Plaintiff v Second Defendant

(a) First, the second defendant applies by summons filed on 23 September 2024 for orders, amongst others, that:

(i) the ex parte order made in this proceeding on 1 September 2023, extending the period of validity for service of the generally endorsed writ dated 15 September 2022, be set aside pursuant to r 46.08(b) of the Supreme Court (General Civil Procedure) Rules 2015 ('Rules');

(ii) service of the writ dated 15 September 2022 and the statement of claim dated 29 August 2024 be set aside; and

(iii) further or alternatively, pursuant to r 23.01 of the Rules and/or s 62 of the Civil Procedure Act 2010 ('CPA'), the claims the subject of the statement of claim be stayed on the basis that they are frivolous and/or an abuse of process or, alternatively, judgment be entered for the second defendant dismissing those claims.

(b) Second, the plaintiff applies by summons filed on 24 October 2024 for orders to:

(i) substitute Acciona M&E Pty Ltd (ACN 006 337 113) ('Acciona') as plaintiff in place of the currently named plaintiff pursuant to r 9.06(c) of the Rules; and

(ii) remove John Beever (Aust) Pty Ltd (as Acciona was formerly known) as defendant pursuant to r 9.06(a) of the Rules.

2 If the Court accedes to the second defendant's application, there will be no need to determine the plaintiff's application as the period of validity for service of the writ will have expired, and the writ will be stale.

3 The second defendant relies upon the affidavits affirmed by its solicitor, Christy Mellifont, on 23 September 2024 and 25 November 2024. The plaintiff relies upon the affidavits of Jehan Mata affirmed on 23 October and 10 December 2024 and 18 February 2025. The plaintiff also relies upon the affidavit of Mark Andrew Beech, solicitor for the plaintiff, affirmed on 23 August 2023 ('Beech Affidavit'), which was relied upon in support of the application seeking orders pursuant to r 5.12(2) of the Rules to extend the period of validity for service of the writ ('Extension Application').

4 On 15 September 2022, the plaintiff[1] commenced this proceeding by filing a generally indorsed writ. The plaintiff sued the second defendant in its capacity as the insurer of Integrated Bulk Systems (Australia) Pty Ltd ('IBS'), a company deregistered on 8 November 2021. The plaintiff alleges that IBS provided services to the first defendant (which the plaintiff insures) during the period from about October 2016 until May 2017. It alleges that the services were defective, and the first defendant suffered loss and damage as a consequence.

5 On 23 August 2023, the plaintiff made the Extension Application ex parte. That application was supported by the Beech Affidavit.

6 The Beech Affidavit stated that the proceeding had been initiated to 'preserve the legal rights of the [p]laintiff and [f]irst [d]efendant as against the [s]econd [d]efendant'.[2] It also stated that the writ had not been served on any defendant at the time of the application.[3] The Beech Affidavit described the plaintiff as the insurer of the first defendant and stated that a dispute between it and the first defendant regarding 'the scope of coverage available to the [f]irst [d]efendant under the policy of insurance'[4] had been resolved on 22 May 2023. For this reason, the writ had not been, and would not need to be, served on the first defendant. Regarding the reasons for the Extension Application, the Beech Affidavit stated as follows:

1. The Plaintiff is now in the process of formulating its claim as against the Second Defendant and wishes to explore the potential for a negotiated resolution without the need to resort to formal Court processes.
2. The quantum of the claim is significant and the evidence supporting the claim is of a highly technical and engineering nature.
3. As such the Plaintiff seeks orders to extend the validity of the Writ in order for it to properly quantify the loss and damage and to negotiate with the Second Defendant to seek a compromise of the claim without the need to serve the Writ and initiate the Court processes.[5]

7 On 1 September 2023, Woronczak JR determined the Extension Application on the papers. Her orders ('Extension Order') provided:

The period of validity for service of the generally indorsed writ dated 15 September 2022 is extended to 1 September 2024.[6]

8 Subsequent to the making of the Extension Order, on 22 December 2023, the plaintiff's solicitors (on behalf of the plaintiff and the first defendant) sent a letter to the second defendant demanding payment of $3,593,313.62 by 29 January 2024.[7] The letter of demand referred to the writ and general indorsement, but did not enclose a copy of it nor disclose that the Extension Order had been made. Prior to receipt of the letter of demand, the second defendant was not aware of the existence of this proceeding.[8]

9 The plaintiff served a copy of the generally indorsed writ on the second defendant on 29 August 2024.[9] A statement of claim, filed on the same day, accompanied the writ.[10] The second defendant filed a conditional appearance on 9 September 2024, following which it filed its summons on 23 September 2024. Approximately one month later, the plaintiff filed its summons on 24 October 2024.

10 Under r 46.08(b), the Court may set aside or vary an order which affects a person where the application for the order 'was not made on notice to that person'.

11 The second defendant relies upon two grounds to motivate the exercise of the discretion to set aside the Extension Order.

(a) First, it submits that there was a material non-disclosure by the plaintiff in its application for the ex parte Extension Order, such that it should be set aside as irregularly obtained.

(b) Second, on a re-hearing of the Extension Application on the merits, the plaintiff has failed to demonstrate a good reason for the extension and the Extension Order should be set aside on that basis.

Ground one - Setting aside for material non-disclosure

12 An applicant for an ex parte order has an obligation to the court of the utmost good faith which obligation contemplates the full and fair disclosure to the court of all material matters.[11] That obligation applied to the plaintiff when making the Extension Application ex parte and had to 'be complied with on pain of a penalty that the order will be set aside.'[12] The facts undisclosed must be material to the decision, and the Court has a discretion to set aside on proof of the failure to discharge the obligation.[13] Setting aside is not inevitable unless the disclosure was deliberate. The Court will consider the seriousness of the non-disclosure and the importance or weight that should be attached to the omitted fact in the decision making process.[14]

13 In this case, the second defendant submits that the plaintiff failed[15] to disclose two material matters in making the Extension Application. First, the plaintiff allegedly failed to disclose anything about the limitations periods applicable to its claims. Second, the plaintiff failed to disclose that the second defendant had no knowledge of the proceeding and the likely prejudice that it would suffer by reason of the extension. The second defendant says that each of these matters was 'material' because they are each relevant to the Court's decision to exercise the discretion to extend time, as established in the authorities summarised in Howard v Power,[16] and repeated more recently in Jabiru Satellite Ltd v Société Generale.[17] In particular, in Howard, Derham AsJ identified the deprivation of a limitation defence, the defendant's lack of awareness of the existence of the proceeding and the prejudice caused to the defendant by reason of the lapse of time as relevant factors (among others) that usually weighed against the exercise of the discretion to extend.[18]

14 Regarding the first alleged material non-disclosure, the second defendant submits that the limitations periods for the plaintiff's claims had expired by May or June 2023, being, respectively, six years after the works were completed and six years after a demand was made in respect of the alleged defects in the works. If the second defendant is correct, it means the limitations periods expired shortly before the Extension Application was made. The second defendant submits that the expiry of the limitations periods likely explains the 'opaque'[19] statement in the Beech Affidavit that the proceeding had been commenced in September 2022 'to preserve the legal rights of the [p]laintiff and [f]irst [d]efendant as against the [s]econd [d]efendant'.[20] However, it submits that without more this statement alone told the Court nothing about the material issue of the expiry of the limitations periods, a factor that was relevant for the Court to consider in the Extension Application. To establish the materiality of the non-disclosure of limitations periods, the second defendant also relies on the position taken by the New South Wales Court of Appeal in Arthur Andersen Corporate Finance Pty Ltd v Buzzle Operations Pty Ltd (in liq),[21] as follows:

... on 21 March 2007, the registrar, on Buzzle's ex parte application, extended the time for service of the statement of claim until 15 June 2007. In obtaining this order, no disclosure was made to the registrar that the limitation period had expired. It is not in dispute that, on this ground alone, that order should be set aside.[22]

15 With respect to the second alleged material non-disclosure, it is submitted that while the Beech Affidavit recorded that neither defendant had been served with the writ at the time of the Extension Application, there was no disclosure of the fact that the second defendant had no knowledge of the existence of the proceeding and would likely be prejudiced by the delay in service. The second defendant submits that the two non-disclosures, which have been identified as relevant factors weighing against the exercise of the discretion in Howard, were therefore material non-disclosures.

16 The plaintiff submits that its disclosures in respect of its Extension Application were adequate, including because different limitations periods applied to their claims and some of those had not expired at the time of their application. It says the reference to 'preserving' legal rights, together with the allegations and timeframes pleaded in the general indorsement, were sufficient to put an experienced judicial officer on notice of the potential expiration of the limitations periods. It further contends that the affidavit stated clearly that the proceeding had not been served, and so it could be inferred that the second defendant did not have knowledge of it. The plaintiff submits, therefore, that there was no relevant non-disclosure.

17 This ground of the second defendant's application is not concerned with whether the judicial registrar should[23] have made the Extension Order on the material put before her, but instead it involves the Court putting itself in her shoes to determine whether or not she was induced to make the order in the absence of the material fact that was not disclosed. One difficulty for the second defendant in respect of this ground is that, having identified the non-disclosures that it says were material because they are factors that might usually weigh against the exercise of the discretion to extend, it has not developed in its submissions how those non-disclosures were material to the judicial registrar's decision to make the Extension Order, that is, whether disclosure would have led to a different outcome.[24] The second defendant's task is made more difficult because the judicial registrar made a determination on the papers and without giving written reasons.

18 I am not satisfied that the non-disclosures complained of were material, or if they were, that they induced the grant of the Extension Order in circumstances where those orders would not have been granted if the matters were disclosed. I am satisfied that the judicial registrar, an experienced lawyer and judicial officer, would have been aware of the potential limitation issues in relation to the claims given the statement in the Beech Affidavit that the proceeding had been commenced to preserve the plaintiff's rights against the second defendant and given the factual allegations (including the date of entry into the contracts and performance of the works) set out in the general indorsement. I am also satisfied that she would have been aware the second defendant might be prejudiced by the delay, given the extension was sought without any attempts at service even being disclosed. Whilst the expiry of limitations periods and prejudice to the defendant are factors to which a court may have regard in determining whether to extend time, the selection, in any given case, by the Court of the particular factors relevant to the exercise of its discretion, and the significance to be given to them are matters of discretion and will depend on the circumstances.[25] I do not accept, what appears to be the thrust of the second defendant's submission on materiality, that the identification, in Howard, of these matters as potentially relevant factors weighing against the exercise of the discretion necessarily makes them 'material' considerations for the purposes of a different case.

19 I will not set aside the Extension Order based upon the second defendant's first ground.

20 An application under r 46.08(b) of the Rules to aside an extension order that is not irregular proceeds as a re-hearing and not as an appeal.[26] The Court's task on the re-hearing is to determine, based on the material filed at the time and any additional material, whether the period of validity for service of the writ should have been extended.[27] To succeed, the plaintiff must establish a 'good reason' for the Court to grant the indulgence of an extension of time in which to serve.[28]

21 As noted above, the principles governing an application to extend service of a writ under r 5.12 were summarised in Howard, and restated more recently in Jabiru. Whether there is a good reason to extend depends on all of the circumstances of the case and the selection of the relevant factors applicable to any one case, and the weight to be given to each is in the discretion of the Court.

22 In this case, the 'good reason' identified by the plaintiff in the Beech Affidavit in support of its Extension Application is twofold. First, the plaintiff says it was only able to embark upon the process of 'formulating its claim as against the second defendant' after resolving its claims against the first defendant. Further, it maintains the quantum of the claim is significant and the evidence supporting the claim is of a highly technical and engineering nature, such that it needed the extension to 'properly quantify the loss and damage'. Second, the plaintiff says that it wished to explore the potential for a negotiated resolution without the need to resort to formal court processes. No different or additional reasons have been advanced in this hearing as providing a 'good reason' for the extension on the re-hearing.

23 In my view, there is no good reason for the extension of time in this case for the reasons that follow.

(a) First, the second defendant was not on notice of the proceeding until it received the letter of demand in December 2023, some four months after the Extension Order was made. It was not served with the writ until close to 12 months after the Extension Order was made. Knowledge of the existence of the proceeding, even in the absence of service of the writ, would usually mitigate against the prejudice that the Court presumes would otherwise affect a defendant by reason of the delay in prosecution of the proceeding. Here, the second defendant does not point to any actual prejudice - such as a witness no longer being available - however, it does not need to do so. The second defendant was affected adversely by the effluxion of time[29] from the date the cause of action arose until it became aware of the proceeding because (unlike the plaintiff) it could not begin preparation of its defence, it could not marshal evidence it will call in support of its defence, relevant documents may have been lost and the memories of witnesses may have faded. The presumptive prejudice in this case, and the absence of any steps to put the defendant on notice as to the existence of the proceeding, weighs strongly against the extension.[30]

(b) Second, the reasons relied upon by the plaintiff are entirely self-serving with respect to its own convenience and benefit. In so far as it sought an extension to have additional time to quantify its loss and damage, I accept the second defendant's submission that claims are routinely commenced prior to the quantification of losses, especially if the quantification depends upon the assistance of an expert. A plaintiff does not have the luxury of leaving a defendant in the dark about the existence of the proceeding and suffering prejudice whilst it uses up all of the time allowed under the Rules for service of a proceeding and then asks for more to quantify its claim. Likewise, it left its further investigations of its claims against the second defendant until too late.[31] There is no evidence that the second defendant impeded the plaintiff's investigation or that it controlled access to information or documents. There is similarly no evidence of any other external factor impeding the plaintiff's timely investigation and prosecution of its claims such as the external factors that might affect a liquidator, for example, their reliance on funding from third parties to progress a claim or their late assumption of control of a proceeding. In effect, the plaintiff's conduct is a product of its wishes or preferences. It has arrogated for itself the benefit of a stay of the proceeding whilst it investigated and formulated its claims against the second defendant, and to give it more time to negotiate. The authorities establish that such reasons, borne from the deliberate choices or wishes of the plaintiff, are not usually 'good' reasons to justify an extension.[32]

(c) Third, the plaintiff's delay in service of the writ was inconsistent with its obligations under s 25 of the CPA to use reasonable endeavours to minimise delay. Whilst it expressed its intention in the Beech Affidavit to negotiate a resolution without recourse to the Court process which is consistent with its obligations under the CPA, there is no evidence before me that it actually did so. Regardless, service of the writ would provide no impediment to negotiation, and to the contrary, it may have assisted it. Whilst alternative avenues for resolution are encouraged, a stay of the proceeding to enable those processes to occur can only be granted by the Court and is not something for the plaintiff to arrogate for itself. The letter of demand issued in December 2023 sought payment, within a period of about five weeks, of the full amount of the plaintiff's alleged loss as well as lost profit and legal costs, failing which instructions would be sought 'to proceed to the formal litigation process without further notice to you.'[33] Neither that letter nor any subsequent communications in evidence invited further negotiation, and none occurred. The letter did not enclose a copy of the writ, although it did disclose the existence of the proceeding. The plaintiff still did not serve the writ until 29 August 2024, that is, a couple of days before the additional period for service afforded by the Extension Order expired.

(d) Fourth, the expiry of the limitations period is a neutral factor on this application. Whilst the plaintiff will likely now be prevented from bringing some or all of its claims, the second defendant will otherwise suffer the loss of its limitations defences.

24 For the reasons given, I will set aside the Extension Order. I will also order that service of the writ and statement of claim upon the second defendant be set aside.

25 I will also order that the plaintiff pay the second defendant's costs of the proceeding including the costs of the plaintiff's and the second defendant's summonses.

26 I will ask the parties to provide a minute of order to give effect to the ruling, and consequential orders as to the future conduct of the proceeding.

27 Given the above orders, there is no need to consider the plaintiff's application for substitution orders.

[1] The plaintiff is described in the writ as 'Navigators Underwriting Agency Ltd as Managing Agent of Navigators Syndicate 1221 at Lloyd's'. This was changed in the statement of claim filed on 29 August 2024, but there have been no orders made to effect any amendment to the proceeding title.

[2] Affidavit of Mark Andrew Beech affirmed on 23 August 2023, [4] ('Beech Affidavit').

[6] Order of Woronczak JR in Navigators Underwriting Agency Ltd v Beever (Supreme Court of Victoria, S ECI 2022 03641, 1 September 2023).

[7] Affidavit of Christy Mellifont affirmed on 23 September 2024, [4], Exhibit CMM-1, 1-2 ('Mellifont Affidavit').

[10] That statement of claim purported to record a different party as the plaintiff (namely, Hartford Corporate Underwriters Limited), removed the reference (appearing in the writ) to the first defendant and identified the second defendant as the sole defendant to the proceeding.

[11] Savcor Pty Ltd v Cathodic Protection International APS [2005] VSCA 213; (2005) 12 VR 639, 647 [24] (Gillard AJA, Ormiston and Buchanan JJA agreeing), citing R v Kensington Income Tax Commissioners; Ex parte Princess Edmond de Polignac [1917] 1 KB 486.

[12] Savcor Pty Ltd v Cathodic Protection International APS [2005] VSCA 213; (2005) 12 VR 639, 648 [25] (Gillard AJA, Ormiston and Buchanan JJA agreeing) ('Savcor').

[15] It is not submitted that there was any intention to mislead.

[16] Howard v Power [2013] VSC 198 ('Howard').

[17] Jabiru Satellite Ltd v Société Generale [2021] VSC 544 ('Jabiru').

[19] Transcript of Proceedings, Navigators Underwriting Agency Ltd v Beever (Supreme Court of Victoria, S ECI 2022 03641, Goulden AsJ, 13 March 2025) T7.7 ('Transcript').

[21] [2009] NSWCA 104 ('Buzzle Operations').

[22] Buzzle Operations [8] (Ipp JA, Tobias and McColl JJA agreeing).

[23] In Savcor, Gillard AJA noted, at 650 [38] and 652 [42], his doubts as to whether the Master should have made the extension order in that case based on the material that was put before him, but no re-hearing application had been made and so that was irrelevant.

[26] Re APCH Ltd (in liquidation) (No 3) [2014] VSC 456, [17] ('Re APCH No 3').

[28] Re APCH No 3 [24], citing Ramsay v Madgwicks [1989] VicRp 1; [1989] VR 1; Jabiru [3].

[29] Ramsay v Madgwicks [1989] VicRp 1; [1989] VR 1, 7 ('Ramsay').

[30] Cf Jabiru [79], where the plaintiffs took reasonable steps to provide copies of the writ to the defendants.

[31] Pell v Hodges [2007] NSWCA 234.

[32] Ramsay 4; Savcor 651 [41(iv)]; Jabiru [53].

[33] Mellifont Affidavit [4], Exhibit CMM-1, 1-2.