by the applicants before Efthim AsJ were similar to those relied upon by them before Randall AsJ. The respondents submitted to Efthim AsJ that the applicants’ submissions before Randall AsJ had omitted to refer to the whole of r 2.7(1) of the Corporations Rules, and in particular the words requiring service ‘as soon as practicable after filing’. The respondents submitted that r 2.7 did not permit reliance on the rules referred to by the applicants before Randall AsJ, including r 5.12 of the General Civil Procedure Rules. The respondents also submitted before Efthim AsJ that the applicants had failed to refer Randall AsJ to s 588FF(3)(a) of the Corporations Act and the authorities discussing the policy underlying that provision.

On 10 July 2015, Efthim AsJ dismissed the respondents’ applications.[18] His Honour found that r 2.7 does not preclude the operation of rr 1.3 and 1.10 of the Corporations Rules; that r 1.10 enlivened the operation of r 5.12 of the General Civil Procedure Rules; and that r 5.12 is not inconsistent with r 2.7.[19] Efthim AsJ stated:

Senior counsel for the Lend Lease defendants conceded that the Court did have power to extend time for service but that could be done pursuant to r 3.02 of the Civil Procedure Rules. That rule was referred to in the submissions put before Randall AsJ, but his Honour did not refer to which rule his order was made under, nor did he say in the transcript which rule he was relying upon.
I accept that r 3.02 of the Civil Procedure Rules can also be invoked to obtain an extension, but it is my view that r 5.12 also applies. On reading the submissions put before his Honour, it would appear that his Honour made his order pursuant to r 5.12 of the Civil Procedure Rules.[20]

[18]Horne v Retirement Guide Management Pty Ltd [2015] VSC 327.

[19]It appears that Efthim AsJ considered that the one-year period for the validity of service of a writ or originating motion in r 5.12 of the General Civil Procedure Rules applied to the originating process filed by the applicants: see ibid [33], [49], [67]. This is an issue in contention in the present application for leave to appeal.

[20]Horne v Retirement Guide Management Pty Ltd [2015] VSC 327 [34]–[35].

Having found that there was a power to grant an extension of time, Efthim AsJ went on to consider whether that power should be exercised. His Honour considered that there had not been inordinate delay on the part of the applicants; they came to the Court relatively quickly after filing the originating process seeking the Court’s guidance on an extension of time for service.[21] His Honour accepted the respondents’ submissions that the authorities indicated that waiting for the completion of another proceeding or a lack of funding were not good reasons for an extension of time.[22] However, there were other factors in the present case. First, the applicants had given notice to the respondents of the proceeding through their letters of demand in March 2012. Secondly, those letters included allegations of unreasonable director-related transactions pursuant to s 588FDA, which the applicants were seeking to include in the originating process.[23] Thirdly, the Lend Lease respondents had an observer at the hearing before Randall AsJ.[24] Fourthly, there was no prejudice to the respondents as a result of the ex parte hearing;[25] in all of the circumstances of the case, the applicants had acted appropriately.[26] Fifthly, the Lend Lease respondents’ lawyers were aware of the extension orders, considered them, and decided to do nothing about them and allow the applicants to proceed and incur costs.[27] Finally, the decision of Robson J to set aside extension orders and service in the Management Rights Proceeding[28] could be distinguished because in that proceeding, the receivers had ‘sat on their hands’ and did not go to court to regularise their position; here, in contrast, ‘the liquidators acted diligently in attending court and seeking a timetable’.[29]
[21]Ibid [49].
[22]Ibid [61].
[23]Ibid [62]–[63].
[24]Ibid [65].
[25]Ibid [66]–[67], [77]–[78].
[26]Ibid [70].
[27]Ibid [77].
[28]Re APCH Ltd (in liq) [No 3] [2014] VSC 456.
[29]Horne v Retirement Guide Management Pty Ltd [2015] VSC 327 [71].

Efthim AsJ noted that:

Mr Horne deposed that if an extension was not given, the liquidators would have served the originating process very promptly after the rejection of the interlocutory application for the extension of time. The liquidators would have then sought a long adjournment of the interlocutory procedures in order to allow time for the completion of the other steps that he did. This could have been an alternative means of avoiding the incurring of possibly unnecessary costs by all the parties and allowing better investigation of the circumstances giving rise to the claims. That option did not arise for consideration, because the liquidators believed the extension orders clarified the time available to them for those other steps.[30]

[30]Ibid [74].

In the result, his Honour dismissed the respondents’ applications to set aside the extension orders with costs.

Appeal from Efthim AsJ (Judd J)

The respondents appealed from the decision of Efthim AsJ. The appeal was heard by Judd J.

In his reasons,[31] Judd J first considered the regime for applications for orders in relation to voidable transactions under the Corporations Act. His Honour noted that:

Under s 588FF, an application to a court for orders in relation to a voidable transaction may only be made by a company’s liquidator. There is a limited period within which an application may be commenced.[32]

[31]Re APCH Ltd (in liq) [2015] VSC 745 (‘reasons’).

[32]Ibid [25].

Judd J cited and quoted from the judgment of Spigelman CJ in BP Australia Ltd v Brown:[33]

There is, in my opinion, a broader public interest to be served by allowing persons who have had dealings with companies which become insolvent to conduct their commercial affairs with a degree of certainty about their exposure to having past transactions unravelled.
…
The commercial and economic life of the community is sometimes better served by allowing the loss to lie where it falls, so that all concerned may proceed with a high degree of certainty as to their financial position. The passage of time, even the passage of three years, can be seen to legitimately alter the balance of conflicting interests in this regard.
A creditor or other person who has received the benefit of a voidable transaction is at risk of having to surrender it. The time limit in s 588FF(3) has the effect that at the end of the period of three years, such a person will know whether s/he remains at risk. In a legislative scheme which seeks to balance conflicting commercial interests of this character, that appears to me to be a perfectly reasonable requirement. Those who have an interest, or who represent those who have an interest, to disturb transactions must indicate, within three years, whether they wish to keep open the option of doing so. In this, as in other areas, legal policy favours certainty.
…
Section 588FF(3) does not have the effect of requiring all applications to be brought within a short period of time. It does, however, have the effect of requiring those who wish to keep open the option to do so, to determine that they do wish to do so within the three year period and to seek a determinate extension of the period. One thing that must be decided within the three year period is how long the process of deciding whether to pursue voidable transactions will take. Eventually, investigations to overcome deficiencies of information or the pursuit of funding must cease. Parliament has identified a reasonable time for such matters to occur, subject to a single determinate extension of time.[34]

[33](2003) 58 NSWLR 322.

[34]Ibid 345-6 [112], [114]–[115], [118].

Judd J noted that the analysis of Spigelman CJ was endorsed by the High Court in Fortress Credit Corporation (Australia) II Pty Ltd v Fletcher.[35]
[35](2015) 254 CLR 489 (‘Fortress’).

His Honour then turned to consider the regime for bringing applications under the Corporations Rules, including the requirements for supporting documents and for service. Judd J noted the special nature of proceedings commenced under s 588FF of the Corporations Act as compared to other proceedings commenced under the General Civil Procedure Rules.[36] He relied on decisions of the New South Wales Court of Appeal, including Arthur Andersen Corporate Finance Pty Ltd v Buzzle Operations Pty Ltd (in liq)[37] and Tolcher v Gordon,[38] in which the New South Wales courts had emphasised the importance of prompt service by a liquidator. In Buzzle, Ipp JA (Tobias and McColl JJA agreeing) had held:

In my view it would be inappropriate to allow an extension of time for the service of a writ or statement of claim where a significant cause of the delay has been the willingness of the plaintiff to do nothing about service while awaiting a decision from a litigation funder as to whether or not to provide the necessary funds. Were that to be regarded as a good reason to extend time, the Court would be allowing plaintiffs to arrogate to non-parties the right to decide the period by which the time for service of a writ should be extended. That would be fundamentally in conflict with the Court’s duty to exercise, alone, the discretion conferred upon it.[39]

[36]Reasons [45], [47].

[37][2009] NSWCA 104 (‘Buzzle’).

[38][2005] NSWCA 135.

[39][2009] NSWCA 104 [82].

And in Tolcher v Gordon, Hodgson JA had held:

Although the three-year period is a limit for the commencement of such proceedings, not service of the proceedings, in my opinion an important aspect of the public policy behind the limitation period is that potential defendants should be made aware of claims against them within a reasonable time; so that in my opinion, delay in service of such proceedings, in contravention of the rules, is particularly serious if it occurs after the expiration of the three-year limitation period. A liquidator who does not commence proceedings until just before expiry of the limitation period should in my opinion be especially diligent in pursuing prompt service of the proceedings.[40]

Summary of principles

[40][2005] NSWCA 135 [3].

Judd J summarised the principles from the legislative provisions, rules and case law as follows:

(1)The liquidators’ opportunity to extend the period within which to commence a proceeding under s 588FF is a once only opportunity.
(2)An extension of time under s 588FF(3)(b) may be justified to enable a liquidator to complete investigations, and identify potentially voidable transactions and defendants.
(3)The opportunity for extension under s 588FF(3)(b) covers the field, excluding other avenues to obtain further time within which to commence a proceeding.
(4)An application for extension under s 588FF would ordinarily require notice to be given to putative defendants, who have ‘a substantive interest in the question to be determined’.
(5)When deciding whether to extend time under s 588FF, the court must balance the interests of business certainty against the prospects for recovery to benefit creditors. Expedition is of the essence.
(6)The Corporations Rules impose a mandatory obligation to serve the Originating Process as soon as practicable.
(7)The regulatory context (statute and rules) informs the exercise of any discretion to extend time for service, including under r 5.12.
(8)On commencement of a proceeding, the liquidators must verify a proper basis for the allegations made in the proceeding.
(9)An extension under r 5.12 would not usually be granted to enable a plaintiff to further investigate the merits of the claims or obtain litigation funding.
(10)It is the duty of a plaintiff to serve legal process promptly. The obligation is more acute in the case of a proceeding commenced under s 588FF, arising directly under r 2.7 in relation to an Originating Process, and more generally under s 25 of the Civil Procedure Act.
(11)Even in the absence of a requirement under the rules to serve as soon as practicable, an applicant for an extension under r 5.12 would be required to demonstrate reasonable steps had been taken to serve the court process.
(12)A decision not to serve, made by a plaintiff for forensic or strategic purposes, is antithetical to the duty to serve promptly.
(13)An extension will not ordinarily be granted to facilitate a plaintiff’s decision not to serve process on a defendant, whose whereabouts were known and who might readily be served.
(14)A delay in service of a proceeding commenced under s 588FF, in contravention of the applicable rules, is particularly serious if it occurs after the expiration of the limitation period.[41]

Decision on power

[41]Reasons [52].

Judd J came to the conclusion that resort could not be had to either r 5.12 or r 3.02 of the General Civil Procedure Rules to extend the date for service and validity of an originating process.

His Honour noted that:

Modern case management principles, reinforced by the Civil Procedure Act, require that a proceeding not be commenced before the plaintiff is in a position to verify that, on the factual and legal material available, each allegation of fact in a document has a proper basis. A proceeding may not be commenced in the hope that evidence will emerge to support allegations.
… Should a liquidator require more time within which to investigate claims, the proper course is to make application for an extension under s 588FF(3)(a). … Section 588FF(3) of the Corporations Act provides a singular and unique regime under which the commencement of proceedings by a liquidator may be deferred. Ordinarily, an application to extend time would require notice to be given to any party with a substantial interest in the question to be determined.[42]

[42]Ibid [64]–[65] (citation omitted).

His Honour held that r 2.7 of the Corporations Rules, in requiring service as soon as practicable after filing, reflected the underlying policy of pt 5.7B of the Corporations Act — ‘requiring expedition in the resolution of claims’.[43] His Honour continued:

An ex parte application under r 5.12 of the General Civil Procedure Rules, for an order purporting to extend the period of validity of the Originating Process, was antithetical to the policy and the mandatory obligation under the Corporations Rules to serve the Originating Process. Put another way, the regime for commencing a proceeding under s 588FF is inconsistent with an order extending the validity of the Originating Process, as if a writ or originating motion under the General Civil Procedure Rules.[44]

[43]Ibid [70].

[44]Ibid.

Similarly, Judd J rejected reliance on r 3.02 of the General Civil Procedure Rules. Rule 1.10 of the Corporations Rules did not provide a gateway to the application of r 3.02 because:

First, the Corporations Rules ‘otherwise provide’. Second, r 2.7 of the Corporations Rules does not fix a time that is amenable to extension or abridgement. The obligation that service be effected as soon as practicable is a substantive obligation, without any fixed time for doing the act, save that it is to be done not less than five days before the date fixed for the hearing.[45]

[45]Ibid [71].

His Honour observed that under the Corporations Rules, applications may be made to adjourn hearing dates, but such applications must be determined within the statutory context, including the requirement in r 2.7 that service be effected as soon as practicable.[46] An application to adjourn the date for hearing must ordinarily be made on notice to the defendants identified in the originating process.[47]

Decision on discretion

[46]Ibid [68].

[47]Ibid [69].

Judd J further held that even if resort could be had to the provisions of the General Civil Procedure Rules to extend the date for service, the associate judge’s discretion had miscarried in granting the extension.

Judd J noted the applicants’ main reasons for seeking to delay service: to await developments in the Management Rights Proceeding, and to endeavour to secure funding from a litigation funder.

His Honour stated that the applicants’ decision not to serve the originating process on the respondents, and to seek an extension of the time for service in an ex parte hearing, had the effect of reserving to themselves the right to decide the period by which the time for service of the writ should be extended:

They chose not to serve the Originating Process for their own strategic purposes. Their choice of procedure had the effect, and was intended to have the effect, of shutting the [respondents] out of the decision-making process of the court, and relieving themselves of the mandatory obligation in r 2.7 of the Corporations Rules to serve the Originating Process as soon as practicable.[48]

[48]Ibid [96].

Judd J accepted that the applicants’ desire to await the outcome of the Management Rights Proceeding was explicable in terms of commercial pragmatism. However, that pragmatic decision had to be balanced against the purpose of limitation periods and in particular the three-year period set by s 588FF of the Corporations Act.[49]
[49]Ibid [97].

As to delaying service in order to secure funding, Judd J held, citing Savcor and Buzzle, that ‘to do nothing about service while awaiting a decision of a litigation funder is to arrogate to a non-party the right to decide the period for service’.[50]
[50]Ibid [99].

His Honour noted that Efthim AsJ, in exercising the discretion to extend time, had relied heavily on the fact that the respondents had not suffered any prejudice. Efthim AsJ had referred to the facts that: the respondents were already involved in the Management Rights Proceeding involving the same or related transactions; the respondents became aware of the proceedings shortly after they were commenced; even though the hearing before Randall AsJ was ex parte, they had a representative present observing the hearing; and the respondents did not take action to set aside the orders of Randall AsJ until much later.

Judd J was of the view that Efthim AsJ had overlooked the presumptive prejudice to the respondents. His Honour considered the controversy in the Management Rights Proceeding was ‘quite different’. Further, the fact that the respondents had a representative present at the hearing before Randall AsJ was no substitute for notice and service. As the respondents were not a party to the hearing before Randall AsJ, they did not have access to the confidential Stone affidavit that supported the application for the extension of time for service until close to the end of 2014.

Further, Judd J held that the lack of prejudice to the respondents was not sufficient to justify an extension of time for service; the applicants were still required to show ‘good reason’. His Honour concluded:

Having commenced the proceeding under s 588FF(3), the liquidators were required to serve the Originating Process as soon as practicable. There was no uncertainty about the whereabouts of the defendants, or any impediment to service. The reasons given by the liquidator for delaying service were strategic, to avoid cost and inconvenience in the liquidation. In my opinion, that is not a proper basis upon which to extend the date for service, of the validity of a proceeding commenced under s 588FF of the Corporations Act.[51]

[51]Ibid [106].

Judd J also made the following observations about the relevance of the Civil Procedure Act 2010:

If it was ever appropriate for a party to adopt a holding position, that option expired in this State with the introduction of the Civil Procedure Act 2010 and the overarching obligations. Merely because a party has an additional period within which to serve a legal process, does not entitle the party, without good reason, to deliberately choose to refrain from serving the process. In the present case, the duty to act promptly and minimise delay is more emphatic because of the mandatory requirement contained in r 2.7 of the Corporations Rules, that the Originating Process be served as soon as practicable. The liquidators’ failure to act promptly after funding became available reinforces my conclusion that they reserved to themselves the right to choose the time for service to suit their own liquidation and litigation strategy.[52]

[52]Ibid [102].

Consequently, Judd J allowed the appeal from the decision of Efthim AsJ. Subsequently, by consent, his Honour ordered that the orders of Randall AsJ made on 20 December 2013 be set aside; that the service of the originating process on all respondents be set aside; and that the proceeding be permanently stayed.

The grounds of appeal

The applicants propose eight grounds of appeal. Grounds 1–3 relate to whether the Court can have resort to r 3.02 and/or r 5.12 of the General Civil Procedure Rules to extend the time for service. We will call this the question of ‘power’. Grounds 4–8 relate to whether, assuming that the Court did have the power to extend the time for service, Judd J was correct to find that Efthim AsJ’s discretion miscarried in granting the extension. We will call this the question of ‘discretion’.

Nature of appeals

The appeal from Efthim AsJ to Judd J was made pursuant to s 17(3) of the Supreme Court Act 1986 and r 77.06 of the Supreme Court (General Civil Procedure) Rules 2005. Appeals from an associate judge under r 77.06 are appeals by way of rehearing, rather than a hearing de novo (as was the case under the former appeal procedure).[53] On the issue of the exercise of the discretion to extend time for service, the principle in House v The King[54] applies.
[53]Oswal v Carson [2013] VSC 355 [11] (Ferguson J); Hou v Westpac Banking Corporation Ltd [2015] VSCA 57 [44] (Whelan and Beach JJA).
[54](1936) 55 CLR 499.

Similarly, on the appeal from Judd J to this Court, on the issue of discretion, House v The King applies.

The question of power

In their proposed grounds of appeal 1-3 the applicants allege that the judge:

(a) erred in concluding that r 2.7 of the Corporations Rules does ‘otherwise provide’ in respect of extending times for service, so as to preclude the operation of r 1.10 and in turn r 3.02 or r 5.12. The judge should have concluded that r 2.7 does not ‘otherwise provide’ or so preclude the other Rules;

(b) erred in concluding that r 5.12, or an ex parte application under r 5.12, were not available procedures in corporations list proceedings, or specifically proceedings under s 588FF, on the basis that such procedures were ‘antithetical’ to the ‘mandatory obligation’ under r 2.7 to serve an originating process as soon as practicable, and erred in holding that proceedings under s 588FF were ‘unique’ or required expedition ‘beyond that which is ordinarily required in other litigation’. The judge should have concluded that there was no more or special antithesis in corporations list proceedings, compared to applications under r 5.12 in other types of proceedings also subject to statutory limitations periods; and

(c) erred in concluding that r 2.7 did not ‘fix’ a time within the meaning of r 3.02. The judge should have concluded that r 2.7, both in requiring that an originating process be served ‘as soon as practicable’, and in requiring that ‘in any case’ it be served at least five days before the date fixed for hearing, fixed a time (for service) within the meaning of r 3.02.

The parties disagreed as to whether Efthim AsJ relied on r 5.12 or r 3.02 or both when extending the time for service. However, in the end it is not necessary to decide which rule his Honour relied on or whether he relied on both, as the applicants no longer argue that the power to extend time arises from r 5.12. The applicants abandoned reliance on that rule at the hearing of the application for leave to appeal; therefore, it is not necessary to consider proposed ground 2. It is now only necessary for this Court to determine whether r 1.10 of the Corporations Rules acts as a gateway for the operation of r 3.02 on r 2.7.

Parties’ submissions
Applicants’ submissions

Before Judd J the applicants argued that rr 1.3 and 1.10 of the Corporations Rules each provide a gateway to the application of rr 3.02 and 5.12 of the General Civil Procedure Rules, such that Efthim AsJ could have extended the time for service of the originating process pursuant to either r 3.02 or r 5.12. As mentioned, on the application before this Court, the applicants abandoned reliance on r 5.12 because there was no argument that the originating process itself needed any extension of the period in which it was valid. While the Corporations Rules do not appear to impose any temporal criterion on the validity of the originating process, it may be considered that the originating process is valid for service indefinitely. However, this Court need not decide the point.

While the focus of the applicants’ ‘gateway’ argument in the application for leave to appeal was r 1.10, they made brief submissions with respect to r 1.3. They submitted that r 1.3 has the effect that, subject to conflict between the two sets of rules, the General Civil Procedure Rules apply. Where there is conflict the Corporations Rules apply. As the Corporations Rules are silent on extension or abridgment of time, r 1.3(2)(a) brings in r 3.02 of the General Civil Procedure Rules.

The applicants submitted that r 3.02 is also invited into the Corporations Rules by r 1.10, which explicitly refers to rules in the General Civil Procedure Rules that provide for the extension or abridgment of periods of time. Rule 1.10 is a signal that the Corporations Rules contemplate extension or modification of time. If extensions or abridgments were incompatible with the Corporations Rules there would be no reason for r 1.10.

The applicants further submitted that r 1.10 brings in rules from the General Civil Procedure Rules that ‘provide for the extension or abridgment of a period of time fixed for the doing of any act or thing in relation to a proceeding’, unless the Corporations Act, ASIC Act or Corporations Rules otherwise provide. They said the first question is whether r 3.02 answers the description of the rules of the General Civil Procedure Rules to which r 1.10 applies. If it does, the next question is whether the Corporations Act, ASIC Act or Corporations Rules otherwise provide. The applicants submitted that it is not argued that the Corporations Act or ASIC Act otherwise provide, so the question in this application for leave to appeal is whether the Corporations Rules otherwise provide.

Under the applicants’ argument, the first question is answered in the affirmative as r 3.02 is plainly a rule to which r 1.10 refers. On the question of whether the Corporations Rules otherwise provide, the applicants submitted that the Corporations Rules (including r 2.7) are silent on extension or abridgment, therefore they do not ‘otherwise provide’. In order to provide otherwise, specific verbiage would ordinarily be required, such as the requirement that a statutory demand ‘may only be served within 30 days’, which makes the time for service insusceptible of being extended or abridged.[55] The applicants submitted there is nothing of that character in the Corporations Rules. Presumably Judd J held that there is some implicit provision that a party may only serve as soon as practicable and not otherwise.
[55]Cf David Grant & Co Pty Ltd v Westpac Banking Corp (1995) 184 CLR 265.

When it was suggested in argument before this Court that Judd J may have relied on s 588FF(3)(b) of the Corporations Act or a policy in that Act that matters be dealt with expeditiously when his Honour found in r 2.7 an implication that it otherwise provides, the applicants submitted that there are fundamental errors in that approach. First, r 2.7 applies not just to s 588FF but to every application under the Corporations Act. The applicants identified various other applications under the Corporations Act to which r 2.7 applies, many of which have a six year limitation period and one of which has a 15 year limitation period. The applicants submitted that those limitation periods do not suggest an imperative of high expedition. Then it was said there is no universal notion of expediency found throughout the Corporations Act or ASIC Act.

The second fundamental error asserted by the applicants is that the very existence of s 588FF(3) conveys the ability to extend time. The question was postulated: if importing into r 2.7 the purpose of s 588FF, why take the expedition aspect but not the extension of time aspect? It was submitted that it is not possible to discern from s 588FF a single purpose of expedition. Reliance was placed on Spigelman CJ in BP Australia Ltd v Brown:

Section 588FF, with its time limitation, applies to all of the disparate

pre-liquidation transactions referred to in Pt 5.7B and which are susceptible to

avoidance. The identification of a purpose for a time limit applicable to so

disparate a range of commercial conduct can only be stated at a high level of

generality.[56]

[56](2003) 58 NSWLR 322, 342 [96] (Spigelman CJ, with whom Mason P and Handley JA agreed).

It was also argued by the applicants that s 588FF(3) only deals with the time for commencing proceedings. It does not deal with serving process in proceedings already commenced.

The applicants conceded that the Corporations Rules are designed to promote efficiency, and that is no doubt the source of the expression ‘as soon as practicable’ in r 2.7. However, ‘as soon as practicable’ is not too different, if different at all, from the requirement that originating motions issued under the General Civil Procedure Rules be served promptly.[57] ‘As soon as practicable’ means as soon as may be accomplished in a reasonable time, and that is the same as the duty of promptitude.
[57]The applicants rely on Howard v Power [2013] VSC 198 for the requirement to serve promptly.

According to the applicants’ argument, once r 3.02 is allowed through the gateway of r 1.10, the next question is whether it operates on r 2.7 of the Corporations Rules. Rule 3.02 will not apply to r 2.7 if r 2.7 does not ‘fix’ a time by which service must be effected.

The applicants submitted that r 2.7 does in fact fix a time, and that Judd J seemed to agree. In fact, r 2.7 identifies two time limits for service of the originating process. The first is the ‘as soon as practicable after filing’ element and the second is the ‘at least 5 days before the date fixed for hearing’ element. Both elements involve a fixing for the purposes of r 1.10. The applicants contended that to ‘fix’ is:

…to determine by stipulation that which is otherwise undetermined. To cause a subject matter to be no longer at large and so in other context to make firm or stable that which is not firm or stable…
So here in the time area of discourse it is bringing into a sphere of limitation, finite limitation, that which is otherwise indeterminate. The fixing of a time can be done in various ways.

One way to fix a time is to require that an act be done within a reasonable or practicable time, or that it be done forthwith. The applicants here relied on Morgan v Victoria where the Court of Appeal held that ‘[t]ime may be fixed by requiring payment within a certain time of the making of the order, or by a certain date, or even “forthwith”’.[58] The applicants submitted that requiring that something be done ‘forthwith’ is directly cognate with ‘as soon as practicable’. It is a way of fixing time not by direct specification of dates but by reference to facts which will establish what the time limit is. The meaning of ‘as soon as practicable’ in each case can be determined by assessing the facts of that case. In any event, if ‘as soon as practicable’ does not fix a time, the second time element clearly does.
[58](2008) 22 VR 237 (‘Morgan’), 255 [95] (Nettle and Ashley JJA, with whom Pagone AJA agreed).

The applicants further submitted that the obligation to serve as soon as practicable does not impose a standard of conduct; it imposes a time limit and in order to satisfy the time requirement, the party must conduct itself in a particular way. The distinction between a requirement to serve as soon as practicable and a requirement to serve within four weeks is not one of kind but one of degree; the former imposes a more stringent time requirement, but both are time requirements. If the two limbs of r 2.7 were doing different work, the words ‘in any case’ would be unnecessary and inapposite. Those words indicate that both limbs concern time, and that the second limb takes priority.

According to the applicants, the two time requirements in r 2.7 must be considered separately, and both must be satisfied. Usually, the two requirements will work in harmony, but in cases where they do not work harmoniously, an abridgment of the second time element may be necessary. The applicants pointed out that if there is no power to extend the time requirement in r 2.7, there is also no power to abridge it, even in compelling cases calling for abridgment. The fact that there may be friction between the two requirements is itself an indicator of the need for an ability to extend or abridge time.

Lend Lease respondents’ submissions

The Lend Lease respondents submitted that corporations proceedings are generally subject to a summary process and the philosophy of that process, which is seen in the Corporations Act and the Corporations Rules, is that proceedings should be dealt with expeditiously.

They submitted that in terms of commencement, s 588FF(3)(b) allows for a single determinative extension of time, and the party seeking an extension must make application before the expiry of the three year limitation period. The party must satisfy a judge, who has the benefit of hearing from the other party, that the extension is controlled, limited, purposeful and appropriate. Section 588FF(3)(b) ensures parties can properly investigate claims and secure funding before the commencement of proceedings, because once the proceeding is commenced, ‘expeditious rules’ apply under the Corporations Rules. The proper time for investigating claims is pre-commencement.

The Lend Lease respondents submitted that Judd J did not find that there is no power to extend the time in r 2.7. Rather, his Honour found, correctly it was submitted, as follows. The first part of r 2.7 lays down a mandatory overriding standard to be applied in every case at all times in respect of service, namely that service be effected as soon as practicable after filing. That provision does not fix a period of time. The time element prescribed by r 2.7 is the ‘at least 5 days before the date fixed for hearing’ part. In paragraph [68] of his reasons Judd J said that that part of r 2.7 is extendable, by extending the five day period or the date for hearing. By extending the hearing date, the court would necessarily extend the time at which the five day limit is reached. However, in paragraphs [71] and [72] it is clear that Judd J decided that r 3.02 did not authorise an extension that subverted the central and overriding standard that applies to service in Corporations Act and Corporations Rules proceedings.

It was submitted by the Lend Lease respondents that the central and mandatory command ‘as soon as practicable’ meant that r 2.7 did not fix a time that was amenable to extension or abridgment. By laying down that standard, the Corporations Rules ‘otherwise provide’ within the meaning of r 1.10. Even if the whole of r 2.7 were characterised as fixing a time, and r 3.02 applied, any extension granted under r 3.02 must be qualified by the central obligation. In this case the extension granted was not so qualified. Accordingly, r 3.02 did not authorise the kind of extension that was granted.

On abridgment, the Lend Lease respondents said that presumably a court could abridge the five day period in r 2.7. To do so, the court would need to rely on r 3.02, if it falls within r 1.10.

When asked about the intention of national harmonisation which underpins the Corporations Rules, the Lend Lease respondents said that that intention means a very clear indication is needed that resort to the General Civil Procedure Rules is plainly and clearly not inconsistent with the policy objectives behind the uniform Corporations Rules. Those policy objectives include promptly placing management of corporations proceedings into the hands of the court, especially in insolvency proceedings. Once the proceeding is commenced, the commencing party must act quickly, irrespective of what the limitation period is. The limitation periods may vary but the operation of the Corporations Rules does not; prompt service is always required.

Second respondent’s submissions

The second respondent adopted the Lend Lease respondents’ written and oral submissions in full. It contended that r 2.7 does ‘otherwise provide’ within the meaning of r 1.10. It does not speak of extending the time for service because an actual time for service is specified. This may be contrasted with the General Civil Procedure Rules, where no time for service of writs or originating motions is actually expressed. As it stipulates a time for service, r 2.7 does not contemplate that service may be extended.

It was submitted by the second respondent that accepting the applicants’ submissions would substantially undermine the regime established by s 588FF(3). Under that section, what a liquidator must do within three years is either commence a proceeding or go to court after giving notice to the prospective defendant and seek an extension of time in which to commence the proceeding. Section 588FF(3) does not expressly require extension applications to be made on notice to the prospective defendant, however the point was made generally in Fortress and BP Australia Ltd v Brown that such applications would ordinarily be made on notice where the party against whom relief is claimed can be identified. The second respondent accepted that s 588FF(3)(b) permits ex parte applications, but in a case where the defendants are known or capable of being identified, such as the present case, the application would have to be on notice.

The second respondent relied on the policy behind the time limit in s 588FF(3)(a). In Fortress it was explained that a purpose of ‘the requirement that liquidators be placed under a reasonable time limitation for taking action under the voidable transaction provisions’:

expressed in ‘clear and emphatic’ terms, is to favour certainty for those who have entered into transactions with the company during the periods in respect of which designated transactions may be voidable.[59]

[59](2015) 254 CLR 489, 505 [24].

Accepting the applicants’ argument would be to allow parties to circumvent s 588FF(3)(b) by commencing a proceeding and then deciding within an indefinite period whether they were going to pursue the action and to do so without giving notice to the prospective defendant. Parties would be able to circumvent s 588FF(3)(b), which applies harmoniously across all jurisdictions, by reference to local court rules, and this produces disharmony among jurisdictions.

The second respondent also submitted that it ‘probably does follow’ that s 588FF ‘otherwise provides’ within the meaning of r 1.10 of the Corporations Rules. It then retreated from that position, acknowledging that the section does not have express terms to that effect and arguing instead that s 588FF(3) is a factor that must inform any exercise of power if the power is otherwise available.

Once the applicants commenced the proceeding they were obliged to serve the originating process as soon as practicable. There was the ability, on notice to the respondents, to have the matter case managed in an appropriate way. The applicants should have effected service then approached the Court with a contradictor and advanced their reasons for seeking a stay or other directions facilitating the applicants’ desired approach.

Analysis

As already observed,[60] Efthim AsJ considered that he had power under both r 5.12 and r 3.02 to extend the time for service. In contrast, and as explained above,[61] Judd J held that the applicants could not resort to r 5.12 to extend the date for service and validity of the originating process.[62] Further, r 1.10 did not provide a gateway to r 3.02 because the Corporations Rules ‘otherwise provide’ and r 2.7 ‘does not fix a time that is amendable to extension or abridgment’. His Honour held that the ‘as soon as practicable’ obligation was a substantive obligation ‘without any fixed time for the doing of the act, save that it is to be done not less than five days before the date fixed for the hearing’.[63] The General Civil Procedure Rules ‘cannot be employed to subvert that mandatory and purposeful obligation of service’.[64]
[60]See [45] above.
[61]See [56]-[60] above.
[62]Reasons [70].
[63]Ibid [71].
[64]Ibid [72].

The respondents had submitted before Judd J that the mandatory requirement that service take place as soon as practicable ‘otherwise provided’ within the meaning of r 1.10. When his Honour said that the Corporations Rules ‘otherwise provide’, it appears he was accepting that submission. We note that before Efthim AsJ, the Lend Lease respondents conceded that the Court had power under r 3.02 to extend time for service. Their position changed in the appeal before Judd J.

In order to determine whether the Court has power under r 3.02 to extend the time for service provided for in r 2.7, it is necessary to consider three issues. The first issue is whether r 3.02 is a rule that meets the description of rules to which r 1.10 applies. The second issue will only arise if r 3.02 is such a rule. The second issue is whether the Corporations Act, ASIC Act or Corporations Rules ‘otherwise provide’ within the meaning of r 1.10. The third issue is whether r 2.7 fixes a time to which r 3.02 may apply.

We turn now to the first issue, namely whether r 3.02 is a rule that meets the description of rules to which r 1.10 applies. We note here that when interpreting court rules, the usual principles of statutory construction apply.[65] Rule 3.02 of the General Civil Procedure Rules provides that the ‘Court may extend or abridge any time fixed by these Rules … ’. The applicants acknowledged that r 1.10 may describe a narrower extension/abridgment rule than that which r 3.02 provides for, but none of the respondents argued that r 3.02 is not a rule that meets the description of rules to which r 1.10 applies. Plainly, r 3.02 is a rule that provides ‘for the extension or abridgment of a period of time fixed for the doing of any act or thing in relation to a proceeding’. Rule 3.02 may go beyond that scope, but to the extent it meets that description, it is a rule to which r 1.10 refers.
[65]See Interpretation of Legislation Act 1984 ss 35 and 38 (definition of ‘subordinate instrument’); and the principles set out in Project Blue Sky Inc v Australian Broadcasting Authority (1998) 194 CLR 355, 381-2 [69]-[71], 384 [78] (McHugh, Gummow, Kirby and Hayne JJ).

The second issue must now be considered. Unless the Corporations Act, ASIC Act or Corporations Rules otherwise provide, r 3.02 will apply to corporations proceedings. Judd J held that the Corporations Rules otherwise provide. The Lend Lease respondents and the second respondent agreed, and although the second respondent made an additional suggestion that the Corporations Act ‘probably does’ otherwise provide, it abandoned that submission in favour of an argument that s 588FF(3) should be considered when deciding whether to exercise the discretion to extend time under r 3.02, if that rule is available. It is therefore only necessary to consider whether the Corporations Rules ‘otherwise provide’.

In our view, the Corporations Rules do not otherwise provide. They do not expressly state that extensions or abridgments of time are not permitted. Rule 2.7 does not expressly state that the time for service cannot be altered. Nor does it, by necessary implication, preclude extensions or abridgments. It merely fixes a time for service,[66] and provides that a party must effect service within that period. That amounts to a standard rule fixing a time for the doing of an act or thing. It does not state that service ‘may only’ be effected within that time. The words ‘may only’, when used to fix the time for bringing an application or commencing proceedings, have been held to mean that time cannot be extended.[67]
[66]See [108]-[111] below.
[67]David Grant & Co Pty Ltd v Westpac Banking Corp (1995) 184 CLR 265; Newtronics Pty Ltd v Gjergja (2008) 67 ACSR 468.

Moving to the third issue, namely whether r 2.7 fixes a time to which r 3.02 may apply, we reject the respondents’ submissions that ‘as soon as practicable after filing’ does not fix a time for effecting service. As the Court of Appeal said in Morgan, time may be fixed by requiring an act to be done ‘forthwith’.[68] Similarly to the expression ‘as soon as practicable after filing’, the meaning of ‘forthwith’ is not certain when considered in abstract. The content of a time requirement of ‘forthwith’ or ‘as soon as practicable’ will vary depending on the facts of each case, but there is nevertheless a fixing of time. As the applicants submitted it is a way of fixing time not by direct specification of dates but by reference to facts which will establish what the time limit is.
[68](2008) 22 VR 237, 255 [95] (Nettle and Ashley JJA, with whom Pagone AJA agreed).

Our conclusion is reinforced by the words ‘and, in any case, at least 5 days before the date fixed for hearing’. Those words in r 2.7 set the outer limit of the ‘as soon as practicable after filing’ time requirement. We accept the applicants’ submission that the presence of the words ‘and, in any case’ indicates that both elements of r 2.7 do the same work and that the second element takes precedence over the first.

Indeed, to refer to the words ‘as soon as practicable after filing’ as a central, overriding or mandatory command or standard is unhelpful. If a party effects service well after it became practicable to do so, the party being served may attempt to set aside service by establishing that in the circumstances of the case, it had become practicable to serve well before service was effected. It is a time requirement that will have either been met or not been met, depending on the facts of the case. It was not argued by the respondents that a party effecting service well after it had become practicable to do so but more than five days before the hearing date, would not be in breach of r 2.7. If a party could be found to have contravened the ‘as soon as practicable after filing’ element of r 2.7 while not having contravened the ‘at least 5 days before the date for hearing’ element, it is difficult to conceive how the former element does not fix a time.

We note that the second element of r 2.7, ‘and, in any case, at least 5 days before the date fixed for hearing’, plainly fixes a time for the doing of an act or thing in relation to a proceeding.

Our conclusions on the three issues are therefore that first, r 3.02 allowing extensions of time meets the description of local rules which r 1.10 of the Corporations Rules imports to operate over corporations matters unless, relevantly, those rules ‘otherwise provide’. Secondly, the Corporations Rules do not ‘otherwise provide’ such that r 1.10 would preclude reliance on r 3.02. Thirdly, r 2.7 fixes a time to which r 3.02 can apply.

It is not necessary to comment on the Court’s inherent power to extend times specified by court rules as the applicants did not rely on that power. In our opinion, r 3.02 of the General Civil Procedure Rules empowered the Court to extend or abridge the time for service set out in r 2.7 of the Corporations Rules. While leave to appeal should be granted in respect of proposed grounds 1 and 3, the leave is of no utility for the appeal unless the discretion was wrongly exercised. So much was acknowledged by the parties.

We will turn to the question of discretion. However, having reached this conclusion, it is relevant to consider how a court might go about extending the time for service stipulated in r 2.7, and the consequences of there being a power to extend that time.

A court relying on r 3.02 to extend the time for service specified in r 2.7 may do so in numerous ways. It may extend the second element of r 2.7 so that service may be effected less than five days before the date for hearing, but leave the first element of r 2.7 in place. Alternatively, the court might grant an extension that disposes of both elements of r 2.7 and specifies a particular date by which service must be effected. The respondents’ contention that any extension must be subject to the ‘as soon as practicable after filing’ requirement is rejected.

The Lend Lease respondents submitted that even if awaiting the outcome of the Management Rights Proceeding was a good reason for an extension, it ceased to be a good reason after March 2014 when the applicants took full control of that proceeding. In respect of the second reason, awaiting funding in order to complete investigations, Efthim AsJ thought it was inadequate when considered in isolation. The authorities, including Buzzle and Savcor, make it clear that to do nothing about service while awaiting the decision of a litigation funder is to arrogate to a non-party the right to decide the period in which service may be effected.

The Lend Lease respondents submitted that the appropriate approach when a party needs to complete further investigations into the merits of a proceeding, is to effect service, and the matter can then come under the court’s control and proper case management will ensue. Further investigations may still be conducted under those circumstances. Assuming there was a proper basis for commencing the proceedings, as was verified in this proceeding, conducting further investigations is not a reason for extending the time for service. In addition to considering the applicants’ reasons for seeking an extension, Judd J considered presumptive prejudice to the respondents. His Honour noted that the events the subject of the proceeding occurred more than eight years ago. The Lend Lease respondents submitted that they did not become aware of the Voidable Transactions Proceeding during the limitation period. The mere lapse of time should be regarded as prejudicial.

It was submitted by the Lend Lease respondents that other compelling arguments against extension were that the limitation period had expired and that s 25 of the Civil Procedure Act imposes an overarching obligation to use reasonable endeavours to act promptly and minimise delay. It is no longer appropriate to adopt a holding position.

The Lend Lease respondents further submitted that it is clear from his reasoning that Judd J reviewed all the circumstances of the case and all the grounds that were relied on in support of the discretionary extension. His Honour correctly concluded that the grounds relied on were unsound or irrelevant and that the discretion should therefore be exercised against granting an extension.

Second respondent’s submissions

As already noted above,[77] the second respondent adopted the Lend Lease respondents’ written and oral submissions in full. The second respondent also argued that prejudice is presumed even in the face of a respondent having knowledge,[78] and knowing about a proceeding but not being served with it is arguably a greater evil than the kind described by Spigelman CJ in BP Australia Ltd v Brown.[79] The potential defendant cannot take steps to challenge the proceeding and move on with their commercial life; they are forced to wait for the plaintiff to decide whether to serve.
[77]See [96] above.
[78]The second respondent here relied on Re APCH Ltd (in liq) [No 3] [2014] VSC 456 [29] and Brealey v Royal Perth Hospital [1999] 21 WAR 79, 79, 83, 89-91.
[79](2003) 58 NSWLR 322, 345 [112]-[115].

Analysis

As we observed already,[80] after finding the Court lacked power under r 3.02 or r 5.12 to extend the time for service specified in r 2.7, Judd J considered the position in the event the Court had power under those rules. His Honour found that Efthim AsJ’s exercise of discretion had miscarried, and that he, Judd J, would not exercise the discretion to extend time for service.
[80]See [61]-[70] above.

There are four steps to be considered for the purposes of dealing with the applicants’ proposed grounds of appeal concerning discretion. The first step involves looking at whether Judd J’s approach to the appeal from Efthim AsJ was correct. The second and third steps require consideration of whether Judd J found error in Efthim AsJ’s exercise of discretion, and if so, whether he was correct in doing so. The fourth and final step is to consider whether the applicants have identified error in Judd J’s re-exercise of the discretion.

The applicants argued that his Honour approached the question of discretion as though it was a rehearing de novo, instead of first searching for error in Efthim AsJ’s exercise of discretion and then re-exercising the discretion if error was found. That argument must be rejected. His Honour’s approach was to assess whether the discretion miscarried; not simply to decide whether he would exercise the discretion differently.

It is clear from the following passages of the reasons that Judd J was alert to the difference in nature between the application to Efthim AsJ to set aside the orders of Randall AsJ and the appeal from Efthim AsJ which he heard:

The [respondents] accepted that it was necessary to show error on the part of the Associate Judge. They submitted that there were jurisdictional errors, and insofar as discretionary considerations arose, there had been a miscarriage of discretion.
…
The decision of Efthim AsJ under appeal was a rehearing of the application made to Randall AsJ. His Honour found no prejudice to the [respondents] by reason of the orders made on 20 December 2013. His Honour appeared to overlook presumptive prejudice. His Honour did not give sufficient weight to the expedition required in a proceeding under s 588FF, or to the requirement under the rules for prompt service.
…
For the reasons given above, the exercise of discretion to extend the date for service and validity of the Originating Process, as if a writ or originating motion under r 5.12 of the Civil Procedure Rules, miscarried.[81]

[81]Reasons [22], [105], [107].

Moving to the second and third steps, Judd J did in fact find that Efthim AsJ’s discretion had miscarried. Judd J concluded that the discretion miscarried for reasons including that:

(i) presumptive prejudice was overlooked and the absence of any perceived prejudice to the respondents appeared paramount to, or a very important consideration in, Efthim AsJ’s reasoning;[82]

(j) Efthim AsJ failed to take into account the destabilising effect on the respondents of the letters of demand sent in March 2012;[83] and

(k) Efthim AsJ erred in imposing on the respondents some obligation to initiate a challenge to the extensions prior to service, rather than allowing the applicants to proceed and incur costs.[84]

[82]Ibid [75], [103], [105].

[83]Ibid [86], [89]-[90].

[84]Ibid [91]. See [46] above.

In our view, Judd J correctly identified House v The King error in the exercise of discretion, for the reasons that follow.

It appears that Efthim AsJ considered awaiting the outcome of the Management Rights Proceeding and seeking funding were not, in themselves, sufficient to allow an extension.[85] However, his Honour found that in light of the circumstances of the case, including there being no prejudice to the respondents, the respondents having notice of the Voidable Transactions Proceeding, and the applicants having approached the Court ‘relatively quickly’, those reasons amounted to good reasons for an extension.
[85]Horne v Retirement Guide Management Pty Ltd [2015] VSC 327 [61], [69].

The principal error identified by Judd J was that the associate judge did not take into account presumptive prejudice. As will be seen, prejudice was considered, but as Judd J found, the associate judge did not consider presumptive prejudice.

The associate judge noted that there was ‘no real prejudice suffered by the [respondents] as the order can always be set aside’ and that there is ‘no prejudice in such an ex parte hearing, because it is allowed pursuant to r 5.12 and secondly because any order made can be undone if it has been done improperly’.[86] The relevant prejudice does not arise because the order for extension cannot be set aside. Extension orders obtained ex parte are susceptible to being set aside after an inter partes hearing, however, this does not mean that the granting of the extension did not prejudice the defendant. The relevant prejudice is that caused by delay and the effluxion of time.
[86]Ibid [36], [67].

Another basis on which the associate judge found that there was no prejudice to the respondents by virtue of the extension was knowledge or notice. Based on the March 2012 letters of demand which were sent to the respondents, and the Lend Lease respondents having an observer at the hearing before Randall AsJ and ‘everything else they needed to know’ apart from the confidential Stone affidavit, Efthim AsJ said ‘there could be no prejudice to the [respondents] at the time the application was heard by Randall AsJ’.[87]
[87]Ibid [65]-[66].

The correct approach to presumptive prejudice was outlined in the passage of Robson J’s decision in Re APCH Ltd (in liq) [No 3] that Efthim AsJ cited:

The essential factor weighing against the grant of an extension is prejudice to the defendant. Delay in service amounts to prejudice. This is presumptive prejudice. In this hearing, the defendants have not given evidence of any actual or particular prejudice …
In the absence of any evidence of actual or particular prejudice, I find the defendants will only suffer presumptive prejudice, in the event that the extensions are granted. This prejudice is mitigated by the fact that delay between the period for service expiring and the service of writ was three to four months, and the first defendant Mr Lewski was likely on notice of the claim from late July 2012.[88]

[88]Ibid [76].

After setting out the above passage Efthim AsJ held that the ‘prejudice referred to by Robson J does not apply here’. That is, presumptive prejudice did not apply. The reason for that finding appears to be that the Lend Lease respondents were aware of the extension order but they decided not to do anything about it. According to Efthim AsJ they allowed the applicants to proceed and incur costs, and then only later decided to challenge the extension orders. As for the second respondent, it discovered the existence of the proceedings only four months after the extension was granted. Efthim AsJ concluded that no prejudice was suffered.[89]
[89]Ibid [78].

Efthim AsJ recognised that the onus was on the applicants to demonstrate a good reason for an extension.[90] The onus was to establish that the respondents were not prejudiced by the delay in service. The respondents were not required to establish prejudice. The evidence before the associate judge concerning the respondents’ knowledge of the proceeding may have supported a finding that presumptive prejudice was mitigated,[91] but it did not support a finding that it was eliminated. The events the subject of the proceeding occurred more than six years prior to the applicants seeking an extension, and more than seven years prior to the respondents being served. The principle of presumptive prejudice reflects the adverse effect of the effluxion of time on defendants’ ability to prepare their defences. In Ramsay v Madgwicks the Court of Appeal recognised that ‘mere lapse of time is itself generally to be regarded as prejudicial’.[92] As Robson J said in relation to the events the subject of the Voidable Transactions Proceeding:

the directors and others who are named as defendants are facing a proceeding that challenges conduct that allegedly took place in about July 2007. The prejudice to the defendants of further delay cannot be ignored. Delay constitutes prejudice, especially where the circumstances surrounding complicated transactions need to be examined many years after the relevant events.[93]

[90]Ibid [46].

[91]Re APCH Ltd (in liq) [No 3] [2014] VSC 456 [140]-[144]; Van Leer Australia Pty Ltd v Palace Shipping KK (1981) 180 CLR 337, 350-351.

[92][1989] VR 1, 7 (Young CJ, with whom Kaye and Southwell JJ agreed).

[93]Re APCH Ltd (in liq) [2014] VSC 190 [183].

Presumptive prejudice was a relevant consideration in this case, and it should have been taken into account. In our view, on this basis alone, the challenge to Judd J’s finding that the associate judge’s discretion miscarried fails. Furthermore, there are three other aspects of the associate judge’s decision that are problematic.

First, Efthim AsJ appeared to consider as a matter favouring the grant of an extension the fact that the respondents did not seek to challenge the extension until after they were served, and in so waiting they allowed the applicants to proceed and incur costs. Judd J found that ‘it was incorrect to impose upon the [respondents] in a proceeding commenced, but not yet served, and which may never have been served, some obligation to initiate a challenge prior to service’.[94]
[94]Reasons [91].

Delay between being served and seeking to set aside an extension order is a relevant consideration when determining whether the extension order should be set aside.[95] However, in our view, the fact that the respondents waited until they were served to challenge the extension orders was an irrelevant consideration, and Efthim AsJ erred by taking it into account. The respondents were entitled to decide not to incur the costs of a challenge to Randall AsJ’s orders until they were served. Until the respondents were served, it remained a possibility that the applicants would not prosecute the proceeding in which case it would not be necessary to have the extension orders set aside.
[95]See Savcor (2005) 12 VR 639, 662 [91] (Gillard AJA, with whom Ormiston and Buchanan JJA agreed).

Secondly, and in addition to Judd J’s analysis of Efthim AsJ’s decision, a consistent theme in Efthim AsJ’s decision was the timing of the applicants’ extension application. His Honour said that the applicants:

came to the Court relatively quickly seeking orders to clarify what their applications were. This is not a case where the plaintiffs waited for the time for the originating process to expire. The plaintiffs have not been dilatory in this application and did not wait for the time that the limitation period contained in r 5.12 to come to an end.[96]

[96]Horne v Retirement Guide Management Pty Ltd [2015] VSC 327 [49].

Later, Efthim AsJ said:

The [applicants] came to court relatively quickly. They did not leave it to the last day to extend the originating process, as occurs in many of these applications for an extension. They were faced with r 2.7 of the Corporations Rules, which required them to serve an originating process as soon as practicable after filing an originating process or in any case at least five days before the date fixed for hearing. In effect, they sought guidance by the court before the period for service of the originating process ran out.
…
… Here, the liquidators acted diligently in attending court and seeking a timetable.
…
… here there has not been a long delay by the [applicants]. They have acted rather quickly to bring the matter to regularise the time to be taken and have, in effect, put the matter under the court supervision.[97]

[97]Ibid [67], [71], [73] (emphasis added).

The applicants conceded before this Court that they did not in fact seek the guidance of the Court before the period for service of the originating process expired. In other words, the time for service under r 2.7 had already expired when the applicants filed their interlocutory process on 19 December 2013 seeking an extension. At that stage, the applicants had not taken any steps to serve the originating process.[98] This meant that the applicants had allowed time to expire before involving the Court and before taking any steps to effect service. This was a relevant consideration, and it added weight to the argument that the applicants had arrogated to themselves the power to decide the period in which service should be effected.
[98]Ibid [49].

Rather than asking when it became practicable for the applicants to serve the respondents, and when the time under r 2.7 expired,[99] the associate judge focused on the one year period of validity established by r 5.12(1). If the originating process had been valid for service for one year from 17 October 2013, it would have been accurate to say that by approaching the Court in December 2013 the applicants had acted relatively quickly. It seems that the associate judge’s approach overlooked the period for service established by r 2.7. His Honour considered the timeliness of the applicants’ approach to the Court through the lens of r 5.12, rather than that of r 2.7, and as a result mistakenly praised the applicants for promptly placing the matter in the Court’s hands.
[99]Efthim AsJ had before him evidence that if Randall AsJ had not granted an extension, the applicants probably would have served the originating process very promptly after being refused the extension; Horne v Retirement Guide Management Pty Ltd [2015] VSC 327 [43], [74]. However, this evidence did not appear to be significant in his Honour’s reasoning. It did not lead to any analysis of when it became practicable for the applicants to effect service, or whether service after a refusal by Randall AsJ to grant an extension would have been within the time permitted by r 2.7.

Thirdly, as Judd J observed, the associate judge placed particular reliance on the letters of demand sent by the applicants to the respondents in March 2012.[100] Efthim AsJ appeared to be of the view that the March 2012 letters of demand gave sufficient knowledge of the Voidable Transactions Proceeding.[101] In our view, Judd J correctly held[102] that it was not appropriate to place such reliance on the letters of demand when finding that the respondents had knowledge of the Voidable Transactions Proceeding. Many letters of demand threatening legal proceedings are not followed through with. Where proceedings are commenced, the allegations and particulars in the pleading are not necessarily identical to the claims made in the letter of demand. When a judge has a letter of demand and an originating process side by side, it may be possible in hindsight to say that the letter gave the defendant notice of the precise claim pursued in the proceeding. However, it is another thing entirely to say that between receiving the letter and discovering the existence of the proceeding, the defendant had knowledge of the claims the subject of the proceeding or that the defendant had knowledge that it would be facing a proceeding at all.
[100]Horne v Retirement Guide Management Pty Ltd [2015] VSC 327 [61], [63]-[64].
[101]Ibid [64].
[102]Reasons [86], [90].

After correctly identifying error in the exercise of discretion to extend time,[103] it fell to Judd J to re-exercise the discretion. His Honour then explained how he would have exercised the discretion under r 5.12 or r 3.02 if those rules applied.
[103]Given the finding that Judd J correctly identified error in the exercise of discretion, it is not necessary to resolve the dispute between the parties as to whether Judd J was required to find error before re-exercising the discretion, or whether Efthim AsJ never exercised the r 3.02 discretion therefore Judd J was able to exercise the discretion under that rule without first finding error.

The fourth and final step in dealing with the question of discretion is to determine whether the applicants have established error in Judd J’s re-exercise of the discretion.

The applicants contended in proposed grounds 4 and 5 that if Judd J was required to re-exercise the discretion, he erred in doing so by finding that awaiting the outcome of another proceeding and seeking litigation funding can never amount to good reasons for extending time, irrespective of the circumstances of the case. That was the applicants’ main challenge to Judd J’s exercise of discretion. The argument is not supported by a close reading of the reasons. His Honour carefully considered the applicants’ two principal reasons for seeking an extension, and the broader circumstances of the case, and concluded that the applicants had failed to establish a good reason for extension. The conclusion that Judd J did not assess the two reasons in the abstract, and instead considered the circumstances of the case, is supported by the following aspects of the reasons. First, Judd J quoted from the decision of the Court of Appeal in Savcor, and in particular, the general proposition that:

It is not possible and indeed is unwise to attempt to define the circumstances which amount to a good reason. It is trite observation but not very helpful that whether or not it is a good reason must depend upon all the circumstances of the particular case.[104]

[104]Reasons [99].

Secondly, in respect of the applicants’ first main reason for seeking an extension, Judd J looked at the particular proceeding the outcome of which the applicants were awaiting. It was explained that the receivers had commenced the Management Rights Proceeding and that in December 2013 the applicants did not know whether the receivers had completed their investigations or whether they intended to continue the proceeding at all. His Honour set out the evidence that if the receivers continued with the Management Rights Proceeding ‘it may impact on [the applicants’] decision to proceed, and might mean that [the applicants] would not continue with this proceeding, or if [they] did, both proceedings would be heard in conjunction with each other’. If his Honour considered that awaiting the outcome of another proceeding could never amount to a good reason, it would have been unnecessary to recount the applicants’ evidence. Further, the similarity between the Voidable Transactions Proceeding and the Management Rights Proceeding was considered:

The allegations in the Management Rights proceeding are different. The claims are different. The writ became stale on 17 September 2014. While it is true that a new proceeding, relying on equitable grounds, has been commenced, the nature of the controversy remains quite different.[105]

[105]Ibid [88].

Thirdly, Judd J expressly recognised that assessing whether awaiting the outcome of the Management Rights Proceeding was a good reason for extension involved a balancing exercise:

Their desire to wait and see what happened to the Management Rights proceeding may be readily explicable in terms of commercial pragmatism. The difficulty with such an approach is that pragmatic strategic decisions, explicable in terms of an efficient application of liquidators’ time and funds, must be balanced against the purpose of limitation periods and more particularly, in the present case, the balancing of interests under pt 5.7B of the Corporations Act.[106]

[106]Ibid [97].

Fourthly, in respect of the second main reason for seeking an extension, Judd J recorded the applicants’ evidence relevant to litigation funding, including that the applicants:

only commenced the proceeding to prevent the expiry of the limitation period. He deposed that they would probably still be without funds after March 2014, and required time to sell assets or get in funds as a result of other proceedings. Mr Stone deposed that funds derived from those sources ‘will enable us to complete further investigations that may assist us in obtaining funding for this proceeding’. In other words, to place themselves in a position to be able to persuade litigation funders of a sufficiently meritorious case.[107]

[107]Ibid [77]. See also the evidence of Mr Horne set out in [79]-[80].

Fifthly, after setting out the evidence in respect of litigation funding Judd J recounted the applicants’ submissions on litigation funding.[108] In finding that seeking litigation funding did not amount to a good reason for extension in this case, his Honour focused on the extent to which control of the timing of service had been placed in the funder’s hands. The below analysis (which is also relevant to proposed ground 7) would have been unnecessary had the finding been that seeking litigation funding never amounts to a good reason for extension:

The authorities make it clear that to do nothing about service while awaiting a decision of a litigation funder is to arrogate to a nonparty the right to decide the period for service. …
The liquidators may well have had real difficulty in funding litigation and saw the possibility of asset sales as a means by which some funding may be available to undertake investigations in order to persuade a litigation funder to assume funding risk. These are all circumstances that placed the timing of service in the hands of third parties, such as willing purchasers of assets and litigation funders. In the present case, the liquidators placed themselves in a position where their ability to prosecute the proceeding, once commenced, depended on a wide range of factors outside of their control, but which they decided to convert into conditions under which they would be prepared to serve the process and thus prosecute the proceeding.
The appellants complained of the absence of any explanation for the delay in serving the Originating Process after litigation funding was obtained. …
… The liquidators’ failure to act promptly after funding became available reinforces my conclusion that they reserved to themselves the right to choose the time for service to suit their own liquidation and litigation strategy.[109]

[108]Ibid [98].

[109]Ibid [99]-[102].

Sixthly, Judd J did not confine himself to considering the Management Rights Proceeding and litigation funding. Prejudice and notice/knowledge were also considered in detail.[110]
[110]Ibid [75], [86]-[90], [103], [105].

Seventhly, the practicability of service was considered. Judd J found that ‘[t]here was no uncertainty about the whereabouts of the defendants, or any impediment to service’.[111] A critical circumstance of the case was evidence that the applicants would have effected service promptly had an extension not been granted. To Judd J, this plainly meant the decision not to serve was deliberate and made for strategic purposes.[112]
[111]Ibid [106]. See also [90].
[112]Ibid [94], [96], [102].

Eighthly, synthesising the above features of the case, Judd J concluded that the applicants’ two main reasons for seeking an extension ‘were strategic, to avoid cost and inconvenience in the liquidation’.[113]
[113]Ibid [106].

There is no error revealed in his Honour’s reasoning. Accordingly, proposed grounds 4 and 5 are without merit.

Proposed ground 6 concerned presumptive prejudice and the weight Judd J attributed to it. As discussed already, presumptive prejudice was a relevant consideration in this case. His Honour did not err by taking it into account. Further, Judd J did not treat presumptive prejudice as an ‘irrebuttable presumption’. Rather, after considering all the circumstances of the case, including the letters of demand, that the Lend Lease respondents had an observer in court before Randall AsJ and that the second respondent was a party to the Management Rights Proceeding, Judd J found that presumptive prejudice could not be overlooked in this case. Again, there is no error in his Honour’s reasoning. Proposed ground 6 is also without merit.

In their proposed ground 7 the applicants submitted that the authorities to which Judd J referred when dealing with litigation funding, especially Buzzle, were all cases in which the litigant had awaited a decision from the litigation funder and only afterward approached court for orders effectively ratifying that course.[114] In contrast, the applicants explained their predicament to the Court before obtaining litigation funding. After the making of the extension orders, the applicants acted according to the Court’s orders, not their own timetable. The applicants submitted that Judd J erred in characterising what happened during that period and in regarding the applicants’ steps in conformance with the extension orders as reflecting some impermissible arrogation of any prerogative to themselves or the funder.
[114]This submission appeared in the applicants’ written case in respect of proposed ground 5, however, it is more conveniently dealt with in the context of proposed ground 7.

There is no error in his Honour’s analysis of the applicants’ position on litigation funding or his treatment of what occurred after the extension orders were made. The critical passages in the reasons have already been set out.[115]
[115]See [176] above.

There was no finding that the applicants approached the Court after the litigation funder had made its decision. The finding that weighed against the grant of an extension was the finding that the applicants had made the timing of service conditional on the actions of third parties. We see no error in the making or the application of that finding. Further, Judd J found that as at 20 December 2013, the discretion to grant an extension should not have been exercised. Judd J’s characterisation of what happened after the extension orders were made did not form part of that conclusion; it simply reinforced it.

With respect to Buzzle and Judd J’s reliance on it, we note that Buzzle stands for the proposition we have emphasised above[116] and the proposition that under r 1.12 of the Uniform Civil Procedure Rules 2005 (NSW), (which is substantially the same as r 3.02 of the General Civil Procedure Rules):

a deliberate decision to allow a writ to become stale after a limitation period had expired would be a powerful factor against the grant of the order sought ... Any prejudice suffered, in such circumstances, were the writ not to be extended, would be self-inflicted.[117]

[116]See [53] above.

[117]Buzzle [2009] NSWCA 104 [92] (Ipp JA, with whom Tobias and McColl JJA agreed).

We note it was also observed in Buzzle that the r 1.12 discretion was ‘to be exercised in the context of and by reference to the statute by which it is conferred (and any other statute that is relevant to the legislative context)’, and with regard to the policy behind the applicable limitation statute.[118] Certain of the guiding principles in the Civil Procedure Act 2005 (NSW), including the overriding purpose, required the judge to consider whether the applicant for extension:

(a)diligently pursued the object of disposing of the proceedings in a timely way;
(b) used, or could reasonably have used, available opportunities under the rules or otherwise, to avoid delay; and
(c) reasonably implemented the practice and procedure of the court with the object of eliminating any lapse of time between the commencement of the proceedings and their final determination.[119]

[118]Ibid [28], [37].

[119]Ibid [36].

These principles are properly reflected in the reasons of Judd J.[120] No error in Judd J’s analysis of or reliance on Buzzle is revealed. Nor do we see any error in his Honour’s reliance on Savcor, where Gillard AJA, with whom Ormiston and Buchanan JJA agreed, set out the following general propositions with respect to applications to extend the period for service:

(i)It is the duty of the plaintiff to serve the writ promptly.
(ii)There must be a good reason for the grant of an extension, and if the application is made after the period has expired the reason must be one of substance.
(iii)It is not possible and indeed is unwise to attempt to define the circumstances which amount to a good reason. It is trite observation but not very helpful that whether or not it is a good reason must depend upon all the circumstances of the particular case. As a general proposition difficulties serving the writ within the 12-month period will usually establish a good reason, for example where the defendant is evading service, his whereabouts are unknown or some other difficulty is experienced in serving the defendant.
(iv)By reference to decided cases it is possible to compile a list of the circumstances which constitute a good reason. The cases also provide examples where the circumstances have not been a good reason to extend the period of validity. For example, it is not a good reason that negotiations are continuing between the parties, or legal aid has not been granted and the plaintiff is waiting for the grant. There are cases which say that the latter proposition is not a good reason. But in Waddon v Whitecroft-Scovill Ltd it was said delay caused by the authorities to grant aid may be a good reason. Other examples which have not found favour are difficulty tracing witnesses or obtaining evidence.
…[121]

[120]Reasons [36], [47]-[48], [51]-[52], [68], [70], [99], [102].

[121](2005) 12 VR 639, 651 [41].

Proposed ground 7 therefore has no real prospect of success.

The applicants’ final attempt to demonstrate error in Judd J’s exercise of discretion was the submission that his Honour erred by holding that the proper course was for the applicants to seek an extension of time in which to commence under s 588FF(3)(b). This submission was misplaced and must be rejected. His Honour’s consideration of s 588FF(3)(b) was relevant to the question of power. When dealing with discretion, Judd J proceeded on the basis that the Court did have power to grant an extension order and he put to one side the issue of extensions under s 588FF(3)(b). His Honour did, however, consider that the expedition required in proceedings under s 588FF and the requirement under the Rules for prompt service were factors to be taken into account when exercising the discretion to extend time for service.[122]
[122]Reasons [105].

Accordingly, the applicants have failed to establish House v The King error. While such error was found in Efthim AsJ’s exercise of discretion with the result that Judd J was required to re-exercise the discretion, no such error has been demonstrated in Judd J’s decision.

In proposed ground 8 the applicants argued that Judd J erred in concluding that there was not a good reason for an extension. As the applicants have failed to establish any particular error in Judd J’s discretionary decision, there is no occasion for this Court to consider for itself whether there was a good reason for granting an extension in this case. In any event, had it been up to us to exercise the discretion afresh, for the reasons given above, like Judd J, we would have refused the extension application. Proposed ground 8 is without merit.

Conclusion

When in December 2013 the applicants sought an extension of time in which to serve the respondents, the Court had power under r 3.02 of the General Civil Procedure Rules to grant the extension. Leave to appeal should be granted in respect of proposed grounds 1 and 3.

Judd J decided that in the circumstances of this case the applicants’ reasons for seeking an extension, namely awaiting the outcome of another proceeding and seeking litigation funding, did not justify an extension. The applicants failed to establish any error in the judge’s exercise of discretion. Leave to appeal should be refused in respect of proposed grounds 4 to 8. While leave to appeal should be granted in respect of proposed grounds 1 and 3, the appeal should be dismissed.

SCHEDULE

STIRLING LINDLEY HORNE AND PETR VRSECKY IN THEIR CAPACITIES AS JOINT AND SEVERAL LIQUIDATORS OF:

AUSTRALIAN PROPERTY CUSTODIAN HOLDINGS LIMITED ACN 095 474 436 (RECEIVERS AND MANAGERS APPOINTED) (CONTROLLERS APPOINTED) (IN LIQUIDATION)

NAMBOUR RETIREMENT VILLAGE PTY LTD ACN 069 358 701 (IN LIQUIDATION) (RECEIVERS AND MANAGERS APPOINTED)

BUDERIM MEADOWS RETIREMENT VILLAGE PTY LTD ACN 052 895 244 (IN LIQUIDATION) (RECEIVERS AND MANAGERS APPOINTED)

CHANCELLOR PARK RETIREMENT VILLAGE PTY LTD ACN 061 399 139 (IN LIQUIDATION) (RECEIVERS AND MANAGERS APPOINTED)

NOOSA OUTLOOK PTY LTD ACN 010 860 394 (IN LIQUIDATION) (RECEIVERS AND MANAGERS APPOINTED)

ARGYLE GARDEN VILLAGE PTY LTD ACN 010 502 879 (IN LIQUIDATION) (RECEIVERS AND MANAGERS APPOINTED)

CARLYLE VILLAGES PTY LTD ACN 075 243 800 (IN LIQUIDATION) (RECEIVERS AND MANAGERS APPOINTED)

First Applicants

and

AUSTRALIAN PROPERTY CUSTODIAN HOLDINGS LIMITED ACN 095 474 436 (RECEIVERS AND MANAGERS APPOINTED) (CONTROLLERS APPOINTED) (IN LIQUIDATION)

Second Applicant

and

NAMBOUR RETIREMENT VILLAGE PTY LTD ACN 069 358 701 (IN LIQUIDATION) (RECEIVERS AND MANAGERS APPOINTED)

Third Applicant

and

BUDERIM MEADOWS RETIREMENT VILLAGE PTY LTD ACN 052 895 244 (IN LIQUIDATION) (RECEIVERS AND MANAGERS APPOINTED)

Fourth Applicant

and

CHANCELLOR PARK RETIREMENT VILLAGE PTY LTD ACN 061 399 139 (IN LIQUIDATION) (RECEIVERS AND MANAGERS APPOINTED)

Fifth Applicant

and

NOOSA OUTLOOK PTY LTD ACN 010 860 394 (IN LIQUIDATION) (RECEIVERS AND MANAGERS APPOINTED)

Sixth Applicant

and

ARGYLE GARDEN VILLAGE PTY LTD ACN 010 502 879 (IN LIQUIDATION) (RECEIVERS AND MANAGERS APPOINTED)

Seventh Applicant

and

CARLYLE VILLAGES PTY LTD ACN 075 243 800 (IN LIQUIDATION) (RECEIVERS AND MANAGERS APPOINTED)

Eighth Applicant

and

RETIREMENT GUIDE MANAGEMENT PTY LTD ACN 125 225 390

First Respondent

and

RETIREMENT GUIDE PTY LTD ACN 108 659141

Second Respondent

and

HIBISCUS RV MANAGEMENT PTY LTD ACN 125 236 446

Third Respondent

and

CARLYLE RV MANAGEMENT PTY LTD ACN 125 236 473

Fourth Respondent

and

BUDERIM GARDENS VILLAGE MANAGEMENT PTY LTD ACN 108 443 474

Fifth Respondent

and

ASHTON GARDENS VILLAGE MANAGEMENT PTY LTD ACN 120 069 650

Sixth Respondent

and

BELLFLOWER VILLAGE MANAGEMENT PTY LTD ACN 123 008 631

Seventh Respondent

and

LINDFIELD VILLAGE MANAGEMENT PTY LTD ACN 124 389 377

Eighth Respondent

and

BRENTWOOD VILLAGE MANAGEMENT PTY LTD ACN 125 660 540

Ninth Respondent

[2017] VSCA 47

16 March 2017