MBD Management Pty Ltd v Butcher
FEDERAL COURT OF AUSTRALIA
MBD Management Pty Ltd v Butcher [2010] FCA 1071
Citation: MBD Management Pty Ltd v Butcher [2010] FCA 1071 Parties: MBD MANAGEMENT PTY LTD ATF MBD MANAGEMENT TRUST (ACN 084 458 159) v MARK BUTCHER AND THE PARTNERS OF ERNST & YOUNG AS LISTED IN SCHEDULE A TO THE FURTHER AMENDED APPLICATION, ANDERSEN PRIVATE WEALTH MANAGEMENT PTY LTD (ACN 091 034 007), STEVEN BREIRL AND THE PERSONS WHO TRADED AS ARTHUR ANDERSEN AS SET OUT IN SCHEDULE B TO THE FURTHER AMENDED APPLICATION and DEL MORRISON File number: NSD 1114 of 2009 Judge: EDMONDS J Date of judgment: 1 October 2010 Catchwords: PRACTICE & PROCEDURE – O 4 rr 11 – 13 Federal Court Rules (Cth) (‘the Rules’) – requirement that the originating process be served not less than five days before the first hearing date – whether the Court should exercise its discretion to regularise short service where the respondents have not identified any relevant prejudice.
Held: Pursuant to O 1 r 8 of the Rules, and in accordance with the nature and purpose of O 4 rr 11 – 13, the requirement that the originating process be served not less than five days before the first hearing date, be dispensed with.
Legislation: Federal Court of Australia Act 1976 (Cth) ss 35A(1)(h), 51(1)
Federal Court Rules (Cth) O 4 rr 11 – 13
Supreme Court Rules 1970 (NSW) Pt 5 r 4A(3)Cases cited: Re BHP Trading Asia Ltd; BHP Materials Trading Pty Ltd trading as BHP International Group and John Lysaght (Australia) Ltd v Oceaname Shipping Ltd [1991] FCA 438 considered
CDJ v VAJ (1998) 197 CLR 172 cited
Howey & Co Pty Ltd v Creative Projects International Pty Ltd [1973] 2 NSWLR 898 considered
JC Techforce Pty Ltd v Pearce (1996) 138 ALR 522 applied
Protec Pacific Pty Ltd v Steuler Industriewerke GmbH [2007] VSC 93 applied
Regie Nationale des Usines Renault SA v Zhang (2002) 210 CLR 491 cited
Robinson v Kuwait Liaison Office (1997) 145 ALR 68 appliedPearce DC & Geddes RS, Statutory Interpretation in Australia (6th ed, LexisNexis Butterworths, 2006)
Date of hearing: 15 and 16 July 2010 Place: Sydney Division: GENERAL DIVISION Category: Catchwords Number of paragraphs: 98 Counsel for the Applicant: Mr JC Sheahan SC with Mr S Balafoutis Solicitor for the Applicant: Piper Alderman Counsel for the First Respondent: Mr RI Harper SC Solicitor for the First Respondent: HWL Ebsworths Lawyers Solicitor for the Second Respondent: No appearance Counsel for the Third Respondent: Mr N Bender Solicitor for the Third Respondent: Baker & McKenzie Counsel for the Fourth Respondent: Mr DR Meltz Solicitor for the Fourth Respondent: Thynne & Macartney
IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY
GENERAL DIVISION
NSD 1114 of 2009
BETWEEN: MBD MANAGEMENT PTY LTD ATF MBD MANAGEMENT TRUST (ACN 084 458 159)
Applicant
AND: MARK BUTCHER AND THE PARTNERS OF ERNST & YOUNG AS LISTED IN SCHEDULE A TO THE FURTHER AMENDED APPLICATION
First RespondentANDERSEN PRIVATE WEALTH MANAGEMENT PTY LTD (ACN 091 034 007)
Second RespondentSTEVEN BREIRL AND THE PERSONS WHO TRADED AS ARTHUR ANDERSEN AS SET OUT IN SCHEDULE B TO THE FURTHER AMENDED APPLICATION
Third RespondentDEL MORRISON
Fourth Respondent
JUDGE:
EDMONDS J
DATE OF ORDER:
1 OCTOBER 2010
WHERE MADE:
SYDNEY
In respect of the Applicant’s motion on notice filed 31 May 2010 –
THE COURT ORDERS THAT:1.Pursuant to O 1 r 8 of the Federal Court Rules (Cth) (‘the Rules’), the requirement in O 4 r 11 that the Amended Application and the Amended Statement of Claim filed 2 October 2009 be served upon the Respondents not less than five days before the date appointed for hearing pursuant to O 4 r 8 be dispensed with.
2.The First Respondent and Mr Martin Madden pay the Applicant’s costs of the motion.
In respect of the First Respondent’s motion on further amended notice filed 15 July 2010 –
THE COURT ORDERS THAT:3.The motion be dismissed.
4.The First Respondent pay the Applicant’s costs of the motion.
In respect of Mr Madden’s motion on further amended notice filed 15 July 2010 –
THE COURT ORDERS THAT:5.The motion be dismissed.
6.Mr Madden pay the Applicant’s costs of the motion.
In respect of the Fourth Respondent’s motion on notice filed 4 June 2010 –
THE COURT ORDERS THAT:7.The motion be dismissed.
8.The Fourth Respondent pay the Applicant’s costs of the motion.
THE COURT FURTHER ORDERS THAT:
9.The proceeding be listed for further directions on 6 October 2010 at 9:30 a.m.
Note:Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.
The text of entered orders can be located using Federal Law Search on the Court’s website.
IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY
GENERAL DIVISION
NSD 1114 of 2009
BETWEEN: MBD MANAGEMENT PTY LTD ATF MBD MANAGEMENT TRUST (ACN 084 458 159)
Applicant
AND: MARK BUTCHER AND THE PARTNERS OF ERNST & YOUNG AS LISTED IN SCHEDULE A TO THE FURTHER AMENDED APPLICATION
First RespondentANDERSEN PRIVATE WEALTH MANAGEMENT PTY LTD (ACN 091 034 007)
Second RespondentSTEVEN BREIRL AND THE PERSONS WHO TRADED AS ARTHUR ANDERSEN AS SET OUT IN SCHEDULE B TO THE FURTHER AMENDED APPLICATION
Third RespondentDEL MORRISON
Fourth Respondent
JUDGE:
EDMONDS J
DATE:
1 OCTOBER 2010
PLACE:
SYDNEY
REASONS FOR JUDGMENT
INTRODUCTION
On 15 and 16 July 2010 I heard four motions on notice, one filed by the first respondent (‘Ernst & Young’), a second by Mr Martin Madden, one of the persons listed as the third respondent (‘Andersen’), a third by the applicant (‘MBD’) and a fourth by the fourth respondent (‘Ms Morrison’). The motions filed by Ernst & Young, Mr Madden and MBD concern the operation of O 4 rr 11 – 13 of the Federal Court Rules (Cth) (‘the Rules’). These rules require that respondents be served with the originating process five days before the first hearing date, invariably a directions hearing, unless the Court otherwise orders, and allows the Court (including a Registrar) (see item 64A of Sch 3 to the Rules; O 46 r 7AA(b); and s 35A(1)(h) of the Federal Court of Australia Act 1976 (Cth) (‘the Federal Court Act’)) to alter that date to a later date.
In this proceeding, all of the respondents were served before the first directions date, as altered on four prior occasions, being 24 March 2010, but were not served the requisite five clear days before that date.
MBD filed a motion seeking orders that regularise the late service. Ernst & Young and Mr Madden filed motions seeking, inter alia, a declaration that the originating process has not been duly served and an order that the originating process be set aside.
The latter motions proceed on the premise that O 4 rr 11 – 13 should be treated as cognate to rules of state supreme courts which provide for time limits on the validity of originating process and for power to extend those limits. MBD submitted that this premise is wrong. According to MBD, the Rules do not limit the validity of originating process, but rather place the conduct of a proceeding from its commencement under the Court’s supervision. Extensions of time for an initial hearing are made available by a flexible, summary and inexpensive process, but the extensions granted are, consistently with the objects of the Rules, typically of short duration (as occurred in this case). The time limit in O 4 r 11 has a function not of limiting validity or ensuring prompt service but rather of ensuring adequate notice.
According to MBD, its motion seeks to regularise short service of a few days, in circumstances where the respondents have not identified any relevant prejudice, and any prejudice due to short service has now been cured.
Ms Morrison’s motion seeks leave to withdraw an appearance filed on 23 March 2010 pursuant to O 22 r 1 of the Rules.
It was agreed that I first hear the motions of Ernst & Young and Mr Madden together with MBD’s motion on the basis that if I declined the motions of Ernst & Young and Mr Madden, the motion of Ms Morrison would go away.
Nature of Proceedings
These proceedings concern investment advice provided by Ernst & Young, the second respondent (‘APWM’), Andersen and Ms Morrison to MBD.
It is alleged that from March until June 2002, MBD approached each of the respondents (Ernst & Young acquired the business of APWM on or about 27 May 2002) and sought tax and investment planning advice with respect to the investment of $2 million. MBD made it known to the respondents that its sole director and shareholder, Michael Dunkley (‘Dunkley’), had no experience in making substantial financial investments.
In about May and June 2002, the respondents advised MBD to invest the entire sum of $2 million into five managed investment schemes. Each of those schemes was engaged in agribusiness (‘Agribusiness Investments’). The respondents did not advise MBD to diversify its investments and did not warn MBD that the Agribusiness Investments were unsuitable for MBD.
In June 2002, in accordance with the respondents’ recommendations, MBD invested in the Agribusiness Investments. In April and May 2009, administrators were appointed to two of the Agribusiness Investments – Timbercorp Almond Project and Great Southern Plantations.
MBD alleges that the respondents were negligent, breached the Corporations Act 2001 (Cth), engaged in misleading conduct and breached their fiduciary duties in the course of their provision of investment advice to MBD.
Brief procedural history
On 1 October 2009, an application and statement of claim were filed in this proceeding. The following day an amended application and an amended statement of claim were filed (‘Amended Documents’).
The first directions date in the proceeding was listed for 6 November 2009. MBD’s solicitors (‘Pipers’) wrote to the Registry on three occasions (19 October 2009, 9 December 2009 and 28 January 2010) requesting that the first directions date be vacated and a new date listed. Although, there is no record of the Court’s orders, it is apparent that those directions were made. The 6 November 2009 date was altered to 18 December 2009; that date was altered to 5 February 2010; and that date was altered to 5 March 2010.
The letters read as follows:
‘19 October 2009
By Hand
The Registry
Federal Court of Australia
Law Courts Building,
Queens Square
SYDNEY NSW 2000Attention: The Duty Registrar
Dear Sir
MBD Management Pty Limited ATF MBD Management Trust (ACN 084 458 159) and Michael Bruce Dunkley v Mark Butcher and the Partners of Ernst & Young as listed in Schedule A and Ors
Federal Court of Australia No. NSD 1114 of 2009We refer to our Justin Le Blond’s telephone attendance with Jerry English on 16 October 2009 and confirm that we act for the Applicants in the abovementioned matter.
We advise that the directions hearing listed on Friday, 6 November 2009 at 9:15 am (the Directions) is not suitable and accordingly we respectfully request that the Directions be vacated and alternatively the matter be listed for directions on Friday, 18 December 2009.
We enclose, the Amended Application and the Amended Statement of Claim filed on 2 October 2009 so that the Court may make the necessary amendments.
Should you have any queries in relation to the above, please do not hesitate to contact Justin Le Blond of our Sydney office directly on (02) 9253 9910.
Yours faithfully’
‘9 December 2009
By Hand
The Registry
Federal Court of Australia
Law Courts Building,
Queens Square
SYDNEY NSW 2000Attention: The Duty Registrar
Dear Sir
MBD Management Pty Limited ATF MBD Management Trust (ACN 084 458 159) and Michael Bruce Dunkley v Mark Butcher and the Partners of Ernst & Young as listed in Schedule A and Ors
Federal Court of Australia No. NSD 1114 of 2009We refer to our Lewis Seelenmeyer’s telephone attendance with your Joshua on 9 December 2009 and confirm that we act for the Applicants in the abovementioned matter.
We advise that the directions hearing listed on Friday, 18 December 2009 at 9:15 am (the Directions) is not suitable. Since obtaining the return date for our application, it has been necessary to make a number of amendments to the Amended Application and Amended Statement of Claim (the Claim), including the removal of persons that were originally listed as Respondents. Due to the required amendments, we have not been in a position to serve the Claim on the Respondents at this stage.
Accordingly we respectfully request that the Directions be vacated and alternatively the matter be listed for directions on Friday, 5 February 2009 [sic].
We enclose, the Amended Application and the Amended Statement of Claim filed on 2 October 2009 so that the Court may make the necessary amendments.
Should you have any queries in relation to the above, please do not hesitate to contact Lewis Seelenmeyer of our Sydney office directly on (02) 9253 9951.
Yours faithfully’
‘28 January 2010
By Hand
The Registry
Federal Court of Australia
Law Courts Building,
Queens Square
SYDNEY NSW 2000Attention: The Duty Registrar
Dear Sir
MBD Management Pty Limited ATF MBD Management Trust (ACN 084 458 159) and Michael Bruce Dunkley v Mark Butcher and the Partners of Ernst & Young as listed in Schedule A and Ors
Federal Court of Australia No. NSD 1114 of 2009We refer to our letter dated 9 December 2009.
On 9 December 2009, our client was granted an extension of the date listed for the directions hearing until 5 February 2010 at 9.15 am (the Directions).
Due to a combination of difficulties in obtaining instructions, the accessibility to persons caused by the closure of businesses over the Christmas and New Year period and the availability of Counsel advising on this matter, these proceedings have not progressed as far as anticipated. As a result, we have not yet been able to serve the Claim on the Respondents.
In the light of this position, we respectfully request that the Directions hearing be vacated and that alternatively the matter be listed for direction on Friday, 5 March 2010.
We enclose, the Amended Application and the Amended Statement of Claim filed on 2 October 2009 so that the Court may make the necessary amendments.
Should you have any queries in relation to the above, please contact Lewis Seelenmeyer of our Sydney office directly on (02) 9253 9951.
Yours faithfully’
Senior counsel for MBD conceded that this correspondence was less than ideal in terms of disclosure but submitted that such disclosure would not have resulted in a different outcome. That may be so, but solicitors have a duty, in such cases, to be totally forthright in their communications with the Court. Anything less is unacceptable. This correspondence, and that referred to in the next two paragraphs, does not reflect favourably on a firm with Pipers’ reputation.
During this period, there was also an exchange of correspondence between Pipers and Ernst & Young in which Pipers requested information and in which Ernst & Young supplied certain of such information but without any disclosure on the part of Pipers that a proceeding had already commenced. Indeed, some statements in Pipers’ latter correspondence were, on their face, false and misleading. Senior counsel for MBD described it as ‘a little strange’, ‘unduly coy, not to put a too fine a point’, ‘has an unpretty aspect’ and observed that it was sent to the general counsel of Ernst & Young and not to some lay person. It is, nevertheless, in my view, unacceptable coming out of a firm such as Pipers.
The exchange included:
(a)Letter dated 5 January 2010 from Pipers to Ernst & Young requesting information. Ernst & Young observed that this letter did not reveal that a proceeding had been commenced and that the heading to the letter is notably different in its language from the heading on the letters to the Registrar reproduced in [10] above.
(b)Letter dated 8 January 2010 from Ernst & Young to Pipers in response to Pipers’ request for information. Ernst & Young was unable to provide the specific information requested by Pipers, but rather addressed the enquiries in a general sense.
(c)Letter dated 27 January 2010 from Pipers to Ernst & Young requesting further information and again making no reference to the proceeding commenced against Ernst & Young.
(d)Letter dated 3 February 2010 from Ernst & Young to Pipers in response to Pipers’ request for further information providing that information.
(e)Letter dated 18 February 2010 from Pipers to Ernst & Young requesting further information. In that letter, threats were made to ‘seek instructions to commence proceedings for the return of … documents’ and to possibly making a cost application ‘in any relevant proceedings between you and your [sic] client’. Ernst & Young observed that this letter is obviously misleading in conveying the impression that legal proceedings had not been commenced.
(f)Letter dated 19 February 2010 from Ernst & Young to Pipers in response to Pipers’ request for further information providing some of the requested information.
(g)Letter dated 3 March 2010 from Pipers to Ernst & Young requesting further information. In that letter, Pipers again threatened Ernst & Young with a cost application ‘in any relevant proceedings between you and our clients’. Ernst & Young observed that this again conveys a misleading impression that legal proceedings had not been commenced.
(h)Letter dated 16 March 2010 from Pipers to Ernst & Young seeking confirmation in respect of instructions to accept service of any claim filed by MBD. In that letter, Pipers wrote ‘We understand you are aware of our client’s claim against your firm and would like us to forward any copies of process to you’. Ernst & Young observed that this statement was false and misleading. There was no basis for asserting that they had any understanding of a claim having been commenced against it. Indeed, Ernst & Young’s ignorance of the proceeding is confirmed by its letter in reply referred to in (i) below.
(i)Letter dated 17 March 2010 from Ernst & Young to Pipers in response to the Piper’s request for confirmation in respect of the service of any claim filed by MBD. In that letter, Ernst & Young wrote: ‘As a professional courtesy, we would expect copies of any process be forwarded to us, prior to filing with the Court’ (emphasis added).
On 5 March 2010, a directions hearing took place before Registrar Hedge. On that occasion, a solicitor from Pipers informed the Court that the Amended Documents had not yet been served and referred to further amendments of the Amended Documents and the removal of one of the parties as a respondent. The solicitor identified that arrangements for service were being finalised.
Registrar Hedge ordered that the matter be referred to a judge’s docket and that the first directions date on the Amended Application be altered from 5 March 2010 to 24 March 2010. Pursuant to the combined operation of O 4 r 11 and O 3 r 2, the last day for service of the Amended Documents was 16 March 2010.
On 16 March 2010, MBD’s solicitors wrote a letter to particular officers of Ernst & Young asking whether they had instructions to accept service. On 17 March 2010, those officers confirmed that they had instructions to accept service. Those officers were served with the Amended Documents on 17 March 2010.
On 17 March 2010, Pipers attempted to effect service upon Mr Madden (one of the partners of Andersen) in the following ways:
(a)Someone from or on behalf of Pipers attended the office of Mr Madden, spoke to Mr Madden’s personal assistant and requested that he see Mr Madden to serve upon him the Amended Documents. Mr Madden refused to see him. He then left the documents with Mr Madden’s personal assistant; and
(b)Pipers sent an email to Mr Madden enclosing the Amended Documents and requesting that Mr Madden accept service of the documents.
On 17 March 2010, Pipers had the Amended Documents delivered to APWM’s registered office.
On 19 March 2010, Ms Morrison was personally served with the Amended Documents.
On 22 March 2010, Pipers arranged for personal service of the Amended Documents on Mr Madden.
On 23 March 2010, Ms Morrison filed a notice of appearance.
On 24 March 2010, the proceedings were listed for directions before me. On that day:
(a)The solicitor for Mr Madden appeared conditionally and filed a notice of conditional appearance;
(b)Ernst & Young’s solicitor appeared and then later sought to ‘clarify’ that Ernst & Young appeared conditionally;
(c)A solicitor from Pipers advised the court that service had not been effected 5 days before 24 March 2010 and requested that the hearing date be altered for one week to 31 March 2010; and
(d)On being informed that MBD proposed to file a further amended application and a further amended statement of claim, I directed that any further amended application and further amended statement of claim be filed and served on the respondents by 31 March 2010 and directed that the proceedings be listed for directions on 21 April 2010. No objection to that course was made by any respondent.
On 31 March 2010, MBD filed and served on the respondents a further amended application and a further amended statement of claim.
The position with respect to service of the Amended Documents on each of the respondents may be summarised as follows:
(a)Ernst & Young was personally served on Wednesday, 17 March 2010, being one day after the last day permitted for service under O 4 r 11 and O 3 r 2.
(b)Mr Madden was personally served on Monday, 22 March 2010, however, on 17 March 2010, someone from or on behalf of Pipers left a copy of the Amended Documents with Mr Madden’s assistant after Mr Madden’s assistant refused to allow access to Mr Madden. On the same day, Pipers sent the Amended Documents by email to Mr Madden.
(c)On 17 March 2010 Pipers delivered the Amended Documents to APWM’s registered office. It has not entered an appearance.
(d)Ms Morrison was served on Friday, 19 March 2010, and has entered an appearance. According to MBD, the effect of entering an appearance is that Ms Morrison has waived the irregularity of late service: Robinson v Kuwait Liaison Office (1997) 145 ALR 68 at 75; Protec Pacific Pty Ltd v Steuler Industriewerke GmbH [2007] VSC 93 at [45].
THE MOTIONS
The Motion of MBD
The motion of MBD was for an order altering the initial directions date to 21 April 2010; in the alternative, an order pursuant to O 4 r 11 abridging the time for service of the Amended Documents until 22 March 2010 or alternatively dispensing with the requirement to serve the Amended Documents five days before the initial directions date pursuant to O 1 r 8.
The Motions of Ernst & Young and Mr Madden
The motions of Ernst & Young and Mr Madden are in common terms and seek a declaration that the originating process has not been duly served; in the alternative, that service be set aside; further, an order that the originating process be set aside; further, an order that the orders or decisions to extend or alter the initial directions date of the originating process be set aside pursuant to O 35 r 7 or reviewed pursuant to s 35A(5) and (6) of the Federal Court Act.
The application to set aside the Registrar’s orders altering the initial directions date pursuant to s 35A of the Federal Court Act is out of time. Such an application must be made, unless the Court otherwise orders, within 21 days of the date on which the power was exercised (O 46 r 7B(1)). The last occasion on which the Registrar exercised the power under O 4 r 12 was 5 March 2010. The amended notices of motion relying upon s 35A were not filed until 30 April 2010. On the other hand, the other basis upon which application to set aside the Registrar’s orders is made, namely, O 35 r 7, contains no relevant time limit.
The Motion of Ms Morrison
The motion of Ms Morrison was for leave to withdraw her notice of appearance filed on 22 March 2010; and an order requiring the filing and service of a notice of conditional appearance within two business days of the date of the order.
RELEVANT RULES AND LEGISLATION
Order 4 rule 11 provides that:
‘An application and affidavit or statement of claim shall, unless the Court otherwise orders, be served upon the respondent named in the application in accordance with Order 7, not less than five days before the date appointed for hearing pursuant to rule 8 or rule 9 of this Order.’
Order 4 rule 12 provides that:
‘If a date for hearing has been obtained or made, the Court may:
(a) alter the date for hearing to a later date; and
(b)authorise the legal practitioner for a party to make corresponding alterations in any copy for service of any application or notice.’
Order 4 rule 13 provides that:
‘(1)Where an application and affidavit or statement of claim have been served upon the respondent named in the application less than five days before the date for hearing endorsed in the application pursuant to Order 4, rule 8 or rule 9, the Court or Registrar may alter the date to a later date and may authorise the solicitor for a party to give notice to that respondent of that altered date for hearing by posting an altered copy of the application by registered post to the usual or last known place of business or abode of the respondent or to the place at which the application was served if appropriate.
(2)The Registrar may give authority by telephone or by some other means as the Registrar thinks fit.’
Sections 37M and 51 of the Federal Court Act provide:
‘37M (1) The overarching purpose of the civil practice and procedure provisions is to facilitate the just resolution of disputes:
(a) according to law; and
(b) as quickly, inexpensively and efficiently as possible.(2)Without limiting the generality of subsection (1), the overarching purpose includes the following objectives:
(a) the just determination of all proceedings before the Court;
(b)the efficient use of the judicial and administrative resources available for the purposes of the Court;
(c)the efficient disposal of the Court’s overall caseload;
(d)the disposal of all proceedings in a timely manner;
(e)the resolution of disputes at a cost that is proportionate to the importance and complexity of the matters in dispute.
(3)The civil practice and procedure provisions must be interpreted and applied, and any power conferred or duty imposed by them (including the power to make Rules of Court) must be exercised or carried out, in the way that best promotes the overarching purpose.
(4)The civil practice and procedure provisions are the following, so far as they apply in relation to civil proceedings:
(a) the Rules of Court made under this Act;
(b)any other provision made by or under this Act or any other Act with respect to the practice and procedure of the Court.
51(1) No proceedings in the Court are invalidated by a formal defect or an irregularity, unless the Court is of the opinion that substantial injustice has been caused by the defect or irregularity and that the injustice cannot be remedied by an order of the Court.
(2)The Court or a Judge may, on such conditions (if any) as the Court or Judge thinks fit, make an order declaring that the proceeding is not invalid by reason of a defect that it or he or she considers to be formal, or by reason of an irregularity.’
SUBMISSIONS OF THE PARTIES
Comprehensive written submissions were relied on by each of the parties in relation to their respective motions; by Ernst & Young and Mr Madden in opposition to MBD’s motion; by MBD in opposition to Ernst & Young and Mr Madden’s motions as well as to Ms Morrison’s motion, in addition to the extensive oral submissions that were made over two hearing days. No doubt significant resources have gone into the preparation of these submissions and by refraining from detailing them in these reasons with the particularity their respective merit may deserve, I should not be taken to have not considered them or to have not taken them into account. I most certainly have considered them and taken them into account and I am most grateful for counsel for the assistance they have provided me. But, at the end of the day, they have led me to the firm view that the submissions of Ernst & Young and Mr Madden are indeed predicated on a false premise of a kind indicated by MBD and noted at [4] of these reasons and, in those circumstances, and in the circumstance of this being an interlocutory hearing, I think it preferable that I immediately proceed to the reasons which underlay my view rather than by first canvassing the respective merits of the submissions. On the other hand, I accept that I have been persuaded by what appears to me to be considerable force in MBD’s submissions and, to the extent that I have, those submissions are reflected in these reasons.
ANALYSIS
Overview
Consistent with the provisions of s 37M of the Federal Court Act, the provisions of O 4 rr 11 – 13 are to be read and construed as ‘case management tools’ designed to enable the Court to manage and control a proceeding from the time it is commenced ‘quickly, inexpensively and efficiently as possible’, according to law. Its policy and purpose so understood, its construction and application is not to be trammelled by authorities decided with respect to the construction and application of the rules of other courts in this country which have a different policy and purpose, for example, to invalidate process which is not served within a period of months after it was filed. In this regard, it is not without significance that these latter rules speak in terms of months from the date of filing, whereas O 4 r 11 speaks of days before the first hearing date. History and context aside, the terms of O 4 r 11 are inconsistent with the terms of the rules considered in the authorities relied upon by Ernst & Young and Mr Madden; viewed in the full broadcast of history and the context provided by O 4 of the Rules, the terms of O 4 r 11 are totally inconsistent with such rules.
Principles governing the exercise of the discretion
(a) General guiding principles
Order 4 rr 11 – 13 contain two relevant discretionary powers:
(a)The power to shorten time for service on the respondents to less than five days before the first hearing (or directions) date (O 4 r 11); and
(b)the power to alter the first directions date to a later date (O 4 rr 12 – 13).
Order 4 rr 11 – 13 do not specify the matters that the Court must consider when exercising the discretion conferred by those sections.
The High Court has held that a provision conferring judicial power upon a court should be construed liberally without the imposition of limitations not found within the legislation: CDJ v VAJ (1998) 197 CLR 172 at [110] per McHugh, Gummow and Callinan JJ. Notwithstanding this, legislation conferring a judicial discretion, such as O 4 rr 11 – 13, is to be exercised in accordance with:
(a)The nature and purpose of the discretion: CDJ v VAJ at [108] per McHugh, Gummow and Callinan JJ; at [53] per Gaudron J.
(b)principles developed by judicial decision relating to the exercise of the discretion: Regie Nationale des Usines Renault SA v Zhang (2002) 210 CLR 491 at [22] per Gleeson CJ, Gaudron, McHugh, Gummow and Hayne JJ; and
(c)the overarching purpose contained in s 37M of the Federal Court Act.
The fundamental purpose of O 4 rr 11 – 13, the purpose which informs the application of the overarching purpose contained in s 37M of the Federal Court Act, is to ensure that the respondent has sufficient notice of the first directions date. The Court has adapted a mechanism so that the first directions date is capable of being altered cheaply and with a minimum of formality. The purpose of the Rules is not, as the respondents contend, to invalidate the originating process if service does not occur five days prior to the first directions date.
(b) Purpose and nature of the discretion - context of the rules
The purpose of these discretionary powers is not expressly stated in the Rules. Nor does there appear to be any detailed consideration of these powers by the Court. No other jurisdiction in Australia has rules similar in terms or structure.
However, assistance may be gained from examining:
(a)The context of these rules within the Rules; and
(b)comparable rules that existed at the time that O 4 rr 11 – 13 were originally introduced.
The Rules provide the relevant context to O 4 rr 11 – 13:
(a)An application must state a date for hearing (first directions hearing) at which the Court may hear the proceeding in whole or in part, or give directions for the further conduct of the proceeding (O 4 r 8);
(b)the application shall bear a note that (O 4 r 5):
(i)if there is no attendance before the Court by the respondent or a lawyer representing the respondent at the time and place stated in the application, the proceeding may be heard and an order may be made or judgment given against the respondent; and
(ii)before any attendance at that time the respondent must enter an appearance in the Registry;
(c)a number of obligations are imposed on the respondent by reference to the first directions hearing. The respondent:
(i)must enter an appearance before the date appointed for the first directions hearing (O 9 r 2);
(ii)who wishes to deny that he or she was a partner of a partnership must file an affidavit making that denial before the first directions hearing (O 42 r 6(1));
(iii)must attend the first directions hearing. If the respondent does not attend, the respondent is in default (O 35A r 2(c)). In such circumstances, the court may give judgment against the respondent (O 35A r 3(2));
(iv)must obtain all necessary directions at the first directions hearing with respect to any cross-claim that the respondent wishes to make against another party. If the respondent does not obtain such directions, the respondent must not cross-claim without the leave of the court (O 5 r 9); and
(v)must file a defence to a statement of claim within 7 days after the first directions hearing, unless the court otherwise directs (O 11 r 20).
In this context, the purpose of O 4 r 11, which requires service of the originating process five days before the first directions hearing, can be readily understood. O 4 r 11 is designed to ensure that the respondent has adequate notice of the directions hearing so that it can make arrangements to attend and can comply with the various requirements imposed on it. The discretion contained in O 4 r 11 to ‘otherwise order’ is for those occasions when the Court considers it appropriate to shorten the time for service; for example, in cases of urgency.
O 4 rr 12 and 13 complement r 11. Those rules address the possibility that the respondent has not been served five days before the first directions date and there is no reason to shorten the time for service. In those circumstances, those rules provide for a mechanism to alter the first directions date to a later date. The purpose of including this mechanism is to avoid unnecessary court appearances and to avoid prejudice to the respondent. If the respondent has not been served within the requisite time, it is unlikely that it will be in a position to meet its obligations as set out in [46(c)] above. To avoid this undesirable outcome, rr 12 and 13 provide a quick, efficient and informal mechanism to alter the first directions date.
These rules provide for the authorisation of a lawyer to alter the service copy of the originating process; it is not necessary for the lawyer to again approach the registry and obtain new sealed documents. Authorisation under r 13 may be by telephone. Rules 12 and 13 emphasise informality and avoidance of unnecessary steps and costs.
The Rules are noteworthy for the absence of a rule which provides that an application will be valid only if it is served within a particular time. The rules of the Supreme Court of every State and Territory in Australia contain such a rule:
(a)In the Supreme Courts of New South Wales, South Australia and Tasmania the rule is that an originating process is valid for service for six months after the date on which it was filed: Uniform Civil Procedure Rules 2005 (NSW), r 6.2(4)(a); Supreme Court Civil Rules 2006 (SA), r 39; Supreme Court Rules 2000 (Tas), r 107(1)(b).
(b) in the Supreme Courts of Victoria, West Australia, Queensland, Northern Territory and the ACT the rule is that an originating process is valid for service for one year after the date on which it was filed: Supreme Court (General Civil Procedure) Rules 2005 (Vic), r 5.12; Rules of the Supreme Court 1971 (WA), O 7 r 1; Uniform Civil Procedure Rules 1999 (Qld), r 24; Supreme Court Rules (NT), O 5 r 12; Court Procedure Rules 2006 (ACT), r 74.
The absence of such a rule in the Rules was observed by Morling J in Re BHP Trading Asia Ltd; BHP Materials Trading Pty Ltd trading as BHP International Group and John Lysaght (Australia) Ltd v Oceaname Shipping Limited [1991] FCA 438. In that case, Morling J was referred to comments made in another case where there was an obligation to serve a writ within 12 months. Relevantly at [28], Morling J observed that:
‘I do not think O 4, rule 12 should be given the same effect as a rule requiring a writ
to be served within twelve months after it is issued. There is no real equivalence in the special rule applicable to service of a writ in rem and the requirements of O 4, rule 12.’Relevantly at [22], his Honour said:
‘I think it would have been preferable for the matter to have been listed for a directions hearing on a reasonably proximate fixed date . . . But the rules did not require the plaintiffs' solicitors to ensure that that was done.’
The conclusion expressed by Morling J and quoted in [51] above is supported by reference to the Supreme Court Rules 1970 (NSW) upon which the Rules were based. It is well accepted that, when construing a statute, reference may be made to statutes in different jurisdictions if those statutes are sufficiently analogous: Pearce & Geddes, Statutory Interpretation in Australia (6th ed, LexisNexis Butterworths, 2006) at [3.36].
O 4 rr 11 – 13 are substantially the same as the former NSW Supreme Court Rules Pt 5 r 4A(3) and Pt 5 r 5A. Those NSW Supreme Court Rules commenced in 1970 and were partially repealed in 2003 and then completely repealed in 2005.
NSW Supreme Court Rule Pt 5 r 4A(3) provided that:
‘[T]he summons shall, unless the Court otherwise orders, be served not less than 5 days before the date of the appointment for hearing.’
NSW Supreme Court Rule Part 5 rule 5A provided that:
‘(1)Where an appointment for hearing has been obtained or made, the Court may alter the appointment to a later date and may authorise the solicitor for a party to make corresponding alterations in any copy for service of any summons or notice.
(2)The registrar may exercise the powers of the Court under subrule (1) and may give authority by telephone or by such other means as he thinks fit.’
An analysis of the NSW Supreme Court rules that were in force at the time reveals the functions of those rules adapted by this Court. The NSW Supreme Court Rules provided that:
(a) The plaintiff was not required to serve a statement of claim within a particular time;
(b) there were two means for a plaintiff to commence a hearing by summons:
(i)a summons for a hearing to be appointed in accordance with Pt 5 r 4B (this rule was not contained in the Rules). Under this procedure the plaintiff was under no obligation to serve a summons within a particular time; or
(ii)alternatively, a summons stating an appointment for hearing in accordance with Part 5 rule 4A. Under this procedure, the plaintiff was obliged to serve the summons 5 days before the date of the appointment for hearing but the plaintiff could contact the registry (pursuant to Pt 5 r 5A) and request that the registrar give authority to alter the first directions date to a later date by telephone;
(c)for the purposes of service, an originating process was valid for 1 year from the date of filing (Pt 7 r 7).
It can be seen that the outer limit of the plaintiff’s right to serve an originating process was the rule that made the originating process invalid for service for one year from the date of filing. That rule (Pt 7 r 7) applied equally regardless of which method the plaintiff chose to commence proceedings. Although Pt 5 r 4A required the summons to be served five days before the date of the appointment for hearing, that date could be quickly and informally altered to a later date.
What is important for present purposes is that Pt 5 r 4A was not designed to compel the plaintiff to serve the originating process within a particular time. That function was performed by Pt 7 r 7 which has, it may be assumed deliberately, no analogue in the Rules. The likely explanation is that proceedings in the Federal Court were intended to be conducted on a different model to any of the state supreme courts – proceedings were intended to be controlled by the Federal Court from commencement.
(c) Principles developed by judicial decisions
There are very few reported or even unreported judgments of applications made under O 4 r 12 – 13 or the NSW Supreme Court equivalent. The paucity of written judgments supports MBD’s contention that O 4 rr 12 – 13 contain a mechanism for the quick and cheap alteration of first directions dates. It is inconsistent with such a rule for the Court to produce a written judgment recording its decision to alter a first directions date.
MBD has been able to locate one written judgment where the Supreme Court equivalent of O 4 r 13 was considered. In Howey & Co Pty Ltd v Creative Projects International Pty Ltd [1973] 2 NSWLR 898, Mahoney J considered whether a summons had been served five days before the date of the appointment for hearing. Mahoney J decided that the summons had been served four days before the appointment for hearing. On that basis, Mahoney J altered the appointment for hearing to a date three weeks later and authorised the solicitor to make a corresponding alteration in a copy of the summons for service.
The case was reported because of the interpretation of the words ‘not less than five days before’. However, for the purposes of the present proceedings, it is noteworthy how perfunctorily Mahoney J dealt with the application to alter the hearing date. His Honour did not consider any reason that the plaintiff had for serving the summons late; his Honour appeared to alter the first directions date as a matter of course. Once again, this is consistent with MBD’s interpretation of the Rules.
None of the cases upon which the respondents rely (with the exception of Re BHP Trading Asia which has been already considered above) involve O 4 rr 12 – 13 or the NSW Supreme Court Rules equivalent. Most of the cases upon which the respondents rely involve court rules of the type set out in [50] above. That is, rules which provide that an originating process is not valid for service after a period of six months or one year.
Typically, in those cases, the plaintiff has failed to serve the originating process within the prescribed time and then applies for a ‘renewal’ of the originating process.
As observed by Morling J in Re BHP Trading Asia (see [51] above), those rules should not be equated with O 4 rr 11 – 13. With respect, Morling J was clearly right for at least two reasons.
First, the text of O 4 rr 11 – 13 is entirely different from the rules which provide that an originating process is not valid for service after a period of six months or one year. O 4 rr 11 – 13 do not state that the originating process is invalid for service if service is not carried out in accordance with those rules. Indeed, s 51 of the Federal Court Act provides that no proceedings in the Court are invalidated by an irregularity, unless the Court is of the opinion that substantial injustice has been caused by the irregularity and that the injustice cannot be remedied by an order of the Court.
Secondly, if O 4 r 11 was equated with the rules in other jurisdictions providing that an originating process was invalid for service after a prescribed period of time, the result would be that the Rules would be unduly harsh compared to other jurisdictions. This is because the time period until the first return date in the Federal Court is typically about one month. If the respondents’ interpretation were correct, an originating process would be set aside as invalid for service if service was not carried out in that time unless ‘good reason’ was shown. In every other jurisdiction in Australia, a plaintiff has at least six months (and in some jurisdictions one year) to serve an originating process. These matters provide context in which the relevant judicial discretion is exercised. It is inherently unlikely that the exercise of a discretion to alter hearing dates for a period less than the minimum period for validity of a writ in all other jurisdictions, is an inappropriate exercise of judicial discretion.
The result is that most of the cases relied upon by the respondents are not helpful in the construction of O 4 rr 11 – 13.
(d) Application of case management provisions in the Federal Court Act
Section 37M of the Federal Court Act commenced on 1 January 2010. That section provides that the rules of the court must be interpreted and carried out in the way that best promotes the ‘overarching purpose’. That purpose is to facilitate the just resolution of disputes according to law and as quickly, inexpensively and efficiently as possible.
MBD’s interpretation of O 4 rr 11 – 13 is consistent with this purpose. The powers in O 4 rr 11 – 13 should be exercised so that justice is achieved by giving the respondent sufficient time to prepare for the first directions hearing. In the event that the respondent has not been served, O 4 rr 12 – 13 provide for an inexpensive and efficient mechanism to alter the first directions date, while keeping the process at all times under the court’s supervision.
Any alteration of the first hearing date ought also to take into account the purpose of achieving a quick hearing. It was in this case – there were four extensions each of short duration, the last in terms which brought the matter before a judge. However, for the reasons already explained this is not the principal purpose of O 4 rr 11 – 13 and moreover ‘quick’ in this context should be understood by reference to [50] and [67] above.
(e) Conclusion
O 4 rule 11 is designed to ensure that the respondent has adequate notice of the directions hearing so that it can make arrangements to attend and can comply with the various requirements imposed on it. O 4 rr 12 and 13 are complementary to O 4 r 11. That is, those rules are designed to ensure that the respondent has adequate notice of the first directions hearing and also to avoid unnecessary court hearings. To achieve this aim, rr 12 and 13 provide for a simple, cheap means of altering the first directions hearing.
MBD’S Motion
Ernst & Young, Mr Madden, APWM and Ms Morrison were not personally served with the originating process within the time prescribed by O 4 r 11. They were each required to be served by:
(a)at the latest, 16 March 2010 if it is assumed that Registrar Hedge’s order amending the first directions date to 24 March 2010 remains valid; or
(b)at the earliest, 29 October 2009, if it is assumed that all of the registrar’s decisions to alter the first directions date are set aside.
Ernst & Young was personally served on 17 March 2010. Mr Madden was personally served on 22 March 2010 but on 17 March 2010 was informally served by email and by a copy left with his assistant. APWM was served on 17 March 2010 and Ms Morrison was served on 19 March 2010.
MBD’s motion filed on 31 May 2010 seeks orders altering the first directions date to 21 April 2010 (thereby moving the date for service to 13 April 2010) or shortening or dispensing with the requirement to serve the originating process not less than five days before the date appointed for hearing.
Order for abridgment of time for service
MBD seeks an order pursuant to O 4 r 11 or O 3 r 3 abridging the time for service of the Amended Documents until 22 March 2010 or alternatively dispensing with the requirement pursuant to O 1 r 8 to serve the originating process five days before the first directions date.
In accordance with the principles set out above, the principal consideration is whether the respondents would be prejudiced by an order abridging or dispensing with time for service of the Amended Documents.
I agree with MBD’s submission that the evidence demonstrates that the respondents would not be prejudiced by such an order:
(a)There is no doubt that Ernst & Young, Mr Madden and Ms Morrison all had sufficient time to engage lawyers to appear on their behalf. Ernst & Young, Mr Madden and Ms Morrison were all represented by lawyers on the first directions date on 24 March 2010. APWM, which may be an inactive company, was not represented and has still not entered an appearance;
(b)the only direction made on the first directions date was that the applicant file and serve any Further Amended Application and Further Amended Statement of Claim by 31 March 2010. None of the legal representatives of the respondents objected to those orders at that time. It is difficult to see what prejudice was caused by those orders;
(c)the respondents have not adduced any relevant evidence that they have suffered prejudice arising from the short time for service. Had there been any such prejudice, Ernst & Young and Mr Madden would have led such evidence in support of their motions. In the absence of such evidence, the inference is that no relevant prejudice has been suffered.
In their written submissions, the respondents suggest that it is ‘possible’ that MBD’s causes of action may have become time barred after the commencement of the proceedings in October 2009. None of the respondents have suggested any cogent basis for this possibility. In any event, such a possibility is not relevant to an application for abridgement of time for service. Time stopped in relation to any limitation period relevant to any cause of action upon filing of the Application. The proceedings remain valid. Abridgement or otherwise of time for service does not affect the validity of the Application; and
(d)any prejudice suffered arising out of the short service of the Amended Documents was remedied by the directions made on 24 March 2010. Those directions adjourned the matter until 21 April 2010 without requiring the respondents to take any further step. The respondents were thereby granted a substantial period of time to consider the originating process.
Order for alteration of the first directions date to 21 April 2010
As an alternative to an order pursuant to O 4 r 11, MBD seeks an order pursuant to O 4 rr 12 or 13 to alter the first directions date to 21 April 2010. In accordance with the principles set out above, the principal consideration is whether the respondents were prejudiced by receiving insufficient time prior to 24 March 2010 to prepare for the directions hearing.
For the reasons set out in [78] above, the respondents were not prejudiced by the short notice of the originating process. However, if they were, it would be appropriate to alter the first directions date to 21 April 2010.
It is to be noted that on 24 March 2010, Pipers informed the Court of the failure to serve the originating process and initially requested an alteration of the first directions date. The following exchange occurred between Pipers and the Court:
‘[Pipers]:We’re here today because service occurred. . .within the five day period before the first hearing date. We’re seeking – the plaintiffs are seeking an order today that the first hearing date be altered for one week to next Wednesday or whatever suits your Honour – 31 March.
His Honour: So the only order that you’re seeking this morning is that the matter be stood over till next Wednesday?
[Pipers]:That’s correct.’
For the reasons set out above, I accept MBD’s submission that the primary matter to be considered by the Court when deciding whether to make orders pursuant to O 4 rr 11 - 13 is whether the respondents have suffered prejudice by the late service of the originating process. In my view, they have not. I therefore propose to make an order pursuant to O 1 r 8 dispensing with the requirement of O 4 r 11 to serve the originating process five days before the first directions date.
Ernst & Young and Mr Madden’s Motions
No Utility
As indicated at [31] above, these motions are in common terms. Insofar as they seek a declaration that Ernst & Young/Mr Madden have not been duly served ([1]); an order setting aside service of the originating process ([2]); and an order that the orders or decisions to extend or alter the first directions dates be set aside ([3A]), I agree with MBD’s submission that there is no utility in making such a declaration and orders.
A court will not make orders and declarations which are devoid of utility. This principle was applied in JC Techforce Pty Ltd v Pearce (1996) 138 ALR 522 at 529. In that case Branson J held that an order to set aside an Anton Piller which had already been executed would have no utility. Branson J said at 529 - 530 that:
‘A significant factor telling against the exercise of the discretion in this case is the failure of the respondents to identify any utility which would result from the setting aside of the order.’
The same issue arises in the present case. There is no utility in making the orders sought in paras 1, 2 and 3A of the motions of Ernst & Young and Mr Madden. The principal complaint they have is with the Court’s orders to grant extensions of the first directions date in this proceeding. Assuming that they were to succeed in their attempt to set aside the orders altering the first directions date, what would be the result?
It would follow from such an order that the first directions date in this proceeding was the originally assigned date, 6 November 2009. MBD says this is a nonsense; there was no hearing on that date and it seems absurd to seek an order that brings about this fiction. I agree.
If 6 November 2009 was reinstated as the first directions date, it would mean that MBD did not comply with the requirement to serve the respondents five days before that time. The respondents argue that this is a basis for a declaration that the respondents have not been validly served.
Again, what would be the utility of making such a declaration? The respondents have now all been personally served with the originating process. In any event, the originating process has now been superseded by a Further Amended Application and Statement of Claim. These documents were filed and served in accordance with the orders of the Court made on 24 March 2010.
In the other jurisdictions identified in [50] above, a declaration that a respondent has not been duly served has utility. That is because the respondent cannot be served with a valid originating process after the prescribed period. There is no such provision in the Rules.
No basis for an order that the originating process be set aside
It is not clear whether Ernst & Young and Mr Madden are pressing the order in para 3 of their motions that the originating process be set aside. The submissions of Ernst & Young and Mr Madden do not identify how their complaints could justify such an order.
Section 51 of the Federal Court Act is relevant. Section 51(1) provides that:
‘No proceedings in the Court are invalidated by a formal defect or an irregularity, unless the Court is of opinion that substantial injustice has been caused by the defect or irregularity and that the injustice cannot be remedied by an order of the Court.’
The failure to serve an originating process within the prescribed time is a procedural irregularity: Protec Pacific at [45]. Ernst & Young and Mr Madden have not identified that they have been caused any substantial injustice which cannot be remedied. A general assertion that there is a possibility that there is a limitation issue which they cannot presently identify is neither relevant nor is it enough even if it were relevant.
Again, the Application is valid and time stopped running from its filing. The Court is not dealing with an application to ‘reinstate’ an invalid writ. In those circumstances, limitation periods may be relevant to the Court’s exercise of a discretion to reinstate the invalid writ. However, the issue before the Court concerns service of a valid originating process. The possible ‘limitation issue’ raised by Ernst & Young and Mr Madden has no role to play in the Court’s discretion.
Altering the first directions date until 24 March 2010 was a proper exercise of power
The order to alter the first directions date to 24 March 2010 was made on 5 March 2010. On that date, Registrar Hedge was told that the respondents had not been served. No relevant prejudice has been identified as arising from this alteration. In accordance with the principles set out above, these considerations were sufficient to allow an amendment of the directions date to 24 March 2010.
Further, as at 5 March 2010 service of the originating process had been delayed for only three months. This delay should be considered in the context of the provisions in other jurisdictions requiring service to be either six months or one year from the date of filing.
The earlier decisions of the Court to alter the first directions date were superseded by Registrar Hedge’s orders on 5 March 2010. Accordingly, they need not be considered. In any event, the same considerations apply.
Ernst & Young’s and Mr Madden’s motions must be dismissed.
Ms Morrison’s Motion
Ms Morrison accepted that if Ernst & Young’s and Mr Madden’s motions were dismissed, her motion must also be dismissed.
I certify that the preceding ninety-eight (98) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Edmonds. Associate:
Dated: 1 October 2010
MBD Management Pty Ltd v Butcher [2010] FCA 1071
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