Weston v Publishing and Broadcasting Limited

LEGISLATION CITED : Corporations Act 2001 (Cth), ss 588FF(1), 588FF(3) Uniform Civil Procedure Rules 2005, rules 1.1(2), 6.2(4)(a), 12.11(1)(e), 12.11(2)

Hoddinott v Persimmon Homes [2008] 1 WLR 806 Mason v First Leisure Corporation Plc [2003] EWHC 1814 (QB) Onefone Australia Pty Ltd v One.Tel Ltd [2007] NSWSC 1320 CASES CITED : Rich v Long [2008] NSWSC 487 Simpson v Saskatchewan Government Insurance Office (1967) 65 DLR (2d) 324 Van Leer Australia Pty Ltd v Palace Shipping KK (1981) 55 ALJR 243 Verdich v McKechnie [1981] TasR 91 Weston v Publishing and Broadcasting Ltd [2007] NSWSC 1318

Paul Gerard Weston in his capacity as special purpose liquidator of One.Tel Limited - Plaintiff Publishing and Broadcasting Limited - First Defendant Consolidated Press Holdings Limited - Second Defendant Robbdoc Pty Limited - Third Defendant Toranaga Pty Limited - Fourth Defendant Cavalane Holdings Pty Limited - Fifth Defendant News Limited - Sixth Defendant Leteno Pty Limited - Seventh Defendant James Douglas Packer - Eighth Defendant PARTIES : Peter Wilson Yates - Ninth Defendant Lachlan Keith Murdoch - Tenth Defendant Peter John Macourt - Eleventh Defendant Kevin Beck - Twelfth Defendant Mark Alan Silbermann - Thirteenth Defendant Peter David Howell-Davies - Fourteenth Defendant Pirjo Hannele Kekalainen-Torvinen - Fifteenth Defendant Persons named in Schedule A trading as Freehills who are named in Schedule A to the Statement of Claim filed on 25 May 2007 - Sixteenth Defendant Persons named in Schedule B trading as Ernst & Young who are named in Schedule B to the Statement of Claim filed on 25 May 2007 Persons named in Schedule C trading as Ferrier Hodgson who are named in Schedule C to the Statement of Claim filed on 25 May 2007 - Eighteenth Defendant

COUNSEL : Mr N A Cotman SC/Mr R D Glasson - Plaintiff

IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION CORPORATIONS LIST

2902/07 PAUL GERARD WESTON v PUBLISHING AND BROADCASTING LIMITED & 18 ORS JUDGMENT 1 I made an order this morning extending the time limited by rule 6.2(4)(a) of the Uniform Civil Procedure Rules 2005 for the service of originating process in these proceedings. I indicated that I would publish brief reasons later in the day, as I now do. 2 The order extending time was made under rule 1.12 on the ex parte application of Mr Weston, as special purpose liquidator of One.Tel Limited. Three like orders have been made in the past. The statement of claim was filed on 25 May 2007. Having regard to the earlier extensions, the time for service was due to expire on 25 May 2009. The effect of the order made ex parte this morning is to extend the time for service to 25 November 2009. 3 I approached the application on the footing outlined by me in Weston v Publishing and Broadcasting Ltd [2007] NSWSC 1318 at [2], that is, that the court's discretion is broad and that the court need see no more than "good reason" to make the extension sought. 4 The reasons on which the special purpose liquidator relied today are set out in his affidavit sworn on 20 April 2009. A confidentiality order has been made in respect of the affidavit but it is still possible to state the principal matters. 5 The proceedings are proceedings under s 588FF(1) of the Corporations Act 2001 (Cth) in which the special purpose liquidator seeks an order requiring the defendants to pay money to One.Tel Ltd. The special purpose liquidator was appointed for the specific purpose of investigating whether such causes of action existed. His powers and functions were later extended on several occasions to allow him to move, step by step, to the initiation of proceedings within the three year time limit created by s 588FF(3). As I have said, the statement of claim was filed on 25 May 2007. 6 In November 2007, the court extended the special purpose liquidator's powers to enable him to seek litigation funding. This was appropriate because there were then insufficient funds in the One.Tel administration to finance litigation of the expected magnitude, yet there were clear prospects that the interests of One.Tel's creditors might be well served by continuation of the litigation. 7 On 22 October 2008, the court approved the making of an agreement between the special purpose liquidator and an overseas organisation engaged in the business of arranging and providing large scale litigation funding. The agreement was for the limited purpose of enabling the overseas organisation to assess the possibility of providing or arranging funding for this case. 8 The committee of creditors of One.Tel thereafter brought an application seeking to have the order of 22 October 2008 set aside and, in the interim, to have it stayed. On 10 November 2008, that dispute was settled. This was after the committee of inspection had been given certain information about the agreement with the overseas party. 9 The process provided for in the agreement was thereafter pursued. The special purpose liquidator's affidavit refers to a number of steps that have been taken on both sides. It is not necessary to go into them in detail. It is sufficient to say that the parties appear to have proceeded with reasonable despatch and diligence, although there were some delays caused largely by other persons. The term of the agreement was extended on two occasions. The overseas party has invested significant time and resources in the funding investigation. 10 It is pertinent that one factor in the litigation funding negotiations is that judgment has not yet been delivered in Australian Securities and Investments Commission v Rich, the case heard by Austin J. As has been noted in other judgments on applications by the special purpose liquidator, that case and this involve a number of significant common issues. The special purpose liquidator expects that a number of matters relevant to the funding possibilities will become more clear-cut after judgment is delivered in Australian Securities and Investments Commission v Rich. 11 The special purpose liquidator remains of the view that it is in the best interests of the creditors of One.Tel that he pursue the litigation and, to that end, continue with his attempts to arrange the necessary funding. 12 The evidence thus briefly described (but much more fully set out in the confidential affidavit and its confidential exhibit) showed, to my satisfaction, that there are good reasons why service of the statement of claim has not occurred and good reasons why its life should be preserved so as to allow it to be served in the future - if, of course, it is served at all. The special purpose liquidator's evidence makes it clear that if litigation funding is not obtained, he will be unable to proceed and there will be no alternative but to let the statement of claim lapse. 13 While good reason to extend the time for service was thus shown, it was nevertheless necessary to consider whether relevant prejudice would be visited upon the defendants by the granting of an extension. 14 The first point to make is that, although the s 588FF(3) limitation period expired shortly after the statement of claim was filed on 25 May 2007, the situation cannot and should not be regarded as one in which an extension of time for service will deny the defendants a defence that would otherwise be available. This is made clear in the judgment of Stephen J in Van Leer Australia Pty Ltd v Palace Shipping KK (1981) 55 ALJR 243, with particular reference to the Canadian case of Simpson v Saskatchewan Government Insurance Office (1967) 65 DLR (2d) 324. 15 Further, in relation to any possibility of prejudice to the defendants, the special purpose liquidator refers to orders and undertakings of April 2004 in proceedings in which certain persons associated with some of the present defendants challenged Part 5.9 examination summonses issued on the application of the special purpose liquidator. On that occasion, it was ordered, without opposition by the special purpose liquidator, that the examination summonses be discharged. Certain consents were, at that time, given by certain of the present defendants. These were given on conditions which included a condition that the special purpose liquidator not seek to examine any executives or employees of those defendants until after the delivery of judgment in the Australian Securities and Investments Commission v Rich case referred to above. 16 This, the special purpose liquidator submitted, indicates an attitude on the part of the relevant defendants that matters of controversy between the special purpose liquidator and those defendants can sensibly be left to await the outcome in Australian Securities and Investments Commission v Rich. There is force in that submission. 17 Finally, of course, there is the point that, if and when service within the extended period is actually effected, the defendants will have ample opportunity to argue that the order extending service should be set aside. This opportunity is assured by rule 12.11(1)(e) of the Uniform Civil Procedure Rules. I venture to repeat here what I said about that rule in Onefone Australia Pty Ltd v One.Tel Ltd [2007] NSWSC 1320 at [9] to [12}: "There is, in any event, a strong indication in the rules of the court themselves that a person named as a defendant in unserved originating process is not intended to be heard on an application for extension of the time for which the process remains valid for service. Rule 12.11(1)(e) of the Uniform Civil Procedure Rules 2005 is in these terms: 'In any proceedings, the court may make any of the following orders on the application of a defendant: ... (e) an order discharging any order extending the validity for service of the originating process.'

This, it seems to me, recognizes the obvious point that there will be cases in which filed but unserved process is never served. Unless and until a filed process is served, the defendant has not been drawn into the proceeding. The rule works on the basis that the named defendant is a non-participant in the process by which the court decides whether the time for service should be extended and that a defendant's interest in that question, if there is any, is something that is to be aired and dealt with after the event - that is, when the plaintiff has, by service, shown that it does in truth draw the defendant into the proceeding.

To put this another way, a defendant who has been served and who is thereby given a definitive status in relation to proceedings which it is by then clear will be pursued should be heard only retrospectively on the question of extension of time for service, assuming he or she wishes to be heard at all.

This is, to my mind, an example of a situation in which the rules of court expressly put to one side the general expectation that affected persons should be heard before any order affecting them is made. The expectation evidenced by the rules in this area is one of being heard after the event, not before the event, in much the same way as one might expect in relation to, for example, a subpoena. Much time and effort could be wasted if an unserved defendant were heard on a question that would become entirely academic if the plaintiff eventually decided not to serve at all." 18 I was there dealing with the question whether an application such as the present should properly be heard ex parte. The decision that it should was in line with earlier authority: see, in addition to the cases referred to in Weston v Publishing and Broadcasting Ltd (above), Verdich v McKechnie [1981] TasR 91. 19 Subsequently, in Rich v Long [2008] NSWSC 487, Young CJ in Eq, while accepting that, according to precedent, an application for an extension of time for service may proceed ex parte, expressed some disquiet about the proposition. He referred to Hoddinott v Persimmon Homes [2008] 1 WLR 806 where the English Court of Appeal endorsed the ex parte approach but, as his Honour saw it, at the same time gave the defendants leave to seek to set aside the order for extension. His Honour then addressed the question whether, in the case before him, the court "should direct that the defendants be notified of this order and of their right to have it set aside". Young CJ in Eq answered the question in the affirmative, although the direction he in fact made was referred to in the judgment (at [31]) as follows: "Where the application is in the second or third classes of case, unless the extension of time is for no more than a month or there is some suggestion that the defendants may seek to avoid service, the order, if it is to be made, may be made on an ex parte application, but the defendants must be notified of the order within seven days and also notified that they have up until the expiration of 28 days after service of the process to set aside the order. " [original emphasis] 20 In referring to "the second or third classes of case", his Honour was speaking of cases in which the limitation period is about to expire but the initiating processes still valid for service and cases where the limitation has expired and the initiating process is no longer valid for service. Because of the earlier extensions, this case is within the second class rather than the third. 21 Two points may be made. First, there does not appear to be in England any equivalent of our rule 12(11)(1)(e) which gives a clear and express right to a defendant to seek an order setting aside an order extending time for service. In England, it appears, a defendant wishing to make such an application must proceed under a rule concerning setting aside of orders made without notice or a rule under which jurisdiction may be disputed: see Mason v First Leisure Corporation Plc [2003] EWHC 1814 (QB) at [11]. The Hoddinott case to which Young CJ in Eq referred was an appeal in a case in which application under the latter rule had been made. 22 Second, it is not clear, with respect, what purpose a direction of the kind favoured by his Honour would serve. A defendant who has suffered prejudice because of an extension of time for service is assured by rule 12.11(1)(e) of an opportunity to assert that prejudice as a ground for an order that any service ultimately effected on him or her should be set aside. Under rule 12.11(2), such an order may not be made unless a notice of motion to apply for it has been filed "within the time limited for the defendant to enter an appearance in the proceedings" - that is, in a case where the proceedings are commenced by statement of claim, within "28 days after service on the defendant of the statement of claim" (or such other time as the court directs for the filing of a defence). In such a case, therefore, an application under rule 12.11(1)(e) cannot be made until after service has been effected and the defendant has actually been drawn into the proceedings. And, of course, service may never be effected. 23 It is difficult to discern what is to be gained by notifying an unserved defendant of a right that is not exercisable at the time of notification and may never become exercisable. 24 In the present case, there is the added practical point that the defendants are well aware that proceedings against them have been commenced. They applied unsuccessfully for leave to be heard when the first extension application was made. Highly competent lawyers represent them. Even if a direction of the kind advocated by Young CJ in Eq may be of some use in some cases as a means of reminding a defendant of a right that might in future arise and become relevant to the defendant's welfare, there is no need for it in this case. 25 It is for the foregoing reasons that I made this morning's order extending the time for service without also making any direction of the kind envisaged in Rich v Long (above). **********

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