In the matter of One.Tel Limited (in liq)

[2012] NSWSC 630

Supreme Court

New South Wales

Medium Neutral Citation:	In the matter of One.Tel Limited (in liq) [2012] NSWSC 630
Hearing dates:	Monday 28 May 2012
Decision date:	28 May 2012
Jurisdiction:	Equity Division - Corporations List
Before:	Brereton J
Decision:	Powers of the Special Purpose Liquidator varied.
Legislation Cited:	(NSW) Court Suppression and Non-publication Orders Act 2010, s 8(1)(a) and s 8(1)(e)
Cases Cited:	Weston v Publishing and Broadcasting Ltd [2011] NSWSC 433 Port of Melbourne Authority v Anshun Pty Ltd [1981] HCA 45
Category:	Procedural and other rulings
Parties:	Paul Gerard Weston (applicant)
Representation:	M R Aldridge SC w A A D'Arcy (Applicant) Lipman Karas (Applicant)
File Number(s):	2003/86446

Judgment (ex tempore)

1. HIS HONOUR: The applicant Mr Weston is the special purpose liquidator ("SPL") of One.Tel Limited (in Liquidation) ("One.Tel"), pursuant to orders made on 23 December 2003 by Windeyer J. The purposes of his appointment have from time to time been varied, and are presently encapsulated in an order of 29 July 2010:

2. Order number 1 made in these proceedings on 21 May 2010 varying the purpose of the SPL's appointment, be varied such that the purpose of the SPL's appointment shall be to:

(i) consider and make recommendations to the creditors of One.Tel as to whether:

(a) any rights of action exist in relation to the cancellation of the RRI;

(b) any rights of action exist in relation to the decision to appoint voluntary administrators to One.Tel on 29 May 2001;

(c) any action should be commenced against any persons in relation to any such rights of action referred to in sub-paragraphs (a) and (b) above,

and

(ii) in the event that the SPL recommends to the COI that an action within Order 3(i)(c) above be commenced and the COI, by majority, accepts or does not oppose that recommendation, to commence any such proceedings in the name and on behalf of One.Tel in the manner in which the SPL thinks fit;

(iii) perform such work as the SPL considers necessary to advise the COI concerning such proceedings on or before 28 September 2007 or any adjourned date of the meeting of the COI of 28 September 2007, notwithstanding the filing of proceedings by the SPL on 25 May 2007 in relation to the cancellation of the RRI;

(iv) perform such work as the SPL considers necessary to make final recommendations to the COI in accordance with these orders, including but not limited to the following:

a. to apply for a 6 month extension of time from 25 November 2007 to 25 May 2008, or such other extension as the SPL considers necessary, for service of the Statement of Claim in the Proceedings;

b. to amend the Statement of Claim in the Proceedings as the SPL considers necessary including by way of application to the Court for leave if required;

c. to take all necessary steps to obtain funding to prosecute the Proceedings;

d. to take all necessary steps to continue with the restored public examinations of Messrs Darren Miller and Martin Green;

e. to make application to a Corporations Judge for the issue of further examination orders to such persons as the SPL considers necessary;

f. to instruct his lawyers to prepare an advice on evidence regarding the Proceedings;

g. to apply for a further 6 month extension of time from 25 May 2008 to 25 November 2008, or such other extension as the SPL considers necessary, for service of the Statement of Claim in the Proceedings;

h. to participate in negotiations to settle the Proceedings;

i. to apply for a further 6 month extension of time from 25 November 2008 to 25 May 2009, or such other extension as the SPL considers necessary, for service of the Statement of Claim in the Proceedings; and

j. to apply for a further 6 month extension of time from 25 May 2009 to 25 November 2009, or such other extension as the SPL considers necessary, for service of the Statement of Claim in the Proceedings; and

k. to apply for a further 6 month extension of time from 25 November 2009 to 25 May 2010, or such other extension as the SPL considers necessary, for service of the Statement of Claim in the Proceedings;

l. to apply for a further 3 month extension of time from 25 May 2010 to 25 August 2010, or such other extension as the SPL considers necessary, for service of the Statement of Claim in the Proceedings; and

m. to serve the Statement of Claim in the Proceedings.

(v) prosecute the Proceedings, including any appeals until conclusion.

1. Mr Weston investigated whether there were any claims available against any persons arising from the circumstances surrounding the cancellation of a renounceable rights issue on 29 May 2001. On 25 May 2007, he caused a statement of claim to be issued against 18 named defendants pleading statutory, common law and equitable causes of action. Between 2007 and 2010 he applied for and was granted six extensions of time in which to serve the statement of claim, the last of which expired on 25 August 2010. On 23 August 2010, the statement of claim was served on the first to eleventh defendants, and leave to discontinue was sought against the twelfth to eighteenth defendants.

1. In September 2010, the first to eleventh defendants applied to have the extensions of time for service of statement of claim set aside. Ward J heard those applications in February 2011, and on 13 May 2011 her Honour set aside the fifth and sixth extensions of time, and (consequently) service of the statement of claim, and dismissed those proceedings [Weston v Publishing and Broadcasting Ltd [2011] NSWSC 433] (for convenience, called the rights issue proceedings).

1. Mr Weston sought leave to appeal. After a hearing in February 2012, the Court of Appeal on 12 April 2012 granted leave to appeal but dismissed the appeal, upholding the dismissal of the rights issue proceedings, which therefore stand dismissed. Mr Weston has sought special leave to appeal from the judgment of the Court of Appeal to the High Court of Australia. There is some evidence before me as to the advice that he has been given as to the prospects of success of that application; it is sufficient to say for present purposes that the application faces the difficulties that it involves concurrent dismissals of the proceeding at first instance, and by a unanimous judgment of the Court of Appeal, and one could, therefore, not be particularly optimistic about its prospects.

1. The purpose of the present application is essentially to enlarge the SPL's powers to bring fresh proceedings based on the same matters of fact as the rights issue proceedings, but pleaded only as causes of action in equity without reliance on the statutory or common law counts, which are now statute barred.

1. Mr Weston has sought and obtained advice of eminent counsel as to the prospects of success of these fresh proceedings, called for convenience the equitable proceedings. Again, it is unnecessary to say more than to observe that the advice, while far from confident that the proceedings will succeed, does not suggest that they are without merit. In short, it may be summarised as expressing the view that while there are some difficulties, at this early stage, there appear to be reasonable prospects of success.

1. In considering the present application, it is important first to identify what is the role of the court. Were the liquidator a general purpose liquidator and not a special purpose liquidator, the liquidator would not need to make such an application at all. It would be a matter for the commercial judgment of the liquidator as to whether or not to institute the proposed equitable proceedings, although a prudent liquidator might, at least in come cases, seek the court's advice and direction as to whether he or she would be justified in so doing. Upon the present application, I am not even considering judicial advice of that sort, but simply an enlargement of powers to commence proceedings closely analogous to those that the SPL was originally appointed to pursue.

1. Nonetheless, I think it relevant to take into account whether the proceedings apparently have prospects of success, based on the advice of counsel, to which I have referred. It seems that they have at least sufficient prospects that the court would not be compelled by considerations of futility to refuse the extension of powers sought. Beyond that, it is largely a matter for the commercial judgment of the liquidator as to whether they have sufficient prospects to justify their pursuit in the interests of creditors.

1. Secondly, it is relevant to take into account that the burden on creditors of prosecuting the proposed proceedings will be slight. The liquidator has negotiated a funding arrangement, with a litigation funder, the effect of which is that the costs of the proceedings and any adverse costs order will be borne by the litigation funder, and not by the creditors (except only costs personal to the liquidator, such as the liquidator's remuneration or independent advice for the liquidator). This means that there is little financial burden to creditors, or to the administration, from the proposed extension of the SPL's powers.

1. Thirdly, as has been pointed out, a very large amount of creditor's money has already been invested in the pursuit of the rights issue proceedings, which now stand dismissed. There is some prospect of that investment being saved, in whole or in part, if the SPL's powers are extended in the manner sought.

1. Finally, it may well be that the SPL's existing powers as set out above are sufficient to authorise the proposed equitable proceedings. The SPL has made clear that he would, nonetheless, not embark on them in reliance on the existing powers, if the court were of the view that it would be inappropriate to grant an extension sought, but seeks an extension to clarify the position to ensure that the proceedings would regularly be brought.

1. Bearing in mind the matters to which I have referred, it seems to me that it is plainly in the interests of the creditors that the SPL's powers be extended in the manner sought. I have considered whether I should take into account, and, if so, give weight to, the interests of the potential defendants: for example, it might be argued that the liquidator took much time to serve the previous proceedings on the relevant defendants, that they ultimately had succeeded in having those proceedings dismissed, and that it would be vexatious for the SPL to launch another set of proceedings on substantially the same subject matter.

1. But there are countervailing considerations. First, even in the proceedings before Ward J, her Honour referred to the possibility that some causes of action might not be statute barred, and that it would be open to the SPL to commence new proceedings in respect of those causes of action. Secondly, in a judgment given on 19 December 2011, when an application substantially identical to that made before me was made before Barrett J, his Honour declined the application, but essentially because it was thought appropriate to await the outcome of the appeal to the Court of Appeal, and without prejudice to the ability of the SPL to bring a new application. Thirdly, an argument that any estoppel in the nature of that considered in Port of Melbourne Authority v Anshun Pty Ltd [1981] HCA 45 is applicable, would encounter the considerable difficulty that there was no hearing on the merits of the rights issue proceedings, and that their dismissal by Ward J contemplated, as I have said, the possibility that there might be further proceedings. Fourthly, it remains open to the prospective defendants to raise any such issue in defence to the equitable proceedings, should they be commenced.

1. Ultimately, to the extent that the defendants' interests are at all relevant to the application before me, they are, I think, subordinate to the interests of the creditors, which are the predominant consideration.

1. I have heard this application in closed court and made a suppression order, essentially because the application involves the disclosure to the court of legally privileged material, being the advice the SPL has received in respect of the special leave application, and the proposed equitable proceedings, and the terms of the funding arrangement. The terms of the funding arrangement are substantially similar to another funding arrangement that the court has previously accepted to be confidential. In those circumstances I will continue a suppression order in respect of information that discloses or tends to disclose the advice and the funding arrangements to which I have referred.

1. Finally, the SPL is represented on this application by a firm of solicitors who are not the solicitors on the record in the proceedings in which it was made, but are intended to be the solicitors acting for the SPL in the equitable proceedings, should they be commenced. In those circumstances, it is appropriate that those solicitors be retained to make the present application, without becoming the solicitors on the record in the present proceedings, and I will make orders to regularise that position.

Orders

1. Grant leave, nunc pro tunc, to the first defendant in these proceedings to be represented on the present application by Lipman Karas, notwithstanding that O'Neill Partners are, and remain, the solicitors on the record for the first defendant in the proceedings.

1. Make Order 4 in the document entitled 'Draft Orders' initialled by me, dated this day and placed with the papers.

1. Pursuant to (NSW) Court Suppression and Non-publication Orders Act 2010, order that disclosure, by publication or otherwise, be prohibited of information read or tendered in these proceedings and in these reasons for judgment that comprises or tends to reveal:

(a) the content or substance of the advice obtained by the special purpose liquidator concerning the prospects of success of his application for special leave to appeal;

(b) the content or substance of the advice of Messrs Karkar QC and D'Arcy of 18 November 2011; and

(c) the funding arrangements negotiated by the SPL in respect of the proposed equitable proceedings.

1. This order is made on the grounds referred to in s 8(1)(a), that the order is necessary to prevent prejudice to the proper administration of justice, and s 8(1)(e), that it is otherwise necessary in the public interest for the order to be made and that public interest significantly outweighs the public interest in open justice. This order applies throughout the Commonwealth of Australia and its territories. This order operates for the period that expires 28 days after final judgment in the equitable proceedings, provided that such proceedings are instituted by 28 July 2012, or earlier further order of the court. If these proceedings are not instituted by 28 July 2012, this order will cease to operate on that date unless earlier extended by the court.

1. In the above orders I have referred to s 8(1)(e) of the Courts Suppression and Non-Publication Orders Act. It seems to me that the public interest in the due administration of the winding up of One.Tel, and in the preservation of confidential legal advice given in that respect, outweighs the interest in open justice in the context of what is an ex parte application, in which substantially only the liquidator has an interest.

1. Order that the affidavit of Mr Weston sworn 10 May 2012 and the exhibit thereto be placed in a sealed envelop and marked 'not to be opened without the leave of a judge of the court'.

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Decision last updated: 04 August 2014