Re Shangri-La Construction Pty Ltd
[2023] VSC 503
•24 August 2023
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMERCIAL COURT
CORPORATIONS LIST
S ECI 2023 03028
IN THE MATTER of SHANGRI-LA CONSTRUCTION PTY LTD (ACN 130 534 244) (UNDER EXTERNAL ADMINISTRATION)
BETWEEN:
| VICTORIAN WORKCOVER AUTHORITY | Plaintiff |
| v | |
| SHANGRI-LA CONSTRUCTION PTY LTD (ACN 130 534 244) (UNDER EXTERNAL ADMINISTRATION) | Defendant |
| CERTAIN UNDERWRITERS AT LLOYDS OF LONDON | Interested Party |
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JUDGE: | Gardiner AsJ |
WHERE HELD: | Melbourne |
DATE OF HEARING: | 14 August 2023 |
DATE OF JUDGMENT: | 24 August 2023 |
CASE MAY BE CITED AS: | Re Shangri-La Construction Pty Ltd |
MEDIUM NEUTRAL CITATION: | [2023] VSC 503 |
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CORPORATIONS — Application for leave to proceed pursuant to s 500(2) of the Corporations Act2001 (Cth) (‘Act’) — Plaintiff commenced proceeding within the limitation period prescribed by s 5(1)(d) of the Limitation of Actions Act1958 (Vic) (‘Limitation of Actions Act’) against the defendant pursuant to s 369 of the Workplace Injury Rehabilitation and Compensation Act 2013 (Vic) seeking recovery of payments made to injured worker — Defendant subsequently went into creditors’ voluntary liquidation under Part 5.5 of the Act — Order made by a Judicial Registrar of the County Court of Victoria extending validity of writ — Writ served on defendant during period of such extension but when proceeding was stayed by operation of s 500(2) of the Act — Defendant’s insurance underwriters contended that order for leave should not be made nunc pro tunc from the date the defendant went into liquidation as to do so would deprive it of a limitation period defence it contended had subsequently come into existence — Plaintiff’s proceeding was issued within the six-year period prescribed by s 5(1) of the Limitation of Actions Act and no defence of the proceeding being barred by limitation came into existence — Orders sought by plaintiff nunc pro tunc from the date that defendant went into liquidation would not deprive the interested party of any limitation period defence available to it — Van Leer Australia Pty Ltd v Palace Shipping KK (1981) 180 CLR 337 applied — Re Link Construction (NSW) Pty Ltd (in liq) [2016] NSWSC 684; HFPS Pty Ltd (Trustee) v Tamaya Resources Ltd (in liq) (No 1) [2016] FCA 442; FF (R & D) Pty Ltd v Australian Securities and Investments Commission [2017] VSC 482 distinguished — Orders made for leave to proceed nunc pro tunc from date that defendant went into liquidation.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Ms M Cameron | Russell Kennedy |
| For the Interested Party | Mr C Viti, solicitor | Moray & Agnew Lawyers |
TABLE OF CONTENTS
Factual background........................................................................................................................... 3
VWA’s evidence................................................................................................................................. 4
Evidence of the Underwriters.......................................................................................................... 7
The parties’ submissions.................................................................................................................. 8
Submissions of VWA.................................................................................................................... 8
The Underwriters’ submissions................................................................................................ 14
Consideration.................................................................................................................................... 22
HIS HONOUR:
The plaintiff, Victorian WorkCover Authority (‘VWA’), applies by an originating process filed 11 July 2023 for leave nunc pro tunc to proceed from 31 March 2023 against Shangri-La Construction Pty Ltd (‘Shangri-La’) pursuant to s 500(2) of the Corporations Act 2001 (Cth) (‘Act’) in proceeding CI-21-02103 in the County Court of Victoria (‘Recovery Proceeding’).
In the Recovery Proceeding, VWA makes claims against Shangri-La pursuant to s 369 of the Workplace Injury Rehabilitation and Compensation Act 2013 (Vic) (‘WIRC Act’) for recovery of statutory payments made to an injured worker for weekly compensation and medical expenses.
Section 500(2) of the Act provides:
After the passing of the resolution for voluntary winding up, no action or other civil proceeding is to be proceeded with or commenced against the company except by leave of the Court and subject to such terms as the Court imposes.
VWA requires leave under s 500(2) of the Act because Shangri-La went into creditor’s voluntary liquidation on 31 March 2023.
Section 500(2) and its equivalent in court-ordered windings up, s 471B, impose a statutory moratorium preventing any enforcement process after a company goes into liquidation without the leave of a court having jurisdiction under the Act. The broad purpose of these provisions is to prevent an insolvent company’s assets being dissipated by unnecessary litigation and it enables the Court to supervise the claims brought against the company. In Re Gordon Grant and Grant Pty Ltd,[1] McPherson J stated:
The precise purpose and function of provisions similar to s. 230(3) [the precursor to s 471B of the Corporations Act] have seldom been explained. From time to time the suggestion has been made that the prohibition exists in order to effectuate the statutory policy of ensuring that corporate assets are distributed rateably amongst all creditors so that none of them will gain an advantage over others … But in Australia at least it is not often that the institution of proceedings or even the recovery of judgment operates to confer a priority or advantage on a litigating creditor. A more convincing explanation is that, without the relevant restriction, a company in liquidation would be subjected to a multiplicity of actions which would be both expensive and time-consuming, as well in some cases as unnecessary. …[2]
[1][1983] 2 Qd R 314.
[2]Ibid 316 (WB Campbell CJ and Sheahan J agreeing at 314).
In Vagrand Pty Ltd (in liq) v Fielding,[3] the Full Court of the Federal Court of Australia, after considering the authorities as to the standard to be applied and whether leave should be granted, stated that the test required the establishment by an applicant for leave of the existence of a serious claim and a real dispute.[4] It was described as being ‘akin to that used in considering whether interlocutory relief should be granted: “a serious question to be tried”’.[5]
[3](1993) 41 FCR 550 (‘Vagrand’).
[4]Ibid 556 (Wilcox, Burchett and Beazley JJ).
[5]Ibid.
Among other factors that the courts have considered may be relevant to the discretion include whether there is a policy of insurance that reacts to the claim for which leave is sought.[6] In Altinova Nominees Pty Ltd v Leveraged Capital Pty Ltd (recs and mgrs apptd) (in liq) (No 2) (‘Altinova’),[7] Jacobson J of the Federal Court of Australia granted leave in circumstances where, as here, the insurer in question had reserved its position as to acceptance of liability. His Honour observed:[8]
[A]lthough the insurer has reserved its position, it is at least arguable that the policy responds to a claim for indemnity from OPSL. In my view, that is a sufficient basis for a grant of leave but I will reserve liberty to the Liquidators to apply to revoke the grant of leave if the insurer denies indemnity.
[6]Lawless v MacKendrick (No 2) [2008] WASC 15, [35]–[37] (Newnes J) and the cases there cited; Re Sydney Formworks Pty Ltd (in liq) [1965] NSWR 646, 651 (McLelland CJ); Meehan v Stockmans Australian Café (Holdings) Pty Ltd (1996) 22 ACSR 123, 126–7 (Lehane J).
[7][2009] FCA 42 (‘Altinova’).
[8]Ibid [42].
The policy underlying insurance as being a relevant discretionary factor would seem to be based on s 562 of the Act, which provides for a quarantine of the proceeds of an insurance policy that reacts to a claim from the claims of other creditors. The grant of leave is not likely to be disruptive to the progress of the liquidation and such a claim is not amenable to be dealt with by the proof of debt mechanism.
Section 562(1) provides:
Where a company is, under a contract of insurance (not being a contract of reinsurance) entered into before the relevant date, insured against liability to third parties, then, if such a liability is incurred by the company (whether before or after the relevant date) and an amount in respect of that liability has been or is received by the company or the liquidator from the insurer, the amount must, after deducting any expenses of or incidental to getting in that amount, be paid by the liquidator to the third party in respect of whom the liability was incurred to the extent necessary to discharge that liability, or any part of that liability remaining undischarged, in priority to all payments in respect of the debts mentioned in section 556.
VWA’s application is opposed by Certain Underwriters at Lloyds of London (‘Underwriters’), who are the underwriters of an ‘ATC Insurance Solutions Pty Ltd Construction Material Damage and Liability’ insurance policy issued to Shangri-La, and who are thereby interested parties in the outcome of the application by reason of the potential liability to indemnify Shangri-La in respect of the claims made in the Recovery Proceeding.
VWA relies on the four affidavits of Ms Joanna Petousis, an employed solicitor at Russell Kennedy, solicitors for VWA, sworn 10, 12, 25, and 27 July 2023 respectively.
The Underwriters rely on an affidavit of Christian Viti, an employed solicitor at Moray & Agnew, solicitors for the Underwriters, sworn 27 July 2023.
The Underwriters do not oppose a general grant of leave pursuant to s 500(2). However, they oppose an order granting leave nunc pro tunc from any date earlier than 11 July 2023, which is the date on which this application for leave was issued, on the basis that it is not within the power of the Court to do so. They otherwise do not oppose the orders sought.
Factual background
Mr Patrick Owens was employed by Clark Labour Hire Pty Ltd and he was injured on 10 March 2015 in the course of his employment at a construction site on Toorak Road, South Yarra.
Shangri-La is a construction company. At the date of Mr Owens’ injury, it was the principal contractor at the construction site.
On 16 March 2015, Mr Owens lodged a WorkCover worker’s injury claim for compensation in respect of the injury suffered by him, which VWA accepted. Pursuant to its obligations under the Workplace Injury Rehabilitation and Compensation Act 2013 (Vic) (‘WIRC Act’), VWA made payments of statutory compensation to Mr Owens, including weekly payments of compensation and medical and like expenses.
VWA’s evidence
On 25 May 2021, Ms Petousis commenced the Recovery Proceeding by issuing a generally endorsed writ in the County Court of Victoria. Shangri-La is the first defendant in the Recovery Proceeding.
Ms Petousis states that on 29 September 2021, she sent a letter of demand to Shangri-La. On 12 October 2021, a representative of Shangri-La responded to Ms Petousis, advising that it had notified its liability insurers who would be in contact with her. Shortly afterwards, on 21 October 2021, Russell Kennedy was notified of the appointment of Moray & Agnew to act on behalf of Shangri-La in the Recovery Proceeding.
On 10 June 2022, pursuant to a request by VWA made on 12 May 2022 and which was supported by an affidavit of Ms Petousis, Bales JR of the County Court of Victoria made orders that the period of the validity of the writ for service was extended to 25 May 2023. There has been no further extension of the validity of the writ.
On 31 March 2023, Shangri-La went into creditors’ voluntary liquidation under Division 3 of Part 5.5 of the Act. Mr David Coyne was appointed as liquidator in the winding up.
Ms Petousis states that Russell Kennedy was not informed by Moray & Agnew that Shangri-La had gone into liquidation. She states she only became aware of this when she obtained an Australian Securities and Investments Commission (‘ASIC’) search for Shangri-La on 1 May 2023.
On 3 May 2023, while preparing for this application, Ms Petousis wrote to Moray & Agnew, seeking confirmation that Shangri-La was insured at the date of Mr Owens’ injury.
On the same day, Ms Petousis wrote to the liquidator, Mr Coyne, seeking confirmation that Shangri-La was insured on the date of Mr Owens’ injury and asking for Mr Coyne’s consent for VWA to commence proceedings against Shangri-La.
On 4 May 2023, Ms Petousis was advised by Mr Coyne that it was not known whether Shangri-La held public liability insurance at the time of the incident. Mr Coyne neither consented to nor opposed proceedings being commenced against Shangri-La and indicated that Shangri-La would not be deregistered in the current financial year.
On 19 May 2023, within the period of the extension of time for service of the writ ordered by Bales JR, Russell Kennedy served the County Court generally endorsed writ on Mr Coyne, on Shangri-La’s registered office, and on Moray & Agnew.
On 24 May 2023, Russell Kennedy filed and served VWA’s statement of claim on Mr Coyne, on Shangri-La’s registered office, and on Moray & Agnew.
On 29 May 2023, Moray & Agnew informed Russell Kennedy that it considered the service of the writ to be invalid by reason of the failure to have been granted leave under s 500(2) of the Act at the time of service. It was also noted that the writ was now stale as the date to which it had been extended by Bales JR, 25 May 2023, had passed.
Moray & Agnew filed a conditional appearance on 29 May 2023 in the Recovery Proceeding, but that appearance has since been withdrawn.
On 1 June 2023, Ms Petousis’ principal, Mr Cox of Russell Kennedy, emailed Moray & Agnew again seeking confirmation of Shangri-La’s insurance position.
On 9 June 2023, Moray & Agnew responded by letter, raising various legal issues, noting that it might object to an application for leave, but not providing confirmation as to the position regarding insurance.
On 16 June 2023, Russell Kennedy briefed counsel to consider the issues raised in Moray & Agnew’s letter of 9 June 2023.
By a letter dated 3 July 2023 to Moray & Agnew, Russell Kennedy, referring to the legal issues raised by Moray & Agnew and the cases referred to in its letter of 9 June 2023, informed Moray & Agnew that Russell Kennedy considered its proposed objection to this application to be without merit and again requested confirmation as to the position regarding insurance.
In her affidavit of 12 July 2023, Ms Petousis deposes that on 11 July 2023, she served Mr Coyne, Shangri-La at its registered office, and Ms Daffey of Moray & Agnew with the originating process in this proceeding and the accompanying documents. On the same day, she sent those documents by email to Mr Coyne and Moray & Agnew.
In her affidavit of 25 July 2023, Ms Petousis stated that she forwarded an email that she had received from the Commercial Court Registry of this Court of 20 July 2023, which advised of the requirements to enable participation in the hearing of this matter scheduled for 28 July 2023 to Mr Coyne. Moray & Agnew were also provided with a copy of that email.
In her affidavit of 27 July 2023, Ms Petousis states that on 25 July 2023, she emailed Ms Daffey, Mr Viti, and others at Moray & Agnew, again requesting their confirmation as to whether Shangri-La was insured at the date of Mr Owens’ injury.
The following day, Mr Viti wrote to Ms Petousis, confirming that Moray & Agnew acted on a reservation of rights basis, on instructions from the Underwriters’ representative, Proclaim. Mr Viti indicated that the Underwriters had not been able to grant indemnity in relation to the claim given an ‘absence of information available’. Mr Viti stated that if cover was ultimately to be extended it would be extended pursuant to the cover afforded in the 2014 to 2015 policy period. The email also attached a copy of Shangri-La’s policy schedules, noting cover from 18 June 2014 to 18 June 2015.
In his letter, Mr Viti confirmed Moray & Agnew’s instructions to resist the Court making the orders proposed in the application nunc pro tunc to a date prior to the date on which this application was issued.
Ms Petousis responded to Mr Viti’s letter on the same day. She states she was mindful of the authorities dealing with the grant of leave, in particular the relevance of the existence of an insurance policy that reacts to the incident and that she did not issue the application for leave earlier because of her understanding of the applicable law that, without confirmation of insurance, or at least the possibility of insurance, an application of this kind was futile. She concludes her affidavit by stating that if Mr Viti had provided confirmation of insurance or at least the possibility of insurance, she would have caused the application for leave to proceed to be issued at an earlier time.
Evidence of the Underwriters
In his affidavit sworn 27 July 2023, Mr Viti confirms that Moray & Agnew acts on instructions from Proclaim, which represents the Underwriters who have an interest in the outcome of the Recovery Proceeding.
Mr Viti confirms that the Underwriters’ position regarding the orders sought is that they oppose the order for leave to be granted nunc pro tunc to a date earlier than the date of issue of the application for leave.
Mr Viti, by reference to documents exhibited to his affidavit, states that the relevant policy afforded general liability cover to Shangri-La for the period 18 June 2014 to 18 June 2015. Mr Viti states that the Underwriters accept that the cover afforded during this policy period responds to the claims arising out of the incident the subject of the Recovery Proceeding, however, the Underwriters’ decision on the grant of indemnity was reserved by reason of the lack of information. He states that Moray & Agnew acted on a reservation of rights basis until the position about the grant of indemnity was finalised.
Mr Viti states that these matters were confirmed with Ms Petousis of Russell Kennedy by a letter of 26 July 2023.
The parties’ submissions
Submissions of VWA
In its submissions, VWA contends that the conduct of the Underwriters has been the cause of delay in this matter by failing to provide confirmation of the insurance position and, in opposing this application, seeks to derive advantage from this delay.
VWA pointed to what it contended were the relevant dates in the chronology of the matter. It noted that Mr Owens was injured on 10 March 2015. His damages proceeding was issued on 25 May 2021 and at that time, Shangri-La was not in liquidation. Moray & Agnew were appointed to act on behalf of the Underwriters from at least October 2021. VWA notes that Shangri-La was placed into liquidation on 31 March 2023, but neither Shangri-La nor Moray & Agnew informed the VWA of this development. VWA’s solicitors did not learn of the liquidation until performing an ASIC search on 1 May 2023.
VWA contends that on learning of Shangri-La’s liquidation, VWA’s solicitors acted promptly and responsibly.
In this regard, VWA emphasised the chronological features the subject of Ms Petousis’ evidence. On 3 May 2023, VWA’ solicitors sought confirmation of Shangri-La’s insurance position from Moray & Agnew and from Shangri-La’s liquidator. On 4 May 2023, the liquidator, Mr Coyne, responded to the effect that he was unable to confirm the insurance position. On 19 May 2023, VWA’s generally endorsed writ was served on Shangri-La, its liquidator and Moray & Agnew Lawyers. This service was within the period of the validity of the writ, which expired on 25 May 2023. On 25 May 2023, VWA’s statement of claim was served on the same persons.
In it submissions, VWA emphasises that Moray & Agnew did not respond to VWA until 29 May 2023 and that response still did not provide confirmation of Shangri-La’s insurance position. Rather, it took issue with the service of the writ.
On 1 June 2023, VWA’s solicitors again sought confirmation as to the insurance position. On 9 June 2023, Moray & Agnew responded, referring to the issues it now raises in response to the application for leave, but again not responding in respect of the insurance position.
VWA states that on 16 June 2023, it briefed counsel to advise in respect of the issues raised by Moray & Agnew.
On 3 July 2023, VWA’s solicitors responded to Moray & Agnew’s arguments, noting that Shangri-La would soon serve s 500(2) application documents, and sought details as regards to the insurance position. As there was still no response forthcoming, VWA’s solicitors says that on 11 June 2023, it was forced to issue this application without confirmation of the existence of insurance cover that would react to Shangri-La’s claim.
On 25 July 2023, VWA’s solicitors sent a further email to Moray & Agnew, once again seeking confirmation of insurance and finally, by letter dated 26 July 2023, Moray & Agnew responded to the effect that there was an insurance policy that might respond to the claim, but this could not be confirmed because of an absence of information. On 26 July 2023, VWA’s solicitors again complained of the lack of confirmation of insurance and offered to assist in that enquiry.
VWA’s submissions then moved to what it contended were the relevant legal principles. VWA submits that Shangri-La’s submissions misapprehend the relevant principles and as such, make incorrect contentions as to the expiry of the limitation period that applies in these circumstances. VWA says that the applicable limitation period is six years from the date on which the VWA’s cause of action accrued, with no provision for an extension.[9]
[9]Cting s 5(1)(d) of the Limitation of Actions 1958 (Vic) and Victorian WorkCover Authority v Manildra Pty Ltd [1999] VSC 220.
VWA accepts that the effect of this is that any weekly payments made by VWA more than six years prior to the commencement of VWA’s Recovery Proceeding are statute barred. VWA observes that the Recovery Proceeding was commenced on 25 May 2021 and makes claims of general indemnity in relation to any sums paid or payable by VWA as a result of Mr Owen’s injury on 10 March 2015. VWA accepts that it cannot seek indemnity in respect of any payments made to or in respect of Mr Owens prior to 25 May 2015, i.e. six years prior to the date of issue of the writ, by reason of the application of the relevant limitation period.
VWA contends that its initiation of the Recovery Proceeding by the issue of the general endorsement was regular. At that time, unlike the position in the authorities to which the Underwriters rely,[10] Shangri-La was not in liquidation. It says that the commencement of the proceeding by its filing in the County Court (as opposed to its service) was sufficient to satisfy s 5(1)(d) of the Limitation of Actions Act 1958 (Vic) (‘Limitation of Actions Act’). The writ was then served on Shangri-La on 19 May 2023, within the period for validity of service as extended by Bales JR.
[10]HFPS Pty Ltd (Trustee) v Tamaya Resources Ltd (in liq) (No 1) [2016] FCA 442 (‘Tamaya’); Re Link Construction (NSW) Pty Ltd (in liq) [2016] NSWSC 684 (‘Link Construction’); FF (R & D) Pty Ltd v Australian Securities and Investments Commission [2017] VSC 482 (‘Fuji Fuels’).
VWA submits that in any event, the failure to serve a writ within the period of its validity does not render the writ itself a nullity, nor does it re-enliven a limitation defence for Shangri-La.
In this regard, VWA referred to the decision of Stephen J of the High Court in Van Leer Australia Pty Ltd v Palace Shipping KK (‘Van Leer’),[11] which cited with approval the decision of the Full Court of the Supreme Court of South Australia in Victa Ltd v Johnson (‘Victa’).[12] Justice Stephen adopted the discussion of the authorities and reasoning of Bray CJ in the Full Court’s reasons in Victa. In Van Leer, the plaintiff, a steel importer, sued the owner of a ship and a charterer in relation to a shipment of steel that had developed rust in transit from Japan to Australia. The claim was commenced within the 12-month limitation period provided for by the Hague Rules for claims of that type, however the ship’s owner was not served until almost 23 months after the issue of the writ and after the time for service of the writ, which had been extended for a further six months, had expired. As such, the writ was ‘stale’ when it was served.
[11](1981) 180 CLR 337, 340–1 (‘Van Leer’).
[12](1975) 10 SASR 496 (‘Victa’).
The plaintiff applied for a renewal of the writ. The ship owner applied to set aside the ex parte order that had been made for renewal and to have the writ and service on it of notice of the writ be set aside. The case was predominantly concerned with how the expiry of a limitation period should affect the exercise of the discretionary power to renew the plaintiff’s writ. Justice Stephen cited a passage of the South Australian Full Court’s decision in Victa, where Bray CJ stated:
It follows then that it is incorrect to talk about allowing a cause of action or a new cause of action to be set up after expiry of the period of limitation. Once the writ is issued within the period, the Statute of Limitations is ousted or rather never comes into operation. It is not the Statute, which the court must obey on which it thinks is its proper interpretation, but the rule of court which takes over then. That rule [concerned with discretion to renew the writ] has the discretion built into it and that discretion is to be exercised judicially, indeed, but not fettered by inflexible prescriptions …
It is not correct to say that the defendant has acquired an absolute right to immunity when a writ issued within the limitation period is not served within 12 months of its issue and the limitation period has in the meantime expired. What has expired is in reality not the limitation period but the period which would have been a limitation period if no writ had ever been issued. What the failure to serve a writ within 12 months gives the defendant is no more than a right to contend that the court in the exercise of its discretion should not renew the writ. The efficacy of the writ does not expire absolutely at the end of the 12 months, it only expires if and in so far as the court sees fit not to renew it. …[13]
[13]Ibid 503–4; Van Leer (n 11) 344 (emphasis added).
VWA also referred to r 34A.15 of the County Court Civil Procedure Rules 2018 (Vic) (‘County Court Rules’), which it submits makes clear that the expiration of the period during which time a writ should have been served does not render the writ itself a nullity. VWA remains at liberty to apply to extend the period of validity for service of the writ pursuant to s 5.12 of the County Court Rules, but that course will prove unnecessary should the Court make the orders sought for leave.
VWA contends that as such, any payments made on and from 25 May 2015 are not barred by limitation because VWA’s proceeding was commenced regularly during the applicable limitation period. Nothing that has occurred since the Recovery Proceeding has altered this position.
VWA says that in these circumstances, considerations as to the interaction between a proceeding ‘commenced’ in contravention of a provision of the Act and any applicable limitation period, as discussed in Re Link Construction (NSW) Pty Ltd (‘Link Construction’),[14] HFPS Pty Ltd (Trustee) v Tamaya Resources Ltd (in liq) (‘Tamaya’),[15] and FF (R & D) Pty Ltd v Australian Securities and Investments Commission (‘Fuji Fuels’),[16] do not arise.
[14]Link Construction (n 10) [86]–[91] (Black J).
[15]Tamaya (n 10) [14]–[15] (Foster J).
[16]Fuji Fuels (n 10) [69]–[73] (Randall AsJ).
VWA contends that in both Link Construction and Tamaya, leave nunc pro tunc to the commencement of the plaintiff’s proceedings was refused on the basis that to grant such leave might disadvantage the defendant company or its insurer in any later argument that a proceeding commenced in contravention of a provision of the Act was not a proceeding ‘commenced’ within an applicable limitation period. For this reason, in each case, leave was granted only from the date of the filing of the interlocutory application for leave to proceed, thereby leaving available to the defendant an argument that the proceeding had not been ‘commenced’ by the expiry of the limitation period, without deciding the point. In Fuji Fuels,[17] Randall AsJ refused to grant leave nunc pro tunc to the commencement of the plaintiff’s proceeding on the same basis, also doubting that such a power existed on an application of Hartley Poynton Ltd v Ali (‘Hartley Poynton’).[18]
[17]Ibid [68]–[69].
[18](2005) 11 VR 568 (‘Hartley Poynton’).
In Fuji Fuels, akin to the chronological sequence in Link Construction and Tamaya, Fuji Fuels went into administration and then liquidation in February and March 2012 respectively. The proceeding was commenced without leave having been obtained some four and a half years later, in September 2016, and a month later, the limitation period expired.[19] The question of whether leave nunc pro tunc for some later time, such as the date of the plaintiff’s interlocutory application and the effect of such a grant of leave on the respondent’s limitation defence, does not appear to have been considered.
[19]Fuji Fuels (n 10) [68]–[69].
Ms Cameron, counsel for VWA, observed that the situations under consideration in Link Construction, Tamaya, and Fuji Fuels were relevantly different to that under consideration in this application. In those cases, the issue of limitation periods was a significant consideration as there was a potential that the limitation periods had, in fact, expired by the time the applications for leave to proceed were brought. On an application of Van Leer, no limitation period issue arises here because the Recovery Proceeding was commenced before the company was put into liquidation.
VWA observes that the involvement of an insurer standing behind a defendant company is a ‘near-determinative factor’ when a Court gives consideration as to whether leave to proceed should be given. This is because without an insurer to defend the claim and pay any judgment sum, there is likely to be prejudice to the creditors or orderly winding up of the defendant company. Further, if there is no possibility that a defendant company in liquidation will be able to meet any award of damages against it, the Court will not grant leave to commence or proceed with a proceeding that would be fruitless.
VWA’s submissions referred to the evidence of its solicitor, Ms Petousis, where she deposed that it was Shangri-La’s failure to provide any information as to its insurance position, which was the cause of the delay in filing this application, and that application was filed without confirmation of insurance only due to the further delay of Shangri-La. It was submitted that there is no reference in Mr Viti’s evidence as to why his office did not provide information to VWA’s solicitors as to Shangri-La’s insurance position. It is observed that the evidence of Mr Viti does not address the confirmation of insurance issue at all and the Court is invited to draw an inference that Mr Viti does not know or that any evidence he would have given would have been unfavourable to Shangri-La and its insurer. Rather, the position adopted by Mr Viti is that there was no reason why VWA could not have issued the leave application in early May 2023 upon learning of the liquidation of Shangri-La.
As such, it says that any ‘delay’ is clearly referable not to any fault of VWA, but to delay on the part of Shangri-La in responding to VWA’s well-justified inquiries.
The Underwriters’ submissions
Mr Viti, who appeared at the hearing of the application on behalf of the Underwriters, confirmed that the Underwriters were on risk at the date of the incident involving Mr Owens.
Mr Viti stated that the Underwriters’ interest in the outcome of the leave to proceed application concerns the potential prejudice that an order in the terms that VWA seeks would have to a limitation defence which would otherwise be available to Shangri-La and the Underwriters in the Recovery Proceeding. In this regard, in the Recovery Proceeding, VWA seeks to recover payments of $130,016.44 paid to Mr Owens between March 2015 and 15 August 2017 under the WIRC Act. Of that sum, $126,830.58 was invoiced and made by VWA on or before 10 February 2017, that is, more than six years prior to the date on which the leave application was commenced. Mr Viti described these payments as the ‘Barred Payments’ because as of 10 February 2023, more than six years had passed since the last of the Barred Payments was made and invoiced.
The balance of the payments, $3,845.86, was invoiced and made by VWA between 5 and 15 August 2017, that is less than six years prior to the date on which this application was commenced. Mr Viti described those payments as the ‘Claimable Payments’.
Mr Viti identified what he contended were the significant events in the timeline in the context of the limitation period issue revealed by the evidence.
On 25 May 2021, VWA commenced the Recovery Proceeding when it issued a generally indorsed writ.
On 10 June 2022, the period for service of the writ was extended to 25 May 2023.
On 31 March 2023, Shangri-La went into voluntary liquidation and from this point, all proceedings against Shangri-La were stayed by operation of s 500(2) of the Act.
On 19 May 2023, in what is described in the Underwriters’ submissions as the ‘purported service’ of the writ, VWA sent the writ with a statement of claim to Shangri-La’s liquidator, Mr Coyne, and to Moray & Agnew.
On 26 May 2023, the period for service of the writ, as extended, expired.
On 29 May 2023, Moray & Agnew wrote to VWA’s solicitors to inform them of their view that the effect of the stay coming into operation pursuant to s 500(2) was to ‘neutralise’ the attempted service of the writ on 19 May 2023 as leave pursuant to s 500(2) had not been obtained prior to such purported service and that the writ had subsequently expired.
On 1 June 2023, Russell Kennedy responded to the 29 May email, stating that the passing of the deadline for service could be cured by the application for leave, seeking that the grant of leave be made nunc pro tunc from the date on which the writ was issued.[20]
[20]This misconceives the position as leave under s 500(2) of the Corporations Act 2001 (Cth) is only required from the date that Shangri-La went into liquidation, i.e. 31 March 2023.
On 9 June 2023, Moray & Agnew wrote to the VWA’s solicitors to elaborate on Underwriters’ position that the writ had expired, could not be revived, and that as a result, VWA was now unable to recover the Barred Payments by reason that they were statute barred.
In response to the 9 June letter, VWA:
(a) distinguished the case law cited by the Underwriters on the basis that Shangri-La went into liquidation after VWA commenced proceedings (whereas in the authorities cited, the liquidation pre-dated the commencement of proceedings);
(b) blamed Moray & Agnew for the delay in confirming insurance arrangements; and
(c) stated that the grant of leave was required no earlier than 31 March 2023.
On 11 July 2023, this application for leave was issued.
The Underwriters characterise the dispute as arising by reason that VWA requires the grant of leave to be backdated to a date prior to expiry of the time for service of the writ on 26 May 2023. It is said that this will retrospectively cure service of the writ, which was not valid because the Recovery Proceeding was stayed by operation of s 500(2) of the Act at the time of purported service on 19 May 2023.
The Underwriters contend that if this leave is not granted nunc pro tunc, the six year limitation period will operate to bar recovery of the Barred Payments. In this regard, it is said that a six year limitation period applies to the Recovery Proceeding pursuant to the WIRC Act by reason of the operation of s 5(1)(d) of the Limitation of Actions Act, which imposes the limitation period to ‘actions to recover any sum recoverable by virtue of an enactment, other than a penalty or forfeiture or sum by way of penalty or forfeiture’.
Mr Viti referred to the decision of the Victorian Court of Appeal in Hartley Poynton as being a collection of the principles of the power of the Court to make orders nunc pro tunc.[21]
[21]Hartley Poynton (n 18).
The Underwriters contend that the principles to be extracted from Hartley Poynton in this regard are as follows:
(a) nunc pro tunc orders were used to overcome procedural unfairness created by historical delay between entry of judgment and the making of orders to give ‘expression to the fact that the plaintiff (or defendant) had already been successful and, to that extent, there was no element of artificiality’;[22]
(b) the order is made where it is procedural rights which are affected, largely by processes of the court, and the Court cannot make the order where to do so would affect the substantive rights of a party;[23]
(c) the Court cannot use the orders to ‘deem something to exist which does not exist and cannot deem something to have remained in existence which no longer remains in existence’.[24]
[22]Ibid 586 [35] (Ormiston JA, Buchanan JA agreeing at 620 [113], Eames JA agreeing at 620 [114]).
[23]Ibid 603 [69], 606 [73].
[24]Ibid 612 [91].
The Underwriters contend that on an application of the principles in Hartley Poynton to the Recovery proceeding:
(a) VWA has not identified, and cannot identify, any procedural unfairness created by processes in either this Court or the County Court. The correspondence cited shows that VWA chose not to issue the leave application prior to the expiry of the writ;
(b) now that the writ has expired, the six year limitation period, which has expired[25] operates in relation to the Barred Payments. This provides the Underwriters, acting in Shangri-La’s stead, with a limitation defence which operates to reduce the value of the Recovery proceeding by 97%;
(c) a limitation defence is a substantive defence and cannot be undermined by the making of an order nunc pro tunc, as illustrated in the cases to which reference will be made below; and
(d) the leave application had not been made at a point in time prior to the expiry of the writ. A nunc pro tunc order cannot be backdated to a point in time prior to commencement of the leave application.
[25]The Underwriters contend that this occurred on 28 November 2022 but this is not explained.
It was submitted that Ormiston JA’s analysis, with whom Buchanan and Eames JJA agreed, was recently confirmed by the Court of Appeal in Bannon v Nauru Phosphate Royalties Trust.[26]
[26][2019] VSCA 303.
The Underwriters accept that the Court can grant leave nunc pro tunc to the date on which the leave application was commenced because the delay between issuing the leave to proceed application and the making of the order is procedural. However, they contend there is a limitation on the jurisdiction of the Court to make the order nunc pro tunc. In this regard, the Underwriters accept that VWA can still attempt to recover the Claimable Payments, which were not statute barred on the date which the present application was commenced.
The Underwriters contend that the application of the principles as to whether or not a court should make an order nunc pro tunc in the context of applications for leave to proceed against companies in liquidation have been consistently applied on the basis of the above analysis; in several cases, it was accepted that a limitation defence is a substantive right of defendants to claims with which the courts would not interfere.
In Tamaya, the plaintiffs acquired shares in the defendant company between 28 May and October 2008. The defendant went into liquidation on 19 December 2008. On 28 May 2014, the plaintiffs commenced, without leave, a Federal Court proceeding, seeking relief against the defendant and others. 28 May 2014 was also the last day proceedings could be issued before the six year limitation expired, at least in relation to parts of the claim. On 5 February 2015, the plaintiffs issued an interlocutory application in the Federal Court proceeding for leave pursuant to s 500(2) of the Act.
In their s 500(2) application, the plaintiffs in Tamaya sought that leave be granted nunc pro tunc, to the date of commencement of the proceeding. It was contended that the effect of this would be to defeat any limitation defence which could be raised by the defendants.
Justice Foster declined to grant leave to proceed nunc pro tunc to the commencement of the proceeding as his Honour did not consider it was open to him to undermine the limitation defence otherwise open to the defendants to pursue at trial.[27] Justice Foster granted the leave to proceed nunc pro tunc from 5 February 2015,[28] the date that the application for leave under s 500(2) was issued.
[27]Tamaya (n 10) [91]–[92].
[28]Ibid.
In Link Construction, Link Constructions Pty Ltd (‘Link’) held a policy with Allianz Australia Insurance Ltd (‘Allianz’). The loss and damage in question, which became the subject of a proceeding, occurred in January 2010. It was accepted that the policy would, at least partially, respond to a claim against Link in respect of the loss and damage. In March 2012, Link went into liquidation.
In December 2015, a District Court proceeding was commenced by the plaintiffs against Link. In January 2016, the limitation period expired. In April 2016, the plaintiffs issued an application for leave pursuant to s 500(2) of the Act in the Supreme Court of New South Wales. In that application, the plaintiffs sought that leave be granted nunc pro tunc on and from the commencement of the District Court proceeding. It was said that the effect of such an order being made would be to defeat any limitation defence which could be raised by the defendant.
Justice Black, apparently concerned by the delay of four months between issuing the District Court proceeding and the leave application in the Supreme Court, declined to grant the leave nunc pro tunc to the date of commencement of the District Court proceeding. He considered to do so would deprive Allianz of a potential limitation defence.[29] Justice Black granted leave nunc pro tunc from the date on which the application for leave was filed in the Supreme Court.[30]
[29][2016] NSWSC 684, [15].
[30]Ibid [16].
In Fuji Fuels,[31] the dispute was between the insurer of Fuji Fuels Pty Ltd, Newline Underwriting Management Ltd, and the insurer of the plaintiff, FF (R&D), Zurich Australian Insurance Ltd. On 6 October 2010, an explosion occurred causing damage to the plaintiff’s property. On 17 February 2012, Fuji Fuels went into administration and, on 26 March 2012, into liquidation. The insurers engaged in protracted correspondence attempting to settle the dispute. On 14 September 2016, the plaintiff issued a generally endorsed writ in the County Court of Victoria against Fuji Fuels. On 6 October 2016, the six-year limitation period provided for under s 5 of the Limitation of Actions Act expired. On 7 January 2017, Fuji Fuels was deregistered.
[31]Fuji Fuels (n 10).
On 19 April 2017, the plaintiff issued an application in the Supreme Court of Victoria, seeking orders that Fuji Fuel’s registration be reinstated and that leave be granted pursuant to s 500(2) of the Act nunc pro tunc to the date of the commencement of the County Court proceeding. It was said that the effect of this would be to defeat any limitation defence that could be raised by Fuji Fuels.
Associate Justice Randall considered that determination of whether leave nunc pro tunc should be granted was also relevant to the assessment of whether the plaintiff’s registration should be reinstated.[32]
[32]Ibid [38].
In his Honour’s reasons, Randall AsJ applied Hartley Poynton and Link Construction and declined to grant leave to proceed nunc pro tunc pursuant to s 500(2) from the date that the County Court proceeding was issued against Fuji Fuels. He also declined to order the reinstatement of the defendant’s registration.[33]
[33]Ibid [69], [70]–[73].
The Underwriters contend that the fact that primary proceedings in Tamaya, Link Construction, and Fuji Fuels were not commenced until after the liquidation in each case was not material to the reasoning or the outcomes of the applications in those cases. It was submitted that the relevant factors in those cases were whether a nunc pro tunc order could be made where to do so would interfere with a limitation defence. In each case, the Court ruled the order could not be made. It was submitted that this was the case regardless of whether the leave application was commenced as part of the primary proceeding in the County or District Court or whether it was brought in a superior court having jurisdiction under the Act.
As to VWA’s contention that it was awaiting the confirmation of insurance position before commencing the leave application, the Underwriters observe that it was ultimately able to issue the application for leave on 11 July 2023 without the information it had requested being provided.
The Underwriters observe that VWA has not provided any adequate explanation as to why it delayed the attempt to serve the writ for two years.
The Underwriters also contend that there is no reason VWA could not have issued the leave application upon learning of the liquidation of Shangri-La in early May 2023. The Underwriters accept that if VWA had done so, it would be open to the Court to grant leave nunc pro tunc to that point, which would have had the effect desired by the VWA, that is, they say, to ‘revive’ the expired writ.
The Underwriters contend that on an application of Hartley Poynton, the Court does not have the jurisdiction to make the order nunc pro tunc in the manner sought by VWA and this is confirmed and illustrated in the cases of Tamaya, Link Construction, and Fuji Fuels.
As to VWA invoking the reasoning of Stephen J in Van Leer, Mr Viti referred to a passage in Victa (the decision to which Stephen J adopted with approval in Van Leer), where Bray CJ stated:[34]
If the writ really became a nullity when it expired without being renewed at the end of the year, then the defendant would, at the end of the year, be in the same position as regards to the running of the period of limitation as if no writ had ever been issued at all, and to renew it would be to subject him to a statute barred claim. But it is not a nullity. A nullity cannot be renewed or waived … The true position is that service of it is not valid unless it is renewed or the objection waived, but that is all.
[34]Victa (n 12) 503 (emphasis added in oral submissions).
Mr Viti contended that service of the writ was not valid unless the Court made an order in this application to grant the leave nunc pro tunc prior to the date on which service occurred, which would then make this service valid.
Mr Viti referred to an earlier passage of Stephen J’s judgment in Van Leer, in which his Honour observed:[35]
However more recent English authority, while otherwise following Battersby’s Case, recognizes that a “stale” writ is no nullity. In Sheldon v. Brown Bayley’s Steel Works and Dawnays Ltd both Singleton and Denning L.JJ., recognized that the only quality which such a writ lacks is that of not being in force for the purpose of service. The Courts of Appeal of both Saskatchewan and British Columbia have likewise unequivocally rejected the view that a “stale” writ is a nullity. It follows that renewal out of time cannot properly be described as depriving a defendant of a defence the essence of which is failure to issue within time. This is made clear in the judgments of the Full Court of the South Australian Supreme Court in Krawszyk v. Graham and Victa Ltd. v Johnson, and see in particular per Bray C.J. in Victa.
[35]Van Leer (n 11) 340–1 (citations omitted).
Mr Viti contended that the last sentence in this passage is not a proper characterisation of what Bray CJ said in Victa, and that the qualification that Bray CJ added to that, which his Honour was concerned with, was that there was no absolute right to a limitation period, or there was no absolute bar, and it was simply an arguable position for a defendant. Mr Viti contended that the statement ‘that renewal out of time cannot properly be described as depriving a defendant of a defence’ is inconsistent with what Bray CJ was stating in Victa. Justice Stephen has the last word on that issue and it is one which I am, of course, bound to follow.
Consideration
In my view, on a consideration of the evidence and the relevant legal principles, it is appropriate to grant leave to proceed nunc pro tunc from the date that the defendant went into liquidation. I consider that the submission by the interested parties that the claim made in the Recovery Proceeding is presently barred by limitation cannot be sustained.
At the outset, I observe the interested parties did not contend that the Recovery Proceeding did not involve ‘a serious question to be tried’ and ‘a serious claim and a real dispute’ [36]. The Recovery Proceeding was commenced on 25 May 2021, within the six-year limitation period prescribed by s 5(1)(d) of the Limitation of Actions Act. Several months later in September 2021, a letter of demand was sent to Shangri-La and shortly afterwards, VWA’s solicitors were notified that Moray & Agnew acted on behalf of Shanri-La in dealing with VWA’s claim. On 22 June 2022, the period of validity for service of the writ was extended to 25 May 2023.
[36]See Vagrand (n 3) 556.
On 31 March 2023, Shangri-La went into creditors voluntary liquidation. Moray & Agnew did not inform Russell Kennedy of this fact, nor did Mr Coyne, the liquidator appointed in the winding up. VWA’s solicitors only became aware that Shangri-La was in liquidation when an ASIC search was obtained for Shangri-La on 1 May 2023.
The evidence of Ms Petousis is that Russell Kennedy then sought to obtain information as to the insurance position over the next several weeks. Ms Petousis’ evidence was that she was aware of the relevance of the existence of insurance coverage in applications for leave to proceed against companies in liquidation. Moray & Agnew was unresponsive to such enquiries.
On 19 May 2023, Russell Kennedy served the generally endorsed writ on the liquidator, at Shangri-La’s registered office and on Moray & Agnew. A statement of claim was filed and served on those parties the following day. Service of those documents occurred at a time within the period of the extension of time for service of the writ.
Several days later, on 29 May 2023, Moray & Agnew indicated to Russell Kennedy its opinion that the service of the writ was invalid by reason of the failure to have been granted leave under s 500(2) at the time of service of the writ and that the writ was now stale.
This application for leave to proceed was filed and served on 11 July 2023. I do not consider that the delay of which Russell Kennedy contends occurred in making the application was inordinate. In my view, it was reasonable for Russell Kennedy to attempt to obtain information concerning the insurance position as, in the context of this particular type of application, it is a prominent, often decisive, discretionary factor in favour of the grant of leave to proceed. There is no evidence that any mischief ensued from VWA’s not issuing the application earlier. Mr Coyne, the liquidator, takes no position in response to the application and presumably if some prejudice was occasioned to the liquidation by the leave application not being issued sooner than it was the court would have been informed .
As well as Hartley Poynton, the Underwriters relied in their submissions on three authorities, Tamaya, Link Construction and Fuji Fuels, but in my opinion, the circumstances of those cases are relevantly different to those here. In particular I regard it as a relevant difference that at the time the Recovery Proceeding was issued Shangri-La was not in liquidation. The authorities relied upon by the Underwriters were all instances of where the defendant company was in liquidation and proceedings were subsequently commenced, several years later, without leave being obtained. In Tamaya, the plaintiffs commenced their proceeding nearly six years after the defendant company went into liquidation without seeking leave to proceed. In Link Construction, the proceeding was commenced some three and a half years after the defendant went into liquidation and no application for leave was made to commence of the proceeding. In Fuji Fuels, the defendant went into insolvency administration in March 2012. Over four years later, when the liquidators had caused the deregistration of the defendant at the conclusion of the liquidation, the plaintiff issued a generally endorsed writ without obtaining leave. Here, the Recovery Proceeding had been under way for some period before Shangri-La went into liquidation. It was only at that point that leave under s 500(2) was required and an application was made on 11 July 2023, some two months after VWA’s solicitors became aware that the defendant was in liquidation, after engaging with the Underwriters’ solicitors in respect of the insurance position.
There is no doubt that the Court may grant leave nunc pro tunc.[37] Implicitly, in circumstances where proceedings have been commenced and a defendant subsequently goes into some form of insolvency administration, and a court otherwise considers that leave to proceed should be granted because there is a serious question to be tried, a nunc pro tunc order will be required, giving leave to proceed from the time that the company went into liquidation.
[37]See Oceanic Life Ltd v Insurance and Retirement Services Pty Ltd (in liq) (1993) 11 ACSR 516, 521 (Zeeman J); Ong v Lottwo Pty Ltd (in liq) (2013) 116 SASR 280, 296 [59] (Nicholson J).
In the circumstances of this case, I see no reason not to make an order nunc pro tunc from 31 March 2023, the date that Shangri-La went into liquidation,. As has been noted, the Underwriters have reserved their position in respect of whether the recovery proceeding will be covered by the relevant insurance policy. As has been observed, in Altinova, , Jacobson J considered that where it is at least arguable that a policy of insurance would respond to a claim for indemnity by the company in liquidation, that is a sufficient basis for the grant of leave under s 500(2).[38] The uncertainty of the position in regard to whether indemnity will be provided can be dealt with by reservation of liberty to the liquidator to apply to revoke the grant of leave if the underwriters deny indemnity.
[38]Altinova (n 7) [62]–[65]. See also Al Khaled v Jacaranda Property Developments Pty Ltd [2012] NSWSC 755, [19] (SG Campbell J).
I will make orders that:
(i) Victorian WorkCover Authority has leave nunc pro tunc from 31 March 2023 to proceed against Shangri-La Construction Pty Ltd (ACN 130 534 244) (‘Shangri-La’) pursuant to s 500(2) of the Corporations Act 2001 (Cth) in proceeding CI-21-02103 in the County Court of Victoria.
(ii) VWA not be permitted to enforce any judgment against Shangri-La without further leave of the Court.
(iii) Reserve liberty to the liquidator of Shangri-La to apply to revoke the grant of leave.
The Underwriters opposed the grant of leave and were unsuccessful in doing so. I consider that the Underwriters should pay VWA’s costs of the application by originating process filed 11 July 2023, including reserved costs.
SCHEDULE OF PARTIES
| S ECI | |
| BETWEEN: | |
| VICTORIAN WORKCOVER AUTHORITY | Plaintiff |
| - v - | |
| SHANGRI-LA CONSTRUCTION PTY LTD (ACN 130 534 244) (UNDER EXTERNAL ADMINISTRATION) | Defendant |
| CERTAIN UNDERWRITERS AT LLOYDS OF LONDON | Other Party |
0
9
0