Williams & Kersten Pty Ltd v National Australia Bank Limited

Case management hearing 7. The matter be listed for a case management hearing at 2:15pm on 9 December 2022 in person in Melbourne to deal with all outstanding interlocutory applications including security for costs, the opt-out notice, and all other matters necessary to ready the proceeding for hearing as soon as possible. 8. By 12pm on 8 December 2022, the parties provide a joint position paper identifying the position of the parties on any outstanding matters including identifying any orders that they propose to seek at the case management hearing. 9. The future case management of the proceeding be relocated to the Victorian Registry. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

(Delivered ex tempore, revised from the transcript)

A INTRODUCTION AND BACKGROUND 1 This was a class action commenced as long ago as 12 September 2019. It is unnecessary to explain why this proceeding has been the subject of such extraordinary delay, but, it is said to relate primarily to the inability of the applicant, Williams & Kersten Pty Ltd (which has brought this proceeding both in its own right and as representative of group members), to obtain litigation funding for a considerable period of time. 2 This left the proceeding in a stasis. I was informed by King's Counsel for the applicant that, highly unusually, the file was referred back to the Registry and "closed" sometime in 2020. It was reactivated in late 2021, by communication to the Court by the applicant's solicitor. A first case management hearing took place before a former judge of the Court in February 2022. 3 The matter came before me for the first time on 11 July 2022, when I made it clear that if the matter was to proceed, it needed to proceed like any other commercial case before the Court, and in line with the overarching purpose. 4 On that occasion, the applicant explained that it did not wish to amend the currently existing pleading until it obtained discovery of a large number of documents from the first respondent, the National Australia Bank (NAB). I refused this request because I said it was incumbent upon the applicant to plead a case against the respondent on the current state of its knowledge, before issues could be defined and orders for discovery made. 5 Following the case management hearing, a draft copy of an amended statement of claim was served but not filed. That document is the subject of an application for leave to amend before me today.

B THE APPLICATION FOR LEAVE TO AMEND 6 The amended statement of claim has at its heart an allegation that as at 31 March 2013, the NAB knew that if administrators or liquidators had been appointed to the second and third respondents (Walton companies), a series of events would have occurred, by which the NAB would have become an unsecured creditor and limited to making a pari passu claim with other unsecured creditors. 7 Armed with that knowledge, it is said that the NAB knew of, and became involved in, what is described as a "scheme", by which it sought to limit its exposure to the Walton companies, which were said to be either insolvent or close to insolvent. 8 The proposed pleading raises two primary controversies. The first relates to an amendment to include a claim under s 588M(3) of the Corporations Act 2001 (Cth) (Act) against the NAB for liability as a shadow director of the Walton companies for trading while insolvent. Originally, it was said that this claim required leave to be sought by the Court, but, for reasons that I will come to, that contention is no longer pressed. The second relates to the amendment of the group definition. 9 As to the first issue, the chronology of relevant events can be set out as follows: (1) on 3 October 2013, the Walton companies began to be wound up; (2) relevantly for the purposes of s 588S of the Act, the six-month period after the commencement of winding up expired on 3 April 2014; (3) on 18 September 2019, consent was obtained in respect of the applicant in its own right, pursuant to s 588R of the Act; and (4) on 4 May 2022, the applicant sought the liquidator's consent to take proceedings from the liquidator on behalf of the Group Members pursuant to s 588S of the Act. 10 I am also told that there was an attempt to procure the liquidator's consent with respect to the Group Members in September 2019, but such a document is not in evidence. I will proceed on the basis that some form of consent (along the lines sought in May 2022) was sought at an earlier time. 11 In seeking the liquidator's consent as it did, the applicant was acting under a misapprehension. Part 5.7B of the Act provides for the recovery of property or compensation for the benefit of creditors of an insolvent company. Division 4, Subdiv B provides a mechanism whereby proceedings can be commenced by a creditor with the consent of a liquidator, which may be sought after the end of the six month period beginning when a company begins to be wound up: ss 588R, 588S. If such consent is not given, the creditor can approach the Court for leave following the expiry of a period of three months: s 588T. 12 The group members have not commenced such a proceeding. They are not parties to this class action. The only proceeding that is on foot has been brought on behalf of the representative applicant. If a group member was to seek leave to bring a proceeding (for example, after the class action had been declassed), it would be necessary for such a group member to obtain the leave of the Court. 13 The proposed pleading proceeds on the basis that the insolvent trading claim is brought in a representative rather than individual capacity. For this reason alone, amendment to include this aspect of claim should be refused. 14 Further, the delay has been extraordinary and is largely unexplained, save for the suggestion that there has been a difficulty obtaining funding. Even if one assumed (without deciding) that it is correct to characterise this claim as arising out of the same facts, or substantially the same facts, as those already pleaded to support an existing claim for relief, I would, in any event, refuse leave to advance this proposed claim for the two reasons indicated. 15 The second controversial issue is the group member definition. The proposed definition seeks to refine the identification of group members. As I expressed to counsel, I was initially somewhat concerned that this might have the effect of excluding current group members from advancing claims which would otherwise be out of time, but were saved by reason of those persons being group members. I am told, however, that no such potentially excluded claims on behalf of group members are viable. 16 The opposition to the amendment to the group member definition was premised on the basis that the criteria in the definition were phrased in such a way as to include people who may not have suffered loss and damage. Even assuming that this was the case, this is not a valid objection to the question of how the group is defined. I have repeatedly said that a group member definition merely gives rise to a notional list of persons. Whether those persons in truth have claims (and whether they can successfully advance those claims) is a matter for another day. 17 It is well in closing to say something of a final matter, which may also be left for another day. It seems to me that the current iteration of the pleading is overly complex. I made clear to the applicant that it may be possible to simplify the case greatly, in accordance with the overarching purpose of civil litigation in this Court.

C CONCLUSION AND ORDERS 18 Accordingly, while leave to amend the group member definition is granted, I refuse the application to include a claim of insolvent trading. I will make orders facilitating the filing of amended pleadings. This case, which has been inexplicably delayed, should now proceed as quickly, inexpensively and efficiently as possible. I certify that the preceding eighteen (18) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Lee.