Mervyn Jonathan Kitay as liquidator of ACN 009 009 072 Pty Ltd v CHAUCER Syndicates Ltd (CRN 184915) as managing agents for CHAUCER SYNDICATE 1084
[2021] WASC 450
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CIVIL
CITATION: MERVYN JONATHAN KITAY as liquidator of ACN 009 009 072 PTY LTD -v- CHAUCER SYNDICATES LTD (CRN 184915) as managing agents for CHAUCER SYNDICATE 1084 [2021] WASC 450
CORAM: ARCHER J
HEARD: 16 AUGUST 2021
DELIVERED : 16 DECEMBER 2021
FILE NO/S: CIV 1498 of 2020
BETWEEN: MERVYN JONATHAN KITAY as liquidator of ACN 009 009 072 PTY LTD
Plaintiff
AND
CHAUCER SYNDICATES LTD (CRN 184915) as managing agents for CHAUCER SYNDICATE 1084
Defendant
Catchwords:
Preliminary determination of issues - Proceedings against the insurer of a deregistered company under s 601AG Corporations Act - Brought in name of liquidator not company - Limitation period that applied to the underlying cause of action expired after deregistration of company - Is the claim time barred or does a different limitation period apply to an action under s 601AG - Can time be extended - 'Improper conduct' - 'Attributable to'
Legislation:
Corporations Act 2001 (Cth) s 601AG
Result:
Application for declarations dismissed
Category: B
Representation:
Counsel:
| Plaintiff | : | J Sexton SC & JM Healy |
| Defendant | : | JA Thornton |
Solicitors:
| Plaintiff | : | Barry Nilsson Lawyers (WA) |
| Defendant | : | Ashurst Australia |
Case(s) referred to in decision(s):
Allianz Australia Insurance Ltd v Mercer [2014] TASFC 3
Almario v Allianz Australia Workers Compensation (NSW) Insurance Ltd [2005] NSWCA 19; (2005) NSWLR 148
AME Hospitals Pty Ltd v Dixon [2015] WASCA 63; (2015) 48 WAR 139
Belgravia Nominees Pty Ltd v Lowe Pty Ltd [2017] WASCA 127; (2017) 51 WAR 341
Brisbane South Regional Health Authority v Taylor [1996] HCA 25; (1996) 186 CLR 541
Chalker v Clark [2008] VSCA 92
China Ocean Shipping Co Ltd v P S Chellaram & Co Ltd (1990) 28 NSWLR 354
Del Borrello v Australian Securities and Investments Commission [2008] WASC 48
Fairwater Pty Ltd v QBE Insurance (Australia) Ltd [2012] WASCA 270
Farah Constructions Pty Ltd v Say-Dee Pty Ltd [2007] HCA 22; (2007) 230 CLR 89
Kinzett v McCourt (1999) 46 NSWLR 32
Krstevska v ACN 010 505 012 Pty Ltd [2001] NSWSC 1093
Lowe Pty Ltd v Belgravia Nominees Pty Ltd [2020] WASCA 180
Mohammadi v Bethune [2018] WASCA 98
Murdock v Lipman (No 2) [2013] NSWSC 11
Murdock v Lipman [2012] NSWSC 983
Pagnon v Workcover Queensland [2000] QCA 421; (2001) 2 Qd R 492
Re Regional Planners Developments Co Pty Limited [2015] NSWSC 1996
Roncevich v Repatriation Commission [2005] HCA 40; (2005) 222 CLR 115
Sciacca v Langshaw Valuations Pty Ltd [2013] NSWSC 1285
Woodley v Woodley [2014] WASC 377
Young Investment Group Pty Ltd v QBE Insurance (Australia) Limited [2019] WASC 74
Table of Contents
Introduction
Issues
Issue 1 - Is the claim time barred?
Section 601AG
The framework in this case
The authorities leading to Mercer
Kinzett v McCourt
Pagnon
Almario
The facts
The NSW Court of Appeal decision
Murdock
Mercer
The facts
The Tasmanian Full Court decision
The plaintiff's submissions - 'plainly wrong'
The plaintiff's reply submissions - distinguish
Other cases cited by the parties
Del Borrello
Young Investment
The rationales behind limitation periods
Section 601AH orders
Conclusion on issue 1
Issue 2 - Can time be extended under section 38(2) of the Limitation Act?
Legal framework
First precondition - fraudulent or other improper conduct
Second precondition - attributable to
Effect of substitution order
The preconditions
Was there improper conduct?
The name of the insurer
The correct plaintiff
Was the failure attributable to the conduct?
Issue 3 - Should time be extended?
Conclusion
ARCHER J:
Introduction
The plaintiff, Mr Mervyn Kitay, is the liquidator of ACN 009 009 072 Pty Ltd (in liquidation) (formerly Pindan) (Pindan).
The plaintiff's underlying claim relates to the construction by Pindan of the Rosewood aged care facility in Leederville. Pindan engaged Infra Tech Projects Pty Ltd (Infra Tech) to install an impermeable barrier when the basement level was being constructed. The plaintiff alleges that Infra Tech breached its contract and duty of care in performing those works. The plaintiff alleges the breaches of contract occurred in April to July 2014. The plaintiff alleges that the defects caused by the alleged negligence became known in and around September 2014.
By s 13 of the Limitation Act 2005 (WA), an action against Infra Tech was required to be commenced within six years of the cause of action accruing. Although the contractual claims accrued earlier than the negligence claims, the plaintiff says that the claims are coextensive.[1] Consistently with this, the parties have acted on the basis that proceedings against Infra Tech could be commenced up to September 2020, but no later.[2]
[1] ts 54.
[2] See, for example, ts 41, 54 and 71.
Infra Tech was deregistered on 19 August 2018.
The defendant was Infra Tech's insurer at the time of the alleged breaches.
Section 601AG of the Corporations Act 2001 (Cth) provides:
A person may recover from the insurer of a company that is deregistered an amount that was payable to the company under an insurance contract if:
(a)the company had a liability to the person; and
(b)the insurance contract covered the liability immediately before deregistration.
Pindan went into liquidation on 3 December 2019 and the plaintiff was appointed as liquidator.
On 17 April 2020, the plaintiff commenced these proceedings seeking relief against the defendant pursuant to s 601AG.
It is now common ground that the plaintiff (the liquidator of Pindan) was not a 'person' to whom Infra Tech had any liability. The plaintiff accepts that the action should have been brought in Pindan's name. To address the problem, he seeks an order substituting Pindan as the plaintiff.
The defendant says that a substitution order should not be made because it would be pointless. A substitution order would not have retrospective effect.[3] By October 2020, the limitation periods that applied to Pindan's action against Infra Tech had elapsed. The defendant submits, therefore, that the claim would be time barred, and there would be no power to extend the time limit.
[3] Belgravia Nominees Pty Ltd v Lowe Pty Ltd [2017] WASCA 127; (2017) 51 WAR 341 (Belgravia 2017) [27].
The plaintiff's primary argument is that the time limit that applied to Pindan's underlying action against Infra Tech does not apply to the action against Infra Tech's insurer under s 601AG of the Corporations Act. He submits that, therefore, s 79(1) of the Judiciary Act 1903 (Cth) operates to pick up s 13 of the Limitation Act because the Corporations Act contains no limitation period.
Section 13 of the Limitation Act applies to actions which are not specifically dealt with elsewhere in the Act. It provides that actions must be brought within 6 years of the cause of action accruing.
The plaintiff submits that, as s 13 applies to an action under s 601AG, there would be a 6-year limitation period which commenced to run from the later of the date of deregistration of Infra Tech (being 19 August 2018) or, alternatively, from the date on which Infra Tech's insurer was identified (being April 2020). The plaintiff contends that, therefore, Pindan's claim is not time barred.
The defendant disputes this. The defendant submits that the plaintiff's contention is inconsistent with a decision of the Tasmanian Full Court in Allianz Australia Insurance Ltd v Mercer (Mercer).[4] The defendant submits that the decision in Mercer was correct (and certainly not plainly wrong).
[4] Allianz Australia Insurance Ltd v Mercer [2014] TASFC 3.
If I accept the plaintiff's construction, the claim would not be time barred. The plaintiff would then seek an order that Pindan be substituted as the plaintiff under O 18 r 6 of the Rules of the Supreme Court 1971 (WA). The defendant does not oppose this order being made if the claim is not time barred.
If I do not accept the plaintiff's construction, the plaintiff then seeks an extension to the limitation period under s 38(2) of the Limitation Act.
Section 38(2) gives the court the power to extend the time in which an action can be commenced if the court is satisfied that the failure to commence the action was attributable to fraudulent or other improper conduct of the defendant. The plaintiff alleges that the commencement of the action was delayed by the defendant's then solicitors refusing to identify the defendant's insurer and by its current solicitors failing to advise him that he was not the proper plaintiff sooner than they did.
The defendant submits that s 38(2) of the Limitation Act does not apply because neither of the preconditions to its operation have been met. First, the defendant submits that it did not engage in any improper conduct. Second, it submits that, in any event, the failure to bring the action in the name of the proper plaintiff before the limitation period expired was not attributable to anything it did.
If I find that I have the power to extend time under s 38(2) and decide that I should extend time, the plaintiff would again seek that Pindan be substituted as the plaintiff under O 18 r 6. The defendant would not oppose this order being made in those circumstances.
The plaintiff has two further 'fall-back' positions.
The first is that, if I find that the claim is time barred and that time cannot or should not be extended, the plaintiff would then seek an order nunc pro tunc that the cause of action be vested in the plaintiff as liquidator on and from 16 April 2020, under s 474 of the Corporations Act.
The defendant submits that, if the claim is time barred and an extension of time is not made, the court should not make that order, as this would affect the substantive rights of the parties.
The plaintiff contends that the order would not affect, in a practical sense, the substantive rights of the parties. The plaintiff further contends that, in any event, such an order can be made even where substantive rights are affected.
The plaintiff's final fall-back position is that, if he is unsuccessful on all of the above, he would seek orders under s 601AH of the Corporations Act. That section relevantly provides:
601AHReinstatement
Reinstatement by Court
…
(2)The Court may make an order that ASIC reinstate the registration of a company if:
(a) an application for reinstatement is made to the Court by:
(i) a person aggrieved by the deregistration; or
(ii) a former liquidator of the company; and
(b)the Court is satisfied that it is just that the company's registration be reinstated.
(3)If:
…
(b) the Court makes an order under subsection (2);
the Court may:
(c) validate anything done during the period:
(i)beginning when the company was deregistered; and
(ii)ending when the company's registration was reinstated; and
(d)make any other order it considers appropriate.
…
Effect of reinstatement
(5)If a company is reinstated, the company is taken to have continued in existence as if it had not been deregistered. A person who was a director of the company immediately before deregistration becomes a director again as from the time when ASIC or the Court reinstates the company. Any property of the company that is still vested in the Commonwealth or ASIC revests in the company. If the company held particular property subject to a security or other interest or claim, the company takes the property subject to that interest or claim.
…
The orders the plaintiff would seek under s 601AH are that Infra Tech's registration be reinstated and that, for the purposes of the limitation period, time not run during the period in which Infra Tech was deregistered. In these reasons, I will refer to these types of orders as 's 601AH orders'.
The parties consider that these issues should be determined before any trial. The parties contend that this will promote the attainment of the goals set out in O 1 r 4A and the objects set out in O 1 r 4B(1) of the Rules of the Supreme Court. I accept this contention.
Ordinarily, all issues arising on the pleadings are determined in the trial. However, I have the power under O 32 r 4 of the Rules of the Supreme Court to determine issues before any trial of the proceedings. I have had regard to the appropriate principles to be applied in assessing whether I should.[5] I am satisfied it is appropriate to determine these issues at this early stage.
[5] See Woodley v Woodley [2014] WASC 377 (Beech J, as his Honour then was) [4] - [11].
The parties proposed that I deal with these issues in two tranches. The first tranche was to involve all of the issues except the last one. That is, the parties proposed that the question of whether s 601AH orders should be made should be determined only if the plaintiff failed on the other issues.
I agreed to this course. However, during the hearing to deal with the first tranche of issues, it became apparent that the plaintiff's justification for submitting that the vesting order nunc pro tunc should be made was his assertion that, if it was not made, he would almost inevitably succeed in obtaining s 601AH orders.[6] If that is correct, the effect of the vesting order would not, in substance, create any new substantive right for the plaintiff or prejudice the defendant.
[6] See ts 14 - 15, 25, 40 and 80.
After some discussion, the parties agreed that the question of whether a vesting order should be made would be better dealt with in conjunction with the question relating to s 601AH orders.[7]
[7] ts 88 - 89. See also ts 79 - 80, 81 and 87.
Accordingly, these reasons deal with all but the last two fall-back positions.
Issues
The issues to be determined are:
1.Is the claim time barred? In particular, does the statutory limitation period that would have applied to a claim against Infra Tech apply to a claim under s 601AG against the defendant, Infra Tech's insurer? Or, does time only start to run from the date on which Infra Tech was deregistered (or the date on which Pindan discovered the identity of Infra Tech's insurer)? [If it is not time barred, the plaintiff seeks,[8] and the defendant does not oppose,[9] leave being granted to substitute Pindan as the plaintiff under O 18 r 6 of the Rules of the Supreme Court.]
2.If the claim is time barred, can time be extended under s 38(2) of the Limitation Act?
3.If time can be extended, should time be extended? [If time can and should be extended, the plaintiff seeks,[10] and the defendant does not oppose,[11] leave being granted to substitute Pindan as the plaintiff under O 18 r 6.]
[8] ts 77.
[9] ts 75
[10] ts 77.
[11] ts 75.
Issue 1 - Is the claim time barred?
Section 601AG
Section 601AG of the Corporations Act creates a new cause of action against an insurer to recover an amount that was payable to the deregistered company under an insurance contract. The new cause of action does not arise until the company having the benefit of the insurance is deregistered.[12]
[12] Young Investment Group Pty Ltd v QBE Insurance (Australia) Limited [2019] WASC 74 [3] - [4], citing Fairwater Pty Ltd v QBE Insurance (Australia) Ltd [2012] WASCA 270 [3] - [4].
In Young Investment Group Pty Ltd v QBE Insurance (Australia) Limited,[13] Quinlan CJ described the elements of the cause of action as follows:
1.The company is deregistered;
2.At the time of its deregistration, the company had a liability to the plaintiff; and
3.At the time of the company's deregistration, an insurance contract with the defendant covered the liability.
[13] Young Investment [5].
Any defence the insured may have had to the claim against the insured may be advanced to show that the insured had no liability to the plaintiff.[14]
[14] Young Investment [4], quoting Fairwater [4] (Pullin JA).
The Explanatory Memorandum to the Bill that introduced s 601AG relevantly said:[15]
15.22At present, a person wishing to make a claim against a deregistered company may need to apply to a court for reinstatement of the company in order to bring an action against it. The Bill enables a person to proceed directly against the insurer of a company that is deregistered, without seeking the company's reinstatement (Bill s 601AG). Comparable rights have previously been provided in other legislation, for example, section 6 of the Law Reform (Miscellaneous Provisions) Act 1946 (NSW).
15.23The Bill enables a third party to recover directly from the insurer of the deregistered company an amount payable under their contract of insurance if 2 preconditions are met:
(a)the deregistered company had a liability to the third party;
(b)the insurance contract covered that liability (Bill s 601AG).
The framework in this case
[15] Explanatory Memorandum to the Company Law Review Bill 1997 [15.22] and [15.23].
At the time of Infra Tech's deregistration, in August 2018, Pindan's claim was not time barred.
The effect of the plaintiff's submissions is that, as the claim was not time barred at that time, the insurer cannot rely on the limitation period that would have operated had Infra Tech not been deregistered. The plaintiff submits that, as s 601AG creates a new cause of action, the limitation period that applied to the cause of action against Infra Tech does not apply to the cause of action against the insurer.
Standing against the plaintiff's construction is the decision of the Full Court of Tasmania in Mercer. The plaintiff accepted that I am required to follow that decision unless I am convinced it is plainly wrong. However, he contends it is plainly wrong.[16] The defendant contends the decision is correct.
The authorities leading to Mercer
[16] But see the discussion below under the heading 'The plaintiff's reply submissions - distinguish'.
The parties referred to various authorities that dealt with s 601AG of the Corporations Act or with other provisions said to be analogous.
Unlike the decision in Mercer, none of these other authorities directly addressed the point raised by issue 1. I will, however, discuss them. I will do so in chronological order.
In a separate section, I will also briefly explain why I consider that two other cases cited by the parties were not useful.
Kinzett v McCourt
Kinzettv McCourt[17] is a decision of a five-member bench of the New South Wales Court of Appeal. Spigelman CJ, with whom Mason P, and Priestley and Handley JJA agreed, delivered the leading judgment. Although neither party cited this case in their written submissions, it was extensively referred to in the Mercer decision.[18] It was also cited in another case relied upon by both parties, Almario v Allianz Australia Workers Compensation (NSW) Insurance Ltd.[19]
[17] Kinzettv McCourt (1999) 46 NSWLR 32.
[18] Mercer [55] - [64].
[19] Almario v Allianz Australia Workers Compensation (NSW) Insurance Ltd [2005] NSWCA 19; (2005) NSWLR 148.
The Court in Kinzettconsidered s 6 of the Law Reform (Miscellaneous Provisions) Act 1946 (NSW) (NSW Law Reform Act). As will be seen, it has been said that s 601AG should be construed as operating in a way akin to s 6, in the sense that the insurer is put into the shoes of its insured and the parties are given the same rights and liabilities as if the action were against the insured.[20]
[20] See Almario [37] - [38] (Ipp JA, with whom Hodgson JA and Hunt AJA agreed).
Section 6 of the NSW Law Reform Act provided:[21]
[21] It has since been repealed.
6Amount of liability to be charge on insurance moneys payable against that liability
(1)If any person (hereinafter in this Part referred to as the insured) has, whether before or after the commencement of this Act, entered into a contract of insurance by which the person is indemnified against liability to pay any damages or compensation, the amount of the person's liability shall on the happening of the event giving rise to the claim for damages or compensation, and notwithstanding that the amount of such liability may not then have been determined, be a charge on all insurance moneys that are or may become payable in respect of that liability.
(2)If, on the happening of the event giving rise to any claim for damages or compensation as aforesaid, the insured (being a corporation) is being wound up, or if any subsequent winding-up of the insured (being a corporation) is deemed to have commenced not later than the happening of that event, the provisions of subsection (1) shall apply notwithstanding the winding-up.
(3)Every charge created by this section shall have priority over all other charges affecting the said insurance moneys, and where the same insurance moneys are subject to two or more charges by virtue of the Part those charges shall have priority between themselves in the order of the dates of the events out of which the liability arose, or, if such charges arise out of events happening on the same date, they shall rank equally between themselves.
(4)Every such charge as aforesaid shall be enforceable by way of an action against the insurer in the same way and in the same court as if the action were an action to recover damages or compensation from the insured; and in respect of any such action and of the judgment given therein the parties shall, to the extent of the charge, have the same rights and liabilities, and the court shall have the same powers, as if the action were against the insured:
Provided that, except where the provisions of subsection (2) apply, no such action shall be commenced in any court except with the leave of that court. Leave shall not be granted in any case where the court is satisfied that the insurer is entitled under the terms of the contract of insurance to disclaim liability, and that any proceedings, including arbitration proceedings, necessary to establish that the insurer is so entitled to disclaim, have been taken.
(5)Such an action may be brought although judgment has been already recovered against the insured for damages or compensation in respect of the same matter.
(6)Any payment made by the insurer under the contract of insurance without actual notice of the existence of any such charge shall to the extent of that payment be a valid discharge to the insurer, notwithstanding anything in this Part contained.
(7)No insurer shall be liable under this Part for any greater sum than that fixed by the contract of insurance between himself and the insured.
(8)Nothing in this section shall affect the operation of any of the provisions of the Workers Compensation Act 1987 or the Motor Vehicles (Third Party Insurance) Act 1942 ...
In Kinzett, the Court needed to determine which section of the Limitation Act 1969 (NSW) (NSW Limitation Act) applied to an action against the insurer. It also needed to determine when time began to run in relation to an action against the insurer.
Spigelman CJ noted that it had been held that s 6 created a new right with an associated remedy to enforce it.[22]
[22] Kinzett[51].
In relation to the first issue, the limitation provisions that applied to the underlying cause of action (being the insured's liability to pay damages or compensation, as referred to in s 6(1)), were ss 14(1)(a) and (b) of the NSW Limitation Act,[23] with a power to extend time elsewhere in the Act. Spigelman CJ concluded that the same limitation period applied in an action against the insurer.[24]
[23] Relating to causes of action founded on contract and tort, respectively.
[24] Kinzett[54] - [59].
In relation to the second issue, there was a conflict of authority. One line of authority said time began from the date of the event which gave rise to the claim against the insured. The other said it ran from the date of the grant of leave to proceed against the insurer.[25]
[25] Kinzett[61].
Spigelman CJ concluded that the former was correct[26] (although rejected another aspect of the construction in the first line of authority[27]).
[26] Kinzett[81] - [82], [91] and [109].
[27] See Kinzett[88]. The rejected aspect is not relevant to the issues in this case.
Spigelman CJ summarised his construction as follows (formatting altered):[28]
This Court should now decide that the statutory remedy under s 6(4) is, subject only to other subsections, assimilated to a cause of action against an insured, so that:
1.Section 14(1)(a) and s 14(1)(b) of the Limitation Act applies to the proceedings.
2.Time commences to run at the same time as the cause of action in tort or contract accrues to the claimant against the insured.
3.Time ceases to run under s 14(1)(a) or s 14(1)(b) when proceedings are brought against the insured or the insurer, whichever comes first.
[28] Kinzett[107] - [110].
Three of the other four members of the Court agreed with Spigelman CJ's reasons on this issue.[29]
[29] Mason P and Priestley and Handley JJA, with Meagher JA dissenting.
This decision is plainly contrary to the plaintiff's construction. The plaintiff submitted, however, that the legislation under consideration in Kinzett was significantly different to s 601AG of the Corporations Act.
The plaintiff's submissions on this were very brief.[30] He submitted that the words 'as if' in s 6(4) was language that required the action to be run as if it was the underlying contract or tort claim. He submitted that the text in s 601AG was quite different and was much closer to s 186 of the Queensland legislation, which was the subject of a Queensland decision,[31] discussed next.
[30] The plaintiff did not refer to this case in his written submissions. In oral submissions, the plaintiff discussed it at ts 17 - 18.
[31] Pagnon v Workcover Queensland [2000] QCA 421; (2001) 2 Qd R 492.
I accept that the language in s 6(4) was different to the language in s 601AG. Nevertheless, the provisions are comparable. As will be seen, in Almario, Ipp JA, with whom Hodgson JA and Hunt AJA agreed, said that s 601AG was akin to s 6, that the rights conferred by s 601AG were comparable to the rights provided by s 6,[32] and that the basic concept underlying the two different statutory provisions was the same. Ipp JA said that s 601AG should be construed so that the opening words read (emphasis added): 'A person may recover from the insurer of a company that is de-registered (as if the insurer was the deregistered company) an amount that was payable to the company under the insurance contract'.[33] I respectfully agree.
[32] See also the Explanatory Memorandum set out earlier.
[33] See the discussion below of Almario.
Finally, the plaintiff submitted that the words 'as if' created a critical distinction between s 6 and s 601AG because the latter creates a new and separate cause of action. The plaintiff submitted that a s 6 action was 'as if' it was an action in contract and tort, while a s 601AG action was a direct recovery on an insurance policy because there was a liability at the time of deregistration.[34] I do not accept there is such a distinction. Section 6 also created a new and separate cause of action. It created a charge on insurance moneys enforceable against the insurer, subject to the leave of the court. The court could not give leave where the insurer was entitled to disclaim liability.[35]
Pagnon
[34] See ts 18 and 25.
[35] See s 6(4) and Kinzett [51] - [52] and [106].
In Pagnon v Workcover Queensland,[36] the Queensland Court of Appeal considered s 186 of the Workers Compensation Act 1990 (Qld). It provided:[37]
[36] Pagnon v Workcover Queensland [2000] QCA 421; (2001) 2 Qd R 492.
[37] It has since been repealed.
186. (1)If a worker suffers injury in respect of which compensation under this Act is payable in circumstances conferring a right of action for damages in respect of the injury against the worker's employer who -
(a) has died; or
(b) being a corporation, has ceased to exist; or
(c) cannot be served with process;
a person who might have obtained judgment for damages against the employer in respect of the injury may recover by action against the board, as if the board were the employer, the sum that would have been payable by way of damages to that person by the board under section 183(1) had judgment been given against the employer.
(2)The entitlement conferred by subsection (1) cannot be exercised by court proceedings unless the person seeking the damages proves that notice of the person's claim for damages and a short statement of the grounds thereof were given to the board -
(a)as soon as practicable after the person became aware of the fact giving rise to the entitlement; or
(b)at such time afterwards that the board would not be prejudiced by want of such notice and statement.
(3)Subsection (1) does not confer on a person any right or advantage that the person would not have had if action had been brought or pursued against the employer of the worker who has suffered injury.
The question before the Court was whether the limitation period that applied to the plaintiff's action in negligence for damages for personal injury (imposed by s 11 of the Limitation of Actions Act 1974 (Qld)) applied to the plaintiff's claim in the action instituted against the board.[38]
[38] The board referred to in s 186 was 'the Workers Compensation Board of Queensland', whose successor in title was the defendant in the action - see Pagnon [3].
The Court held that an action under s 186 was required to be commenced within the time period imposed by s 11 of the Limitation of Actions Act. However, it held that the time period only began to run when the cause of action under s 186 had accrued, and not when the time period began to run for an action against the employer.
The Court held that s 186 created a new cause of action that did not accrue until all the requirements for bringing the action were complied with.[39] McPherson JA, with whom Thomas JA agreed, and with whom Muir J[40] agreed on this point, said:[41]
The right conferred is a new right or cause of action against the substituted defendant and not simply a continuation of the existing cause of action against the original wrongdoer subject to the unexpired duration of the limitation period fixed by s 11 of the Limitation of Actions Act 1974.
[39] Pagnon [3].
[40] As his Honour then was.
[41] Pagnon [7].
McPherson JA then turned to consider the effect and function of s 186(3) of the Act. His Honour said:[42]
The first impression derived from reading s 186(3) is that it may well have been primarily intended to ensure that dependants of a deceased worker who suffered injury are to be in no better position than they would have been if their action had been brought against the employer rather than the board. It is, however, plainly capable of a wider operation. The defendant contends that its effect is that a plaintiff who brings action against the board pursuant to s 186(1) is subject to the same limitation period as applied, or would have applied, to an action if brought against the employer. Otherwise, it is said, s 186(1) would 'confer a right or advantage' that the plaintiff would not have had in the action against his employer. A difficulty with this interpretation is, however, that it is not self-evident that immunity from s 11 of the Limitation of Actions Act is a 'right or advantage' that derived under s 186(1). A plaintiff who sues under s 186(1) may still be liable to be defeated by a defence under s 11 of the Limitation of Actions Act after the lapse of three years from the date on which the cause of action against the board accrued under s 186(1). It is true that, if only because of the need to give notice under s 186(2), the date of accrual of the statutory cause of action under s 186(1) would invariably be later than that of the common law action; but that is an inevitable incident of creating or characterising it as a new cause of action. It is a consequence of imposing the additional requirement of notice under s 186(1) rather than of anything in subsection (2) of s 186. It is, moreover, in my opinion a right or advantage which, quite apart from s 186, the plaintiff already enjoyed and enjoys in an action for damages against a corporate employee that has been dissolved [his Honour went on to refer, among other things, to s 601AH of the Corporations Act.[43]]
[42] Pagnon [8].
[43] Pagnon [8] - [18].
His Honour said that the requirement to comply with the obligation in s 186(2) afforded adequate protection to the legitimate interests of the board.[44] His Honour concluded that s 186(1) could not, within the meaning of s 186(3), be said to confer on the plaintiff in the case a right or advantage that he would not have had if he had brought or pursued an action against his employer. This was because he could have applied for and obtained s 601AH orders.[45]
[44] Pagnon [17].
[45] Pagnon [18].
Considered as a whole, this case supports the plaintiff's construction. However, I do not accept the plaintiff's submission that s 186 of the Queensland Act was more similar to s 601AG of the Corporations Act than the provision under consideration in Kinzett, being s 6 of the NSW Law Reform Act. In particular, s 186(2) required a claimant to give notice to the board of his or her claim for damages and a statement of the grounds 'as soon as practicable after the person became aware of the fact giving rise to the entitlement or at such time afterwards that the board would not be prejudiced by want of such notice and statement'. MacPherson JA expressly referred to this provision as affording adequate protection to the legitimate interests of the board. There is nothing comparable to that requirement in s 601AG.
I also note that Kinzett, a decision of a five-member bench[46] of the New South Wales Court of Appeal, was not cited by Queensland Court of Appeal in Pagnon.
Almario
The facts
[46] With one dissentient.
Mr Almario sought to make a claim in respect of injuries he allegedly suffered whilst employed as a labourer by a corporation. At the relevant time, Allianz was the employer's workers' compensation and common law extension insurer.
Section 151D(2) of the Workers Compensation Act 1987 (NSW) (NSW Workers Compensation Act) provides, in effect, that a worker is not entitled to commence court proceedings against an employer for damages more than three years after the date of an injury, except with the leave of the court. In Mr Almario's case, that three-year time limit had expired by December 1995.
In 1999, the employer corporation was deregistered.
In June 2001, Mr Almario commenced proceedings (relying upon s 601AG of the Corporations Act) against Allianz. Balla DCJ dismissed Mr Almario's application for an extension of time on the basis that the power to extend time under s 151D(2) did not apply in actions against the employer's insurer.
In February 2004 Allianz applied to strike out Mr Almario's statement of claim on the ground that the second element of s 601AG was not met: namely that, at the time of its deregistration, the company had a liability to the plaintiff. Allianz argued that the element was not met because the three-year time limit had expired in December 1995, long before the employer's deregistration in 1999. Walmsley DCJ agreed.
Mr Almario appealed against the decisions of both Balla DCJ and Walmsely DCJ.
The NSW Court of Appeal decision
Ipp JA, with whom Hodgson JA and Hunt AJA agreed, noted that, on the findings made at first instance, Mr Almario 'fell between two stools'. The insurer was entitled to rely on a limitation defence that would have been available to the insured, despite the insured being deregistered, yet Mr Almario was precluded from applying for an extension of time that he could have sought against the insured, because the insured had been deregistered. His Honour observed that 'the anomaly of this situation is obvious'.[47]
[47] Almario [16].
Before turning to consider the issues that arose, his Honour noted that Walmsley DCJ's finding that the limitation period for s 601AG actions begins to run on deregistration of the company had not been challenged in the appeal.[48]
[48] Almario [15].
In relation to the issues, Ipp JA said (underlining added):[49]
[49] Almario [34] - [43]. See also [46].
34.In my view, the purpose of the legislature in inserting s 601AG in the Corporations Act is to require the insurer of a deregistered company to stand in the shoes of the company to the extent necessary to allow creditors of the company to recover from the insurer whatever amounts they were entitled, by force of law, to recover from the company had it not been deregistered. This purpose is discernible from the section as a whole and the Explanatory Memorandum. The notion that a person may 'recover' from the insurer of a deregistered company 'an amount that was payable' supports this inference. These words convey the idea of a creditor being entitled to recover that which was payable to him or her. Paragraph (a) of s 601AG is not inconsistent with this idea.
35.In accord with such a purpose, an insurer would be able to raise against a claimant under s 601AG whatever defences would have been open to the company - subject to any qualification that might, in law, attach to those defences. So that if a statute caused a creditor's remedy to be time barred, but nevertheless provided that the bar could be relaxed by affording the creditor the opportunity of applying for the time to be extended, any right the insurer would have to rely on the time bar would be subject to the creditor being able to apply (as against the insurer) for an extension of the time period.
36.On this basis, it would be open to the insurer, in a claim against it under s 601AG, to raise the defence that the three-year period under s 151D(2) of the Workers Compensation Act had expired. But, as that defence is subject to the right of the person claiming to seek the Court's leave to extend the three-year period, that person would have the right to apply to the Court for leave to extend the time as against the insurer, as if the insurer was the employer of the person concerned.
37.In this sense, s 601AG would be construed as operating in a way akin to s 6 of the Law Reform (Miscellaneous Provisions) Act. Section 6(1) of that Act imposes a charge on all insurance monies that may become payable in respect of a liability that arises from a contract of insurance indemnifying a person against liability to pay any damages or compensation. Section 6(4) provides:
Every such charge as aforesaid shall be enforceable by way of an action against the insurer in the same way and in the same court as if the action were an action to recover damages or compensation from the insured; and in respect of any such action and of the judgment given therein the party shall, to the extent of the charge, have the same rights and liabilities, and the court shall have the same powers, as if the action were against the insured: …
38.Spigelman CJ observed in Kinzett v McCourt (1999) 46 NSWLR 32 at 49 [89]: '… the statutory objective [of s 6] is to assimilate proceedings against the insurer to those against the insured.' In Ratcliffe v V S & B Border Homes Limited (1987) 9 NSWLR 390 at 397, Hunt J said: '… It is made clear [by s 6] that the insurer is put into the shoes of its insured by the terms of s 6(4), which equate the action to enforce the charge with an action to recover damages from the insured and in respect of which the parties are given the same rights and liabilities as if the action were against the insured.' Sheller JA referred to this analysis with approval in New South Wales Medical Defence Union Limited v Crawford (1993) 31 NSWLR 469 at 529 - 530, and Spigelman CJ in Kinzett v McCourt (at 48) agreed with his Honour's observations in this respect.
39.Paragraph 15.22 of the Explanatory Memorandum accompanying the Company Law Review Bill 1997 (quoted above) described the rights conferred by s 601AG as '[c]omparable' to the rights provided by s 6.
40.I accept that the wording of s 601AG differs in significant respects from s 6. In particular, the phrase 'as if', in s 6(4) is not used in s 601AG. Nevertheless, the basic concept underlying the two different statutory provisions is the same, as the Explanatory Memorandum correctly recognises.
41.In my view, s 601AG should not be textually construed. Rather, it should be construed so that the opening words read: 'A person may recover from the insurer of a company that is de-registered (as if the insurer was the deregistered company) an amount that was payable to the company under the insurance contract …'.
42.On such a construction, it would be open to the insurer to rely on the three-year limit in s 151D(2). It would also be open to a person claiming under s 601AG to seek from the court (as against the insured), in an application under s 151D(2), an extension of the three-year period referred to in the latter section.
43.Construing s 601AG in this way accords with a purposive construction of the statute. Such a construction avoids the anomalies to which I have referred and gives rise to an equitable result. A textual construction of s 601AG, not encompassing the assimilation of other legislation that provides for the time barring of remedies together with a means of extending the time limits in question, would result in the anomalies I have described and the concomitant inequities.
Hodgson JA added:[50]
[U]nder the purposive construction proposed by Ipp JA, s 601AG of the Corporations Act in effect deems the insurer to be the employer for the purposes of s 151D(2) of the Workers Compensation Act. I am inclined to think also that, in the event that there is recovery from the insurer under s 601AG on the basis that money was payable to the company because the company was liable as a tortfeasor in respect of damage, s 601AG would in effect deem the insurer to be a tortfeasor liable in respect of damage within the meaning of s 5 of the Law Reform (Miscellaneous Provisions) Act 1946, so as to enable it to recover contribution in an appropriate case.
[50] Almario [2].
The Court of Appeal upheld the appeals against both first instance judges and set aside the orders made. It ordered that Mr Almario's application for an extension of time be remitted to the District Court of New South Wales for rehearing.
I will say more about the decision in Almario when later discussing Mercer.
Murdock
In Murdock v Lipman,[51] McCallum J was dealing with, among other things, whether she had the power to extend the limitation period in relation to a s 601AG action.
[51] Murdock v Lipman [2012] NSWSC 983.
In that case, Mr Murdock had a claim arising from injuries he allegedly suffered at his workplace on 26 June 2002. The applicable limitation period required the action to be brought within three years of that date (the first bar).[52] However, the court had the power to extend the limitation period for up to five years (the second bar) under s 60C of the NSW Limitation Act. There was no power to extend time after the second bar.[53]
[52] See s 18A of the Limitation Act 1969 (NSW).
[53] Murdock [9].
The first bar expired on 26 June 2005. The second expired on 26 June 2010.
On 8 June 2010, after the first bar expired, but before the second bar expired, Mr Murdock brought an action against the head contractor (Lipman) as the first defendant and one of its subcontractors (HNH) as the second defendant.
HNH had been deregistered on 10 June 2007. On 25 October 2010, Australis, the insurer of HNH, was substituted (by consent) as the second defendant, with s 601AG of the Corporations Act in mind.[54]
[54] An issue was raised in the proceedings as to the form of the substitution order, but it is not material here. See Murdock [35] - [43].
Subsequently, Mr Murdock sought to pursue a claim against his employer at the time of the accident. His employer had been deregistered, so he sought to make a claim against its insurer (GBS) under s 601AG.
There were two applications before McCallum J. In the first, Mr Murdock sought an extension of the limitation period for bringing the claims against the first and second defendants. In the second, Mr Murdock sought leave to commence proceedings out of time against GBS. It was assumed by the parties (and the Court) that Mr Murdock was out of time against GBS because, by s 151(2) of the NSW Workers Compensation Act, he was out of time to bring an action against his employer.
In dealing with the applications as they affected the two insurers (Australis and GBS), McCallum J considered s 601AG.
Her Honour referred to s 601AG of the Corporations Act as 'a species of statutory subrogation, in which a person in the position of the plaintiff is entitled to be subrogated to the rights of the deregistered company as against its insurer'.[55]
[55] Murdock [46].
After summarising the decision in Almario, her Honour said:[56]
The decision in Almario thus acknowledged some bifurcation in the position of an insurer responding to a claim under s 601AG. In its own right the insurer is responding to a claim for indemnity under the contract of insurance. For that purpose, the plaintiff is subrogated (by the statute) to the rights of the deregistered insured and must establish the insured's entitlement to cover under the insurance contract. However, the insurer also stands, in effect, as the keeper of the cause of action in tort against its deregistered insured. For that purpose, the insurer is subrogated to the rights of the deregistered insured in defending the claim at the suit of the plaintiff. An insurer can adopt that position by consent, if it accepts indemnity. Alternatively, it can be substituted for the deregistered company by order of the court, preserving its right to contest indemnity.
…
As explained by Ipp JA in Almario at [34], the purpose of inserting s 601AG was to require the insurer of a deregistered company to stand in the shoes of the company to the extent necessary to allow 'creditors' to recover. The use of the term 'creditors' in that passage of the judgment requires some analysis. In the present context, the plaintiff is no more than a prospective, contingent creditor but that is no impediment to recovery under s 601AG.
In inserting that provision, the legislature created a new statutory cause of action. However, it does not follow that that is the only characterisation or even a correct characterisation of a claim against an insurer that has been substituted for the deregistered company as a defendant in proceedings for damages for personal injury, particularly where, as occurred here, the substitution order was made by consent.
[56] Murdock [54], [59] - [60].
In relation to its application to the case against Australis, her Honour referred to the second and third elements of s 601AG, which she referred to as the first and second condition respectively.[57] In relation to the first condition (that the company had a liability to the plaintiff at the time of its deregistration), her Honour said:[58]
In the present case, the satisfaction of the first condition turns on the determination of a claim for damages for personal injury against the deregistered company. One of the objects of s 601AG is to enable a person in Mr Murdock's position to have that claim determined without having to take the step of restoring the company to the register. The mechanism by which that is achieved is by requiring the insurer to stand in the shoes of the deregistered company to defend that claim. To that extent, the claim is one for damages for personal injury in which the insurer is subrogated to the rights of [the] insured. That is the capacity in which Australis stands in defending the present claim.
[57] Murdock [61].
[58] Murdock [62].
McCallum J then dealt with the applications before her Honour. It is unnecessary to detail this analysis. It is summarised in Mercer,[59] and the plaintiff in this case did not suggest that summary was inaccurate. In short, her Honour approached the issues on the basis that the limitation period that applied to the underlying cause of action applied to the actions under s 601AG.[60] That is, her Honour dealt with the matter on the basis that a separate and distinct limitation period did not apply to the action under s 601AG.
[59] See Mercer at [109] - [122].
[60] In relation to Australis, see in particular Murdock [69] and [80], and, in relation to GBS, it is implicit in [97].
Ultimately, her Honour made an order under s 60C of the NSW Limitation Act, extending the limitation period that applied to Mr Murdock's claim against Australis.[61]
[61] Implicit in Murdock [70] and [90].
In relation to the claim against GBS, her Honour considered whether an extension of time should be granted under s 151(2) of the NSW Workers Compensation Act - the provision that applied to the underlying cause of action against the employer.[62] An issue relating to a potential cross claim, on which the parties had not been heard, meant that her Honour did not make a final order in relation to GBS at that time.[63] Her Honour subsequently did, granting leave to the plaintiff under s 151(2) to commence the action against GBS out of time.[64]
Mercer
The facts
[62] See Murdock [93] and [97].
[63] Murdock [97], [121] and [123].
[64] Murdock v Lipman(No 2)[2013] NSWSC 11.
Mr Mercer had been injured in the course of his employment in March 2008. On 5 March 2010, acting in accordance with s 138AB of the Workers Rehabilitation and Compensation Act1988 (Tas), he lodged an election to claim damages against his employer.
On 26 January 2011, his employer was deregistered, and on 21 February 2012, Mr Mercer instituted s 601AG proceedings against his employer's insurer, Allianz.
At the relevant time, s 5A(3) of the Limitation Act 1974 (Tas) (the Tasmanian Limitation Act) provided that an action for damages for negligence, nuisance or breach of duty involving claims for damages for personal injuries, must not be brought after the expiration of one of two periods of limitation, whichever is the earlier. In Mr Mercer's case, the period that would have applied was '3 years commencing on the date of discoverability'. At the relevant time, the Tasmanian Limitation Act did not contain any provision enabling a limitation period to be extended, nor for leave to be granted for an action to be brought after it had expired.
Allianz pleaded that the date of discoverability was 3 September 2008, and that the plaintiff's claim was therefore statute barred. Mr Mercer contended that s 5A(3) of the Tasmanian Limitation Act did not apply to the s 601AG action.
Assuming the date of discoverability was as alleged (3 September 2008), Mr Mercer was still within the three-year time limit in s 5A(3) at the time of his employer's deregistration (26 January 2011). However, more than three years had elapsed when he sued Allianz as the insurer in February 2012.
The trial judge found that, as the time at which the employer was deregistered was within the three-year period, the only time limit that applied to the s 601AG action against the insurer was the six-year time limit under s 4(1)(d) of the Tasmanian Limitation Act, a time limit that applied to actions to recover a sum under an enactment.
The insurer then successfully appealed to the Full Court.
The Tasmanian Full Court decision
Porter J, with whom Tennant and Wood JJ agreed, engaged in a detailed analysis of Almario and cases involving legislation similar to s 601AG of the Corporations Act.
This included a detailed analysis of the New South Wales Court of Appeal's decision in Kinzett and its interpretation of s 6 of the NSW Law Reform Act.[65] His Honour also analysed Pagnon[66] and Murdock.[67]
[65] Mercer [55] - [64].
[66] Mercer [65] - [73].
[67] Mercer [109] - [122].
In the course of his Honour's analysis, Porter J considered other provisions of the Corporations Act, including the power in s 601AH to reinstate a deregistered company and make an order that the period of deregistration not be counted for the purposes of a limitation period. His Honour considered the legislative purpose of s 601AG (and s 601AH). His Honour considered the consequences of the competing constructions.
Porter J concluded that the proper construction of s 601AG was not free of difficulty.[68]
[68] Mercer [150].
His Honour accepted that s 601AG creates a new cause of action which arises on deregistration. His Honour said that the issue was what limitation period applied to that action.[69]
[69] Mercer [151].
Porter J set out the principles he drew from the authorities he had previously analysed.[70] I will later say more about his Honour's discussion of Almario, when dealing with the plaintiff's submissions.
[70] Mercer [153] and continuing.
His Honour drew from the authorities, among other things, that a purposive approach should be adopted in the interpretation of s 601AG.[71] His Honour said:[72]
[Section 601AG] operates so that the insurer stands, in effect, as the keeper of the cause of action against the deregistered insured, and for that purpose the insurer is subrogated to the rights of the deregistered insured. At the same time, a plaintiff is subrogated to the rights of the deregistered insured.
[71] Mercer [153] - [156].
[72] Mercer [156].
Porter J referred to s 6 of the NSW Law Reform Act, noting that it (and statutory equivalents) had been interpreted as not enhancing the plaintiff's position at the insurer's expense, nor augmenting an insurer's liability.
Porter J referred to the five-member bench decision in Kinzett, also referred to by Ipp JA in Almario.[73] Porter J said:[74]
In Kinzett, Spigelman CJ referred to the common law presumption that a remedy specified in a statute is intended to be exclusive, and noted that the presumption had been expressly applied to s 6 of the Law Reform Act. In Bailey v New South Wales Medical Defence Union Ltd … at 446, McHugh and Gummow JJ said that s6 achieves the creation of a new right with an associated remedy to enforce it. From the consequences of that, and the wording of s 6(4), the Court in Kinzett concluded that that [sic] there is a statutory assimilation of the s6 proceedings with proceedings against an insured, and that limitation periods such as the equivalent of s 4(1)(d) of the Limitation Act do not apply.
It is also true of s 601AG that it creates both a statutory right of action and the remedy. The purpose of the section is plain, and its effect is, and was intended to be, comparable to that of s 6, although its operating mechanism is different. Accordingly, in my opinion, to that extent the reasoning in Kinzett is persuasive.
[73] See Almario [38].
[74] Mercer [159] - [160].
Porter J dealt with the trial judge's finding that the insurer's construction was inconsistent with the purpose of s 601AG to avoid the need for a claimant to apply to a court for s 601AH orders (orders for the reinstatement of the company and for the period of deregistration not to be counted for the purposes of the limitation statute). His Honour accepted that s 601AG was intended to 'short-cut' the need to reinstate the company.[75] His Honour said, however:[76]
I respectfully agree with the statements of Adamson J in [Sciacca v Langshaw Valuations Pty Ltd [2013] NSWSC 1285] at [51] to the effect that there is a need for ss 601AG and 601AH to be read together, and that: 'Section 601AH is the wider remedy. Section 601AG is a narrower provision which obviates the need to use s 601AH to the extent of its operation.' There is nothing at all to suggest that s 601AG was intended to completely obviate any need to seek reinstatement. I would add, in passing, that in considering whether the applicable limitation period is that which governs the underlying cause of action, it might be unwise to approach the resolution of the issue on the certain assumption that where the remedy has been barred by the expiration of a limitation period, the defence will always be pleaded.
[75] Mercer [161] - [163].
[76] Mercer [164]. See also [165] - [166].
As set out in that extract, Porter J noted that there was 'nothing at all to suggest that s 601AG was intended to completely obviate any need to seek reinstatement'.[77] I will later say more about this when dealing with the plaintiff's submissions.
[77] See Mercer [164].
Porter J then examined the structure of s 601AG.
In relation to the second element (namely, that at the time of its deregistration, the company had a liability to the plaintiff), his Honour noted that did not mean that a claimant must establish a determinate or crystallised liability which existed at the time of deregistration.[78]
[78] Mercer [173].
In relation to the third element (namely, that at the time of its deregistration, an insurance contract with the defendant covered the liability), his Honour said that this required an examination of the terms of the contract. His Honour noted that the amount 'which was payable under the contract of insurance is governed by the way in which the cover responds to the established liability. That amount may be capped, or it may be subject to a specific deduction or 'excess' payment'.[79] His Honour said that the section was not limited to an amount which literally 'was payable' to the company at the time of deregistration.[80]
[79] Mercer [174].
[80] Mercer [175].
From this, Porter J said that it followed that:[81]
the facts and the law which apply to the resolution of the company's liability, and the amount that was payable to the company pursuant to the contract, are agitated in the s 601AG action. As to the company's liability, the relevant law must be the law which applies to the underlying cause of action. The law relevant to the contract of insurance is to be applied where necessary, and the contract is to be construed in accordance with its terms.
[81] Mercer [176].
Porter J concluded that:[82]
These features of the section combine to support the proposition that the insurer is to stand in the shoes of the insured as if it were being sued on the underlying cause of action, whilst the claimant is put in the same position under the [contract] of insurance, as was the insured. The existence and nature of the company's liability which it may have had, and the existence and amount of the insurer's liability, are determined at the trial of the s 601AG action. All of that in turn, in my view, supports the assimilation of the statutory cause of action to the underlying cause of action.
[82] Mercer [177].
Porter J noted that, if the limitation period that applied to the claim against the insured did not apply to the claim against the insurer, various anomalies would result. Depending on the limitation period that applied to the underlying action, it may mean action could be taken against an insurer that would have been time barred against the company. His Honour noted that this could significantly expand the liabilities of insurers, and said that such a legislative intention was not discernible.[83]
[83] Mercer [178].
His Honour also noted that if, for example, there was no time limitation on the underlying action, it would mean such actions would become subject to a time limitation. His Honour accepted this could be ameliorated by seeking reinstatement, but noted 'the irony in the fact that the undesirability of seeking reinstatement is relied on by Mr Mercer to support the construction for which he contends. I think a court should be very slow to adopt a construction which produces these results.'[84]
[84] Mercer [179].
Porter J accepted that his construction would mean some plaintiffs would be limited to seeking s 601AH orders without the option of bringing an action under s 601AG. His Honour noted that this would be particularly detrimental where the court considered it was appropriate to refuse s 601AH orders.[85]
[85] Mercer [180] - [181].
However, Porter J concluded that the limitation period that applied to the claim against the insured applied to the claim against the insurer. His Honour said it was the 'least disharmonious construction.'[86]
[86] Mercer [180] - [184].
His Honour held that s 4(1)(d) of the Tasmanian Limitation Act (which applied to actions to recover a sum under an enactment) did not apply to a s 601AG action. His Honour held that, given that the underlying cause of action was one for damages for personal injuries, s 5A(3)(a) of that Act governed Mr Mercer's cause of action under s 601AG.
The Full Court remitted the trial back to a first instance judge, limited to the issue pleaded in the appellant's defence as to the date of discoverability.[87]
The plaintiff's submissions - 'plainly wrong'
[87] Mercer [185]. It is plain from the first instance decision that 'par16' was the pleading as to the date of discoverability - see Mercer v Allianz Australia Insurance Ltd [2013] TASSC 11 [2] and [4].
The plaintiff says the decision in Mercer was plainly wrong.[88]
[88] Plaintiff's Submissions filed 25 May 2021 (Plaintiff's Submissions) [22.2] and [23] and ts 17, 23, 25.
First, the plaintiff submits that Porter J's construction does not best achieve the purpose or object of the section, contrary to the statutory construction principle in s 15AA of the Acts Interpretation Act 1901 (Cth).[89] Section 15AA provides:
In interpreting a provision of an Act, the interpretation that would best achieve the purpose or object of the Act (whether or not that purpose or object is expressly stated in the Act) is to be preferred to each other interpretation.
[89] Plaintiff's Submissions [23.1].
The plaintiff asserts that s 601AG was intended to confer greater rights on a prospective claimant than existed prior to the deregistration and significantly expand the liabilities of insurers.[90]
[90] Plaintiff's Submissions [23.1] - [23.2], [23.8] and [23.11].
If, by 'greater rights', the plaintiff meant no more than that s 601AG was intended to give a prospective plaintiff the right to directly sue an insurer rather than seeking s 601AH orders, I accept this. If, however, the plaintiff meant that it was intended that prospective claimants would be able to sue insurers in relation to an insured's liability in circumstances where the underlying action against the insured was time barred, I do not.
In my view, the purpose was to create a simpler mechanism by which a person could bring an action in relation to a deregistered company. Rather than having to apply for the company to be reinstated, the claimant could proceed directly against the insurer. In my view, it was not intended to put a claimant against a deregistered company in a better (or worse) position than a claimant against a company that had not been deregistered. It was not intended to put an insurer of a deregistered company in a worse (or better) position than an insurer of a company that had not been deregistered. It was intended to provide a simpler pathway so that the insurer could be sued directly (provided the insured would have had a claim against the insurer).
There is nothing in the explanatory memorandum to suggest the contrary.[91]
[91] See the Explanatory Memorandum to the Company Law Review Bill 1997 [15.22] and [15.23].
In addition, I consider the weight of the authorities support that that is the purpose. The authorities include Almario, and the cases cited by Ipp JA, in relation to the insurer standing in the shoes of the insured (and I will later say more about this).
Second, the plaintiff submits that, properly construed, s 601AG contains two liabilities, being: (i) the liability referred to in paragraph 601AG(a) in respect to the underlying cause of action against the deregistered company; and (ii) the liability of the insurer to the prospective claimant.[92]
[92] Plaintiff's Submissions [23.3].
The plaintiff submits that, consistent with ordinary statutory construction principles, the starting point is that separate meaning and effect should be given to each of those different liabilities, because the prospective claimant will have to establish liability under both limbs and an insurer may plead a limitation period defence in respect to either of those liabilities.[93]
[93] Plaintiff's Submissions [23.3].
It is apparent that the plaintiff is referring to the second and third elements of s 601AG as the source of the two 'liabilities'. The second 'liability' would, in my view, be more usefully expressed as the liability of the insurer to the insured under the insurance contract.
Putting that to one side, separate meaning and effect will be given to each 'liability' regardless of whether the Mercer construction is adopted. In the first, the plaintiff will need to prove the company had a liability to the plaintiff at the time of its deregistration. In the second, the plaintiff will need to prove that, at the time of the company's deregistration, an insurance contract with the defendant covered the liability.
Third, the plaintiff submits that his construction is consistent with the legislative purpose of providing a short cut to avoid the additional step of a prospective plaintiff having to reinstate the deregistered company and obtaining orders for the cessation of the running of limitation period during that period of deregistration.[94] The plaintiff submits that, under the Mercer construction, there will be circumstances where the s 601AG 'short-cut' will not be available, namely those cases in which the time limit for commencing an action against the company expired after its deregistration. In such cases, the claimant's only option will be to seek s 601AH orders.[95]
[94] Plaintiff's Submissions [23.4] and [23.11].
[95] See ts 23 - 24 and 36.
I accept this. Nevertheless, I do not accept that Parliament intended that s 601AG would supplant s 601AH altogether.
In Mercer, Porter J noted that there was 'nothing at all to suggest that s 601AG was intended to completely obviate any need to seek reinstatement'.[96]
[96] See Mercer [164] - [166].
One of the cases referred to by Porter J in relation to this point was Sciacca v Langshaw Valuations Pty Ltd.[97] Porter J noted that, in Sciacca, Adamson J had said that s 601AG and s 601AH need to be read together, with s 601AH being the wider remedy and s 601AG a narrower provision which obviates the need to use s 601AH to the extent of its operation.[98]
[97] Sciacca v Langshaw Valuations Pty Ltd [2013] NSWSC 1285 [27]. See also at [32] - [34].
[98] Mercer [164].
Even when an action can be brought under s 601AG, a plaintiff may still prefer to seek s 601AH orders. This may be the preferable option where, for example, the plaintiff would have difficulty in proving the third element of s 601AG, namely that an insurance contract with the defendant covered the liability.[99]
[99] See, for example, Krstevska v ACN 010 505 012 Pty Ltd [2001] NSWSC 1093 [20], cited in Sciacca [53].
For these reasons, while I accept that the legislative purpose of s 601AG was to provide a 'short-cut', I do not accept that it was intended that s 601AG would completely supplant s 601AH. In addition, the Mercer construction only removes the s 601AG 'short-cut' for those cases in which the time limit for commencing an action against the company expired after its deregistration.[100]
[100] This was conceded by the plaintiff - see ts 36.
Fourth, the plaintiff submits that[101]
the Tasmanian Full Court at [154] stated 'in Almario, the statutory remedy was treated by the court as fully assimilated to the cause of action against the company'. That stated 'assimilation' is entirely inconsistent with the position adopted by Ipp JA in Almario where he stated at [15] the parties proceeded on the basis that the cause of action under section 601AG commenced from the point of deregistration. Ipp JA's position had in fact been recorded in [Mercer] at [96] but was then contradicted, without explanation as to the basis for doing so, by the finding at [154].
[101] Plaintiff's Submissions [23.7].
In Almario at [15], Ipp JA noted that the judge at first instance had held that the limitation period for s 601AG actions begins to run on the deregistration of the company. Ipp JA noted that that finding had not been challenged in the appeal.[102]
[102] Almario [15].
In Mercer at [96], Porter J noted this. His Honour went on to say:
As has been seen, Ipp JA later said that the section creates a new cause of action, not being one for damages. It can be inferred that his Honour treated this cause of action as arising on deregistration, but did not directly examine or reach any express conclusion about what limitation period applied nor, if it were assumed that the s151D(2) time limitation applied, did [he] consider the correctness of the proposition as to its commencement.
Porter J explained, at some length, why he considered that Ipp JA's approach in Almario 'was a direct assimilation between the cause of action against the company and the s 601AG action'.[103]
[103] See Mercer [100] - [108].
In [153], Porter J noted that the Court of Appeal in Almario had adopted a purposive approach to the interpretation of the section.
In [154], the second of the paragraphs referred to by the plaintiff, Porter J said:
That purposive interpretation gave rise, in my view, to the assimilation within s 601AG of limitation legislation relevant to the underlying cause of action. That in Almario, the statutory remedy was treated by the Court as fully assimilated to the cause of action against the company is evident from the reasons of Ipp JA, and highlighted by the additional comments of Hodgson JA, the effect of which is that the section puts the insurer in the position of a tortfeasor who is able to recover contribution.
I do not accept that there is a contradiction between [96] and [154] of Porter J's reasons. Ipp JA's 'position' in Almario was not that the limitation period for s 601AG actions begins to run on the deregistration of the company. Rather, his Honour was noting that this view of the trial judge had not been challenged in the appeal. In my view, having regard to Ipp JA's reasons as a whole, his Honour considered it was unnecessary to discuss the correctness of that view.
I agree, with respect, with Porter J's analysis of Ipp JA's reasons. In particular, Ipp JA considered that, under s 601AG, the insurer would stand in the shoes of the insured, and that the plaintiff's right of recovery was as if the insurer was the deregistered company.[104]
[104] See in particular Almario [34] - [35] and [41].
I accept, as pointed out by the plaintiff,[105] that Ipp JA expressed the purpose as being (plaintiff's emphasis) 'to require the insurer … to stand in the shoes of the company to the extent necessary to allow creditors of the company to recover from the insurer whatever amounts they were entitled, by force of law, to recover from the company had it not been deregistered'.[106] However, as pointed out by Porter J:[107]
[I]t is also plain from the judgment that the 'necessary extent' included the capacity to take advantage of limitation periods, the overriding principle being that the section should be construed so as to assimilate legislation which provided for the time barring of remedies, and relief from such bars.
[105] Plaintiff's Reply Submissions filed 14 July 2021 (Plaintiff's Reply Submissions) [12].
[106] Almario [34]. See also [46].
[107] Mercer [168].
Fifth, the plaintiff submits that the decision in Mercer results in the anomalous situation in which the s 601AG cause of action has the same limitation period as applies to the cause of action of the underlying claim against the deregistered company.[108]
[108] Plaintiff's Submissions [23.9].
I do not accept that this is anomalous. On the contrary, it is consistent with the plaintiff's right of recovery being as if the insurer was the deregistered company, and it promotes the legislative purpose of preventing the deregistration of a company defeating a legitimate claim.
Sixth, the plaintiff submits that '[t]here are no clear words within s 601AG, or more broadly in the Corporations Act, which would justify assimilating the limitation period for the first liability to the second liability under s 601AG.' The plaintiff submits that the construction in Mercer is inconsistent with the acceptance in that case that s 601AG created an entirely new cause of action.[109]
[109] Plaintiff's Submissions [23.10].
It is not merely the limitation period that is assimilated by the Mercer construction. Mercer discussed 'assimilation' in the context of the assimilation of the right of action against the authorised insurer with the underlying cause of action. It was used in the same context in Almario. Ipp JA also said, as set out earlier, that '[a] construction of s 601AG, not encompassing the assimilation of other legislation that provides for the time barring of remedies together with a means of extending the time limits in question, would result in the anomalies I have described and the concomitant inequities'.
In my view, this is not inconsistent with s 601AG creating an entirely new cause of action. As Ipp JA said, s 601AG permits a person to recover from the insurer of a deregistered company an amount that was payable to the company under the insurance contract, as if the insurer was the deregistered company. It does not appear to be intended to give the person greater rights of recovery. Consistently with this, an action against an insurer will be subject to the same limitation provisions as would have applied had the action been against the company.
Seventh, the plaintiff submits that[110] the construction in Mercer would lead to the anomalous result that the time period for commencement of proceedings under s 601AG would be entirely dependent upon the unexpired portion of the limitation period for the underlying cause of action against the original wrongdoer.
[110] Plaintiff's Submissions [23.11].
In my view, this result is not anomalous. It would mean that, whether or not a defendant company was deregistered, a plaintiff would have the same period of time within which to bring a claim.
The plaintiff's reply submissions - distinguish
In the plaintiff's original written submissions and in oral submissions, he made extensive submissions as to why he contended Mercer was plainly wrong. The submissions were plainly advanced on the understanding that the plaintiff needed to establish this in order to succeed on the first issue. I note, however, that the plaintiff contended in his written reply submissions that he did not need to argue that it was plainly wrong.[111] Instead, the plaintiff contended that Mercer had not decided the issue. The plaintiff contended that Mercer had only determined the limitation period that applied to the second element of the s 601AG cause of action, and not the limitation period that applied to the s 601AG cause of action itself.
[111] Plaintiff's Reply Submissions [7].
I assume from the plaintiff's extensive oral submissions to the effect that Mercer was plainly wrong[112] that the plaintiff does not maintain these reply contentions. In case I am wrong about that, I will deal with them briefly.
[112] Made after the reply submissions were filed.
I do not accept that Mercer can be distinguished on the contended basis. As noted earlier, the relevant factual background in Mercer was the same as in this case: a limitation defence in favour of the company had not arisen as at the date of deregistration but had arisen prior to the commencement of the s 601AG proceeding.
The Tasmanian Full Court found that the provision of the Tasmanian Limitation Act which applied to actions to recover a sum under an enactment did not apply to a s 601AG cause of action. The Full Court found that s 5A(3)(a) of that Act (the limitation period that applied to the underlying cause of action against the employer) governed Mr Mercer's cause of action under s 601AG. The Full Court remitted the trial back to a first instance judge, limited to the issue pleaded in the appellant's defence as to the date of discoverability. If the insurer succeeded in proving that date of discoverability, Mr Mercer's cause of action would be time barred because he did not commence the s 601AG proceedings until after the limitation period that applied to his cause of action against the employer had elapsed.
Other cases cited by the parties
Del Borrello
The defendant noted that, in Del Borrello,[113] Beech J[114] appeared to accept that the proceedings against the insurer under s 601AG had to be commenced within the six-year limitation period applying to the underlying cause of action against the deregistered company.
[113] Del Borrello v Australian Securities and Investments Commission [2008] WASC 48.
[114] As his Honour then was.
In Del Borrello, the applicant sought to make a claim against the operator of a mine (Western Metals) in relation to an injury he had suffered on 15 March 2002. Such a claim could not be commenced if six years had elapsed since the cause of action accrued (being the date of the injury).
Western Metals was deregistered on 17 June 2006. At that time, the applicant's claim was not time barred.
On 14 March 2008, the day before it would be six years after the injury was suffered, Beech J dealt with an application for reinstatement of Western Metals and an application for leave to proceed against a company in liquidation. Beech J also noted that the applicant was going to commence proceedings against Western Metals' insurer under s 601AG that same day.
Beech J appeared to accept that the limitation period that would apply to the s 601AG action would expire the following day.[115]
[115] See Del Borrello [8], [18] - [19].
In my view, little weight can be placed upon this. Beech J was plainly dealing ex tempore with an urgent matter, and was not called upon to decide what the limitation period was.
Young Investment
In addition to submitting that the Mercer decision was plainly wrong, the plaintiff submitted[116] that I 'should follow' Young Investment.
[116] Plaintiff's Submissions [23].
In my view, nothing said in Young Investment is inconsistent with the decision in Mercer.
In Young Investment, Quinlan CJ was dealing with an action brought pursuant to s 601AG of the Corporations Act, whereby the plaintiffs sought to recover amounts payable to them by a company that had been deregistered. At the time that it was deregistered, the company had a liability to each of the plaintiffs pursuant to a default judgment.
His Honour commenced his judgment by setting out s 601AG, and endorsing the observations that had been made about it by the Court of Appeal in Fairweather Pty Ltd v QBE Insurance (Australia) Ltd.[117]
[117] Fairweather Pty Ltd v QBE Insurance (Australia) Ltd [2012] WASCA 270.
The observations his Honour endorsed were that:
1.Section 601AG creates a new cause of action against an insurer to recover an amount that was payable to the deregistered company under an insurance contract.
2.The new cause of action does not arise until the company having the benefit of the insurance is deregistered.
3.Any defences that the insurer may have at that point to an action on the insurance contract may be pleaded by it in defence to the s 601AG claim and any defence the insured may have had to the claim against the insured may be advanced to show that the insured had no liability to the plaintiff.
His Honour then listed the elements of the cause of action.[118]
[118] These were set out earlier in this judgment under the heading 'Issue 1 - Is the claim time barred?'
After listing the elements, his Honour noted that the only element that arose for determination in the case before him was the last - whether an insurance contract covered the relevant liability.[119]
[119] Young Investment [6] - [8].
In considering the issues that arose in the case, his Honour did not deal with, nor mention, the limitation period that would apply.
The rationales behind limitation periods
In Brisbane South Regional Health Authority v Taylor,[120] McHugh J said that '[t]he enactment of time limitations has been driven by the general perception that "[w]here there is delay the whole quality of justice deteriorates"'.[121] His Honour noted that courts and commentators had perceived four broad rationales for the enactment of limitation periods:[122]
First, as time goes by, relevant evidence is likely to be lost. Second, it is oppressive, even 'cruel', to a defendant to allow an action to be brought long after the circumstances which gave rise to it have passed. Third, people should be able to arrange their affairs and utilise their resources on the basis that claims can no longer be made against them. … The final rationale for limitation periods is that the public interest requires that disputes be settled as quickly as possible.
[120] Brisbane South Regional Health Authority v Taylor [1996] HCA 25; (1996) 186 CLR 541.
[121] Brisbane South Regional Health Authority, 551, quoting R v Lawrence [1982] AC 510, 517.
[122] Brisbane South Regional Health Authority, 552 - 553.
McHugh J said:[123]
A limitation period … represents the legislature's judgment that the welfare of society is best served by causes of action being litigated within the limitation period, notwithstanding that the enactment of that period may often result in a good cause of action being defeated. … The extension provision is a legislative recognition that general conceptions of what justice requires in particular categories of cases may sometimes be overridden by the facts of an individual case.
[123] Brisbane South Regional Health Authority, 553.
Giving a claimant against a deregistered company more time within which to make a claim, simply because of the deregistration, is inconsistent with these rationales.
The defendant also pointed out that an insurer of a deregistered company is likely to have particular difficulty in investigating the allegations and assembling evidence. The deregistered company will no longer be operating and may be unable to assist with the provision of information required for the defence of a claim. These matters do not support the plaintiff's construction.
The plaintiff submitted that, given the court's power to reinstate a company and order that the period of deregistration not be counted towards any limitation period, an insurer's exposure is less certain on the Mercer construction than on the plaintiff's construction. He submits that 'the insertion of s 601AG and its concomitant separate limitation period for the new cause of action ensures that an insurer has a determinative identification of its potential exposure to liability.'[124]
[124] Plaintiff's Reply Submissions [16].
I do not accept this. Even if there is a separate limitation period that applies to s 601AG actions, there is no reason why, on the plaintiff's construction, a claimant could not seek s 601AH orders after such a limitation period had expired.
When I raised this with the plaintiff during the hearing, the plaintiff agreed that an application under s 601AH could be made but submitted that it was the type of situation in which the discretion may not be exercised. The plaintiff said that this was because the application to reinstate would be being brought only for the purposes of bringing the second part of the claim under s 601AG. I asked the plaintiff how that was conceptually different to seeking s 601AH orders simply for the purposes of getting around what would otherwise be a limitation period on the Mercer construction (remembering that the plaintiff had submitted such an application would almost inevitably be granted).[125] The plaintiff said it was '[not] conceptually different but the circumstances might be regarded as different if the plaintiff was aware of s 601AG and did nothing within that six-year period'.[126]
[125] ts 14 - 15, 25 and 80.
[126] ts 40. The 'not' is recorded as indistinct in the transcript, but is plain from the context.
In my view, any delay by the claimant would be equally relevant to whether a court would make s 601AH orders in the first scenario.
Section 601AH orders
As noted earlier, the parties proposed that the question of whether s 601AH orders should be made should only be determined if the plaintiff failed on the other issues. I have therefore not heard full argument on whether it is (as the plaintiff contends) almost inevitable that, if a time limit expired during a period of deregistration, a court would order the reinstatement of the company and order that time not run during the period of deregistration. However, on a preliminary review of some authorities, there appears to be a difference of opinion.
Porter J's decision in Mercer supports the plaintiff's contention. His Honour considered that, if the only reason reinstatement is sought is the expiration of a time limit, a reinstatement order will almost inevitably be made, with the associated direction that the interim period after deregistration not count for limitation purpose, citing Pagnon.[127]
[127] Mercer [163] citing Pagnon [17].
In Re Regional Planners Developments Co Pty Limited,[128] Brereton J[129] ordered that time ceased to run during only that part of the period of deregistration in which the deregistration practically prevented the plaintiff from bringing proceedings against it which otherwise the plaintiff could and would have brought. His Honour considered it was not appropriate to suspend time during that period of deregistration in relation to which there was no evidence to indicate any intention or attempt to sue the company. That is, his Honour ordered that time should not run only from the point at which the plaintiff would have brought action but could not because of the deregistration.[130]
[128] Re Regional Planners Developments Co Pty Limited [2015] NSWSC 1996.
[129] As his Honour then was.
[130] See Re Regional Planners Developments [29] - [32].
The Victorian Court of Appeal decision in Chalker v Clark[131] is an example of where s 601AH orders were not made at all.
[131] Chalker v Clark [2008] VSCA 92 [37] - [39] (Osborn AJA (as his Honour then was), with whom Dodds‑Streeton JA agreed) and [45] (Maxwell P).
Conclusion on issue 1
Of all of the authorities drawn to my attention, the decision in Mercer was the only one to deal with the same issue I face. I must follow it unless I am convinced it is plainly wrong.[132]
[132] Farah Constructions Pty Ltd v Say-Dee Pty Ltd [2007] HCA 22; (2007) 230 CLR 89 [135].
I am not convinced.
Statutory construction 'requires attention to the text, context and purpose of the Act. While the task of construction begins and ends with the statutory text, throughout the process the text is construed in its context'.[133]
[133] Mohammadi v Bethune [2018] WASCA 98 [31]. See also [32] ‑ [36].
The plain words of s 601AG do not compel a particular construction.
In my view, the purpose of s 601AG is to require the insurer of a deregistered company to stand in the shoes of the company, so as to allow a claimant to proceed directly against the insurer rather than having to seek s 601AH orders. It was not intended to put a claimant against a deregistered company in a better (or worse) position than a claimant against a company that had not been deregistered. It was not intended to put an insurer of a deregistered company in a worse (or better) position than an insurer of a company that had not been deregistered. It was intended to provide a simpler pathway so that the insurer could be sued directly (provided the insured would have had a claim against the insurer). It was not intended to obviate the need to seek s 601AH orders in all cases.
Construed in context, s 601AG permits a person to recover from the insurer of a company that is deregistered, as if the insurer was the deregistered company, an amount that was payable to the company under the insurance contract.
The Mercer construction has the effect that a claimant against a deregistered company is not advantaged or disadvantaged in any way by the deregistration.
The plaintiff's construction would, in some cases, advantage a claimant against a deregistered company by extending the time within which a claim could be made simply because the company had been deregistered. The cases in which a claimant may be advantaged by the plaintiff's construction are those in which the limitation period for the underlying cause of action expired after the company was deregistered, but before the action under s 601AG was commenced. In those cases, the action would not be time barred on the plaintiff's construction.
The plaintiff submits that this would not, in truth, advantage a claimant because it was 'virtually a given' that s 601AH orders would be made to suspend time running during a period of deregistration.[134]
[134] ts 25 - 30. See also ts 14 - 15, 40 and 80.
Even if s 601AH would usually be made in such cases, I do not accept this would not be an advantage. Orders under s 601AH suspending time can only be made if the court considers it to be appropriate in the particular circumstances of the case before it. It is a discretionary order. It will not inevitably be made. The plaintiff did not appear to contest this. The plaintiff also appeared to accept that, in considering whether to make the order, the court could take into account the extent of the claimant's delay.[135]
[135] See ts 25 - 30.
Even if I was to accept that s 601AH orders suspending time are almost inevitably made, the plaintiff's construction eliminates the risk that a court would decide it was not appropriate to order time not run throughout some or all of a period of deregistration. It would effectively give claimants this order automatically, without the court having any discretion as to whether it was appropriate.
The Mercer construction does not mean that a claimant will have no chance of a remedy if the underlying cause of action is time barred and no extension of time is available, provided the company was deregistered before the limitation period expired. Such a claimant could seek s 601AH orders.[136] (If the company was deregistered after the limitation period expired, the claimant would have no remedy on both the Mercer construction and the plaintiff's construction).
[136] Section 601AH of the Corporations Act. See also Del Borrello [19], [21].
As I am not convinced that the construction of the Tasmanian Full Court in Mercer was plainly wrong, I must follow it.[137]
[137] Farah Constructions [135].
I find that the claim under s 601AG is time barred.
Issue 2 - Can time be extended under section 38(2) of the Limitation Act?
The plaintiff sought, if issue 1 was resolved against him, an extension to the limitation period under s 38(2) of the Limitation Act, based on the conduct of the defendant (through its solicitors). The plaintiff alleges that Pindan's failure to bring the action before the limitation period expired was attributable to the defendant's conduct.
Legal framework
Section 38 relevantly provides:
38.Court may extend time to commence actions in cases of fraud or improper conduct
(1)A plaintiff may apply to a court for leave to commence an action on a cause of action even though the limitation period provided for under this Act has expired.
(2)On an application a court may extend the time in which the action can be commenced up to 3 years from when the action ought reasonably to have been commenced if the court is satisfied that the failure to commence the action was attributable to fraudulent or other improper conduct of the defendant or a person for whom the defendant is vicariously liable.
(3)Nothing in section 39, 41 or 42 prevents a court from extending, under this section, the time in which a plaintiff can commence an action.
(4)This section does not apply to an action relating to the publication of defamatory matter.
In Lowe Pty Ltd v Belgravia Nominees Pty Ltd,[138] the Court of Appeal noted that, from the terms of s 38, it can be seen that there are two preconditions to the power to extend time. They are:
1.the defendant, or a person for whom the defendant is vicariously liable, engaged in fraudulent or other improper conduct; and
2.the failure to commence the action was attributable to that fraudulent or other improper conduct.
[138] Lowe Pty Ltd v Belgravia Nominees Pty Ltd [2020] WASCA 180 (Belgravia (2020)) [180].
The person seeking an extension of time has the burden of proving that the court should extend time.[139] That person must establish the preconditions to the court's satisfaction. If the court is so satisfied, it then has a discretion whether to grant an extension.[140]
[139] Section 79(3) of the Limitation Act.
[140] Belgravia (2020) [180].
A plaintiff in a cause of action under s 601AG may apply for an extension under s 38(2) as if the insurer was the deregistered company.[141]
First precondition - fraudulent or other improper conduct
[141] See Almario [35], [42].
The relevant principles that apply to the first precondition were explained in Lowe. In particular, the Court said (formatting altered):
1.Section 38(2) is concerned with conduct on the part of a prospective defendant that is liable or intended to impede or delay the commencement of an action by the prospective plaintiff.[142]
2.[T]he phrase 'other improper conduct' carries its ordinary meaning - conduct not in accordance with propriety, or what is proper in the circumstances - understood in its context. In that context, the impropriety must, at least ordinarily, relate to the purpose or tendency of the conduct to deprive a prospective plaintiff of the reasonable opportunity to commence proceedings within the limitation period, or to divert the prospective plaintiff from doing so.[143]
3.[It] is not limited to conscious wrongdoing, conduct akin to fraud or to conduct with an element of moral turpitude.[144]
4.Whether a person's conduct is improper within the meaning of s 38(2) is to be judged in the context of that person's conduct as a prospective defendant to an action by the prospective plaintiff.[145]
5.Whether fraudulent or other improper conduct has been established is an evaluative judgement to be made in all the circumstances of the case. In that respect, the position is analogous to whether given conduct in a given set of circumstances amounts to unconscionable conduct.[146]
Second precondition - attributable to
[142] Belgravia (2020) [181].
[143] Belgravia (2020) [7] and [187].
[144] Belgravia (2020) [182], [187], [189] - [191].
[145] Belgravia (2020) [186].
[146] Belgravia (2020) [188].
The second precondition is that the failure to commence the action was attributable to that fraudulent or other improper conduct. In this context, the 'failure to commence the action' is the failure to commence the action prior to the date on which the limitation period expired.[147]
[147] The plaintiff accepted this - see ts 54.
The test of attributability may be satisfied by 'a causal link alone or a causal connection … without any qualifications conveyed by such terms as sole, dominant, direct or proximate'.[148]
[148] Roncevich v Repatriation Commission [2005] HCA 40; (2005) 222 CLR 115 [27]; cited by McLure P, with whom Newnes JA agreed, in AME Hospitals Pty Ltd v Dixon [2015] WASCA 63; (2015) 48 WAR 139 [32].
Before turning to the factual analysis, I will briefly deal with a legal point raised by the defendant.
Effect of substitution order
Section 38(2) gives the court the power to extend the time in which an action can be commenced. It is plainly premised on the action not having been commenced within time.
The defendant initially submitted that s 38(2) had no application in this case because these proceedings were commenced within time. The defendant submitted that what the plaintiff was actually trying to overcome was the institution of the proceedings in the wrong name.[149]
[149] Defendant's Submissions in Opposition to Plaintiff's Application to Amend Writ of Summons filed 29 June 2021 [55] - [56].
The plaintiff submitted that, if Pindan is substituted as plaintiff, the proceedings will not have been commenced in time, as there is no relation back to the date the writ was issued if a new plaintiff is substituted into these proceedings.[150]
[150] Belgravia (2017) [27].
During the hearing, the defendant withdrew its submission.[151] The defendant limited its opposition to the application for an extension to two bases. First, the defendant submitted it did not engage in any improper conduct. Second, it submitted that, in any event, Pindan's failure to bring the action before the limitation period expired was not attributable to anything it did.
[151] ts 75.
In order to properly conceptualise the issues, I will assume that an order will be made to substitute Pindan as the plaintiff. What Pindan, as the new plaintiff, would then be seeking is an order extending the time within which Pindan is entitled to commence the action.
The preconditions
The plaintiff alleges that the defendant engaged in improper conduct in two respects. First, it did not tell him the name of Infra Tech's insurer. Second, it did not tell him until January 2021 that the action should not have been brought in the plaintiff's name.
The plaintiff sought leave to rely on, among other things, conferral correspondence between the parties annexed to a solicitor's affidavit.[152] The defendant neither consented to nor opposed the grant of leave. The defendant did not identify any reason why leave should not be granted.[153] The plaintiff submitted that leave should be granted because the correspondence showed 'the way the defendant has acted in changing its position concerning the plaintiff's capacity to pursue the cause of action under section 601AG'.[154] I granted leave. In my view, the correspondence is relevant to the evaluation of the plaintiff's submissions and should be admitted into evidence.
Was there improper conduct?
The name of the insurer
[152] Affidavit of Belinda Merle Randall filed 25 May 2021 (Randall Affidavit).
[153] ts 74.
[154] Plaintiff's Submissions [40].
In March 2016, the solicitors then acting for Pindan's insurers asked the solicitors then acting for Infra Tech (DS1) to advise them of the name of Infra Tech's insurer on the basis that discussions between the insurers may assist to narrow the issues in dispute. The request was repeated.[155] On 22 June 2016, DS1 advised they did not have instructions to disclose the identity, but said that 'at an appropriate time', a process for narrowing the issues could be considered.[156] The parties then engaged in ongoing correspondence on other matters. It appears that the question of the insurer was not raised again until October 2018, over two years later.
[155] Randall Affidavit pages 80 and 84.
[156] Randall Affidavit pages 86 and 92.
Around 12 October 2018, the solicitors then acting for Pindan's insurers (BN) became aware that Infra Tech had been deregistered. BN asked DS1 for the name of Infra Tech's insurer. This time, it was in the context of a foreshadowed action against the insurer under s 601AG of the Corporations Act.[157]
[157] Randall Affidavit page 122.
In the correspondence that followed, DS1 did not provide the name of Infra Tech's insurer. BN asked DS1 why they would not. On 19 December 2018, DS1 said they did not propose to engage further on the issue until the claim on the contract works policy had been resolved.[158] From the correspondence, it is plain that the respective solicitors took a different view as to the order in which the various claims should be resolved. BN wrote back the next day, noting DS1's refusal and reserving their rights in relation to costs.[159]
[158] Randall Affidavit page 129.
[159] Randall Affidavit pages 131 - 132.
In the affidavit of the plaintiff's solicitor, the solicitor asserts that the proposed s 601AG claim was delayed during 2019 by, among other things, the identity of the insurer not being known or disclosed.[160] No basis is given for this assertion, nor is any specification given of the extent to which this issue caused delay. I would therefore infer that the statement was intended to be limited only to those matters that appear from the matters subsequently referred to.[161] On that basis, the insurer's identity only arose again in November 2019. In the first 11 months of 2019, BN engaged counsel who provided advice and a draft pleading.[162]
[160] Randall Affidavit [47].
[161] If it was not intended to be so limited, its lack of specificity would render it of almost no probative value.
[162] Randall Affidavit [48] - [50].
In November 2019, BN wrote to DS1 advising that a writ against Infra Tech's insurer was being finalised and asking for its name.[163] DS1 did not reply. BN asked again in February 2020, and, that same month, DS1 declined to provide the name.[164]
[163] Randall Affidavit page 133.
[164] Randall Affidavit page 139.
On 13 February 2020, BN asked Infra Tech's insurance broker for the name.[165] On the same day, Infra Tech's insurance broker refused to provide the insurer's name.[166]
[165] Randall Affidavit page 141.
[166] Randall Affidavit page 150.
On 23 March 2020, BN filed an Originating Summons seeking an order that Infra Tech's insurance broker give discovery in relation to the name of Infra Tech's insurer. On 31 March 2020, Infra Tech's insurance broker provided the name.[167]
[167] Randall Affidavit page 157.
DS1 is not a party to these proceedings and has not had the opportunity to offer context or explanations in relation to the correspondence. Accordingly, these observations are made on a preliminary basis.
On the face of the correspondence, it is difficult to understand why DS1 considered it appropriate to refuse to provide the name of the insurer, particularly after November 2019 when it was told a writ was being finalised. Even if they had a different view of the way in which the matter ought to proceed, other solicitors were asking them for information that those solicitors considered they needed. It was information that all knew could be obtained through the court. It is difficult to conceive of a legitimate reason for the refusal. Nor was one offered by counsel for the defendant.[168] On its face, it appears to be inconsistent with a practitioner's duty to the administration of justice.
[168] ts 70.
In my view, DS1's conduct was liable to impede or delay the commencement of the action against the insurer. It was, within the meaning of s 38(2), improper conduct.
The correct plaintiff
The second respect in which the plaintiff alleges that the defendant engaged in improper conduct is that the defendant did not tell the plaintiff until January 2021 that the action should not have been brought in the plaintiff's name.
On 2 April 2020, BN advised DS1 that the plaintiff of the action against the defendant would be the liquidator.[169] The following day, DS1 sought and received a copy of the draft writ.[170]
[169] Randall Affidavit page 159.
[170] Randall Affidavit page 162.
The writ was filed on 17 April 2020.
On 6 October 2020, BN sent a copy of the writ to DS1 asking if they would accept service on behalf of the defendant. DS1 advised that Ashurst would act for the defendant. On 20 October 2020, Ashurst advised BN that they had instructions to accept service. The following day, BN served Ashurst with the writ and statement of claim.
On 25 November 2020, Ashurst served BN with a conditional memorandum of appearance. Ashurst advised BN that their client was considering its position.[171]
[171] Randall Affidavit page 193.
On 11 December 2020, Ashurst wrote to BN, noting that the defendant's appearance had become unconditional, but raising three 'threshold concerns'. One was a query as to whether Pindan had assigned its rights of recovery to another entity. Ashurst said that, if that was so, they did not understand why the plaintiff, rather than that entity, had brought the action.[172]
[172] Randall Affidavit pages 194 - 195.
On 14 January 2021, BN replied.[173] The same day, Ashurst wrote to BN saying:[174]
In considering the responses contained in your letter of 14 January 2021, and the issues that our client would need to address in preparing a defence, we have noticed that the plaintiff in the proceeding is Mervyn Jonathan Kitay as liquidator of ACN 009 009 072 Pty Ltd. However, the writ and statement of claim both appear to seek recovery of losses suffered by 'Pindan' - which we understand to be the defined term used to describe the company, rather than Mr Kitay as liquidator of the company.
If it is correct that the claim sought to be advanced is a claim on behalf of the company, which we understand to be the position, then Mr Kitay, as liquidator, is not advancing any claim in the proceeding and is not properly a plaintiff.
[173] Randall Affidavit page 196.
[174] Randall Affidavit page 199.
On 15 January 2021, BN replied, disputing that the plaintiff was not the proper plaintiff.[175]
[175] Randall Affidavit page 201.
On 18 January 2021, Ashurst wrote to BN again, repeating its view, and referring to 'a long line of authority'. BN replied, again disputing that the plaintiff was not the proper plaintiff.[176]
[176] Randall Affidavit pages 202 - 203.
On 29 January 2021, BN wrote again. BN did not concede that Ashurst was correct, but said they would make an application to amend the name of the plaintiff. BN appeared to assert that they had brought the action in the name of the plaintiff because they had not known that the plaintiff (their own client) had not obtained a vesting order.[177] During the hearing, senior counsel for the plaintiff confirmed that that was indeed the reason.[178]
[177] Randall Affidavit page 205 [8].
[178] ts 64.
In my view, no matter how broadly 'improper' is construed, it would not capture the defendant's solicitors' conduct in relation to this issue.
It is not suggested that the defendant's lawyers knew, before January 2021, that the incorrect person had been named as plaintiff.[179] Indeed, the evidence suggests that they did not know until around the time they communicated the error to the plaintiff.
[179] ts 64.
My reasons for this conclusion are as follows.
The defendant did not know prior to 2 April 2020 that the action was going to be brought in the name of the plaintiff. The action was brought on 17 April 2020.
After that time, the plaintiff did not communicate with the defendant until October 2020. By then, the limitation period had expired.
In the period between 2 April 2020 and October 2020, the defendant had nothing more than the draft writ. It knew the action was being brought in the name of the plaintiff for alleged losses suffered by Pindan. There is no reason to infer it or its then solicitors knew that the plaintiff was not the proper plaintiff for the proposed action. The plaintiff's solicitors did not realise this until they were told (and even then, they did not immediately accept it).
When the plaintiff sought to serve the writ and statement of claim in October 2020, he was advised that Ashurst would be acting going forward.
It could not be suggested that the defendant gained any forensic advantage by its failure to notify the plaintiff that he was not the proper plaintiff in the period following receipt of the filed writ and statement of claim (October 2020) and when it did notify the plaintiff (14 January 2021). The limitation period had already expired.
I would infer from the correspondence that followed the receipt of the filed writ and statement of claim that Ashurst was analysing the claim, and raising issues with the plaintiff as they did so.
It cannot be suggested that, because the error was so obvious, the defendant's solicitors must have immediately realised it was an error. Again, the plaintiff's solicitors did not realise it was an error, even for a period of time after the error had been pointed out to them by Ashurst.
In my view, no matter how broadly 'improper conduct' is interpreted in this context, it would not capture not telling the other side something that you do not know.
For these reasons, I am not satisfied that the failure of the defendant to advise the plaintiff of the error earlier than it did was improper conduct.
This makes it unnecessary to consider the scope of the conduct captured by the phrase 'improper conduct' in s 38(2). In particular, it is unnecessary to consider whether it could capture conduct that was liable to delay the commencement of an action, but which, if not done, would have breached an ethical duty. Nevertheless, as it was raised by the plaintiff, I will briefly deal with this point.
In my view, even if the defendant's solicitors knew immediately that the plaintiff was not the proper plaintiff but did not notify the plaintiff until January 2021, this would not be 'improper conduct'. The defendant itself would not have known. The defendant's solicitors were not under an obligation to point out the plaintiff's error, unless it was unlikely to prejudice the defendant's interests.[180] Pointing out the error prior to the limitation period expiring could have prejudiced the defendant's interests. Pointing it out afterwards would have, self‑evidently, been too late.
[180] See r 23 of the Legal Profession Conduct Rules 2010 (WA). See also China Ocean Shipping Co Ltd v P S Chellaram & Co Ltd (1990) 28 NSWLR 354, 385E - 386C (Kirby P, as his Honour then was).
Indeed, not only were the defendant's solicitors not obliged to point out the error prior to the limitation period expiring, their duty to their client prevented them from doing so without their client's permission.[181]
[181] And see China Ocean Shipping, 385E - 386C.
During the hearing, senior counsel for the plaintiff confirmed he accepted this. However, he argued that it was nevertheless 'improper conduct' for the defendant not to point out the error because the conduct had the tendency to delay the institution of the proceedings by Pindan. Senior counsel submitted that the phrase 'improper conduct' captured any conduct that was liable to impede or delay the commencement of an action by the prospective plaintiff, even where the defendant's solicitors would be breaching their professional obligations if they pointed out the error. He submitted this was established by Belgravia (2020).[182]
[182] ts 62 - 63.
I do not accept this. I do accept that the court in Belgravia (2020) rejected the need for the conduct to involve any element of moral turpitude, and focussed rather on the purpose or tendency of the conduct to impede or delay the proceedings. However, I do not accept that the court intended that it would include conduct which a person was ethically obliged not to do.[183]
Was the failure attributable to the conduct?
[183] Nor does the court's application of its analysis to the facts require a contrary conclusion - see, for example, Belgravia (2020) [221] - [222], [227] - [228], [234] - [235].
The defendant submits that, even if it was improper conduct to not disclose the name of the insurer, the plaintiff cannot establish that the failure to commence the action prior to the date on which the limitation period expired was attributable to that conduct. The defendant points out that the plaintiff found out the name of Infra Tech's insurer in April 2020, before the limitation period expired (in September 2020).
The plaintiff submits that Pindan's failure to commence the action was attributable, in part, to DS1's refusal. He submitted that it was entirely reasonable to first seek the name from DS1 rather than going straight to court to seek a discovery order against Infra Tech's insurance broker.
I accept that it was entirely reasonable to first seek the name from DS1 before seeking a court order. I do not, however, consider that it was reasonable to do nothing but ask DS1 for the name for such an extended period.
Further, BN became aware that Infra Tech had been deregistered in October 2018. BN then intended to bring action under s 601AG against its insurer. BN renewed its request of DS1 for the name of the insurer. By at least December 2018, DS1 had made it plain it would not provide the name. At this point, BN, acting reasonably, ought to have made a prompt application to the court.
I accept that Pindan's action against the defendant could not be commenced until it knew the name of Infra Tech's insurer. However, Pindan knew the name before the limitation period expired. There is no evidence to suggest that Pindan's failure to commence the action prior to September 2020 was influenced in any way by the fact it did not know the insurer's name until March 2020. There is no suggestion that BN was so distracted by the need to ascertain the name of the insurer that it did not have the resources or capability to consider who should be the plaintiff in the action.[184] Further, even after BN knew the insurer's name, BN failed to appreciate that the plaintiff was not the proper plaintiff. Indeed, even when it was told this by the defendant's new solicitors, it did not immediately accept it.
[184] And see ts 57.
For these reasons, I am not satisfied that Pindan's failure to commence the action within time was attributable to the defendant's failure to advise of the name of Infra Tech's insurer. I am not satisfied that there was any causal link or connection between these two things. Nor am I satisfied that the defendant's failure to provide the name made it responsible, in any sense and to any degree, for Pindan's failure to commence the action in time.
It is unnecessary to consider whether Pindan's failure to commence the action before the limitation period expired was attributable to the defendant's failure to advise the plaintiff that he was the wrong plaintiff earlier than it did. This is because I am not satisfied that this was misconduct. Nevertheless, I will briefly explain why, even if it was misconduct, I would not be so satisfied.
I accept that, in one sense, the defendant's failure to advise did cause Pindan's failure to commence the action before the limitation period expired. If the defendant had raised the error before the limitation period expired, and managed to persuade the plaintiff of the error before it expired, the action may well have been brought in the name of the proper plaintiff. However, in my view, 'attributable to' does not cover this type of causal connection. While I accept that there is no requirement that the conduct be the sole, dominant, direct or proximate cause or causal connection, it must be sufficiently connected to justify describing the result as attributable to it, or pertaining to it.
Further, I am not satisfied that the defendant's failure to point the error out earlier made it responsible for Pindan's failure to commence the action in time. The defendant was not responsible for giving legal advice to the plaintiff or Pindan. It was not responsible for ensuring that the action was brought in the correct name and within the time limit.
For these reasons, I am not satisfied that Pindan's failure to commence the action in time was attributable to the defendant's conduct.
Issue 3 - Should time be extended?
As I am not satisfied that the preconditions have been met, I do not have a discretion to extend time. However, in case I am wrong, I will briefly consider this.
The defendant submits[185] that it may well be prejudiced if an extension of time was granted. The defendant did not adduce any evidence of actual prejudice. However, it pointed out it would be dealing with a deregistered company which no longer has employees, and that it did not know where the directors or documents were. It pointed out that some prejudice can be assumed to flow from long delay.[186]
[185] See ts 74.
[186] As to which, see the discussion under the heading 'The rationales behind limitation periods'.
I consider that, in the circumstances, the delay would not unacceptably diminish the prospects of a fair trial of the action nor significantly prejudice the defendant (other than by reason only of the commencement of the proposed action).[187] Infra Tech and its solicitors (DS1) have been aware of the substance of the claim since at least 2015. DS1 confirmed it was acting for the defendant in 2018.[188]
[187] See s 44 of the Limitation Act.
[188] Randall Affidavit page 125.
Had I been satisfied that the failure to commence the action within time was attributable to the defendant's conduct, I would have granted an extension of time.
Conclusion
I have found that the claim is time barred and there is no power to extend the time within which to bring the action. I therefore refuse to make the declarations sought in paragraphs 4 and 5 of the plaintiff's chambers summons filed on 19 March 2021.
I will hear from the parties as to final orders, costs and next steps.
I certify that the preceding paragraph(s) comprise the reasons for decision of the Supreme Court of Western Australia.
AG
Research Associate to the Honourable Justice Archer
13 DECEMBER 2021
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