Appeal Dismissed: Court Upholds Discharge of Time Extension Orders

The Court of Appeal dismissed an appeal challenging the discharge of orders extending the time for service of a statement of claim in a liquidation case. The claimant sought to challenge the lower court's decision to discharge the fifth and sixth extensions of time for service due to delays in litigation funding. The Court held that the lower court did not err in discharging these orders.

Court of Appeal Supreme Court New South Wales Medium Neutral Citation: [NAME] in Capacity as Special Purpose Liquidator of [COMPANY] (in liquidation) v [COMPANY] [2012] NSWCA 79 Hearing dates: 22 & 23 February 2012 Decision date: 12 April 2012 Before: Campbell JA at 1 Young JA at 2 Sackville AJA at 3 Decision: 1. [NAME] leave to appeal.

2. The appeal is dismissed. 3. [NAME] pay the respondents' costs of the appeal. [Note: The Uniform Civil Procedure Rules 2005 provide (Rule 36.11) that unless the Court otherwise orders, a judgment or order is taken to be entered when it is recorded in the Court's computerised court record system. Setting aside and variation of judgments or orders is dealt with by Rules 36.15, 36.16, 36.17 and 36.18. Parties should in particular note the time limit of fourteen days in Rule 36.16.] Catchwords: PROCEDURE - six successive extensions of time for service pursuant to Uniform Civil Procedure Rules, r 1.12 - service of statement of claim three years and three months after filing - [NAME] judge discharges Fifth and Sixth extension pursuant to r 12.11(1)(e) - whether [NAME] Judge's exercise of discretion miscarried - whether challenges to findings on prejudice should be set aside - significance of the decision by the liquidator of the plaintiff to postpone service until litigation funding arrangements were in place - whether any conflict between extensions of time for service on ex parte applications and discharge orders Legislation Cited: Corporations Act 2001 (Cth)

Civil Procedure Act 2005 Fair Trading Act 1987 Supreme Court Act 1970 Uniform Civil Procedure Rules 2005 Cases Cited: Agriculture and Rural Finance Pty Ltd v Kirk [2011] NSWCA 67; 82 ACSR 390 Arena Management Pty Ltd (Receiver & Manager Appointed) v Campbell Street Theatre Ltd [2011] NSWCA 128; 281 ALR 304 Armory v Delamirie (1722) 1 Stra 505; 93 ER 664 [COMPANY] v [COMPANY] (in liq) [2009] NSWCA 104 Australian Securities and Investments Commission v Rich [2009] NSWSC 1229; 236 FLR 1 [COMPANY] (in liq) v Deloitte Haskins & Sells [1999] 3 VR 863 [NAME] v [COMPANY] (No 2) [2001] FCA 1833; 117 FCR 424 Brisbane South Regional Health Authority v Taylor [1996] HCA 25; 186 CLR 541 House v The King [1936] HCA 40; 55 CLR 499 [COMPANY] (in liq) v Australian Competition and Consumer Commission [2006] QCA 407; [2007] 1 Qd R 148 Jackamarra v Krakouer [1998] HCA 27; 195 CLR 516 Maile v Rafiq [2005] NSWCA 410 Onefone Australia Pty Ltd v One.Tel Ltd [2010] NSWSC 498 Onefone Australia Pty Ltd v One.Tel Ltd [2007] NSWSC 1320 [COMPANY] v [COMPANY] (in liq) [2006] NSWSC 349 [COMPANY] v [COMPANY] (in liq) [2003] NSWC 1228 Rich v Long [2008] NSWSC 487 Tolcher v Gordon [2005] NSWCA 135; 53 ACSR 442 Weston v Publishing and Broadcasting Ltd [2010] NSWSC 1288 Weston v Publishing and Broadcasting Ltd [2010] NSWSC 499 Weston v Publishing and Broadcasting Ltd [2009] NSWSC 1235 Weston v Publishing and Broadcasting Ltd [2009] NSWSC 321 Weston v Publishing and Broadcasting Ltd [2007] NSWSC 1318 Category: Principal judgment Parties: [NAME] in his capacity as Special Purpose Liquidator of [COMPANY] (in liq) (First Applicant) [COMPANY] (in liq) (Second Applicant)

[COMPANY] (now known as [COMPANY]) (First Respondent) [COMPANY] (Second Respondent) [COMPANY] (Third Respondent) [COMPANY] (Fourth Respondent) [COMPANY] (Fifth Respondent) [COMPANY] (Sixth Respondent) [COMPANY] (Seventh Respondent) [NAME] (Eighth Respondent) [NAME] (Ninth Respondent) [NAME] (Tenth Respondent) [NAME] (Eleventh Respondent) Representation: Counsel:

[redacted]

[NAME] (First, Second, Third, Fourth, Fifth and Eighth Respondents) [NAME] (Sixth, Seventh, Tenth and Eleventh Respondents) [NAME] (Ninth Respondent) Solicitors:

[redacted]

[NAME] (First, Second, Third, Fourth, Fifth and Eighth Respondents) [NAME] (Sixth, Seventh, Tenth and Eleventh Respondents) [NAME] (Ninth Respondent) File Number(s): 2007/255083 Decision under appeal Jurisdiction: 9111 Citation: Weston v Publishing and Broadcasting Ltd [2011] NSWSC 433 Date of Decision: 2011-05-13 00:00:00 Before: Ward J File Number(s): 2007/255083

Judgment 1CAMPBELL JA: I agree with Sackville AJA. 2YOUNG JA: I agree with Sackville AJA. 3SACKVILLE AJA: This application for leave to appeal was argued as on an appeal. The critical issue is whether the [NAME] Judge (Ward J) erred in discharging the last two of six orders made by the Supreme Court successively extending the time for service of the statement of claim filed by the present applicant ("[NAME]"). The statement of claim was filed by [NAME], the Special Purpose Liquidator of [COMPANY] (in liq) ("[NAME]"), on 25 May 2007. It was served on the present respondents on 23 August 2010, shortly before the expiry of the last of the extended periods for service. 4The orders for extension of time for service of the statement of claim were made pursuant to Uniform Civil Procedure Rules ("UCPR"), r 1.12, which confers power on the Court, by order, to extend any time fixed by the rules, or by any judgment or order of the Court. The orders extending time were necessary because an originating process in the Supreme Court is valid for service only for six months after the date on which it is filed: r 6.2(4)(a). 5The [NAME] Judge made the orders discharging the last two of the orders extending time for service pursuant to UCPR r 12.11(1)(e). Rule 12.11 provides as follows: "(1) In any proceedings, the Court may make any of the following orders on the application of a defendant: [redacted] (e) an order discharging any order extending the validity for service of the originating process. ... (2) Such an order may not be made unless notice of motion to apply for the order is filed by the defendant within the time limited for the defendant to enter an appearance in the proceedings. (3) Notice of motion under subrule (2): (a) may be filed without entering an appearance; ... (4) The making of an application for an order under subrule (1) does not constitute submission to the jurisdiction of the Court." 6The effect of [NAME]'s orders under r 12.11(1)(e) was to render [NAME]'s statement of claim stale and incapable of being served.

Accordingly, [NAME] dismissed the proceedings: Weston v Publishing and Broadcasting Ltd [2011] NSWSC 433, at [851]. 7The [NAME] accepts that it is possible, theoretically at least, for him to institute fresh proceedings. Therefore the orders made by Ward J were interlocutory and leave to appeal is needed: Supreme Court Act 1970, s 101(2)(e).

BACKGROUND 8The proceedings arise out of the announcement and subsequent cancellation by [NAME] of a $132 million renounceable rights issue ("RRI"). The RRI was to be underwritten by [COMPANY] ("[NAME]") and [COMPANY] ("[NAME]") and was announced on 17 May 2001. However, on 29 May 2001, the [NAME] resolved not to proceed with the RRI and instead to appoint administrators to the company. [NAME] went into liquidation on 24 July 2001. 9On 23 December 2003, Windeyer J appointed [NAME] ([NAME]) as the Special Purpose Liquidator of [NAME]. His functions included considering and making recommendations to creditors of [NAME] as to whether any rights of action existed in relation to the cancellation of the RRI and whether proceedings should be instituted against any person. 10On 25 May 2007, just days before expiration of the six year limitation period, [NAME] filed a statement of claim. The named defendants included: * [NAME] and four associated companies; * [NAME] and an associated company; * [NAME] ("[NAME]"), a director and Executive Chairman of [NAME] and a director of [NAME]; * [NAME] ("[NAME]"), a director and Chief Executive Officer of [NAME] and a director of [NAME]; * [NAME] ("[NAME]"), a director of [NAME] and a director of [NAME]; and * [NAME] ("[NAME]"), a director and Chief Operating Officer of [NAME] and a director of [NAME]. (I refer to the named defendants above collectively as "the respondents". I refer to [NAME], its associated companies and [NAME] as "the [NAME]". I refer to [NAME], its associated company, [NAME] and [NAME] as "the [NAME]".) Other defendants were also named, but proceedings against them were subsequently discontinued. 11By reason of UCPR, r 6.2(4)(a), unless the time for service of the statement of claim was extended pursuant to r 1.12, it had to be served by 25 November 2007. In fact, as I have noted, the time for service of the statement of claim was extended by the Supreme Court on [NAME]'s application on six occasions, the last extension expiring on 25 August 2010. When the statement of claim was finally served on the respondents on 23 August 2010, three years and three months had elapsed from the date of filing. 12The following table sets out the date of each extension of time granted by the Court and the period of extension granted and also refers to the judgments given or orders made on each occasion: Date of Order Extending Time for Service Period of Extension Granted Decision Designation of Order 15 November 2007 From 25 November 2007 until 25 May 2008 Weston v Publishing and Broadcasting Ltd [2007] NSWSC 1318 ([NAME]) "First Extension" 12 May 2008 From 25 May 2008 until 25 November 2008 Orders made; no published judgment (Hammerschlag J) "Second Extension" 23 October 2008 From 25 November 2008 until 25 May 2009 Orders made; no published judgment ([NAME]) "Third Extension" 24 April 2009 From 25 May 2009 to 25 November 2009 Weston v Publishing and Broadcasting Ltd [2009] NSWSC 321 ([NAME]) "Fourth Extension" 16 November 2009 From 25 November 2009 until 25 May 2010 Weston v Publishing and Broadcasting Ltd [2009] NSWSC 1235 ([NAME]) "Fifth Extension" 20 May 2010 From 25 May 2010 until 25 August 2010 Weston v Publishing and Broadcasting Ltd [2010] NSWSC 499 ([NAME]) "Sixth Extension"

13There were a number of applications before the [NAME] Judge. Relevantly for present purposes, the respondents applied pursuant to UCPR, r 12.11(1)(e) for orders discharging the orders extending the validity for service of the statement of claim. [NAME] characterised (at [11]) the issue before her as whether any [NAME] or more of the orders for extension of the time for service of the statement of claim should be discharged or set aside. 14As the [NAME] Judge observed (at [50]), perhaps with a degree of understatement, the respondents' application was "vigorously contested". The [NAME], the [NAME] and [NAME] were each separately represented by senior and junior counsel, as was [NAME]. 15The hearing took place over four days, from 15-18 February 2011. [NAME] gave oral evidence and was cross-examined. [NAME] was also presented with a great deal of documentary evidence and extensive written and oral submissions from the parties. 16The [NAME] Judge delivered judgment on 13 May 2011. [NAME] declined to discharge the orders granting the first four extensions. However, she discharged the Fifth and Sixth Extensions pursuant to r 12.11(1)(e). This had the consequence, as I have noted (at [6] above), that the proceedings instituted by [NAME] were dismissed. 17The [NAME] does not submit that the [NAME] Judge incorrectly stated the principles governing the exercise of the discretionary power conferred by r 12.11(1)(e). Those principles were laid down by decisions of this Court in [COMPANY] v [COMPANY] (in liq) [2009] NSWCA 104 ("[NAME]") and Agriculture and Rural Finance Pty Ltd v Kirk [2011] NSWCA 67; 82 ACSR 390 ("[NAME]"). [NAME]'s contention is that [NAME]'s exercise of discretion miscarried because she made some errors of fact, took into account irrelevant matters and failed to take into account relevant matters. Thus, so [NAME] argues, her decision should be set aside in conformity with the principles stated in House v The King [1936] HCA 40; 55 CLR 499, at 504-505. 18The respondents do not challenge [NAME]'s decision not to discharge the first four extensions. However, they submit that [NAME] has not demonstrated any material error that would justify disturbing [NAME]'s discretionary decision to discharge the Fifth and Sixth Extensions. In addition, they have each filed a notice of contention seeking to uphold the orders made by the [NAME] Judge on grounds not relied on by [NAME]. 19Most of [NAME]'s submissions were directed to the order discharging the Fifth Extension, presumably on the basis that if that order was set aside, so too would the order discharging the Sixth Extension. However, [NAME] challenged some additional matters upon which the [NAME] Judge was said to have relied to support the discharge of the Sixth Extension. [NAME], who appeared with [NAME] and [NAME] for [NAME], did not suggest that if the order discharging the Fifth Extension was upheld, there was any independent basis on which to challenge the order discharging the Sixth Extension.

PRINCIPLES 20The principles governing the exercise of the power conferred by UCPR, r 12.11(1)(e) can be summarised as follows: (1)The principles relevant to an application to extend time for service under r 1.12 also apply to a motion pursuant to r 12.11(1)(e) to discharge orders for extension: [NAME], at 402 [58], per [NAME] JA (with whom Macfarlan JA and Sackville AJA agreed). (2)In exercising the discretion conferred by r 12.11(1)(e), the court should consider: "the attempts that have been made at service, the length of the delay, the reasons for the delay, whether the delay was deliberate, whether notice was given to the defendant, the conduct of the parties generally and the hardship or prejudice caused to the plaintiff by [discharging the orders] or to the defendant [by refusing to discharge the order]." [NAME], at [43], per [NAME] (with whom [NAME] agreed) cited with approval in [NAME], at [94]. (3)The discretion is to be exercised in the context of, and by reference to, the statute by which it is conferred: [NAME], at [28]. Consequently, in New South Wales, ss 56-59 of the Civil Procedure Act 2005 ("CP Act") require a judge exercising the discretion to have regard to whether the relevant party has: (a)diligently pursued the object of disposing of the proceedings in a timely way; (b)used, or could reasonably have used, available opportunities under the rules or otherwise, to avoid delay; and (c)reasonably implemented the practice and procedure of the court with the object of eliminating any lapse of time between the commencement of the proceedings and their final determination: [NAME], at [36]. (4)The court must take into account the policy considerations underlying the relevant limitations statute. Thus, defendants or potential defendants should be made aware of claims against them within a reasonable time and liquidators who do not commence proceedings until just before expiry of the limitation period should be especially diligent in pursuing prompt service: [NAME], at [37]-[39]; cited with approval in [NAME], at 410 [98]-[99]. (5)It is for the court and not [NAME] of the litigants to determine whether there should effectively be a stay of proceedings.

Accordingly, it is generally: "inappropriate to allow an extension of time for the service of a ... statement of claim where a significant cause of the delay has been the willingness of the plaintiff to do nothing about service while awaiting a decision from a [NAME] as to whether or not to provide the necessary funds. Were that to be regarded as a good reason to extend time, the Court would be allowing plaintiffs to arrogate to non-parties the right to decide the period by which the time for service of a writ should be extended. That would be fundamentally in conflict with the Court's duty to exercise, alone, the discretion conferred upon it." [NAME], at [82] cited with approval in [NAME], at 411 [101]. (6)Ordinarily, it is not a good reason for delay that a plaintiff wishes to hold up proceedings while some other case is tried: [NAME], at [90]. However, this is not an inflexible rule: [NAME], at 411 [102]. (7)If a defendant knows that claims have been made against him or her and understands the nature of the claims that have been made, that may mitigate the prejudice the defendant might otherwise suffer by reason of a delay in service: [NAME], at 415 [123]. 21In [NAME] referred (at [32]) with approval to [COMPANY] (in liq) v Australian Competition and Consumer Commission [2006] QCA 407; [2007] 1 Qd R 148 ("IMB"). In IMB, Keane JA (with whom McMurdo P and Cullinane J agreed), observed (at 160 [54]) that no case had held that the Queensland rules or their equivalents authorise renewal of a claim in favour of a party who: "chooses not to serve a claim where the facts of the case sufficient to enable the claim to be pleaded are known to the plaintiff." This observation was made having regard to the requirement in the Queensland rules that a party impliedly undertakes to the Court and to the other parties to proceed in an expeditious way. In [NAME] pointed out that (at [35]) the provisions of the CP Act are "akin to (and, in some aspects, go further than) the Queensland ... rules". In [NAME] JA distinguished IMB on the facts, but cast no doubt on the applicability of the reasoning in that case in New South Wales.

GENERAL OBSERVATIONS 22Before addressing [NAME]'s contentions, some general observations should be made about the circumstances of this litigation and of [NAME]'s successful applications to extend the time for service of the statement of claim.

1. Allegations in the Statement of Claim 23The statement of claim filed on 25 May 2007 made very serious allegations against the respondents. Among many other claims, the pleading alleged that: * [NAME], on and from 25 May 2001, determined to undertake such steps as might be necessary to procure [NAME] to release them from an agreement which included the terms of the RRI and a commitment by [NAME] to subscribe for their full entitlement in the share offer and to underwrite any shortfall in subscriptions (par 85); * [NAME], on and from 25 May 2001, determined to undertake a course of conduct designed to convince the directors, officers and advisers of [NAME] that [NAME] had not been fully informed or had been misled when they determined that a capital raising of $132 million was sufficient to keep [NAME] solvent (par 86(ii)); * [NAME] withheld information from the board and independent directors of [NAME] that might have suggested that [NAME] had practical prospects available to it, as an alternative to insolvent administration (par 86(xv)); * [NAME] asserted to the directors and advisors of [NAME] that the underwriting and subscription agreements to which [NAME] were parties were conditional on satisfactory due diligence when, to their knowledge, they were not (par 86(xxiii)); * pursuant to the determination between [NAME] represented to the solicitors and auditors of [NAME] that the future cash requirements of [NAME] could be assessed by reference to past expenditure when, to their knowledge, the circumstances of the business had materially changed (par 95); and * [NAME] and [NAME] "feigned" an interest in securing capital from a third party to maintain [NAME]'s solvency, when [NAME] well knew that the third party would require time to consider and obtain approvals for any such investment (pars 96, 97).

2. Non-Disclosure of the Statement of Claim and Other Material 24The respondents were informed, through their solicitors, of the filing of the statement of claim shortly after the event. The [NAME] applied to the Supreme Court on 28 May 2007, three days after the statement of claim had been filed, seeking an order for access to the pleading. That application was rejected, apparently by a Registrar of the Court. [NAME] did not seek review of the decision and did not renew its application. The result was that the respondents did not see the statement of claim until it was served on them on 23 August 2010. 25The [NAME] Judge made findings as to the respondents' prior knowledge of the claims pleaded against them in the statement of claim: "314. The [respondents] were informed, through their respective solicitors, of the filing of the claim from shortly after that occurred. They had already been on notice of the principal areas of investigation and had been alerted to the prudence of making notification of a potential claim to their insurers some time before. They were on notice of the likely subject matter of the claims that might be made against them at least insofar as that comprised uncommercial transaction claims; perhaps insolvent trading claims; misleading and deceptive conduct claims; and claims for breach of their duties as directors under the Corporations Act. 315. They had been the subject of examinations in relation to matters relating to the renounceable rights issue and had given evidence in the proceedings before Austin J (and so were aware at least of the thrust of the questioning from the [NAME] ... perspective)." 26Her [NAME] accepted (at [317]) that the respondents were on notice of matters of public record such as [NAME]'s June 2004 report, which referred to possible claims under the Corporations Act 2001 (Cth) and the Fair Trading Act 1987 ("FT Act"). However, [NAME] found (at [318]) that [NAME] made a conscious decision not to provide the respondents with details of the allegations made in the statement of claim. Therefore, while it could not be said that the respondents were totally unaware of the existence of potential claims against them or of the broad subject matter of those claims, it equally could not be said that they had specific knowledge of the claims actually made (at [319]). 27Her [NAME] later found (at [325]) that [NAME], after weighing the advantages and disadvantages of the courses of action open to him, "chose to delay the service of the originating process and to keep it confidential". [NAME] inferred (at [325]) that: "there was perceived to be a tactical advantage in keeping [the respondents] in the dark as to the claims it was then intended to bring against them". 28The [NAME] Judge rejected (at [148]) a suggestion made by [NAME] that the respondents should have asked [NAME] for a copy of the statement of claim. The [NAME] had unsuccessfully sought a copy from the [NAME] (via reports to creditors) had stated that the claim would be kept confidential. In these circumstances: "no criticism can ... be made of the [respondents] in failing to ask [NAME] for it ...[I]t was a matter for [NAME], if he wished to minimise the chance that extensions of time would be set aside, to make a copy available (on a confidential basis if thought necessary) to the [respondents] rather than waiting for them to ask for it."

3. Absence of Opportunity to be Heard 29All six applications for extension of time in which to serve the statement of claim were made ex parte and were determined in the absence of the respondents. The [NAME] were aware in November 2007 that [NAME] intended to seek an extension of time for service of the statement of claim without prior notification to the respondents. 30On 13 November 2007, the day after the application for the First Extension came before the Corporations List Duty Judge, the [NAME] and [NAME] filed a motion seeking leave to be heard in the proceedings, without becoming a party to them. Although the motion referred specifically only to [NAME]'s application to seek a variation in his powers (a matter that was also before the List Judge), the supporting affidavit made it clear that the [NAME] wished to have the extension application heard in open court and to ensure that none of the evidence was subject to a non-publication order. 31In argument on the motion, senior counsel for the [NAME] said that his clients might or might not want to oppose [NAME]'s application for an extension of the time for service. However, senior counsel also submitted that the [NAME] had a self-evident interest in the matter and that they had suffered prima facie prejudice because of the lapse of time since the relevant events had occurred. 32Barrett J refused the application by the [NAME] on 15 November 2007: Onefone Australia Pty Ltd v One.Tel Ltd [2007] NSWSC 1320. His [NAME] recorded (at [6]) the [NAME]' submission that as named defendants in the unserved proceedings, they had an obvious and direct interest in the question of whether the time for service should be extended. His [NAME] gave these reasons for rejecting the application: "9. There is ... 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 time for which the process remains valid for service ... 10. [Rule 12.11(1)(e)] recognises 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 proceedings. 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.

11. 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.

12. This is, to my mind, an example of a situation in which the rules of court expressly put to [NAME] 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 [NAME] of being heard after the event, not before the event, in much the same way as [NAME] 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." 33This decision provided the basis for all subsequent extension applications to be made ex parte, therefore without the respondents either being notified or having the opportunity to be heard. In addition, the affidavits prepared by [NAME] in support of the six applications for extension of time, together with exhibits and certain written submissions, were subject to confidentiality orders made on [NAME]'s application. 34The respondents did not gain access to the affidavits, exhibits and written submissions until they filed motions in September and October 2010 (after the statement of claim had been served) seeking orders for access. [NAME] resisted the applications, but [NAME] ruled in favour of the [NAME] (who had carriage of the motions): Weston v Publishing and Broadcasting Ltd [2010] NSWSC 1288. His [NAME] held that there was no basis for maintaining the confidentiality orders, except for a limited class of commercially confidential documents relating to the litigation funding arrangements.

4. The Respondents' Entitlement to be Heard After the Event 35As the judgment of [NAME] on [NAME]'s application to be heard in relation to the First Extension made clear (at [12]), [NAME] was expressly put on notice (if he was not previously) that the respondents would have the opportunity to be heard on the question of extensions after the event. [NAME]'s judgment proceeded on the basis that an extension of time for service of originating process on an ex parte application could in no way determine the outcome of a subsequent application to discharge the order extending time. 36The point was reinforced on other occasions. In his judgment of 24 April 2009 granting the Fourth Extension, [NAME] observed (at [17]) 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) ..." 37In his judgment of 20 May 2010 granting the Sixth Extension, [NAME] noted (at [3]) that he had granted the Fifth Extension "with some hesitation" but that he was nonetheless prepared to grant "yet another extension" for two reasons. These were (at [5]): "first, the broad discretion that the court has upon an application such as this and, second, the safeguard provided for the defendants by rule 12.11(1)(e)..." 38The provisional nature of a grant of extension of time is important. [NAME] submitted more than once in this Court that there was an inconsistency between decisions to grant the Fifth and Sixth Extensions and the [NAME] Judge's decision to discharge the orders granting the extensions. [NAME]'s written submissions, for example, asserted that: "[t]wo different judicial officers have reached diametrically different conclusions with dramatic adverse consequences for the applicants. There were no new or additional facts before the [NAME] judge that were not before [NAME] which could explain the difference in result." 39With great respect to [NAME], that submission rests on a misconception. Quite apart from the fact that there was material before the [NAME] Judge that was not before Barrrett J, there is no relevant inconsistency between the Fifth and Sixth Extensions and the [NAME] Judge's decision to discharge the orders granting those extensions. The extensions of time were granted on ex parte applications by [NAME], in circumstances where it was made clear that the respondents would have an opportunity in due course to apply to discharge the orders. When the respondents made such an application, they advanced submissions and relied on materials that were not (and, in certain respects, could not have been) put to [NAME]. This is precisely what his [NAME] envisaged would happen. 40This is not to say that the procedure established by the rules is ideal. Far from it. In Rich v Long [2008] NSWSC 487, also a case arising out of the liquidation of [NAME], Young CJ in Eq identified (at [24]) "two great weaknesses" in what he characterised as the "English Procedure" for hearing ex parte applications for extensions of time to serve originating process: "First, the court does not have the benefit of competing arguments from the proposed defendants. Secondly, if the extension were refused before the original time limit ran out, the plaintiffs could just serve the initiating process. If the extension is granted and later the defendants successfully move to set the extension aside, the plaintiffs may be without remedy." His [NAME] considered (at [25]) that the "English Procedure", despite its drawbacks, was too firmly entrenched to be altered. 41In view of the criticisms made by Young CJ in Eq and the arguments advanced in the present case, there is much to be said for amending the UCPR to confer a discretion on the court to allow the unserved party to be heard in opposition to an application for an extension of time for service. Among other advantages, this might minimise delay and unnecessary expense, at least in the long run. It is also likely to avoid the risks to the perceived institutional integrity of the court that can flow from decisions that may be seen (particularly by those unversed in the nuances of ex parte applications) as difficult to reconcile. 42Whatever the merits of amending the UCPR, [NAME] was always aware that the respondents would have an opportunity, after they had been served with the statement of claim, to apply to discharge the orders extending the time for service. [NAME] also knew that any such application would be determined at a contested hearing at which all parties would be entitled to be heard. The respondents would therefore be entitled at the hearing to adduce evidence and advance arguments that were not before the Judges who granted the various extensions.

5. [NAME] 43The delay in finalising the proceedings in Australian Securities and Investments Commission v [NAME] ("[NAME]") was relied on by [NAME], both before the [NAME] Judge and on the appeal, as a good reason for obtaining extension of time for service of the statement of claim against the respondents. In [NAME], the Australian Securities and Investments Commission ("[NAME]") sought civil penalties against [NAME], a director of [NAME]. 44ASIC commenced the proceedings in the Supreme Court against [NAME] on 12 December 2001. The trial began before Austin J on 6 September 2004 and continued for nearly three years, concluding on 21 August 2007. Austin J did not hand down judgment until 18 November 2009, when his [NAME] dismissed the [NAME]'s claims against [NAME]: ASIC v Rich [2009] NSWSC 1229; 236 FLR 1. [NAME] obtained the Fifth Extension on 16 November 2009, two days before delivery of the judgment in [NAME]. 45As the [NAME] Judge in the present case found (at [51]), [NAME] involved a detailed analysis of [NAME]'s financial position during the period from January 2001 until the appointment of administrators, a period that overlapped with the announcement and cancellation of the RRI. Not surprisingly, a very large volume of documentary evidence was tendered at the trial before Austin J. Oral evidence was given by [NAME] and [NAME] (among others). All three were extensively cross-examined by [NAME]'s counsel. 46The [NAME] contended in the present proceedings that there was a substantial overlap between the issues in [NAME] and those raised by the statement of claim in this case. In particular, it was said that the vital question of [NAME]'s solvency as at 29 May 2001, when the RRI was cancelled and [NAME]'s board resolved to appoint administrators, was expected to be determined by the judgment in [NAME]. 47The [NAME] Judge pointed out (at [55]) that the question of whether [NAME] would resolve the issue of [NAME]'s solvency was addressed by [NAME], in a judgment given on 26 April 2006 on an application by [NAME] to vary the terms of his appointment as Special Purpose Liquidator of [NAME]. In that judgment ([COMPANY] v [COMPANY] (in liq) [2006] NSWSC 349), [NAME] recorded (at [16]) that at the trial in [NAME], which had not then concluded, Austin J had rejected a substantial body of expert evidence tendered by [NAME] in relation to solvency. [NAME] also said (at [17]) that in his view it was not clear that the precise questions of solvency relevant to the cancellation of the RRI would necessarily be determined by the judgment in [NAME]. As events transpired, the judgment in [NAME] did not resolve the questions of solvency raised for determination in the proceedings against the respondents. 48The [NAME] Judge in this case noted (at [323]) that senior counsel for [NAME] had accepted that there was no agreement in place as at November 2007, or at any time thereafter, pursuant to which the respondents consented to the extension of time for the institution and hence later service of the proceedings until six months after delivery of the judgment in [NAME]. A request made by [NAME]'s legal representatives to the respondents' solicitors in April 2008 to confirm that they had instructions to accept service, was inconsistent with any arrangement that service should be deferred until delivery of the judgment in [NAME] (at [117]). 49Furthermore, it could not be said that the respondents had acquiesced in a delay of the proceedings until delivery of judgment in [NAME]. [NAME] could not reasonably have formed the view (from November 2007) that the [NAME] and [NAME], if not the [NAME], acquiesced in any further delay, since they had sought leave to oppose the First Extension (at [325]). Nor had they encouraged [NAME] to believe (as he claimed he did) that the respondents acquiesced in delays in serving the statement of claim (at [327]).

6. Legal Advice and Investigation 50In May 2007, [NAME] received senior counsel's advice that the claim then propounded had reasonable prospects of success. [NAME] decided to defer service of process to permit senior counsel to review the pleadings (at [108]). At that stage, [NAME] had not completed his investigations and had also formed the view that there were insufficient funds available to run the proceedings (at [109]). 51Following filing of the statement of claim, [NAME] (in accordance with the wishes of the [NAME] ("[NAME]")) requested another senior counsel to review the pleadings. In addition, he took steps to procure funding for the litigation (at [111]). 52By March 2008, [NAME] had formed the view that it was likely that the proceedings against the respondents would be actively pursued (at [116]). On 11 April 2008, [NAME] received detailed final opinions from counsel which were incorporated into packages sent to a number of potential [NAME] (at [340]). At this stage, [NAME] had formed the view that the proceedings should be pursued, but considered that he did not yet have the requisite funding to do so (at [341]). By May 2008, [NAME] had concluded his investigations into the merits of the claims against the respondents. 53The reasons why an extension of time for service was sought at that time had nothing to do with the pending judgment in [NAME] (at [344]), nor with the need to carry out further investigations (at [346]). The reasons related to the need to secure litigation funding (including court approval for any funding agreement) and for proposed amendments to the pleading to be effected once approved by the [NAME] (at [347]).

7. The Alternatives 54The [NAME] Judge summarised (at [90]) the options [NAME] believed he had available to him as follows: "first, to serve the proceedings prior to the expiry of any limitation periods and then to serve the proceedings on all [respondents] notwithstanding that [he] had not completed all of [his] investigations, the proceedings in [NAME] had not been completed and [he] had not made a final decision as to whether to prosecute the proceedings against any of the [respondents] and the second option being to issue the proceedings prior to the expiry of any limitation periods and then to apply to the courts to extend the time within which to serve the proceedings ... (the latter being the course he adopted)." 55The [NAME] Judge found (at [92]) that, leaving aside the possibility of agreeing with the respondents not to issue the proceedings until after judgment in [NAME] broadly had a choice either: * to activate the proceedings by serving the statement of claim and putting in place measures to minimise costs pending judgment in [NAME]; or * to seek successive extensions of time. * 56The [NAME] Judge found (at [93]) that the link between the handing down of the judgment in [NAME] and service of the statement of claim arose only in April 2009, when the [NAME] with whom [NAME] was negotiating, said that they wished to await delivery of the judgment before making a decision. The particular difficulty arose when [NAME], who were asked to provide shortfall insurance cover for the second layer ($28 million) of a potential adverse costs order (on the worst case scenario) of $40 million, indicated that they wished to see the judgment in [NAME]. (The [NAME] Judge said (at [93]) that the link with the judgment in [NAME] became apparent in 2008, but [NAME]'s later findings make it clear that the link was first made in April 2009 (see [109] below).)

[NAME]

JUDGMENT 57I have referred, under the heading of "GENERAL OBSERVATIONS" (at [22] above) to some of the findings made by the [NAME] Judge. In this section I summarise [NAME]'s reasoning on important aspects of the case. 58It is to be borne in mind that [NAME] delivered a very detailed judgment, 317 pages in length (although not all issues addressed in the judgment are relevant to the appeal). The [NAME] in their submissions described the judgment as "carefully reasoned". In my opinion, that is a fair description.

General Findings 59The [NAME] Judge accepted (at [101]) that [NAME] believed, from the time the statement of claim was filed, that the respondents accepted that [NAME]'s decision whether to proceed should await the outcome in [NAME]. [NAME] did so notwithstanding that [NAME] had not seen "fit to share [his belief] with the Court", at least on the earlier applications for extensions of time of service. 60However, [NAME] did not accept (at [102]) that there was: "a reasonable foundation for that belief at least as from the time of the first extension application in November 2007, when it was clear that some of the defendants (the [NAME] [respondents] and [NAME]) wished to be heard on that application and to contend that there should be no such extension of time." (Emphasis in original.) 61Her [NAME] continued: "103. ... [w]hile it is certainly the case that, as late as January 2007, the [respondents] had expressed a willingness to agree to an extension of the limitation period (or, perhaps more accurately, not to plead a limitation defence) for a period up to six months after the [NAME] judgment was handed down (in the context of their assertion that further public examinations at that stage were unnecessary and were likely to prove futile), I was taken to nothing that indicated that such a willingness continued after the time at which the proceedings were instituted. 104. [[NAME]] was clearly on notice that there was no agreement in place for the extension at that stage - it had been pointed out very clearly by [NAME] in his April 2006 reasons and there was no suggestion at that time that his [NAME] had incorrectly described the position. Further, [[NAME]] has had the benefit of legal advice throughout and must have been aware of the risk that any extension of time obtained by him (on an ex parte basis) could be subject to later challenge (indeed, that possibility was expressly adverted to by [NAME] both in November 2007, in the context of the defendants' unsuccessful application for leave to be heard, and, most recently, on the final extension application in May 2010)." (Emphasis in original.) 62Her [NAME] found (at [116]) that by March 2008, [NAME] had formed the view that it was likely that only the [NAME] and [NAME] (including [NAME]) would be pursued in the proceedings. At about this time, [NAME] prepared a litigation funding package, which included a draft statement of claim. 63In October 2008, [NAME] entered into a Due Diligence Agreement in relation to litigation funding (at [118]). The Agreement contemplated the procurement by a syndicate (of which [NAME] was to be a member) of funding for the litigation. The proposed funding was to cover [NAME]'s legal costs in the proceedings and his own remuneration in connection with the litigation. It was also to include an indemnity in respect of adverse cost orders, to a maximum of $12 million. It was further contemplated that Indemnity Shortfall Insurance would be obtained for an additional amount of $28 million, making a total of $40 million available to cover any adverse cost orders against [NAME]. The due diligence period was eight weeks, although this was subsequently extended. 64In fact, completion of the litigation funding arrangements did not occur until after judgment had been handed down in [NAME] in November 2009. [NAME] considered (at [120]) that the delay in completing the litigation was due to: "the concern by [[NAME]] that he not be personally exposed and that he had funding in place to meet the full estimated 'catastrophic' adverse costs event (of around $40m); his desire to achieve this on the basis he considered most cost-effective for creditors through the procuring of indemnity shortfall cover..." 65The [NAME] Judge explained (at [121]) the basis on which [NAME] reached the figure of $40 million as the extent of his possible exposure to adverse costs orders: "[The basis of the calculation] was that [NAME] might be liable for the whole of the costs of the [NAME] defendants (include in a separate and equal amount for the CPH defendants within the [NAME] group) on a solicitor/client basis ... [the sum of] $40m was comprised in effect of ... the amount estimated to [NAME]'s (solicitor/client) costs (roughly $14m); assuming that there would be the same level of costs incurred by each of the three sets of defendants - [NAME], and adding this multiple of three times [NAME]'s costs to the $14m for [NAME]'s own costs." (Emphasis in original.) 66The [NAME] Judge considered at some length the authorities on delay and prejudice. [NAME] then dealt with the respondents' contention that they had suffered actual prejudice by reason of [NAME]'s delay in serving the statement of claim. In particular, the respondents argued that they had lost the opportunity to pursue potential cross-claims and to claim contribution from joint tortfeasors. They maintained that cross-claims might be pursued against other directors of [NAME] and various professional advisers to the company. 67The [NAME] Judge found (at [245]) that the potential cross-claims identified by the respondents could not simply be dismissed as "speculative". Nonetheless, [NAME] did not think that the risk of prejudice to the respondents was great because she was not satisfied that any direct cross-claim against professional advisers was statute barred (at [253]), although she accepted (at [252]) that there was a risk that other potential cross-defendants might be able to rely on a limitations defence. [NAME] concluded that no prejudice had been established in relation to contribution claims, since the time limit for bringing those had not yet expired (at [258]). 68Her [NAME] recognised (at [266]-[267]) that there were circumstances in which presumptive prejudice could be negated or not given much weight, for example because there had been an opportunity to take statements from relevant witnesses and all relevant documents had been preserved. [NAME] also acknowledged (at [268]) that the majority of key witnesses had already given evidence on oath, both in public examinations conducted by [NAME] and in [NAME]. Furthermore, [NAME] had sought to conduct public examinations as early as April 2004, but had been delayed in his endeavours because of resistance from the respondents (at [269]). Nonetheless, in [NAME]'s view: "this does not meet the difficulty that there seem to be a large number of potential witnesses to the relevant events who have not been the subject of any examinations or given evidence of their recollections to date, and however assiduous some or all of them may have been in recording their recollection of events, inevitably their evidence will have less immediacy (and hence be more prone to be unreliable) than it would have been closer to the events in question." 69The [NAME] Judge accepted that the prejudice to [NAME] also had to be weighed in the balance (at [271]). That prejudice included the loss of claims that would now be statute-barred and the loss of a significant investment in the investigation of potential claims. [NAME] also accepted that ss 56-59 of the CP Act did not require delay to be given primacy over the need to reduce costs and to ensure that proper consideration is given to the issues in a case. Even so (at [277]): "it is a relevant factor in the balancing exercise to be carried out that there has been considerable delay in the prosecution of the proceedings (and that such delay, coupled with the delay in the commencement of the proceedings in the first place, is likely to have a prejudicial effect on the conduct of the proceedings by the [respondents])." 70The [NAME] Judge stated her conclusions as to prejudice, as follows (at [270]): "I accept that the [respondents] have not pointed to particular witnesses who are no longer available to give evidence or whose memories have been adversely affected by illness or the like; nor have they pointed (beyond reference to the matters noted in Austin J's judgment [in [NAME]]) to loss of documentary material. I also accept that there has been an opportunity for them to preserve or record their recollection of events (and there is every indication that they have done so through the retainer of legal advisers) and, further, that the events of May 2001 have been tested in a public context over the period since 2001 with a variety of people. I do not, however, accept that this means that the likelihood of prejudice has been negated and I do not consider that this is matter which should be accorded little weight (particularly having regard to the context in which delay must be considered in the light of the statutory mandate contained in ss 56-59 of the Civil Procedure Act)."

The Extensions of Time for Service 71The [NAME] Judge next considered the circumstances in which each of the six extensions of time was granted by the Court. She noted (at [281]) that the reasons given for the delay in service fell broadly into three categories: "(i) to enable the completion of [NAME]'s investigations (this being relevant only in relation to the first extension of time); (ii) to enable [NAME] to secure funding (in satisfactory terms to [NAME]) for the proceedings (that being, from late October 2008/early 2009 until at least September 2009, depended upon the outcome in and [NAME]' review of [NAME]) (relevant to the second to fifth extensions); and (iii) to permit a final review of the judgment in [NAME], handover of the matter to new solicitors and to allow for the preparation of the proposed amendments to the statement of claim having regard to the evidence, submissions and reasons for judgment in [NAME] (the final extension)."

The First Extension 72In relation to the First Extension, the [NAME] Judge pointed out that the relevant period of delay was from the date of filing of the statement of claim and not from the accrual of the cause of action pleaded (at [289]). [NAME] did not think that a six months delay weighed heavily in the balance against an extension, particularly because [NAME]'s decision to commence proceedings shortly prior to the expiry of the limitation period could not be characterised as dilatory conduct (at [291], [292]). 73The [NAME] had given two main reasons for seeking the First Extension (at [294]). These were that further investigations were required before he would be in a position to make a final recommendation to creditors as to whether to serve the statement of claim on any of the named defendants and, secondly, that he had to be satisfied that there were sufficient resources available to fund the proceedings. The [NAME] Judge noted (at [304]) that [NAME] had accepted at the time that there was no need, from his point of view, to wait for the judgment in [NAME] before serving the statement of claim and that this was not a reason for seeking the extension. 74The [NAME] Judge then addressed the extent of the respondents' knowledge of the allegations against them and made findings as to [NAME]'s conscious decision not to provide the respondents with a copy of the statement of claim prior to service (see at [25], [26] above). 75Despite [NAME]'s findings that the respondents had not acquiesced in any delay (at [49] above) she concluded (at [332]) that: "the prejudice occasioned by a short six month extension is outweighed by the reason for which the extension was required [that is, the need to complete investigations where there had been no suggestion that [NAME] had been dilatory in that regard] and the circumstances in which the matter had reached this point, particularly in light of the significant prejudice to [[NAME]] if an extension were not to be granted."

Second Extension 76The [NAME] Judge summarised (at [338]) the reasons given by [NAME] for seeking the Second Extension as follows: "'to enable [him] to have sufficient time to obtain satisfactory litigation funding' ... and thereafter to take the following steps: (a) make final recommendations to the [NAME] and seek the Committee's views on the proposed funding agreement; (b) make an application to the Court to vary powers to enter into a funding agreement; (c) complete the proposed amendments to the Statement of Claim in these proceedings; (d) seek leave to make those amendments; and (e) serve the Statement of Claim." (Emphasis in original.) 77As I have noted (at [53] above), the application for the Second Extension had nothing to do with the pending judgment in [NAME] or the need for further investigations. [NAME]'s reasons related to the need to secure litigation funding and Court approval for the funding agreement (at [347]). In this respect, [NAME] found (at [350]) that there were sufficient funds available to [NAME] at this stage to commence the proceedings, although not to meet the likely costs of the proceedings in full or to meet any adverse costs orders against which [NAME] (not surprisingly) wished to be protected. In this respect, the legislation governing some of the claims [NAME] wished to bring, such as the uncommercial transactions claims, required [NAME] personally to be the plaintiff. Consequently, any adverse costs order would be against him personally: Arena Management Pty Ltd (Receiver & Manager Appointed) v Campbell Street Theatre Ltd [2011] NSWCA 128; 281 ALR 304, at 308 [18], per Campbell JA (with whom McColl and Macfarlan JJA agreed). Furthermore, at the time [NAME] sought the Fifth Extension the UCPR had not been amended to take their present form, which allows costs orders to be made against [NAME] even if they have not provided an indemnity to the relevant party: [NAME] at 309 [24]-[25]. 78Her [NAME] expressed her conclusions in relation to the Second Extension as follows: "358. By May 2008, seven years had passed since the events in question. At this and each successive occasion, it must logically be the case at the risk of prejudice (whether that be termed presumptive, inferred or otherwise) from the passage of time, and the harshness of the operation of the delay on the individual [respondents] will have increased (at least in the absence of some further steps taken to preserve the position). Similarly, the prejudice to [[NAME]] by the potential loss of the claim and a loss of the (by now) increased financial investment in the proposed proceedings remained. 359. On balance, I consider that, weighing the above factors, the order for extension on this occasion should not be set aside."

Third Extension 79The [NAME] Judge noted (at [360]) that a final opinion had been received from counsel in April 2008 and that at that stage [NAME] was ready to serve the statement of claim, subject to funding and the leave of the Court. [NAME] observed that [NAME] had accepted in his evidence that by this stage he had been able to form a view as to whether the claim should be brought, independently of the pending decision in [NAME]. 80Her [NAME] recorded (at [363]) that [NAME], in his affidavit, had given details of a proposed funding agreement with [COMPANY] ("[NAME]"), an offshore [NAME]. [NAME] had said that a further extension of time for service was necessary because the due diligence period for [NAME] would expire eight weeks after Court approval of the due diligence agreement (at [365]). If an offer of funding was to be made, following favourable due diligence, a further 28 days would be required to enter into the agreement and seek Court approval to do so. For that reason, it was unlikely that funding arrangements could be concluded prior to 25 November 2008 (the extended date for service as it stood at the time). 81The [NAME] agreed in his evidence before the [NAME] Judge that in October 2008, he had effectively received an offer that he could have accepted for the funding of his costs, non-legal expenses and an indemnity of $12 million in respect of adverse costs orders (at [367]). Although the offer had been subject to due diligence, [NAME] appeared to have been confident of the outcome of the process. [NAME] had also agreed in his evidence that all delays after October 2008 were connected to his desire to secure additional funding coverage for a possible adverse costs order over and above the sum of $12 million. Consequently, as at October 2008, the only "hitch" in finalising the funding agreement was [NAME]'s inability to find an insurer prepared to provide insurance on acceptable terms for adverse costs (as well as the due diligence period provided for in the agreement with [NAME] (at [368])). [NAME] found that the so-called "free cash" that might have been available for the funding of the litigation varied over time, but about $7.5 million to $8 million of "free cash" was to be included in the funding package, since [NAME] itself was to be a syndicate member and a provider of capital for the litigation fund (at [368]). 82The [NAME] Judge concluded that although the period of delay had increased by the time of the Third Extension, the balance still lay in favour of the extension of time. [NAME] had taken active steps to put in place funding in order to enable the proceedings to be commenced on a basis favourable to creditors (this funding proposal was referred to as "[NAME]"). However, [NAME] observed that [NAME]'s view was influenced by the fact that litigation funding at that stage appeared likely to eventuate reasonably promptly (at [371]).

Fourth Extension 83The [NAME] had given affidavit evidence in support of the application for the Fourth Extension in which he said that he had taken further steps to secure litigation funding from the proposed syndicate, including $12 million in respect of any adverse costs order, subject to additional insurance to cover a "catastrophic" cost outcome (at [375]). [NAME] had referred to a letter of 17 April 2009 from [NAME], stating that its continued investment in the proposed funding arrangements reflected its confidence that the claim was financially viable and would be successfully funded and insured. However, [NAME] had also said in his affidavit that it was "extremely unlikely" that the funding arrangements could be concluded by 25 May 2009 (the expiry of the Third Extension) (at [377]). 84The [NAME] had accepted in his evidence before the [NAME] Judge that * he did not think that it was in the interests of creditors to await the decision in [NAME], but waiting for the decision was necessary because it seemed to be a condition of funding (at [380]); * he was not prepared to take any risks until the funding agreement was in place, even though he was aware that the events in question had taken place about eight years previously and that, by this time, there was a "high probability" that he would obtain funding for the litigation (at [382]); and * the sole reason he was not prepared to serve the statement of claim in April 2009 was that funding was not "locked in" and he acknowledged that there might have been enough funds, in the form of "free cash" of about $7.5 million, to commence running the proceedings (at [383]). * 85The [NAME] Judge stated her conclusion in relation to the Fourth Extension as follows (at [395]): "By this stage it seems to me that the balance is clearly shifting against an extension. The sole reason for the delay is [NAME]'s decision to achieve funding on terms satisfactory to him (even though that may have been at a higher than necessary level) (and the need to await [NAME] is simply a function of the requirements of such funding). [NAME] had expressed confidence in its being concluded by September 2009, he had advice expressing confidence in the claim and he was ready, but for funding, to serve it. Moreover, while I do not go so far as to say that the level of funding is excessive, there was clearly a point at which [NAME] could have taken the view that the proceedings could commence (as the Committee back in 2007 had urged be done) with the funding for the immediate tasks, with consideration to further negotiations in relation to what was on [NAME]'s own estimates, a catastrophic funding scenario. With some hesitation, nonetheless, I have concluded that this order for extension should not be discharged." (Emphasis added.)

Fifth Extension 86The [NAME] Judge recorded (at [398]) [NAME]'s affidavit evidence on the application for the Fifth Extension that the proposed indemnity shortfall insurers wished to see the judgment in [NAME] before committing themselves to the additional insurance coverage. (The coverage related to the second layer of a potential adverse costs order over and above the sum of $12 million already provided for, the additional layer being estimated by [NAME] at $28 million.) These difficulties had led [NAME] to propose in late September 2009 alternative funding structures for litigation (referred to by [NAME] as "[NAME]"). 87Her [NAME] summarised (at [400]) the two versions of [NAME] as follows: "[The first version] involved the introduction of additional capital investors into the existing proposed funding syndicate to effectively provide an additional $28 million in capital in lieu of the indemnity shortfall insurance and that under this model all capital investors (in the total amount of funding) would rank pari passu. A second version of '[NAME]' ... involved an implementation of the draft Funding Agreement structure unchanged, with the indemnity shortfall insurance cover being provided by additional 'contingent' capital investors." 88The [NAME] Judge observed (at [401]) that there had been no suggestion by [NAME] when applying for the Fifth Extension that funding for [NAME] was not achievable within a relatively short period. [NAME] had given affidavit evidence at the time that he had decided not to pursue [NAME] because it would involve additional expense to the creditors. He said in his affidavit that either [NAME] or [NAME] would take approximately 11 to 15 weeks to implement, but that the time required to implement [NAME] would run only from the date of delivery of judgment in [NAME]. 89After referring to [NAME]'s judgment granting the Fifth Extension, [NAME] found (at [411]) that as at November 2009 (and indeed from November 2007 at the latest): "it could not safely be assumed by [NAME] that the key defendants were prepared to accept that matters of controversy between the special purpose liquidator and those defendants could sensibly be left to await the outcome of [NAME]. Rather, [NAME] seems simply to have assumed that that was the case based on the earlier correspondence." In this respect, she disagreed with [NAME], who had said in his judgment (at [7]) that the respondents could be taken to have accepted that matters of controversy between them and [NAME] could sensibly be left to await the outcome of [NAME]. [NAME]'s finding in this respect is not challenged by [NAME]. 90The [NAME] Judge continued as follows: "413. The reasons for the delay were again solely attributable to the position adopted by [NAME] as to the choice of litigation funding to pursue and the requirements of the proposed [NAME]. However, by this stage the further (in my view, very significant) factor to note is that [NAME] was aware that he could in all probability have secured litigation funding (even for the catastrophic costs scenario), albeit it at a higher cost, by proceeding with [NAME]. He did not do so. 414. ... In his supporting affidavit, [[NAME]] indicated that around $9m was available in the company at that time, and that another $8-$9m was expected to become available, giving some $17-18m on top of the legal expenses of more than $6m paid to date... ... 417. ... [T]he deliberate decision by [NAME] to pursue as at September 2009, in effect, a funding option that required the outcome in [NAME] to be known in advance (and not to pursue what from at least late September 2009 was known to be an available alternative option for funding that did not require the outcome in [NAME] to be known and that would have permitted service within a short period of time - thus eliminating the uncertainty of timing inherent in the [NAME] option) is a significant factor pointing against any further extension. 418. It seems to me that this was a decision by [NAME], made in the awareness of a risk of challenge to the orders for extension (and on the basis that [NAME] was apparently urging the court to defer a consideration of prejudice until after the originating process was finally served)... 419. [T]he practical effect of [NAME] choosing to pursue [NAME] and not [NAME] was that (in effect) control of the time at which the originating process was to be served was largely abrogated to the [NAME] (since it was their requirement to await the decision in [NAME]). ... 422. Balancing the factors outlined above, I have concluded that the order extending the time for service of the Statement of Claim (which was made in November 2009 with some hesitation by his [NAME]), should be discharged ... 423. It seems to me significant that there was a deliberate decision by [NAME] not to pursue what he knew at that time was [a] potential alternative source of funding (and [NAME] that would not have been dependent on the [NAME] judgment), which had the inevitable effect of prolonging the delay in commencement of the proceedings. I accept that there was not at that stage a concluded agreement as to funding (and that there would have been a need for completion of the due diligence and hence funding was not assured)... 424. However, by late 2009, [NAME] himself saw there being a high probability of funding by this time ... and simply chose not to pursue that option (that being a deliberate decision on his part) in the time leading up to the November 2009 extension, though it was known by him by late September to have been an available alternative option for funding (and, had inquiries been made of alternative options at an earlier time, there seems no reason to believe that option would not have been available then). In cross-examination, [[NAME]] agreed that he was not prepared to take any risks until a funding agreement was in place even though he knew that the events in question had taken place some 8 years or so before and that there was a high probability that he would obtain funding ... His decision not to pursue [NAME] (which was not suggested to be an inappropriate or inadequate method of funding, simply a less favourable [NAME]) meant that he had made it impossible to progress the proceedings diligently at that point. 425. Therefore, while I accept that the position was ... that there was no offer of funding then capable of acceptance so as to constitute a binding agreement ... the position is that whether or not funding could have been finalised as at late 2009 will never be known because of [NAME]'s decision not to pursue the avenue that he conceded was then available to him. The arrangements for funding seem to have been well in train and the decision not to set the clock running (as it was put to [[NAME]] in cross-examination) meant that this opportunity was foregone and [NAME] was left, in effect, at the dictates of the [NAME] as to the timing of its decision in relation to the shortfall indemnity insurance cover (without which [[NAME]] was not prepared to proceed). 426. The (by then considerable) lapse of time since the events in question ... must have increased the risk of prejudice to the abilities of the [respondents] to conduct their defence (in circumstances where it was apparently known, by reference to Austin J's judgment that not all financial records were still available ...). ... 428. Taking into consideration the rationales by the courts for the imposition of limitation periods and the statutory context in which applications of this kind must be determined ... the likelihood that continuing delay would prejudice the [respondents] by the inevitable deterioration in the quality of evidence and the oppression of having the spectre of proceedings of this kind, I am of the view that the order made in November 2009 ... should be discharged."

Sixth Extension 91The reason given at the time by [NAME] for the delay leading to the application for the Sixth Extension was to permit new legal representatives, apparently retained on the instructions of the [NAME], to review materials that previous legal representatives had already reviewed. This review, according to [NAME], required an extension of three months (at [434]). In [NAME]'s view (at [432]), the change of solicitors must have contributed to a "not insubstantial further delay". 92The [NAME] Judge observed (at [434]) that [NAME]'s representatives did not inform [NAME], when he heard the application for the Sixth Extension that: "it was proposed that consideration be given to the introduction of a vast array of new and very serious allegations (the mere deletion of defendants and the need for further particularisation giving no indication of what was in store in terms of the pleading amendments). (It may, of course, be that there was no intention at that stage to plead matters such as conspiracy or fraud. However, it does not seem to me that his [NAME] was alerted to the scope of the exercise then being proposed to be undertaken - of substantially rewriting the claims the subject of the proceedings albeit by reference to some or more of the same set of facts.)" 93Her [NAME] criticised (at [435]) [NAME]'s decision to engage new solicitors: [redacted] 94Her [NAME] observed (at [437]) that the delay since the relevant events was now nine years. Three years had elapsed since the filing of the statement of claim (at [431]). Even without evidence of actual prejudice, there had to be real concern about the prejudice such a delay was likely to cause the respondents (at [437]). [NAME] recognised (at [438]) that it was also necessary to take into account prejudice to [NAME] in the form of the loss of a potential claim of considerable value. 95Nonetheless, in [NAME]'s view (at [439]), the "significant factor that ... weighs against an extension as at May 2010, is that the sole reason for the delay at that stage seems to have been the [NAME]' desire to retain different lawyers and to conduct not simply a process of amending the claim to deal with amendments based on the material emerging in [NAME] (materials which had already been reviewed by [NAME]'s previous lawyers) but a wholesale review and expansion of the pleadings. [NAME] had nine months to serve a statement that had been drafted already to serve back in 2007." (Emphasis added.) [NAME] accepted during oral argument in this Court that he could not point to any error in this paragraph of the judgment.

Discharge Orders 96The [NAME] Judge summarised the position as follows: "440. ... [It] was not suggested by the [respondents] at any time after the first extension application (in November 2007) that more time was needed to complete investigations before proceeding with the claims against the [respondents] or that [NAME] considered it would be necessary to undertake any further investigations following the decision in [NAME] (other than the final extension when there was to be a review of the pleading in light of the judgment of Austin J), nor was there any need expressed to await the outcome of the decision in [NAME] until this was imposed as a condition of commitment to the highest level of funding sought by [NAME] (a matter for [NAME]'s benefit as much, if not more so, than for the creditors)... ... 443. [NAME] had concluded his investigations in May 2008; had received detailed final opinions of counsel in April 2008; and was in a position to approach funders with a proposed funding litigation package between February and September 2008 ... [T]here was no suggestion by [NAME] at this time (or even later) that a judgment in [NAME] was necessary for [NAME] to make a decision on whether to prosecute a claim against some if not all of the [respondents] (the only suggestion being that the proceeding might not be prosecuted against all [respondents] and might not be prosecuted in respect of all claims) ... 444. [NAME] had by September 2009 been in a position where there was a high probability that litigation funding could be quickly concluded (albeit not [on] as favourable terms as that contemplated by [NAME]) to cover the full extent of his estimated costs exposure (be that a realistic or unrealistic estimate) but chose not to pursue that option. [NAME] seems to have taken what might be said to be the calculated risk (instead of proceeding to take steps to finalise litigation funding in late 2009 at a higher cost but so as to minimise further delay in the prosecuting of the company's claims) of waiting to see if more cost-effective funding could be procured after the judgment in [NAME] was handed down. This was so even though he must have known this would mean further delay (and all at a time when there was sufficient cash available in the liquidation to have permitted the commencement of the proceedings and [NAME]'s concern seems to be to put himself in a position to meet an adverse costs order predicated on an indemnity basis that would not arise, in the ordinary course, absent unreasonable conduct of the litigation on his part). 445. By the time of the last extension application (and in my view also at the time of the November 2009 application) ... [NAME] was, in effect, seeking to arrogate to himself (with a view to the requirements or anticipated requirements of [NAME]) the power to determine when proceedings should be served; not least by having chosen not to take steps to facilitate the earlier completion of funding, such that by the time various of the applications for extension were made (in particular the penultimate application) the die was cast and his [NAME] was presented, in effect, with a fait accompli - that it was not by then possible to secure funding within the limited time available before the extension applied or, in the case of the last extension, the change in legal representatives had delayed completion of the pleading amendments. 97The [NAME] Judge then returned to the question of prejudice. She accepted (at [449]) that the respondents would suffer prejudice if the proceedings were permitted to continue, "being the prejudice inherent in having serious allegations made and pursued long after the events to which they relate." [NAME] also accepted (at [450]) that there was likely to be prejudice to the individual directors by reason of the significant delay in bringing claims going directly to the their probity, honesty and fitness for their main occupation. 98The [NAME] Judge restated findings she had previously made concerning the extent to which the respondents had acquiesced in any delay, the preservation of evidence by the respondents and the position of cross-claims. [NAME] concluded (at [456]), subject to any discretionary considerations, that the orders for the Fifth and Sixth Extensions should be discharged. 99The [NAME] Judge proceeded to consider and reject submissions advanced on behalf of [NAME] that, as a matter of discretion, the orders for extension of time should not be discharged. 100Accordingly, [NAME] ordered (at [852]) that: "1. Pursuant to rule 12.11(1)(e) of the Uniform Civil Procedure Rules 2005 (NSW), I discharge the orders made on 16 November 2009 and 20 May 2010 extending the time for service of the Statement of Claim in these proceedings.

2. I dismiss [[NAME]'s] application for leave to amend the Statement of Claim.

3. I dismiss the proceedings."

CHALLENGES TO FINDINGS

The Challenge to the Litigation Funding Findings 101The [NAME]'s written submissions identified a large number of what were said to be factual errors by the [NAME] Judge. [NAME] was invited at the outset of his oral submissions to concentrate on the most cogent points. He responded by giving prominence to [NAME]'s challenge to the [NAME] Judge's finding (at [413]) that [NAME], at the time of the Fifth Extension on 16 November 2009 was aware that: "he could in all probability have secured litigation funding (even for the catastrophic costs scenario), albeit at a higher cost, by proceeding with [NAME]." As part of this challenge, [NAME] also criticised related findings made by the [NAME] Judge at [417], [424] and [444], which are reproduced at [90], [96] above. 102The [NAME]'s written submissions challenged these findings on a number of bases: (1)[NAME] pursued [NAME] in preference to [NAME] because he believed it in the interests of [NAME]'s creditors to do so. At any hearing to approve entry into a funding agreement, the Court would not have sought to second-guess [NAME]'s commercial judgment. In essence, the [NAME] Judge had substituted her commercial judgment for that of [NAME], preferring a more expensive alternative funding option. (2)[NAME]'s decision to pursue [NAME] was conditional on the Court's approval. [NAME] had stated (through his counsel) to [NAME], when seeking the Fifth Extension, that if the requirements of justice demanded service prior to the delivery of judgment in [NAME], he was prepared to implement [NAME]. In his judgment granting the Fifth Extension, [NAME] observed (at [6]) that the delay in delivery of the judgment in [NAME] had delayed securing litigation funding. Nonetheless, his [NAME] thought that it was "understandable" that a potential funder and [NAME] would wish to await the judgment because of the "overlap" on the issues of fact. The [NAME] Judge had simply taken a different view to that of [NAME]. (3)The [NAME] Judge had mistakenly assumed that if [NAME] had pursued [NAME] from September 2009 (when it was first proposed) he could have secured litigation funding. [NAME]'s finding overlooked the conditions to which [NAME] was subject and which would have been equally applicable to [NAME]. These included the requirements that [NAME] finalise a syndicate of capital investors, complete satisfactory due diligence and obtain court approval for [NAME]'s participation in the funding arrangements. Having regard to the uncertainties, the [NAME] Judge was wrong to conclude that there was a high probability that [NAME] could have quickly secured funding through [NAME]. (4)The [NAME] Judge was wrong to find (at [424]) that [NAME]'s decision to pursue [NAME] had the inevitable effect of delaying commencement of the proceedings. Even if [NAME] had pursued [NAME], it still would have been necessary to secure the Fifth Extension, since the Fourth Extension expired on 25 November 2009 and [NAME] only emerged on 30 September 2009. In any event, [NAME] had estimated in his affidavit seeking the Fifth Extension that [NAME] would take 11-15 weeks to complete after delivery of judgment in [NAME]. Since judgment was delivered on 18 November 2009, [NAME] (on [NAME]'s estimate) could have been implemented by the end of February 2010, only six weeks later than the most optimistic estimate for [NAME].

The Evidence Relating to Litigation Funding 103In order to address these submissions, it is necessary to summarise the evidence directly bearing on [NAME]'s findings. The account which follows concentrates on events occurring in and after October 2008. 104On 22 October 2008, [NAME] and [NAME] entered into a Due Diligence Agreement. This provided that for a period of eight weeks [NAME] would carry out due diligence with a view to organising a syndicate to fund the proceedings on the terms of an annexed draft Funding Agreement. 105As I have already recounted (at [63] above), the draft Funding Agreement contemplated that the proposed syndicate would provide funding for [NAME]'s costs (including his own fees) incurred in connection with the litigation. The syndicate was to indemnify [NAME] and [NAME] against any adverse costs order, up to a limit of $12 million. The syndicate was also to procure Indemnity Shortfall Insurance to cover any adverse costs orders over and above $12 million, to a limit of $40 million (that is, to provide cover of an additional $28 million). The limit of $40 million represented [NAME]'s estimate of the maximum adverse costs order in the proceedings. 106In his evidence before the [NAME] Judge, [NAME] appeared to accept that, although the proposed funding arrangement was subject to due diligence, as a practical matter he had an offer capable of acceptance: "Q. So, if we were to stop there, you had, effectively, in hand an offer that you could have accepted for the funding of your legal costs, for your non-legal expenses, plus an indemnity of $12 million dollars for adverse costs orders as of October 2008, is that correct? A. Yes. ... Q. And there was no difficulty about any of those elements in your discussions with [NAME]? A. That's correct. Q. And there never was? A. At various times in 2008 - I don't recall the exact timing, Mr Young, but the global financial crisis was an issue and my recollection is there were some swapping and changing elements of the parties, the external parties, that were going to form part of the syndicate. Beyond that, I think that's correct. Q. No change to the terms; only discussion about substituting particular syndicate members with other syndicate members? A. I believe so." 107On 22 October 2008, at the same time as the Third Extension was granted, the Court made an order that [NAME] was justified in entering into the Due Diligence Agreement without the prior approval of the [NAME] or [NAME]'s creditors. 108The due diligence period was extended by agreement on several occasions. However, the reason for the extensions was [NAME]'s insistence on obtaining the Indemnity Shortfall Insurance to the level ($40 million) that he considered to be desirable. As [NAME] accepted in his evidence before the [NAME] Judge, had he not insisted on coverage to this level, litigation funding could have been arranged in or shortly after October 2008. 109To this point, there had been nothing to indicate that the progress of the funding arrangements was dependent on delivery of the judgment in [NAME] or the opportunity to scrutinise the judgment. The first indication that the [NAME] judgment might be relevant to funding came in a letter from [NAME] to [NAME] on 17 April 2009, some six months after execution of the Due Diligence Agreement. [NAME] attributed slow progress to dislocation in financial markets and to the withdrawal of a "cornerstone investor" in March 2009. However, he informed [NAME] that [NAME] had identified a potential replacement and that he was "confident that sufficient funding capital will be available". 110Mr [NAME] recorded in the letter that the preferred insurance provider had made a "broadly acceptable" offer of Indemnity Shortfall Insurance in January 2009. However, the insurance provider had subsequently changed its underwriting policy and proposed terms that were unacceptable. The letter continued as follows: "We expect there will be further negotiations with the original preferred insurer but are now concentrating our efforts on two alternate providers ● [NAME] of these has completed an extensive review of the transaction and is favourably disposed but will not make a firm offer of insurance until judgement has been delivered in the [NAME] proceedings. ● The other is in the process of reviewing the case materials." 111Under the heading "The Prospects for Successful Completion of the Financing", [NAME] stated his conclusions as follows: "● the case has now been reviewed by several highly competent, and experienced, assessors of litigation risk for the purposes of both insurance and funding. All of these reviewers have been broadly favourable in their analysis and have found that the case merits capital investment. In the case of the preferred insurer this analysis has been overshadowed by internal policy issues and macro economic developments but their fundamental favourable stance augurs well for securing acceptable insurance from [NAME] of the alternate providers. ● The financial markets, whilst still stressed, are displaying signs of relative calm and a shift back to increased risk tolerance with a consequent willingness to commit capital." He added this comment: "This is work for which [NAME] has not been paid and will likely only receive payment upon a funding agreement being entered with you. At [NAME] we are presented with a large variety of litigious investment opportunities and as a result we have no difficulty in fully utilising our time and capital resources. The fact that we continue to invest in this transaction is testament to the fact that we are confident it represents a financially viable claim that will be successfully be funded and insured." 112There appears to be no evidence identifying the steps, if any, taken by [NAME] between April and September 2009 to secure funding. However, on 15 September 2009, [NAME] sent an email to [NAME], apparently in answer to criticisms made by the [NAME] of the litigation funding process. The email asserted that [NAME]'s claim was "eminently fundable" and stated that [NAME] remained confident that the case could be funded. The email also observed that, as delivery of the judgment in [NAME] was presumably imminent, it was clearly reasonable to see the judgment before proceeding. 113On 30 September 2009, [NAME] prepared a document which incorporated for the first time the so-called "[NAME]". The document recorded that [NAME] had been engaged in discussions with a number of insurance providers in relation to the Indemnity Shortfall Insurance component of [NAME]. None of the insurers was prepared to proceed until delivery of the judgment in [NAME]. This was "frustrating", but [NAME] still represented the most cost effective solution. 114Mr [NAME] said that it was possible, if circumstances so required, to arrange funding using only a cash investment. [NAME] suggested two approaches: "[NAME] Agreement" ("Plan B1") and "[NAME] Agreement Plus Separate Indemnity" ("Plan B2"). Plan B1 contemplated increasing the "Indemnity Amount" to the full extent of adverse risk cover required - that is, $40 million. In this way, the Funding Agreement would cover all capital requirements for the funding of the litigation, but would require an increase in risk capital. Plan B2 contemplated that the draft Funding Agreement would remain in place, but the Indemnity Shortfall Insurance would not be provided by an insurer, but by a separate special purpose indemnity company. Thus there would be two classes of investor: [NAME] providing the funding and the other the Indemnity Shortfall Insurance. 115Mr [NAME] wrote a further letter on behalf of [NAME] on 5 November 2009, presumably in anticipation of the application for the Fifth Extension. The letter restated the elements of Plans A, B1 and B2. It recorded that capital for the funding (apparently meaning the funding for [NAME]) was to come from [NAME]'s funds, [NAME]' own resources and from investors associated with or represented by [NAME]. The letter reported that the original cornerstone capital partner had a much improved liquidity position and had rejoined the syndicate. Additional capital partners remained committed to the project.

Accordingly, [NAME] was "highly confident that sufficient Funding Capital will be available". 116The letter of 5 November 2009 noted that efforts in relation to Indemnity Shortfall Insurance had focussed on two providers. Both providers were favourably disposed (particularly the first) but wished to see the [NAME] judgment before committing themselves. The impending judgment therefore represented "an insurmountable obstacle to insuring the adverse cost risk". 117While [NAME] would be the best outcome for creditors, [NAME] had spent some time considering Plan B1 and Plan B2. Either of these alternatives required a greater amount of cash capital than [NAME]. [NAME] had had preliminary discussions with its capital partners regarding the possibility of proceeding without Indemnity Shortfall Insurance. It believed that, subject to satisfactory revision of the structure and terms of the Draft Funding Agreement, capital would be available. 118Mr [NAME] assessed the prospects for successful completion of the financing as follows: "there is still a high probability that the financing will be successfully completed based on the following: ● The case has now been reviewed by several highly competent, and experienced, assessors of litigation risk for the purposes of both insurance and funding. All of these reviewers have been broadly favourable in their analysis and have found that the case merits capital investment. ● The financial markets, whilst still somewhat stressed, have shifted back to display an increased risk tolerance with a consequent willingness to commit capital." 119Mr [NAME] attached a chart showing time lines of the best and worst case projections for [NAME], being 11 and 15 weeks respectively. The letter suggested that [NAME] allow for completion of the financing for [NAME] to take three months after delivery of judgment in [NAME]. The author stated that he had not produced a detailed time line for [NAME], but it would not be less than three months and could be "somewhat longer". 120The [NAME] explained his preference for [NAME] over [NAME] in his affidavit of 6 November 2009, prepared in support of his application for the Fifth Extension: "Because the alternatives involve introducing new capital participants with an interest in and claim on any judgment or settlement, both [NAME] and I anticipate that the effective cost to the creditors of this strategy is much higher than obtaining insurance cover for the same risk of a capital requirement. Hence my view remains that if funding can be obtained on the original model consistent with the interests of justice as to when service should be effected, the interests of creditors are best served by the insurance model. Thus, whilst the delay in the delivery of judgment in [NAME] has caused a delay in the funding process, it has not prevented me pursuing alternative funding, although such alternative funding would be at a greater cost to the creditors of [NAME]. ... From my discussions with [NAME] [of [NAME]], my understanding is that a funding agreement with the structure envisaged by either version of [NAME]' '[NAME]' can be completed within about the same time period as envisaged with [NAME] [that is, 11-15 weeks], except that the starting time does not need to await the delivery of judgment in [NAME]." 121The submissions made to [NAME] on [NAME]'s behalf in connection with the Fifth Extension application contained this statement: "[[NAME]] has had regard to the interests of creditors in not implementing [NAME] to this point because of the additional effective cost to the creditors of having a larger 'equity' pool claiming on any fund generated. However, if the requirements of justice are for service sooner than [NAME], [[NAME]] must implement [NAME] for funding." 122In [NAME]'s cross-examination at the hearing before the [NAME] Judge of the respondents' discharge application, he gave the following evidence: "Q. The position was this, wasn't it, that at this time, April of 2009, you didn't take the view that it was in the interests of creditors to await for the decision of [NAME] but rather you were concerned because that seemed to be a condition of the funding? A. That's correct. Q. Your position then was, as I think you said it was before, that you weren't prepared to go ahead without funding? A. That's correct. ... Q. ... The only impediment as you saw it was the obtaining of funding, the making of certain minor amendments and the obtaining of leave of the court? A. Yes. Q. In paragraph 23 and following of this affidavit [of 20 April 2009] you set out what you describe in the affidavit as free cash available in the liquidation of [NAME]. See that? A. Yes, I do. Q. That amount was 7.5 million to 8 million with an estimate from [NAME] [the General Purpose Liquidator] that another 8 to 9 million would come in, is that right? A. Yes, I believe the 8 to 9 million was expected to come in at some future date. Q. So when [NAME] was referring to 'free cash', as you understood it what he was referring to was cash that would be available to prosecute the [NAME] litigation? A. Yes, that's correct. Q. And that was 7.5 to 8 million immediately and the balance, 8 to 9 million, becoming available in the next 12 months? A. That was the expected timeframe of [NAME]. Q. That, I want to suggest to you, was ample funds to commence these proceedings? A. No, it was not. ... Q. You weren't prepared to use the free cash available to commence the proceedings without obtaining external funding? A. The funds themselves were the 7.5 to 8 million that was available at that time was, as I recall, proposed to be included in the funding, but it was not enough in terms of the cash required and the cover needed for adverse costs, the second layer of adverse costs. Q. You believed, at that stage - that is, in April 2009 - you'd be able to get funding, didn't you? A. Yes, I did. Q. And you certainly had enough money to commence the proceedings? A. No, I did not. Q. You had $7.5 million, didn't you? A. Yes, I did. Q. And that would have been enough to commence the proceedings, correct? A. Whilst it may have been enough to commence proceedings per se, it was not enough to see out the proceedings and provide the necessary cover for potential adverse costs if the case was lost. Q. And you weren't prepared to take any risks until you had a Funding Agreement in place? A. That's correct. Q. Even though you knew, by 2009, that the incidents which had occurred and which gave rise to the proceedings took place some eight years or thereabouts earlier? A. That's correct. Q. And even though your advice was that there was a high probability that you would obtain funding? A. Yes. Q. And that is what you say in paragraph 44 of your affidavit of [20 April 2009]. And, once again, would you agree with me that the sole reason that you weren't prepared to serve and sought an extension - this is in April 2009 - was that you did not have funding locked in? A. That's correct." 123On a date not disclosed in the evidence, but before 14 May 2010, [NAME] entered into a Funding Agreement with [NAME]. [NAME]'s report to creditors dated 5 August 2010, which was before the Court on [NAME]'s Sixth Extension application, recorded that [NAME] had obtained court orders on 14 May 2010 preserving the confidentiality of the Funding Agreement. The reasons for the confidentiality orders were themselves subject to confidentiality orders: Onefone Australia Pty Ltd v One.Tel Ltd [2010] NSWSC 498, at [5], per [NAME]. 124On 20 May 2010, [NAME] approved [NAME]'s entry into the final Funding Agreement. [NAME] has maintained confidentiality in the terms of the Funding Agreement.

Accordingly, they have not been revealed to the respondents or, for that matter, to the [NAME] Judge or this Court. 125The [NAME] did not adduce evidence as to the date the Funding Agreement was executed. [NAME] invited this Court to infer that the agreement must have been finalised a considerable time before 14 May 2010. However, there is no evidentiary basis for such an inference to be drawn. Indeed, given that this is quintessentially a matter within the knowledge of [NAME], I think it appropriate to infer the evidence is that the final funding agreement was entered into shortly before 14 May 2010, nearly six months after the Fifth Extension was granted: [NAME] (1722) 1 Stra 505l 93 ER 664.

Reasoning

The Findings 126In my opinion, the [NAME] Judge was justified in making the finding at [417] of the judgment (at [90] above). [NAME]'s written submissions to [NAME] on the application for the Fifth Extension (at [121] above) explicitly stated that [NAME] had had regard to the interests of creditors, particularly the "additional effective cost" of [NAME], in not implementing [NAME] to that point. The written submissions implied that [NAME] had deliberately decided not to implement [NAME] because he regarded it as more costly to creditors than [NAME]. This reading of the submissions is consistent with [NAME]'s affidavit of 6 November 2009, in which he said that, although awaiting the judgment in [NAME] had delayed the funding process, it had not prevented [NAME] from pursuing alternative sources of funding. 127Plan B was first mooted by [NAME] on 30 September 2009. [NAME] adduced no evidence to explain why it had taken five months from the 17 April 2009 letter from [NAME] (which indicated that [NAME] insurer wished to see the [NAME] judgment before proceeding) for this alternative funding proposal to emerge. [NAME]' letter of 30 September 2009 said that if circumstances required prompt action (for example, because the Court would grant only a limited extension of time), it was possible to arrange cash funding (that is, Plan B1). 128In its letter of 5 November 2009, [NAME] was "highly confident" that capital funding would be available (not including the $28 million referable to the second layer of a potential adverse costs order). There was still a "high probability" that financing would be successfully completed. The latter comment was made under the heading "The Prospects for Successful Completion of the Financing", after [NAME] had discussed Plans A, B1 and B2. Read in context, the comment related to both [NAME] and [NAME]. [NAME] gave no precise time line for the completion of [NAME], but [NAME] said in his affidavit that [NAME] could be completed in 11-15 weeks. [NAME]'s own estimate supports the finding that [NAME] was an available option that did not require the outcome in [NAME] to be known and that would have permitted service within in a short time frame. I do not accept [NAME]'s contention that at this stage [NAME] was "no more than a concept" and that [NAME] should have treated it as such. 129For the reasons I have given, the [NAME] Judge was also justified in finding (at [423]) that [NAME] had made a deliberate decision not to pursue what he knew was a potential source of funding. That decision meant that at no time between 30 September 2009 and the Fifth Extension on 16 November 2009 did [NAME] do anything to advance [NAME]. [NAME] inferred that [NAME]'s decision had the inevitable effect of prolonging the delay in commencement of the proceedings. Given that [NAME] was not dependent on the judgment in [NAME] and, on [NAME]'s estimate, had a time line of 11-15 weeks, it was well open to [NAME] to draw that inference. 130Mr [NAME] criticised the findings made by the [NAME] Judge (at [424]) on the basis that there was no evidence demonstrating that [NAME] himself appreciated in late 2009 that there was a high probability of funding at the highest level thought to be required. [NAME] also submitted that [NAME]'s references (at [424]) to [NAME]'s cross-examination, where he agreed that there was a high probability that he would obtain funding, disclosed error. In this evidence, as the respondents accept, [NAME] was addressing the position as at April 2009. According to [NAME] mistakenly assumed that [NAME] was addressing the position in late 2009, by which time [NAME] had proposed [NAME]. In fact, since [NAME] was addressing the position as at April 2009, his oral evidence related only to [NAME]. 131In my opinion, the evidence justified [NAME]'s finding that [NAME] believed in late 2009 that there was a high probability of funding at the level thought to be required. [NAME] had said precisely that in its letter of 5 November 2009, and had given reasons why it was so confident. [NAME] said in his affidavit that his understanding, based on discussions with [NAME], was that either version of [NAME] could be completed within 11-15 weeks. In cross-examination, [NAME] said that he agreed with the advice he received from [NAME] that both [NAME] and [NAME] could be completed within 15 weeks. In these circumstances, it is not difficult to conclude that [NAME] believed in November 2009 that there was a high probability that the required funding for [NAME] could be put in place. 132Her [NAME] was also justified in inferring that there was no reason to believe that [NAME] would not have been available earlier than 30 September 2009, had appropriate inquiries been made. [NAME]'s evidence was that he chose not to pursue [NAME] because it was a more expensive option. He also expressly accepted that the delay in the delivery of the judgment in [NAME] had not prevented him pursuing alternative means of funding. [NAME] adduced no evidence as to the specific steps, if any, he took to pursue alternative funding between 15 April 2009 (when an insurer first indicated the need to await the judgment in [NAME]) and late September 2009, when [NAME] came up with [NAME]. Nor was there any evidence to suggest that [NAME] (or another funder) would have found it more difficult to formulate and work on [NAME] in late April 2009, than apparently proved to be the case five months later. 133The [NAME] Judge's reference to [NAME]'s evidence in cross-examination does not, in my view, demonstrate error. [NAME] meticulously recounted the evidence given by [NAME], referring both to his affidavit and oral evidence. In my view, she understood that [NAME], in the relevant passage in his evidence, was describing the position as at April 2009, prior to the emergence of [NAME]. When the judgment is read as a whole, [NAME] was making the point that [NAME] had thought that [NAME] had a high probability of success some months before [NAME] had been formulated. She considered that [NAME]'s views in April 2009 indicated the decision in late September 2009 not to pursue [NAME], which was "simply ... less favourable" in relation to cost, did not reflect any different view of the prospects of successfully securing funding. 134For these reasons, I reject [NAME]'s challenge to the [NAME] Judge's findings of fact relating to the availability of litigation funding.

Irrelevant Considerations? 135Once [NAME]'s challenge to factual findings are rejected, [NAME]'s contention that the [NAME] Judge took into account an irrelevant consideration, namely [NAME]'s failure to pursue [NAME], must also be rejected. I deal briefly with the arguments relied on by [NAME]. 136First, as I have already observed, the evidence and submissions before the [NAME] Judge were different from those which were before [NAME] on the application for the Fifth and Sixth Extensions. The fact that [NAME], in his judgment in relation to the Fifth Extension, said it was understandable that a [NAME] (in fact, a litigation insurer) would wish to see the judgment in [NAME], does not mean either that the [NAME] Judge was "second-guessing" [NAME]'s commercial judgment or that she reached conclusions inconsistent with those of [NAME] on the same material. 137In the absence of a contradictor, [NAME] proceeded on the basis that the continued unavailability of the [NAME] judgment caused the litigation funding process to be delayed (at [6]). This, however, was not [NAME]'s finding. She found that [NAME] had an alternative source of funding to pursue, which did not depend on the [NAME] judgment, but that [NAME] chose not to pursue the alternative because it was too expensive. That alternative source ([NAME]) had been formulated by 30 September 2009, but on [NAME]'s findings could have been pursued by [NAME] from an earlier time. In particular, [NAME] (or some similar plan) could have been investigated from April 2009 when [NAME] knew that [NAME] of the [NAME] wanted to see the [NAME] judgment before committing itself to [NAME]. 138The [NAME] Judge was not concerned to analyse whether [NAME] or [NAME] was superior. She took into account that [NAME]'s deliberate decision not to investigate alternatives reflected his opinion as to the best interests of creditors, but [NAME] found that he failed to give weight to the interests of justice in ensuring that the proceedings were commenced within a reasonable period. 139The [NAME]'s submissions to [NAME] stated that "if the requirements of justice are for service sooner than [NAME], the liquidator must implement [NAME] for funding". [NAME] did not refer to this observation in his judgment and it is not entirely clear what it was intended to convey. [NAME] may have been indicating that if the Fifth Extension was refused, he would have to serve the statement of claim immediately and rely on [NAME] for funding. Another possibility is that [NAME] was indicating that he would have pursued [NAME] vigorously, but still would not have served the statement of claim until [NAME] bore fruit (which in fact did not happen until March 2012). In any event, as I have noted, [NAME] was well aware that the extension did not preclude the respondents subsequently seeking to discharge the order and that, if they did so, the application would be based on the evidence and arguments then advanced by the parties. 140The [NAME] Judge clearly appreciated the preconditions to which [NAME] and [NAME] were subject as at November 2009. Contrary to [NAME]'s submissions, [NAME] did not find that [NAME] could have been finalised by November 2009, thus avoiding the need for the Fifth Extension. [NAME]'s major findings were that [NAME] could and should have pursued [NAME] (or some similar alternative to [NAME]) earlier than he did. She recognised (at [425]) that it could not be known whether funding could have been finalised by November 2009. But that was because [NAME] had not pursued the alternative courses available to him. 141The [NAME] correctly says that the time required to implement [NAME] (11-15 weeks), if calculated from 30 September 2009 (when [NAME] was formulated), took matters beyond 25 November 2009 (the date the Fourth Extension expired). But it was not just [NAME]'s failure to pursue [NAME] after 30 September 2009 that [NAME] took into account. It was also [NAME]'s failure to do anything other than adhere to [NAME], even after it became apparent in April 2009 that the implementation of [NAME] depended on the timing of the judgment in [NAME]. On [NAME]'s findings (at [425]), [NAME]'s failure to pursue [NAME] or something similar, either after 30 September 2009 or earlier, "had made it impossible to progress the proceedings diligently".

The Challenge to Findings Relating to [NAME] v [NAME] 142The [NAME] submitted that the [NAME] Judge had misconstrued the evidence as to the respondents' attitude to [NAME] awaiting the outcome of [NAME] before serving the statement of claim. [NAME] contended that [NAME] had mistakenly found (at [102]) that when the [NAME] (and [NAME]) had sought to be heard on the application for the First Extension, they had contended that there should be no such extension. In fact, the [NAME] had not opposed the extension, but had merely indicated that they wished to be heard. According to [NAME], this misinterpretation of the evidence was crucial to the finding that there was no reasonable basis for [NAME]'s belief that the respondents were content to await the judgment in [NAME]. 143Furthermore, there was evidence that the respondents shared [NAME]'s belief that [NAME] was central to [NAME]'s potential claims. The respondents or their representatives had repeatedly expressed the view or acknowledged that a decision in [NAME] would provide considerable assistance to [NAME] by shedding light on the causes of action [NAME] intended to pass. 144The [NAME] further submitted that "objectively assessed" the evidence demonstrated that there were good reasons for awaiting the outcome of [NAME] before serving the statement of claim. The allegations in the statement of claim were the subject of evidence and submissions in [NAME]. It was not to the point whether [NAME] believed that the pending decision was relevant at the time the extensions were granted. The objective significance of the decision in [NAME] was demonstrated by the fact that some of the judgments granting extensions or dealing with other interlocutory matters, had recognised the overlap between [NAME]'s claims and the issues in [NAME].

Reasoning

The Evidence Relating to the Respondents' Attitude to [NAME] 145The [NAME]'s "Statement of Factual Findings Challenged" did not include the [NAME] Judge's finding (at [103]) that there was nothing to indicate that the respondents were willing to await the outcome of [NAME] after the time at which the proceedings were filed. Nor did the statement refer to the finding (at [327]) that the respondents had not acquiesced in the delay in service of the statement of claim. However, [NAME]'s written submissions appear to challenge those findings. 146Since [NAME] relied on the respondents' conduct in the period leading up to the filing of the statement of claim, it is necessary to recount the most important events relevant to [NAME]'s challenge: (1)[NAME] was appointed on 23 December 2003, by order of Windeyer J, for the specific purpose of investigating the RRI and making recommendations as to any potential causes of action with a limitation period of less than three years (at [5]). [NAME] such cause of action related to s 588FF(3) of the Corporations Act (uncommercial transactions), which has a limitation period of three years (at [6]). (2)Windeyer J directed that [NAME] should assume that [NAME] had been insolvent by reason of the cancellation of the RRI. His [NAME] thought it was not in the interests of creditors to spend money on the insolvency question, when it would be resolved in [NAME]: [COMPANY] v [COMPANY] (in liq) [2003] NSWC 1228, at [19]. (As the [NAME] Judge found in the present case (at [32]), the insolvency question was not resolved by the judgment in ASIC v Rich.) (3)In March 2004, [NAME] obtained orders for the examination of a number of officers of [NAME] (at [39]). (4)The summonses issued to the respondents were dismissed by consent on 6 April 2004, on the giving of certain undertakings by the respondents. These included their consent to the extension of the three year limitation period to six years, for causes of action arising under s 42 of the FT Act and s 588FF of the Corporations Act. It was a condition of the consents and undertakings that [NAME] agree not to examine any of the officers in relation to the causes of action until the earliest of the following: * the outcome of [NAME] being known; * six months prior to the end of the six year limitation period; or * further order of the Court (after the respondents had an opportunity to be heard) (at [40]-[41]). (5)On 26 April 2006, on [NAME]'s application, [NAME] varied [NAME]'s powers so as to remove the limitation that he was to assume that [NAME] became insolvent as the result of the cancellation of the RRI (at [53]). It was in this judgment that [NAME] observed that Austin J had rejected a substantial body of expert evidence in [NAME] and that it was not clear that the decision in that case would resolve the precise questions of solvency relevant to the cancellation of the RRI: Onefone Australia v One.Tel Ltd [2006] NSWSC 349, at [17]. (6)In September 2006 (shortly before expiry of [NAME]'s agreement not to conduct public examinations of the respondents' officers), the respondents offered to extend the limitation period until six months after delivery of the judgment in [NAME], but subject to a condition that [NAME] not conduct public examinations (at [60]). The offers related to the causes of action under the Corporations Act and s 42 of the FT Act (at [63]). (7)[NAME] did not accept the respondents' offer and in December 2006 applied for the issue of examination summonses directed to the respondents' officers (at [73]). The respondents unsuccessfully opposed the issue of the summonses and in March 2007 they unsuccessfully applied to have them discharged. The respondents argued, among other things, that [NAME] should defer major investigative efforts until after judgment in ASIC v Rich. (8)Most of the public examinations took place in April and May 2007 (at [85]). (9)The respondents did not subsequently offer to agree to the extension of the limitation period or to deferral of service of the statement of claim.

The Findings Were Justified 147It is clear that the respondents wished to avoid or postpone public examinations and, in order to achieve that objective, were prepared to agree to the deferral of the proceedings against them until a time measured by reference to the date of delivery of the judgment in [NAME]. [NAME] was clearly entitled to find that once [NAME] rejected the offer made in September 2006, there was no basis on which [NAME] could have reasonably concluded that the respondents were content for him to delay service for any particular period, and certainly not to delay service until May or August 2010. 148Mr [NAME] submitted that the respondents had never disavowed the stance they had taken during the negotiations to avoid the holding of public examinations. But [NAME] never asked the respondents, after [NAME] rejected their offer to delay the proceedings in return for foregoing public examinations, whether they remained willing to delay the proceedings until delivery of the judgment in [NAME]. It was hardly up to the respondents to warn [NAME] that the offer they had made in an attempt to avoid public examinations would not necessarily be their position once [NAME] rejected their offer and insisted on conducting public examinations. 149Mr [NAME] drew attention to a number of documents which he said demonstrated that the respondents' position was consistently that the judgment in [NAME] would prove central to [NAME]'s claims. However, the documents on which [NAME] relied do not establish this proposition. For example, a letter of 22 September 2006 from [NAME]'s solicitors to the solicitors for [NAME] said that [NAME] related "in a core way" to the financial position of [NAME] in the first half of 2001. But this letter was written before the statement of claim was filed and, of course, before [NAME] had sought any extension of time in which to serve the statement of claim. It was also written in the context of negotiations designed (from [NAME]'s point of view) to forestall public examinations of [NAME] and other officers. 150A letter written by [NAME]' solicitors to [NAME]'s solicitors on 24 January 2007, questioned whether [NAME] could have formed a concluded view on the question of [NAME]'s solvency as at 29 May 2001 without the benefit of the submissions made and the judgment to be handed down in [NAME]. However, this letter, also written before the statement of claim was filed, was an attempt to persuade [NAME] to withdraw his application for the issue of examination summons. 151Correspondence which post-dated the First Extension did no more than record events that had occurred. For example, a letter dated 10 August 2009 from [NAME]'s solicitors to the group's company secretary merely reported (inaccurately) that the time for service of the statement of claim had been extended until [NAME] month after delivery of judgment in [NAME]. 152I accept that the [NAME] Judge overstated somewhat the effect of the evidence when she found (at [102]) that the [NAME] had not only sought to be heard in [NAME]'s application for the First Extension, but wished to oppose the application. But I do not think that the overstatement was a material error. 153Senior counsel representing the [NAME] at the hearing before [NAME] on 15 November 2007, no doubt conscious of the limited information then available to him, stated that his clients might or might not wish to oppose the application for an extension of time. But he also submitted to [NAME] that the [NAME] had been "self-evidently" prejudiced by the lapse of time since the critical events of May 2001. This was a clear indication that, if the [NAME] were given the opportunity to be heard, they were likely to oppose the application for an extension of time to serve the statement of claim. At the least, the application by the [NAME] put [NAME] on notice that, if they were permitted to make submissions, they might well oppose the application for the First Extension and, a fortiori, any subsequent applications for extensions of time. 154For these reasons I do not think that [NAME] has demonstrated any error in [NAME]'s findings as to the respondents' attitude to awaiting the outcome of the proceedings in [NAME].

PREJUDICE

Submissions 155The [NAME] did not suggest that the [NAME] Judge had misstated the principles relating to prejudice as a criterion to be taken into account on an application for the discharge of orders extending the time for service of a statement of claim. However, [NAME] contended that [NAME] had erred in her assessment of prejudice to the respondents flowing from the delay in service and to [NAME] that would flow from a discharge of the orders for the Fifth and Sixth extensions. The errors were said to be the following: (1)The [NAME] Judge, in finding that not all financial records were available, failed to take into account that the unavailability of the records predated the filing of the statement of claim. Thus any prejudice to the respondents was not caused by the delay in service of the statement of claim. (2)[NAME] wrongly thought that prejudice to [NAME] was ameliorated by the possibility that he could issue fresh equitable proceedings against the respondents. In taking this approach, [NAME] failed to recognise that there was a risk that any equitable proceedings could be defeated because of a time bar or other defences available by reason of delay. (3)The [NAME] Judge was required to take into account that prejudice from delay in service may be mitigated if a defendant has notice of the nature of the claim before service of the originating process. As in [NAME], the respondents were aware of the nature of the claims against them. It was therefore irrelevant that they did not have notice of the precise claims pleaded in the statement of claim and [NAME] erred in taking that fact into account. (4)The [NAME] Judge was incorrect to find that the risk of prejudice increased with every successive extension. Since by 2005 some of the respondents had no memory of key events (so it was argued), there could be no additional prejudice by reason of delay beyond that date. Furthermore, the [NAME] Judge had failed to find that the risk of prejudice had been negated by the steps taken by the respondents to preserve documentation soon after the relevant events had occurred. (5)The [NAME] Judge erred in finding (at [428]) "presumptive prejudice" on the basis of "the inevitable deterioration in the quality of evidence" and the oppression of having the spectre of serious obligations pursued so long after the relevant events.

Reasoning

The Need to Identify Error 156The [NAME]'s submissions, particularly on the question of prejudice, did not always pay sufficient attention to the discretionary nature of [NAME]'s decision and the role of this Court on an appeal from such a decision: cf Supreme Court Act 1970, s 75A(5). As I have noted, [NAME] does not suggest that the [NAME] Judge misstated the relevant principles, either generally or in relation to prejudice. With [NAME] or two exceptions, [NAME] does not challenge the findings of [NAME] fact relevant to questions of prejudice to the respondents and to [NAME], respectively. Rather, [NAME] says that the [NAME] Judge's conclusions on prejudice failed to take relevant considerations into account or took irrelevant considerations into account. 157In the absence of an error of principle or a successful challenge to findings of [NAME] fact, an appellate court on appeal from a discretionary decision will not set aside the decision merely because it is arguable that a different interpretation might be placed on the [NAME] facts. It is necessary to remember that error must be demonstrated. It is also necessary to remember that the trial Judge, particularly in a complex case, has advantages over an appellate court when matters of judgment or impression are concerned: [NAME] v [COMPANY] (No 2) [2001] FCA 1833; 117 FCR 424, at 435 [24], 437 [29], per Allsop J (with whom Drummond and Mansfield JJ agreed). As Allsop J said in [NAME] (at 437 [28]), albeit in a slightly different context: "if a choice arises between conclusions equally open and finely balanced and where there is, or can be, no preponderance of view, the conclusion of error is not necessarily arrived at merely because of a preference of view of the appeal court for some fact or facts contrary to the view reached by the trial judge." 158The point can be illustrated by the third argument identified at [155(3)] above. [NAME] relied on the [NAME] Judge's observation (at [541]) that the pleaded causes of action "broadly follow[ed] the areas of investigation highlighted by [NAME]" and were therefore "unlikely to have come as a surprise" to the respondents when they were served with the statement of claim. This was said to satisfy the "test" in [NAME] (at [43]) and [NAME] (at 434 [222(d)]), namely that it is relevant to consider whether notice was given to the defendants, prior to service, of the nature of the claim. 159The precise finding made by the [NAME] Judge (at [314]) was that the respondents were on notice of the "likely subject matter of the claims that might be made against them", at least in respect of the principal causes of action. While the causes of action pleaded would not have come as a surprise to the respondents because they broadly followed the areas of investigation reported by [NAME] to creditors (at [541]), the respondents did not have specific knowledge of the causes of action pleaded (at [314], [319]). 160The [NAME] Judge weighed in the balance the extent of the respondents' knowledge of the claims made against them. She distinguished [NAME] (at [193]-[196]), correctly in my view, on the ground that the defendants in that case learned nothing new at all when the statement of claim was served. They had been fully aware of the issues in the case because they were fully aware of a test case that had raised precisely the same issues. 161Her [NAME] did not take into account an irrelevant consideration or apply an incorrect principle when determining that the respondents' knowledge of the case against them did not militate against discharging the Fifth and Sixth Extensions. She merely gave less weight to the respondents' understanding of the case against them prior to service of the statement of claim than [NAME] considers would have been appropriate. I see no appellable error in [NAME]'s approach.

Unavailability of Records 162The [NAME]'s submission on this question seems to rest on a misinterpretation of the [NAME] judgment. [NAME] did not find that the respondents had suffered prejudice by the loss of documents after the filing of the statement of claim. The respondents put forward the loss of documents as a response to a submission by [NAME] that the respondents had not suggested that they had lost any access to witnesses or documents needed to defend [NAME]'s claims. The [NAME] Judge merely observed (at [426]) that the length of time that had elapsed since the relevant events increased the risk of prejudice from further delays, given that not all financial records were available. [NAME] had in mind that the recollections of witnesses on contested issues were more likely to become less reliable if contemporaneous documentation had been lost. This seems to me an unexceptionable proposition.

Fresh Equitable Proceedings 163The [NAME]'s submission that the [NAME] Judge failed to take into account the likelihood that equitable claims would be time barred is curious. As the [NAME] pointed out, it was [NAME] who argued before the [NAME] Judge that, as a matter of discretion, [NAME] should not discharge the orders for extension of the time for service because an order for discharge would be futile. The futility was said (at [457]) to flow from [NAME]'s entitlement to bring fresh proceedings seeking equitable relief against the respondents. In support of this contention, [NAME] argued (at [471]) that a claim for such relief would not be defeated by the lapse of time. 164The [NAME] judge, in the passages criticised by [NAME] on appeal, was simply responding to arguments made on behalf of [NAME] himself. When [NAME] said (at [478]) that the only real cost of dismissing the current proceedings would be that [NAME] would incur fresh filing fees, [NAME] was accepting, for the sake of argument, the submission that had been advanced on behalf of [NAME]. [NAME] did not make a finding that little prejudice had been occasioned to [NAME] because it would be a straightforward matter to institute fresh proceedings. On the contrary, [NAME] repeatedly acknowledged that discharge of the orders for extension of time would prejudice [NAME] because he would lose potential causes of action against the respondents and the creditors would lose their financial investment in the proceedings. 165This submission must be rejected.

The Respondents' Notice of the Claim 166I have already explained why [NAME] has not shown that the [NAME] Judge erred in the manner in which she dealt with the respondents' prior knowledge of the claims pleaded against them (at [158]-[161] above). I add only that it is difficult to see how [NAME] and [NAME] (both of whom were appointed to the [NAME] on 17 May 2001, a few days before the relevant events) could have appreciated from reading [NAME]'s reports that [NAME]'s statement of claim would make specific allegations of serious wrongdoing against each of them.

Incremental Prejudice 167The [NAME] Judge referred at considerable length to the principal authorities dealing with the significance of delay in the institution or conduct of civil proceedings. As I have noted, it has not been suggested that [NAME] misstated the relevant principles. These include the observations made by McHugh J as to the prejudicial effect of delay in Brisbane South Regional Health Authority v Taylor [1996] HCA 25; 186 CLR 541, at 551-553: "The enactment of time limitations has been driven by the general perception that '[w]here there is delay the whole quality of justice deteriorates'. Sometimes the deterioration in quality is palpable, as in the case where a crucial witness is dead or an important document has been destroyed. But sometimes, perhaps more often than we realise, the deterioration in quality is not recognisable, even by the parties. Prejudice may exist without the parties or anybody else realising that it exists ... The longer the delay in commencing proceedings, the more likely it is that the case will be decided on less evidence than was available to the parties at the time that the cause of action arose. ... The effect of delay on the quality of justice is no doubt [NAME] of the most important influences motivating a legislature to enact limitation periods for commencing actions. But it is not the only [NAME]. Courts and commentators have perceived four broad rationales to the enactment of limitation periods. First, as time goes by, relevant evidence is likely to be lost. Second, it is oppressive, even 'cruel', to a defendant to allow an action to be brought long after the circumstances which gave rise to it have passed. Third, people should be able to arrange their affairs and utilise their resources on the basis that claims can no longer be made against them. ...The final rationale for limitation periods is that the public interest requires that disputes be settled as quickly as possible." See also Jackamarra v Krakouer [1998] HCA 27; 195 CLR 516, at 526 [29], per Gummow and Hayne JJ. 168McHugh J in Brisbane South was speaking of the approach to be taken by a court to an application to extend the limitation period pursuant to statutory authority to do so. But his [NAME]'s observations also inform the approach to be taken to an application to extend time for service of initiating process and to an application to discharge orders extending time. In resolving such applications, the lapse of time to be considered is the period commencing from the filing of the initiating process, rather than the period commencing on the date the cause of action arose: Tolcher v Gordon [2005] NSWCA 135; 53 ACSR 442, at 448 [33], 460-461 [90]-[96], per [NAME] JA (with whom [NAME] agreed). In the present case the [NAME] Judge correctly recognised that prejudice had to be assessed by reference to the delay in service, calculated from the date of filing the statement of claim. 169Mr [NAME] did not dispute that the principles stated by McHugh J were applicable to the present case. However, he relied on evidence given by [NAME] and [NAME] in [NAME] to attack the [NAME] Judge's finding that the delay of three years and three months in serving the statement of claim caused prejudice to the respondents. [NAME] pointed to evidence by [NAME] that he did not recall much about [NAME] outside of board meetings and that his memory of board meetings was "hazy". [NAME] also pointed out that [NAME], when asked whether he had tried to forget about the events that had occurred in the six months before [NAME] went into administration, replied that "in a general sense [the suggestion was] relatively fair". [NAME] also repeatedly said in his evidence that he could not recall matters that the cross-examiner put to him. 170Contrary to [NAME]'s submissions to this Court, the evidence given by [NAME] and [NAME] in [NAME] does not establish that, from the time the statement of claim was filed if not earlier, neither had any recollection of the events relevant to [NAME]'s pleaded claims. This case is not like Maile v Rafiq [2005] NSWCA 410 (to which [NAME] referred), where there was a single, narrow factual question to be resolved and it was clear that the parties' memories had not faded in any relevant way: see at [90], per [NAME] JA (with whom Brownie AJA agreed). The pleaded case against the respondents raises a large number of factual issues, many of which are different from to the issues addressed in [NAME]. Even if attention is confined to the evidence that could be given by [NAME] and [NAME] in the proceedings, it was open to [NAME] to conclude that the risk of prejudice to the respondents increased as time passed. 171In any event, as [NAME] found (at [269]), there were many potential witnesses in the proceedings instituted by [NAME] who had not previously given evidence as to their recollection of the relevant events and who had not otherwise had their memories refreshed. For example, not all of the 27 people who attended the crucial board meeting on 29 May 2001, which was referred to in the statement of claim, had recorded their version of what transpired at the meeting. [NAME] considered (at [269]) that even if witnesses had had an opportunity to record their recollections, their evidence would: "have less immediacy (and hence be more prone to be unreliable) than it would have been closer to the events in question". 172In my view, it was well open to the [NAME] Judge to find (at [270]) that, even taking into account the opportunity for some witnesses to record their recollection of events, the likelihood of prejudice had not been negated. [NAME] was entitled to take into account not only the number of potential witnesses in the proceedings, but also that it was not until service of the statement of claim that the respondents learned of the precise allegations against them. That situation came about, as I have already noted, because [NAME] insisted on maintaining confidentiality of the statement of claim until it was served.

Presumed Prejudice 173What I have said on the question of incremental prejudice largely answers [NAME]'s complaints about [NAME]'s findings as to presumed or inherent prejudice. I add the following observations: * The [NAME] Judge's assessment (at [449]-[450]) of the prejudice to the respondents in having allegations of serious dishonesty determined years after the filing of initiating process is supported by the observations of Tadgell and Ormiston JJ (with whom Brooking J agreed) in [COMPANY] (in liq) v Deloitte Haskins & Sells [1999] 3 VR 863, at 887 [60]. While it is true, as [NAME] contended, that he would have to prove the allegations of serious misconduct to the so-called Briginshaw standard, this does not detract from the conclusion that the respondents would suffer prejudice by reason of the delay in serving the statement of claim. * I do not think it is correct to say (as [NAME] submitted) that the respondents "took all conceivable steps to preserve the position" by recording their evidence shortly after the relevant events had occurred. While the respondents clearly did take steps to record evidence and receive legal advice, they took measures to preserve the position without the benefit of knowing the precise allegations to be made against them. In addition, as I have noted, not all potential witnesses had their memories refreshed or their evidence recorded. * Nor do I think it correct that the [NAME] Judge failed to appreciate that the relevant delay was the time between filing of the statement of claim and service on the respondents. [NAME] was conscious of the need to focus on the prejudicial consequences of the delay in service for that period (see for example, at [289], [291], [431]).

OTHER ISSUES

The Challenge on the Grounds of Unreasonableness 174The [NAME] challenged the [NAME] Judge's decision to discharge the Fifth and Sixth Extensions on the ground that the decision was plainly unreasonable or unjust. It followed, so [NAME] argued, that the orders could be set aside notwithstanding that the [NAME] Judge's decision involved the exercise of a discretionary power. 175The principal argument advised in support of this ground was that two different judicial officers ([NAME] and the [NAME] Judge) had reached "diametrically different conclusions with the dramatic consequences for [[NAME]]". For reasons I have already given (at [38],[39]), this submission rests on a misconception and must be rejected. 176Mr [NAME] also submitted that the result was unreasonable or unjust because [NAME] had relied on the orders made to extend the time for service and any delay in effecting service had not caused significant prejudice to the respondents. To the extent [NAME] relied on the orders extending the time for service, that reliance had to be qualified by his knowledge that it was open to the respondents to apply to discharge the orders and to put forward evidence and arguments that had not been before the Judges who had granted the orders for extension. As I have explained, the question of prejudice, both to the respondents and to [NAME] was carefully considered by the [NAME] Judge. For reasons I have already given, [NAME]'s conclusions in relation to prejudice cannot be characterised as unreasonable. 177This challenge also fails.

Filing of Appearances 178The [NAME] submitted that, as the respondents had entered appearances in the proceedings before filing their notices of motion seeking to discharge the orders extending time for service of the statement of claim, they had waived any irregularity in the service of the statement of claim. In oral argument, however, [NAME] accepted that this submission was inconsistent with the holding in [NAME] (at [219]), that the filing of the notice of appearance is not a bar to a defendant seeking to discharge an order extending the time for service of initiating process. [NAME] did not submit that this Court should reconsider the holding in [NAME].

Sixth Extension 179The [NAME] submitted that the [NAME] Judge had made two errors in discharging the Sixth Extension. 180The first error was said to be that [NAME] had incorrectly taken into account [NAME]'s alleged failure to disclose to [NAME], on the ex parte application for the Sixth Extension, that it was intended to amend the statement of claim to introduce an array of new and serious allegations. [NAME] acknowledged that it was unclear whether [NAME] had taken this matter into account. However, if she did, she had overlooked [NAME]'s evidence that, at the time of the Sixth Extension, he was unaware of the nature of the proposed amendments. In any event, so it was argued, any proposals to amend the statement of claim were irrelevant to the issues before the [NAME] Judge. 181The [NAME]'s second argument was that [NAME] made factual errors in finding (at [439]) that the sole reason for the delay in service as at May 2010 was the [NAME]' desire to retain fresh orders to conduct a wholesale review of the pleadings. 182The short answer to the first submission is that a fair reading of the [NAME] judgment indicates that [NAME] took into account [NAME]'s alleged non-disclosure only in relation to the [NAME]' respondent's application, pursuant to UCPR, r 36.16(2)(b), to set aside the orders extending time. The application, which was rejected by the [NAME] Judge (at [483]), was based on [NAME]'s alleged non-disclosures. No issue arises on the present appeal in relation to [NAME]'s conclusion on the [NAME]' respondents' application. 183As to the second argument, [NAME] gave evidence to the [NAME] Judge that the change of lawyers was at the insistence of the [NAME]. He also gave evidence that as from May 2008, the only thing holding up service of the statement of claim was the need to secure funding, except for some "fairly minor amendments". It was well open to [NAME] to conclude that the engagement of fresh lawyers further delayed service of the statement of claim. Even if some amendments were required at this late stage, the inference was readily available that that the lawyers who were already familiar with the proceedings would have been able to complete the task more speedily than new lawyers.

Notices of Contention 184The respondents filed notices of contention, seeking to affirm the [NAME] decision on grounds other than those on which [NAME] relied. Three grounds, in substance, were common to each of the notices of contention, although framed in different language: (1)[NAME]'s deliberate decision to await a binding commitment from a [NAME], in the circumstances of this case, was not a good reason to allow an extension of time for service of the statement of claim. (2)Even if [NAME]'s desire to obtain litigation funding was a good reason, it was unreasonable for [NAME] to delay service, since by October 2008 he had an offer of funding, which he could have accepted at that time. The offer would have covered his own costs and fees in an unlimited amount and provided an indemnity of $12 million in respect of adverse cost orders. (3)In any event, [NAME] had sufficient funding to commence the proceedings and to serve the statement of claim. Any delay in service beyond that time and certainly beyond November 2009 was unreasonable. 185In addition, the [NAME] advanced a fourth ground in their notice of contention. They contended that any contribution claims in respect of matters pleaded in the statement of claim against them had become statute barred.

Accordingly, so they argued, they would suffer irremediable prejudice if the orders extending time were not discharged.

Litigation funding arrangements 186Mr [NAME], who appeared with [NAME] for [NAME] had carriage of the argument on the litigation funding aspects of the notices of contention. In summary, he made the following submissions: (1)[NAME]'s desire to await a binding commitment from a [NAME] was not a good reason for successive extensions of time for service of the statement of claim and, of itself, was sufficient to warrant discharge of the Fifth and Sixth Extensions. (2)[NAME] acted unreasonably in insisting on insurance coverage or an indemnity in the sum of $40 million to cover possible adverse cost orders. The figure selected by [NAME] lacked the rational foundation and was not supported by contemporaneous estimates provided to him. (3)As a matter of commercial reality, [NAME] had an offer capable of acceptance in October 2008. That offer would have covered all [NAME]'s legal costs in the litigation, his own fees and non legal expenses as well as an indemnity of up to $12 million against the possibility of adverse cost orders. [NAME]'s unwillingness to accept the offer was unreasonable having regard to the dictates of ss 56-59 of the CP Act, which emphasised the importance of the timely in efficient conduct of litigation. (4)In any event, consistently with the [NAME] Judge's findings (at [414]), [NAME] had ample funds to commence the proceedings no later than February 2009. At all relevant times, [NAME] had over $7.5 million in "free cash" held by [NAME] ("[NAME]"). From February 2009, the [NAME] expected to receive a further $8 million to $9 million in "free cash" from the Netherlands. According to Mr Young, these resources were ample to allow [NAME] to serve the statement of claim and to conduct the proceedings pending the outcome of negotiations for litigation funding. 187I am inclined to doubt that a desire to secure litigation funding can never justify delay in serving initiating process. Otherwise, I think that there is a good deal of force in the arguments advanced by Mr Young. In particular, in the circumstances of this case, it is difficult to understand the justification for [NAME] delaying service of the statement of claim until he procured a costs indemnity of $40 million. This figure was arrived at by means of little more than a highly dubious "back of the envelope" calculation. It was at odds with the more careful assessment provided by [NAME]'s solicitors in September 2007. At that time, they estimated [NAME]'s cost exposure, if he decided to pursue claims against the [NAME] and [NAME], to be within the range of $6 million to $8 million. While the solicitors correctly recognized the inherent difficulties of accurately estimating the cost of large scale litigation, their estimate provides little or no support for [NAME]'s insistence on a very much larger costs indemnity being in place before the statement of claim could be served. 188The [NAME]'s position is even more difficult to justify when, on his own account, he could have had funding arrangements in place in or shortly after October 2008. Those arrangements would have covered his legal costs and fees and indemnified him up to a limit of $12 million against adverse cost orders. Moreover, the evidence establishes that [NAME] expected to have additional resources at his disposal in the form of $8 million to $9 million "free cash". It is true that [NAME] itself was to be a member of the funding syndicate, a role that would have consumed the free cash of about $7.5 million available to [NAME] through the [NAME]. But the additional funds [NAME] expected to receive could have provided further security against any adverse cost orders in the proceedings. The conclusion seems inevitable that [NAME]'s insistence on an indemnity of $40 million reflected his determination to eliminate even the remotest chance that he would be personally exposed to any liability to pay costs in the proceedings. 189The significance of the free cash and the expectation of further funds is that the choices facing [NAME] were not as stark as [NAME] suggested in argument. He submitted that the only practicable choices open to [NAME], other than delaying service of the statement of claim, were to proceed with the proceedings and hope that litigation funding would eventuate, or to serve the statement of claim and immediately seek a stay of the proceedings. The first of these two choices he characterised as "imprudent and irresponsible". The second, so he contended, created a dilemma for the respondents. If they successfully opposed a stay, [NAME] would not have been able to pursue the proceedings because he had insufficient funds. 190Even disregarding the opportunities available to [NAME] to obtain litigation funding in 2008, he had sufficient resources not only to serve the statement of claim, but also to conduct the proceedings using the available free cash. While the free cash was unlikely to be sufficient to enable the proceedings to be conducted to their conclusion, the further funds expected to become available to [NAME] may well have permitted that course. If the respondents sought security for costs, the further progress of the proceedings might have depended on the availability of litigation funding (although not in the amounts [NAME] sought). But the service of the statement of claim and pursuit of the proceedings in these circumstances could hardly be described as "imprudent and irresponsible". 191I do not think it is necessary to determine whether these matters would provide an independent basis for upholding the orders made by the [NAME] Judge. It is enough to say that they lend powerful support to the conclusions [NAME] reached.

Barring of contribution claims 192Mr [NAME] SC, who appeared with [NAME] for the [NAME], initially submitted that any contribution claims by the [NAME] had become statute barred and thus the Fifth and Six Extensions have caused them irremediable prejudice. In oral submissions, however, [NAME] modified that submission and contended only that there was a "real question" as to whether any potential contribution claims had become statute barred. 193The issues raised by the submissions are not simple. In the circumstances, I do not think it is either necessary or appropriate to attempt to resolve them.

Proper Exercise of Discretion 194Because the [NAME] Judge, did not, in my view, commit any error that would justify setting aside her decision to discharge the Fifth and Sixth Extensions, it is not necessary to consider whether, if error had been established, this Court would exercise the discretion conferred by UCPR, r 12.11(1)(e) to reach the same result. I think it appropriate to record, however, that if this Court was required to re-exercise the discretion conferred by the sub-rule, I would have made orders discharging the Fifth and Sixth Extensions. 195In my opinion, the key elements in this case are the following: By early April 2008, [NAME] had received a final opinion from counsel and was ready to serve the statement of claim, subject only to funding and the leave of the Court. By that stage, [NAME] had carried out extensive investigations (at a cost, on his estimate, of over $5 million) and formed the judgment that proceedings should be brought against the respondents. [NAME] formed this judgment without considering it necessary to await the outcome of the proceedings in [NAME]. * As a matter of commercial reality, [NAME] had an offer of litigation funding in October 2008 that would have covered his costs and fees and provided an indemnity of $12 million against adverse costs orders. [NAME]'s decision not to accept that offer and to prolong negotiations arose from his desire to gain protection against remote risks. That decision paid little regard to the importance of litigation being pursued with reasonable speed and diligence. Even if it was reasonable in the interests of [NAME] not to undertake litigation without a complete protection against any possible personal liability for costs, what is reasonable in the interests of the liquidator is not necessarily the same as what is reasonable in the conduct of litigation. [NAME] made a deliberate decision to pursue funding through [NAME], rather than [NAME] or any similar proposal, no later than September 2009 and probably earlier that year. In consequence, as the [NAME] Judge found (at [419]), effective control of the time at which the originating process would be served had largely been abdicated to [NAME]. It was they who insisted on waiting for the delivery of judgment in [NAME]. Having regard to the serious nature of the allegations made in the statement of claim and [NAME]'s determination to maintain confidentiality in the pleading until it was served, the delay between filing and service of the statement of claim (as the [NAME] Judge found) occasioned prejudice to the respondents. While this prejudice would have to be weighed against that caused to [NAME] by the discharge of the orders for the Fifth and Sixth Extensions, it is a significant factor in the exercise of the Court's discretion. At all material times, [NAME] was aware that the respondents could apply to the Court to discharge the orders made on its ex parte application extending the time for service of the statement of claim. Any such application by the respondents could (and did) rely on evidence and submissions not put to the Judges who granted the extensions of time for service. 196I have set out earlier (at [20],[21]) the principles governing the exercise of the discretion conferred by UCPR, r 12.11(1)(e). In the light of those principles, if the Court was required to re-exercise the discretion conferred by the sub-rule, I would have made orders discharging the Fifth and Sixth Extensions.

ORDERS 197I think that this is an appropriate case in which to grant [NAME] leave to appeal. However, the appeal should be dismissed. [NAME] should pay the respondents' costs of the appeal. 198Accordingly, the orders that I propose are: (1)[NAME] leave to appeal. (2)The appeal is dismissed. (3)[NAME] pay the respondents' costs of the appeal.

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