Liquor National Pty Limited (in liq) v Australia and New Zealand Banking Group Limited

[2020] NSWSC 122

Supreme Court

New South Wales

Medium Neutral Citation:	Liquor National Pty Limited (in liq) v Australia and New Zealand Banking Group Limited [2020] NSWSC 122
Hearing dates:	17 February 2020
Date of orders:	17 February 2020
Decision date:	17 February 2020
Jurisdiction:	Common Law
Before:	Beech-Jones J
Decision:	Pursuant to Uniform Civil Procedure Rule 1.12, the time limited by Uniform Civil Procedure Rule 6.2(4)(a) in which the Statement of Claim in these proceedings can be served be extended for a period of six months from 17 February 2020.
Catchwords:	CIVIL PROCEDURE – commencement of proceedings – statement of claim – application for extension of time for service pursuant to Uniform Civil Procedure Rules, r 1.12 – ex parte – appointment of a special purpose liquidator by the Federal Court – prejudice caused to the defendants in granting extension does not outweigh prejudice to plaintiffs if extension not granted – time for which statement of claim can be served extended for six months
Legislation Cited:	Corporations Act 2001 (Cth), s 477(2)(b) Uniform Civil Procedure Rules, r 1.12, r 6.2(4)(a)
Cases Cited:	Arthur Andersen Corporate Finance Pty Ltd v Buzzle Operations Pty Ltd (in liq) [2009] NSWCA 104 James in the matter of Liquor National Pty Limited (in liq) v Liquor National Pty Limited (in liq) (No 2) [2017] FCA 1154 Weston in Capacity as Special Purpose Liquidator of One.Tel In Liquidation v Publishing and Broadcasting Ltd [2012] NSWCA 79 Weston v Publishing and Broadcasting Limited [2019] NSWSC 321 White v Atwells, Atwells v White [2019] NSWSC 1278
Category:	Procedural and other rulings
Parties:	Liquor National Pty Ltd (in liq) (First Plaintiff) Wine National Pty Ltd (in liq) (Second Plaintiff) Print National Pty Ltd (in liq) (Third Plaintiff) Print National Australia Pty Ltd (Fourth Plaintiff) James Estate Wines Pty Ltd (in liq) (Fifth Plaintiff) Sundara Pty Ltd (in liq) (Sixth Plaintiff) Killara 10 Pty Ltd (in liq) (Seventh Plaintiff) Australia and New Zealand Banking Group Limited (First Defendant) David Paul Merryweather and Greg Hall (Second Defendants)
Representation:	Counsel: J Baird (Plaintiff) Ex parte   Solicitors: CCSG Legal Pty Ltd (Plaintiffs) Allens Lawyers (Defendants)
File Number(s):	2019/255935

Judgment

1. HIS HONOUR: Before me is an application seeking an order pursuant to Uniform Civil Procedure Rule (“UCPR”) 1.12 that the time provided in UCPR 6.2 (4)(a), in which the statement of claim filed in the substantive proceedings is valid for service be extended for a further period of six months.

2. On 16 August 2019 a statement of claim was filed in this Division by or on behalf of the special purpose liquidator appointed to seven companies, naming as the defendants, the Australia and New Zealand Banking Group Limited (“ANZ”) as the first defendant, and as second defendants, persons who were appointed as the receivers and managers of certain of the plaintiffs at the behest of the ANZ (the “ANZ receivers”).

3. By the operation of UCPR 6.2 (4)(a) that statement of claim was only valid for service for a period of six months which, on the plaintiff's calculation, having regard to the weekend, expires today.

4. The application is made ex parte. Bearing in mind that ultimately the defendants have the capacity to set orders extending the period for service aside, I accepted that it was appropriate to proceed without them appearing: (See Weston v Publishing and Broadcasting Limited [2019] NSWSC 321).

5. The background to the matter is reasonably complex. What follows is only by way of short summary. The plaintiff companies named in the statement of claim are seven companies to which, I have stated, have a special purpose liquidator appointed. Those companies previously formed part of a group of companies that were associated with Mr David James (the “James Group”). Mr James organised the James Group in such a way that the plaintiff companies in these proceedings were funded by Rabobank Australia Limited (the “Rabobank Companies”) and as one would have expected, they gave Rabobank securities for their loans.

6. The James Group also included a number of other companies which were funded by the ANZ and to which they had given securities (the “ANZ Companies”). The activities of the James Group companies were varied but they included the conduct of vineyards, the distribution of alcohol, the conduct of printing and packaging businesses and the conduct of a wine storage business.

7. To the extent that the businesses involved the storage of products and their distribution, it appears that, in broad terms, they used premises that were either leased, owned or occupied by companies associated with Mr James or members of his family. They utilised a reasonably sophisticated computer system software to maintain records of the storage of stock, which company owned it and where it was located. However, at least according to the plaintiffs, stock associated with the various groups was physically intermingled, although records were apparently available to identify what stock was owned by what company.

8. On or about 19 August 2013, ANZ appointed the ANZ receivers to the ANZ Companies within the James Group. Thereafter, there appears to be a very substantial debate about the conduct of those receivers when they entered various warehouses and other premises. Without traversing the claims in detail, it seems that there is evidentiary material available to the plaintiffs to suggest that, in doing so, they effectively seized stock that was associated with or indeed owned by the Rabobank companies within the James Group.

9. The statement of claim that was filed in August 2019 pleads causes of action in trespass, conversion, negligence and alleges consequential economic loss. Although it is a gross oversimplification, at the heart of the statement of claim is a contention that the ANZ receivers, in exercising their function, effectively ignored the differences between the companies, entered premised when they had no right to do so, seized property of the Rabobank properties and accordingly converted it. It is alleged that, in doing so, they effectively destroyed the businesses of the Rabobank Companies.

10. For the sake of completeness, I note that, shortly after the events that are pleaded as having occurred from August 2013, Rabobank then moved to liquidate the Rabobank companies.

11. Presumably it was by reason of the six year limitation period that would otherwise apply to claims in trespass, conversion and negligence that are not said to cause personal injury and damages, that the statement of claim was filed in August 2019.

12. Much occurred in the meantime. In October 2017, Jagot J in the Federal Court, appointed Mr Hurst as a special purpose liquidator of the Rabobank companies after they had been reinstated. In her Honour's judgment, Jagot J referred to the contentions that were being made to support the appointment of a special purpose liquidator which, as I understand it, relate to the conduct of receivers appointed by ANZ to which I have referred. Her Honour described those contentions as being, "[g]enuinely made and cannot be dismissed as mere fancy": (James in the matter of Liquor National Pty Limited (in liq) v Liquor National Pty Limited (in liq) (No 2) [2017] FCA 1154 at [10].

13. On or about 15 August 2019, Mr Hurst entered into a litigation funding deed with Mrs Irene Rose James, who I understand is a person associated with Mr David James. On 16 August 2019, Gleeson J of the Federal Court ordered, pursuant to s 477(2)(b) of the Corporations Act, that Mr Hurst was authorised to enter into that litigation funding deed. Her Honour made orders that its terms be kept confidential.

14. In his affidavit sworn on this application, Mr Hurst makes it clear that the purpose of the funding agreement was to allow for the investigation of the various claims including the conduct of public examinations. In the second half of 2019, Mr Hurst pursued public examinations. He initially obtained summonses for examination directed to a significant number of people associated with ANZ. After some disputation, that list of people was reduced. Eventually on 18 December 2019 public examinations of two persons were conducted. On 31 January 2020 Mr Hurst obtained a memorandum of advice from counsel about the prospects of success in his claim. On this application, I have made a suppression order in relation to the contents of that advice which have been tendered on the basis that a disclosure of the substance of the advice has the potential to prejudice the plaintiff companies and ultimately its creditors.

15. Mr Hurst recites in his affidavit that, based upon his investigations to date, he considers that he has two potential claims available to him, namely, a claim by the Rabobank companies against ANZ and the ANZ receivers for economic loss by reason of the destruction in value of the companies caused by the conduct of the ANZ receivers at one of the premises to which they entered and a claim by two of the Rabobank Companies for the damages for loss of wine and liquor stock of those companies held at warehouses at Homebush Bay and Marrickville. It is not my function on this application to conduct any searching examination of that opinion. It suffices to say that, bearing in mind the material that was tendered, I can reach a similar state of satisfaction to that stated by Jagot J, namely that such claims appear to be arguable, genuinely made and they cannot be dismissed as mere fancy. I would add that they appear to be, in large part, intended to be dependent upon the evidence of Mr James himself.

16. In his affidavit Mr Hurst also recites attempts to obtain various documents from ANZ, which in part have been unsuccessful.

17. Mr Hurst states that the statement of claim has not yet been served for a number of reasons. First, he states that he has not yet been able to obtain funding from a funder with respect to the prosecution of the statement of claim which includes an appropriate indemnity for himself against any adverse costs orders.

18. Second, he notes that the delay in the obtaining of the compulsory examinations which as I stated did not occur until 19 December 2019.

19. Third, he states that bearing in mind what was revealed at those examinations he considers it necessary to conduct, if he can, further examinations in respect of personnel from Price Waterhouse Cooper's who were said to be present when the entry by the receivers occurred at one of the premises.

20. Fourth, he also nominates that he may need to agitate further to obtain orders for production of documents against the ANZ and one of the ANZ receivers.

21. Mr Hurst states in his affidavit that he is seeking to source further funding. He recounts efforts made to approach funders with a view to obtaining funding to prosecute the proceedings.

22. From that material I am satisfied that efforts have been made but that they have not yet been able to either come to fruition or to arrive at a position where it is clear that funding will not be made available.

23. I will come to the various tests shortly but I think at least suffice it to state that since I am satisfied that, since Mr Hurst's appointment as special purpose liquidator and obtaining of funding for an investigation, there have been diligent efforts to obtain funding to pursue an investigation. There have been diligent efforts to seek funding for the litigation as well as further investigate matters necessary to obtain a final opinion in relation to the conduct of the litigation.

24. In White v Atwells, Atwells v White [2019] NSWSC 1278 Gleeson JA, sitting at first instance set out at [82] and following the principles applicable for an extension of time for service of a statement of claim. His Honour noted that the plaintiff had the burden of satisfying the Court that good reasons exist for exercising the discretion and that, while the defendant has no right to claim the benefit of the expiry of the limitation period, it is a relevant factor.

25. Further, his Honour noted that in Arthur Andersen Corporate Finance Pty Ltd v Buzzle Operations Pty Ltd (in liq) [2009] NSWCA 104 at [43] (“Buzzle”) the Court of Appeal stated:

“Accordingly, the Court should consider, when exercising a discretion such as that under UCPR 1.2 the attempts that have been made at service, the length of the delay, the reasons for the delay, whether the delay was deliberate, whether notice was given to the defendant, the conduct of the parties generally and the hardship or prejudice caused to the plaintiff by refusing to renew or to the defendant by granting it.”

26. This passage from Buzzle appears to be principally directed to the circumstance where a plaintiff has been seeking to serve a statement of claim but for some reason has been unable to do so. In the case where he has not been seeking to serve the statement of claim, the question is perhaps better directed to what were the reasons for their conduct in waiting until the end of the extension period.

27. In and of itself awaiting a decision from a litigation funder may not be sufficient to amount to a good reason to extend time, depending upon the other circumstances (see Weston in Capacity as Special Purpose Liquidator of One.Tel In Liquidation v Publishing and Broadcasting Ltd [2012] NSWCA 79 at [20.5]). However, all these matters must be considered in context.

28. In this case if the extension were to be refused, then it would cause significant prejudice to the plaintiff and ultimately to the creditors of the plaintiff. The end result would be that the limitation period in respect of its claims against ANZ and the ANZ receivers would expire and the claim that it has been agitating about for a significant period would be lost.

29. Further, I am satisfied that at least so far as the special purpose liquidator is concerned there has been nothing in his conduct which would warrant a refusal of the application. Instead, as I have stated, since the time that he obtained litigation funding to at least conduct an examination, I am satisfied that he has conducted himself with reasonable diligence in pursuing the matter. The reasons stated for the further extension appear to me to be more than reasonable.

30. So far as the ANZ is concerned, it is revealed in the evidence that it has a copy of the statement of claim. No doubt it would be on notice of the allegations, given the course of events since the appointment of the special purpose liquidators and the public examinations.

31. ANZ and the ANZ Receivers will not lose any substantive defence by the extension being granted save as to the potential loss of pleading a limitation period. It can otherwise be expected that defendants like ANZ and the ANZ receivers will be in a position to preserve records and the like to meet a statement of claim that might be served on them at a later time if funding becomes available.

32. In the end result I am not satisfied that such prejudice as may be caused to the defendants would outweigh the substantive prejudice and hardships to the plaintiff that would be occasioned if the extension were not granted.

33. Subject to one matter, I should indicate that in all the circumstances I considered it appropriate to exercise the discretion to extend time for service of the statement of claim for a further six months. One matter to note is this, that if a further extension is to be sought, then the application should not be made on the very last day upon which the time is about to expire, given the pressures upon the Court which may impair its ability to deal with the application in an appropriate way.

34. Accordingly, the Court orders pursuant to UCPR 1.12 the time limited by UCPR 6.2(4)(a) in which the statement of claim in these proceedings can be served be extended for a period of six months from today.

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Decision last updated: 26 February 2020