The decision of the primary judge
56Notwithstanding that some of the primary judge's findings have now been undermined by the respondent's concessions on the appeal and to which I will not refer further except to place other claims in context, it is nevertheless relevant to set out some aspects of his Honour's reasons as well as some findings upon which they respondents still rely. Essentially the only finding of the primary judge that is no longer relevant is that the respondents have been prejudiced by the delay in serving them in that they have lost the opportunity of re-agitating the cross-claims of Mr Gardiner rejected by the Court of Appeal.
57After setting out the introductory factual material, under the heading " The nature of the discretion " the primary judge recorded [28]-[34] of the judgment of Ipp JA, with whose reasons myself and McColl JA agreed, in Arthur Anderson Corporate Finance Pty Ltd v Buzzle Operations Pty Ltd (in liq) [2009] NSWCA 104. It was not suggested by ARF that the principles articulated by his Honour in Buzzle did not inform the exercise of the discretion to extend time in an application under UCPR r 1.12(1). Rather, as will appear, it was submitted that the application of those principles was inappropriate in a case such as the present. In Buzzle the application to extend the time for service of the originating statement of claim was made after the limitation period in respect of the plaintiff's claim had expired, whereas in the present case the application for extension was made prior to ARF's claim becoming statute barred. Even if this be so, there are aspects of the statements of Ipp JA in Buzzle which have relevance to the present case.
58I should interpolate at this point that, as noted at [6] above, the primary relief sought in the Notices of Motion was for orders pursuant to UCPR r 12.11(1)(b) setting aside service of the summons upon the respondents rather than for an extension of time pursuant to UCPR r 1.12(1). Relief was also sought pursuant to UCPR r 36.16(1) for orders setting aside or vacating the ex parte order made by Bergin J on 14 November 2008 to extend time for service of the summons on each respondent. The relief sought in Buzzle was similar. Yet Ipp JA stated the relevant principles as applicable to an application to extend time for service pursuant to UCPR r 1.12(1). Be this as it may, in my view the applicable principles are the same irrespective of the applicable rule pursuant to which the relevant relief from service of the originating process is sought.
59The primary judge relied in particular upon the statement of Keane JA in IBM Group Pty Ltd (in liq) v Australian Competition & Consumer Commission [2006] QCA 407; [2007] 1 Qld Rep 148 at [57], cited with approval by Ipp JA in Buzzle at [33], where Keane J said:
"What the plaintiffs were plainly not entitled to do was unilaterally to arrogate to themselves the benefit of a stay of proceedings in the Supreme Court in defiance of r 5(3) of the UCPR."
60Rule 5 of Queensland UCPR was in the following terms:
"(1) The purpose of these rules is to facilitate the just and expeditious resolution of the real issues in civil proceedings at a minimum of expense.
(2) Accordingly, these rules are to be applied by the courts with the objective of avoiding undue delay, expense and technicality and facilitating the purpose of these rules.
(3) In a proceeding in a Court, a party impliedly undertakes to the Court and to the other parties to proceed in an expeditious way."
61At [12] of his reasons the primary judge noted that after referring to ss 56, 57, 58 and 59 of the Civil Procedure Act 2005 (NSW), Ipp JA (at [36]) had stated that those sections required a judge exercising his or her discretion under UCPR r 1.12 to have regard to whether a party, seeking the exercise of the discretion in its favour, has:
"(a) diligently pursued the object of disposing of the proceedings in a timely way;
(b) used, or could reasonably have used, available opportunities under the rules or otherwise, to avoid delay; and
(c) reasonably implemented the practice and procedure of the Court with the object of eliminating any lapse of time between the commencement of the proceedings and their final determination."
62At [13] of his reasons his Honour reiterated what Ipp JA had said at [43] of Buzzle when the latter concluded that
"The Court should consider, when exercising a discretion such as that under UCPR r 1.12 the attempts that have been made at service, the length of the delay, the reasons for the delay, whether the delay was deliberate, whether notice was given to the defendant, the conduct of the parties generally and the hardship or prejudice caused to the plaintiff by refusing the renewal or to the defendant by granting it."
63The foregoing approach was sourced by Ipp JA from the judgment of Bray CJ in Victa Ltd v Johnson (1975) 10 SASR 496 at [503-54] and Stephen J in Van Leer Australia Pty Ltd v Palace Shipping KK (1981) 180 CLR 337 at 350.
64Finally, at [14] the primary judge quoted the following passages from Ipp JA's judgment in Buzzle where his Honour said:
"81. In Battersby v Anglo American Oil Co Limited [1945] KB 23 (at 32) Lord Goddard said: 'It is for the Court and not for one of the litigants to decide whether there should be a stay'. This statement was made in the passage cited with approval in Kleinwort Bensen Ltd v Barbrak Ltd [1987] AC 597 and by Lord Browne-Wilkinson in Dagnell v J L Freedman & Co [1993] 1 WLR 388.
82. In my view it would be inappropriate to allow an extension of time for the service of a writ or statement of claim where a significant cause of the delay has been the willingness of the plaintiff to do nothing about service while awaiting a decision from a litigation funder as to whether or not to provide the necessary funds. Were that to be regarded as a good reason to extend time, the Court would be allowing plaintiffs to arrogate to non-parties the right to decide the period by which the time for service of a writ should be extended. That would be fundamentally in conflict with the Court's duty to exercise, alone, the discretion conferred upon it."
65His Honour then turned to the attempts at service upon each of the respondents. With respect to Mr Kirk, he summarised the unsuccessful attempts made to serve him between June and September 2003. As I have already indicated, the evidence established Mr Kirk's correct address and his contactability by either mobile or email. It had not changed over the years.
66With respect to Mr Jones, he lived at the Manly address shown on his loan application until 2001 as a consequence whereof an unsuccessful attempt was made to serve him in June 2003 although by then he had left for overseas. Nevertheless, his mobile number had not changed and was on ARF's file but was not discovered by its solicitors until December 2008. His Honour found that ARF had not reviewed its files in 2003 and he regarded as unacceptable that it had not taken the obvious step of checking Mr Jones' application form for contact details until December 2008. This was so notwithstanding that Mr Jones had not informed ARF of his change of address since leaving the Manly address in 2001. His Honour referred to the fact that "Jones" was a common name and that his evidence was that from about March to November 2003 he did not have an address in Australia as he was overseas and he could not be served until he returned. By that time the direction that a test case should be held had already been made (in August 2003).
67Importantly, the primary judge recorded at [25] of his reasons that counsel for the respondents had submitted that ARF's failure to serve them before the summons became stale in June 2004 was really caused by its incompetence in their failure to properly investigate obvious internal records (being, in Mr Kirk's case, the letters that he had sent on his letterhead, including suggested means of contacting him by email and, in Mr Jones' case his application form). His Honour accepted that had either of these obvious steps been taken, the respondents would have avoided the prejudice they had suffered by reason of the late service of the summons upon them.
68The point to be made from this submission was that it does not appear to have been submitted to his Honour, and his Honour did not expressly find, that ARF's failure to serve the respondents before the summons became stale (or shortly thereafter) was deliberate. On appeal, the respondents submitted that the primary Judge, in effect, had made such a finding.
69The primary judge then turned to the respondents' evidence with respect to the alleged prejudice each had sustained as a consequence of late service. He noted that Mr Kirk contended for three heads of prejudice: first, his having lost the opportunity to participate in the test case; second, his having lost the opportunity to pursue cross-claims; and, third, his having lost or had diminished the opportunity to effectively participate in the final hearing of the Atkinson proceedings (which was then fixed to commence before the primary judge on 6 April 2010).
70Relevant to the second of these matters, his Honour recorded those paragraphs of Mr Kirk's affidavit in which he deposed that he would have wished to pursue the " ARF funding arrangement " allegation with respect to the prospectuses in support of the allegation that they were false and misleading, a desire no longer pressed. He further deposed that he would have wished to investigate Mr Gardiner's cross-claim described by the Court of Appeal as " the repayment understanding " allegation.
71Having noted that the Court of Appeal had found against Mr Gardiner in relation to both these alleged non-disclosures, his Honour observed that Mr Kirk had deposed that he would, had he been served in accordance with the Rules, have reviewed Mr Gardiner's draft affidavits and offered his services to Clayton Utz for the purpose of instructing both Mr Gardiner and an appropriate expert in relation to the issues. He had thus lost the opportunity of joining the Clayton Utz team.
72His Honour then turned to Mr Jones' cross-examination and at [33] noted that his evidence was that in 2003 he may have brought a claim on his own (notwithstanding that subject to service, he had agreed to be bound by the test case) because his father had given him approximately $100,000 and, therefore, he had greater financial resources for the purpose of making a choice.
73The primary judge then recorded (at [35]) the respondents' submissions that first, they could have involved themselves in the test case process and possibly been put into a different category of defendant; second, Mr Kirk could have assisted with the expert accounting evidence; third, that ARF had taken away the respondents' opportunity to be heard on those matters as they might not have wished to stay in limbo; and, fourth, that such loss of opportunity was prejudicial in itself.
74After recording ARF's submissions at [36], his Honour (at [37]) stated that the Court must exercise its discretion informed by the various factors identified in Buzzle and, relevantly, must consider the " hardship or prejudice " caused by the grant of the renewal of the summons. He acknowledged that any loss of opportunity must be such as to have caused some material prejudice: that is a material possibility that the position of either of the respondents would have been better had the summons been served on him earlier.
75At [38] his Honour made the following finding:
"The [respondents] have established that in effect [ARF] in all of the circumstances is seen to have unilaterally abrogated (sic) to itself the equivalent of a stay of proceedings in this Court."
It would appear that this finding was based upon what Ipp JA said at [81] and [82] of his judgment which I have recorded at [64] above: in particular, the statement of Lord Goddard in Battersby that it is not for one of the litigants to decide whether there should be a stay.
76The primary judge then turned to the evidence given by Mr Patakas (ARF's solicitor) who deposed that he first became aware in mid to late 2007that not all defendants had been served. He further realised that the summons had become stale in respect of those defendants. In cross-examination he said that he then engaged in discussions with ARF with respect to the timing of service on those defendants. At that time he was awaiting the decision of the Court of Appeal (the four day hearing having commenced on 19 February 2007, with judgment delivered on 6 September 2007). Mr Patakas deposed that because he was awaiting the decision of the Court of Appeal, and as a consequence of some offers that had been made in anticipation of that decision, it was intended that when it came out
"then the rest of the proceedings would sort of all catch up with the Gardiner test case and we would then proceed to serve them [the unserved defendants including the respondents]."
77However, as a result of the Court of Appeal's decision on the punctuality issue in favour of Mr Gardiner, it became necessary for ARF to seek special leave to appeal from the High Court as a consequence whereof the issue of serving the unserved defendants then again took a secondary position to finalising the test case in the High Court. Mr Patakas then referred to the matter coming before Bergin J on 12 December 2007 when orders were sought by ARF with respect to the overall conduct of the proceedings. However, her Honour had refused ARF's application for directions to be made for preparation of the trial against all defendants as a consequence of the fact that an application had been filed by ARF on 4 October 2007 for special leave to appeal in the High Court. The only order her Honour was prepared to make at that time was that the defendants represented by Clayton Utz were to notify ARF if they claimed to be punctual in the payment of their loans and if they proposed to continue pressing their cross-claims.
78The following exchange with Mr Patakas, recorded by his Honour at [39] of his reasons, then took place:
"Q. But the question of what orders Bergin J would or wouldn't make in December 2007 doesn't alter the need to serve unserved defendants promptly, does it?
A. Look, it was an unusual situation where we had a test case, and on every occasion where we'd go to the Court, effectively the matter was constantly just being adjourned, so the way - it was just be adjourned until a decision would come out. Prior to the Court of Appeal decision coming out, we'd just, it just kept getting adjourned, no orders could be made or would be made by the Court even if we - when we did ask for them, her Honour declined to make any orders. She just said well, we'd wait till the High Court, the Court of Appeal. And then after the Court of Appeal pretty much the same thing happened except that her Honour was interested in just pinpointing after the Court of Appeal decision on punctuality came out, she did want to know who was claimed to be punctual and who claimed were unpunctual, or who admitted were unpunctual. And then of course pretty well everybody came back and said we're punctual.
Q. Was it ARF's intention so far as you understand it, ever to make further attempts to serve these unserved defendants if the High Court decision was unfavourable to ARF?
A. If the High Court decision on punctuality was such that it determined that being precisely - I mean the indemnities were held to apply because it was a force majeure event. So we're not in the threshold --
Q. I'm just asking if ARF --
A. -- had ended up losing the proceedings?
Q. Is it your understanding that ARF would have taken the view that the unserved defendants should never be served?
A. Well if we had lost the High Court and the High Court determined the punctuality was not relevant for the indemnities applying, and the indemnities applied come what may, there would have been no point in serving those people because we would not have been able to sue for the money that ARF is claiming for.
HIS HONOUR
Q. Is the answer yes to Mr --
A. I'm sorry, yes."
79To the foregoing I would add the following evidence of Mr Patakas not directly referred to by the primary judge but which followed that set out in the preceding paragraph:
"Q. Well, is it your understanding they are executed, that you could file a summons against 20 defendants, pursue the claim against 19 of them and see how you go and bring the twentieth one in if and when the plaintiff saw fit. Is that what ARF thought, on your understanding?
A. No, no, not at all. In fact the plaintiff's --
Q. That amounts to that, doesn't it?
A. Not at all. I disagree with that, the orders that were made by the court notwithstanding ARF's requests for different orders to be made in relation to the defendants were always knocked back. They were just put back and just said no, you're going to wait till the Gardiner test case. It was ARF's understanding as I understand its solicitors and as well as OAL's, that no action was being prosecuted against any of the defendants until the test case came out. Because the issue of the test case was to see whether or not they were necessary anyway so ARF took the view that until that decision came down, if we had joined them nothing would have happened, - I beg your pardon, if we had served them, nothing would have happened in relation to those defendants.
...
Q. Why did you not seek, with instructions, urgently from the time in 2007 when you knew about this problem to repair it?
A. Because it did not occur to me that there was any real prejudice to these people and in fact from my understanding of the circumstances of the creation of the Gardiner test case it appeared to me the most efficient and cost-effective way for dealing with what were these issues. Yes, I take your point that they could have showed up to court and made any number of representations, but everything that I understood about the case and every communication I'd had, even with third - like defendants, reinforced in my mind the fact that it was the most cost-effective way for all concerned to have matters determined in the test case, so that's why."
80His Honour noted that Mr Patakas ' understanding was that ARF made no substantial efforts of any kind after about September 2003 to serve either of the respondents. He certainly knew of no attempt to do so. No evidence to the contrary was called from ARF's former solicitors.
81Finally, the primary judge referred to Mr Patakas' concession that he had received instructions in October 2008 to press ahead with service upon the unserved defendants as a consequence of his advice to ARF as to the imminent expiration of the limitation period with respect to the bringing of ARF's claims against those defendants. Mr Patakas accepted that this was necessary in order to predominantly protect ARF's interests.
82I interpolate that what Mr Patakas had in mind was that in the event that an extension of time for service was refused, it would be necessary for ARF to institute fresh proceedings against the unserved defendants, and to do so before the limitation period applicable to ARF's claim expired on 4 January 2009. In this respect the Court's attention was drawn to UCPR r 6.2(5) which provided as follows:
"Failure to serve originating process within the time limited by these rules does not prevent the plaintiff from commencing fresh proceedings by filing another originating process."
This provision was in essentially identical terms to Supreme Court Rules (SCR) Pt 7 r 7(2), which was repealed in August 2005. SCR r 7(1) provided that the service of an originating process was valid for one year from the date of filing unless the Court otherwise ordered.
83On the appeal ARF placed particular emphasis upon these provisions, submitting that having obtained an order for an extension of time to serve, inter alia, the respondents on 14 November 2008, and having effected service upon them in December 2008, it would suffer hardship and prejudice if service of the summons was now to be set aside as it would now be too late to institute fresh proceedings against the respondents as the claims against them became statute barred on 5 January 2009. I shall return to this submission below which was made to the primary judge but not referred to in his reasons.
84I return to the primary judge's reasoning. At [40] his Honour referred to the observation by Lord Goddard in Battersby (cited by Ipp JA in Buzzle at [90]) that:
"[O]rdinarily it is not a good reason that the plaintiff desires to hold up the proceedings while some other case is tried or to await some future development."
85The primary judge then made the following finding at [41]:
"The central problem for [ARF] in relation to the instant issues centres around the enormous difficulty facing the [respondents] who are expected to be able, many many years after the period of time when they should have been served, to now, with precision, demonstrate what precisely they would have done had they been served prior to the promulgation of the test case. Litigation is not a game. And it does not seem to me [to] be permissible for the plaintiff at this very late stage to blithely challenge the evidence put forward by the [respondents] as specious or ludicrous in the circumstances. A plea by the [respondents] that had they been served in time they would have become involved in parameters of the test case cannot be wiped out as specious after the expiry of such a lengthy period of time."
86I interpolate to observe that whatever criticism might be made of ARF with respect to the decisions it took regarding the service of the unserved defendants including the respondents, there was no proper basis for asserting, as his Honour appears to have done, that it was treating the litigation between it and those defendants as some sort of game. Certainly, ARF submitted to his Honour that the claims of prejudice alleged by the respondents should be rejected but it was well within its rights to so contend.
87Furthermore, as I have indicated, his Honour recorded ARF's submissions at [36] of his reasons and a reading of them does not, with respect, support the finding that ARF was acting ' blithely " or that it was asserting that the respondents' evidence was either specious or ludicrous. Certainly it was submitted that the evidence should be rejected, but that is another matter.
88The primary judge then turned to what he referred to as " the limitations point ". His finding with respect to it was as follows:
"45. Both Mr Jones and Mr Kirk have given evidence of claims that they would wish to make against parties other than OAL and ARF. These claims include claims arising from the defects in the prospectus against the directors of the entities (as persons knowingly concerned in the contraventions) and, particularly, against the investigating accountant of the Projects. The failure of the [respondents] to assert these claims while unserved is immaterial to the relevant prejudice. As outlined below, it is entirely unrealistic to expect Mr Kirk and Mr Jones to have voluntarily joined the litigation by filing those cross-claims despite not having been served with the summons in these proceedings.
46. The right of these third parties to raise limitations defences is a further clear and highly material prejudice to the [respondents] arising from the delay in service of the summons."
89As I have noted above, on the hearing of the appeal, the respondents expressly abandoned the proposition that they had lost the opportunity to institute cross-claims against the directors of ARF and/or OAL or against the investigating accountants. Accordingly, it was accepted that his Honour had erred in accepting that the respondent's had suffered prejudice as consequence of those claims now being statute barred. As pointed out at [54], it was conceded that they were statute barred within days of the summons having been filed on 18 June 2003.
90The primary judge dealt further with the effect of the loss of these alleged claims by the respondents against third parties under the heading " The [respondents'] loss of the opportunity to influence the conduct of the test case ". At [48] he rejected ARF's contention that it would have been irrelevant to the test case process if the respondents had available to them different or more meritorious cross-claims than those available to Mr Gardiner. At [51] he observed that the fact that Clayton Utz decided not to raise cross-claims in the test case that the respondents may have had against third parties, such as the directors of ARF and/or OAL and the investigating accountants, demonstrated the prejudice that the respondents had suffered by reason of their exclusion from the process.
91Again, his Honour's reliance upon those elements of prejudice has now been abandoned as a consequence of the concessions that such cross-claims as his Honour identified would have been statute-barred either before or shortly after the summons was filed in June 2003. They therefore do not require further consideration. It follows that as his Honour's conclusion that the prejudice to the respondents was such as to justify the setting aside of the service of the summons upon them can no longer be maintained, it is now necessary for this Court to re-exercise the relevant discretion.
92There is one other matter upon which his Honour relied (at [60] of his reasons) and which the respondents still maintain. His Honour heard the respondents' Notices of Motion on 2 and 3 February 2010. He gave judgment on 11 February 2010. At that time the hearing date for the proceedings against all the remaining served defendants was fixed to commence before his Honour on 6 April 2010.
93The respondents submitted and the primary judge accepted that if they were unsuccessful in having the service upon them set aside, they would be prejudiced in preparing for that hearing due to its proximity. His Honour considered that was an appropriate factor to be taken into account in the exercise of his discretion given the decision of the High Court in Aon Risk Services Australia Ltd v Australian National University [2009] HCA 27; (2009) 239 CLR 175. To entertain an application by the respondents to vacate that hearing, given its effect upon the remaining defendants to those proceedings, would be contrary to the approach to litigation laid down in Aon .