Peter Michael Dimitrov and ORS (according to the Schedule) v Bendigo And Adelaide Bank Limited (ACN 068 049 178) and ORS (according to the Schedule)
[2019] VSCA 41
•6 March 2019
SUPREME COURT OF VICTORIA
COURT OF APPEAL
S APCI 2018 0107
PETER MICHAEL DIMITROV & ORS (according to the Schedule) Applicants v BENDIGO AND ADELAIDE BANK LIMITED (ACN 068 049 178) & ORS (according to the Schedule) Respondents ---
JUDGES: WHELAN AP, HARGRAVE and EMERTON JJA WHERE HELD: MELBOURNE DATE OF HEARING: 12 February 2019 DATE OF JUDGMENT: 6 March 2019 MEDIUM NEUTRAL CITATION: [2019] VSCA 41 JUDGMENT APPEALED FROM: [2014] VSC 516 (Croft J) ---
APPEAL – Application for extension of time for leave to appeal – Proposed appeal against orders approving settlement of group proceedings – Delay over four years – Numerous transactions undertaken pursuant to or in reliance upon the settlement – Proposed appeal not futile – Unsatisfactory explanation for delay – Prejudice to respondents, other group members and third parties if extension granted – Application for extension of time refused – PCCEF Pty Ltd v Geelong Football Club Ltd [2018] VSCA 225 applied.
---
APPEARANCES: Counsel Solicitors For the Applicants Mr Q A Rares S Ivantsoff For the First to Fourth Respondents Ms P Neskovcin SC with
Ms F Gordon and
Mr D GrationAllens For the Eleventh to Thirteenth Respondents Mr G K J Rich SC with
Mr B K LimArnold Bloch Leibler WHELAN AP
HARGRAVE JA
EMERTON JA:1 By an application dated 7 September 2018 Peter Dimitrov, Mark Laszczuk and Tiffany Cairncross seek an extension of time to apply for leave to appeal orders made by Croft J in the Trial Division on 11 December 2014 (‘the approval orders’). Among other things, the approval orders approved a settlement pursuant to s 33V of the Supreme Court Act 1986 (‘the Act’) whereby a number of group proceedings under Part 4A of the Act were resolved. The settlement was embodied in a deed of settlement entered into on 23 July 2014 (‘the deed of settlement’).
2 The applicants seek the extension of time so as to enable them to apply for leave to have the approval orders vacated and to have alternative orders made which would alter the terms of the settlement insofar as it affects them, and, in particular, insofar as it affects the ability of the first respondent, Bendigo and Adelaide Bank Ltd (‘BABL’), to recover loans from them.
3 On 10 August 2018, BABL obtained judgments against each of Mr Laszczuk and Ms Cairncross in separate proceedings.[1] Applications for leave to appeal by Mr Laszczuk and Ms Cairncross in those separate proceedings have been made and were heard at the same time as this application for an extension of time.[2] A debt recovery proceeding by BABL against Mr Dimitrov is pending in the Trial Division and has been stayed pending the outcome of this application.
[1][2018] VSC 388.
[2]S APCI 2018 0108 and S APCI 2018 0109.
4 The issues raised by this application for extension of time and the issues raised on the separate applications by Mr Laszczuk and Ms Cairncross in relation to the judgments against them overlap. Mr Laszczuk and Ms Cairncross make submissions concerning the application and construction of the deed of settlement, which, if accepted, would render the application for an extension of time in which to apply for leave to appeal the approval orders unnecessary. Counsel appearing for them, and for Mr Dimitrov — who foreshadows relying on similar contentions when his debt recovery proceeding is heard — explained to us that the submissions concerning the application and construction of the deed of settlement constitute the applicants’ primary position and that the application for extension of time is a ‘fall back’ position advanced if ‘everything else fails’.[3]
[3]Transcript of Proceedings (12 February 2019) 10–11.
5 The parties to the applications by Mr Laszczuk and Ms Cairncross in relation to the judgments against them are those two individuals and BABL. The parties to this application for extension of time are Mr Laszczuk, Ms Cairncross and Mr Dimitrov as applicants and:
(1) BABL (first respondent);
(2) related companies of BABL (second, third and fourth respondents);
(3) the group proceeding lead plaintiffs (fifth, sixth, seventh respondents, and two further individuals joined as sixteenth and seventeenth respondents at the beginning of the hearing before us);
(4) two companies in the Great Southern group of companies (eighth and ninth respondents);
(5) Javelin Asset Management Pty Ltd (‘Javelin’) (tenth respondent);
(6) three former directors of companies in the Great Southern group (‘the directors’) (eleventh, twelfth and thirteenth respondents); and
(7) two other directors of companies in the Great Southern group who had been removed as parties to the group proceeding in which the application for approval was made (fourteenth and fifteenth respondents).
6 Javelin filed written submissions in opposition to this application.
7 BABL and its related companies (‘the BEN parties’) and the directors filed written submissions and appeared to oppose the application for an extension of time. We will refer to these parties as ‘the active respondents’.
8 In the course of the hearing the active respondents placed emphasis upon the application for an extension of time, in contrast to the ‘fall back’ position adopted by the applicants. We have determined that we should deal with this application for an extension of time separately from the applications for leave to appeal the judgments against Mr Laszczuk and Ms Cairncross.
Overview of the issues raised on the application for extension of time
9 Beginning in May 2010, a series of proceedings were instituted in this Court concerning the collapse of the Great Southern group. Some of those proceedings were group proceedings. We will collectively refer to them as the ‘Great Southern group proceedings’. They were commenced on behalf of approximately 21,000 group members who invested in Great Southern managed investment schemes.[4]
[4]Summary for the Court of Appeal (‘Summary’) [1], [3].
10 The applicants were investors in Great Southern managed investment schemes.[5] The BEN parties say that loans were advanced by the third respondent and the eighth respondent to the applicants in order to fund these investments, and that those loans were then assigned to BABL.[6]
[5]Ibid [1].
[6]Ibid.
11 There is, or may be, an issue between the parties as to whether the applicants are, or have been proved to be, ‘group members’ of the Great Southern group proceedings. The applicants have previously formally admitted that they are group members,[7] but they specifically would not agree to be so designated in the Summary for the Court of Appeal. For the purpose of this extension application, it is unnecessary to resolve that issue, as, if the applicants are not group members, the approval orders which they seek to vacate and vary could not affect them. If it were to be determined that the applicants are not group members, the application would be misconceived and pointless. In that sense, this application proceeds on the assumption that they are group members.
[7]Ms Cairncross and Mr Laszczuk admitted they were group members in paragraph [8] of defences filed in the separate recovery proceedings against them in March 2018. Mr Dimitrov admits that he was a group member at paragraph [16] of his defence in the recovery proceeding against him filed 5 July 2018. In Mr Dimitrov’s affidavit sworn in support of this application sworn on 5 September 2018 he says that he was a group member. The applicants do not dispute that, if they were group members, they never ‘opted out’.
12 In substance, the applicants seek to vacate and vary the approval orders because they contend those orders and the settlement they approve impermissibly restrict their ability to resist loan recovery proceedings by BABL against them. They explain their delay in applying for leave to appeal on a number of grounds. Principally, they assert that BABL delayed in seeking recovery from them and that they decided to wait until recovery proceedings were taken against them, which they considered might not happen at all, and to then respond to the position at that time. They contend that they did not have sufficient funds to adopt any other course. They also contend that the true import of the settlement, or its potential or asserted import, was not known until more recently. They contend that any earlier application for an extension of time, or an application for leave to appeal within time, would inevitably have failed as they would not have been able to establish substantial injustice.
13 In deciding whether to extend time within which to seek leave to appeal, the question to be determined is whether justice is best served by granting or refusing the extension sought. It is necessary to take account of several factors, including the length of the delay, the reasons for that delay, and the extent of any prejudice suffered by a respondent or any third party if the extension were to be granted. An extension of time will not be granted if the proposed appeal is so devoid of merit that it would be futile to do so.[8]
[8]The relevant principles were accurately summarised by McLeish JA in PCCEF Pty Ltd v Geelong Football Club Ltd [2018] VSCA 225 [39].
14 We have determined that this application for an extension of time must be refused. This is because of the prejudice which will be suffered by the respondents and by thousands of others if the extension were to be granted. The extension must also be refused because of the length of the delay and the unsatisfactory reasons given for that delay. These two factors, prejudice and delay, are interrelated. Had these two factors not been present, this is not a case where we would have refused an extension of time on the ground that the proposed appeal was so devoid of merit that it would be futile to grant the extension.
15 Before turning to the submissions made, and the reasons why we have reached the conclusions which we have, it is necessary to outline the relevant provisions of the deed of settlement which was the subject of the approval orders, to refer to relevant aspects of the approval hearing and Croft J’s reasons for the approval orders he made,[9] to set out the principal steps taken to implement the settlement since the approval, to set out and consider the material relied upon by the parties in relation to the explanation for delay, and to address the proposed grounds of appeal.
[9][2014] VSC 516 (‘Reasons’).
The deed of settlement
16 The deed of settlement resolved the Great Southern group proceedings, and certain other related proceedings. The proceedings that were settled had been the subject of a trial before Croft J which had commenced on 29 October 2012 and had extended over 90 sitting days, concluding on 24 October 2013. The parties had been advised that judgment would be delivered on Friday 25 July 2014. Within hours of being so advised, the Court was informed that the matter had been settled. Application was then made for an order approving the settlement under s 33V of the Act, an order authorising the plaintiffs in the Great Southern group proceedings nunc pro tunc to enter into and give effect to the deed of settlement for and on behalf of the group members, and for certain related orders.
17 For present purposes, it is unnecessary to refer in detail to all the provisions of the deed of settlement. It is necessary to refer to those aspects of the provisions which are important in relation to the application which is before the Court. We will not refer to or attempt to summarise all of the provisions of the deed.
18 The deed of settlement defines the expression ‘Claim’ as any claim ‘arising out of, or in connection with the contents of or the facts giving rise to’ a product disclosure statement issued in relation to Great Southern managed investment schemes, the ‘Loan Agreements’ (as defined) or the allegations made in or the facts giving rise to each of the ‘Proceedings’ (as defined), which includes the Great Southern group proceedings. The definition of the expression ‘Loan Agreements’ referred to advances made to scheme members to finance their interest in the managed investment schemes. A related expression, being ‘Loan Deeds’, was defined as meaning the ‘Loan Agreements’ which were the subject of the relevant proceedings and which had been entered into, between, relevantly, group members and specified lenders, being one or more of the BEN parties or Javelin.[10]
[10]Clause 1.
19 Pursuant to the deed of settlement, the insurers of one of the Great Southern companies agreed to pay $23.8 million which was to be distributed as follows:
(1)$20 million to certain group members who had contributed to meeting the costs of the solicitors who had conducted the trial.
(2)$250,000 to Javelin.
(3)$3,550,000 to be disbursed pro rata to group members pursuant to a scheme of arrangement.[11]
[11]Clause 6.1.
20 The deed of settlement provided for a scheme of arrangement between relevant Great Southern companies and their creditors. The substance of the scheme was that creditors with a claim relating to any product disclosure statement (group members) would receive distributions from the sum of $3,550,000 paid by the insurers, and the Great Southern companies and their directors and officers would be released.[12]
[12]Clause 3.
21 By clause 4.1.1 of the deed of settlement, the BEN parties agreed to waive interest on overdue amounts accrued and unpaid as at the date of approval of the settlement in respect of obligations owed to them under ‘Loan Deeds’.[13]
[13]Clause 4.1.1.
22 Javelin agreed that group members who had loans outstanding to it could take one of three options in relation to repayment. Those options provided for a substantial discount on the amount due, depending upon when repayment was made. The third also provided for a significant extension of the time for repayment.[14]
[14]Clause 5.
23 Clause 4.1.4 provided:
The Lead Plaintiffs for and on behalf of themselves and all Group Members acknowledge and admit the validity and enforceability of the Lead Plaintiffs’ Loan Deeds and the Group Members’ Loan Deeds.
24 By clause 4.1.10, the ‘Lead Plaintiffs’ on behalf of themselves and ‘Group Members’ agreed to release the BEN parties and Javelin from all ‘Claims’, as defined.
25 The proceeding in which the application for approval was made was one of the Great Southern group proceedings, being S CI 2010 02882. The third further amended statement of claim in that proceeding was included in the application book before us. In that statement of claim, group members were separated into groups described as ‘non self-funding group members’ and ‘self-funding group members’. The ‘non self-funding group members’ were those who had taken out loans to finance their investment. Amongst the allegations made was an allegation that BABL had demanded payment of money pursuant to certain loan deeds. It was alleged that group members had entered into these loan deeds in reliance upon misleading statements in product disclosure statements and had paid amounts pursuant to those loan deeds in reliance upon those misleading statements. The relief sought included declarations that the loan deeds were void and unenforceable, and orders for the repayment of money paid pursuant to them. The statement of claim set out the common issues of fact and law in relation to the group proceeding, amongst which were the issues of whether non self-funding group members were entitled to a declaration that the loan deeds were void and to an order for repayment of money paid under the loan deeds. The relief sought included declarations and orders to that effect.
26 The deed of settlement provided that orders approving the settlement and the scheme of arrangement were conditions precedent to the settlement.[15] The application for approval of the settlement, and for related orders, was heard on 18 November 2014.[16]
[15]Clause 2.
[16]Summary [5]–[6].
The approval hearing
27 The applicants were among a group of persons represented by the legal firm ERA Legal.[17]
[17]Summary [7].
28 Prior to the approval hearing, ERA Legal filed written submissions objecting to the approval of the settlement on behalf of the group members they represented. Amongst the submissions made, was the following:
The settlement requires the group members to acknowledge and admit that their loans with the BEN parties are valid and enforceable when:
…
(b)such an outcome may deny the Objectors the right to defend any enforcement proceedings taken by the BEN parties against them. They will be denied the opportunity to plead any defence that would otherwise be available to them to a claim by the BEN parties when such defence was not the subject of a matter pleaded in the group proceedings;
(c)the BEN parties will gain the benefit of declarations as to the validity and enforceability of the loans without limitation, despite not having sought any such declaration in the proceedings; and
(d)the BEN parties will gain the benefit of admissions as to the alleged validity and enforceability of Objectors’ loan deeds which they could not otherwise obtain in the Group Proceedings even if the lead plaintiffs were wholly unsuccessful.[18]
[18]Group Member Objectors represented by ERA Legal, ‘Submissions in Support of Objections to Settlement’, 13 October 2014, Application Book (‘AB’) I 1294 at 1296–7.
29 ERA Legal also appeared at the hearing of the approval application. The ERA Legal representative relied upon the written submission that had been filed and adopted submissions made orally by other objectors to similar effect.[19]
[19]Transcript of Proceedings (18 November 2014) 54 (‘Transcript’) and submissions made by Mr T Chalke on behalf of other Objectors at Transcript 46–53.
30 One matter relied upon by counsel for the BEN parties in the course of the approval hearing, relevant to the issue of the contention that clause 4.1.4 would preclude reliance upon individual defences to loan recovery proceedings, was the fact that the BEN parties’ solicitors had written to the objectors, including to ERA Legal, asking them to identify the defences available to them which they contended they would be precluded from raising, and that no such defences had been identified.[20]
[20]Transcript 105–6.
The Reasons
31 After setting out the relevant background, including the fact that he, as the trial judge, had completed his judgment on the proceedings, and after referring to the authorities concerning the approval of settlement of group proceedings, Croft J set out in full the relevant provisions of the deed of settlement and then summarised the submissions of the parties before him. Submissions had been made by the parties to the proceedings, the Australian Securities and Investments Commission and three groups of objectors, one of whom was the group represented by ERA Legal. The judge referred to the notification of the settlement which had been sent to all group members.
32 Croft J summarised the position of the objectors on the issue relevant to this application as follows:[21]
[21]Reasons [77].
As is discussed further in the reasons which follow, a number of objectors have raised objections to the enforceability clauses. While there are differences between those objections, the objections can be summarised as follows:
(a)first, some group members say that the enforceability clauses go beyond the relief sought by the Bank Parties in the group proceedings and, on that basis, the settlement deed (insofar as it includes the enforceability clauses) is not fair;
(b)secondly, some group members say that the opt out notice in the group proceedings did not adequately put them on notice of the risk that they might lose individual defences or counterclaims in the event the group proceedings settled;
(c)thirdly, a number of group members simply say that the enforceability clauses (or one or more of them) are generally not fair and reasonable; and
(d)fourthly, some group members say that the enforceability clauses will prevent them from raising individual defences or counterclaims relating to their Great Southern loans in the context of any subsequent debt recovery proceedings commenced by the Bank Parties.
The Bank Parties submit that those objections are unfounded and the enforceability clauses and the settlement as a whole are fair and reasonable and the settlement deed should be approved.
The reference to ‘the enforceability clauses’ was a reference, amongst other provisions, to the acknowledgement and admission made by the lead plaintiffs on behalf of group members that the Loan Deeds (as defined) were valid and enforceable (clause 4.1.4 ― as quoted above).
33 The judge set out the submissions of the BEN parties in response to these objections. Those submissions were, in summary, as follows:
(a) The deed reflected a commercial agreement reached after a long running trial. It was submitted that the lenders were probably giving up an entitlement to significant costs orders and were also agreeing to waive significant amounts of interest due under the loan agreements.
(b) The enforceability clauses brought finality to the dispute and ensured that the lenders were not left in a position where they continued to be faced with litigation concerning the enforceability of loan deeds.
(c) Those group members who wished to bring claims or defences that extended beyond the issues raised in the group proceedings should have opted out.
(d) It was submitted to be ‘likely’ that group members would be precluded from bringing subsequent claims in any event under the principles of estoppel or abuse of process.
34 The judge summarised similar submissions made on behalf of Javelin, in which it emphasised the significant reductions in loan liabilities or extensions of loan terms to which Javelin had agreed.[22]
[22]Reasons [80]–[82].
35 The judge observed that 91 per cent of objections received had included a complaint as to the extent of the enforceability clauses.[23] In that context, the judge referred to the submissions made on behalf of objectors, including the applicants through ERA Legal, and to a specific submission made by them that the lenders had not sought declarations to the effect of the enforceability clauses in the proceedings. In relation to that specific submission the judge concluded:
It is quite clear that the enforceability of the Loan Deeds was at the very heart of the Great Southern proceedings, particularly in terms of possible tangible outcomes for the plaintiffs and group members. Having regard to the position of the Bank Parties and Javelin as pleaded in the various proceedings, the substantive relief available would depend on the resolution of the enforceability issue. Consequently, the seeking of declaratory relief as to enforceability would be superfluous and unnecessary – so the fact that such relief was not sought is of no relevance in the present context. [24]
[23]Reasons [85].
[24]Reasons [91].
36 The judge addressed criticisms which were made of the opt out notice which had been sent to group members in 2012. As to those submissions the judge concluded:
Again, it is quite clear that the enforceability of the Loan Deeds was central to the Great Southern proceedings, particularly in terms of tangible outcomes. In my view, the opt out notice made this sufficiently clear to anybody who had any interest in the Great Southern proceedings, as a potential group member or somebody who was considering opting out and taking separate proceedings. In these circumstances, whether or not the Bank Parties or Javelin had sought declaratory relief as to enforceability is not a relevant consideration. [25]
[25]Reasons [98].
37 The judge did not accept submissions made on behalf of objectors, including by ERA Legal on behalf of the applicants, to the effect that the settlement should not be approved because group members would lose ‘a right of defence’ to recovery actions taken by the lenders in the future. In that respect the judge accepted the submissions made on behalf of the lenders, to which reference has already been made, and then added:
Additionally, though this also goes to the issue whether there are defences to enforcement of the Loan Deeds which the objectors say should not be precluded by approval of the settlement, the matters of substance referred to go to a fundamental issue at the heart of the Great Southern proceedings and could not be regarded as individual defence matters. [26]
[26]Reasons [107].
38 The judge said that one ground of objection by ERA Legal, and other objectors, was that ‘the enforceability clauses would prevent group members from raising individual defences or counterclaims relating to their Great Southern loans in the context of any subsequent debt recovery proceedings’. The judge recorded the lenders as agreeing that that was the effect of the enforceability clauses but submitting that they were nonetheless fair and reasonable.[27]
[27]Reasons [110]–[111].
39 The judge accepted the lenders’ analysis of the position, concluding that group members were clearly better off under the settlement than they would have been had he delivered the judgment he had written.[28]
[28]Reasons [143]–[151].
40 The judge referred to the fact that when requested to provide details of the postulated individual defences or counterclaims the legal advisers of the objectors, including ERA Legal, had failed to do so. The judge concluded that the assertion of disadvantage on this basis was ‘hypothetical’.[29]
[29]Reasons [111]–[115], [119].
41 Towards the end of the judgment the judge addressed a further matter relied upon by the lenders in relation to the enforceability clauses, being that the postulated individual defences or counterclaims would be precluded by the operation of issue estoppel, Anshun estoppel[30] and abuse of process in any event. The judge did not reach a definitive conclusion as to the operation of issue estoppel, but he did conclude:
The terms of the settlement deed, including the acknowledgments that the Loan Deeds are valid and enforceable, are consistent with the application of the principles of issue estoppel in the circumstances.[31]
[30]A reference to Port of Melbourne Authority v Anshun Pty Ltd (1981) 147 CLR 589.
[31]Reasons [129] (emphasis added).
42 In relation to the submission based on Anshun estoppel, the judge’s conclusion was as follows:
For the preceding reasons, any group members with purported claims or defences different to those pleaded in the group proceedings, and who wished to pursue those claims or defences, could have and should have opted out. By not opting out, as submitted by the Bank Parties, group members must be taken to have accepted that the claims as pleaded in the group proceedings represent all of the claims reasonably available to them. This is the reality of the way the class action regime operates. That being so, it follows that the Bank Parties are entitled to assume that the only challenges to the enforceability of the Loan Deeds group members wished to pursue were those made in the group proceedings. It would not be reasonable for group members to raise different claims or defences in subsequent proceedings. Further, the Bank Parties should be entitled to seek and achieve a complete settlement of the matters in dispute between them and the group members regarding the Loan Deeds. It would be an abuse of the Court’s process, especially having regard to the opt-out procedure, for any group members to frustrate this entitlement by bringing subsequent claims or defences regarding the Loan Deeds. [32]
[32]Reasons [132].
43 The above treatment of the reasons should not be taken as a comprehensive summary. Rather, it is a summary directed towards those aspects of the reasons which are relevant to the application for an extension of time.
Steps taken to implement the settlement since the approval
44 Under clause 4.1.2 of the deed of settlement, the BEN parties agreed not to commence or continue debt recovery proceedings until at least 30 days after the date of settlement approval. When Croft J published the Reasons and made the approval orders in December 2014, he expressed the hope and expectation that recovery proceedings would be delayed until 2 February 2015.
45 Following the approval, BABL manually adjusted every loan account of relevant group members to reflect the interest waiver that was provided for by clause 4.1.1 of the deed of settlement.[33] BABL commenced (or resumed) loan recovery steps in February 2015.[34]
[33]Affidavit of Stephen Flamer-Smith sworn 10 October 2018 [8].
[34]Ibid [10].
46 Since the approval, BABL has reached agreement on, or otherwise resolved, 5,479 (approximately 98 per cent) of the 5,615 loan accounts held by group members where BABL claimed loans were owed to it.[35] Proceedings concerning 87 loan accounts held by 55 group members remain unresolved. One hundred and twenty-one loan accounts among the 5,479 resolved accounts are the subject of judgments entered on the basis of the terms of the deed of settlement which have not been appealed.[36] There are 49 loan accounts which BABL has determined not to pursue.[37]
[35]Ibid [11].
[36]Ibid [13].
[37]Ibid [14].
47 Javelin has asserted (without objection) that it has allowed borrowers to make the election provided for by the deed of settlement and that the relief sought by the applicants has the potential to unwind four years of transactions.[38]
[38]Tenth Respondent, ‘Written Case’, 12 October 2018 [11].
48 On 15 September 2015, the scheme of arrangement provided for by the deed of settlement was proposed, and orders approving the scheme were made by Croft J in the Trial Division of this Court on 8 February 2016. The distributions provided for by the scheme to scheme creditors have been paid.[39] Approximately 52,000 investors were eligible to receive dividends.[40] The applicants are each scheme creditors who have received a cheque for their distribution. Mr Dimitrov presented his cheque. Mr Laszczuk and Ms Cairncross did not.[41]
[39]Affidavit of Martin Bruce Jones sworn 10 October 2018 [7]–[14].
[40]Ibid [17].
[41]Ibid [15]–[23].
Explanation for delay
49 Each of the applicants have sworn an affidavit explaining their delay in applying for leave to appeal or an extension of time within which to apply for leave to appeal.
50 Mr Dimitrov’s affidavit was sworn on 5 September 2018. After setting out some relevant background, he describes his understanding of the effect of the settlement upon him. He deposes that he understood that the settlement meant that he would not be able to sue BABL but that he did not understand it to mean that if he was sued by BABL he would be ‘rendered defenceless’. He says that he did not realise that that was contended to be the position until this Court’s decision in Pekell Delaire Holdings Pty Ltd.[42] A little later, when explaining why ERA Legal clients, including himself, had instructed ERA Legal to oppose the settlement, he swears that his understanding was that he might be precluded from making claims against BABL as a result of misrepresentations made to him by his financial adviser ‘or any other grounds to have the Loans set aside or set off’.
[42]A reference to Bendigo & Adelaide Bank Ltd v Pekell Delaire Holdings Pty Ltd (2017) 118 ACSR 592 (‘Pekell Delaire’), a judgment handed down on 17 March 2017.
51 We interpose here to briefly outline the relevant effect of this Court’s decision in Pekell Delaire. In Timbercorp Finance Pty Ltd (in liq) v Collins,[43] the High Court had held that investors in different forestry projects, who had been group members in different group proceedings which had proceeded to judgment, were not precluded by issue estoppel or Anshun estoppel from subsequently raising individual issues about their loans in defence of loan recovery proceedings against them. In Pekell Delaire this Court held that that analysis was not relevantly applicable to the deed of settlement which is the subject of this application. The Court held that the analysis in relation to a settlement is different to the analysis in relation to a judgment, and that a settlement could, and did in this case, resolve issues and bind the parties beyond the issues pleaded in the group proceeding. The Court held that a settlement of a group proceeding could, and did in this case, affect the individual claims and defences of group members.[44] In substance, that is the position for which the lenders had expressly contended at the approval hearing.
[43](2016) 259 CLR 212 (‘Timbercorp’).
[44]Pekell Delaire (2017) 118 ACSR 592, 606–9 [49]–[59].
52 Mr Dimitrov deposes that after the approval ‘I did not know whether BABL would sue me or not’. He says that he did not have the money available to personally appeal from the approval decision. He accordingly considered that the ‘appropriate course of action’ was to wait and see if BABL commenced recovery action. He swears that BABL did not do so until ‘[w]ell over a year later’ when BABL commenced recovery proceedings in the District Court of New South Wales against him. Mr Dimitrov deposes that, as he could not afford legal representation, ‘at this time’ he engaged a commercial adviser, Ms Sue Bennell of the SR Group, to assist him in reaching a negotiated settlement. He then sets out steps taken with a view to negotiating a resolution with BABL, including complaints lodged with the Financial Ombudsman Service (‘FOS’). Mr Dimitrov also deposes to steps taken in late 2016 in the District Court of New South Wales. He says that when this Court’s decision in Pekell Delaire was handed down on 17 March 2017, Ms Bennell sought his instructions as to whether he was prepared to apply for public funding in order to bring a ‘test case’ in the High Court. He did obtain funding for that test case, which he instituted on 2 August 2017. Edelman J gave judgment on that matter on 1 December 2017. Mr Dimitrov specifically refers to a passage in the judgment where Edelman J suggested that there would be ‘significant advantages’ for Mr Dimitrov if he were to proceed by way of an application for leave to appeal to the Victorian Court of Appeal. Mr Dimitrov swears that he sought to appeal from Edelman J’s decision. He also applied to set aside a default judgment which had been obtained in the District Court of New South Wales against him. He then refers to a number of judgments handed down in 2018, in particular judgments against his co-applicants, Ms Cairncross and Mr Laszczuk, and a judgment in the New South Wales Supreme Court in the matter of Bendigo & Adelaide Bank Ltd v Howard.[45] That decision led Mr Dimitrov to consider that there was ‘reason to doubt’ BABL’s allegation that he had ever entered into a loan arrangement at all. Mr Dimitrov deposes that he wishes to ‘put BABL to proof’ in relation to the loans.
[45][2018] NSWSC 383.
53 Ms Cairncross’s affidavit was sworn on 3 September 2018. She deposes that after the approval was granted she considered that ‘the best way forward for me was to wait and see if BABL initiated recovery proceedings against me’. She swears that she did not have ‘funds available’ to pursue an appeal at that time. She says that ‘for over two years’ she ‘heard nothing further’ until she was served with a written statement of claim in London on 7 April 2017. She then sets out steps taken in the recovery proceeding against her culminating in a judgment obtained in favour of BABL on 10 August 2018, which is the subject of her separate application for leave to appeal.
54 Mr Laszczuk’s affidavit was sworn on 5 September 2018. He deposes that his understanding of the settlement at the time of the approval, relying upon advice from ERA Legal, was that ‘it would result in an acknowledgment by borrowers that their loans to BABL were valid and enforceable’. He deposes that he understood that to mean that he could not sue BABL again as a plaintiff but that: ‘[w]hat I did not understand it to mean at the time was that if BABL sued me I could not defend myself’.
55 Mr Laszczuk deposes that he did not have sufficient funds to appeal the approval orders and that he took the approach that there was ‘a possibility that BABL would not try to enforce the loan against me’. He deposes that ‘[w]ell over a year’ after the approval, in or about late April 2016, he was served with a written statement of claim in which BABL sought recovery of a loan. Mr Laszczuk says that he was aware of the Pekell Delaire proceeding and that he thought ‘the most appropriate thing to do was to await the outcome of the Pekell decision’. After the Court of Appeal’s decision in that proceeding on 17 March 2017 Mr Laszczuk deposes that his then solicitors filed a notice of ceasing to act because they felt he had no viable defence available to him. Mr Laszczuk deposes that he then became aware of the proceedings being taken by Mr Dimitrov. He sets out the progress of those proceedings and of BABL’s recovery proceeding against him which resulted in a judgment in favour of BABL on 10 August 2018, which is the subject of his separate application.
56 An affidavit by Stephen Flamer-Smith, an officer of BABL, sworn on 10 October 2018 adds further information in relation to recovery action concerning the three applicants.
57 The impression given by Mr Dimitrov’s affidavit (implicitly if not expressly) is that nothing happened in relation to recovery action against him between the approval orders and May 2016 when he was served with a statement of claim issued in the District Court of New South Wales, causing him to then engage Ms Bennell at the SR Group. The Flamer-Smith affidavit reveals that this is not accurate. BABL received an authority dated 5 January 2015 from SR Group, authorising that organisation to deal with BABL in relation to Mr Dimitrov’s loans. Dealings between BABL, SR Group on behalf of Mr Dimitrov, and the FOS were continuous throughout 2015 and early 2016.
58 The Flamer-Smith affidavit also reveals that SR Group began negotiating with BABL on Mr Laszczuk’s behalf in December 2014, within days of the settlement approval.
59 Dealings between BABL and Ms Cairncross also involved SR Group. The Flamer-Smith affidavit exhibits a letter of authorisation signed by Ms Cairncross dated 2 February 2015 which was sent to BABL. There was a period in relation to Ms Cairncross where recovery action was suspended. That was the period between June 2015 and December 2016 when Ms Cairncross and others pursued a class action against ERA Legal in the Supreme Court of New South Wales. That period of suspension came to an end on 15 December 2016 when solicitors acting on behalf of BABL served a notice of demand on Ms Cairncross, prompting her to lodge a complaint with the FOS. The debt recovery proceeding against Ms Cairncross in this Court was commenced on 27 February 2017 after the FOS advised on 21 February 2017 that they would not consider the dispute further.
Proposed grounds of appeal
60 The proposed grounds of appeal are as follows:
Ground 1: The orders of the Court in Clarke were beyond power/ jurisdiction (‘power’) insofar as they bound Mr Dimitov, Mrs Cairncross and Mr Laszczuk beyond their common issues and ought to be set aside to that extent.
Ground 1A: The primary judge erred at paragraphs [110] to [154] by finding that an approval judgment of the Court in its class action jurisdiction could go beyond the common issues.
Ground 1B: The approval judgment and orders approving the settlement were beyond constitutional power for the reasons argued by Mrs Cairncross and Mr Laszczuk in BABL v Laszczuk and Cairncross [2018] VSC 388 which were adumbrated by the Court at [53] to [62].
Ground 1C: The decision in Clarke was a breach of the Victorian Charter of Human Rights and Responsibilities Act 2006 s 24(1), because of the reasons set out in Mr Laszczuk’s submissions in [61] of BABL v Laszczuk and Cairncross [2018] VSC 388.
Ground 2: The Court erred in failing to give directions that made provision for group members to ventilate their non-common issues once the common issues were resolved by the approval judgment pursuant to s 33Q (and in the alternative, s 33S).
61 The reference to ‘Clarke’ in proposed ground 1 is a reference to the proceeding in which the approval orders were made. The reference to paragraphs [110] to [154] in proposed ground 1A is a reference to those paragraphs in the Reasons where the judge dealt with submissions made by the lenders concerning the effect of issue estoppel and Anshun estoppel if the group proceedings had proceeded to judgment. The reference to BABL v Laszczuk and Cairncross in proposed ground 1B is a reference to the proceedings in which judgments were obtained against Mr Laszczuk and Ms Cairncross, which are the subject of the separate applications for leave to appeal by them. The passage at paragraphs [53] to [62] is a section of that judgment where the judge dealt with submissions made on behalf of Mr Laszczuk and Ms Cairncross to the effect that the approval orders and the settlement deed should be construed so that they operate within legislative and constitutional power. The reference in proposed ground 1C to paragraph [61] of the decision in BABL v Laszczuk and Cairncross is a reference to a submission put by Mr Laszczuk in that proceeding to the effect that the approval orders and the deed of settlement should be construed as only relating to common issues in the Great Southern group proceeding because otherwise principles of natural justice will have been infringed.
62 The orders which it is proposed that the Court should make, should the proposed grounds succeed, are as follows:
1.Vacate the orders below.
2.Settlement of the Group Proceedings in the terms contained in the deed of settlement executed by the parties on 23 July 2014 and exhibited and marked ‘SGW-1’ to the affidavit of Stuart Graeme Walter sworn on 15 August 2014 (‘deed of settlement’) is approved pursuant to section 33V(1) of the Supreme Court Act 1986, except for the group members Applicants (Peter Dimitrov, Tiffany Cairncross and Mark Laszczuk) in these proceedings in which case it is approved only insofar as it settles their common issues.
2.The plaintiffs in the Group Proceedings have the authority of the ‘Group Members’ (as that term is defined in each of the Group Proceedings), nunc pro tunc, to enter into and give effect to the deed of settlement and the transactions contemplated thereby for and on behalf of the Group Members insofar as the deed of settlement relates to the common issues of the group member Applicants (Peter Dimitrov, Tiffany Cairncross and Mark Laszczuk) in these proceedings.
3. Costs.
4.Any further or other the Court deems fit.
Submissions
63 The applicants submitted that the delay in bringing the application for an extension of time was not attributable to them but was attributable to BABL which had delayed in instituting recovery proceedings against them. It was submitted on behalf of the applicants that it had been unclear whether BABL would sue them at all. Reference was made in that respect to an affidavit which had been sworn in 2017 by an officer of BABL which had indicated that of 5,615 borrowers recovery proceedings against 1,588 of them remained unresolved. It was said that this was a basis for a belief that many borrowers would not be pursued. The applicants submitted that they were not served with recovery proceedings until April 2016 in the case of Mr Laszczuk, May 2016 in the case of Mr Dimitrov, and April 2017 in the case of Ms Cairncross. The applicants submitted that their approach of waiting until sued was reasonable and had been explained in their affidavits. It was submitted that once proceedings were taken against them they had taken reasonable steps to respond to them. It was also submitted that the relevant issues had evolved over time and in that respect particular reference was made to the decision in Pekell Delaire. Mr Dimitrov had taken High Court proceedings which had not been dismissed until 1 December 2017 and Mr Laszczuk and Ms Cairncross had contested the recovery proceedings against them. The applicants relied upon an observation by Croft J in the judgment against Mr Laszczuk and Ms Cairncross to the effect that if they wished to contend that the approval orders ought to be set aside perhaps the only means by which that could be done was by applying for an extension of time and for leave to appeal in the Court of Appeal.
64 The applicants submitted that during the period of delay, or at least for substantial portions of it, the effect, or contended effect, of the settlement was uncertain. It was contended that it was not known that the Court would ‘imply/ construe’ the settlement so as to preclude defences. It was also submitted that the High Court decision in Timbercorp was significant, but it was not known that this Court would hold that the analysis in that case did not apply to settlements, a reference to Pekell Delaire.
65 The applicants submitted that if they had applied for leave to appeal within time their application would inevitably have failed because they would have been unable to establish that they had suffered substantial injustice. This was said to be because their position at that time was that they would suffer injustice only if two hypothetical circumstances should come to pass, being: (1) if BABL sought recovery from them; and (2) if the settlement deed was interpreted so as to preclude their ability to rely on defences. It was submitted that the applicants were entitled to wait until those risks became ‘real and immediate’. Further, the applicants submitted that limitation defences they now seek to advance had not yet arisen at the date of settlement, and that their desire to put BABL to its proof was hypothetical until BABL took proceedings against them.
66 The applicants relied upon a further observation by Croft J. Croft J had said in a Court hearing that he would be assisted by guidance from the Court of Appeal in relation to construction of the deed of settlement in the light of the Court of Appeal decisions in Byrne v Javelin Asset Management Pty Ltd[46] and Pekell Delaire.
[46][2016] VSCA 214 (‘Byrne’).
67 In the course of the application for an extension of time, all of the parties who appeared devoted considerable attention to the merits of the proposed grounds of appeal. We have concluded that we would not refuse an extension of time on the basis that pursuit of the proposed appeal is futile because the proposed grounds have no merits. Given this conclusion, it is neither necessary nor desirable to address the submissions made on the merits of the proposed grounds any further.
68 The active respondents supported and adopted the submissions they each made, although they emphasised different aspects of the matter. All emphasised the central role which the issue of the validity and enforceability of the loan deeds had played in the Great Southern group proceedings, as the judge had explained in the Reasons.
69 The BEN parties and Javelin submitted that it was always clear that the lenders would seek recovery from borrower group members. Javelin submitted that the assertion that there was any doubt about that in the applicants’ affidavits was ‘disingenuous’. The lenders submitted that, in any event, the asserted possibility that recovery action might not be brought against them could not be a proper reason for delay.
70 The BEN parties and Javelin submitted that the suggestion that there had been relevant uncertainty about the effect of the deed of settlement ought to be rejected. They submitted that the effect of the settlement had been the subject of detailed submissions before Croft J and was addressed in detail by Croft J in the Reasons.
71 All of the active respondents emphasised the length of the delay and the prejudice that would be suffered if the relief now sought in the proposed appeal were to be granted. The BEN parties and Javelin emphasised that the ‘vast majority’ of borrowers had already had their position resolved either by agreement or court determination. They submitted that the relief proposed, although it purported to limit itself to the position of the applicants, inevitably would affect, or potentially affect, all of the group member borrowers. Javelin characterised the potential consequences as being unclear but ‘far reaching’, and asked rhetorically whether group members whose position had already been resolved could seek similar relief to the applicants and a return of any monies paid, and whether lenders could seek to sue borrowers for the full amount allegedly due on their loans without the concessions that had been agreed to in the deed of settlement.
72 The active respondents emphasised the importance of finality.
73 Counsel for the directors particularly emphasised the fact that group members potentially affected by the relief claimed had not been joined as respondents to the application or even notified of it.
74 The active respondents submitted that the orders as proposed would significantly undermine the commercial arrangement which had been reached and embodied in the deed of settlement.
75 The active respondents submitted that the scheme of arrangement was important. The scheme had already been implemented. The applicants do not seek to set it aside. It will remain binding. It was submitted that the deed and the scheme could not be separated as they constituted one overall commercial resolution.
76 Counsel for the directors submitted that there was additional prejudice to them by reason of the strain imposed upon them by the re-agitation of the claims made against them which had been settled. There was also said to be prejudice to the insurers who had made substantial payments pursuant to the deed of settlement.
Analysis ― explanation for delay
77 The reasons for delay deposed to by the applicants, and which were the subject of submissions made on their behalf, are not satisfactory.
78 Mr Dimitrov and Mr Laszczuk’s assertions that they did not realise the settlement would or may preclude them from defending recovery proceedings are inconsistent with the submissions that were made on their behalf by ERA Legal at the approval hearing. We have previously quoted the relevant parts of those submissions at some length and have also referred to and quoted relevant parts of Croft J’s treatment of them in the Reasons. In our opinion it is clear that, at the least, the potential effect of the settlement on the capacity of group members to defend loan recovery proceedings against them was an important and significant matter dealt with both by ERA Legal on behalf of the applicants, by the lenders in response, and by Croft J in the Reasons. The assertions that this effect, or potential effect, was in some sense unknown cannot be accepted.
79 The judgments in Byrne and Pekell Delaire were delivered after the approval orders. But, in substance, they support an analysis for which the lenders have always contended, including at the approval hearing itself.
80 The assertion by each of the applicants in their affidavits, and in the submissions made on their behalf, that they delayed seeking to appeal the approval orders because they believed recovery might not be sought against them by BABL, and the assertion that until sued any prejudice they suffered was ‘hypothetical’, must also be rejected. The Flamer-Smith affidavit reveals that negotiations between the parties concerning recovery of the loans were relevantly continuous from the approval orders. That is why each of the applicants engaged the SR Group, and why complaints were made to the FOS.
81 Insofar as the applicants contend that they have delayed because of lack of funds, no explanation has been given for what has changed or how they are now funding the proceedings before this Court.
Analysis ― prejudice
82 The applicants in their submissions said little or nothing about prejudice. They attempt to address the issue by confining the orders they seek to their own position. We do not accept that the issue can be addressed in that way. Many, probably thousands, of the group member borrowers will be in a position relevantly indistinguishable from that of the applicants. If the applicants are entitled to relief, there will be many others entitled to similar relief.
83 As the active respondents submitted, finality is important. It is far too late for the applicants to now seek to overturn a commercial arrangement, approved by court order, upon the basis of which literally thousands of commercial decisions have been made and arrangements entered into over the last four years.
84 Further, the scheme of arrangement has been propounded, approved, and implemented. It is an integral part of the commercial resolution embodied in the deed of settlement. It cannot simply be ignored.
Conclusion
85 The application for an extension of time in which to seek leave to appeal the approval orders will be dismissed.
- - -
SCHEDULE OF PARTIES
| PETER MICHAEL DIMITROV | First Applicant |
| MARK SIMON LASZCZUK | Second Applicant |
| TIFFANY MICHELLE CAIRNCROSS | Third Applicant |
| BENDIGO AND ADELAIDE BANK LIMITED (ACN 068 049 178) | First Respondent |
| ABL CUSTODIAN SERVICES PTY LTD IN ITS CAPACITY AS TRUSTEE OF THE ABL PORTFOLIO FUNDING TRUST 2007-1 (ACN 097 889 720) | Second Respondent |
| ABL NOMINEES PTY LTD (ACN 106 756 521) IN ITS CAPACITY AS TRUSTEE OF THE LIGHTHOUSE TRUST NO 12 | Third Respondent |
| PIRIE STREET HOLDINGS LIMITED (ACN 061 461 550) (FORMERLY ADELAIDE BANK LIMITED) | Fourth Respondent |
| PETER CLARKE AS TRUSTEE OF THE CLARKE FAMILY TRUST | Fifth Respondent |
| SAMANTHA BARBARA MURRAY | Sixth Respondent |
| RAYMOND CARL DRUMMOND | Seventh Respondent |
| GREAT SOUTHERN FINANCE PTY LTD (RECEIVERS & MANAGERS APPOINTED) (IN LIQUIDATION) (ACN 009 235 143) | Eighth Respondent |
| GREAT SOUTHERN MANAGERS AUSTRALIA LIMITED (RECEIVERS & MANAGERS APPOINTED) (IN LIQUIDATION) (ACN 083 825 405) | Ninth Respondent |
| JAVELIN ASSET MANAGEMENT PTY LTD (ACN 136 367 194) | Tenth Respondent |
| JOHN CARLTON YOUNG | Eleventh Respondent |
| CAMERON ARTHUR RHODES | Twelfth Respondent |
| PHILLIP CHARLES BUTLIN | Thirteenth Respondent |
| JEFFREY ARTHUR SYDNEY MEWS | Fourteenth Respondent |
| PETER JOHN PATRIKEOS | Fifteenth Respondent |
| LAURENCE HOGAN | Sixteenth Respondent |
| JACLYNE FISHER | Seventeenth Respondent |
7
0