Land Enviro Corp Pty Ltd v HTT Huntley Heritage Pty Ltd

HEADNOTE [This headnote is not to be read as part of the judgment] In 1998, Land Enviro Corp Pty Ltd ("LEC") had contracted to purchase an area of land for $2.5 million from Powercoal Pty Ltd. LEC (then under the control of the second applicant, Mr Zdrilic) was unable to obtain the necessary finance to complete the purchase and the land was eventually purchased by another company, HTT Huntley Heritage Pty Ltd ("HTT"), which had been incorporated by a number of directors of LEC shortly before Powercoal sent a notice to complete to LEC. In 2001, LEC commenced proceedings alleging breaches of duty and improper use of information and opportunities against these directors; HTT was joined as a defendant. In 2003 LEC placed a caveat over the land. In 2004 the parties agreed to settle the 2001 proceedings and allow the development of the site to go ahead. By this time, a Mr Renshall was directing the operations of HTT. Key features of this agreement included making Mr Zdrilic a director of HTT; the discontinuance of the 2001 proceedings and the removal of the caveat, once HTT had obtained funding to pay off debts incurred by LEC and HTT, to allow the land to be developed. Mr Zdrilic discontinued the proceedings and the caveat was withdrawn. However, this occurred without the necessary funding being obtained by HTT. Mr Renshall had made representations to Mr Zdrilic that funding was forthcoming. Mr Renshall also informed Mr Zdrilic that a condition of the funding was Mr Zdrilic surrendering his involvement with HTT as agreed to in the settlement. In 2006, when funding did not appear to be forthcoming, LEC lodged a caveat on the title to the land and, in 2007, commenced proceedings to set aside the settlement made in 2004 on the basis that Mr Zdrilic had been misled. The trial judge dismissed these proceedings on the basis that Mr Zdrilic was aware there was no funding in place when the agreement was concluded and made no complaint. LEC sought to appeal. A notice of appeal should have been filed by 30 July 2012 but was belatedly filed on 8 November 2012. On 21 February 2013 Allsop P dismissed an application for an extension of time and consequentially dismissed the notice of appeal as incompetent. The principal ground for dismissing the application was the lack of any real or significant prospect of success. LEC sought to review that judgment, pursuant to s 46(4) of the Supreme Court Act 1970 (NSW). The issues for determination on review were: (i) the extent of delay in the application for leave to extend time to appeal; (ii) the prejudice to the applicant if the application were refused; (iii) the financial prejudice to the respondent (who had undertaken financial obligations after the appeal period expired) if the application were granted; (iv) the prospects of success on the proposed appeal The Court held, allowing the review and extending time: (per Basten JA, Beazley P and Leeming JA agreeing) In relation to (i)

1. The extent of the delay was not a decisive factor in refusing the application for review. The delay of approximately three months was slight relative to the history of the underlying events: [10]-[12] In relation to (ii)
2. The absence of evidence as to the value of the proposed litigation to the applicants meant that limited weight should be given to that factor in the overall balance of what was fair and equitable: [13]-[14] In relation to (iii)
3. The weight given to the financial prejudice the respondent would suffer was diminished by the failure of the respondent to confirm that no appeal would proceed and the incurring of commitments without notice to the applicants. Furthermore, it was by no means clear that the financial obligations taken by HTT would not result in commercial benefits in any event: [52]-[54], [56] (per Basten JA and Leeming JA, Beazley P agreeing) In relation to (iv)
4. The applicant established a reasonably arguable case of error on the part of the trial judge, which should warrant leave to appeal. The applicants raised arguments which are credible and material and were arguably not adequately dealt with by the trial judge. The conclusion of Allsop P that there were no real or significant prospects of success was a material error of fact, which arose because the complex factual issues had not been adequately explained before Allsop P, and that error was sufficient to satisfy the heavy burden of establishing a reviewable error: [19], [61]. Rinehart v Welker [2011] NSWCA 403; Jaffari v Grabowski [2013] NSWCA 114; Collier v Lancer [2013] NSWCA 185; Patrick v Howorth [2002] NSWCA 285; Transglobal Capital Pty Ltd v Yolarno Pty Ltd [2005] NSWCA 136; 60 NSWLR 143 applied.

Judgment 1BEAZLEY P: I agree with Basten JA and with the additional comments of Leeming JA. 2BASTEN JA: On 20 April 2012 Stevenson J, in the Equity Division, dismissed proceedings between the parties to the present application: Land Enviro Corp Pty Limited v HTT Huntley Heritage Pty Limited [2012] NSWSC 382. The applicants (and unsuccessful plaintiffs in the Court below) filed a notice of intention to appeal within time, but failed to file the foreshadowed notice of appeal within three months of the entry of the orders made by the trial judge. It was assumed that the orders were entered on 27 April 2012 (being the date of a mention in Court) although the Justicelink record of proceedings suggests that they were not entered until the following Monday, 30 April 2012. Taking the date more favourable to the applicants, the notice of appeal should have been filed by 30 July 2012. In fact that step was not taken until 8 November 2012. 3When filing the notice of appeal, the applicants also sought an extension of time: that application was dealt with by Allsop P. On 21 February 2013 the President dismissed the application and consequentially dismissed the notice of appeal as incompetent: Land Enviro Corp Pty Ltd v HTT Huntley Heritage Pty Ltd [2013] NSWCA 35. The applicants sought to review that judgment, pursuant to s 46(4) of the Supreme Court Act 1970 (NSW).

(1) Parties 4The active applicant, both before Allsop P and in the review proceedings, was Mr Sam Zdrilic, the second applicant. He appeared, with leave, for the company, Land Enviro Corp Pty Ltd, for his wife, Amy Zdrilic, and for the fourth applicant, Amy Holdings Pty Ltd. There is no need to consider the separate interests of the applicants in this proceeding. 5It is, however, necessary to consider the separate interests of the respondents. They fell into three groupings, which may be addressed in reverse order of significance for the present application. Thus, Sentel Pty Ltd, the fourth respondent, was properly joined as a party, but took no part in the proceedings. Its role, as a corporate entity in which both applicants and respondents had an interest, was essentially neutral. 6Secondly, the third respondent (Mr David Hickie), and the sixth respondent (Vocifa Pty Ltd) had common representation and may be identified as the "Hickie interests". As will be noted below, the primary case for the applicants was that they had suffered loss and damage as a result of misrepresentations for which Mr Renshall (the first respondent) was primarily liable. In the original pleadings, the claim against the Hickie interests was based on Mr Renshall acting as their agent. However, the trial judge found that there was no evidential basis for the agency: at [997]. Nothing was said in the course of the proceedings in this Court to cast doubt on that finding. Although part of the relief claimed by the applicants was the setting aside of the settlement of the 2001 proceedings, to which the Hickie interests were party, it was not submitted that they were a necessary party on that basis. 7In brief submissions to this Court, the Hickie interests noted that they had incurred significant costs which it appeared they would be unlikely to recover, even if the application were to be dismissed, and that factor, combined with the absence of any arguable case in respect of their liability, meant that the proceedings for review should be dismissed with respect to them. That submission should be accepted. 8The third group of respondents were the first, second and fifth respondents. These parties had common representation and may conveniently be referred to as "the Renshall interests". In an affidavit sworn in this Court on 12 February 2013 Mr Renshall stated that he was a director of the first respondent and of the fifth respondent. He said that he had responsibility for the day-to-day management of the first respondent's affairs. The case for the applicants focused squarely on the conduct of Mr Renshall; there was no requirement in the course of the hearing before this Court to distinguish between the parties identified as the Renshall interests.

(2) Relevant considerations 9The primary considerations on an application for leave to extend time within which to appeal are: (a) the extent of the delay and the reasons therefor; (b) the prejudice to the applicant if the application were to be refused; (c) the prejudice to the defendant from the delay if the application were to be granted; (d) the prospects of success on the proposed appeal.

(a) delay 10The extent of the delay was approximately three months. As accepted by Allsop P, the causes of the delay were threefold. On the one hand, the applicants lacked the funds to obtain legal representation for an appeal. Secondly, it being a commercial matter, they were unable to obtain legal aid. Thirdly, it was only in late October 2012 that Mr Zdrilic formed the view that he was capable of commencing and prosecuting the appeal himself. 11Given that the proceedings related to events which commenced in 1998 and challenged the settlement of earlier proceedings in 2001, it may be said that a delay of three months did not involve a significant period, relative to the history of the underlying events. Further, the difficulties faced by litigants without representation or the means to obtain representation in pursuing complex litigation provide a substantial explanation, if not excuse, for the delay. Nevertheless, as noted by Allsop P, the applicants were at fault in not advising the respondents at least by late July 2012 of their difficulties and their ongoing intention to continue to explore avenues of proceeding. 12The President was also critical of the applicants on the basis that they had available to them advice from junior counsel which could have allowed for the preparation of a notice of appeal within time. On the other hand, it seems unlikely that Allsop P gave significant weight to that factor, in the light of his view (discussed below) as to the prospects of success. The President also noted a submission that the applicants were impecunious because of the conduct of the respondents, which formed the basis of the litigation in the Court below: at [25]. Thus, although Allsop P dealt with questions of delay at [21]-[25], he did not suggest that that factor, taken in isolation, would have been fatal to the application for an extension of time: cf [27]. His analysis of those aspects was not challenged on this application.

(b) prejudice to applicants if application refused 13Allsop P referred to the absence of any evidence as to the value of the proposed litigation to the applicants: at [20]. Again, it may be inferred that this was not a matter upon which the President placed much weight, but it was a factor on which the respondents relied in resisting the present application and it is not without significance. The applicants' position in this Court was that they should not be required, in order to establish a right to appeal with respect to liability, to demonstrate the extent of the damages to which they would be entitled if liability were to be established. They relied, at least by inference, on the fact that the project from which they had been excluded involved a multi-million dollar development which the respondents treated as a potentially profitable venture. 14Other things being resolved in favour of the applicants, this factor should be given limited weight in the overall balance of what is fair and equitable.

(c) prejudice to the respondents 15The third matter referred to above was the question of prejudice to the respondents from an extension of time. Allsop P referred to there being "specific matters of prejudice", although he did not deal with evidence of prejudice presented by the respondents. In part it would appear that he had in mind the fact that litigation is necessarily costly and stressful, that once time limits have expired a successful party should be entitled to rely upon the judgment obtained at trial and that any appeal was likely to be prolonged. Specific submissions were put to this Court as to the nature of the prejudice which the respondents had or had not established on the evidence. Accordingly, it will be necessary to return to this issue below.

(d) prospects of success 16There is no doubt that the primary factor which weighed against an extension of time, in the President's view, was the failure of the applicants to persuade him that there were real or significant prospects of success on the proposed appeal: at [16]. That conclusion was based upon three factors, namely: (a) the "apparently careful analysis of the objective evidence" undertaken by the trial judge: at [9]; (b) the importance of the credit and reliability accorded to Mr Zdrilic's evidence - at [10]-[13]; and (c) the advantage generally available to a trial judge in a lengthy trial - at [14]. The President concluded his assessment on the prospects for an appeal by noting that there was "no self-evident crack or flaw ... in the primary judge's reasons": at [15]. 17Much of the oral argument on the review was directed to demonstrating a different view as to the prospects of success. In that, as will be explained below, Mr Zdrilic achieved a significant element of success. 18The respondents submitted that the contrary view, adopted by the trial judge was to be preferred. In that, they may ultimately succeed if the appeal goes ahead; however, they failed to demonstrate that the applicants did not have an arguable case of error on the part of the trial judge with respect to aspects of the claims which, on their face, appeared to be material to the outcome. 19Because of the limited nature of the issues before this Court, it is not appropriate to undertake a full appraisal of the arguments on both sides: however, it should not be thought that in failing to provide a full account of the respondents' submissions the Court has dismissed them or determined that the applicants' submissions are overwhelmingly correct. On the contrary, they are not fully addressed because all that the Court is required, and properly entitled, to consider in this respect is the arguability of the applicants' case. The applicants should succeed on this aspect of their application, not because they have demonstrated that the trial judge was necessarily wrong but because they have raised arguments which are credible and material and were arguably not adequately dealt with by the trial judge. It may be that the real criticism of the judgment below is not that it came to the wrong conclusion, but that it failed adequately to address the applicants' submissions. However, that conclusion is sufficient to warrant an extension of time within which to appeal.

(3) Nature of the case for the applicants 20As with reasons for granting leave to appeal, it is undesirable to attempt an extensive analysis of the case below. Nevertheless, it is necessary to provide some detail, both because the respondents are entitled to an explanation as to why they may need to defend a judgment in their favour against an appeal lodged out of time and because a different view was taken by Allsop P in dismissing the application. 21The first applicant, Land Enviro Corp Pty Ltd ("LEC"), was a company controlled by Mr Zdrilic, Mr Hickie (a respondent), a Mr Hulley and two other members of his family. In June 1998 LEC contracted to purchase, for the sum of $2.5 million, an area of about 420 hectares situated against the Illawarra escarpment, approximately 20 kilometres south-west of Wollongong. (The land used to be known as the Huntley Colliery, although its original owner, Powercoal Pty Ltd had no further use for it.) 22Although Mr Zdrilic advanced some $2.237 million to LEC, LEC was unable to obtain the necessary finance to complete the purchase. A separate company, HTT Huntley Heritage Pty Ltd ("HTT"), the first respondent, which had been incorporated by the Hulley family and Mr Hickie shortly before Powercoal issued a notice to complete to LEC, was able to obtain the funds and exchange contracts within 12 months of termination of the contract between Powercoal and LEC. The purchase was completed on 17 October 2000. 23A year later, LEC commenced proceedings against Mr Hulley, a company associated with him and the mortgagee of the land, Permanent Trustee Australia Pty Ltd ("the 2001 proceedings"). After Mr Zdrilic learnt that HTT had purchased the land, HTT was joined as a defendant, as was Mr Hickie. The claim was based upon alleged breaches of duty by Mr Hulley and Mr Hickie and improper use of information and opportunities which they had acquired as directors of LEC. In April 2003 LEC placed a caveat over the land. 24The operations of HTT were by then apparently directed by a Mr Renshall. On 18 February 2004 the Zdrilic interests and the Renshall interests drew up a document entitled "Heads of Agreement", the purpose of which was to settle the 2001 proceedings and allow the development of the site to go ahead. The document recognised that Mr Zdrilic, through LEC, had contributed an amount valued (with interest) at $5.5 million to the purchase of the property. It also recognised that the Renshall (and Hickie) interests had contributed some $3 million dollars. 25The 2001 proceedings were to be settled on 27 August 2004. The settlement involved four main elements. First, a new company known as Sentel Pty Ltd, was to be established in which the Zdrilic, Renshall and Hickie interests would each hold a one-third share. Sentel would hold approximately a 27.5% interest in the HTT Huntley Trust, with other units in the trust being held by a financier. The trust would own the land. Resolutions of both the board of directors and the membership of Sentel were to be unanimous. Messrs Zdrilic, Renshall and Hickie were also to be directors of HTT and resolutions of the board of that company were to be unanimous. 26Secondly, HTT was to obtain funding sufficient to pay off the debts incurred by LEC and HTT in purchasing and commencing work on the proposed development, together with a substantial sum to carry out the development, which was to include residential dwellings, a hotel and related facilities and a golf course. Thirdly, LEC was to remove the caveat over the land when the funding became available and, fourthly, file a notice of discontinuance of the 2001 proceedings. 27On 15 March 2004 HTT and two New Zealand companies, Ibis Investment Bank ("Ibis") and a related company, Investment Protection Cover Inc ("IPC") entered into the so-called "IPC Heads of Agreement": at [85]. As the trial judge explained at [92]: "A significant obligation in Heads of Agreement was found in clause 4.7 which stated: - 'HTT shall obtain sufficient finance from a new funder (estimated at but not limited to approximately $12 million) to payout [existing mortgagees] and any other creditor holding security over the Huntley Mine, and to purchase the complimentary [sic] land (...) and to prepay 6 months interest on the loans from the new funder.' " 28The settlement did not take place as planned. Although the corporate structure was established, no finance was available at the date of settlement. Despite that missing element, the settlement went ahead, in the sense that the solicitor for the Zdrilic interests handed over executed copies of the notice of discontinuance and a withdrawal of caveat. 29Progress in obtaining approval for the proposed development and the necessary funding progressed slowly. By approximately mid-2006, Mr Zdrilic formed the view that he was in a similar position to that which had led him to commence the 2001 proceedings. On 11 October 2006, LEC lodged a caveat on the title to the property and, on 26 March 2007, commenced the proceedings the subject of the proposed appeal. In these proceedings the applicants sought to set aside the settlement of 27 August 2004 on the basis that they had been induced to enter into the agreement by a number of false representations made by the respondents; alternatively they said that the conduct of the respondents was misleading or deceptive within the meaning of the Trade Practices Act 1974 (Cth).

(4) The representations 30The trial judge rejected the applicants' claims in respect of each of the 17 particularised representations, as set out in the third amended statement of claim ("the Claim") filed on 7 December 2009. Of these, it is sufficient to refer to three only. Representations 2 and 3 are to be read together. Representation 2 (Claim, par 26.3) was that between 18 February 2004 and early March 2004, HTT represented to LEC and Zdrilic that "a funder with substantial resources will inject substantial funds into and take control of HTT's project". Representation 3 (Claim, par 26.4) was contained in a letter of 27 February 2004 from HTT's solicitor to LEC's solicitor setting out a number of specific requirements imposed by "the new funder". These involved variations to a document known as "heads of agreement" settled by Mr Renshall on behalf of HTT and Mr Zdrilic on behalf of LEC. The elements which could not be incorporated into the final settlement, because of the funder's requirements were as follows: "(ii) Renshall and Zdrilic would jointly manage HTT's business; (iii) Hickie, Renshall and Zdrilic would be directors of HTT; (iv) HTT would give security in respect of the $5.5 million loan owed to Zdrilic, the $2.0 million loan owed to Renshall and the $0.9 million owed to Hickie; (v) the new company to be formed in which Renshall, Hickie and Zdrilic would be directors would have veto rights over the decisions of HTT; and (vi) the Constitution of HTT would be amended so that decisions of the Board of HTT would have to be unanimous." 31The representations thus required a significant diminution of Mr Zdrilic's interests, as a condition of the injection of "substantial funds" into the project. If the new funder did not exist, or had not imposed such requirements, the representations would have been false. (Falsity was alleged in the Claim at par 27(c) and (d).) It will be necessary to consider shortly the findings of the trial judge with respect to the existence of and identity of the "new funder" and as to its stated conditions of funding. 32Thirdly, representation 17 (Claim, par 26.18) alleged that certain matters had been represented by HTT at the meeting appointed for settlement on 27 August 2004. These matters included the following: "(aa) the new funder would advance $4.5 million 'next week' and the balance of the $12 million would be paid on 15 September 2004. ... (b) on top of the $12 million loan advance, the new funder would pay $6.5 million to the "small investors" for their units [in the Huntley Trust]; (c) the new funder would take a 71.25% equity stake by purchasing all the shares in HTT and units in the Huntley Trust ... other than those ... held by Sentel (28.75%); ... (f) there was no impediment to funds being advanced by the new funder; ... (j) it made no difference whether the funds were advanced by the new funder today or next week because HTT had an agreement with the new funder that $12 million would be advanced by 15 September 2004; ..." 33All of these particulars were alleged to be false: Claim, par 27(r). 34The applicants' case is that the supposed funding arrangement relied on by HTT throughout the negotiation period was reflected in the IPC heads of agreement dated 15 March 2004 between HTT and IPC, to which the Zdrilic interests were not parties. That agreement did not warrant any of the assurances given. Not only was the agreement highly conditional, in that it required a rezoning approval for the land (which approval had not been sought by August 2004), but it required IPC to present evidence that it had funds available to it to meet its commitments by 15 September 2004, which, as Mr Renshall and HTT knew, by 27 August 2004 it had failed to supply. The agreement with IPC was rescinded by HTT on 16 September 2004, after the withdrawal of the caveat had been lodged (despite no funds being available) by HTT's solicitor and the notice of discontinuance had been presented to the Court by HTT's solicitor. 35The settlement of the agreement between the Zdrilic and Renshall interests took place on 27 August 2004. No money was forthcoming from the proposed funder at that time. At [805], the trial judge asked: "So why, in the absence of funds, would Mr Zdrilic proceed to settle the commercial transaction and consent to the dismissal of the 2001 Proceedings?" 36His answer, in brief, was that Mr Zdrilic believed that the project would generate substantial profits for him: at [807]-[811]. However, in the absence of any guarantee of funding, that would not have occurred. He must therefore have believed that funding was or would shortly become available. The question was what led to that belief. 37The trial judge found that on 28 July 2004, Mr Zdrilic's solicitor, Mr Hilliard, had advised that the settlement would proceed in "two stages". The first stage would involve the completion of the joint venture documentation and execution of short minutes of order dismissing the 2001 proceedings. The second stage, involving "settlement with the funder", would result in the withdrawal of the caveat being exchanged for letters from Mr Hickie and another, resigning as directors of HTT and "most significantly the provision of funds": at [752]-[754]. 38In fact the withdrawal of caveat was handed over, in the absence of funds, at the settlement on 27 August 2004. That took place, the trial judge held, because Mr Hilliard had been provided on 28 July 2004 with an undertaking by the solicitors for the Renshall interests (Mr Gillard) to hold the withdrawal of caveat until the provision of approximately $12 million by the funder to HTT pursuant to cl 4.7 of the heads of agreement: [555]-[557]. 39In fact, Mr Gillard did not hold the withdrawal of caveat in escrow, but registered it immediately. There is no finding that Mr Zdrilic authorised Mr Hilliard to give, or that Mr Hilliard gave, any waiver of the undertaking. Assuming that Mr Gillard acted on the directions of Mr Renshall, the conduct appears to have been improper and a contravention of the basis on which the Renshall interests were acting in seeking to obtain a release of the land from the caveat. As Mr Zdrilic emphasised in argument, he had already accepted (arguably on a fallacious basis) that the funder had refused to provide funds if Mr Zdrilic were a director of HTT and had refused to accept that he should have a veto over the development. Whether or not those representations were false, the remaining obstacle to settlement was the provision of funds. In the absence of an express finding that Mr Zdrilic agreed to withdraw the caveat, despite the failure to obtain funding, there was a plausible argument that the situation had been misrepresented to him, in the sense that funding had been said to be imminent. 40Mr Renshall himself became disillusioned with IPC and on 16 September 2004 terminated their agreement of 15 March on the basis of a failure to complete by the due date. He had on earlier occasions written to IPC demanding proof of ability to fund, which had not been forthcoming. Despite his knowledge that IPC had no demonstrated ability to provide the funds required, he had continued to reassure Mr Zdrilic up until 6 September 2004 that he was expecting the funds to be forthcoming. 41On 1 October 2004 Mr Renshall wrote to a Mr Rutherford stating that he had "no intention of doing any deal with Ping" (Mr Ping being the principal contact for the potential funder) and that he thought far-fetched the possibility that he, Ping, could speak for $40 million. He told Mr Rutherford that he had "seen nothing but a long line of spivs who do not have any money or credibility": at [818]. When he came to that view was unclear from the judge's findings, but two weeks earlier, on 16 September 2004, the day on which he arranged for HTT to terminate the heads of agreement with IPC, he told Mr Zdrilic that Mr Ping remained "ready to put in $40.0m": at [843]. He also told Mr Zdrilic that "St George" will put money in, depending on a valuation which was then being done. On 21 October, Provident Capital Ltd (whose relationship with St George Bank was unexplained) had sent an "indicative" letter stating it "would consider" advancing $6 million to HTT: at [847]. 42Yet two sentences later, the trial judge noted a reference in the board minutes to a statement by Mr Renshall that "funder has not yet settled. Funder will settle provided ... DA is approved [for unwanted fill]". Mr Zdrilic complained that the identification of the DA was omitted from the judgment, thus suggesting that it was a major approval required for the project, whereas it was in fact identified as the DA for a specific and relatively minor aspect of work already undertaken. Further, the statement of the board minute continued, at [849]: "Proof of funds - Robert [Renshall] said Funder has loan approval with Provident Capital - St George was to provide some funding but they have pulled out." 43This (and other material) led the trial judge to the view that Mr Zdrilic knew that funding was not in place and made no complaint. Yet the statements identified in the board minutes, as being made by Mr Renshall on 25 October 2004 in Mr Zdrilic's presence, were hardly consistent with the actual information known to Mr Renshall. Whether the evidence constituted an on-going state of misrepresentation by Mr Renshall was not a question adequately addressed by the trial judge. The subsequent findings as to what Mr Zdrilic knew or understood depended upon him selectively "knowing" that some statements made to him were correct, and discounting other statements: at [850]. There was also a failure to address the proposition that a party could be described as a "funder", in circumstances where an application had been made to that party, without result. On one view, the approach adopted by the trial judge involved reading the statements made by Mr Renshall (referred to by Mr Zdrilic as "misrepresentations") as they might have been understood by a person in Mr Renshall's position, having knowledge of the background events, rather than a person in the position of Mr Zdrilic who had no such knowledge. 44In these circumstances, Mr Zdrilic has established a reasonably arguable case of error on the part of the trial judge which, other things being equal, would warrant leave to appeal out of time, where the delay was only three months, subject to questions of prejudice.

(5) Prejudice to the Renshall interests 45Mr Renshall set out in an affidavit of 12 February 2013, partly corrected by a later affidavit of 18 February 2013, two primary heads of prejudice which he would suffer were the extension of time to be granted. Before Allsop P the applicants objected to Mr Renshall's affidavits being read, but the President rejected the objection. There is no reason to reconsider that ruling. 46On 16 August 2013, Mr Zdrilic filed an affidavit responding to Mr Renshall's evidence of prejudice and annexing a variety of documents. The thrust of this material was to establish that HTT had incurred expenditure of several million dollars each year since 2002 and that it was regular practice for Mr Renshall to guarantee HTT's loans and commercial hire purchase agreements. The affidavit further explained why Mr Zdrilic had not been in a position to present such evidence before Allsop P, namely because of the late filing of Mr Renshall's affidavits. 47Subject to the rulings made at the hearing of the appeal, that parts to which objection was taken be treated as submissions, the affidavit and its annexures (many of which were in evidence at the trial or were extracts from transcripts) should be admitted. They provide some background as to HTT's financial affairs, but do not contradict anything said by Mr Renshall in his evidence. There is no need to explore their content further. 48The two grounds of financial prejudice were a loan made by Mr Renshall personally to HTT, secured by the mortgage over his family home, and guarantees given by Mr Renshall and others in respect of the purchase by HTT of two pieces of machinery for use in constructing the proposed golf course, pursuant to commercial hire purchase agreements. Mr Renshall gave evidence, which was not effectively challenged in cross-examination, that neither step would have been taken had he believed that an appeal was to proceed with respect to the judgment in the Equity Division. 49According to Mr Renshall, the work undertaken by HTT since 27 July 2012, when time to appeal was assumed to have expired, involved the contracting of services by a golf course designer and the purchase of the two items of machinery. The expenditure involved in the golf course design services between August 2012 and January 2013 totalled approximately $73,000, which was roughly the amount lent by Mr Renshall to HTT. In the same period amounts of approximately $42,000 were paid by way of monthly instalments under the hire purchase agreements, the monthly instalments being a little over $4,000 for each piece of machinery. 50The correction made by Mr Renshall in his second affidavit was in effect an acknowledgment that an order had been placed for one piece of machinery prior to the expiry of the appeal period. However, he noted that the order had been "subject to finance approval" and said that he expected the order to be cancelled if the appeal went ahead. 51Mr Renshall stated that he had planned his own financial affairs and those of HTT "on the basis that HTT would not need to incur further legal costs in respect of the conduct of an appeal and that HTT was not at risk of the adverse consequences of a successful appeal ...": Affidavit, 12 February 2013, par 14. The drawdown of the loan to HTT occurred on 31 July 2012. The involvement of the golf course designer commenced in June 2012, with a member of staff being engaged to attend on site in a fulltime capacity "after 27 July 2012". The order for one piece of machinery was made on 31 July 2012, the second being approved shortly prior to 27 July 2012, with finance being obtained soon thereafter. 52As the present application demonstrates, the Court has power to extend time within which to appeal. A party which incurs substantial financial obligations within days of the expiration of the period fixed for an appeal will be at risk of an appeal proceeding if the appellant is able to demonstrate reasonable prospects of success and provide a reasonable justification for the failure to meet the time limitation. An extension of a matter of days is quite likely in such circumstances, particularly where notice of intention to appeal was given within time and there has been no further communication between the parties. In short, Mr Renshall's steps were taken without any guarantee that an appeal would not proceed and, no doubt, on the basis of a commercial assessment of possible risk. That assessment is confirmed by the fact that some steps had been taken, with at least the possibility of proceeding with the construction of the golf course in mind, sometime prior to the expiration of the three month appeal period. The commercial obligations were undertaken without confirming that no appeal would proceed and without notice to the applicants. 53Further, it is necessary to weigh the increased indebtedness of the respondents, though by no means insignificant, in context against the outstanding indebtedness of HTT to its financier, being an amount of $15.9 million, and its expenditure on the trial of $2.9 million. 54Although it must be accepted that Mr Renshall would not have undertaken the further financial obligations, either personally or on behalf of HTT, had he believed an appeal would proceed, it is by no means clear that the existence of the additional obligations constitutes a prejudice in an absolute sense. The ultimate fate of the development is not known, nor is the effect of the additional expenditure, which has been incurred for the ultimate benefit of the company, by improving the value of the land owned on its behalf.

(6) Conclusions 55If the proposed development is ultimately not financially profitable, it is at least possible that this long drawn out history of litigation will prove disadvantageous, or even disastrous, for all parties. In 2004, the parties saw obvious merit in a commercial settlement of their dispute. That settlement fell apart and the purpose of the litigation is to determine whether in law the respondents were ultimately responsible for any loss suffered by the applicants. Had the applicants taken timely steps to pursue an appeal, the matter would not be before the Court in this form at this stage. The President declined to extend time on the basis that there were no reasonable prospects of success. On further consideration, that judgment may have been based upon a failure to appreciate the points sought to be made by Mr Zdrilic, then appearing in person, whereas he had been represented throughout the trial. The force of at least some of the arguments presented by Mr Zdrilic are now more clearly apparent, as more fully explained by Leeming JA. This Court may properly accept that there is a reasonably arguable case to be presented on an appeal. 56Against that finding must be weighed the prejudice to the respondents if time is extended. However, that prejudice is, in substance, the continuation of the business of the principal respondent, HTT, as an alternative to the husbanding of its resources to fight any further litigation. If the respondents are successful on the appeal, the determination to carry on its business may have been beneficial to it. If the respondents are unsuccessful, it is by no means clear that the steps taken to carry on the business will not result in the anticipated commercial benefits for which they were pursued. 57Given the various circumstances set out above, and the additional considerations noted by Leeming JA, it is appropriate to reconsider the view taken by the President and grant the applicants an extension of time within which to appeal, as against the first, second, fourth and fifth respondents. 58The application should be dismissed in relation to the third and sixth respondents. The applicants must pay their costs. To the extent that relief is sought against the third and sixth respondents, the notice of appeal dated 7 November 2012 must be amended. 59As between the applicants and the remaining respondents, the orders made by Allsop P on 21 February 2013 should be set aside. The costs of the proceedings, as between the applicants and those respondents, both before Allsop P and in the review proceedings, should be the respondents' costs in the appeal. In other words, even if successful in the appeal, the applicants will not recover the costs incurred as a result of their own delay and the requirement for an extension of time. 60LEEMING JA: I agree with Basten JA that an extension of time should be granted to the applicants within which to appeal as against the first, second, fourth and fifth respondents. I agree with his reasons, but wish to add the following. 61I am persuaded that Mr Zdrilic has discharged the heavy burden to which this Court referred in Rinehart v Welker [2011] NSWCA 403 at [48], Jaffari v Grabowski [2013] NSWCA 114 at [27] and Collier v Lancer [2013] NSWCA 185 at [20] of establishing reviewable error. It was not disputed, and I think it is clear, that Allsop P's refusal of the application for leave turned upon his Honour being left "unpersuaded that there are real or significant prospects of success in overturning the fundamental elements of the reasons" (at [16]). With great respect, I have concluded that his Honour erred in coming to that conclusion. That amounts to a material error of fact on which the decision turned, which is sufficient to warrant review: Patrick v Howorth [2002] NSWCA 285 at [10] (Heydon JA, with whom Hodgson JA and Young CJ in Eq agreed) and applied in Transglobal Capital Pty Ltd v Yolarno Pty Ltd [2004] NSWCA 136; 60 NSWLR 143 at [5]-[6] (Beazley, Santow and Ipp JJA). It is not necessary to say anything more about the nature of the function under s 46(4) of the Supreme Court Act 1970 (NSW). 62It should be pointed out immediately that the Court as presently constituted has enjoyed two advantages not available to Allsop P. The first is time. A reading of the transcript reveals that most of the hearing time before his Honour was devoted to an application by the Renshall interests for access to documents produced by the applicants, in respect of which a claim of privilege had been made. It seems that it only became plain late in the day on 18 February 2013 that the Renshall interests were contending that there were no reasonable prospects of success: see T 44.8-17; their written submissions only addressed prospects of success in the penultimate paragraph, and even then did not put the matter so high. Mr Zdrilic's oral submissions (supplementing short written submissions) on prospects occupied seven pages of transcript, with roughly the same from the Renshall interests in response. In contrast, all parties' submissions on the present application have focussed on the question of prospects of success, and they had between them the best part of a day to address orally. 63The second advantage is materials. Mr Zdrilic made available for the purposes of this application a bundle of extracts of evidence before the primary judge, which appears not to have been made available to Allsop P. One aspect of that advantage is readily illustrated. The primary judge reproduced extracts of the minutes of a board meeting of 21 October 2004 at [850] in these terms: "Robert said Funder has not yet settled. Funder will settle provided...[inter alia] ... DA is approved..." 64Of this, the primary judge said in the following paragraph that "what was said at the meeting reaffirmed what Mr Zdrilic already knew, namely that funding was contingent on development approval" and pointed (at [852]) to the absence of contemporaneous protest from Mr Zdrilic, and the fact that, to the contrary, "Mr Zdrilic applied himself to progressing the venture: suggesting preparation of accounting reports, suggesting a board meeting of HTT; and participating in the opening of a bank account for Sentel". That is consistent with the absence of any causal connection. 65But that is not what the minute conveys at all when the original document is seen. It is in these terms: "Robert said Funder has not yet settled. Funder will settle provided that two things are completed. 1. DA is approved (for the unwanted fill to be taken care of) 2. DMR report still to be supplied (2 pages)" 66It is clear that what is being recorded are statements to the effect that the funder would settle provided two relatively minor steps were completed. The minutes further recorded (in another passage omitted from the portions reproduced in [850]) that the DA for removal of unwanted fill was to be in the form of a letter from Council, expected within two weeks. 67Mr Zdrilic pointed out those errors, with some force. They were errors which could not have been demonstrated without reference to the primary evidentiary materials. The Renshall interests in response said that the important point was the finding that Mr Zdrilic knew that funds were not yet in place, but in my view it remains reasonably arguable that this aspect of the reasons fails fully to grapple with the contemporaneous documents, as Basten JA has observed. 68There is a larger point, too, turning on the materials that are available on an application such as this. The events the subject of this appeal took place around a decade ago. The trial before the primary judge took some 24 days over approximately six weeks. The applicants and the Renshall interests were both represented by Queen's Counsel. It is unlikely that the applicants (who were plaintiffs at first instance) had commenced and maintained a case that was hopeless. Although it is perfectly possible that the appeal will be dismissed, I find it impossible to conclude that that outcome is inevitable, or close to inevitable, such that there is not a reasonably arguable case on appeal, without reviewing the contemporaneous documentary record in its entirety. 69I agree with what Basten JA has said about the absence of a case against the Hickie interests, and his Honour's proposed orders as to costs. Finally, for the purposes of the future management of this appeal, I respectfully disagree with Allsop P's statement at [18] (reiterated at [27]) that the appeal "would clearly be up to one week long". It is a large appeal, and it will be necessary to traverse the salient contemporaneous documents, but with the assistance of full written submissions, my present view is that two or no more than three days would provide both parties with a fair opportunity to present their cases.

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