The statutory language, although exhibiting the modern (and generally desirable) tendency towards verbal economy, is ambiguous because it does not provide any means of knowing, from the words themselves, whether "within those 3 years" qualifies the visible verb "orders" or the invisible "made" where it fails to appear immediately after "application".
15 Mr Oakes submitted that the time specification is satisfied if the application for an order extending time is made within the three year period and that an order made upon an application so made is effective to extend time even though the period has expired by the time the order itself is made. In support of that, he referred to the course of litigation that culminated in the decision of the Court of Appeal in BP Australia Ltd v Brown (above). It is convenient to set out the contentions in this respect as they appear in Mr Oakes' written submissions:
"(a) The relation back day was 24 October 1997: appeal judgment 46 ACSR 677 at paragraph [17].
(b) The 3 year limitation period thus ended in October 2000 (these submissions leave to another case whether 23 or 24 October 2000 as not relevant to these proceedings).
(c) Austin J made ex parte extension orders on 4 September 2000 - within the 3 year period on any construction: appeal judgment paragraph [37].
(d) BP filed on 4 October 2000 an application seeking leave to be joined as a defendant and to set aside the 4 September 2000 order. However, that application was not heard until 19 and 20 April 2001, ie outside the 3 years period: appeal judgment paragraph [39].
(e) Austin J set aside the 4 September 2000 order, so there was at that stage no extension order made within the 3 year period.
(f) Austin J later held that s 1322(4)(d) could apply to extend time for an application to extend time (6th judgment). This proposition was over-ruled on appeal but ultimately became irrelevant because of the construction given to SCR Part 8 Rule 11(3) by the Chief Justice.
(g) Austin J then proceeded to hear the contested application to extend time under s 588FF(3)(b) and ordered an extension outside the 3 year period: Brown v DML No 7 (2002) 41 ACSR 299. Judgment was given on 13 March 2002; well outside the 3 year period.
(h) The Chief Justice upheld Austin J's final granting of an extension order. The steps leading to that conclusion may be summarised as follows:
· The application was made within the 3 year period.
· The joining of BP outside the 3 year period was not an invalidating factor. (There was an argument on the effect of SCR Part 8 Rule 11(3) not relevant here as National Indemnity Company was joined within the 3 year period.)
· The proceedings were thus regularly constituted. (The purported use of s 1322(4) though incorrect, was irrelevant.)
· The discretion under s 588FF(3)(b) was available to be exercised. The proposition that it was not available to be exercised on the grounds that it needed to be exercised within the 3 year period does not appear to have been advanced.
(i) At several points in his judgment the Chief Justice articulated the premise that only the application needs to be made in the 3 year period: see paragraphs [115], [118], [151] and [162]."
16 I also set out the paragraphs of the Chief Justice's judgment to which the last submission refers:
"[115] A creditor or other person who has received the benefit of a voidable transaction is at risk of having to surrender it. The time limit in s588FF(3) has the effect that at the end of the period of three years, such a person will know whether s/he remains at risk. In a legislative scheme which seeks to balance conflicting commercial interests of this character, that appears to me to be a perfectly reasonable requirement. Those who have an interest, or who represent those who have an interest, to disturb transactions must indicate, within three years, whether they wish to keep open the option of doing so. In this, as in other areas, legal policy favours certainty.
…
[118] Section 588FF(3) does not have the effect of requiring all applications to be brought within a short period of time. It does, however, have the effect of requiring those who wish to keep open the option to do so, to determine that they do wish to do so within the three year period and to seek a determinate extension of the period. One thing that must be decided within the three year period is how long the process of deciding whether to pursue voidable transactions will take. Eventually, investigations to overcome deficiencies of information or the pursuit of funding must cease. Parliament has identified a reasonable time for such matters to occur, subject to a single determinate extension of time.
…
[151] Nothing in s588FF(3)(b) directs attention expressly to a period of this character. The relevant date is the date on which an application for a "longer period" is made to the Court. Such an application must be made within the original period of three years after the relation back day. Nothing under s588FF(3)(b) turns, directly or indirectly, on the date on which proceedings are commenced against a particular person. Accordingly, Pt 8 r11(3) does not impinge upon an application made to the Court under s588FF(3)(b).
…
[162] On 4 September 2000, Austin J made these orders. The effect of his Honour's second, third, fourth and fifth judgments was that each order was set aside insofar as it affected the Appellant. If, as I have decided, his Honour erred in doing so then, subject to the discretionary considerations that arise with respect to the extension of time under s588FF(3)(b), an application had been made to the Court within the three year period identified in that paragraph."
17 Clearly implicit in these statements by Spigelman CJ is a construction requiring no more than that the application be initiated within the three year period. The clearest indication in that direction is in paragraph [151]. There is also an indication that anyone against whom substantive proceedings may be brought should be made aware, by the end of the three year period, whether the possibility of their being pursued under s.588FF(1) may be kept alive or whether proceedings are unquestionably barred. That is consistent with the notion that it is only the application that needs to materialise during the three year period.
18 While this point was not directly decided in BP Australia Ltd v Brown and neither Mr Oakes' researches nor my own have brought to light any other decision bearing directly upon the matter, I am satisfied that the ambiguity in s.588FF(3)(b) should be resolved in favour of the construction under which an extension order made after the period of three years has expired is effective for the purposes of the section provided that the application upon which the order was made was itself (by filing of the appropriate initiating process) within that period. There is, I think, another sound reason of policy favouring that view, in addition to those referred to by Spigelman CJ. The time at which a court order is made is beyond the control of the ultimately successful applicant. Strenuous opposition and interlocutory skirmishes may mean that there is an interval of months between filing of an application and its disposition by the court. Busy court calendars may give rise to delay. A judge, having heard an application raising difficult questions, may take time to consider the matter and to prepare detailed reasons for judgment. In the absence of some clear indication to the contrary, I do not think that the legislature should be presumed to have intended to place time limits on the resolution and determination (as distinct from unilateral initiation) of court proceedings. Much more consonant with reality is a legislative intention of requiring a liquidator to initiate proceedings within the specified time (or forfeit the s.588FF(1) opportunity), with those proceedings then taking their ordinary course within the court system.
19 In the present case, the originating process was filed on 10 March 2004, a few days before the end of the relevant period of three years. On 12 March 2004 (still within the three year period), leave was given to add the defendant as a party and to amend procedural aspects of the originating process accordingly. In exercise of that leave, the amended originating process upon which the plaintiffs eventually proceeded was filed on 24 March 2004, that is, somewhat more than a week after the end of the three year period. Does the timing of the amendment mean that the plaintiffs did not act, in a timing sense, consistently with s.588FF(3)(b)?
20 In my opinion, this question must be answered in the negative. The only substantial effect of the amendment was that the defendant was formally named as a party, the statement that it was not intended to serve the originating process on any person was replaced by a statement of intention of serving the defendant and the statement as to the consequences of non-appearance at the specified time and place were added. There was no change in the description of the relief sought or, as it were, of the cause of action pleaded involving, of its very nature, an order affecting the defendant. The character of the application remained the same. There was no more than the addition of features facilitating service on the person obviously affected by the originating process in its original form so that that person might be afforded the formal position of a party capable of appearing and joining issue. In accordance with general principle (eg, Australia and New Zealand Banking Group Ltd v Laros (1987) 13 NSWLR 286) as reflected in Part 20 rule 1 of the Supreme Court Rules, the amendment should be regarded as operating from the time at which the originating process in its original form came into effect upon being filed on 10 March 2004.
21 Having regard to the conclusions I have expressed about the construction of s.588FF(3)(b) and the effect of the amendment of the originating process, I am satisfied that the extension order the plaintiffs seek, if made, will be an order "on" an application by the plaintiffs within the relevant three year period. To put this another way, the amended originating process now before the court represents, in terms of the statute, a sound basis for the making of a valid order extending the time within which an application by the plaintiffs under s.588FF(1) for an order against the defendant may be made.
Procedural requirements
22 Having disposed of these questions going to jurisdiction, I turn to some procedural matters. Mr Oakes submitted, and I accept, that where, as here, a defendant is to be found in a place which is not a "convention country" as defined in Part 1 rule 8 of the Supreme Court Rules, and there is no appearance by that defendant, the following conditions must be found to be satisfied before the court can address the claim for substantive relief advanced by the plaintiffs:
1. The court must be satisfied as to service in accordance with either Part 10 rule 4 or Part 10 rule 5.
2. Having regard to Part 10 rule 2A, the court must be satisfied that the originating process was accompanied by Form 13A.
3. The court must be satisfied that the case falls within Part 10 rule 1A.
4. Leave to proceed must have been granted under Part 10 rule 2.
Service
23 Evidence to which I shall refer presently shows that the defendant is a corporation owing its existence to the laws of Nebraska. There is no suggestion that it has a place of business or carries on business in New South Wales or any other part of Australia or that it is registered under Part 5B.2 of the Corporations Act.
24 Being incorporated in Nebraska, the defendant may be taken, for the purposes of our law, to be domiciled in Nebraska. Due service of the originating process on it in Nebraska in a way satisfying the requirements of the Supreme Court Rules will therefore be effective to enable this court to entertain and dispose of the claims in that originating process, subject to the remaining matters to which I have referred.
25 Part 10 rules 4 and 5 are as follows:
"4 Rules as to service generally
Subject to this Part and subject to any convention, the rules apply to service outside the State under this Part as they apply to service inside the State.
5 Mode of service
A document which is to be served outside Australia need not be served personally on the person required to be served so long as it is served on him in accordance with the law of the country in which service is effected."
26 The effect of Part 10 rule 5 is to make service in a country outside Australia good service provided that it is in accordance with the law of that country. Compliance with Part 10 rule 5 makes it unnecessary to consider whether there has been compliance with Part 10 rule 4. This is the effect of the opening words of the latter provision: BP Exploration Co (Libya) Ltd v Hunt [1980] 1 NSWLR 497 at 501-2.
27 The plaintiffs have introduced into evidence an affidavit of Richard P. Garden Jr, an attorney duly licensed to practise law in the State of Nebraska. Mr Garden deposes to having searched records kept by the Nebraska Secretary of State, ascertained that the defendant is "a Nebraska corporation in good standing" and that the registered agent of the defendant is Walter C. Strain of 4016 Farnam Street, Omaha, Nebraska. Mr Garden also deposes to having sent to Mr Strain by certified mail on 2 April 2003 (with a return receipt requested) the amended originating process, Mr McGrath's supporting affidavit sworn on 9 March 2004 and a Notice to Defendant Served Outside Australia (Form 13A) prescribed by the Supreme Court Rules. Copies of all of these are annexed to Mr Garden's affidavit. On 6 April 2004, Mr Garden received from the post office a return receipt showing delivery of the envelope containing the documents despatched by him by means of certified mail.
28 Mr Garden also gave evidence about the law of Nebraska regarding service of process:
"3. I am familiar with the laws of the State of Nebraska governing service of process. Neb. Rev. Stat. s 25-5-5.01 provides that a summons may be served on a defendant by personal service, residential service, or by certified mail.
4. In the event that process is served by certified mail, service must be made by sending the summons to the defendant by certified mail with a return receipt requested showing to whom and where delivered and the date of delivery. Proof of service must be filed with the Court with the signed receipt attached. A true and correct copy of Neb. Rev. Stat. s 25.505.01 which governs service of process by certified mail is attached hereto as Exhibit 1 and is incorporated herein by this reference.
5. Service of process by certified mail may be made by the plaintiff or the plaintiff's attorney, as further set forth in Neb. Rev. Stat. s 25-506.01. A true and correct copy of Neb. Rev. Stat. s 25-506.01 is attached hereto as Exhibit 2 and is incorporated herein by this reference.
6. A corporation may be served by personal, residence, or certified mail service upon any officer, director, managing agent, or registered agent, or by leaving the process at the corporation's registered office with a person employed therein, or by certified mail service to the corporation's registered office, as further set forth in Neb. Rev. Stat. s 25-509.01. A true and correct copy of Neb. Rev. Stat. s 25-509.01 is attacked hereto as Exhibit 3 and is incorporated herein by this reference."
29 Annexed to Mr Garden's affidavit are extracts from the Nebraska Revised States of 1943, chapter 25, article 5, dealing with service of process in civil proceedings. In accordance with s.174 of the Evidence Act 1995, regard may be had to this foreign statutory material for the purpose of determining the statute law of the jurisdiction in question. That material fully bears out the statements in Mr Garden's affidavit as to the Nebraska legislative provisions and their effect.
30 Having regard to the whole of Mr Garden's evidence, I am satisfied that the amended originating process, Mr McGrath's affidavit and Form 13A were served in accordance with Part 10 rule 5 of the Supreme Court Rules. The pre-condition to jurisdiction requiring service has thus been satisfied.
31 That disposes of the first and second procedural requirements referred to at [22] above.
Part 10 rule 1A
32 The third of those procedural requirements is that the court be satisfied that the case falls within Part 10 rule 1A. That rule identifies the cases in which originating process may be served outside Australia. Mr Oakes' submission is that the present case is within Part 10 rule 1A(1)(a):
"where the proceedings are founded on a cause of action arising in the State."
33 That submission proceeds on the basis that any proceedings eventually instituted by the plaintiffs against the defendant under s.588FF(1) of the Corporations Act will be a proceeding "founded on a cause of action arising in the State" and that these separate and anterior proceedings to extend the time in which s.588FF(1) proceedings may be brought must be seen as being of the same character and description.
34 The first part of this submission is said to be supported by my decision in New Cap Reinsurance Corporation Ltd v Renaissance Reinsurance Ltd (2002) 43 ACSR 65. It was there held that s.588FF(1) makes a "cause of action" available to a liquidator upon which the court may make a range of orders against other persons with a view to remedying depletion of assets of the company in liquidation at the hands of the controllers in office before winding up. The acts which, in that case, gave rise to the complaint at the heart of the cause of action were the acts of depletion and, since those acts occurred in New South Wales, the cause of action was regarded as a cause of action arising in the State. That conclusion was seen to be consistent with the decision of Cohen J on earlier analogous legislation in Staff Membranes Pty Ltd v Synflex Industries (International) Inc [1984] 2 NSWLR 116.
35 The evidence adduced by the plaintiffs in support of the present application for extension of time outlines the general nature of the possible s.588FF(1) proceedings against the defendant, as presently seen by the plaintiffs. Mr McGrath's affidavit explains that the object of the proceedings would be to seek to remedy depletion of assets that occurred by reason of the making and performance by several of the HIH companies of a contract with the defendant. The contract is described as a reinsurance contract but that may be something of a misnomer. Under that contract, those plaintiff companies were obliged to pay $55 million to the defendant by instalments over five years in return for a contracted maximum recovery of $50 million or, in a defined event, $80 million. The defined event was the occurrence of two earthquakes in Australia, each causing damage of more than $5 billion and each occurring within the period of five years to which I have referred, but neither occurring in the same year as the other. The HIH Royal Commission received expert opinion that the probability of this composite event happening was in the range of 1.8 to 3.3 per cent. The Royal Commission expressed a view that the contract was negotiated and finalised with the primary purpose of enabling FAI to record a profit to boost its results.
36 The contract in question was made in the course of conducting the operations of the relevant plaintiff companies in New South Wales where the centre of their activities was located. In the same way as in the New Cap Reinsurance case (above), any s.588FF(1) proceedings in which it was sought to redress the effects of asset depletion through that contract would, in my opinion, be proceedings "founded on a cause of action arising in the State".
37 But the question before me is, of course, a different question, namely, whether the present proceedings in which an order for the extension of time under s.588FF(3)(b) is sought are "proceedings founded on a cause of action arising in the State". These proceedings are a preliminary to any s.588FF(1) proceedings that the plaintiffs may in due course choose to pursue. In my opinion - particularly because a s.588FF(3)(b) order must, of its nature, have in contemplation a particular proceeding (or a proceeding within definable boundaries) under s.588FF(1) - it is appropriate to regard the subject matter of that contemplated s.588FF(1) proceedings as marking out the ground covered also by s.588FF(3)(b) proceedings. Putting this another way, the "cause of action" as to extension of time under s.588FF(3)(b) should, in my view, be taken to have the same territorial quality as the "cause of action" that the extension would permit to be pursued by way of substantive claim under s.588FF(1).
38 On that basis, I am satisfied that the claim for an order extending time under s.588F(3)(b) is, in this case, "a cause of action arising in the State" as referred to in Part 10 rule 1A(1)(a).
Leave to proceed
39 The fourth condition referred to in paragraph [22] above is that leave to proceed has been granted under Part 10 rule 2. The interlocutory process seeks that leave. The condition will be satisfied only if the claim in the interlocutory process is determined favourably to the plaintiffs. By virtue of Part 10 rule 2(2), the interlocutory process need not be served.
40 In Agar v Hyde (2000) 201 CLR 552 at 576, Gaudron, McHugh, Gummow and Hayne JJ held that leave is to be given or withheld under this provision by reference to the cogency of the substantive case. The test to be applied is the same "as is applied in an application for summary judgment by a defendant served locally". It follows that leave should be granted if the plaintiffs show that there is a triable issue.
41 On that, little needs to be said. The potential viability of any s.588FF(1) claim eventually pursued against the defendant sufficiently emerges from the brief description of the relevant transaction at paragraph [35] above, supplemented by the observations of the HIH Royal Commission. The reasons why the liquidators have not so far been able to pursue that possibility in full are set out in Mr McGrath's affidavit. They correspond with the reasons advanced in support of the application I granted in McGrath re HIH Insurance Ltd (2004) 22 ACLC 449 (see paragraph [14] thereof). I am satisfied that the plaintiffs have shown a triable issue in relation to s.588FF(3)(b) extension and that it is therefore appropriate to grant leave to proceed under Part 10 rule 2.
Conclusion
42 There is then the question whether I should deal immediately with the s.588FF(3)(b) claim itself, without having heard from the defendant.
43 I have before me affidavits of Mr Coffey of Blake Dawson Waldron, the plaintiffs' solicitors, describing contacts and correspondence he has had with Mr Snover, an officer of the defendant. Most of that contact occurred before service of the originating process, supporting affidavit and Form 13A. I leave that to one side. More pertinent is what happened after service. On 17 April 2004, Mr Snover sent to Mr Coffey an email as follows:
"We have received your notice to National Indemnity Company ('NICO') concerning an application and haring to extend by twelve months the period in which the Liquidator may file applications against NICO in relation to the liquidation proceedings.
We are concerned that, given the period of three years since HIH went into liquidation with no indication from anyone representing HIH that there was any basis for a claim against NICO, your request that NICO now consent to an extension is intended solely to create some pressure on NICO to offer some payment and not to preserve any truly viable claim. We are convinced that NICO's actions in this matter were totally appropriate and proper.
Balancing these factors, we have determined not to oppose your application, as we do not wish any opposition to be perceived incorrectly as an effort by us to conceal or avoid scrutiny over our transaction with HIH. Our non-opposition is conditioned on the Liquidator's affirmative agreement that this act of cooperation will not be used as a basis for claiming that the Australian courts have any jurisdiction over NICO, as we do no business in Australia and there is no basis for jurisdiction over NICO in Australia.
We remain prepared, as we have indicated in the past, to discuss with the Liquidator the NICO contract or issues relating to it at your convenience.
Thank you."
44 Mr Coffey replied by email to Mr Snover on 23 April 2004 as follows:
"I refer to my recent e-mail to you regarding your message below.
I have now received instructions from our clients to accept your non-objection to our application to extend time, on the basis that we will not seek to rely on that offer in future as any submission to the jurisdiction of the Australian Courts on the part of National Indemnity Company.
Please could you confirm whether you have instructed any legal representatives in Australia to attend at Court and confirm your instructions at the return of this matter before Justice Barrett at 10.00am on Monday 3 May 2004.
I look forward to hearing from you in this regard as soon as convenient."
45 I do not have any evidence of reply by Mr Snover to Mr Coffey.
46 Having decided to grant leave to proceed, I would in some cases be reluctant to go to the next stage of determining the substantive application without giving the defendant a further opportunity to oppose the making of the order sought. In this case, however, Mr Snover's message to Mr Coffey - or more precisely, the message conveyed, in that way, by the defendant as a corporation to the liquidators - makes it clear that the defendant has decided not to oppose the application for extension of time under s.588FF(3)(b) but, in so doing, makes no concession whatsoever in relation to the foreshadowed s.588FF(1) claim. The plaintiffs, moreover, have accepted that the indication of non-opposition in relation to s.588FF(3)(b) extension will not be relied upon as any concession inimical to the position of the defendant in the longer term.
47 In these circumstances, I am prepared to make the extension order now, particularly as I consider factors I have already mentioned sufficient to satisfy the threefold test referred to by Austin J in Green v Chiswell Furniture Pty Ltd [1999] NSWSC 608. That test directs attention to, first, the explanation for delay in bringing the s.588FF(1) proceedings, second, a preliminary examination of merits to see that the foreshadowed s.588FF(1) claim is not so devoid of substance that it would be unfair to expose the potential defendant to it and, third, questions of prejudice to that party. I have already referred to explanation for delay by way of evidence corresponding with that discussed in McGrath re HIH Insurance Ltd (2004) 22 ACLC 449. The preliminary assessment of merits has been made in the context of the application for leave to proceed. The matter of possible prejudice is adequately laid to rest by the communication between Mr Coffey and Mr Snover. My conclusions on all three matters favour the grant of the extension of time sought.
48 The orders of the court are as follows:
1. Noting that the plaintiffs have duly served on the defendant outside Australia the amended originating process filed on 24 March 2004 together with Form 13A and the affidavit of Anthony Gregory McGrath sworn 10 March 2004 and filed herein, grant to the first plaintiffs leave under Part 10 rule 2(1) to proceed against the defendant under that amended originating process.
2. Order pursuant to s.588FF(3)(b) of the Corporations Act 2001 that any application under s.588FF(1) by the liquidator or liquidators of any one or more of the second to nineteenth plaintiffs in respect of a transaction or transactions between any one or more of the second to nineteenth plaintiffs and the defendant in relation to circumstances involving the defendant and generally described in the affidavit of Anthony Gregory McGrath sworn 10 March 2004 and filed herein may be made within the period ending on 10 March 2005.
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