Appellant v First Respondent

2 There is no question that the proposed proceeding is out of time by several months and pursuant to Rule 56.02(3) of the Rules, the appellant must show that there are "special circumstances" justifying an extension of time to permit the commencement of the proceeding. As the authorities make clear, the Court's power to extend the time for filing the proposed proceeding is not enlivened unless the Court is satisfied that special circumstances exist.[1] Whilst the phrase "special circumstances" has no exact judicial meaning for the purposes of Rule 56.02(3), the requirement to show special circumstances means that there must be some cogent and persuasive reason warranting an extension of time, having regard to the whole of the circumstances of the particular case before the Court.[2]

3 It is incumbent on the appellant to satisfy the Court that the circumstances of this case are "special". A case has to be made that there should be a departure, in the interests of justice, from the requirement under the Rules to commence an Order 56 proceeding within sixty days after the date when the grounds for the grant of relief or remedy claimed arose. Cases where special circumstances have been found to exist may be of assistance in guiding the Court on the kind of circumstances that have been considered to constitute special circumstances,[3] but those cases do not dictate how the Court must decide the issue in this case.

4 The evidence showed that the trigger for the commencement of the proceeding was a statutory demand that the first respondent served on the appellant on

2 February 2012 under s 459E of the Corporations Act 2001 (Cth) ("the Corporations Act") requiring payment of a judgment debt which arose under an order of the Victorian Civil and Administrative Tribunal ("VCAT") made on 13 May 2011. The VCAT order was filed in the Magistrates' Court at Moorabbin on 11 July 2011 and by and under s 121 of the Victorian Civil and Administrative Tribunal Act 1998 (Vic) ("the VCAT Act"), the VCAT order is "taken to be an order" of the Magistrates' Court.[4] The appellant applied under s 459G of the Corporations Act to have the statutory demand set aside and at the same time made application to file the proceeding under Order 56 out of time. The grounds supporting the s 459G application included the same grounds supporting the proposed Order 56 proceeding, namely:

(1) that the VCAT order filed in the Magistrates' Court at Moorabbin was certified by a registrar of VCAT, not a presidential member or the principal registrar of VCAT as required by s 121 of the VCAT Act and "as such there has been an error of law on the face of the record,"[5]; and

(2) that the certified copy of the VCAT order filed in the Moorabbin Magistrates' Court was a "nullity and of no legal effect"[6] because the certified VACT order that was filed in the Magistrates' Court was the order that VCAT made on 13 May 2011 (which the registrar certified on 24 May 2011), not the order as amended on 3 June 2011 pursuant to the "slip rule" to increase the judgment by $100.

5 The s 459G application came on for hearing after the application to file the proceeding under Order 56 out of time was heard and determined by Randall AsJ. The s 459G application was successful but on different grounds to the grounds supporting the earlier application for leave to file out of time. The reasons for decision of Gardiner AsJ[7] record that the appellant conceded before him that the VCAT order is enforceable because there was compliance with s 121 of the VCAT Act.[8] In written submissions filed for the appellant it was asserted that the concession was made "solely because Randall AsJ a short while earlier had pronounced the dismissal of the [appellant's] present application and the [appellant] had not got around to filing this appeal."[9]

6 Several matters were relied on for the appellant as constituting special circumstances justifying the commencement of the Order 56 proceeding out of time. Those matters were substantially directed at showing legal error in the filing of the VCAT order at the Magistrates' Court. A public interest argument was also raised based on the fact that since 2004 VCAT has had its orders certified in the same manner in which the order in this case was certified by the registrar. As I understood the argument, if the appellant is correct in its submission that the entry of the order is affected by legal error, there is public utility in the error being rectified by an order of the Court.

7 Ordinarily, showing arguable legal error will not be determinative in an application for an extension of time. In some cases the establishment of a strong case demonstrating legal error has carried considerable weight in the Court's determination that special circumstances exist,[10] but it does not follow necessarily that the existence of a strong case demonstrating legal error will be sufficient, of itself, to constitute special circumstances.[11] The Court must consider whether special circumstances exist by reference to all of the circumstances of the case in question. The criterion is the existence of special circumstances, not merely legal error.[12]

8 I am not persuaded that special circumstances have been shown in this case and, in my view, the appeal is wholly unmeritorious.

9 First, it was within the control of the appellant to institute this proceeding within time. The appellant had a copy of the certified order of the Magistrates' Court by

26 August 2011 which was within the sixty days from the entry of the judgment in the Magistrates' Court on 11 July 2011. It is that order that the appellant seeks to have quashed. The appellant could have, but chose not to, institute proceedings within time. During the course of submissions the Court was told that the proceeding was not instituted within time because the statutory demand that alerted the appellant to the fact of the entry of the judgment had not been properly served on the appellant, with the consequence that the appellant did not then have to make application under s 459G of the Corporations Act to set aside the demand. The fact that the statutory demand was not effective by reason of the irregular service was neither good nor sufficient reason to withhold instituting proceedings within time to challenge the order if, as the appellant's solicitor asserts, the proceedings have merit. The absence of a good and sufficient reason for not instituting the proceedings promptly within the time is sufficient reason in itself to dispense with this appeal.

10 The point is made good by the submission for the appellant that the merits of the proposed proceeding are so strong that the Court would "inevitably" grant the relief sought by the appellant. The challenge to the Magistrates' Court order, if good in law, did not depend on the enforcement of that order by the first respondent and the commencement of that proceeding in no way depended first upon the institution of a s 459G proceeding. The cause of action existed separately and independently of any process that the first respondent sought to avail itself of under the Corporations Act (or any other process) in order to secure payment of the judgment debt.

11 Secondly, there is no evidence before the Court explaining the delay in seeking to issue the proceeding until the second and anticipated statutory demand was served in February 2012, although the appellant had been on notice before that time that the first respondent was seeking to enforce payment of the amount that VCAT had ordered. There had been correspondence throughout August, September and November 2011 in which it was made clear to the appellant that the first respondent was seeking to pursue its rights to enforce payment of the judgment debt. The appellant took no action however and, in the circumstances, it was incumbent on the appellant to justify why special circumstances are shown, notwithstanding the deliberate and conscious decision to delay the institution of the proceeding. It is open to infer that the institution of the proceeding out of time has been done for the collateral purpose of delaying enforcement of the amount that the appellant had been ordered to pay.

12 Thirdly, the appellant has not shown that any substantial prejudice would arise if the appellant was denied the leave of the Court to file the proceeding out of time. The reason that the appellant sought to challenge the Magistrates' Court order was to support the s 459G application, which was successful (albeit on different grounds) and the statutory demand has been set aside. It is also relevant that the appellant does not challenge the underlying order that was made in VCAT. What is sought to be challenged is the entry of the judgment in the Magistrates' Court. The appellant does not challenge his substantive liability to pay any amount to the first respondent. It is also a relevant consideration that the VCAT order that was filed at the Magistrates' Court is an order for an amount that is $100 less than the actual order amended under the slip rule. The evidence before the Court disclosed that VCAT amended the original order under the slip rule as the result of a submission that there had been a mathematical error in the computation of the amount of the debt. The filing of the original order, not the order as amended, is in the appellant's favour.

13 It was argued for the appellant that there is still utility in commencing the proceeding now because if the appellant was successful in setting aside the Magistrates' Court order, the first respondent would have to file a new certified copy of the VCAT order in the Magistrates' Court before he is able to enforce the VCAT order as a judgment. In that event, interest under statute would start to run from the new date of entry of the order so that the interest presently payable under the extant order would not be payable by the appellant. In my view, the pursuit of the proceeding now for the purpose of avoiding an interest cost presently running on the extant order is tantamount to an abuse of the process of the Court, given that this proceeding could have been, and should have been, instituted at the time when the appellant's solicitors say that it became apparent to them that there were grounds to support a proceeding to quash the Magistrates' Court order. It is now enshrined in legislation in the Civil Procedure Act 2010 (Vic) that a person to whom the overarching obligations apply must use reasonable endeavours in connection with the civil proceeding to act promptly and to minimise delay.[13] That obligation is imposed on the appellant as well as its solicitors.[14] Here, there appears to have been a conscious and deliberate decision not to take proceedings when the proceedings ought properly to have been brought but, instead, to delay the commencement of the proceeding for tactical reasons. There is potential prejudice to the defendant by reason of the conscious and deliberate decision on the part of the appellant not to institute proceedings in a timely fashion.

14 Finally, the public interest argument is unmeritorious. The public interest argument is simply a convenient justification for why the appellant should be allowed to commence proceedings out of time. This argument is countervailed by the public interest in finality of litigation and the public interest in the Court supervising its processes to guard against abuse of process.

15 I have not dealt with the merits of the proposed proceeding, although the merits were argued on behalf of the appellant. In this case, if there are any merits, about which I express no view at all, the merits are outweighed by the matters referred to above and a meritorious case would not be sufficient to constitute special circumstances in this case, having regard to all the circumstances.

17 The first respondent has applied for costs on an indemnity basis against the appellant and the appellant's two directors. Costs on an indemnity basis may be ordered whenever it appears that an action has been commenced or continued in circumstances where the applicant, properly advised, should have known that it had no chance of success.[15]

18 In my view, an order for costs on an indemnity basis should be made. The appellant had the comprehensive reasons of Randall AsJ for refusing the application for an extension of time. In submissions on the appeal no attempt was made to address the matters referred to in paragraphs 31 and 32 of Randall AsJ's decision. It is apparent from the reasons that I have just delivered that I separately reached similar conclusions on those matters. In instituting the appeal, it should have been apparent that those matters would be relevant on an appeal and that an appeal had no chance of success without addressing those matters and putting cogent and persuasive contrary arguments.

19 I am not disposed to make an order for costs against the two directors on the available material. Whilst it appears that the institution of the proposed proceeding was delayed to achieve a collateral purpose, I have insufficient material before me to form a view about where the responsibility actually lies as between the solicitors and the appellant for the decision not to commence the proceeding when it first became apparent to the appellant's solicitors that there were grounds supporting a judicial review application.

[1] Mann v Medical Practitioners Board [2004] VSCA 148; Shire of Carnarvon v Klein Corporation Pty Ltd (No. 2) [2009] VSC 30; Goodman v Victorian Civil and Administrative Tribunal [2011] VSC 35; Grocon Constructors Pty Ltd v Planit Cocciardi Joint Venture (No. 2) [2009] VSC 426, and Mokbel v DPP [2005] VSC 476.

1. [2] Holpitt Pty Ltd v Varimu Pty Ltd [1991] FCA 269; (1991) 29 FCR 576 (Burchett J). See also Lednar & Ors v Magistrates' Court & Anor [2000] VSC 549 at [140]- [145] (Gillard J); Prencipe v Nisselle [1999] VSC 137 at [3] (Balmford J); Re P & M (1895) 39 Sol JO 640, 640 (Chitty J), and Re Beadle and Director-General of Social Security (1984) 6 ALD 1 at [12] (Toohey J).

[3] Shire of Carnarvon v Klein Corporation Pty Ltd (No. 2) [2009] VSC 30; Carra v Hamilton and Magistrates' Court of Victoria [2001] VSC 215 at [24], and Lednar & Ors v Magistrates' Court & Anor [2000] VSC 549.

[4] Victorian Civil and Administrative Tribunal Act 1998 (Vic), s 121(3).

[5] Originating Process filed 23 February 2012 at [9].

[7] Business Structures Pty Ltd v D'Amico [2012] VSC 146.

[8] Business Structures Pty Ltd v D'Amico [2012] VSC 146 at [6].

[9] Outline of appellant's submissions on appeal dated 13 June 2012 at [16].

1. [10] Kocak v Wingfoot Australia Partners Pty Ltd and Goodyear Tyres Pty Ltd and Ors [2011] VSC 285 at [7]; Mann v Medical Practitioners Board [2004] VSCA 148 at [57], [67]-[72]; Shire of Carnarvon v Klein Corporation Pty Ltd (No. 2) [2009] VSC 30; Craig v South Australia [1995] HCA 58; (1994) 184 CLR 163, and O'Dea & Anor v The Magistrates' Court of Victoria at Melbourne & Anor (Unreported, Supreme Court of Victoria, Gillard J, 20 July 1998).

[11] Denysenko v Dessau [1996] VicRp 65; [1996] 2 VR 221, 224 (Beach J) and Lovejoy v Myer Stores Ltd (No. 2) [1999] VSC 271 (Warren J). Cf Mann v Medical Practitioners Board [2004] VSCA 148 at [71] (Hansen AJA); Carra v Hamilton and Magistrates' Court of Victoria [2001] VSC 215; Prencipe v Nisselle [1999] VSC 137, and Lednar & Ors v Magistrates' Court & Anor [2000] VSC 549 at [143] (Gillard J).

[12] Re Norman (1886) 16 QBD 637 (Lopes LJ).

[13] Civil Procedure Act 2010 (Vic), ss 16-27.

[14] Civil Procedure Act 2010 (Vic), s 10(1).

[15] Shaw v Yarranova Pty Ltd & Anor (No 2) [2010] VSC 125 and Fountain Selected Meats (Sales) Pty Ltd v International Produce Merchants Pty Ltd [1988] FCA 202; (1988) 81 ALR 397, 401 (Woodward J).