Weston v Publishing and Broadcasting Ltd

[2011] NSWSC 433

Supreme Court

New South Wales

• Amendment notes

Medium Neutral Citation:	Weston v Publishing and Broadcasting Ltd [2011] NSWSC 433
Hearing dates:	15 -18 February 2011
Decision date:	13 May 2011
Jurisdiction:	Equity Division - Corporations List
Before:	Ward J
Decision:	Applications to discharge orders extending time for service of Statement of Claim upheld. Proceedings dismissed.
Catchwords:	CIVIL PROCEDURE - applications by defendants pursuant to Rule 12.11(1)(e) and/or 36.16(1) for discharge or setting aside of ex parte orders extending time for service of the Statement of Claim - application for dismissal or permanent stay of the proceedings - plaintiffs' application for leave pursuant to s 64 and/or 65 of the Civil Procedure Act 2005 (NSW) to amend the Statement of Claim HELD - order pursuant to Rule 12.11(1)(e) that orders made ex parte on 16 November 2009 and 20 May 2010 extending the time for service of the Statement of Claim be discharged - proceedings dismissed - application to amend Statement of Claim dismissed
Legislation Cited:	Australian Securities and Investments Commission Act 2001 (Cth) Civil Procedure Act 2005 (NSW) Corporations Act 2001 (Cth) Fair Trading Act 1989 (NSW) Law Reform (Miscellaneous Provisions) Act 1946 (NSW) Limitation Act 1969 (NSW) Supreme Court Rules 1970 (NSW) Trade Practices Act 1974 (Cth) Uniform Civil Procedure Rules 1999 (Qld) Uniform Civil Procedure Rules 2005 (NSW)
Cases Cited:	Agricultural & Rural Finance v Kirk [2011] NSWCA 67 Agricultural and Rural Finance Pty Ltd v Atkinson [2010] NSWSC 42 Ahern v The Queen (1988) 165 CLR 87 Aktas v Adepta [2010] EWCA Civ 1170 Allen v Sir Alfred McAlpine & Sons Ltd [1968] 2 QB 229 Aon Risk Services Australia Ltd v Australian National University [2009] HCA 27; (2009) 239 CLR 175 Arthur Andersen Corporate Finance Pty Ltd v Buzzle Operations Pty Ltd (in liq) [2009] NSWCA 104 Arthur Young v Tieco International (1995) 182 LSJS 367 Associated Leisure Ltd (Phonographic Equipment Co Ltd) v Associated Newspapers Ltd [1970] 2 QB 450 Australian Competition and Consumer Commission v CG Berbatis (2003) 214 CLR 51 Australian Competition and Consumer Commission v Radio Rentals Pty Ltd (2005) 146 FCR 292 Australian Croatian Cultural and Educational Society 'Braca Radici' Blacktown Ltd v Benkovic [1999] NSWCA 210 Australian Securities & Investments Commission v Rich [2009] NSWSC 1229 Australian Wool Innovation Ltd v Newkirk [2005] FCA 290 Baker v The Queen [1975] 1 AC 774 Banque Commerciale SA (in liq) v Akhil Holdings Ltd (1990) 169 CLR 279 Bargan v State Government Insurance Office (Qld) (1982) 154 CLR 318 Barker & Ors v The Duke Group (in liq) [2005] SASC 81 Batistatos v Roads and Traffic Authority of New South Wales (2006) 226 CLR 256 Battersby v Anglo-American Oil Co Ltd [1945] KB 23 Bayat v Lord Michael Cecil & ors [2011] EWCA Civ 135 Belan v Casey [2003] NSWSC 159 Bell Group Ltd & Ors v Westpac Banking Corporation & Ors (No 9) (2008) 70 ACSR 1 Birkett v James [1978] AC 297 Bishopsgate Insurance Australia Ltd (in liq) v Deloitte Haskins & Sells [1999] 3 VR 863 Blazai Pty Ltd v Gateway Development (St Marys) Pty Ltd [2009] NSWSC 800 Blomley v Ryan (1956) 99 CLR 362 BP Australia Ltd v Brown & ors [2003] NSWCA 216 Breen v Williams (1996) 186 CLR 71 Brickfield Properties Ltd v Newton [1971] 3 All ER 328 Bridgewater v Leahy (1998) 194 CLR 457 Brisbane South Regional Health Authority v Taylor (1996) 186 CLR 541 Brooks v Sunlife Properties Pty Ltd, unreported; SCt of WA (Scott J, 21 February 1996) Bruce v Odhams Press Ltd [1936] 1 KB 697 Buzzle (Buzzle Operations Pty Ltd v Breirl [2007] NSWSC 922 Cabassi v Vila (1940) 64 CLR 130 Caltex Oil (Australia) Pty Ltd v The Dredge "Willemstad" (1976) 136 CLR 529 Canberra Data Centres Pty Ltd v Vibe Constructions (ACT) Pty Ltd [2010] ACTSC 20 Capital Finance Australia v Tolcher (2007) 164 FCR 83 Cartledge v E Jopling & Sons Ltd [1963] AC 758 CDJ v VAJ [1998] HCA 76; (1998) 197 CLR 172 Cement Australia Pty ltd & ors v Australian Competition and Consumer Commission (2010) 187 FCR 261 Chatsworth Investments Ltd v Cussins (Contractors) Ltd [1969] 1 All ER 143 Chief Executive Officer of Customs v Tony Longo Pty Limited (2001) 52 NSWLR 458 Christie v Purves and 2 Ors [2007] NSWCA 182 Clifton v Robinson (1853) 16 Beav 355; 51 ER 816 Coal and Allied Operations Pty Limited v Australian Industrial Relations Commission (2000) 203 CLR 194 Colbeam Palmer Ltd v Stock Affiliates Pty Ltd (1968) 122 CLR 25 Colonial Mutual Life Assurance Society Ltd v Producers and Citizens Co-operative Assurance Co of Australia Ltd (1931) 46 CLR 41 Commercial Bank of Australia Ltd v Amadio (1983) 151 CLR 447 Commonwealth Bank of Australia v Ridout Nominees Pty Ltd [2000] WASC 37 Commonwealth of Australia v Smith [2007] NSWCA 168 Commonwealth v Griffiths (2007) 70 NSWLR 268 Creevey v Barrois [2005] NSWCA 264 CSR Limited v Eddy (2005) 226 CLR 1 Dagnell v JL Freedman & Co [1993] 1 WLR 388 Dart Industries Inc v Decor Corporation Pty Ltd (1993) 179 CLR 101 Davies v Chicago Boot Co Ltd (2006) 58 ACSR 505 Davy v Garrett (1878) Ch D 473 Deloughery & Ors v Weston (2010) 79 ACSR 180 Department of Transport v Chris Smaller (Transport) Ltd [1989] 1 AC 1197; 1 All ER 897 Distillers Co (Biochemicals) Ltd v Thompson [1971] AC 458 Dresna Pty Ltd v Misu Nominees Pty Ltd [2004] FCAFC 169; (2004) ATPR 1(42-013) Duke Group Ltd (in liq) v Alamain Investments Ltd & Ors [2003] SASC 415 Duncan v Lowenthal [1969] VR 180 Dye v Commonwealth Securities Limited (No 2) [2010] FCAFC 118 Eleftheriou v Water Board [1991] NSWCA 91 Elvidge Pty Ltd v BGC Construction Pty Ltd [2006] WASC 264 FAI Insurance Ltd v Mainprize [2006] NSWSC 554 Farah Constructions Pty Ltd v Say-Dee Pty Ltd (2007) 230 CLR 89 Fatimi Pty Ltd v Bryant (2004) 59 NSWLR 678 Fernance v The Nominal Defendant (1989) 17 NSWLR 710 Ford Excavations v Do Carmo [1981] 2 NSWLR 253 Forster v Outred & Co [1982] 1 WLR 86; [1982] 2 All ER 753 Foxe v Brown (1984) 58 ALR 542 Franklins v Metcash Trading (2009) 264 ALR 15 Galland v Mineral Underwriters Ltd [1977] WAR 116 Ghazal v GIO (NSW) (1992) 29 NSWLR 336 Gill v Eatts [1999] NSWSC 1056 GIO General Ltd v Love [2009] NSWCA 269. Goldie v Johnston [1968] VR 651 Goldsmith v Sandilands (2002) 190 ALR 370 Graham Lewis Herbert v Nozala Pty Ltd and 1 Or [2006] NSWSC 1437 Greater Lithgow City Council v Wolfenden [2007] NSWCA 180 Greenwood v Papdemetri [2007] NSWCA 221 H 1976 Nominees Pty Ltd v Galli (1979) 30 ALR 181 Halpin v Lumley General Insurance Ltd [2009] NSWCA 372 Hans Pet Constructions Pty Ltd v Cassar [2009] NSWCA 230 Harris v Caladine (1991) 172 CLR 84 Hartigan v International Krishna Consciousness [1999] NSWSC 57 Hawkins v Clayton (1988) 164 CLR 539 Henderson v Amadio Pty Ltd (No 1) (1995) 62 FCR 1; 140 ALR 391 Hewitt v Henderson [2006] WASC 233 HIH Insurance Ltd (In Liq) v General Re [2006] NSWSC 128 Hoddinott v Persimmon Homes [2008] 1 WLR 806 Holman v George Elliot & Co Ltd [1944] KB 591 Hoser v Hatcher [1999] NSWSC 527 Hughes v Western Australian Cricket Assn Inc (1986) 69 ALR 660 Hytrac Conveyors Ltd v Conveyors International Ltd [1983] 1 WLR 44 Ingot v Macquarie [2004] NSWSC 1136 International Harvester Co of Australia Pty Ltd v Carrigan's Hazeldene Pastoral Co (1958) 100 CLR 644 Itek Graphix Pty Ltd v Elliott [2002] NSWCA 104; (2002) 54 NSWLR 207 Jackamarra v Krakouer [1998] HCA 27 at 29; (1998) 195 CLR 516 Jago v District Court (NSW) (1989) 168 CLR 23 Kalls Enterprises Pty Ltd (in liq) v Baloglow (2007) 63 ACSR 557 Kellow-Falkiner Motors Pty Ltd v Christoforos Nimorakiotakis [2000] VSCA 1 Kleinwort Benson Ltd v Barbrak Ltd [1987] AC 597 Krakowski v Eurolynx Properties Ltd (1995) 183 CLR 563 Krawszyk v Graham [1966] SASR 73 Lawrance v Norreys (1888) 39 Ch D 213 Leitch v Abbott (1886) 31 Ch D 374 Louth v Diprose (1992) 175 CLR 621 Magman International Pty Ltd v Westpac Banking Corp (1991) 32 FCR 1; 104 ALR 575; [1992] ATPR 41-161; [1992] ASC 56-127 Maile v Rafiq [2005] NSWCA 410 Malec v JC Hutton Pty Ltd (1990) 169 CLR 638 Malterer v Southern Electric Authority of Queensland [1974] Qd R 43 Markisic v Commonwealth of Australia (2007) 69 NSWLR 737 Maronis Holdings Ltd v Nippon Credit Australia Ltd [2000] NSWSC 507 McDonald v Shone and Ors [2010] NSWSC 467 McGee v Yeomans [1977] 1 NSWLR 273 McKenna v McKenna [1984] VR 665 McLeod v West Australian Trustee Executor & Agency Co Ltd (1951) 53 WALR 4 Medcalf v Mardell [2003] 1 AC 120; [2002] 3 All ER 721 Micallef v ICI Australia Operations Pty Ltd [2001] NSWCA 274 Micarone v Perpetual Trustees Australia Ltd (1999) 75 SASR 1 Milperra Marketing Pty Ltd v Bayliss [2001] NSWCA 315 Moratic Pty Ltd v Lawrence James Gordon [2007] NSWSC 5 NCR Australia v Credit Connections Pty Ltd [2004] NSWSC 1 Nelson v Wyong Shire Council (1989) 68 LGRA 164 New Cap Reinsurance v Reaseguros Alianza SA [2004] NSWSC 787 Newcastle City Council v Batistatos [2005] NSWCA 20 News Corporation Ltd v Lenfest Communications Inc (1996) 40 NSWLR 250 NZI Capital Corporation Ltd v Fulton [1998] FCA 667 OneFone Australia Pty Ltd v One. Tel Limited (2007) 61 ACSR 246 OneFone Australia Pty Ltd v One.Tel Limited (2007) 61 ACSR 429 Onefone Australia Pty Ltd v One.Tel Limited (In Liquidation) [2003] NSWSC 1228 Onefone Australia Pty Ltd v One.Tel Limited; Weston v Publishing and Broadcasting Limited [2007] NSWSC 1320 Onefone Australia Pty Ltd v One.Tel Ltd [2007] NSWSC 112 Onefone Australia v One.Tel Ltd [2006] NSWSC 349 Onefone Pty Ltd v One.Tel Ltd (in liquidation) [2006] NSWSC 1434 P&O Nedlloyd BV v Arab Metals Co & Ors [2007] 1 WLR 2288 Pacanowski v Simon Wakerman [2009] NSWCA 402 Pancontinental Mining Ltd v Posgold Investments Pty Ltd and Ors (1994) 121 ALR 405 Permanent Building Society (in liq) v Wheeler (1994) 11 WAR 187 Permanent Trustee Australia v FAI General Insurance Co Ltd [2001] NSWCA 20 (2001) 50 NSWLR 679; 187 ALR 380 Phillips v Phillips (1978) 4 QBD 127 Phillips v The State of New South Wales [1999] NSWSC 681 Pickin v British Railways Board [1972] 3 All ER 923; [1973] QB 219 Pilmer v Duke Group Ltd (in liq) (2001) 207 CLR 165 Pinson v Lloyds and National Provincial Foreign Bank Ltd [1941] 2 KB 72 Porter v Oamps Ltd and ors (2005) 215 ALR 327 Power v Ekstein [2009] NSWSC 130 Protean (Holdings) Ltd (recs and mgrs apptd) v American Home Assurance Co [1985] VR 187 Rajski v Bainton (1990) 22 NSWLR 125 Ramsay v Madgwicks (1989) VR 1 Ratcliffe & Anor v V S & B Border Homes Ltd (1987) 9 NSWLR 390 Ratcliffe v Evans [1892] 2 QB 524 Re Chittenden [1970] 3 All ER 562 Regie National des Usines Renault SA v Zhang [2002] HCA 10; (2002) 210 CLR 491 Rich v Packer; Rich v Long [2007] NSWSC 1290 Rich v Long [2008] NSWSC 487 Ridout Nominees Pty Ltd v Commonwealth Bank of Australia [2003] WASCA 158 Robertson v The Zinc Corporation Pty Ltd [2005] NSWCA 372 Rubenstein v Truth and Sportsman Limited [1960] VR 473 Rundle v Salvation Army (South Australia Property Trust) [2007] NSWCA 443 Ryledar Pty Ltd v Euphoric Pty Ltd (2007) 69 NSWLR 603 Saad v J Robins & Sons Pty Limited [2003] NSWCA 87 Salvation Army (South Australia Property Trust) v Graham Rundle [2008] NSWCA 347 Savcor Pty Ltd v Cathodic Protection International APS (2005) 12 VR 639, [2005] VSCA 213 Scott & ors v Davis (2000) 204 CLR 333 Secured Income Real Estate (Australia) Ltd v St Martins Investments Pty Ltd (1979) 144 CLR 596 Sellars v Adelaide Petroleum NL (1994) 179 CLR 332 Sheldon v Brown Bayley's Steel Works Ld and Dawnays Ltd [1953] 2 QB 393 Southern Cross Exploration NL v Fire & All Risks Insurance Co Ltd (1986) 4 NSWLR 491 Spencer v The Commonwealth of Australia [2010] HCA 28 State of New South Wales v McCloy Hutcherson Pty Ltd (1993) 116 ALR 363 Stollznow v Calvert [1980] 2 NSWLR 749 Street v Luna Park Sydney Pty Ltd [2006] NSWSC 230 SWF Hoists & Industrial Equipment Pty Ltd v State Government Insurance Commn (1990) 6 ANZ Insurance Cases 61-002; [1990] ATPR 41-045; [1990] ASC 55-996 Tekno Ceramics Pty Ltd v Milat [2003] NSWCA 254 The Bell Group Ltd (in liq) v Westpac (2008) 225 FLR 1 The I.M.B. Group Pty Ltd (in liq) v Australian Competition and Consumer Commission [2007] 1 Qd R 148 The IMB Group Pty Ltd (in liq) v Australian Competition and Consumer Commission [2006] QCA 407; [2007] 1 Qld Rep 148 Tipperary Developments v WA (2009) 38 WAR 488 Tolcher v Gordon [2005] NSWCA 153; 53 ACSR 442 Trau v University of Sydney (1989) 34 IR 466 Tyrrell v Tyrrells Building Consultancy Pty Ltd [2008] NSWSC 416 Van Leer Australia Pty Ltd v Palace Shipping KK & anor (1981) 180 CLR 337 Vicary v State of Queensland [2009] QSC 284 Victa Limited v Johnson (1975) 10 SASR 496 Vines v Australian Securities and Investments Commission (2007) 73 NSWLR 451 Wallaby Grip (BAE) Pty Ltd (in liq) v Eraring Energy [2004] NSWCA 269 Wallingford v Mutual Society (1880) 5 App Cas 685 Walter Rau Neusser Oel Und Fett AG v Cross Pacific Trading Ltd [2005] FCA 955 Waltons Stores (Interstate) Ltd v Maher (1988) 164 CLR 387 Wardley Australia Ltd v Western Australia (1992) 175 CLR 514 Warman International v Dwyer (1995) 182 CLR 544 Watson v Foxman (1995) 49 NSWLR 315 Weston v Publishing and Broadcasting Limited [2007] NSWSC 1320 Weston v Publishing and Broadcasting Ltd [2007] NSWSC 1318 Weston v Publishing and Broadcasting Limited & Ors [2009] NSWSC 1235 Weston v Publishing and Broadcasting Limited & Ors [2009] NSWSC 321 Weston v Publishing and Broadcasting Ltd [2010] NSWSC 499 White Industries (Qld) Pty Ltd v Flower & Hart (a firm) (1998) 156 ALR 169 Whiting v JDS Engineering & Labour Services Pty Ltd [2010] NSWCA 28 Wickstead v Browne (1992) 30 NSWLR 1 Williams v Hursey (1959) 103 CLR 30 Williams v Milotin (1957) 97 CLR 465 Williams v Minister, Aboriginal Land Rights Act 1983 (1994) NSWLR 497 Witten v Lombard Australia Ltd [1968] 2 NSWR 529; (1968) 88 WN (Pt 1) (NSW) 405 Young v Waterways Authority of New South Wales [2002] NSWSC 612 Zhang v Zemin [2007] NSWSC 229
Texts Cited:	Balkin and Davis, The Law of Torts (4th edn) Bernard Cairns, Australian Civil Procedure (8th edn) Cheshire and Fifoot, On Contract (1997) Degeling and Edelman (eds) Equity in Commercial Law (2005) Heydon, Economic Torts (2nd edn) Ritchie's Uniform Civil Procedure Rules (NSW) Spry, The Principles of Equitable Remedies (6th edn) The Laws of Australia Vout (ed) Torts, The Laws of Australia (2nd edn)
Category:	Procedural and other rulings
Parties:	Paul Gerard Weston in his capacity as Special Purpose Liquidator of One.Tel Ltd (in liq) (First Plaintiff) One.Tel Ltd (in liq) (Second Plaintiff) Publishing and Broadcasting Ltd (now known as Consolidated Media Holdings Ltd) (First Defendant) Consolidated Press Holdings Ltd (Second Defendant) Robbdoc Pty Ltd (Third Defendant) Toranaga Pty Ltd (Fourth Defendant) Cavalane Holdings Pty Ltd (Fifth Defendant) News Ltd (Sixth Defendant) Leteno Pty Ltd (Seventh Defendant) James Douglas Packer (Eighth Defendant) Peter William Yates (Ninth Defendant) Lachlan Keith Murdoch (Tenth Defendant) Peter John Macourt (Eleventh Defendant)
Representation:	Counsel: J Karkar QC with I Jackman SC, A D'Arcy (Plaintiffs) T F Bathurst QC, with J Elliott SC, S Nixon (First, Second, Third, Fourth, Fifth & Eighth Defendants) N Hutley SC with J Lockhart SC (Sixth, Seventh, Tenth & Eleventh Defendants) N J Young QC with J R Williams (Ninth Defendant)   Solicitors: Lipman Karas (Plaintiffs) Minter Ellison (First, Second, Third, Fourth, Fifth & Eighth Defendants) Allens Arthur Robinson (Sixth, Seventh, Tenth & Eleventh Defendants) Atanaskovic Hartnell (Ninth Defendant) No appearance for Twelfth to Eighteenth Defendants
File Number(s):	07/255083

Judgment

1. HER HONOUR: Before me for hearing on 15 -18 February this year were a number of applications brought in proceedings commenced in 2007 by the special purpose liquidator of One.Tel Limited (in liq), Mr Paul Gerard Weston, on behalf and in the name of One.Tel. Named as defendants in those proceedings were various entities and individuals, who may broadly be grouped as: the PBL defendants, those being Mr James Packer and entities associated with him, (the first to fifth and eighth defendants); the News defendants, those being Mr Lachlan Murdoch, entities associated with him and the Chief Operating Officer of News, Mr Peter Macourt, (the sixth, seventh, tenth and eleventh defendants); Mr Peter Yates, who was, at the relevant time in 2001, both the Chief Executive Officer of PBL and a then recently appointed director of One.Tel (the ninth defendant); four directors of One.Tel (the twelfth to fifteenth defendants; and the partners of three firms of professional advisers (the sixteenth, seventeenth and eighteenth defendants).

2. Although at times since 2001, the same firm of lawyers represented both Mr Yates and the PBL defendants, and thus Mr Yates might loosely be described as falling within the PBL interests for that purpose, Mr Yates has not, since 2004, been associated with the PBL group of companies and on the applications before me Mr Yates was separately represented. (This is relevant insofar as it is contended that various of the plaintiffs' submissions have conflated the position of the respective defendants over the period to date.)

3. The claims made in the proceedings relate to the decision by the Board of One.Tel on 29 May 2001 not to proceed with a renounceable rights issue of $132m that had been announced on 17 May 2001 and which was to be underwritten by entities associated with the PBL and News defendants. Following the decision not to proceed with the rights issue (and at that same meeting), the Board resolved to place One.Tel into administration under Part 5.3 of the Corporations Act 2001 (Cth) and to appoint Messrs Sherman and Walker of Ferrier Hodgson as administrators. Not long after, in July 2001, the company was placed in liquidation and Messrs Sherman and Walker (to whom I will refer as the general purpose liquidators) were appointed as the liquidators of the company.

4. The events leading up to the appointment of administrators (and then liquidators) of One.Tel (and its solvency in May 2001) have already been the focus of judicial consideration in proceedings brought by ASIC against three former executive directors of One.Tel and its former chairman but ultimately contested by only two of the directors - Mr Rich and Mr Silbermann. Judgment in those proceedings was delivered by Austin J on 18 November 2009 ( Australian Securities & Investments Commission v Rich [2009] NSWSC 1229) after a lengthy hearing (232 days) with numerous interlocutory applications over the period from September 2004 to August 2007. (As will be seen, the time that elapsed from hearing to the delivery of judgment was a factor in the delay in service of the originating process in the present proceedings.)

5. Mr Weston was appointed the special purpose liquidator of One.Tel by order of Windeyer J on 23 December 2003. He was appointed for the specific purposes of investigating the cancellation of the renounceable rights issue and of making recommendations to the creditors of the company, first, "as to whether any rights of action exist in respect of which there is a limitation period for the commencement of any such action of less than six years" and, further, as to whether any action should be commenced against any such person on any such rights. (An issue of potential conflict had arisen vis-a-vis the general purpose liquidators in that regard, as Mr Sherman had been present in an advisory capacity at the 29 May Board meeting.)

6. Windeyer J directed that the SPL's recommendation as to the existence of any rights of action should be made on the assumption that One.Tel became insolvent as a result of the cancellation of the renounceable rights issue (his Honour having noted ASIC's position, to the contrary, that the sum of $132m would not have been sufficient to enable the company to continue in business). Windeyer J considered that to be appropriate as it was "not to the benefit of creditors to have a vast sum of money spent on establishing the solvency question when this is going to be established at no expense to them [i.e. in the ASIC v Rich proceedings] unless they will lose valuable rights by reason of the delay" ( Onefone Australia Pty Ltd v One.Tel Limited (In Liquidation) [2003] NSWSC 1228 at [19]). His Honour observed that, were it not for the possibility of some order being made for the benefit of the company through the cancellation of the rights issue being held to be an uncommercial transaction, he would have considered reasonable and proper the decision of the general purpose liquidators to "wait and see" the result of the ASIC v Rich litigation. (The concern in relation to the expiry of any relevant limitation period at that stage related to the three year limitation period under s 588FF(3) of the Corporations Act for claims as to uncommercial transactions.)

1. These proceedings were commenced by Statement of Claim verified by the SPL and filed on 25 May 2007, less than a week before the expiry on 29 May 2007 of the (by then extended to six years) limitation period for the bringing of an uncommercial transaction claim under s 588FF. Under Rule 6.2(4)(a) of the Uniform Civil Procedure Rules , the time limited for service of that originating process expired 6 months after it was filed. It was not served within that time. In fact, the Statement of Claim was not served until 23 August 2010 (some 9 months after judgment was handed down in ASIC v Rich and over three years after the expiry of the extended limitation period for uncommercial transaction claims). Even then it was served on only some of the defendants who had been named as party to the Statement of Claim when it was filed.

2. On six occasions between May 2007 and May 2010 applications were brought by the SPL pursuant to Rule 1.12 of the Uniform Civil Procedure Rules 2005 (NSW) (and orders were on each occasion made) on an ex parte basis for successive extensions of time for the service of the Statement of Claim. On the first of those occasions (in November 2007), leave was unsuccessfully sought by seven of the unserved defendants (the PBL defendants and Mr Yates) to appear and be heard on the extension application. That leave was refused on the basis that, unless and until a filed process is served, a defendant has not been drawn in to the proceedings and has no definitive status in relation to the proceedings, ( Onefone Australia Pty Ltd v One.Tel Limited; Weston v Publishing and Broadcasting Limited [2007] NSWSC 1320 at [10] - [11] per Barrett J). Barrett J noted that there was a strong indication in the Uniform Civil Procedure Rules that a person named as a defendant in an unserved originating process is not intended to be heard on an application for extension of the time for which the process remains valid for service [at 9] and that a defendant's interest in the question whether time for service should be extended is something to be heard only retrospectively after that defendant has been drawn in to the proceedings.

3. All of the extension applications were made after the expiry of the relevant limitation period for claims under s 588FF of the Corporations Act (and after the expiry of the relevant limitation period for claims for breach of directors' duty under the Corporations Act or for claims of misleading and deceptive conduct under the Trade Practices Act 1974 (Cth) or Fair Trading Act 1989 (NSW)) but before the time at which the originating process would otherwise have become stale.

4. The applications now before me are as follows:

(i) an application by notice of motion filed 23 August 2010 by the plaintiffs for leave pursuant to rule 12.1(1)(b) of the Uniform Civil Procedure Rules to discontinue the proceedings against the 12 th to 18 th defendants, none of whom has been served with the Statement of Claim (those defendants variously being certain executive or non-executive directors of One.Tel and the professional advisers who had been involved in the events of May 2001 in one or other capacity) and for leave pursuant to s 64 and/or 65 of the Civil Procedure Act 2005 (NSW) to amend the Statement of Claim (inter alia, to include new claims of negligence, breach of contract, conspiracy, knowing involvement in breach of fiduciary duty and unconscientious conduct, as well as a new claim for relief in the form of an account of profits) ;

(ii) an application by notice of motion dated 3 September 2010 by the PBL defendants seeking a permanent stay of the proceedings and an order pursuant to rule 12.11(1)(e) that service of the Statement of Claim be set aside;

(iii) an application by notice of motion dated 6 September 2010 by Mr Yates seeking an order pursuant to rule 12.11(1)(e) discharging the orders extending the validity of service of the Statement of Claim, a declaration that Mr Yates had not been validly served, and an order pursuant to s 67 of the Civil Procedure Act and/or the inherent jurisdiction of the court, that this proceeding be permanently stayed (in the alternative, an order for the dismissal of the proceedings); and

(iv) an application by notice of motion dated 21 September 2010 by the News defendants seeking an order pursuant to rule 12.11(1)(e) (alternatively rule 36.16(2)(b)), that the six orders extending the time for service of the Statement of Claim be discharged or set aside and an order for a permanent stay of the proceedings against them.

11. Accordingly, apart from the application for leave to discontinue against the 12 th to 18 th defendants (against whom Mr Weston had, as long ago as March 2008, formed the view, with the benefit of Senior Counsel's advice, that the proceedings should not be pursued - subject only to any contrary view by litigation funders - and had so recommended to creditors), there are broadly two separate matters to be determined - first, whether any one or more of the orders for extension of the time for service of the Statement of Claim should be discharged or set aside (and whether the proceedings should now be permanently stayed or dismissed) and, secondly, if the proceedings are not permanently stayed or dismissed, whether leave should be granted to the plaintiffs to amend the Statement of Claim as now sought (those amendments being by no means insubstantial and including very serious allegations tantamount to fraud).

12. On the respective applications, each of the parties (other than the News defendants who filed no affidavit evidence) relied upon affidavit evidence from solicitors retained by them - the plaintiffs reading affidavits sworn by Ms Brooke Hall-Carney on 5 October 2010, 13 February 2011 and 14 February 2011, the PBL defendants reading affidavits sworn by Mr Joshua Wyner on 21 September 2010 and 2 November 2010, and Mr Yates reading an affidavit sworn by Mr Michael Sophocles on 21 September 2010. Mr Weston swore three affidavits, on 23 August 2010, 13 February 2011 and 14 February 2011, respectively, and was cross-examined. A nine volume Court Book was tendered (and marked Exhibit 3), to which I will refer for convenience as the CB.

Summary

13. In summary, for the reasons set out below, I am of the view that:

(i) had the Statement of Claim remained on foot, leave should be granted to the plaintiffs to discontinue the proceedings against the 12 th to 18 th defendants (but, as it is, such relief is not necessary);

(ii) the orders made ex parte on 16 November 2009 and 20 May 2010, (successively extending the time for service of the Statement of Claim through, first, to May 2010 and then to November 2010) should be discharged and, as the originating processes is now stale, the proceedings should be dismissed;

(iii) in view of the finding in (ii), the question whether leave should be granted to the plaintiffs to file an Amended Statement of Claim does not arise. I set out later in my reasons the relief I would have granted on this application had the proceedings remained on foot.

Background

14. Senior Counsel for the plaintiffs, Mr Karkar QC, identifies the factual substratum of the current proceedings as traversing the period from March 1995 to July 2001 (on the basis that the roles played by Mr Packer from 1995 and by Mr Murdoch from 1999 in relation to the business of One.Tel inform the conduct of the Board of One.Tel in May 2001). Nevertheless the critical events are those that occurred in around May 2001 (and the existing Statement of Claim does not make any relevant allegations of fact as to the earlier period).

15. On 17 May 2001, following an examination by senior analysts associated with the PBL interests (Messrs Miller and Green) into the financial affairs of the company (the Miller/Green review), the One.Tel Board resolved to proceed with a renounceable rights issue to raise $132m. It was contemplated that the rights issue would be underwritten by the PBL/News interests.

16. As the Statement of Claim is presently pleaded ([38], [39] and [58]), the plaintiffs allege that on 17 May 2001 there was an agreement between One.Tel and each of the first defendant, Publishing & Broadcasting Limited (now Consolidated Media Holdings Limited) (PBL), the second defendant, Consolidated Press Holdings Limited (CPH), and the sixth defendant, News Limited (alternatively, that those companies are estopped from denying such an agreement ), whereby (in effect) PBL, CPH and News, through their subsidiaries, would subscribe for their full entitlement to shares in the proposed renounceable rights issue and would underwrite that rights issue. The plaintiffs further allege ([37], [58]) that at the 1 7 May 2001 Board meeting, there was an agreement between One.Tel and PBL/CPH (alternatively, that those companies are estopped from denying such an agreement) whereby PBL/CPH would provide a bridging loan to One.Tel pending the receipt of cash under the rights issue.

17. At a One.Tel Board meeting on 29 May 2001, after a rapid succession of meetings (namely, meeting two days earlier between Messrs Packer, Murdoch, Macourt and others, though not Mr Yates; a further meeting on 27 May 2001 at the offices of PBL/CPH at which Mr Yates was present; and a One.Tel Board meeting on 28 May 2001, at which a presentation was made by Messrs Miller and Green), a resolution was passed by the One.Tel Board not to proceed with the renounceable rights issue. (The basis on which that resolution was said to be made was that One.Tel would be, or would be likely to become, insolvent even after raising $132m contemplated under the rights issue.) Following that resolution, the Board then resolved to place the company into administration, appointing Mr Sherman (who was at the meeting) and one of his partners, Mr Walker, as administrators of the company pursuant to the provisions of Part 5.3A of the Corporations Act . The timing of the respective resolutions (particularly, the fact that the decision not to proceed with the rights issue had preceded the resolution to place the company in administration) is one of the matters on which reliance is placed by the plaintiffs for various of the allegations now sought to be made in the present proceedings (such as the alleged conspiracy), as is the question of what information was before the Board when the relevant decisions were made (which is relied upon, inter alia, for the claims based on misleading and deceptive conduct as well as the conspiracy and breach of duty claims).

18. The plaintiffs allege (from [81] to [139] of the existing Statement of Claim), in effect, that prior to the 29 May One.Tel Board meeting (from about 25 May 2001), PBL/CPH had decided that they did not wish to proceed with the rights issue and that they then (together with News) engaged in conduct (defined in the current pleading as "Implementation of the Determination" but now dubbed the Scheme) designed to manipulate the process of the Board of One.Tel and to extract themselves from what are said to have been their contractual obligations to One.Tel in respect of the rights issue. That conduct is now alleged (in [58AO] of the proposed amended Statement of Claim) to have included:

• misleading the Board of One.Tel about the financial position of One.Tel including by providing "purportedly new" financial information about One.Tel's financial circumstances and suggesting that PBL/CPH had been misled at the time of the conduct of the Miller/Green review;

• misleading or lying to the One.Tel Board or individual Board members about a variety of matters;

• convincing the One.Tel Board to appoint Mr Long of Ernst & Young to investigate the financial position of One.Tel (in circumstances where it is asserted that Mr Long was not independent and had been told what conclusion PBL/CPH wanted him to reach and that the (short) time in which Mr Long was asked to report back to the One.Tel Board meant that his findings could not reasonably be relied upon by the Board);

• misleading the One.Tel Board about the "Long Report" in order to deprive the Board of the opportunity to review the report in a timely manner or to obtain further information about the contents of the report;

• manipulating the One.Tel Board process so as to create an "unnecessary sense of urgency", to deprive the Board of material information, and to conceal from the Board what is alleged to have been the true purpose of PBL, CPH and News (namely, to extract themselves from their binding obligations with respect to the rights issue); and

• misrepresenting the position of an entity described as a "major stakeholder" as to the possibility of funding by it (the "Lucent Position" as defined in [114]), described in the plaintiffs' submissions as feigning an interest to secure funds from alternative sources.

19. On 30 May 2001, there was a joint announcement by PBL and News to the ASX that the directors of One.Tel had advised that the company was insolvent, following due diligence investigations which had led the Board's two independent and two management directors to resolve that the $132m rights issue would be insufficient to assure its solvency. The announcement quoted a statement by Mr Murdoch and Mr Packer that they had been "profoundly misled" as to the true financial position of the company and intended "to explore all remedies available to us". (Mr Karkar relies on this as encouragement given by the PBL/News interests to ASIC to take the action it subsequently did in relation to Mr Rich and other directors of One.Tel; suggesting that the cause of any prejudice now suffered due to the delay in the present proceedings is self-inflicted (since that delay was referable to the ASIC prosecution they had themselves urged against Mr Rich in an attempt, it was said, to deflect attention from their own position).)

20. In the aftermath of those events, the PBL interests (and at least up to 2004 Mr Yates seems to have been included as someone on whose behalf those steps were taken) and the News defendants took steps to prepare for an investigation in relation to the financial position of One.Tel at the relevant time. They retained legal advisers and one or more of them recorded (at least in part) their then recollection of the relevant events. I was taken to transcript of some of the evidence in the proceedings before Austin J in which Mr Jalland, as the group general counsel and company secretary of PBL, accepted that PBL/CPH had retained external legal advisers at an early time in relation to the matter (vol 6 CB pp 3916, 3927 and 3930-1). It is said that in his evidence Mr Jalland indicated an awareness by PBL of the potential claims in relation to the alleged underwriting agreements (by accepting that it was important to the PBL interests that there not be found an agreement to underwrite the rights issue).

21. Shortly after the events in question Mr Murdoch swore an affidavit (vol 6 CB pp 4492ff) assisting ASIC in the preparation by it of an urgent application against Mr Rich in June 2001, in which Mr Murdoch deposed to various events and conversations around May 2001 and to his belief that he had been profoundly misled as to the true financial position of One.Tel from at least 30 March 2001. Statements were taken by Counsel representing the PBL defendants (Mr Elliott SC) from overseas witnesses and provided to ASIC and the PBL/News parties answered Notices to Produce issued by ASIC. Reference was also made by Mr Karkar to statements by ASIC that referred to receiving assistance or co-operation from the Packer/News interests. (Mr Karkar relies on this conduct, and the subsequent monitoring by the PBL/News defendants of the ASIC v Rich proceedings, as well as the information contained in the various liquidators' reports over the period, as demonstrating the defendants' awareness of the subject matter, if not the detail, of the present claims and as indicating that the defendants took the opportunity to preserve evidence in relation to the events of mid 2001.)

22. As early as June 2001, notification was made to insurers (on behalf of Mr Packer and Mr Yates) of circumstances which could give rise to a claim on a directors' and officers' liability policy (vol 8 CB p5362.10/11), reference in that notification being made to potential claims for insolvent trading, misrepresentation in relation to the financial position of the company, and breach of directors' duties. (In July 2001, further notification was made of a potential class action - vol 8 CB p 5362.12). (Notification was made on behalf of Mr Murdoch to insurers in June 2002, vol 7 CB p 4847A.)

23. As to the information that was publicly available as to any proposed or potential claims on behalf of the company, the first report to creditors (pursuant to s 439A of the Corporations Act ) prepared by Messrs Sherman and Walker in their then capacity as administrators of the company, on 12 July 2001, referred to their preliminary investigations and noted that the key areas of investigation included insolvent trading, unfair preferences, uncommercial and insolvent transactions, unfair loans and "directors' duty". The directors said to be the subject of review in the context of the insolvent trading claims included Messrs Murdoch and Packer. (Of Mr Yates, who had only been appointed to the One.Tel Board on 17 May 2001, the administrators' preliminary comment was that he had taken reasonable steps to establish the financial position of One.Tel and to act upon it by instigating a report and the Board meetings on 28 and 29 May 2001 (vol 6 CB p 4678). Thus, a reader of this report would not unreasonably conclude that Mr Yates was not then the subject of investigation in relation to proposed insolvent trading claims, or other claims at least up to the time of the May 2001 meetings.)

24. On 24 July 2001, Messrs Sherman and Walker were appointed as liquidators of the company. ASIC had already, by then, commenced its investigation into the affairs of the company.

25. In late 2001, ASIC conducted examinations under s 19 of the Australian Securities and Investments Commission Act 2001 (Cth) of a number of individuals (including Mr Packer in September 2001 and Mr Yates in November 2001). In December 2001, ASIC commenced proceedings against a number of directors or officers of One.Tel (Mr Rich, Mr Keeling, Mr Silbermann and Mr Greaves), those being the ASIC v Rich proceedings that culminated in the 18 November 2009 judgment of Austin J.

26. In 2002, the general purpose liquidators carried out their own examinations of various individuals associated with the PBL/News defendants, including each of Mr Packer, Mr Yates and Mr Murdoch.

27. On 24 June 2002, letters (vol 7 CB pp 4844, 4846, 4847C, 4847E) were sent by the SPL's solicitors, Kemp Strang, to the respective sets of solicitors then acting for Mr Packer, Mr Yates, Mr Murdoch and Mr Macourt (Gilbert + Tobin; Atanaskovic Hartnell; and Allens Arthur Robinson, respectively). In those letters, reference was made to the liquidators' (recent, in the case of Messrs Packer and Yates, and forthcoming, in the case of Mr Murdoch) examinations and the principal areas of investigation in relation to those individuals were noted. Those areas of investigation (in the case of each of Messrs Packer and Murdoch) included whether debts were incurred by One.Tel whilst it was insolvent during the period that he was a director in contravention of s 588G of the Corporations Act and (in the case of all three), the circumstances in which the underwriting or proposed underwriting announced on 17 May 2001 did not proceed and the circumstances in which a proposed bridge funding agreement did not proceed. (The June 2002 letters raised no suggestion of any investigation into claims of conspiracy, fraud or the like.) The letters also contained the statement that:

At the conclusion of the investigations of the above areas the liquidators will decide whether proceedings will be commenced against your client seeking to recover damages or other compensation by reason of your client's conduct including (but not limited to) conduct comprising a breach of statutory common law or equitable duties as a director . (my emphasis)

28. Mr Karkar points to the responses received by the SPL's lawyers from Gilbert + Tobin and Atanaskovic Hartnell (by letters dated 1 and 2 August 2002, respectively) (vol 7 CB pp4848/4850) as confirming that they were aware of the stated areas of concern of the liquidators. Those letters are construed by Mr Karkar as an attempt to discourage the investigation by the general purpose liquidators of the rights issue and bridging loan (the letters having referred to Mr Sherman's attendance as an 'adviser' of certain parties at the relevant board meetings and stating that if proceedings were commenced then he would (or could) be joined to any such proceedings). Whatever the intent, they clearly put the general purpose liquidators on notice of a contention that they were in a position of potential conflict, which was denied by his lawyers, Kemp Strang in their letter of 5 August 2002 (vol 7 CB p 485Z). That response must have fairly clearly indicated to the solicitors acting for the PBL defendants and Mr Yates that the general purpose liquidators were intending to continue with their investigations into at least the previously stated areas of concern (vol 7 CB pp 4852, 4853).

29. The general purpose liquidators' first annual report, issued pursuant to s 508 of the Corporations Act , dated 14 March 2002, (vol 7 p 4878) referred, under the heading "Investigations", to the two issues on which it was said that the liquidators had largely focussed in their investigations to that time - namely, whether there were any transactions recoverable under Part 5.7B and whether there was any substantive breach of directors' duties. The 'key' issues identified included the "termination of the Renounceable Rights issue, related underwriting and loan agreements and related directors duties". Again there is no suggestion of any allegation of conspiracy or fraud.

30. Mr Karkar emphasises that a key issue in both the ASIC v Rich proceedings and the claim against the PBL/News defendants was the question of One.Tel's solvency at the relevant time (and the defendants emphasise, in the context of the current applications, that their awareness at the relevant time was as to the potential for claims relating to insolvency). The 14 December 2002 liquidators' report noted that if, in the ASIC proceedings, it was established that the $132m rights issue would have been sufficient to establish solvency then this might positively impact on a cause of action relating to the Renounceable Rights Issue and the underwriting agreement; and, if not, then the question whether the non-executive directors had been misled would be relevant in relation to any defence that might be raised in answer to the potential insolvent trading claims.

31. On 6 August 2003, the liquidators' second annual report was issued. It summarised the key points at issue and the litigation in similar terms to the first report.

32. In December 2003, as adverted to earlier, application was made to Windeyer J by two creditors of the company for the appointment of a special purpose liquidator (that application being based on the perceived conflict in the position of the general purpose liquidators having regard to Mr Sherman's attendance at the relevant meeting(s)). Mr Karkar points to paragraphs [12] and [17] of his Honour's judgment on that application as a recognition of the essential 'interconnectedness' between the ASIC v Rich proceedings and what later came to be instituted as the present proceedings. Certainly, there seems to have been an assumption, when the matter was before his Honour, that the question of One.Tel's solvency would be determined in the ASIC v Rich proceedings. Ultimately, however, the question whether, had the rights issue proceeded, the company would have avoided insolvency was a question left unanswered at the conclusion of those proceedings. ASIC had contended that the company was insolvent as at May 2001. Austin J did not accept that this had been proven but made no finding as to what would have been the position had the rights issue proceeded, saying (at [7323]):

One of the unanswered questions is whether One.Tel would have survived if, in May 2001, PBL/CPH and News had maintained their support for the company and implemented their plan to underwrite a deeply discounted rights issue to raise $132 million. The tendered evidence has led me to reject ASIC's figures as to the financial circumstances of One.Tel at the end of February, March and April 2001, and to prefer the figures set out in Chs 11, 13 and 15 respectively. If those figures are right, a fundraising of $132 million accompanied by continuing support by the major shareholders would probably have been enough to address the company's cash requirement until November 2001, by which time, according to the business plans, the company's businesses would have been generating more healthy group cash flow. The withdrawal of that support, and the abandonment of the rights issue, may well have ensured that the company could not survive.

33. Following the appointment of the SPL, there was correspondence (on which Mr Karkar places some weight) from Atanaskovic Hartnell (writing on behalf of the PBL interests as well as Mr Yates) to the SPL on 29 January 2004, attaching a copy of that firm's 27 January 2004 letter of advice to Mr Jalland of PBL in relation to the appointment of the SPL (vol 7 pp 4902/4903). The letter of advice so attached referred to the time period for the making of civil claims under both the common law and the Corporations Act (with particular reference to ss 588M, 1325 and 1317R) and stated "There has been no suggestion that a claim under legislation other than the Act is possible and, in the circumstances, we do not examine this possibility". (It seems clear, therefore, that at that stage, the awareness of the PBL defendants and Mr Yates as to the potential claims being considered or investigated by the SPL did not extend to claims of a conspiracy involving individual directors, since one would expect such a claim to have been articulated in that letter of advice, and notified to insurers, had that been the case.) (The letter also suggested that it should be indicated to the SPL that, in the absence of an undertaking by the SPL to take steps to determine whether the Not Proceed Decision did fall within the description of "transaction", PBL was "presently disposed" to seeking declaratory relief.)

34. After advising on issues to which it was said the SPL must have regard in satisfying his fiduciary and other obligations as liquidator and to the court, the 27 January 2004 letter to Mr Jalland went on to consider the power of the court under s 588FF(3)(b) to extend the 3 year limitation period for claims under s 588FF. The writer expressed the opinion that it was appropriate for such an extension to be sought and for the SPL to cease further substantial investigation of the "Not Proceed Decision" until the outcome of the ASIC v Rich litigation was known. The letter observed that "The relevance of the ASIC proceedings, of course, is that questions of One.Tel solvency or otherwise will be determined (or at least significantly advanced) by the ASIC proceedings". It was said (and this was an argument put to the SPL more than once as to the potential futility of investigations prior to the ASIC v Rich litigation) that if, notwithstanding the rights issue, One.Tel would still have been insolvent (as ASIC in due course submitted to Austin J), then the voidable transaction issue would fall away.

35. Mr Karkar submits that the January 2004 letter is indicative of the attitude of the defendants - namely, an understanding on their part that ASIC v Rich would be determinative of many of the fundamental issues in any action against them and that it would be wasteful for the SPL to commence proceedings against them in advance of Austin J's judgment. (I interpose to note that there is nothing to suggest that it was in anybody's contemplation at that time that the outcome of the ASIC v Rich proceedings would not be known until six years later). The 2004 correspondence was again focussed on the issue of uncommercial transaction claims, not the (unnotified) fraud or conspiracy allegations. (It seems to me difficult, in light of later steps taken by the PBL defendants, to read this letter as indicative of an attitude that persisted right through up until 2010 when the last extension was sought and granted.)

36. The January 2004 letter foreshadowed the possibility of consent by the PBL defendants (and Mr Yates) to an order extending the time for commencement of proceedings for up to 6 years, conditional on the SPL suspending any subsequent activity on the "Not Proceed Decision" until the outcome of ASIC v Rich was known and suggesting that this would avoid a good deal of effort and expense. Mr Karkar accepts that this, of itself, may not have given rise to an agreement as such - not least because it was conditioned on the liquidator not taking steps that in fact the liquidator subsequently took - but submits that what it does make clear is that the PBL/Yates defendants were contemplating that the liquidators await the outcome of the ASIC proceedings before determining whether to take any proceedings and, if so, against whom. Again, it does not seem to me that I can draw from this letter the conclusion that this remained the respective defendants' position throughout the period up to 2010. It also appears to be based on an assumption that the outcome of the ASIC v Rich litigation would be known by May 2007 (i.e. within the then extended time period for a claim based on the events of May 2001 constituting an uncommercial transaction or breach of directors' duties or misleading and deceptive conduct).

37. Nor do I think it can be said that this letter supports the conclusion that the PBL/Yates defendants saw no prejudice arising from delay (still less that they had taken or were able to take all possible steps to ensure there would be no prejudice). Rather, the preparedness of the various defendants from time to time to contemplate a scenario where legal proceedings might not be taken against them until after the outcome of ASIC v Rich suggests merely that they were willing at that stage to accept the risk of whatever prejudice was then considered likely to arise from such delay.

38. Correspondence sent around this time by way of update for the PBL defendants' insurers makes it clear that it was the understanding of the PBL defendants that the SPL investigation at that time was as to the cancellation of the rights issue (see letter dated 12 February 2004 from Minter Ellison, also apparently acting for the PBL defendants by this stage - vol 8 CB p 5362.17).

39. In March 2004, the SPL (clearly not having taken up the suggestion that investigation into the 'Not Proceed' decision be deferred) obtained orders for the examination of a number of PBL and News officers and directors, who then moved to discharge the examination summonses. At the same time, examination summonses were issued to various of the professional advisers who made similar applications. Each of the examination summonses was subsequently set aside but in very different circumstances as between the different classes of examinees, as will be seen below.

40. The summonses issued to the PBL and News examinees were dismissed by consent on 6 April 2004, on the giving by PBL/News of undertakings which were noted by the court. Those undertakings were annexed to the court orders made by consent of the parties. The court expressly noted the agreement that if the undertakings were determined to be legally ineffective in achieving what were there stated to be their objectives, then there would be an admission that any misleading or deceptive conduct of each of the identified entities or individuals in relation to the rights issue of the decision of the board of One.Tel on 29 May 2001 not to proceed with the rights issue, to the extent it occurred, was a dealing in securities within the meaning of s 995 of the Corporations Law .

41. The particular undertakings given by the PBL defendants and Mr Yates (vol 7 p 4912; vol 8 CB pp 5476/7) (mirrored by the corresponding undertakings from the News defendants) were as follows:

1. Each of Publishing and Broadcasting Limited ("PBL") and its subsidiaries including without limitation Robbdoc Pty Limited ("PBL Group"), Consolidated Press Holdings Limited ("CPH") and its respective subsidiaries (collectively the "PBL/CPH Parties") on the conditions set out below:

(a) consent to the extension of the limitation period applicable under s 588FF of the Corporations Act (and any equivalent provision under any other corporations legislation) from three to six years in respect of any claim by One.Tel Limited (In Liquidation) ("One.Tel") or any liquidator thereof under that section (or equivalent provision) relating to the renounceable rights issue proposed by One.Tel in May 2001 or the decision by the Board of One.Tel on 29 May 2001 not to proceed with the rights issue; and

(b) undertakes to the Court that it will not plead by way of defence any period of limitation or other time bar or time condition in respect of proceedings for a claim under the Fair Trading Act (NSW) that One.Tel has suffered loss or damage as a result of any misleading or deceptive conduct, to the extent it occurred, in relation to the rights issue or the decision of the Board of One.Tel on 29 May 2001 not to proceed with the rights issue, on its part or on the part of any executive or employee for whom it is vicariously liable ("the waiver ") and for this purpose it admits that it is vicariously liable for any conduct of the executives or employees of itself and any company in the PBL Group or CPH Group of which it is part, and that the waiver extends to such vicarious liability, commenced within 6 years of the accrual of the cause of action.

2. Each of Peter Yates and James Packer undertakes to the court that he will not plead by way of defence any period of limitation or other time bar or time condition in respect of proceedings for a claim under the Fair Trading Act (NSW) that One.Tel has suffered loss or damage as a result of any misleading or deceptive conduct, to the extent it occurred, in relation to the rights issue or the decision of the Board of One.Tel on 29 May 2001 not to proceed with the rights issue, on his part, commenced within 6 years of the accrual of the cause of action.

3. The conditions of such consents and undertakings to waive are as follows:

(a) that News Limited and its subsidiaries consent and undertake mutatis mutandis in accordance with clause 1(b) above, and Lachlan Murdoch and Peter Macourt each undertake mutatis mutandis in accordance with clause 2 above;

(b) that the court orders that the limitation period applicable under s 588FF (or equivalent provision) is so extended in respect of any claim against it referred to in paragraph 1 above; and

(c) that neither the special purpose liquidator nor any other liquidator of One.Tel seeks further to examine any of the executives and employees of any of the PBL/CPH Parties in relation to any of the claims referred to in paragraphs 1 and 2 above, until the earliest of the following:

(i) the outcome of the ASIC proceedings against Mr Jodee Rich and certain other directors and former directors of One.Tel is generally known;

(ii) six months prior to the end of any extended or substituted six year limitation period referred to above; or

(iii) further order by the court (on which the PBL/CPH Parties have been heard before such order is made) that such examination not be further deferred,

and, if required by the special purpose liquidator, the court states that it is permissible for that liquidator so to do.

42. The earliest to occur of the three events listed in 3(c) of the undertakings, as it transpired, was that specified in (ii), since neither (i) nor (iii) had occurred by the date six months prior to May 2007. Thus, as I understand it, it is said for the defendants that the undertaking cannot be read as any ongoing acquiescence to the subsequent deferral of service of the Statement of Claim until after the ASIC v Rich decision - not only because it related in its terms only to the deferral of further examinations but also because, as a practical matter, in its operation it could and did come to an end well before then.)

43. At the same time the SPL sought (and obtained) orders from the court in effect that he was justified in deferring, until after the occurrence of any of the above events, any further investigation or other action pursuant to the orders made by Windeyer J in the 2003 proceedings (that investigation having been the specific purpose for which he had been appointed). (Pausing there, criticism can hardly be levelled at the SPL for not instituting these proceedings until just before expiry of the May 2007 limitation period for various of the claims, in circumstances where the SPL had been the recipient of judicial advice that he was justified in not taking the steps necessary to complete investigations as to the claims at an earlier stage, and where, for at least part of that period, he had been urged by the defendants not to expend moneys on what was considered by the defendants likely to be a futile exercise.)

44. In relation to the examination summonses issued to the professional advisers, no similar undertakings in relation to the extension of the time period for claims against them were agreed and there was a contested hearing on their (ultimately successful) application for the discharge of the examination summonses issued to them. Those examination summonses were discharged by Windeyer J on 8 April 2004 (his Honour accepting that there was no need for the examination summonses because the effect of the undertakings from the PBL/CPH parties was that SPL had until 29 May 2007 to issue process).

45. The effect of the orders (and undertakings) made on 6 April 2004 was to extend the period within which applications under s 588FF(3) or for misleading and deceptive conduct could be made to six years (i.e. up to 29 May 2007), that corresponding with the time period in which a claim for breach of the directors' statutory duties, by reference to the passage of the 2001 "Not Proceed" Board resolutions, could also be brought.

46. Mr Karkar relies on the undertaking regime agreed by the respective defendants as a further recognition by the parties (and the court insofar as it noted that undertaking) that the outcome of the ASIC v Rich proceedings was important in the context of the proposed claims in relation to the rights issue. That may be so but, again, it does not indicate that the parties or the court had in contemplation the possibility that the outcome of those proceedings would not be known until some two and a half years after the expiry of the extended time periods then agreed.

47. On 9 June 2004, the SPL again reported to creditors (vol 8 CB p 5237) in relation to potential claims and identified those as, first, a potential claim that the cancellation of the Renounceable Rights issue involved an uncommercial transaction within the meaning of s 588FB(1) and, secondly, a potential claim for misleading and deceptive conduct. (Reference was made in the report to the receipt by the SPL of instructions for the issue of examination summonses to 32 people, including officers and executives of PBL and News, who were involved in the 17 May and 29 May meetings and to those examinations having been deferred.)

48. On 29 June 2004, in their third annual report, the general purpose liquidators referred to their decision to "wait and see'' the outcome of ASIC v Rich before proceeding in relation to the renounceable rights issue as having been vindicated in regard to the orders made by the court in April 2004 (vol 8 CB p 5488).

49. On 30 July 2004, Minter Ellison (acting for the PBL defendants) wrote to update the insurer (vol 8 CB p5362.19) as to the proceedings and noted that the liquidators of One.Tel were still awaiting the outcome of the proceedings before deciding whether to take recovery proceedings and, if so, against whom. The correspondence with insurers from time to time makes it clear that there was an understanding that what was being (or to be) investigated by the SPL on behalf of One.Tel was the potential for claims arising out of, or relating to, the decision not to proceed with the renounceable rights issue (consistent with the indications that had been received from the SPL to that time). There was no suggestion that a claim in conspiracy or fraud was contemplated.

(d) not given leave to amend to include the claims in conspiracy or the allegations (tantamount to fraud) of knowingly deceptive conduct as presently pleaded (as I consider those to be inadequately pleaded and/or particularised in the proposed Amended Statement of Claim), and particularly having regard to the seriousness of the allegations and the recognised need for such allegations to be pleaded with specificity; and

(e) not granted leave for the inclusion of [141V] that I consider to embarrassing or oppressive insofar as it seeks to open up for consideration what "assistance" was rendered to ASIC as part of the alleged conspiracy or "Scheme" (assuming that allegation otherwise survived deletion of the conspiracy of fraud pleadings) and is in any event too broadly pleaded.

851. As to the various other drafting issues referred to above, suffice it to say that I do not consider that particulars should be permitted to supplement deficiencies in a pleading such as this. Defendants against whom allegations of fraud ("concealed fraud" as it was described) and conspiracy are made are entitled to be told very clearly precisely what is alleged against them. I do not consider that the proposed amended statement of claim does so and I share the criticism of it as convoluted by reason of the copious cross-referencing. Given the extent of the re-drafting that I think would be necessary to address the defendants' pleading complaints (which in broad terms I consider to be justified), had the pleading remained on foot I would not have attempted a blue pencil (or, in perhaps more modern parlance, "red pen") exercise as such but, rather, would have made directions as to the scope of any permitted amendments and required the plaintiffs to file a further proposed amended statement of claim before giving final consent to the filing of an amended pleading. As it is, however, this question does not arise; the originating process is stale and the proceedings should be dismissed.

Orders

852. Accordingly I make the following orders:

1. Pursuant to rule 12.11(1)(e) of the Uniform Civil Procedure Rules 2005 (NSW), I discharge the orders made on 16 November 2009 and 20 May 2010 extending the time for service of the Statement of Claim in these proceedings.

2. I dismiss the plaintiffs' application for leave to amend the Statement of Claim.

3. I dismiss the proceedings.

853. In the circumstances it seems to me, subject to any submissions that may be made by Counsel, that the appropriate order is that the plaintiffs pay the defendants' costs of the proceedings. I will hear any submissions that the parties wish to make on the question of costs at a convenient time.

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Amendments

08 May 2015 - Changed "Agricultural & Rural Finance v Kirk [2011] NSWCA 54" to "Agricultural & Rural Finance v Kirk is [2011] NSWCA 67". Coversheet and paragraph 139

06 June 2011 - Typographical errors.

Amended paragraphs: 153, 163, 214, 272, 332, 340, 346, 356, 382

Decision last updated: 08 May 2015