Re Convector Grain Pty Ltd (In Liquidation)
[2017] VSC 473
•16 August 2017
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMERCIAL COURT
CORPORATIONS LIST
S CI 2016 03434
IN THE MATTER of CONVECTOR GRAIN PTY LTD (IN LIQ) (ACN 124 164 432)
| CONVECTOR GRAIN PTY LTD (IN LIQUIDATION)(ACN 124 164 432) | First Plaintiff |
| ANDREW REGINALD YEO IN HIS CAPACITY AS JOINT AND SEVERAL LIQUIDATOR OF CONVECTOR GRAIN PTY LTD (IN LIQUIDATION) (ACN 124 164 432) | Second Plaintiff |
| GESS RAMBALDI IN HIS CAPACITY AS JOINT AND SEVERAL LIQUIDATOR OF CONVECTOR GRAIN PTY LTD (IN LIQUIDATION) (ACN 124 164 432) | Third Plaintiff |
| v | |
| LAUREVILLE PTY LTD (ACN 063 524 194) | Defendant |
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JUDGE: | RANDALL AsJ |
WHERE HELD: | Melbourne |
DATE OF HEARING: | 23 November 2016 |
DATE OF JUDGMENT: | 16 August 2017 |
CASE MAY BE CITED AS: | Re Convector Grain Pty Ltd (In Liquidation) |
MEDIUM NEUTRAL CITATION: | [2017] VSC 473 |
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CORPORATIONS – Corporations Act 2001 (Cth), s 588FF and s 1322 – Supreme Court (Corporations) Rules 2013 (Vic), rr 1.10, 2.3 and 2.7.
PRACTICE AND PROCEDURE – Originating Process seeking relief under s 588FF – Originating process amended prior to the return date but after the expiry of time for service – Power to amend following the decision of the Court of Appeal in Horne v Retirement Guide Management Pty Ltd [2017] VSCA 47 – r 3.02 of Ch 1 of the Supreme Court (General Civil Procedure) Rules 2015 – Discretion – s 1322(4)(d) – Discretion – Substantial injustice.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiffs | Mr P Fary | Frenkel Partners |
| For the Defendant | Mr A Trichardt | Charles Fice Solicitors |
HIS HONOUR:
The second and third plaintiffs in this matter are the liquidators of the first plaintiff (‘Convector Grain’). The liquidators seek relief under s 588FF(1) of the Corporations Act 2001 (Cth) (‘the Act’). That section allows the Court to make certain orders in relation to voidable transactions. Here, the liquidators are seeking orders that a preference in the sum of $337,928.27 be repaid to Convector Grain.
Section 588FF(3) provides that such an application:
…may only be made:
(a) during the period beginning on the relation‑back day and ending:
(i) 3 years after the relation‑back day; or
(ii)12 months after the first appointment of a liquidator in relation to the winding up of the company;
whichever is the later; or
(b)within such longer period as the Court orders on an application under this paragraph made by the liquidator during the paragraph (a) period.
The relation-back day in this case is 26 August 2013, which is the date on which the liquidators were appointed. The originating process was filed on 25 August 2016, one day within the three-year time limit imposed by s 588FF(3)(a)(i).
The proceedings were initially returnable on 16 September 2016. Rule 2.7 of the Supreme Court (Corporations) Rules2013 (Vic) (‘Corporations Rules’) requires service to be effected ‘[a]s soon as practicable after filing … and, in any case, at least 5 days before the date fixed for hearing’. That is, at least five days before 16 September 2016.
Service was not effected by that time. Instead, the return date was amended on 14 September 2016 by the Prothonotary.
The question now before the Court is whether the statutory regime and rules of court provide any basis for that amendment. That is, whether the Court has power to make such an amendment to the originating process.
I will first set out the various rules of procedure which are relevant to these questions, and then turn to the particular applications before the Court. For the reasons which follow, I find that the amendment ought not have been made, and I will not now use remedial powers to regularise or re-make such an amendment.
Legislative scheme
The Prothonotary must fix a date for hearing an originating process filed under s 588FF when he or she receives it: Corporations Rules r 2.3. Rule 2.7 then requires the originating process to be served ‘as soon as practicable after filing … and, in any case, at least 5 days before the date fixed for hearing’.
The interaction between the Corporations Rules and Supreme Court (General Civil Procedure) Rules 2015 (Vic) (‘GCP Rules’) is primarily governed by Corporations Rules rr 1.3 and 1.10:
1.3 Application of these Rules and other rules of the Court
(1)Unless the Court otherwise orders—
(a)these Rules apply to a proceeding in the Court under the Corporations Act or the ASIC Act; and
(b)Order 15A applies to a proceeding in the Court under the Cross-Border Insolvency Act.
(2)The other Rules of the Court apply, so far as they are relevant and not inconsistent with these Rules—
(a)to a proceeding in the Court under the Corporations Act or the ASIC Act; and
(b)to a proceeding in the Court under the Cross-Border Insolvency Act that is commenced on or after the commencement of the Supreme Court (Chapter V Amendment No. 6) Rules 2009.
…
1.10 Extension and abridgment of time
Unless the Corporations Act, the ASIC Act, or these Rules otherwise provide, the rules of this Court that provide for the extension or abridgment of a period of time fixed for the doing of any act or thing in relation to a proceeding apply to a proceeding to which these Rules apply.
The following two rules of the GCP Rules are potentially relevant in this matter:
3.02 Extension and abridgement
(1)The Court may extend or abridge any time fixed by these Rules or by any order fixing, extending or abridging time.
(2)The Court may extend time under paragraph (1) before or after the time expires whether or not an application for the extension is made before the time expires.
(3)Unless the Court otherwise orders, any time fixed by these Rules or by any order fixing, extending or abridging time may be extended by consent without an order of the Court.
…
5.12 Duration and renewal of originating process
(1)A writ or an originating motion shall be valid for service for one year after the day it is filed.
(2)Where a writ or originating motion has not been served on a defendant, the Court may, from time to time, by order extend the period of validity for such period from the day of the order as the Court directs, being not more than one year from that day.
(3)An order may be made under paragraph (2) before or after expiry.
(4)The plaintiff may apply under paragraph (2) without notice to the defendant, but if the Court considers that the defendant ought to be heard, the Court shall—
(a)adjourn the further hearing; and
(b)direct the plaintiff to give notice to the defendant by summons or otherwise.
(5)Where an order is made under paragraph (2), the Prothonotary shall stamp any sealed copy originating process for service with the date of the order and the extended date of validity.
Order 36 of the GCP Rules allows for amendment of a writ or other originating process where that originating process has not yet been served on the other party: r 36.03(1). Rule 36.03(1)(b) requires an affidavit in support of such an amendment, stating that service has not occurred. Rule 36.01 provides that amendments are to be made for the purpose of:
(a)determining the real question in controversy between the parties to any proceeding; or
(b) correcting any defect or error in any proceeding; or
(c) avoiding multiplicity of proceedings…
Finally, r 46.05.01 of the GCP Rules provides as follows:
(1)A summons which has not been served may, at the request of the party who filed it, be amended on or before the day for hearing named in the summons to name another day.
(2)The summons may be amended—
(a)if the summons is to be heard by the Court constituted by a Judge of the Court, by the Prothonotary or a Judge's Associate;
(b)if the summons is to be heard by the Court constituted by an Associate Judge, by an Associate Judge's Associate or the Prothonotary;
(c)if the summons is to be heard by the Court constituted by a judicial registrar, by a judicial registrar's Associate or the Prothonotary.
(3) A summons shall not be amended under this Rule more than once.
(4) This Rule does not limit the power of the Court under Rule 36.01.
Beyond the Rules, the following parts of s 1322 of the Act have been the subject of argument:
1322 Irregularities
(1) In this section, unless the contrary intention appears:
(a)a reference to a proceeding under this Act is a reference to any proceeding whether a legal proceeding or not; and
(b) a reference to a procedural irregularity includes a reference to:
(i)the absence of a quorum at a meeting of a corporation, at a meeting of directors or creditors of a corporation, at a joint meeting of creditors and members of a corporation or at a meeting of members of a registered scheme; and
(ii) a defect, irregularity or deficiency of notice or time.
(2)A proceeding under this Act is not invalidated because of any procedural irregularity unless the Court is of the opinion that the irregularity has caused or may cause substantial injustice that cannot be remedied by any order of the Court and by order declares the proceeding to be invalid.
…
(4)Subject to the following provisions of this section but without limiting the generality of any other provision of this Act, the Court may, on application by any interested person, make all or any of the following orders, either unconditionally or subject to such conditions as the Court imposes:
(a)an order declaring that any act, matter or thing purporting to have been done, or any proceeding purporting to have been instituted or taken, under this Act or in relation to a corporation is not invalid by reason of any contravention of a provision of this Act or a provision of the constitution of a corporation;
…
(d)an order extending the period for doing any act, matter or thing or instituting or taking any proceeding under this Act or in relation to a corporation (including an order extending a period where the period concerned ended before the application for the order was made) or abridging the period for doing such an act, matter or thing or instituting or taking such a proceeding;
and may make such consequential or ancillary orders as the Court thinks fit.
…
(6)The Court must not make an order under this section unless it is satisfied:
(a) in the case of an order referred to in paragraph (4)(a):
(i)that the act, matter or thing, or the proceeding, referred to in that paragraph is essentially of a procedural nature;
(ii)that the person or persons concerned in or party to the contravention or failure acted honestly; or
(iii) that it is just and equitable that the order be made; and
…
(c)in every case—that no substantial injustice has been or is likely to be caused to any person.
Background
The affidavit sworn in support of the originating process was sworn by one of the liquidators with the authority of both. The liquidators were appointed as voluntary administrators in place of those originally appointed on 5 September 2013. By resolution made on 10 February 2014, the second and third plaintiffs became liquidators of Convector Grain.
This proceeding is one of eight proceedings prosecuted by the plaintiffs, all of which were initially returnable on the same date¾namely, 16 September 2016 at 10:00am.
By email transmission dated 13 September 2016, the plaintiff’s solicitors wrote to my Associate and relevantly said:
We attended at the Supreme Court Registry this afternoon to have the dates contained in the originating process in each of the above proceedings changed to a later date therefore extending the first return of the above proceedings.
We were informed by Registry that they were unable to change the date on the originating process in each of the above proceedings after a date in October 2016 without approval by his Honour.
We therefore seek his Honour’s approval to change the dates contained in the originating process in each of the above proceedings to a date in January 2017. Registry have advised that they will change the dates in the originating process upon approval by his Honour.
Would you please let me know, as soon as practicable, if his Honour is agreeable with this change and we will then arrange for someone from our office to attend at Registry to change the date contained in the originating process in the above proceedings.
At all times, my Associate acted under my supervision and upon my instructions.
On 14 September 2016, my Associate responded relevantly as follows:
I will arrange for the adjournment to be made. Please disregard the listing of the matters on the daily list. No appearances are required.
On 14 September 2016, the plaintiff’s solicitors responded relevantly as follows:
I note by way of clarification that we seek to amend the date in the originating process in the proceedings listed in the email sent to you yesterday.
Accordingly, we would be seeking to attend the Supreme Court Registry to amend the date on the originating process to 3 February 2017.
In the circumstances, an adjournment of the proceedings is not necessary.
On the same day my Associate responded relevantly:
I confirm that you may amend your originating process for all matters listed to 3 February 2017.
Please print this email and take it with you to the Principal Registry tomorrow.
That was not the end of the matter. On 4 October 2016, after dealing with which proceeding had been adjourned to which date, the plaintiff’s solicitors wrote to my Associate and relevantly said:
Due to the length of the extension, Registry advised that we would need to seek his Honour’s permission to have the first return date listed so far into the future for the second extension proceedings, which his Honour subsequently gave and the second extended proceedings were made returnable on 3 February 2017. We note that we have not served the originating process on any of these five defendants at this stage. For the sake of clarity, we note that the Court’s records state that each of these five proceedings were adjourned by consent –– this is not correct as:
(a)we did not seek to adjourn them, rather we sought the first return date to be extended, and
(b) there was no consent as the defendants have not been served.
Notwithstanding the above, upon contacting the Court today we have been advised that the return date for the First Extended Proceedings has been changed to now be listed as returnable before the Court on 3 February 2017 instead of on 14 October 2016. …
We confirm that the Second Extended Proceedings should remain returnable on 3 February 2017. …
On 4 October 2016 my Associate wrote to the plaintiffs’ solicitors relevantly as follows:
I confirm that the First Extended Proceedings are returnable on 14 October.
The Second Extended Proceedings are all returnable on 3 February 2017.
Thank you for your clarification.
The originating process and material in support was served on the defendant on 3 November 2016. The originating process contained a hand-written amendment of the return date, together with the words ‘Amended pursuant to Order 36’. Order 36 of the GCP Rules allows amendment of a writ or originating process to occur by leave of the Prothonotary or Court, in some circumstances.
The Applications
Two interlocutory processes were then filed. The first was filed by the defendant on 17 November 2016. This was an application under rr 36.03(3), 2.01(2)(a) and 2.01(2)(b) of the GCP Rules for the amendment to the return date to be wholly disallowed and for the originating process to be set aside.
The second interlocutory process was filed on behalf of the plaintiffs on 22 November 2016. That application sought relief under s 1322(4) of the Act and r 2.01(2)(c) of the GCP Rules, each of which allows for regularisation of irregularities in procedure and, in the latter case, to allow amendments. The plaintiffs sought leave, nunc pro tunc, to:
(a) make such orders as are necessary under s 1322(2) of the Act to regularise the originating process;
(b) amend the originating process by substituting a new hearing date for the first return date of the originating process; and/or
(c) extend the time for service of the originating process; and/or
(d) make such further or other order as the court considers appropriate.
Paragraph (a) was later amended by the addition of s 1322(4) of the Act and r 2.04(1) of the GCP Rules (which provides for the dispensing of compliance with the rules) as possible alternative grounds for the regularisation of the originating process. The plaintiffs now seek leave to further amend paragraph (a), in order to rely on r 3.02 of the GCP Rules. The request for this amendment has arisen because of the Court of Appeal judgment in Horne, discussed below.
The Defendant’s Affidavit
The defendant’s application was supported by an affidavit of Christopher Anthony Charles sworn 16 November 2016.
That affidavit states that the liquidators made a demand in December 2014 that the defendant repay an unfair preference, followed by a denial of liability by Mr Charles in January 2015.
Mr Charles again wrote to the liquidators in February 2015. There was no further correspondence in the matter until the plaintiff’s solicitors wrote to the defendant’s solicitors on 20 October 2015, and a response provided on 28 October 2015.
Mr Charles’ affidavit then referred to the fact that there was no further correspondence until he received the originating process and supporting material under cover of a letter from the plaintiff’s solicitors dated 3 November 2016.
Mr Charles noted that the originating process was served more than 70 days after the expiration of the three-year limitation period set by s 588FF. I interpolate that the three-year period applies to the institution of the proceeding, and not service of the originating process.
Mr Charles made a number of observations including the following:
(c)Thirdly, the words ‘amended pursuant to Order 36’ were endorsed in manual script on the front page of the originating process in circumstances where the only substantive amendment was a change of hearing date. Such an amendment did not appear to me to satisfy any of three purposes justifying amendment which are prescribed by r 36.01(1) …
(d)Fourthly, the originating process did not show the date on which it was amended, or that leave was granted by either the Prothonotary or the Court.
(e)Fifthly, (and by reason of subparagraph (d), I could not determine whether the purported change to the hearing date had occurred after 16 September 2016 by which time it seemed to me the originating process would have expired.
In addition to what was set out by Mr Charles it should also be noted that the alteration of the hearing date on the originating process was not sealed by the Court, and nor was the original document (retained on the court file) amended in any way whatsoever.
After obtaining a copy of the court file, Mr Charles further observed that r 36.03(1) had not been mentioned in any communication and only r 46.05.1 (which provides for amendment of the return date of a summons) had been relied upon. As to the latter, the reference to that rule only occurred after the authorisation to amend the return date. Insofar as r 36.03 was concerned, Mr Charles also noted that there was no affidavit confirming that the originating process had not been served, as required by r 36.03(1)(b).
Mr Charles then wrote to the plaintiff’s solicitors on 9 November 2016. Among other things, the letter stated:
Steps taken and not taken to amend originating process
3.Your clients filed an originating process … with only one day remaining of the three year period allowed for such an application to be made.
4.The originating process was issued and made returnable on 16 September 2016 but not served before that date. In choosing not to serve, your clients ignored Corporations Rule 2.7(1) which required the originating process to be served ‘as soon as practicable after filing … and, in any case, at least five days before the date fixed for hearing’.
5.Before the expiry of the three year limitation period your client did not apply under s 588FF(3)(b) to extend the period within which to make their application.
Mr Charles then made reference to the email correspondence between my chambers and the solicitors for the liquidators, which I have set out above.
Mr Charles further noted that he could find no evidence that the amendment took place before 16 September 2016 (the initial return date) and noted that the originating process so served did not correspond to the filed originating process. The latter had not been amended and still bears only the original hearing date.
Mr Charles sought that the proceeding be discontinued; otherwise, the defendant would make an application pursuant to r 36.03(3) for the Court to disallow the amendment.
The Plaintiffs’ Affidavits
The plaintiffs’ interlocutory process, seeking to regularise the amendment to the extent necessary, was supported by two affidavits. First, that of Claudia Baskett, the practitioner with the overall control of the conduct of the proceeding; and second, that of Krystelle Hsu, who assisted Claudia Baskett under her supervision. These affidavits were sworn on 22 November 2016 and 23 November 2016, respectively. Ms Baskett set out that the neglect of service was due to unrelated work commitments and preparations for a trial, as well as her part-time employment. Ms Baskett said that due to these factors, she was not able to review and sign off letters of service ‘and their enclosures on any of the [other seven related proceedings] to be posted for service by 2 September 2016.’ That day was the last date which would have ordinarily ensured that service be effected at least five days before the return date.
Ms Baskett instructed her personal assistant to attend the registry on 12 September 2016 to extend the time for the return date specified in each originating process.
Ms Hsu’s affidavit further explained the pressure that Ms Baskett was under.
Mr Trichardt objected to both affidavits on the basis that they contained hearsay.
This is an interlocutory application and pursuant to s 60 of the Evidence Act 2008 (Vic), hearsay evidence is admissible. However, the affidavit of Krystelle Hsu was unhelpful and the affidavit of Claudia Baskett did not really assist the Court in providing an explanation as to why the originating process was not served as soon as practicable, save that it can be distilled that Ms Baskett relied upon the pressure of other work. However, it is clear that after the email correspondence with my chambers referred to above, another practitioner apart from Ms Hsu attended to the file.
Whether or not these matters provide a good reason for an extension of time in this case is dealt with below.
The decision in Horne
I first heard argument in this matter before the decision of the Court of Appeal in Horne v Retirement Guide Management Pty Ltd (‘Horne’).[1] The parties therefore took the law to be that stated by Judd J at first instance in that matter, in Re Australian Property Custodian Holdings Ltd (in liq) (‘Re APCH’).[2] In the result, the judgment of the Court of Appeal overturned much of Judd J’s decision. I sought further submissions from the parties as to the effect of the decision in Horne, and these were duly provided.
[1](2017) ACSR 509.
[2][2015] VSC 745.
As a result of Horne, only brief reference need now be made to Re APCH. That decision concerned an application made under s 588FF. The liquidators requested an extension of time for service and, if necessary, an extension of the validity of the originating process. The reason given for the request was to accommodate the internal strategies of the liquidators.[3] An extension of time was granted, and the question before Judd J was whether that extension was properly granted.
[3][2015] VSC 745, [14].
His Honour held that it was not. While an application for adjournment could be made, ‘any such application must be determined within the statutory context, including the Corporations Rules, which include a requirement that service be effected as soon as practicable.’[4]
[4][2015] VSC 745, [68] (emphasis in original).
Judd J held that an order extending the validity of the originating process under r 5.12 of the GCP Rules ‘was antithetical to the policy and the mandatory obligation under the Corporations Rules to serve the Originating process’.[5]
[5][2015] VSC 745, [70].
Nor was r 3.02 of the GCP Rules available. That rule allows extension of any time fixed by those Rules. The liquidators sought to invoke this power via r 1.10 of the Corporations Rules, which allows recourse to r 3.2 unless the Corporations Rules or the Act ‘otherwise provide’. Judd J held that the Corporations Rules do ‘otherwise provide’. In any event, his Honour found that r 2.7 does not ‘fix a time’ that is amenable to extension: rather, ‘[t]he obligation that service be effected as soon as practicable is a substantive obligation, without any fixed time for doing the act, save that it is to be done not less than five days before the date fixed for the hearing.’[6]
[6][2015] VSC 745, [71].
Judd J concluded that the orders ‘had the effect of relieving [the liquidators] of the obligation that otherwise arose under Corporations Rule 2.7 to serve the Originating process as soon as reasonably practicable’, and that the GCP Rules could not be employed ‘to subvert the mandatory and purposeful obligation of service’.[7] His Honour therefore set aside the orders extending time.
[7][2015] VSC 745, [72].
Argument before me initially proceeded on the basis that the decision of Judd J foreclosed the use of r 3.02 of the GCP Rules in amending the originating process in this case, to the extent that the amendment had the effect of extending time. The points of principle expressed in Re APCH – particularly in relation to the importance of expediency in the statutory scheme – also had the potential to inform the availability or use of other powers.
In any event, the Court of Appeal judgment in Horne is not to the same effect. The appeal from the decision of Judd J in Horne was made on three grounds.[8] First, that his Honour erred in concluding that r 2.7 of the Corporations Rules ‘otherwise provides’ such that r 3.02 of the GCP Rules cannot be accessed via r 1.10 of the Corporations Rules. Second, that Judd J erred in finding that extension of the validity of the writ under r 5.12 was not possible. Third, that Judd J erred in finding that r 2.7 did not ‘fix a time’ which could be extended by r 3.02.
[8](2017) ACSR 509, 526 [74].
The second ground of appeal (concerning r 5.12) was abandoned.[9] Leave to appeal was granted in respect of the other two grounds.[10] The Court found that Judd J’s exercise of discretion to refuse an extension was nevertheless proper, and so the appeals dismissed on that basis.
[9](2017) ACSR 509, 526 [75].
[10](2017) ACSR 509, 533 [112].
The Court of Appeal found that r 3.02 of the GCP Rules is one to which r 1.10 of the Corporations Rules applies.[11] The Court then held that r 3.02 was available in a proceeding such as this, because the Corporations Rules do not ‘otherwise provide’.[12] Rule 2.7 of the Corporations Rules, requiring service as soon as practicable and five days prior to the return date, ‘amounts to a standard rule fixing a time for the doing of an act or thing’ and ‘does not expressly state that the time for service cannot be altered’.[13] The Court noted that r 2.7 ‘does not state that service “may only” be effected’ within the specified time-frame.[14]
[11](2017) ACSR 509, 532 [105].
[12](2017) ACSR 509, 532 [107].
[13](2017) ACSR 509, 532 [107].
[14](2017) ACSR 509, 532 [107].
The Court said that:[15]
time may be fixed by requiring an act to be done ‘forthwith’. Similarly to the expression ‘as soon as practicable after filing’, the meaning of ‘forthwith’ is not certain when considered in abstract. The content of a time requirement of ‘forthwith’ or ‘as soon as practicable’ will vary depending on the facts of each case, but there is nevertheless a fixing of time. As the applicants submitted it is a way of fixing time not by direct specification of dates but by reference to facts which will establish what the time limit is.
Our conclusion is reinforced by the words ‘and, in any case, at least 5 days before the date fixed for hearing’. Those words in r 2.7 set the outer limit of the ‘as soon as practicable after filing’ time requirement. We accept the applicants’ submission that the presence of the words ‘and, in any case’ indicates that both elements of r 2.7 do the same work and that the second element takes precedence over the first.
Indeed, to refer to the words ‘as soon as practicable after filing’ as a central, overriding or mandatory command or standard is unhelpful. If a party effects service well after it became practicable to do so, the party being served may attempt to set aside service by establishing that in the circumstances of the case, it had become practicable to serve well before service was effected. It is a time requirement that will have either been met or not been met, depending on the facts of the case. It was not argued by the respondents that a party effecting service well after it had become practicable to do so but more than five days before the hearing date, would not be in breach of r 2.7. If a party could be found to have contravened the ‘as soon as practicable after filing’ element of r 2.7 while not having contravened the ‘at least 5 days before the date for hearing’ element, it is difficult to conceive how the former element does not fix a time.
We note that the second element of r 2.7, ‘and, in any case, at least 5 days before the date fixed for hearing’, plainly fixes a time for the doing of an act or thing in relation to a proceeding.
[15](2017) ACSR 509, 533 [108]–[111].
The Court summarised its conclusions as follows:[16]
…first, r 3.02 allowing extensions of time meets the description of local rules which r 1.10 of the Corporations Rules imports to operate over corporations matters unless, relevantly, those rules ‘otherwise provide’. Secondly, the Corporations Rules do not ‘otherwise provide’ such that r 1.10 would preclude reliance on r 3.02. Thirdly, r 2.7 fixes a time to which r 3.02 can apply.
It is not necessary to comment on the Court’s inherent power to extend times specified by court rules as the applicants did not rely on that power. In our opinion, r 3.02 of the General Civil Procedure Rules empowered the Court to extend or abridge the time for service set out in r 2.7 of the Corporations Rules.
[16](2017) ACSR 509, 533 [112]–[113].
Their Honours also gave some guidance on the manner in which r 3.02 may be employed:[17]
A court relying on r 3.02 to extend the time for service specified in r 2.7 may do so in numerous ways. It may extend the second element of r 2.7 so that service may be effected less than five days before the date for hearing, but leave the first element of r 2.7 in place. Alternatively, the court might grant an extension that disposes of both elements of r 2.7 and specifies a particular date by which service must be effected. The respondents’ contention that any extension must be subject to the “as soon as practicable after filing” requirement is rejected.
[17](2017) ACSR 509, 534 [115].
This is the background against which this case must be determined, and I turn now to the parties’ submissions on Horne and the propriety of the amendment to the originating process made in this case.
The parties’ arguments
The liquidators seek leave to add r 3.02 as a possible ground for regularisation of the process, by way of leave nunc pro tunc. The liquidators say that such leave became possible only after the decision in Horne.
The liquidators then contend that r 3.02 provided the Court with sufficient discretion to amend the originating process. The liquidators say that the discretion should be exercised in their favour or, if it has already been exercised, ought not be disturbed. The following factors are said to support this submission:[18]
[18]Written submissions (5 May 2017).
(a) the contention that a relatively small delay in service should invalidate the entire proceeding has little intrinsic merit;
(b)the plaintiffs have proceeded on the basis that the steps taken by registry staff to alter the return date on the originating process were valid;
(c)the reasons for delay, while falling short of demonstrating service “as soon as possible” is excusable;
(d)a refusal to make orders (if required) will have a detrimental effect on creditors who would stand to benefit from a recovery;
(e)there is no evidence of any specific prejudice to the defendant; and
(f)while “presumptive prejudice” is a relevant consideration, here it is outweighed by other consideration[s].
The liquidators say that the refusal to grant an extension in Horne is distinguishable, because the delay in that case was around twelve months, whereas the delay in this case is around ten weeks.
The liquidators also say that any irregularity in this matter is a procedural irregularity and falls under s 1322(2) of the Act, such that it does not invalidate the proceeding unless the Court declares so, which is only possible where ‘the Court is of the opinion that the irregularity has caused or may cause substantial injustice that cannot be remedied by any order of the Court’. The liquidators say that any presumptive prejudice here does not rise to the level of ‘substantial injustice’.
In the alternative, the liquidators ask the Court to make a positive order under s 1322(4) of the Act to (in effect) regularise the originating process.
The defendant points out that the amended Originating process differs from that on the Court file, and the Originating processes in a number of related proceedings. Those in the related proceedings are said to have been amended to read, ‘amended pursuant to Rule 36.01’ and not, ‘Amended pursuant to Order 36’. The amended date also reads ‘3/2/17’ rather than ‘3 February 2017’. The defendant says that it is unclear who made the changes, when they were made and on what authority. The first submission, then, is that there was no amendment to the return date. That date having passed, service was ineffective.
The defendant says that, if there was an amendment, it was improper. Rule 36.03 of the GCP Rules cannot have been the basis for the change, because that rule allows amendment of an originating process only where an affidavit is provided stating that service has not yet occurred. There was no such affidavit in this matter.
Nor is r 36.01 said to be applicable, because that rule is limited to amendment of documents for certain purposes, none of which prevail here. The defendant also says that none of the emails above refer to Rule 36.01.
Indeed, it is said that the Court records at 4 October 2016 reflected an adjournment by consent, not amendment of the Originating process.
The defendant says that there ‘is no objective and admissible evidence that leave was granted by either the Prothonotary’ or by me.[19] The defendant casts doubt on the propositions that the Registry would not have insisted on compliance with the Rules, noted that leave had been given and amended the Court’s copy of the Originating process, sealed the amendments, or that the Registry would have relied on different rules in the other proceedings. The amendments are said simply to have been improper and ought to be disallowed.
[19]Written Submissions (5 May 2017) at [9(c)].
The defendant says that the obligation of service was not complied with in this case, and the liquidator’s application should be considered in light of the policy of the Act that members of the business community have certainty in their dealings, particularly when the proceeding was initiated only one day before the expiry of the three-year limitation period.
The defendant also says that s 1322(2) is not available here, as this is not a ‘procedural’ irregularity, but a simple failure to comply with the rules of service. It is said that ‘[n]on-compliance with the Rules has to be dealt with or “regularised” pursuant to the Rules’.[20] In any event, the defendant says that s 1322(2) concerns the validity of a proceeding, not of an originating process. Substantial injustice is also said to be present, such that an order under s 1322(2) is not appropriate.
[20]Written Submissions (5 May 2017) at [11(e)] (emphasis removed).
Similarly, s 1322(4) is said to be unavailable, for two reasons. First, the liquidators are seeking an extension of a time fixed by the Rules, not the Act. Second, the conditions in s 1322(6) are not met here, because there is no good reason why service was not effected.
The defendant says that the liquidators did not base their application on r 3.02 but that, in any event, no extension ought to be granted under that rule. The defendant is not required to show prejudice, as the delay in time is itself generally prejudicial. An extension in these circumstances would amount to real prejudice, because the defendant will be deprived of a defence to the action. The defendant also points out that the relevant events in this matter occurred some three years and eight months prior to service, which is a considerable length of time. The liquidators are said to have made their application for an extension of time only after the defendant’s application to disallow the amendment. There is also no good reason for granting an extension, as Ms Baskett was simply too busy and wished to stagger the proceedings in this liquidation for her own convenience, with no regard to the rules of the Court, the rights of other parties or the position of the Court. As the failure to serve is said to be deliberate, any harm suffered by the liquidator is self-inflicted (albeit through their solicitors).
The defendant also says that there is no evidence, contrary to the liquidator’s submission, that denial of an extension would have an adverse impact on creditors. This assumes¾with no evidence¾that the liquidator would make a successful recovery and that this would be passed on to the creditors (and not used up, for example, in satisfaction of the liquidator’s fees).
Is there an amendment to the Originating process?
There was argument between the parties as to whether the Originating process was amended at all. Arguably, there was no amendment and there is a breach of the obligation of service on that ground alone.
Whether or not the Originating process was in fact amended does not matter in light of my conclusions below. If the Originating process was amended, I find below that there was no power to make that amendment and nor should an improper amendment be regularised now. If the Originating process was not amended, there was a breach of the obligation to serve at least five days prior to the original hearing date. I will not waive compliance with that rule here.
Rule 3.02
I will grant leave to the liquidators to amend their interlocutory process to rely upon r 3.02 of the GCP Rules. I agree that such an amendment was appropriate only after the decision in Horne, given that the decision of Judd J in Re APCH previously rendered reliance on r 3.02 misplaced.
In my view, r 3.02 would have been available to amend the return date. The effect of such an amendment is to extend the time¾fixed by the Rules¾for the return of the Originating process and, by extension, the outer limit for service of that Originating process. The decision in Horne makes it clear that r 3.02 is available for such a purpose.
However, it is my view that there was no good reason for the delay in service in this case. As a result, the discretion to extend time should not have been exercised under r 3.02 at the time of the amendment to the originating process, and ought not be exercised now. So, while the Rule was (and is) available, it ought not be employed here.
It is the duty of the liquidators in this case to demonstrate that there is a good reason for an extension.[21] The principles to be applied in determining whether there is a good reason are as follows:[22]
(i)It is the duty of the plaintiff to serve the writ promptly.
(ii)There must be a good reason for the grant of an extension and if the application is made after the period has expired the reason must be one of substance.
(iii)It is not possible and indeed is unwise to attempt to define the circumstances which amount to a good reason. It is trite observation but not very helpful that whether or not it is a good reason must depend upon all the circumstances of the particular case. As a general proposition difficulties serving the writ within the 12 months’ period will usually establish a good reason. By way of example where the defendant is evading service, his whereabouts are unknown or some other difficulty is experienced in serving the defendant.
(iv)By reference to decided cases it is possible to compile a list of the circumstances which constitute a good reason. The cases also provide examples where the circumstances have not been a good reason to extend the period of validity. For example, it is not a good reason that negotiations are continuing between the parties, or legal aid has not been granted and the plaintiff is waiting for the grant. There are cases which say that the latter proposition is not a good reason. But in Waddon v. Whitecroft-Scovill Ltd[23] it was said delay caused by the authorities to grant aid may be a good reason. Other examples which have not found favour are difficulty tracing witnesses or obtaining evidence.
(v)The Australian cases differ from the English cases as to the effect of a limitation defence arising after the issue of a wait but before the application to extend the validity of the writ. The difference is traced by Stephen J in Van Leek Australia Pty Ltd v. Palace Shipping K.K., supra at pp.245-247. His Honour preferred the approach of the Australian and Canadian courts. He quoted with approval what Bray, C.J. said in Victa Ltd v. Johnson.[24] Bray, C.J. stated that there was no rule that a defendant acquired an absolute right to immunity when a writ issued within the limitation period is not served and in the meantime the period expires. The English cases had stated a test that if the limitation period had expired it was only in exceptional circumstances that the writ would be renewed. This is not the Australian position.
[21]Horne (2017) ACSR 509, 542 [161].
[22]Savcor Pty Ltd v Cathodic Protection International APS (2005) 12 VR 639, 651 [41]; approved in Horne (2017) ACSR 509, 548–9 [187].
[23][1988] 1 WLR 309.
[24](1975) 10 SASR 496.
As I said above, the evidence of the liquidators’ solicitors as to delay went no further than reliance on the pressures of other work. In my view, this is not a good reason of ‘substance’. Service in this case was capable of being effected by mail.[25] There was no difficulty in locating the defendant. Even if the partner with carriage of the matter was under work pressures and worked part-time, I accept the defendant’s point that another partner of the firm would be capable of signing off on a letter of service, even if he or she had little familiarity with the matter.
[25]Corporations Act 2001 (Cth) s 109X(1)(a).
In Horne, the Court of Appeal held that it is the duty of the party seeking to extend time to demonstrate that there is no prejudice to the other party.[26] In my view, the liquidators have failed to discharge that burden.
[26](2017) ACSR 509, 542 [161].
The payments which are subject to the liquidators’ claims are alleged to have occurred between February and August 2013. That is at least three years and three months, and up to three years and eight months, prior to the date of service. The Court of Appeal recognised in Horne that there is presumptive prejudice by virtue of the effluxion of time.[27]
[27](2017) ACSR 509, 543 [161].
In Horne, the Court of Appeal also noted that it was a relevant consideration that the Court was approached to extend time only after expiration of the time for service.[28] The same can be said in this case. The amendment to the return date was first sought on 13 September 2016, only three days prior to the initial return date of 16 September 2016. This was after the ‘outer limit’ for service set by r 2.7 (five days before the return date).
[28](2017) ACSR 509, 544 [167].
The factors which the liquidators put before the Court in relation to the question of discretion have been noted above. In summary, the liquidators say that the delay was relatively small and excusable, that there is no evidence of specific prejudice, any presumptive prejudice is outweighed by other factors, the plaintiffs relied on the validity of the actions taken by registry staff, and a refusal of the extension will have an adverse impact on creditors.
While the length of delay was relatively small, I have expressed my opinion that there was, nevertheless, no good reason of substance given for that delay. While the plaintiffs may have relied on the validity of the actions of registry staff, it only requested that registry staff act only after the expiration of the time for service.
In relation to the potential adverse impact on creditors, I agree with the defendant that this assumes both that there will be a recovery and that this will have an effect on creditors’ dividends (rather than being applied to the liquidators’ fees), each of which is far from certain.
The bald assertion that ‘other consideration[s]’ outweigh the presumptive prejudice in this case cannot be sustained.
Sections 1322(2) and 1322(4)(a)
The liquidators’ application requests the Court to ‘make such orders as are necessary under s 1322(2) or 1322(4) of the Act’.
The only order available under s 1322(2) is an order that a proceeding is invalid. In this instance, that is unhelpful to the liquidator and ought only be relied upon by the defendant in seeking to establish invalidity.[29]
[29]See, Native Bond Pty Ltd v Cant [2015] VSC 203, [43] (Efthim AsJ).
No application for an order of invalidity under s 1322(2) has been made by the defendant. I will therefore make no finding of invalidity under that section. The result is that s 1322(2) will maintain a presumption of validity. This presumption, however, will fall away where there is some other reason for a finding of invalidity.
To the extent that an order of the Court is required (or, in this case, requested), that can only be made under s 1322(4)(a). It has been pointed out in the Supreme Courts of New South Wales and Queensland that, where a question of validity under s 1322(2) is raised, an order under s 1322(4) is the proper and desirable means of providing finality over the question.[30]
[30]Re Chapmans Ltd (2015) 108 ACSR 564, 567 [18]–[19] (Brereton J); Re Cloudzillr Pty Ltd (in liq) [2017] QSC 25, [32] (Burns J).
It is clear here, however, that s 1322(4)(a) cannot avail the liquidators. That provision applies only to acts done in ‘contravention of a provision of this Act or a provision of the constitution of a corporation.’
This does not appear to encompass a contravention of the Corporations Rules.[31] I will accordingly refuse to make an order declaring service (or the amendment to the originating process) to be valid under s 1322(4)(a).
[31]Cf s 1322(4)(d), which is not so limited: Re Dana Australia (Holdings) Pty Ltd and Others (2006) 151 FCR 317, 320 [8], [11].
Section 1322(4)(d)
Section 1322(4)(d) allows an order to be made extending the time ‘for doing any act, matter or thing or instituting or taking any proceeding under this Act’. The time in question here was the time for service which was, in turn, related to the time of the return date.
These periods are not set by the Act. They are set by the Prothonotary under the Corporations Rules. The fact that they are not set by the Act does not, however, deprive s 1322(4)(d) of operation here. In Re Dana Australia (Holdings) Pty Ltd and Others,[32] Finkelstein J considered whether s 1322(4)(d) applied to time limits imposed by ASIC under class orders. His Honour looked to the predecessor of s 1322 in the Uniform Companies Acts (1961), s 366(4) of which allowed extensions of time for acts ‘allowed … by this Act or any rules or regulations made thereunder’. Finkelstein J noted that s 1322(4)(d) was no longer limited in that way, and held that:[33]
one thing is certain: Parliament did not intend to narrow the operation of the section. On this basis it is easy to conclude that s 1322(4)(d) allows the Court to extend or abridge periods prescribed not only by the Corporations Act and any rules or regulations made under the that Act, but also periods prescribed by some other instrument or authority.
[32](2006) 151 FCR 317 (‘Re Dana’).
[33](2006) 151 FCR 317, 320 [8] (emphasis added).
His Honour held that the provision could be applied to Class Orders issued by ASIC and concluded as follows:[34]
I have already indicated that the provision [s 1322(4)(d)] will operate in respect of periods fixed by the Corporations Act and by the rules or regulations made under the Corporations Act. It would not be going much further to read the provision as also having application to instruments made under the Corporations Act by a regulatory authority, such as a class order. This is only a small step to take. Whether the section has a wider operation may be left for another day.
[34](2006) 151 FCR 317, 320 [11].
It is clear that the current proceeding is a proceeding under the Corporations Act. The irregularity in service has arisen under the Corporations Rules. It is true that the Corporations Rules were made under the Supreme Court Act 1986 (Vic) and the Corporations (Ancillary Provisions ) Act 2001 (Vic), rather than the Corporations Act itself. The effect of the judgment in Re Dana, however, is that s 1322(4)(d) may still have application to stipulations of time made under some authority other than the Act itself.
In my view, it is proper to apply s 1322(4)(d) to the Corporations Rules. While not made under the Act, the Rules apply only to proceedings under the Act or the ASIC Act 2001 (Cth): r 1.3. The Rules and the Act work together and are intended to work together. As such, I would consider a time fixed by the Corporations Rules to be a time to which s 1322(4)(d) applies.
The question then is whether time should be extended under that provision¾the power being available, should it be exercised? In this respect, it necessary to recall the words of French J, that ‘the power conferred by s 1322 must be exercised having regard to the requirements of the purposes of the Corporations Act and any other relevant statutes whose application may be in issue’.[35]
[35]Re Wave Capital Ltd (2003) 47 ACSR 418 (‘Re Wave Capital’), 426 [29].
In my view, an order under s 1322(4)(d) should not be made in this case, for the same reasons that an order should not be made extending time under r 3.02. Both provisions grant the Court a discretion to extend time, and it would be anomalous if the discretion were exercised one way under r 3.02 and in the opposite manner under s 1322(4)(d).
The content of the discretion in each provision is relevantly the same for the purposes of this case. It is true that s 1322(4)(d) differs in one respect from r 3.02, in that s 1322(4)(d) is also conditioned on a finding that there is no substantial injustice to any person in making an order: s 1322(6)(c). This criterion, however, is in addition to the general discretion granted by s 1322(4)(d). It does not exhaustively define that discretion.
In each case, the question is one of discretion to extend time. I see no further factors which are cognisable under s 1322(4)(d) which have not already been considered in relation to r 3.02. As such, I consider that time ought not be extended for the reasons given earlier.
Conclusion on the liquidators’ application
In Portelli v Seltsam Ltd,[36] it was said (by way of obiter) that an amendment to the return date of a summons made by the Prothonotary without power was not a nullity.[37] Similarly, a failure to serve by the return date was an irregularity, but one which could be cured by the setting of a new return date and subsequent timely service.[38]
[36][1988] VR 337 (Murray, Gobbo and Southwell JJ).
[37][1988] VR 337, 343.
[38][1988] VR 337, 343.
In this case, I have expressed the view, consistent with Portelli, that there are powers available to the Court to extend the return date and, as a corollary, the time for service. Nevertheless, it is my view that those powers should not be exercised in this matter. Such powers ought to be used in accordance with the rule that a good reason must be given for the delay in service. Here, there has been no such reason given.
Nor do I think this a proper case in which compliance with the rules should be waived. Such an order would, in all the circumstances, amount to the extension of time sought under the other powers. For the reasons already given, such an order would be improper here. In any event, it is also unclear on the face of the Rules whether r 2.04 of the GCP Rules¾which allows dispensation of compliance with ‘these Rules’ (i.e. the GCP Rules)¾could be used to waive compliance with the Corporations Rules, though I need not decide the point.
The defendant’s application
The defendant’s application asks that the amendment to the originating process be set aside under r 36.03(3) of the GCP Rules, the proceeding be set aside under r 2.01(2)(a), or the originating process be set aside under r 2.01(2)(b).
I have found above that, if there was an amendment made to the originating process, it ought not have been made. To the extent that it is necessary, I would order that any amendment be set aside under r 36.03(3).
The result is that service has not been effected within time and I have concluded above that time ought not be extended.
In Re APCH, Judd J invited the parties to make submissions as to the disposition of the proceeding. Orders were made setting aside service and permanently staying the proceeding. Unless the parties wish to be heard, I propose to make similar orders.
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