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In the matter of Legal Practice Management Group Pty Ltd; nSynergy Pty Ltd and nSynergy International Pty Ltd [2017] NSWSC 1500 - NSWSC 2017 case summary — Zoe
Solicitors:
Deutsche Miller (Applicants)
Arnold Bloch Leibler (Respondents)
File Number(s): 2017/194171
[2]
Judgment - ex tempore
By Originating Process filed on 29 June 2017, the Applicants, Mr Keith Redenbach and Mr Campbell Ray, seek leave, under s 237 of the Corporations Act 2001 (Cth) to bring proceedings on behalf of several entities, Legal Practice Management Group Pty Ltd, nSynergy Pty Ltd, and nSynergy International Pty Ltd ("Companies"), against Mr Karl Redenbach, Mr Peter Nguyen-Brown and several companies which I will describe broadly, without expressing any concluded view, as having some association with them.
The application was listed for hearing today, for a single day, but that time has been taken up, initially, in a degree of procedural skirmishing between the parties and, subsequently, in detailed submissions as to evidence on which the Applicants rely by Mr Hutley SC, who appears with Mr Karam for the Applicants, in order to address the question whether, for the purposes of the relevant section, there is a serious question to be tried and possibly also the question whether it is in the best interests of the Companies that the applicant be granted leave. The detail of those submissions is not a matter for criticism because the factual basis of an application of this kind is, of course, essential to its proper determination. There remain at least two issues to be determined, including questions of access to a funding agreement which the Applicants propose to enter with a third party litigation funder and claims for legal professional privilege over that agreement, which will likely need to be resolved before Mr Hutley can complete submissions as to whether it is in the best interests of the Companies that the Applicants be granted leave to bring the proceedings. Dr Higgins, who appears with Mr O'Brien for the Respondents, is yet to be heard, although she anticipates she will only require some 90 minutes in submissions.
Mr Hutley has sought an order for leave to commence proceedings on an interim basis in order to avoid any limitation defence arising while the matter is part heard. The issue to be addressed by the interim application for leave is in narrow compass. The first possibility is that at least some of the relevant events occurred more than six years ago, and Mr Hutley's position in that respect is that equity would not, in the relevant circumstances, apply any analogy with the common law limitation period of six years or, alternatively, that the relief which is sought, including the imposition of a constructive trust, would not be subject to such a limitation period. If that proposition were sustained, then no question of an applicable limitation period would arise. Secondly, to the extent that the matter can be determined and leave granted (if appropriate) in the near future, and events or loss occurred in the six years prior to the date of commencement of the proceedings, then again no question of a limitation period would arise.
The difficulty which Mr Hutley identifies is that events, or possibly the loss claimed to have been suffered by the Companies, may have occurred in the period between six years prior to today and six years prior to the determination of this application, which may be delayed to some extent by limits to the Court's and Counsels' availability for the additional hearing day. Mr Hutley submits, with considerable force, that it would not be in the interests of the Companies or, indeed, their shareholders, that any claim is prejudiced because events have happened, or loss has been suffered, in that relatively short period, so that a limitation period which did not now attach then came to attach before the proceedings were commenced. I should also observe that the question of an interim order has arisen in circumstances where Counsel may have been caught by surprise by the fact that the matter did not complete today and, in those circumstances, Dr Higgins does not have instructions from the Respondents in respect of the position in respect of an interim order, and, given the way in which the matter has arisen, has not had an opportunity to put the matters which the Respondents would put in opposition to the grant of leave on a final basis.
It seems to me that this question is a relatively straightforward one. Dr Higgins, fairly, accepted that any disadvantage which the Respondents had originally anticipated might arise from the grant of leave on an interim basis, does not in fact arise from a grant of leave on an interim and narrow basis, recognising that the only findings that I will make are those that are necessary to find that a cause of action, which might otherwise become subject to a limitation period, should be protected from the risk of being lost until the Court had an opportunity to determine the application on its merits and with an adequate opportunity for the Respondents to be heard.
The Court has power to make an order on an interim basis to permit the commencement of proceedings. That power expressly arises under s 241 of the Corporations Act which provides that the Court may make any orders, on an application for leave, including interim orders. In Re RUS Holdings (Australia) Pty Ltd [2012] NSWSC 1075, I held that an order granting leave for derivative proceedings could be made on an interim basis, where a grant of leave was necessary, without a full exploration of the factual issues, in order to permit a party to commence an application to set aside a creditor's statutory demand within the 21-day period in which such an application had to be brought. In Re Broadcast One Pty Ltd (unpublished, 16 December 2016), I applied similar reasoning in respect of the Court's inherent jurisdiction to grant leave to commence derivative proceedings, in respect of a company in liquidation, in the analogous situation where proceedings were sought to be brought against an imminent expiry of a limitation period.
The question then, accepting that the Court has power to make the relevant order, is whether it should be made. Section 237(2) identifies matters that are relevant to the grant of leave, including on an interim basis. The parties have proceeded on the basis that it is probable that the Companies themselves will not bring the proceedings so that the requirement in s 237(2)(a) is satisfied and notice of the application has been given so the requirement in s 237(2)(e) is satisfied. The remaining questions should be addressed in this application in a narrow scope, and do not require determination of the wider questions which would arise in the application for leave to bring the proceedings on a final basis. The narrower question is, first, whether the Applicants are acting in good faith in seeking to preserve the proceedings, pending a merits determination of the leave application, against the risk of any expiry of a limitation period. Again, I do not reach any substantive findings on the merits of the underlying application, but I am satisfied that their application to preserve the period is made in good faith, where no party would wish to see the expiry of a limitation period without a merits determination.
I am similarly satisfied that it is in the best interests of the Companies that the Applicants be granted leave to commence the proceedings, and do no more than that, to preserve the limitation period, where the Companies' opportunity to commence the proceedings might otherwise be lost. There would, of course, be no inconsistency in subsequently finding that, notwithstanding that the proceedings were properly commenced to preserve the limitation period, they were not properly continued because the basis for their continuance was not established on the merits. I am satisfied that, at least for the purposes of an interim application of this kind, a serious question to be tried is established, but I again expressly recognise that I reach that finding on an interim basis, and in circumstances that Dr Higgins has not had an opportunity to be heard as to the wider questions which would arise in the substantive application.
For these reasons, on the undertaking of the Applicants, by their Senior Counsel, that they will not serve or otherwise continue the proceedings which are commenced against each of the twelve Defendants identified in the draft Statement of Claim which is Annexure D to the affidavit of Mr Keith Redenbach sworn 27 June 2017, without further leave of the Court, I grant leave to the Applicants, under ss 236-237 and 241(1)(a) of the Corporations Act 2001 (Cth), on an interim basis, to file the Statement of Claim, but to take no further step in the proceedings without leave of the Court.
[3]
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Decision last updated: 10 November 2017