Power v Nicholson Ryan

IN THE SUPREME COURT OF VICTORIA

Not Restricted

AT MELBOURNE
COMMON LAW DIVISION
PROFESSIONAL LIABILITY LIST

S ECI 2023 03544

BETWEEN:

JACQUELINE POWER & ANOR (according to the attached Schedule)	Plaintiffs
v
NICHOLSON RYAN – FORMERLY FOSTER NICHOLSON RYAN (ACN 64 619 343 074) & ANOR (according to the attached Schedule)	Defendants

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JUDGE:	Daly AsJ
WHERE HELD:	Melbourne
DATE OF HEARING:	22 February 2024
DATE OF JUDGMENT:	29 July 2024
CASE MAY BE CITED AS:	Power v Nicholson Ryan
MEDIUM NEUTRAL CITATION:	[2024] VSC 441

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PRACTICE AND PROCEDURE — Application for summary judgment pursuant to s 63 of the Civil Procedure Act 2010 (Vic) and/or striking out of the plaintiffs’ claim pursuant to r 23.02 of the Supreme Court (General Civil Procedure) Rules 2015 (Vic) — Whether plaintiffs have a real prospect of success — Second plaintiff is a company controlled by the first plaintiff — Plaintiffs claim to have incurred ‘wasted costs’ by reason of the defendants’ conduct in an earlier proceeding which sought the winding up of a company in which the second plaintiff was a minority shareholder — First defendant acted for opposing parties in winding up proceeding — Second defendant acted for second plaintiff for a period of time in winding up proceeding — Statement of claim discloses no cause of action — First defendant had no legal or equitable duty to either of the plaintiffs — Allegations against second defendant misconceived —Plaintiffs’ claims have no real prospects of success — No real prospect of the plaintiffs bringing a tenable cause of action against either of the defendants — Plaintiffs’ statement of claim struck out.

PRACTICE AND PROCEDURE — Alleged breach of overarching obligations giving rise to relief under s 29 of the Civil Procedure Act 2010 (Vic) (‘Act’) — Application for grant of extension of time pursuant to s 31(2) of the Act — Whether plaintiffs were aware of any breaches of any overarching obligations prior to the conclusion of the proceeding in which the alleged breaches took place — Plaintiffs failed to establish they were unaware of defendants’ breaches of any overarching obligations prior to the finalisation of the proceeding save in one instance — Jurisdiction to grant extension of time not enlivened — Plaintiffs have no real prospects of establishing the conduct amounted to a breach of any overarching obligations — Plaintiffs are impermissibly seeking to relitigate matters which were, or should have been, heard and determined in prior litigation — Giles v Jeffrey [2016] VSCA 314 referred to — Application dismissed.

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APPEARANCES:	Counsel	Solicitors
For the First Plaintiff	In person
For the Second Plaintiff	The first plaintiff (by leave granted for hearing on 22 February 2024).
For the First Defendant	Mr C Brown KC	Nicholson Ryan Lawyers
For the Second Defendant	Mr B Petrie of counsel	K & L Gates

HER HONOUR:

Introduction and background

This proceeding concerns, among other things, the conduct of litigation involving the second plaintiff, Freefall Pty Ltd (‘Freefall’), a company controlled by the first plaintiff, Ms Jacqueline Power, and a corporation in which Freefall was a shareholder between 2012 and 2020, Project Collaboration Pty Ltd (‘Project Collaboration’). Ultimately, as a consequence of that litigation (‘winding up proceeding’), Project Collaboration was wound up, and, by reason of, among other things, a shortfall in funds in the liquidation, Freefall was unable to recover the value of its investment in Project Collaboration. Ms Power says that she and Freefall have incurred ‘wasted costs’ by reason of, among other things, the conduct of the winding up proceeding by the defendants. Both defendants are firms of solicitors.

Project Collaboration was established in 2011, and conducted an information technology business, marketing and distributing software for customers in the construction and mining industries. One of the three founding directors of Project Collaboration (‘directors’) is Ms Power’s brother-in-law. Along with other associates of the directors, Freefall made an investment of $100,000 in Project Collaboration in around 2012, in consideration for a 10 percent share of the company, with the shares purchased being non-voting preference shares.[1]
[1]Subsequently diluted to 7.14%.

In around February 2012, Project Collaboration secured a licencing agreement with 4Projects Ltd (‘4Projects contract’). 4Projects Ltd appointed Project Collaboration as its agent to sell licences for the use of 4Projects’ software to third party clients in Australia. Following the purchase of 4Projects Ltd by Viewpoint Ltd, the 4Projects contract was terminated by Viewpoint in April 2014 in acrimonious circumstances.

On 6 May 2014, Project Collaboration commenced a proceeding in the County Court of Victoria against Viewpoint (‘Viewpoint proceeding’), alleging that Viewpoint repudiated the 4Projects contract by unlawfully terminating Project Collaboration’s licence to sell its software. In support of its claim in the Viewpoint proceeding, Project Collaboration obtained a report from Mr David Ferrier, a forensic accountant with BDO, to assess the loss suffered by Project Collaboration resulting from Viewpoint’s alleged repudiation of the 4Projects agreement (‘BDO report’). The BDO report estimated that the loss to Project Collaboration caused by Viewpoint’s wrongful termination of the 4Projects contract was approximately $4.6 million.

In the Viewpoint proceeding, Viewpoint was represented by Thomson Geer, with Mr Henrik Lassen having carriage of the matter. Mr Leath Nicholson of Nicholson Foster Nicholson Ryan (now Nicholson Ryan Lawyers (‘NRL’)), the first defendant in this proceeding, acted for Project Collaboration in the Viewpoint proceeding.

In 2013, knowing that the dispute ultimately litigated in the Viewpoint proceeding was on the cards, the directors established a new company, Survey Cloud Pty Ltd (‘Survey Cloud’), to pursue further business opportunities, ultimately, unsuccessfully.[2]
[2]Survey Cloud was deregistered in 2017, but had effectively ceased trading by late 2015.

The Viewpoint proceeding was settled in July 2015 with a payment by Viewpoint to Project Collaboration of $990,000 (‘settlement sum’). In August 2015, following the settlement of the Viewpoint proceeding, Ms Power on behalf of Freefall, and another shareholder, Ms Linda Little, a friend of Ms Power, rejected an offer by the directors to pay them $70,000 each to buy back their shares in Project Collaboration. The share buyback process, which was co-ordinated by Mr Nicholson, was part of a plan by the directors to use the settlement sum to pay off the liabilities of Project Collaboration, return the residue to shareholders rateably (albeit with the directors receiving less than their full due), and then deregister Project Collaboration.

Between August 2015 and June 2017, Ms Power on behalf of Freefall and Mr Nicholson of NRL on behalf of Project Collaboration engaged in increasingly fractious correspondence regarding the share buyback process and the future of Project Collaboration. Ms Power made a number of allegations against the directors and Mr Nicholson regarding the conduct and settlement of the Viewpoint proceeding and the management of Project Collaboration generally. Ultimately, Ms Power demanded that Project Collaboration be wound up.

On 8 June 2017, Freefall filed an application in this Court under s 461(k) of the Corporations Act 2001 (Cth) (‘Corporations Act’) seeking that Project Collaboration be wound up on just and equitable grounds. At the first directions hearing before Randall AsJ on 14 July 2017 (‘July 2017 hearing’) counsel for Project Collaboration said that the company and the directors (‘Project Collaboration parties’)[3] would oppose the application to wind up Project Collaboration. What was said by counsel for the Project Collaboration parties at the July 2017 hearing is one of the complaints levelled by Ms Power and Freefall against NRL in this proceeding.
[3]Ultimately, the defendants in the winding up proceeding were the directors and remaining shareholders of Project Collaboration.

The affidavit in support of the application to wind up Project Collaboration was drawn by Ms Power and sworn on 2 June 2017, and made a number of complaints about the conduct of the directors. These complaints included the formation of Survey Cloud, Survey Cloud’s pursuit of business opportunities said to properly belong to Project Collaboration, the directors’ allocation of bonus shares in Project Collaboration to themselves without informing other shareholders, their failure to consult with shareholders about the conduct of the Viewpoint proceeding, the disappointing return received from the settlement of the Viewpoint proceeding, the share buyback process, and the directors’ failure to provide financial and other information to shareholders. The affidavit concluded as follows:

I am greatly concerned that the directors have acted in their own interests financially and not that of [Project Collaboration] shareholders.
I strongly believe that setting up [Survey Cloud] may have had the effect of putting assets of [Project Collaboration] beyond the reach of [Project Collaboration] shareholders, including and not limited to the full and final settlement of the payment from [the Viewpoint] proceeding.

Apart from a brief reference to Project Collaboration no longer being registered for GST purposes, there was no assertion in this affidavit that Project Collaboration had ceased trading.

On 8 August 2017, Freefall, by now represented by solicitors and counsel, amended its originating process to seek relief against the Project Collaboration parties under ss 232 and 233 of the Corporations Act, that is, on grounds that Freefall and Ms Little (who was joined as a plaintiff to the winding up proceeding that day) had been oppressed by the Project Collaboration parties.

On 16 October 2017, Mr Lassen, now with Logie Smith Lanyon (now Colin Biggers & Paisley) (‘LSL’), the second defendant in this proceeding, was retained to represent the plaintiffs in the winding up proceeding. On 9 November 2017, the Project Collaboration parties issued an application to restrain Mr Lassen from acting for the plaintiffs (‘restraint application’), which was heard by Efthim AsJ on 19 February 2018. His Honour dismissed the restraint application on 28 March 2018, on the basis that the applicants had not demonstrated that Mr Lassen had access to any confidential information which could reduce public confidence in the administration of justice. On 1 May 2018, his Honour ordered that the Project Collaboration parties pay the plaintiffs’ costs of the restraint application.

In July 2018 LSL ceased acting for the plaintiffs. In February 2019, shortly prior to the scheduled trial of the winding up proceeding, Freefall’s co-plaintiff, Ms Linda Little, settled with the Project Collaboration parties, and took no further part in the winding up proceeding.

On 26 February 2019, the Project Collaboration parties filed an interlocutory application seeking that Project Collaboration be wound up, on the basis that the company was not trading, and its assets had been exhausted in defending the winding up proceeding. However, the parties were unable to resolve Freefall’s oppression claims,[4] and Efthim AsJ adjourned the hearing of the interlocutory application to the trial of the proceeding. At this time, Freefall was represented by Ms Power, then by Robinson Gill, followed by Madgwicks.
[4]In his reasons concerning the costs of the winding up proceeding (‘costs reasons’), Efthim AsJ referred to a number of offers made by the Project Collaboration parties to the plaintiffs in the winding up proceeding, including offers made in 2017 and 2018 which effectively restated the share buyback offers made in 2015, and later, a series of ‘walk away’ offers. These offers were rejected, and shortly prior to the trial, Freefall offered to accept payment to it of $250,000 inclusive of costs.

In about April 2019, NRL provided a copy of the BDO report to the plaintiffs. The BDO report provided an assessment of the loss said to have been suffered by Project Collaboration resulting from the termination of the 4Projects contract. Included in the BDO report was a statement that Project Collaboration had ‘ceased to operate as a result of the termination of [the 4Projects contract], causing a ‘permanent diminution in the value of [Project Collaboration]’. The value of the loss suffered by Project Collaboration was calculated as the value of the business assuming the 4Projects contract had not been terminated less the actual value of Project Collaboration following the termination of the 4Projects contract. The BDO report concluded that, without the benefit of the 4Projects contract, Project Collaboration had an actual value of $186,000.

The trial of the winding up proceeding was held in September and October 2019 before Efthim AsJ. Madgwicks and Mr Devanny of counsel represented Freefall at the trial of the winding up proceeding. On 21 April 2020, Efthim AsJ made orders winding up Project Collaboration, but dismissed Freefall’s oppression claims. On 27 May 2020, Efthim AsJ ordered that Ms Power and Freefall be jointly and severally liable to pay the Project Collaboration parties’ costs of the winding up proceeding. His Honour published reasons with respect to the restraint application (‘restraint reasons’), the substantive application (‘main reasons’) and with respect to the question of costs (‘costs reasons’). The issues raised and determined and the submissions of the parties referred to in the restraint reasons, the main reasons, and the costs reasons are directly relevant to the issues in the current applications, and are canvassed in more detail later in these reasons.

Following the conclusion of the winding up proceeding, Ms Power continued to pursue her grievances with respect to the conduct of the directors with both the liquidator of Project Collaboration (‘liquidator’) and NRL, and later pursued what she described in correspondence as ‘service issues’ with LSL. She also made complaints about NRL and LSL to the legal profession regulators. However, Ms Power was not satisfied by the results she received from her efforts in that regard, and the plaintiffs issued this proceeding on 19 July 2023. In February 2024, the plaintiffs issued an application for compensation pursuant to s 29 of the Civil Procedure Act 2010 (Vic) (‘CPA’) (‘s 29 application’).

The defendants in this proceeding are NRL, who acted for Project Collaboration in the Viewpoint proceeding and the Project Collaboration parties in the winding up proceeding, and LSL, who acted for the plaintiffs in the winding up proceeding between October 2017 and July 2018. Mr Lassen is no longer with LSL. They seek, among other things, summary judgment against the plaintiffs in this proceeding.

The current proceeding

The writ and statement of claim were drawn by Ms Power on behalf of both plaintiffs, and provides as follows:

At all material times to this proceeding:
Jacqueline Power is a natural person capable of representing herself.
Jacqueline Power is the sole shareholder and sole director of the non trading company, Freefall Holdings Pty Ltd, existing only for the purpose of litigation and is authorised to represent it and act on its behalf.
Nicholson Ryan Lawyers and Colin Biggers & Paisley Lawyers are legal firms in Melbourne, Victoria.
Logie Smith Lanyon, referred to in the Statement of Claim merged with Collin Biggers & Paisley Lawyers in 2021.
Freefall Holdings was a shareholder of Project Collaboration P/L
On 16^th July 2015, Leath Nicholson, of Foster Nicholson and Ryan, representing Project Collaboration, settled an unlawful termination legal dispute, with Viewpoint P/L. Viewpoint was represented by Thompson Geer lawyers.
The settlement agreement was based on an expert valuation report, conducted by David Ferrier of BDO in May 2015, on the written instructions of Foster Nicholson Ryan.
Point 78 and 11O of the BDO report, clearly state Project Collaboration had permanently ceased trading in April 2014 as a direct result of the unlawful termination of the Viewpoint contract.
Loss and damages were calculated on the parameter that Project Collaboration had permanently ceased operating.
Post settlement, in August 2015, Foster Nicholson and Ryan, was engaged to oversee the share buyback and the winding up of Project Collaboration.
On 3^rd June 2017, with the consent of a liquidator, an application was submitted to the Supreme Court of Melbourne, seeking a court order to wind up Project Collaboration under 461(1)(k), just and equitable.
The company at the time:
(a) was not trading,
(b) was deregistered for GST,
(c)had bought back and cancelled the shares of preference and ordinary shareholders, understanding the company was winding up,
(d)had refused a shareholders formal offer to meet and vote to wind up Project Collaboration voluntarily in May 2016.

On 11^th July 2017, Foster Nicholson Ryan, representing Project Collaboration submitted an appearance notice on behalf of Project Collaboration, opposing the winding up of Project Collaboration, claiming as a defence ‘there was no basis to wind up the company’.
At the first hearing on 14^th July 2017, Mr Chris Brown, representing Project Collaboration, stated the company would vehemently oppose a wind up, stating Project Collaboration 'may' trade in the future, as a defence to winding up.
Project Collaboration, re registered for GST on 15^th July 2017, claiming it was deregistered on June 30^th 2015, days prior to the Viewpoint settlement ‘in error’.
Foster Nicholson Ryan ignored a letter dated 21^st July 2017, questioning a likely conflict of interest having represented Project Collaboration in the Viewpoint litigation, reserving Freefalls rights. The letter also questioned the reregistering for GST and the claim Project Collaboration may trade in the future.
On 16^th October 2017, Logie - Smith Lanyon was engaged to represent Freefall.
Logie Smith Lanyon having reviewed the file, confirmed there was no conflict of interest.
In November 2017, Foster Nicholson Ryan submitted an interlocutory application, seeking orders that Henrik Lassen of Logie Smith Lanyon and Andrew Panna KC cease acting for Freefall, claiming both representatives had a conflict of interest, having been directly involved in the Viewpoint settlement.
Henrik Lassen had previously worked for Thompson Geer.
Whilst challenging Logie Smith Lanyon, claiming a conflict of interest, Leath Nicholson, in his own interest, failed to comply with discovery obligations and continued to withhold from court, the expert BDO valuation report, confirming there was a basis to wind up Project Collaboration, as the company could not legally trade again. The report also confirmed Foster Nicholson Ryan had a conflict of interest representing Project Collaboration.
Henrik Lassen, in his own interest, having acknowledged and recalled the BDO valuation report, did not disclose to the court or Freefall, all information within his knowledge that was relevant to the winding up application and also the conflict of interest interlocutory application.
Henrik Lassen, putting his own interests first, continued to challenge the conflict of interest claim.
On 28^th March 2018, as both representatives had withheld the critical information stated in the BDO report from the court, when claiming and defending a conflict of interest, His Honour, in his Judgement, found no conflict.
His Honour clearly states in his judgement, that the defendants had not identified any information regarding the Settlement of the Viewpoint litigation, for him to consider and therefore could not find a conflict.

Logie Smith Lanyon continued to represent Freefall until July 2018, never declaring a conflict of interest nor informing the court it was being misled by Foster Nicholson Ryan claiming there was no basis to wind up.
Foster Nicholson Ryan continued to represent Project Collaboration to trial, at no time declaring a conflict of interest.
On 26th February 2019, an interlocutory application seeking an order to wind up Project Collaboration under section 461(1)k and appoint a liquidator of its preference, was submitted to the court.
The relief sought by Project Collaboration in the Interlocutory application, was identical to the relief sought by Freefall in the Originating Process dated 3^rd June 2017.
Project Collaboration was also seeking an order to dismiss the Originating Process of June 2017 and order the wind up under the application dated 26^th Feb 2019, clearly impacting the relation backdate available to the nominated liquidator.
The affidavit supporting Project Collaborations application to wind up states:
(a)In defending proceedings, since 2 June 2017, PC has now not traded for a significant period of time,
(b)the companies’ funds have been significantly depleted in dealing with the protracted litigation,

(c) It has now become clear that the company will no longer be trading'.
His Honour, at a directions hearing ordered that the defendants interlocutory wind up application be considered at trial.
His Honour, ordered Project Collaboration be wound up on Freefalls Originating Process application, dated 3^rd June 2017, as the company was not trading at the time and there was no reason not to wind up.
The BDO report was discovered in May 2019, in the context of a company valuation, after an order by His Honour.
Had Foster Nicholson Ryan discovered the BDO report in a timely manner and immediately declared a conflict of interest representing Project Collaboration, a court order to wind up Project Collaboration at the first hearing on 14^th July 2017 was most likely, ending the litigation and reserving funds for the liquidation.
Had Henrik Lassen not ignored his duty to the court and Freefall, in October 2017, immediately confirming a conflict of interest and informing the court that Foster Nicholson Ryan was withholding critical evidence, the case would have been considerably shortened and likely avoided the trial.
As there is no mandatory requirement for lawyers to report fellow lawyers misconduct, duties to the court and client have been abused, with excessive time and money wasted.
The Plaintiff claims:
(a)Wasted Costs relating to the Wind up Originating Process, dated 3^rd June 2017 - SCI 2017 2209

(b) Interest
(c) Such further or other orders as the Court deems appropriate.

A number of issues are immediately apparent from the statement of claim:

(a) Ms Power, who is self-represented, was not a party to the winding up proceeding, and was not LSL’s client;

(b) Freefall, which was a party to the winding up proceeding, is not an entity of any financial substance, and is not represented by a solicitor in this proceeding;

(c) NRL did not act for either Ms Power or Freefall at any time;

(d) the claims against LSL are limited to two matters, the first being the claim that Mr Lassen had a conflict of interest in acting for the plaintiffs in the winding up proceeding, and the second being the failure of Mr Lassen to obtain the BDO report; and

(e) the plaintiffs’ claim in this proceeding appears to be limited to what were said to be ‘wasted costs’ in the winding up proceeding.

However, as can be seen from the summary of Ms Power’s affidavit sworn on 5 February 2024 (‘second Power affidavit’) at paragraph 34 of these reasons, which was filed in support of the s 29 application, the plaintiffs’ grievances against NRL in particular extend well beyond its conduct in the winding up proceeding, and, while it is not entirely clear what the plaintiffs seek by way of compensation in the s 29 application, the potential scope of the compensation sought seems to extend well beyond what might be considered to be ‘wasted costs’.

In its defence filed on 19 December 2023, NRL, under cover of its objection that the statement of claim is vexatious, embarrassing and an abuse of process and should be dismissed or struck out, said in summary, as follows:

(a) the BDO report was prepared for the purposes of the Viewpoint proceeding, and said that the business of Project Collaboration had ‘ceased to operate’, not that it had permanently ceased trading;

(b) Freefall and Ms Little were the only shareholders who did not accept Project Collaboration’s share buyback offer;

(c) the deregistration of Project Collaboration in June 2015 for GST purposes was due to an oversight by the directors;

(d) counsel for Project Collaboration, when appearing at the July 2017 hearing, was merely speculating as to whether or not Project Collaboration may trade in the future;

(e) it acknowledged that it received a letter dated 21 July 2017 from Freefall’s former solicitor stating that Mr Nicholson of NRL may have a conflict of interest in continuing to act in the winding up proceeding given that he had also acted for Project Collaboration in the Viewpoint proceeding. However, Freefall’s solicitor did not request Mr Nicholson cease acting for the Project Collaboration parties, and neither Freefall nor Ms Little made an application to restrain NRL from acting on behalf of the Project Collaboration parties in the winding up proceeding;

(f) the restraint application was made by the Project Collaboration parties, not NRL or Mr Nicholson. The BDO report was not relevant to the restraint application. The underlying premise of the restraint application was that Freefall claimed the Viewpoint proceeding was settled too cheaply, and that Mr Lassen would have been aware of confidential information, including the amount that Viewpoint would have been prepared to pay to Project Collaboration to settle the Viewpoint proceeding. NRL denied that the BDO report concluded that Project Collaboration could not legally trade again or that it confirmed that NRL had a conflict of interest in representing the Project Collaboration parties in the winding up proceeding;

(g) it denied misleading LSL that there was no basis to wind up Project Collaboration;

(h) it is unable to discern what Ms Power claims constitute ‘wasted costs’ and in any event, Ms Power did not incur wasted costs in the winding up proceeding as she was not a party to the winding up proceeding. Any personal liability of Ms Power to pay the Project Collaboration parties’ costs of the winding up proceeding cannot constitute wasted costs;

(i) as for the s 29 application, the winding up proceeding has been finalised and s 31 of the CPA does not apply; and

(j) the plaintiffs are estopped from pursuing the claims pleaded and relief sought in the statement of claim.

LSL’s defence filed on 25 October 2023 largely mirrored the contents of NRL’s defence.

In her reply to NRL’s defence, Ms Power and Freefall referred to the contents of the BDO report and other matters leading up to the settlement reached between Viewpoint and Project Collaboration in the Viewpoint proceeding and the share buyback process. Ms Power and Freefall stated that:

(a) it was highly unlikely that Project Collaboration was deregistered for GST in 2015 in error;

(b) Mr Nicholson, on behalf of Project Collaboration, refused Freefall’s request to call a general meeting to voluntarily wind up Project Collaboration;

(c) the confidential information pertaining to the settlement between Viewpoint and Project Collaboration was not put before Efthim AsJ in the course of the restraint application, and so a conflict of interest could not be found;

(d) the settlement deed between Viewpoint and Project Collaboration (‘settlement deed’) did not include non-competition and non-solicitation clauses, as it was well known that Project Collaboration had permanently ceased trading;

(e) in the winding up proceeding, the Project Collaboration parties continued to claim that Project Collaboration may trade in the future up until the company was drained of funds and the liquidator was left with no funds to investigate any wrongdoing by the directors; and

(f) NRL ignored its professional and ethical obligations by not questioning whether it had a conflict of interest in the winding up proceeding.

In her reply to LSL’s defence, the plaintiffs said that Mr Lassen withheld information contained in the BDO report from her and Freefall and ignored his duty to take steps to resolve the winding up proceeding, and as such, incurred unnecessary costs and caused Ms Power to incur a liability to pay costs. Ms Power also said that some correspondence sent by her to Mr Lassen was missing from the file held by LSL on behalf of Freefall.

Following the issue of this proceeding, both NRL (which represents itself in this proceeding) and LSL’s solicitors engaged in extensive correspondence with Ms Power regarding what they considered to be serious deficiencies with the form and content of her statement of claim, and the tenability of the plaintiffs’ claims in this proceeding.

The observations made by the defendants in their correspondence with Ms Power comprehensively identify some of the issues in the current applications. By way of example, in a letter to Ms Power dated 23 October 2023, NRL said, among other things, as follows:

No Proper Basis
As you know, Nicholson Ryan Lawyers acted for Collaboration in the Collaboration Proceeding. Paragraph 14 of the Statement of Claim refers to an oral submission made by Mr Christopher Brown, former counsel for Collaboration, during the first directions hearing.
However:
(a)Mr Brown made it undoubtedly clear that he was speculating with regard to Collaboration trading in the future. The transcript states:
Partly but there may be ongoing trading in the future because the other company that’s referred to in the affidavit of Ms Power and also our clients affidavit is - has had difficulties. And as that company has stopped trading so the directors may choose to come back into this company to continue trading. I don’t know, I’m just speculating Your Honour but we ..

(b)It is noted that this allegation of a misleading submission has previously been misstated by you in affidavit material. To that end, we refer you to paragraph 5 of your affidavit affirmed on 12 June 2018 and filed in the Collaboration Proceeding. In that affidavit, you wrongly stated:
His Honour asked counsel appearing for Project Collaboration if that company was still trading. Counsel appearing for Project Collaboration, having conferred with. Michael Tonov, one of the directors of Project Collaboration and also the fourth named defendant to this proceeding, responded “yes”.

(c)Mr Brown then when on to state that the directors of Collaboration were “... looking to wind [Collaboration] up some years ago.” We have enclosed the transcript for your reference.
(d)at this direction hearing, it was apparent that Freefall was not seeking a wind up but rather was seeking relief pursuant to section 232 and 233 of the Corporations Act 2001 (Cth), which it sought from August 2017, and which was sought by Freefall at trial, noting that Freefall opposed Collaboration's interlocutory application filed on 26 February 2019 seeking a wind up.

Further, it is alleged at paragraph 23 that Mr Henrik Lassen ‘...acknowledge and recalled the BDO valuation report’, although Nicholson Ryan Lawyers are somehow criticised for not producing that document. Mr Lassen was your legal representative from at least 16 October 2017 (being shortly after you filed the proceeding against Project Collaboration Pty Ltd), and:
(a)it is not clear why you did not press for production of the BDO report, given that you and Mr Lassen were aware of its existence. Notably, it was a document referred to Collaboration’s second amended statement of claim that was filed in the proceeding between Viewpoint and Collaboration (which you and Mr Lassen had in your possession).
(b)you instructed Mr Lassen that no further discovery was pressed after our letter to Mr Lassen dated 13 June 2018. We received an email from him by reply which stated, inter alia “We are instructed not to pursue further the issue of discovery.” This was after the report prepared by Mr David Ferrier, being the ‘BDO report’ had already been raised as a document sought by Freefall (which, for the avoidance of doubt, we remain of the view was not relevant although it was eventually discovered).
(c)Collaboration or Nicholson Ryan Lawyers cannot be criticised for not having discovered that document given that it was not pressed by you, noting that it was provided to you yet Freefall still (unsuccessfully) sought relief under the oppression remedy.

Abuse of Process and Anshun Estoppel
Further, many of the issues identified in the Statement of Claim were raised by you in the Collaboration Proceeding. For instance, on 24 September 2019, you filed an affidavit in support of a costs order (despite failing in your oppression claim) which stated, inter alia:
(a)that the ‘basis for settlement [of the Viewpoint proceeding] was a BDO Valuation Report’;
(b)that the BDO report ‘confirms that [Collaboration] had permanently ceased operating as at 1 April 2014’.

These matters have already been agitated by Freefall, and the court did not agree with Freefall’s submission. At paragraph 12 of the judgment on costs dated 27 May 2020, the Honourable Associate Justice Efthim stated (regarding the allegation that Collaboration opposed Freefall's wind-up application):
I do not accept the plaintiffs submission that the trial would have been avoided had the defendants agreed to the initial wind up application. The supporting affidavit of Jacqueline Power, the plaintiff’s director, demonstrative oppression like-claims and then the application was shortly amended to include oppression. It is clear from the evidence before me that although he plaintiff initially filed an application to wind up the Company, it intended to pursue the oppression claim and has only considered winding up the Company if the defendants paid its costs and offer a buyback at various amounts. The oppression was the only course of action pursued by the plaintiff. The plaintiff amended its originating process in 2017 to include oppression. The defendants have no choice but to continue the litigation to defend the plaintiffs allegations and I ultimately found that there was no misconduct on their behalf. The defendants were successful in defending the plaintiff’s application. Costs will be awarded in·their favour.

This is consistent with your own email to our firm on 1 February 2019, which stated that:
the minority shareholder oppression in this case we believe is overwhelming. Linda and I both believe with all the evidence we have put forward we would be successful proving oppression. Mr Brown was very clear in the original hearing that he believed this case was more of an oppression case than a winding up case yet now suddenly its more of a winding up case than an oppression case.

It is apparent that:
(a)any allegation that either you or Freefall were misled, causing you to not pursue a wind up, is wrong. If there was some misapprehension, it was not the fault of our firm or Collaboration.
(b)even if there was a misrepresentation, which there was not, you did not rely on it. It is noted that as of 9 May 2018, Ms Lassen (being your legal representative at the time) remained of the view that Collaboration was not trading and did not intend to trade. He restated this view again on 7 June 2018 in correspondence to our firm. The relevance of Collaboration trading or not fell away because of the matters referred to in paragraph 3.2(d) above, which is the same conclusion reached by Justice Efthim.
(c)these issues have been heard and determined, and those determinations were made against Freefall.

In the circumstances and notwithstanding paragraph 1 above, even if Freefall and/or Ms Power were somehow able to seek relief against Nicholson Ryan Lawyers, as the issues referred to in the Statement of Claim have already been agitated it would be an abuse of the Courts process to litigate this matter. If Freefall and/or Ms Power were to seek relief against Nicholson Ryan Lawyers, then that claim ought to have been agitated in 2019. We are of the view that they ought to be estopped from pursuing this claim pursuant to the principles enunciated in Port of Melbourne Authority v Anshun Pty Ltd (1981) 147 CLR 589.

Further, in a letter from LSL’s solicitors to Ms Power dated 13 October 2023, LSL referred to what it said were deficiencies in the statement of claim, saying, among other things, as follows:

Statement of Claim is vague
The Statement of Claim is also vague in many respects and needs to be re-pleaded on this basis alone to clarify the allegations made against [LSL].
For example:
(a)it is unclear why you are a party to the Proceeding personally, given the Statement of Claim appears to suggest that Freefall was [LSL’s] client on and from 16 October 2017 and it made the application on or about 3 June 2017 to seek orders putting Project Collaboration Pty Ltd (Project Collaboration) into liquidation;
(b)it is unclear how you and Freefall allege that costs were “wasted” in circumstances where:
(i)Project Collaboration, on its own legal advice, made an election to resist the “winding up” application. Given the applicant(s) intended to press their “winding up” application despite Project Collaboration resisting it, it became a contested application and therefore had to be litigated;
(ii)Henrik Lassen/[LSL] were resisting an application made by Project Collaboration seeking to prevent them from acting for Freefall in connection with the “winding up” application and Supreme Court of Victoria proceeding S Cl 2017 2209 (the Winding Up Proceeding). Do you and/or Freefall allege that either or both of them paid costs in connection with the above application? If so, the Statement of Claim should plead to:
(A) those costs; and
(B)the basis on which you and/or Freefall allege they were “wasted”.

It is especially important that you and Freefall address the above matters in circumstances where the Statement of Claim acknowledges that the Supreme Court of Victoria ultimately found that neither Henrik Lassen nor [LSL] had a conflict of interest;
(iii)it is unclear whether you and/or Freefall maintain that Mr Lassen did have a conflict of interest notwithstanding the Court's findings otherwise - if you and/or Freefall do maintain that position, then the Statement of Claim must clearly set out the basis for those allegations rather than merely concluding that he was conflicted;
(iv)the basis on which you and/or Freefall allege at paragraph 23 of the Statement of Claim that Mr Lassen “acknowledged and recalled the BDO valuation report, did not disclose to the Court or Freefall, all information within his knowledge that was relevant to the winding up application and also the conflict of interest interlocutory application.” is entirely unclear.
…
(v)it is unclear from the Statement of Claim whether or not the “BDO valuation report” was influential in the ultimate outcome of the Winding Up Proceeding.
… and
(vi)it is unclear what are the "Wasted Costs" claimed in the Statement of Claim.
…

Also in evidence were Ms Power’s responses to this and other correspondence with the defendants in the lead up to the hearing of the applications. While I do not propose to reproduce this correspondence in full here, some of the statements made by Ms Power in this correspondence have helped me better understand the way Ms Power puts her case in this proceeding. By way of example:

(a) in an email from Ms Power to Mr Corns dated 16 October 2023, Ms Power stated as follows:

The wasted costs are all the costs that resulted from having to widen the case to incorporate oppression as a means to wind up. This includes the costs against me.

(b) in an email from Ms Power to Mr Corns dated 2 November 2023, Ms Power stated as follows:

Henriks own interests prevented him from providing me with impartial advice. He knew winding up the company had been extended to incorporate section 461 c yet never challenged the defendants on the facts known to him
A. The company hadn’t traded since April 2014
B.All directors had new career paths in Australia and USA. This was clearly stated in Tony Kelly first letter which Henrik received on the first day we spoke. 16/10/17.

Challenging the misleadingly claim that is the company may trade again was the quickest cost effective route to wind up the Company…

(c) in an email from Ms Power to Mr Hogg dated 6 November 2023, Ms Power stated as follows:

Cause of action relating to the wasted costs incurred:
A.Abuse of process – [NRL] not declaring a conflict of interest representing PC in wind up case and interlocutory 'conflict of interest' hearing.
B.Misleading statements made on court documents and stated in court, at the initial directions hearing with Judge Randell, whilst withholding a critical document related to the argument.

My legal advice at the time, relied on the fact the company was claiming to trade again and had re registered for GST days after the first hearing. I was advised, in writing, I would now need to widen my claim to include oppression in order to wind up the company, sending the case down an unnecessary, costly path.
While defending the winding up of the company and also the application for representatives to cease acting, your firm continued to withhold the BDO report, that was directly related to the application to wind up and the application for opposing representatives to cease acting.
Leath Nicholson confirmed in writing the settlement relied on the BDO report. The BDO report had been filed in court. The report stated the company had permanently ceased operating as a result of the unlawful termination of VP contract.
This document should have been discovered prior to the commencement of the wind up litigation…

On 10 November 2023, LSL issued a summons seeking the following relief:

1.Pursuant to sections 62 and 63 of the Civil Procedure Act 2010 (Vic) and/or rule 22.16 and/or rule 23.01 of the Supreme Court (General Civil Procedure) Rules 2015 (Rules), that there be summary judgment in favour of the Second Defendant in respect of all of the claims made personally by the First Plaintiff against it.
2.Further or alternatively to paragraph 1, that the Plaintiffs’ Statement of Claim dated 8 August 2023 be struck out in its entirety to the extent that it concerns the Second Defendant pursuant to rule 23.02 of the Rules.
3.The proceeding as against the Second Defendant be stayed until the Second Plaintiff has appointed solicitors to act for it in this proceeding in accordance with rule 1.17(1) of the Rules.
4.Pursuant to rule 62.02 of the Rules, the Second Plaintiff pay the sum of $50,000 into Funds in Court within 14 days of the date of this Order as security for the Second Defendant's costs incurred, and to be incurred, in the course of this proceeding up to and including mediation.

5. Costs.
6.Such further or other orders as the Court thinks appropriate, including (but not limited to) orders if Second Plaintiff fails to comply with any orders made by the Court in the terms sought in paragraphs 3 and 4 above.

A summons in similar terms was issued by NRL on 22 December 2023, save that the amount sought by way of security was $45,000, not $50,000.

On 6 February 2024 the plaintiffs issued the s 29 application. Their summons sought the following relief:

1.1^st and 2^nd defendants pay the legal costs and costs arising from the contravention.

2. Penalty interest rates be applied.
3. Such further or other orders as the court thinks appropriate.

The s 29 application was supported by the second Power affidavit, which deposed to the following matters:

(a) under the heading ‘Background to Misconduct’, the accounting treatment of funds loaned by Freefall to Project Collaboration in March 2013, which was said to be used to artificially inflate the amount of working capital held by Project Collaboration and as such, to conceal Project Collaboration’s non-compliance with the terms of the 4Projects contract (‘working capital issue’);

(b) accordingly, Project Collaboration was in material breach of its obligations under the 4Projects contract, and its assertions to the contrary in its pleadings in the Viewpoint proceeding (when it was represented by NRL) were misleading;

(c) the BDO report stated that the Project Collaboration business ceased to operate as a consequence of the termination of the 4Projects contract;

(d) the BDO report failed to identify Project Collaboration’s breach of the working capital requirements under the 4Projects contract. However, these breaches were identified by an accountant retained by Ms Power after the conclusion of the winding up proceeding using financial information provided to her by the liquidator, which was the same information available to BDO at the time the BDO report was prepared;

(e) during the share buyback process, Ms Power was required to correspond with Mr Nicholson of NRL, rather than the directors. She was denied permission to review the financial records of Project Collaboration unless she signed an onerous non-disclosure agreement. She referred to correspondence between her and Mr Nicholson in August 2015 (see paragraphs 48 and 49 of these reasons), her demand for a shareholders meeting in September 2016 to wind up Project Collaboration, and correspondence between her and Mr Nicholson in January 2017 (see paragraph 50 of these reasons), which culminated in Mr Nicholson blocking her emails;

(f) what transpired at the July 2017 hearing;

(g) NRL did not respond to a letter from her former solicitor in the winding up proceeding dated 21 July 2017 which challenged the assertion that Project Collaboration might continue trading, and raised the possibility that NRL might have a conflict of interest in acting for the Project Collaboration parties in the winding up proceeding;

(h) she received advice from her solicitor and counsel that she would need to seek relief for oppression in the alternative to winding up Project Collaboration given that the Project Collaboration parties would not agree to wind up Project Collaboration on just and equitable grounds;

(i) Mr Lassen of LSL commenced acting for the plaintiffs in the winding up proceeding in October 2017. In this regard, Ms Power largely deposed to the matters referred to in the statement of claim, and made the following additional observations:

Both parties acting for themselves withheld the critical information contained in the BDO report relied on when settling the [Viewpoint proceeding], confirming the company had ceased trading as a result of the unlawful termination and was winding up, therefore there was a basis to wind up [Project Collaboration], under section 461 (1) (k) (c). …
Post the interlocutory conflict judgment, [Mr Lassen] sent me a newspaper article referencing [Mr Nicholson] and a client he was representing. I now believe [Mr Lassen] had a personal issue with [Mr Nicholson],
[Mr Lassen] advised me that I would need to get a valuation of the company. I noted that [Mr Nicholson] had referred to a company valuation back in 2015 by a company BDO. [Mr Lassen], recalled the BDO report and stated he didn’t think much of the [BDO] report and we would need to engage another valuer.
At no time did [Mr Lassen] disclose the information known to him having recalled the BDO report, relied on when negotiating the [Viewpoint proceeding] settlement deed. [Mr Lassen] was claiming the·basis upon which the company was to be wound up had changed from the Originating Process, ignoring the amended Originating Process had expanded the basis to include 461(c) as well adding oppression section 232.
…
Having received the financial information I had been seeking for 3 years from NRL, I agreed with [Mr Lassen] that no more bank statements would need to be discovered.
I didn’t agree that the BDO report, that had been denied twice, no longer be discovered, as claimed by NRL.

(j) NRL continued to claim that Project Collaboration was likely to trade in the future until February 2019;

(k) the discussion between counsel for the Project Collaboration parties and Efthim AsJ at the directions hearing on 2 April 2019 regarding the BDO report, and the affidavit subsequently filed by Mr Michael Tonov (one of the directors) regarding the purpose for which the BDO report was commissioned;

(l) her dealings with the liquidator following the conclusion of the winding up proceeding and the misleading statements made by NRL to the liquidator. In particular, Ms Power claims that NRL told the liquidator that Ms Power lived in England, and could not be contacted, and that the costs order in favour of Freefall and Ms Little arising from the restraint application had been compromised with Ms Little. She exhibited an extract of correspondence with Ms Little in February 2022, where Ms Little denied that her shares in Project Collaboration were bought back for $100,000. She deposed that, despite engaging a lawyer and an accountant to review the records provided to her by the liquidator, the liquidator dismissed her concerns;

(m) the liquidator confirmed that Project Collaboration had ceased to trade in 2014, owing to the termination of the 4Projects contract, contradicting the reasons advanced by the Project Collaboration parties in February 2019;

(n) her inquiries regarding schedule 1 of the settlement deed. The settlement deed referred to ‘schedule 1’ to the settlement deed, which has never been disclosed, and which Ms Power believes would have included non-solicitation and non-competition clauses which would have precluded Project Collaboration from trading again after the settlement of the Viewpoint proceeding (‘schedule 1 issue’); and

(o) her attempts to resolve her concerns with NRL and LSL prior to the issue of this proceeding.

Accordingly, the claims made in the second Power affidavit can be categorised as follows:

(a) the claims against NRL in relation to the Viewpoint proceeding (2014–2015) (see paragraphs 34(a), (b), and (d) above);

(b) the claims against NRL in relation to the share buyback process (2015-2017) (see paragraph 34(e) above);

(c) the claims against NRL in relation to the winding up proceeding (2017-2020) (see paragraphs 34(c), (f), (g), (h), (j), (k), (l), (m) and (n) above);

(d) the claims against LSL in relation to the winding up proceeding (2017-2018) (see paragraph 34(i) above); and

(e) the claims against NRL in relation to the liquidation process (2020-2022) (see paragraph 34(e) above).

As can be seen from the above, the allegations in the second Power affidavit, at least insofar as they concern NRL, are more wide ranging than the allegations in the statement of claim, and extend to NRL’s conduct of the Viewpoint proceeding and NRL’s dealings with the liquidator following the conclusion of the winding up proceeding.

The categories of claims referred to in paragraph 35 above cover discrete proceedings and time periods. However, there is some overlap in the factual matters alleged by the plaintiffs. By way of illustration, the BDO report is said to be relevant to the question of when and why Project Collaboration ceased trading, but also seems to be implicated in what was said to be misleading conduct by NRL in the Viewpoint proceeding by reason of the assertions made by Project Collaboration in its pleadings regarding its compliance with the working capital requirements under the 4Projects contract. Further, what I will later describe as the schedule 1 issue seems to have been identified by Ms Power after the conclusion of the winding up proceeding and during the liquidation process, but appears to be only relevant to the question of when Project Collaboration ceased trading. Finally, some of the matters deposed to in the second Power affidavit go to the question of when Ms Power became aware of the alleged contraventions.

The plaintiffs’ issue of the s 29 application post-dated the filing and service of the defendants’ applications, which sought summary judgment on the basis of the allegations in the statement of claim. The defendants submitted that summary judgment should be granted with respect to the statement of claim, and the s 29 application should be treated as an application for an extension of time under s 31(2) of the CPA, which should be refused.

I propose to address the applications in the following order:

(a) the defendants’ strike out applications;

(b) the defendants’ summary judgment applications based upon the allegations in the statement of claim;

(c) the plaintiffs’ (informal) application for an extension of time under s 31(2) of the CPA;

(d) if, and the extent to which, an extension of time is granted under s 31(2) of the CPA, the disposition of the s 29 application;

(e) the defendants’ applications that Freefall provide security for their costs; and

(f) the defendants’ applications that the claims brought by Freefall against them be stayed pending the appointment of a solicitor to represent Freefall in this proceeding.

In summary, my conclusions with respect to the applications are as follows:

(a) the statement of claim should be struck out, with no right to replead, as the plaintiffs’ claims as articulated in the statement of claim have no real prospects of success;

(b) the plaintiffs’ application for leave to bring the s 29 application under s 31(2) of the CPA should be dismissed, because, save in respect of one matter, being the working capital issue, I cannot be satisfied that the matters referred to in the second Power affidavit were not known to Ms Power and Freefall before the conclusion of the proceeding in which the alleged contraventions were said to be made;

(c) however, insofar as the working capital issue was not known to the plaintiff before the conclusion of the proceeding, then leave will not be granted, because the plaintiffs’ claims against NRL in respect of the working capital issue have no real prospects of success;

(d) accordingly, summary judgment should be granted in favour of the defendants;

(e) if it had been necessary to do so, I would have granted the defendants’ applications for security for costs in the sums sought by them; and

(f) if it had been necessary to do so, I would have granted the defendants’ applications that the claims made against them by Freefall be stayed pending the appointment of a solicitor to represent Freefall in this proceeding.

My detailed reasons follow.

The evidence

The plaintiffs relied upon an affidavit of Ms Power sworn on 15 January 2024 (‘first Power affidavit’) and the second Power affidavit.[5] In the first Power affidavit, Ms Power deposed, in summary, as to the following matters:
[5]On 19 February 2024, Ms Power filed and served a supplementary affidavit which exhibited an affidavit sworn by Michael Tonov on 26 February 2019 in the winding up proceeding, but this affidavit was already in evidence.

(a) the background to the Viewpoint proceeding and the share buyback process;

(b) the progress of the winding up proceeding, and in particular the restraint application;

(c) the contents of the BDO report, including its conclusion that Project Collaboration had ceased operating following the termination of the 4Projects contract and Mr Ferrier’s assessment of the loss and damage suffered by Project Collaboration as a result;

(d) her request in May 2016 that Project Collaboration be voluntarily wound up, and the refusal of Mr Nicholson of NRL to call a general meeting to wind up the company;

(e) at the July 2017 hearing, counsel for the Project Collaboration parties claimed that there was no basis for Project Collaboration to be wound up. The following day, Project Collaboration reregistered for GST, indicating an intention to trade again. Freefall subsequently amended the originating process so as to seek relief on grounds of oppression pursuant to s 233 of the Corporations Act 2001 (Cth);

(f) Freefall’s solicitor wrote to NRL on 21 July 2017 raising concerns about Project Collaboration being reregistered for GST, and given that Mr Nicholson of NRL had acted for Project Collaboration since April 2014, that there was a potential conflict of interest should NRL continue to act for the Project Collaboration parties in the winding up proceeding;

(g) in October 2017, Mr Lassen of LSL commenced acting on behalf of Freefall in the winding up proceeding. He confirmed that he did not have a conflict of interest in doing so, despite having acted for Viewpoint in the Viewpoint proceeding;

(h) on 26 February 2019, the Project Collaboration parties filed an interlocutory application seeking that the company be wound up;

(i) her communications with the liquidator after the conclusion of the winding up proceeding. The liquidator advised Ms Power to engage a lawyer to assist with any concerns she held regarding Project Collaboration, and despite doing so, Ms Power’s concerns were nevertheless ignored by the liquidator;

(j) the schedule 1 issue; and

(k) Ms Power observed that when she inspected the documents held by LSL regarding the winding up proceeding on 1 November 2023, certain documents she had provided Mr Lassen confirming that Project Collaboration had ceased trading were missing from LSL’s file. Ms Power said that her attempts to communicate with LSL to resolve this issue both prior to and following Mr Lassen’s departure from LSL have been ignored by LSL.

Ms Power exhibited the following documents to the first Power affidavit:

(a) copies of correspondence from 2014 between 4Projects and NRL leading up to the termination of the 4Projects contract and the issue of the Viewpoint proceeding;

(b) the settlement deed;

(c) a letter from the directors of Project Collaboration dated 7 August 2015 addressed to shareholders containing a share buyback offer and proposed share buyback agreement, and Ms Power’s letter in response dated 10 August 2015;

(d) the BDO report and Project Collaboration’s financial statements as at August 2015;

(e) affidavits of Mr Tonov affirmed in the winding up proceeding on 26 February 2019 and 12 April 2019;

(f) extracts of transcript from pre-trial hearings in the winding up proceeding and other court documents in the winding up proceeding;

(g) correspondence between Ms Power and/or her solicitors and NRL in 2016 and 2017 in relation to the proposed winding up of Project Collaboration;

(h) email correspondence between Mr Lassen and Ms Power between 2017 and 2018;

(i) a copy of the directors’ report on Project Collaboration’s activities and property dated 10 June 2020 and the liquidator’s report to creditors dated 25 June 2020;

(j) email correspondence between Ms Little and Ms Power in 2022;

(k) an ASIC Form 484 lodging a change in company details for Project Collaboration dated 20 September 2019;[6]

(l) a copy of a draft termination of contract agreement between Project Collaboration and Viewpoint dated 7 March 2014; and

(m) email correspondence from between 2020 and 2022 between Ms Power and LSL regarding missing documents.

[6]Referrable to the settlement with Ms Little in or around February 2019.

The matters deposed to in the second Power affidavit are summarised in paragraph 34 of these reasons. In addition to the documents already in evidence and previously described in these reasons, the following documents were exhibited to the second Power affidavit:

(a) copies of correspondence between Project Collaboration and Viewpoint leading up to the issue of the Viewpoint proceeding;

(b) copies of correspondence exchanged between Ms Power and Mr Nicholson in August 2015 and January 2017 regarding Project Collaboration’s settlement with Viewpoint and the accounting treatment of Ms Power’s loan to Project Collaboration;

(c) Project Collaboration’s working capital report for the period between 2013 and 2015, and a balance sheet for the company as at 31 March 2013; and

(d) selected court documents in the Viewpoint proceeding.

These documents largely concern the working capital issue. The 4Projects contract required Project Collaboration to maintain a minimum of $100,000 in working capital, and to demonstrate to Viewpoint that it held the minimum working capital at six monthly intervals. Project Collaboration would be in material breach of the 4Projects contract if it failed to maintain the minimum level of working capital for three consecutive months and it failed to satisfy Viewpoint that steps had been undertaken to restore the minimum level of working capital. In the notices sent to Project Collaboration by Viewpoint and its solicitors in the lead up to the termination of the 4Projects contract, Viewpoint asserted that Project Collaboration was in material breach of the 4 Projects contract, by reason of, among other things, its failure to maintain the required level of working capital. Project Collaboration’s failure to respond to two written requests by Viewpoint seeking information regarding Project Collaboration’s working capital was one of the material breaches relied upon by Viewpoint to terminate the 4Projects contract.

A balance sheet for Project Collaboration dated 31 March 2013 showed that Project Collaboration held approximately $40,000 in working capital on that date. Further, a document described by Ms Power as a ‘Working Capital Spread Sheet created post-trial’[7] showed that Project Collaboration did not hold the minimum level of working capital required between 31 March 2013 and 30 June 2014.
[7]I believe that this is a document prepared by her brother-in-law, an accountant who assisted Ms Power to review the financial documents provided to her by the liquidator after the conclusion of the winding up proceeding.

In Project Collaboration’s second amended statement of claim dated 26 June 2015, filed by NRL in the Viewpoint proceeding, Project Collaboration asserted that it was not in material breach of the 4Projects contract. This statement was said by Ms Power to be misleading.

The correspondence between Ms Power and Mr Nicholson in August 2015 was in the context of the share buyback offer made on 7 August 2015. This correspondence is relevant to the current applications, because it evidences what was known and what was not known by Ms Power prior to the issue of the winding up proceeding. On 10 August 2015, Ms Power wrote to Mr Nicholson as follows:

I cannot believe that you are all ignoring an extremely serious issue. I’m not.
I sent you, the directors, an email last week requesting a shareholders meeting. I explained that as a shareholder I (we) have to question if the directors were in breach of their contract as they settled out of court for a 5th of what they were claiming (as per your expert advice) 3 days before court. I never heard back from you and I still am requesting a shareholders meeting so we can all discuss this together “BEFORE the event” of signing off.
I was already lending money to Project Collaboration (under contract) to help them out financially, (emails available) when I got another ‘Mayday’ call from Project Collaboration while on holiday in Europe. PC were asking for a short term loan of around $132000. As my dealings with lending money to PC had been positive at that point and a massive deal with Roy Hill had just been signed I felt comfortable transferring the money.
I then spent two days of my holiday travelling into London from my village trying to make this transaction happen.
Money was transferred. A week or so later the money was transferred back to me as promised.
I was thanked by PC for the loan at the time (emails available). It wasn’t until I was at a shareholders meeting at a later date, when the topic of me lending money this particular time was brought up, that it became very apparent to me that a couple of directors in particular were not wanting to acknowledge it at all. Their silence and lack of eye contact spoke volumes!!!
I have since learned why.
Re reading emails sent to me from PC at the time of the transfer (Emails available) I worked out via an attached email sent to me inadvertently (email available) why you were clearly concerned this matter was openly being mentioned at the meeting.
Although Leath you claimed on the call you made to me (“it’s not all about you Jackie” call) not to have known of this ‘controversial deal’ (conversation witnessed by my daughter in the car) I find it EXTREMELY unlikely as I have had it confirmed by a director in the past and very recently, (conversations witnessed by daughter on both occasions) that the Directors had rightly been very honest with you and their legal team in that they showed their ‘full’ hand to you regarding all information you sought during the discovery process. Good and bad. My understanding is that the directors had discussed with you as their lawyer this particular controversial deal (perhaps other deals as well???) and the legal feedback was that although clearly not great, as it would obviously cast doubt over PC’s honesty and integrity the impact would be ‘diluted’ to a degree because of the clear bad faith intentions of 4Projects. Your denial on the phone tells me that this/ these deals were not disclosed at all. This is very serious and definitely left PC exposed going to court.
If the directors of PC have been mislead by you or any of their legal team, and directed to wrongfully withhold this information from court documents then your code of conduct as their lawyer will have to be seriously questioned by the directors of PC and other appropriate bodies.
I have spoken to ASIC (anonymously) and was guided by them to familiarise myself with this section.
3.5 Section 184 - Criminal offences
The primary penalties for criminal offences in relation to directors’ duties arise from section 184 of the Corporations Act. The criminal offences under section 184 include the following:
1 a director commits an offence if they are reckless or intentionally dishonest, and fall to exercise their powers and discharge their duties in good faith in the best interests of the corporation or for a proper purpose
I want to move on just like all of you.
Simply putting it under the circumstances, I want my investment back. A very reasonable request considering my unquestioned trust to firstly invest in you as people to honestly (?????) represent the shareholders then to lend money to PC at very short notice to help out when you were financially challenged on two occasions.
It seems very clear to me now having read the attached email (email available) there would be NO settlement at all if I had not loaned the money to you.
Interestingly I am dealing with a business broker at present on a project. He informed me to contract a broker to perform the same urgent dealings that was asked of me would have cost the client a daily consultancy fee and a percentage of any money secured or generated as a result of that funding. Just like people who lend money for legal cases!!!!!
For example this is what he would charge as a minimum.
Two days consultancy fee @ $ 1000 + a day = $2000
5% of any revenues generated or secured (10000000) = $50000
I suggest we all meet ASAP (BEFORE the event, Leath) to work out how to move forward if you want this settled by Friday.
For the directors to allocate themselves hundreds of thousands of shares under these very questionable circumstances will definitely be analysed and dealt with by the appropriate governing body.
I would like a response before Tuesday 5pm I will be contacting the other shareholders directly to discuss the situation known and I will also contact ASIC again to seek further advice if I have not heard from you by Tuesday 11th August 2015 5pm.

On 12 August 2015, NRL responded as follows:

You assert that the directors were in breach of their contract by settling out of Court for a fifth of what they were claiming. The settlement was based upon legal advice as to prospects of success. The advice provided by counsel and our firm was that it was a very good settlement outcome. The amount that Project Collaboration was claiming was not, contrary to your email, based on our expert advice, it was based on the expert advice of BDO Accountants who provided the independent expert report on loss and damage. That represented the best case outcome and beyond what the Court was unlikely to order if the claim succeeded.
As I indicated in our previous telephone conversation where you indicated that you wished to renegotiate the settlement, the settlement had already been agreed and was simply awaiting final signatures on the settlement agreement which happened shortly thereafter.
As for your description of the $132,000 loan, I was not previously aware of you lending those funds, but I was aware of the transaction in question. The transaction was not the subject of the litigation, but it was disclosed in financial information provided to the defendant on discovery. You state that I did not know about that transaction. I do not specifically recall a discussion with you about that issue as you spent most of the conversation rather erratically telling me how the case should not be settled, contrary to our legal advice, because you were so experienced in being involved in litigation. As noted above, I was not aware of your loan, but I was aware of the transaction and quite frankly I do not consider how it is relevant to anything at present.
My client is concerned about your threats as they are not founded on any reasonable basis. I am asked to remind you that under Section 87 of the Crimes Act 1958 (Vic) it is an offence for a person to make an unwarranted demand with menaces, with a view to gain for himself (or herself). My client is concerned that your letter seems to constitute a threat to allege criminal offences against the directors unless you are paid a greater sum. The directors do not consider there to be any legal basis for such a threat and should this conduct persist our client will refer this matter to the appropriate authorities.
Ultimately, the directors have instructed me that they would like to finalise matters and at this time are offering shareholders significantly more than they are entitled to.

On 19 January 2017, Ms Power wrote to Mr Nicholson as follows:

Dear Leath
I am writing to you today as a past client, a member of [Project Collaboration].
The originating motion to wind up [Project Collaboration] is being prepared. The liquidator will deal with the company financials.
After much paper sorting and timelining over Christmas it is now very clear that my loan to [Project Collaboration], recognised by you as the Reconnect Deal, then, after observing the Viewpoint AR report was known as PCP OPERA, and after much investigation can be confirmed as the client known to Viewpoint as Stainfield North - Bata PCP, was of absolute importance to this litigation. It was the deal that triggered the downfall of the relationship between Viewpoint and [Project Collaboration] due to the treatment of the prepaid commissions. It was also the accounting treatment of this loan that is at the centre of the maintenance of the ‘working capital’ issue. The material breach. Reporting issues that were cited as another material breach clearly branched from this ‘Reconnect Deal’
…
You defamed me and bullied the shareholders, to sign off on their shareholdings without them ever knowing the misconduct of both the directors and yourself.
I now note that on both the Mediation ‘statement of fact’ and the affidavit it is stated that at all time the agreed working capital was maintained.
This is absolutely untrue. We know [Project Collaboration] had clearly not maintained the agreed working capital and more than likely were trading insolvent (to be confirmed). My accountant can confirm this from the limited financial reports he had available to him and from the information I personally could give him. It appears they were in material breach of their contract.
In the likelihood that a spurious litigation was brought to court, that false statements were made on court documents and your defaming me in calling a concerned shareholder liar and threatening her with legal action when she is telling the truth is of great concern to Linda and I.
I would like the opportunity to meet with you and discuss the above issues and other issues such as your fees (including the generous uplift you granted yourself.)
Also, Linda and I would like you to confirm by return email that the settlement amount from the Viewpoint litigation was in fact $990,000 in full and final payment to [Project Collaboration].
Please confirm a convenient time to meet.

In the s 29 application, Ms Power and Freefall claim the wasted costs associated with the winding up proceeding. However, Ms Power has not deposed as to the nature and quantum of the costs said to have been wasted by the conduct of NRL and/or LSL, although reference is made in pre-proceeding correspondence with LSL to her personally having paid LSL the sum of $10,000 in legal fees, and wanting that sum reimbursed to her.[8]
[8]Email from Ms Power to LSL dated 13 July 2022.

Further, while no express claim is made to this effect, it seems that Ms Power’s primary grievance is that, by defending the winding up proceeding, the Project Collaboration parties delayed the appointment of a liquidator, and exhausted the remaining funds of Project Collaboration, which, among other things:

(a) caused Freefall and Ms Power to incur costs in pursuing Freefall’s claims in the winding up proceeding, and caused them to incur a costs liability to the Project Collaboration parties in the winding up proceeding;

(b) deprived the liquidator of funding to investigate her claims against the directors, a number of which were referred to in her affidavits and exhibits in this proceeding, and forced Freefall to agitate these claims in the winding up proceeding; and

(c) exhausted the funds available to the liquidator to investigate any claims Freefall had against the directors and which otherwise may have been available to Freefall to recoup its original investment in Project Collaboration.

Indeed, it seems that the main reason for bringing this proceeding is that the plaintiffs (really, Ms Power) consider that they have exhausted all other avenues by which they can seek redress for their grievances regarding the conduct of the directors. The plaintiffs consider that Mr Nicholson facilitated that conduct, and Mr Lassen failed to stop it.

No express claim is made by the plaintiffs with respect to any wasted costs or other losses said to have been suffered by them with respect to NRL’s allegedly misleading and deceptive conduct in the Viewpoint proceeding concerning the working capital issue.

NRL relied upon an affidavit of Mr Stuart Hogg affirmed on 22 December 2023 (‘first Hogg affidavit’) and an affidavit of Mr Hogg affirmed on 12 February 2024 (‘second Hogg affidavit’) in support of its application for summary judgment, which, among other things, exhibited and referred to various affidavits filed by the parties in the winding up proceeding, and an affidavit of Mr Hogg affirmed on 19 May 2020 (‘2020 Hogg affidavit’).

The first Hogg affidavit provided a summary of the dispute that arose between Project Collaboration and Viewpoint, the subsequent commencement of the Viewpoint proceeding in May 2014, and the conduct and outcome of the Viewpoint proceeding. The first Hogg affidavit also provided a summary of what occurred during the winding up proceeding, including the restraint application.

Mr Hogg deposed further as follows:

(a) the BDO report was referred to in the particulars to the statement of claim in the Viewpoint proceeding, and its existence was known to Mr Lassen and Ms Power;

(b) in 2018, Freefall sought discovery in the winding up proceeding, and discovery was provided by the Project Collaboration parties. However, there was a disagreement between Mr Lassen and NRL as to whether the BDO report was relevant to the issues in the winding up proceeding, and Mr Lassen did not press the matter at the time. On 13 June 2018, Mr Lassen wrote to NRL stating ‘[w]e are instructed not to pursue further the issue of discovery’;

(c) the BDO report was provided to Ms Power in April 2019. Freefall relied on the BDO report at the trial of the winding up proceeding as a valuation of Project Collaboration in order to assess the value of its shareholding for the purposes of a buyout; and

(d) judgment in the winding up proceeding was handed down on 21 April 2020, and the costs judgment was handed down on 27 May 2020. In the costs reasons, Efthim AsJ rejected Freefall’s allegation that the Project Collaboration parties had breached various provisions of the CPA by not consenting to Freefall’s original winding up application and by making representations that Project Collaboration was still trading.

The first Hogg affidavit also addressed the following matters:

(a) the correspondence exchanged between Ms Power and NRL between October and December 2023 concerning various issues identified in the statement of claim in this proceeding, and the financial position of Ms Power and Freefall;

(b) the correspondence received from Ms Power in late October 2023 requesting a copy of schedule 1 of the settlement deed.[9] On 7 December 2023, Mr Hogg sought instructions from Mr Tonov, who advised that he did not believe schedule 1 or any variation to the settlement deed ever existed; and

(c) he provided an estimate of the disbursements incurred by NRL to date, and said that neither Freefall nor Ms Power had paid any amount owing by them to the Project Collaboration parties as a consequence of the costs order made against them in the winding up proceeding.

[9]The settlement deed included a reference to there being terms of the agreement in schedule 1 of the settlement deed. However, schedule 1 is missing from all known copies of the settlement deed (‘schedule 1 issue’).

Exhibited to the first Hogg affidavit were the following documents:

(a) various court documents in the winding up proceeding;

(b) the BDO report;

(c) email correspondence between NRL and Mr Lassen during the course of the winding up proceeding;

(d) a copy of the statutory report prepared by the liquidator; and

(e) emails and letters exchanged between NRL and Ms Power in relation to the current proceeding.

The second Hogg affidavit was largely responsive to the allegations made by Ms Power in the first Power affidavit, as follows:

(a) in relation to the schedule 1 issue, on 29 January 2024, Mr Hogg emailed Ms Power advising her that the original settlement deed had been located, that it was the same as the electronic copy previously provided to her, and it did not contain a schedule. Ms Power did not attend NRL’s offices to inspect the original settlement deed;

(b) Mr Hogg noted that Ms Power was not a shareholder of Project Collaboration, but rather Freefall was a shareholder. Freefall was a preference shareholder only, and therefore had no decision-making rights in relation to the day-to-day operations of Project Collaboration, including matters relating to the conduct and settlement of the Viewpoint proceeding;

Finally, for the reasons already provided, the plaintiffs’ claims against LSL in the s 29 application are an abuse of process, because they directly (in the case of the conflict of interest claim) or indirectly (in the case of the claim regarding the BDO report) seek to impeach the determinations made by Efthim AsJ in the restraint reasons and the costs reasons. For that reason, it would not be in the interests of justice to grant relief, for substantially the same reasons that McDonald J refused relief in Jeffrey v Giles (No 2).[51]
[51][2016] VSC 2.

Turning first to the allegation that Mr Lassen had a conflict of interest, this issue was at the forefront almost immediately upon LSL’s appointment to act for the plaintiffs in the winding up proceeding. The evidence shows that Mr Lassen informed Ms Power soon after his appointment that Project Collaboration considered that he had a conflict of interest by reason of his previous representation of Viewpoint. The restraint application was made, heard and determined by March 2018. Ms Power also deposed that during the course of the winding up proceeding, she approached Mr Panna KC (who acted for the plaintiffs in the restraint application, and had also acted for Viewpoint in the Viewpoint proceeding) with a view to briefing him for the trial of the winding up proceeding, and Mr Panna told her that he also had a conflict of interest.

Ms Power has not deposed to, or articulated in any way, what information she became privy to after the conclusion of the winding up proceeding which led her to draw the conclusion that Mr Lassen, notwithstanding the findings of Efthim AsJ in the restraint reasons, did in fact have a conflict of interest. All that she deposes to is approaching LSL in March 2020 requesting a meeting to discuss ‘service issues’, and later, informing LSL that she had documents confirming that Mr Lassen had a conflict of interest in representing Freefall in the winding up proceeding.

As for the BDO report, the BDO report was ultimately provided to Ms Power and Freefall in April 2019, about a year prior to the finalisation of the winding up proceeding. To the extent that the BDO report supported Freefall’s contention that Project Collaboration had ceased trading in 2014, and that the BDO report could and should have been deployed to support a contention that Project Collaboration should have been wound up well prior to 2020, that must have been known to Ms Power no later than April 2019, when she received and no doubt reviewed the BDO report.

However, in the event that I am wrong about the issue of whether the Court’s jurisdiction under s 31(2) of the CPA is enlivened, I would not grant an extension of time, because in any event, the plaintiffs’ claims against LSL in the s 29 application have no real prospects of success, as discussed below.

Turning first to Mr Lassen’s refusal to recognise that he had a conflict of interest, I repeat my earlier observations (see paragraphs 152 and 153 of these reasons) that the restraint application concerned not a potential conflict between the interests of Mr Lassen’s current client, Freefall, and Mr Lassen’s former client, Viewpoint, but rather the potential prejudice to the Project Collaboration parties (and the administration of justice) of having Mr Lassen act for Freefall while potentially in possession of confidential information by reason of his retainer in the Viewpoint proceeding, which could be used to the detriment of the Project Collaboration parties.

Further, even assuming for the moment that holding an erroneous opinion about a contestable matter could amount to a breach of an overarching obligation, a further difficulty facing the plaintiffs is that the question of whether Mr Lassen was permitted to act for Freefall in the winding up proceeding has already been conclusively determined by Efthim AsJ in the restraint application. Again, it is an abuse of process for the plaintiffs to attempt to relitigate the restraint application in this proceeding.

Further, Freefall was a party to the restraint application, and vigorously defended the restraint application. It would also be an abuse of process for Freefall to adopt the opposite position in the s 29 application than it did in the restraint application. Accordingly, the s 29 application, insofar as it concerns the conduct of Mr Lassen in refusing to recuse himself from acting for Freefall in the winding up proceeding, has no real prospects of success. In any event, as discussed earlier in these reasons, there is no evidence that Freefall suffered any loss by reason of any alleged conflict of interest.

As for not taking steps to obtain and provide Freefall with a copy of the BDO report, I repeat my earlier observations in paragraphs 164 to 166 of these reasons. In particular:

(a) while the BDO report supports a conclusion that, as at April 2014, Project Collaboration was no longer trading, it was not, of itself, conclusive proof that, as at July 2017, Project Collaboration was no longer trading or could not trade in the future;

(b) in any event, the primary purpose of the winding up proceeding was to act as a vehicle for Freefall to pursue its oppression claims, and indeed, the BDO report was deployed at the trial of the winding up proceeding in support of Freefall’s submissions regarding the value of its shareholding of Project Collaboration;

(c) accordingly, it is difficult to see how any delay in Freefall obtaining the BDO report caused any delay in the winding up of Project Collaboration;

(d) in any event, the evidence shows that Mr Lassen wrote to NRL in June 2018 informing NRL that he had been instructed not to press Freefall’s claims for further discovery. I can infer that those instructions came from Ms Power on behalf of Freefall;

(e) even if Ms Power’s evidence that she did not provide those instructions is correct (and I am prepared to assume so for present purposes) it is difficult to see how a failure to press for the other party to make discovery is a breach of an overarching obligation. It might amount to negligence, but the CPA is concerned with the integrity and ethics of parties and practitioners, not their competence; and

(f) finally, the plaintiffs’ claims against LSL in relation to its failure to obtain the BDO report amounts to a collateral attack on the decision of Efthim AsJ recorded in the costs reasons in the winding up proceeding.

Accordingly, the plaintiffs’ claim that, in failing to obtain the BDO report during the term of its retainer, LSL breached an overarching obligation and caused the plaintiffs to suffer loss, has no real prospects of success. The plaintiffs’ application for an extension of time under s 31(2) of the CPA will be dismissed.

Turning now to the position of NRL, the claims brought by the plaintiffs against NRL in the s 29 application are somewhat more orthodox, given that NRL acted for Freefall’s opponents in the winding up proceeding.

As summarised in paragraph 35 of these reasons, the plaintiffs’ complaints about the conduct of NRL concern the following matters and events:

(a) the Viewpoint proceeding;

(b) the share buyback process;

(c) the winding up proceeding; and

(d) the liquidation process.

Insofar as the plaintiffs’ claims concern the conduct of NRL in the share buyback process and the liquidation process, those claims can be dealt with quite promptly. The CPA governs the conduct of parties involved in civil proceedings. The overarching obligations apply only to certain participants in civil proceedings. The jurisdiction of the Court under s 29 of the CPA is limited to providing relief for breaches of overarching obligations by participants in civil proceedings. It is not a regime which regulates the conduct of parties and legal practitioners outside the sphere of civil litigation, even if there is some connection between the conduct complained of and a past civil proceeding, or where that conduct may ultimately precipitate the issue of a civil proceeding.

No civil proceeding was on foot involving the parties to this proceeding between July 2015, when the Viewpoint proceeding was concluded, and June 2017, when the winding up proceeding was commenced. Accordingly, the plaintiffs’ complaints about the conduct of NRL in the share buyback process, which commenced after the settlement of Viewpoint proceeding, such as the alleged refusal to provide Ms Power with financial information save on unacceptable terms, Mr Nicholson’s refusal to convene a meeting of shareholders, or Mr Nicholson taking steps to block Ms Power’s emails, regardless of their merits, cannot attract any relief under s 29 of the CPA, even if that conduct might be said to have precipitated, or at least contributed to, Freefall’s decision to commence the winding up proceeding.

Similarly, while the liquidator was appointed by the Court at the conclusion of the winding up proceeding, the fact that the appointment of the liquidator was, in effect, the relief granted in the winding up proceeding does not bring the liquidation process within the ambit of s 29 of the CPA.

Accordingly, the claims made by the plaintiffs in the s 29 application against NRL with respect to the share buyback process and the liquidation process fall outside the Court’s jurisdiction under s 29 of the CPA, and should be dismissed.

In any event, even if the plaintiffs’ complaints about the share buyback process fell within the jurisdiction of the Court under s 29 of the CPA, they were squarely raised in Freefall’s grounds of oppression in the winding up proceeding, and, as is apparent from the main reasons, those grounds were not pressed at trial. Freefall is bound by the forensic choices it made in the winding up proceeding, and it would be an abuse of process for Freefall and Ms Power to attempt to relitigate those issues in this proceeding.

Turning now to the Viewpoint proceeding, the plaintiffs say that NRL misled Viewpoint and the Court by making an assertion in a pleading filed by NRL on behalf of Project Collaboration to the effect that Project Collaboration was not in material breach of the 4Projects contract. Ms Power says that statement was misleading and deceptive, because the financial records of Project Collaboration show that in 2013 and 2014 Project Collaboration was continually in breach of the working capital requirement in the 4Projects contract.

The Viewpoint proceeding concluded in July 2015. [52] The s 29 application was issued by the plaintiffs on 6 February 2024, nearly nine years later. The plaintiffs therefore require an extension of time under s 31(2) of the CPA. Relevant to the question of whether an extension should be granted are the following matters:
[52]I assume that consent orders were made finalising the Viewpoint proceeding shortly after the settlement deed was executed on 15 July 2017.

(a) the plaintiffs’ standing to bring the s 29 application against NRL in relation to the conduct of the Viewpoint proceeding;

(b) whether the plaintiffs have established that they did not become aware of the alleged contraventions of the CPA prior to the conclusion of the Viewpoint proceeding;

(c) any additional explanations for the delay, including any explanation as to why these claims were not ventilated in the winding up proceeding;

(d) whether any person would suffer any prejudice by reason of the delay in bringing the s 29 application; and

(e) the merits of the plaintiffs’ claims.

Turning first to the question of standing, I have serious doubts as to whether a minority shareholder of a party to a civil proceeding (and even further removed, the person standing behind the shareholder) would be considered to be a person ‘prejudicially affected’ by any contravention of any overarching obligations within the meaning of s 29 of the CPA. However, for present purposes, I am prepared to assume that Ms Power and Freefall may be found to have had a sufficient interest in the Viewpoint proceeding, although those doubts may be relevant to the exercise of the discretion to grant of an extension of time, going as they do to the merits of the s 29 application.

Further, while it does seem that Ms Power was alert to some aspects of the working capital issue prior to the finalisation of the Viewpoint proceeding (see the letter of 10 August 2015 extracted at paragraph 48 of these reasons), I am prepared to give Ms Power the benefit of the doubt, and accept that she was not fully aware that Project Collaboration made allegedly misleading and deceptive allegations in its pleadings in the Viewpoint proceeding by reason of the working capital issue until after the conclusion of the Viewpoint proceeding.

However, I do not accept that Ms Power was unaware of the working capital issue until after the conclusion of the winding up proceeding, following an examination by her and those assisting her of financial documents provided to her by the liquidator. That much is clear from the contents of the letter sent by Ms Power to Mr Nicholson on 19 January 2017, which is reproduced at paragraph 50 of these reasons. In this letter, Ms Power squarely raises the working capital issue, and alleges that Project Collaboration made ‘false statements’ in court documents prepared by NRL, including a mediation statement, which was presumably provided to Viewpoint for the purposes of mediation.

Further, even if the plaintiffs have any standing to bring claims against NRL for allegedly making false or misleading statements in court documents in the Viewpoint proceeding, I have some doubts as to whether making assertions in pleadings regarding contestable factual matters can amount to a breach of an overarching obligation if done honestly and on a proper basis. The question of whether Project Collaboration was in material breach of the terms of the 4Projects contract was a hotly contested issue in the Viewpoint proceeding, which was compromised only a matter of days prior to trial, when all of the usual pre-trial disclosure processes were complete.

However, even assuming that making assertions of the kind made by the Project Collaboration parties in their pleadings and other court documents in the Viewpoint proceeding could amount to a breach of the overarching obligations, I simply cannot see how that conduct could have caused the plaintiffs loss. Originally, during the share buyback process, Ms Power complained that the Viewpoint proceeding was settled too cheaply, given that the BDO report concluded that the termination of the 4Projects contract caused a loss to Project Collaboration of $4.6 million. However, as a matter of logic, if Project Collaboration had admitted in the Viewpoint proceeding that it in fact had been in material breach of the 4Projects contract, at least insofar as it held insufficient working capital, then Viewpoint’s bargaining position in the Viewpoint proceeding would have been even stronger than it in fact was, and therefore Viewpoint may not have been prepared to pay Project Collaboration as much as it ultimately did. If any party had any reason for contending that Project Collaboration had made misleading statements in court documents, it was Viewpoint, not a shareholder of Project Collaboration who ultimately stood to benefit from any recovery by Project Collaboration in the Viewpoint proceeding.

Of course, Freefall did not recover anything from the proceeds of settlement from the Viewpoint proceeding. But that is because Freefall rejected the directors’ offer to buy back its shares for $70,000, not because Project Collaboration (or NRL) made misleading statements in court documents.

In her letter to Mr Nicholson of 19 January 2017 foreshadowing her application to wind up Project Collaboration, Ms Power referred to the working capital issue, and Project Collaboration withholding vital information from the Court, and possibly trading while insolvent. However, as is apparent from the main reasons, in the winding up proceeding, no allegation was made or pressed that the responsibility for the termination of the 4Projects contract should be sheeted home to the directors.[53] If such an allegation was to be made, it should have been made in the winding up proceeding.
[53]Main reasons [64].

In my view, it was patently unreasonable for Freefall not to bring all of its complaints it had regarding the conduct of the directors in the winding up proceeding.

In the winding up proceeding, Freefall through Ms Power, made a series of wide ranging complaints against the directors, many of which have been repeated in the affidavits and submissions filed by Ms Power in this proceeding. Freefall did initially make an allegation that the directors settled the Viewpoint proceeding too cheaply, which, as I have noted, sits somewhat uncomfortably with an allegation that Project Collaboration misrepresented its position in the Viewpoint proceeding regarding whether it was in material breach of the 4Projects contract. However, the allegation that the directors settled the Viewpoint proceeding too cheaply was not included in the grounds of oppression filed in the winding up proceeding, or pressed at the trial of the winding up proceeding.

I have not been able to locate anywhere in the materials before me any reference to any allegation against the directors regarding the working capital issue in the winding up proceeding. However, it is clear from the letter from Ms Power to Mr Nicholson extracted at paragraph 50 of these reasons that Ms Power was well aware of the working capital issue no later than January 2017. While she may not have had all of the financial information she now has, which she says verifies her concerns, she certainly had enough to make accusations of serious misconduct against the directors, but chose not to pursue that issue in the winding up proceeding. Given the nature of the issues in the winding up proceeding, it is unreasonable for the plaintiffs to now bring claims against NRL for their alleged complicity in Project Collaboration’s alleged misconduct in the Viewpoint proceeding in the s 29 application.

Accordingly, the plaintiffs’ claims in the s 29 application regarding NRL’s conduct during the Viewpoint proceeding lack sufficient merit to justify the grant of leave under s 31(2) of the CPA. Further, no explanation whatsoever has been provided as to why this issue was not agitated in the winding up proceeding, and, while there is no direct evidence of any prejudice to NRL or the directors of Project Collaboration of being forced to respond to the plaintiffs’ claims concerning the veracity of Project Collaboration’s claims in the Viewpoint proceeding, I can infer that there would be, given the passage of time, especially in circumstances where the party alleged to have been deceived, being Viewpoint, has apparently expressed no interest in pursuing the matter.

The gravamen of the plaintiffs’ complaints against NRL in relation to the winding up proceeding are as follows:

(a) at the July 2017 hearing, counsel for the Project Collaboration parties (instructed by NRL), misled the Court by refusing to concede that Project Collaboration had ceased to trade, and ought to be wound up; and

(b) by refusing to disclose the BDO report until April 2019, NRL withheld from Freefall (and the Court) evidence which would inevitably have led the Court to wind up Project Collaboration at an earlier time, thus making available funds to the liquidator to investigate and meet Freefall’s claims.

The plaintiffs submitted that NRL’s conduct in refusing to concede that Project Collaboration had ceased to trade in 2014 and should be wound up breached a number of overarching obligations, and caused the plaintiffs to incur wasted costs.

I accept that the evidence supports a conclusion that Project Collaboration was not operating an active business after the termination of the 4Projects contract in 2014. But that does not necessarily mean that it should have been wound up. After the settlement of the Viewpoint proceeding it still had assets, or at least it did until the depletion of its resources by the Project Collaboration parties’ defence of the winding up proceeding. There was no legal barrier preventing Project Collaboration from commencing a new business, despite the directors having gone their own ways.

The plaintiffs’ contention that Project Collaboration could not trade by reason of the terms of the settlement deed is based upon a misreading of the settlement deed, which contains no restraint of trade or non-compete clauses. Further, the plaintiffs have seized upon the schedule 1 issue to support a contention that the settlement deed contained non-compete clauses which would have prevented Project Collaboration from trading further, because a draft agreement circulated on behalf of Viewpoint contained such clauses. I can infer that the plaintiffs contend that those clauses were contained within the now missing schedule 1.

However, in the second Hogg affidavit, Mr Hogg deposes to having been informed by Mr Tonov that it seems that the reference to schedule 1 in the settlement deed was a drafting error.

I see no good reason to go behind that evidence. Further, I cannot see the relevance of terms in a draft agreement which was never executed to speculation about what might have been included in schedule 1, had it existed. However, even if there were non-compete clauses in the settlement deed, they might have hampered the ability of the company to operate certain types of businesses, but not all types of businesses. Theoretically, at least, the directors could have decided to use the proceeds of settlement from the Viewpoint proceeding to purchase a childcare centre, or open a restaurant. The fact that an agreement precludes a corporation from operating in one industry does not preclude it from shifting focus and operating in another industry.

Accordingly, the schedule 1 issue is a red herring.

Further, for the reasons provided for dismissing the plaintiffs’ claims against LSL, the plaintiffs have failed to establish that any of the alleged breaches of the overarching obligations by NRL caused the plaintiffs, or either of them, any compensable loss. First, once again, as stated by Efthim AsJ in the costs reasons, the proceeding was a vehicle for Freefall’s oppression claims. That much was evidenced by the fact that the winding up proceeding continued after the Project Collaboration parties made their own application to wind up the company. The focus of the main reasons was Freefall’s oppression claims.

Ms Power said that she only referred to her allegations against the directors in her initiating affidavit in the winding up proceeding because she was advised to do so in order to alert a potential liquidator to the issues in the management of Project Collaboration and the concerns she had about the conduct of the directors, not for the purpose of pursuing any oppression claims. Further, she said that Freefall only amended the originating process to include relief for oppression because Freefall followed the legal advice it received to do so after it became clear at the July 2017 hearing that the Project Collaboration parties would resist Freefall’s application to wind up the company. In other words, Freefall’s conduct was in response to the Project Collaboration parties’ intransigence, which was promoted and/or enabled by NRL.

Setting aside for the moment the question of whether the reasoning behind what Freefall did in the winding up proceeding is particularly relevant, as opposed to what Freefall actually did in the winding up proceeding, it seems to me that the reality of the situation is that Ms Power was always going to pursue her allegations against the directors in one form or another. She wanted to wind up the company so that a liquidator could investigate her allegations. There is no evidentiary support for Ms Power’s contention that an investigation by a liquidator into her claims against the directors would have been quicker and more cost-effective than litigating those claims in the winding up proceeding, given that liquidators are entitled to renumeration. In any event, when she met resistance to the appointment of a liquidator, she pursued those claims in the winding up proceeding. When she failed in the winding up proceeding, she pursued her complaints with the liquidator. And, when that course of action bore no fruit, she issued this proceeding.

And there lies the vice of this proceeding. Freefall is clearly trying to relitigate matters which have been heard and conclusively determined in the winding up proceeding, as evidenced by the main reasons and the costs reasons, or should have been agitated in the winding up proceeding. The question of whether the Project Collaboration parties’ defence of the winding up proceeding was justified was squarely addressed by Efthim AsJ in the costs reasons, where he held that it was. Any contention that it was not impermissibly seeks to undermine that finding. And, while the costs reasons did not explicitly refer to the late provision of the BDO report, his Honour impliedly rejected Freefall’s submissions that the Project Collaboration parties failed to disclose critical documents in a timely fashion. Further, no allegations were made by Freefall in the winding up proceeding that NRL had breached its overarching obligations at the time, and it should have done so then.

I accept that the BDO report was almost certainly a discoverable document, given the way the winding up proceeding had unfolded. But I doubt that it was a critical document, given its subject matter and the purpose for which it was created. And, for the reasons already discussed, there is no evidence to suggest that matters would have progressed any differently had the BDO report been provided to Ms Power at an earlier time.

In any event, in addition to the above, there is an insurmountable barrier to the plaintiffs bringing their claims in the s 29 application against NRL with respect to its conduct of the winding up proceeding: the plaintiffs have not established that they were not aware of the alleged contraventions of the CPA prior to the conclusion of the winding up proceeding, and indeed, the evidence is to the contrary. The question of whether Project Collaboration had ceased trading or might recommence trading in the future was front and centre as early as July 2017. The BDO report was provided to Ms Power in April 2019, and was relied upon by Freefall at the trial of the winding up proceeding.

Accordingly, the Court’s jurisdiction to grant an extension of time under s 31(2) of the CPA for the plaintiffs to bring their claims against NRL in relation to its conduct of the winding up proceeding has not been enlivened.

In sum, summary judgment should be granted in favour of NRL. There was no relationship between NRL and the plaintiffs, or either of them, which would give rise to any duties or obligations known to the law, save for the overarching obligations under the CPA. Some of the conduct complained of by the plaintiffs was conduct engaged in outside the civil litigation context, and thus does not fall within the jurisdiction of the Court under s 29 of the CPA. Insofar as the conduct does fall within the jurisdiction of the Court, the alleged breaches of the overarching obligations could not possibly have caused the plaintiffs any loss (such as the alleged breaches in the Viewpoint proceeding) or were known to the plaintiffs prior to the conclusion of the proceeding concerned (such as the alleged breaches in the winding up proceeding).

Discussion – security for costs application

Given my conclusion that summary judgment should be granted in favour of the defendants, then strictly speaking, it is not necessary for me to deal with the defendants’ applications that Freefall provide security for costs. But I will do so, briefly.

This proceeding highlights the policy considerations underpinning the Court’s jurisdiction to order security for costs against a corporate plaintiff. Freefall has no assets or undertaking, and is said by Ms Power to be merely a vehicle for pursuing the claims in this proceeding. During the course of her oral submissions, Ms Power said ‘there’s no money left’. Freefall is a shell. Ms Power did not advance any evidence or submissions in opposition to the defendants’ contention that there is a real risk that Freefall would not be able to meet an order for costs if the defendants were successful at trial, or offer any undertaking to be personally liable for any costs orders which might ultimately be made in favour of the defendants.

The jurisdiction of the Court to order security is therefore enlivened. Further, the discretionary factors weigh in favour of ordering that Freefall provide security for costs. If I am found to be wrong in my conclusion that the plaintiffs’ claims in this proceeding have no real prospects of success, then at the very least, the merits of those claims are dubious, and those claims face many obstacles. Ms Power has not deposed as to whether or not she or Freefall would be able to provide security in the sums sought. The sums sought by the defendants are supported by evidence, and seem reasonable in all of the circumstances, taking the broad brush approach endorsed by the authorities.

Ms Power’s submissions did not really engage with the principles governing applications for security for costs. Rather, she submitted that she has taken all reasonable steps to try and resolve her concerns with the defendants, in compliance with appropriate pre-action protocols, but her efforts have been unrewarded. I understood this to mean that the plaintiffs have issued this proceeding as a final resort, and should not be impeded from progressing those claims by an order for security for costs. However, for the reasons outlined above, that submission should be rejected.

Discussion – stay application

The defendants also seek orders that, should summary judgment not be granted, the proceeding, insofar as it includes claims brought by Freefall, be stayed pending the appointment of a solicitor by Freefall.

Rule 1.17 of the Rules provides that a corporation may not take any step in a proceeding save by a solicitor. Rule 2.04 provides that the Court may dispense with the requirements of the Rules. However, the authorities make it clear that, when determining whether to waive the requirement that a corporation be represented in a civil proceeding by a solicitor, the following must be taken into account when considering whether to dispense with this requirement.

(i)The manner in which the case has progressed at the time that the application is made;
(ii)The manner in which the case can proceed in the future without a solicitor;

(iii) The complexity of the issues involved in the case;
(iv)Whether the lack of disciplinary measures in relation to the person seeking to represent the company will affect the administration of justice;
(v)Whether the case can be conducted in an orderly and responsible fashion without a solicitor;
(vi)Whether there are financial considerations which would inhibit a company from obtaining legal representation;

(vii) The stage which the case has reached;
(viii)Whether the defendant is likely to expend more funds in defending the claim absent a solicitor acting for the company; and
(ix)What effect, if any, permitting a company to appear without a solicitor will have on Court resources and, particularly, the effect upon other litigants in the Court list.[54]

[54]Worldwide Enterprises Pty Ltd v Silberman (2010) 26 VR 595 [41].

Consideration of the factors outlined above tells against dispensing with the requirement that Freefall be represented by a solicitor. Indeed, the evidence and submissions put forward by the plaintiffs in the context of the current applications highlight the hazards faced by defendants facing claims made by a corporation with no solicitors, no assets and limited liability. While Ms Power is clearly intelligent and has a reasonable understanding of commercial matters, her inability to articulate clear causes of action against the defendants or either of them, her inability to quantify or even explain in broad terms the losses said to have been suffered by her and/or Freefall as a consequence of the defendants’ conduct, and the inclusion of wide ranging and long standing grievances in support of what is said to be a limited claim for wasted costs all highlight the need for Freefall to obtain legal representation should the proceeding continue.

Conclusion and proposed orders

Accordingly, I will make the following orders:

1. The statement of claim be struck out.

2. The plaintiffs’ application for leave pursuant to s 31(2) of the CPA be dismissed.

3. There be summary judgment in favour of the defendants.

4. The parties notify the Court and the other parties of the orders they seek with respect to the costs of the proceeding by 4:00pm on 5 August 2024.

SCHEDULE OF PARTIES

S ECI 2023 03544
BETWEEN:
JACQUELINE POWER	First Plaintiff
FREEFALL HOLDINGS PTY LTD (ACN 139 700 057)	Second Plaintiff
- v -
NICHOLSON RYAN – FORMERLY FOSTER NICHOLSON RYAN (ACN 64 619 343 074)	First Defendant
COLIN BIGGERS & PAISLEY LAWYERS – FORMERLY LOGIE SMITH LYON (ACN 166 080 682)	Second Defendant

[2024] VSC 441

29 July 2024