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Baskerville v Baskerville QSC 292
SUPREME COURT OF QUEENSLAND
Baskerville v Baskerville & Ors  QSC 292
CHRISTOPHER JOHN BASKERVILLE IN HIS CAPACITY AS LIQUIDATOR OF PROFESSIONAL REPRESENTATIVES PTY LTD ACN 162 127 880
CHRISTOPHER JOHN BASKERVILLE IN HIS CAPACITY AS LIQUIDATOR OF SNG5 PTY LTD ACN 162 503 488
DAVID LAWRENCE ORTH
REAL WEALTH PROTECT PTY LTD ACN 600 035 818
ORTH HOLDINGS PTY LIMITED ACN 611 540 286
ORTH ASSETS PTY LIMITED ACN 622 385 200
MARK ALVIN HOLZWORTH
HWP FINANCIAL PTY LTD ACN 164 056 624 (formerly known as HOLZWORTH WEALTH PARTNERS PTY LTD)
BS No 7829 of 2021
Supreme Court at Brisbane
15 November 2021
23 July 2021
CORPORATIONS – WINDING UP – CONDUCT AND INCIDENTS OF WINDING UP – EFFECT OF WINDING UP ON OTHER TRANSACTIONS – PREFERENCES AND VOIDABLE TRANSACTIONS – GENERALLY – where the applicant liquidator seeks an extension of time to commence voidable transaction proceedings – where the applicant submits that there is an adequate explanation for the delay in bringing the proceedings – where the respondents submit the delay is caused by the conduct and lack of action by the liquidators and that the liquidator was able to commence proceedings before the expiration of the time – whether it is fair and just in all the circumstances to extend the limitation period
EVIDENCE – ADMISSIBILITY – EXCLUSIONS: PRIVILEGES – PUBLIC INTEREST PRIVILEGE – SETTLEMENT NEGOTIATIONS – where the applicant objects to the admissibility of an email relied upon by the respondents given the without prejudice nature of the communication – where the applicant submits that the email sent by the applicant’s solicitor is inadmissible because it is a without prejudice communication between the applicant’s solicitor and the second respondent about settlement discussions – where the respondents submit that the email is admissible because it is at odds with the suggestion that the applicant could not have commenced a proceeding within time and, if the email is without prejudice communication, then the Court would be misled if the evidence were not received – whether the statement should be admitted as evidence going to the truth of the assertion that the application was not ready to proceed
Corporations Act 2001, s 503B, s 588FE, s 588FF
Uniform Evidence Act 1995 (NSW), s 131
BP Australia Limited v Brown (2003) 58 NSWLR 322
Clout v Andi-Co Australia Pty Ltd (2013) 96 ACSR 512
Field v Commissioner for Railways (NSW) (1959) 99 CLR 285
Fortress Credit Corporation (Australia) II Pty Ltd v Fletcher (2015) 254 CLR 489
Glengallan Investments Pty Ltd v Andersen  1 Qd R 233
Green v Chiswell Furniture Pty Ltd (in liq)  NSWSC 608
JA McBeath Nominees Pty Ltd v Jenkins Development Corporation Pty Ltd  2 Qd R 121
Liu v Chan  QCA 25
Lohar Corp Pty Ltd v Dibu Pty Ltd (1975) 1 BPR 9177
McFadden v Snow (1951) 69 WN (NSW) 8
New Cap Reinsurance Corporation Ltd (in liq) v Reaseguros Alianza SA (2004) 186 FLR 175
O'Neill v Martini  QSC 198
Parker; Worldwide Specialty Property Services Pty Ltd (in liq), Re v Worldwide Specialty Property Services Pty Ltd (in liq)  FCA 687
Pitts v Adney  NSWR 535
Re Clarecastle Pty Ltd (in liq) (2011) 255 FLR 435
Re Dudley, Freshwater Bay Investments Pty Ltd (in liq) (2021) 152 ACSR 532
Taylor v Woden Constructions Pty Ltd  FCA 1228
Trade Practices Commission v Arnotts Ltd (1989) 88 ALR 69
Unilever Plc v Proctor & Gamble Co  1 WLR 2436
L Copley for the applicant
C Johnstone for the second to fourth respondents
Ellem Warren Lawyers for the applicant
Taylor David Lawyers for the second to fourth respondents
- Christopher Baskerville is the liquidator of Professional Representatives Pty Ltd (“the company”). He seeks an extension of the time limit to commence proceedings pursuant to s 588FF(3)(b) of the Corporations Act 2001 (“the Act”).
- The company was placed into liquidation on 11 July 2018. Two people were appointed as the liquidators – one resigned on 24 July 2019 and the other was replaced by Mr Baskerville on 23 April 2020.
- The time limit for commencing voidable transaction proceedings expired on 11 July 2021. This application was filed two days before that limitation period expired.
- Section 588FF(3)(b) does not prescribe any criteria for the exercise of the discretion to extend time. The issue, then, is whether it would be fair and just in all the circumstances for the limitation period to be extended.
- The second respondent – Mr Orth – was a director of the company. He was also a director of the third respondent – Real Wealth Protect Pty Ltd – which changed its name to SNG5 Pty Ltd. It was deregistered at the request of Mr Orth on 24 June 2020. On 1 June 2021, this Court ordered that SNG5 be reinstated, and that Mr Baskerville be appointed as liquidator.
- In January 2018, Mr Orth offered a number of enforceable undertakings to the Australian Securities and Investments Commission (“ASIC”). They included that he would not, for a period of five years: provide financial services, be the director of a company that holds an Australian Financial Services Licence (“AFSL”) or hold out that he holds an AFSL.
- Mr Orth also acknowledged to ASIC that, among other things, he had failed to comply with the best interest obligations imposed upon providers of personal advice under Division 2 of Part 7.7A of the Act.
- From time to time, Mr Orth has been the recipient of correspondence from the applicant, especially with respect to the company’s records and SNG5.
A brief history
- Each of Mr Baskerville and Mr Orth have provided affidavits for use in this application. From those, the following brief history of the matter emerges:
- 11 July 2018 – Marcus Watters and Ginette Muller were appointed liquidators of the company. Each of them was a member of the firm Jirsch Sutherland.
- 9 October 2018 – the Second Report to Creditors was issued.
- 29 January 2019 – pursuant to section 530B of the Act, Mr Waters requested Mr Orth to provide the company’s books.
- February 2019 – Mr Orth replied, to the effect, that he did not have any of the books which had been requested because he had provided them to another director.
- 23 July 2019 – Ms Muller resigns as liquidator.
- 13 February 2019 to April 2020 – the applicant says that “limited work” took place during this time because the liquidation remained unfunded.
- February 2020 – Mr Orth says that he met with Mr Watters with respect to another matter and, at that meeting, Mr Watters told him that there were no outstanding issues in the liquidation and that he did not need any further information.
- 23 April 2020 – Mr Watters resigns as liquidator, and Mr Baskerville is appointed in his place. Mr Baskerville is a member of Jirsch Sutherland.
- 23 April 2020 to 19 March 2021 – Mr Baskerville says that he and his staff conducted a “thorough review of the file and [identified] likely claims against SNG5 Pty Ltd, David Orth personally and other entities related to Mr Orth.”
- 6 April 2021 and 27 April 2021 – the applicant sends s 530B notices to Mr Orth, who replies that he did not have any more records in respect of the company.
- 24 June 2020 – Mr Orth causes SNG5 to be deregistered.
- 1 June 2021 – Mr Baskerville causes SNG5 to be reregistered, and he was appointed liquidator.
- 7 June 2021 – Mr Baskerville, as liquidator of SNG5, sends a s 530A notice to Mr Orth.
- Section 588FF(1) sets out the orders which may be made when a court is satisfied that a transaction of a company is voidable because of s 588FE. Section 588FF(3) provides for a time limit for the making of an application for such an order in the following terms:
“(3) An application under subsection (1) may only be made:
(a) during the period beginning on the relation‑back day and ending:
(i) 3 years after the relation‑back day; or
(ii) 12 months after the first appointment of a liquidator in relation to the winding up of the company;
whichever is the later; or
(b) within such longer period as the Court orders on an application under this paragraph made by the liquidator during the paragraph (a) period.”
- The High Court described the purpose underlying s 588FF(3) in the following way:
“The function of s 588FF(3), which reflects its immediate purpose, is to confer a discretion on the court to mitigate, in an appropriate case, the rigours of the time limits imposed by para (a). That is a discretion to be exercised having regard to the scope and purpose of Pt 5.7B, characterised in the Harmer Report as the continuing “policy” which underpinned its recommendations. That policy included the avoidance of transactions by which an insolvent company has disposed of property in circumstances that are regarded by the legislature as unfair to the general body of unsecured creditors. It is, however, a policy qualified in its application by the requirement that liquidators be placed under a reasonable time limitation for taking action under the voidable transaction provisions. A purpose of that qualification, expressed in “clear and emphatic” terms, is to favour certainty for those who have entered into transactions with the company during the periods in respect of which designated transactions may be voidable. There is, however, no independent basis for the assertion that any extension of time which does not identify a particular transaction or transactions must be an unreasonable prolongation of uncertainty militating against a construction which would allow such an order to be made. The section provides for the exercise of discretion by the court. Questions of what is a reasonable or an unreasonable prolongation of uncertainty and the scope of such uncertainty are more appropriately considered case-by-case in the exercise of judicial discretion than globally in judicial interpretation of the provision.”
- While there is no established test to be applied on an application such as this, some factors have been identified as relevant to the determination of the application and have been applied by many courts. For example, in Green v Chiswell Furniture Pty Ltd (in liq), a decision that has been applied many times, Austin J identified the following as relevant issues for consideration:
- the explanation for the delay in bringing the proceedings,
- a preliminary review of the merits of the foreshadowed proceedings,
- whether the likely actual prejudice resulting from the grant of an extension is sufficiently substantial to outweigh the case for granting an extension, and
- where the liquidators’ purpose in seeking the extension of time is simply to put them in a position where they can properly decide whether or not to bring proceedings, a preliminary enquiry into the merits of any consequent proceedings may not always be necessary.
- The onus is on the liquidator to show why the time limitation should not apply.
- A matter which will be of considerable importance is whether prejudice has been caused to a party by the delay. The respondents do not assert any prejudice but, even so, prejudice will be presumed because of, for example, the inevitable deterioration in the memory of witnesses. The presumption, though, is rebuttable. Much will depend upon the circumstances of the winding-up: the time which has elapsed, the availability of physical or digital records, and whether relevant witnesses have been aware of the liquidation.
- Where, as here, there has been a delay by a liquidator then the analysis by Lee J in Parker; Worldwide Specialty Property Services Pty Ltd (in liq), Re v Worldwide Specialty Property Services Pty Ltd (in liq) is of particular assistance:
“ The question of delay and its relevance to assessing what is fair and just in all the circumstances in the context of an application under s 588FF(3)(b) was canvassed, in some detail, by Ward J (as her Honour then was) in Re Clarecastle Pty Ltd (in liq)  NSWSC 857; (2011) 255 FLR 435 at  to . Her Honour collected a number of cases and statements about delay in a variety of contexts from which the following principles emerge:
(a) in assessing what is fair and just in all the circumstances, in the context of an extension application under s 588FF(3)(b), regard must be had to first, the public policy underlying the imposition of limitation periods generally; and secondly, in relation to s 588FF(3)(b) in particular;
(b) as to limitations generally, four broad rationales for the enactment of limitation periods can be identified: first, as time goes by, relevant evidence is likely to be lost; secondly, it is oppressive to a defendant to allow an action to be brought long after the circumstances which gave rise to it have passed; thirdly, people should be able to arrange their affairs and utilise their resources on the basis that claims can no longer be made against them; fourthly, it is in the public interest requires that disputes be settled as quickly as possible;
(c) as to the particular context of s 588FF(3)(b):
(i) a broader public interest is served by allowing persons who have had dealings with companies which become insolvent to conduct their commercial affairs with a degree of certainty about their exposure to having past transactions unravelled and, to quote Spigelman CJ in BP Australia v Brown  NSWCA 216; (2003) 58 NSWLR 322 at  to :
‘…(c)ommercial life must at some stage rule off the past and focus energy on the future…… the commercial and economic life of the community is sometimes better served by allowing the loss to lie where it falls, so that all concerned may proceed with a high degree of certainty as to their financial position. The passage of time, even the passage of three years, can be seen to legitimately alter the balance of conflicting interests in this regard.’
(ii) where conflicting interests have to be balanced, the eventual loss of the ability to make a relevant claim for a voidable transaction may be less important in favour of providing certainty to others who have had dealings with the company, including other - 11 - creditors, so that they can proceed with their business affairs with an assurance that they are no longer at risk;
(iii) importantly … in Arthur Andersen Corporate Finance Pty Limited v Buzzle Operations (In Liq) (2009) NSWCA 104 (at (), Ipp JA expressed the view, that the deliberate decision to allow a writ to become stale after a limitation period had expired would be a powerful factor against extending time for service, noting that any prejudice suffered in such circumstances would be “self-inflicted”. Consistently with this notion, a seemingly deliberate decision on the part of a liquidator not to pursue, in a timely fashion, the investigations for which an extension is sought, is a decision of a similar kind, such that any prejudice occasioned might also be said to be self-inflicted: see Ward J in Clarecastle at .”
 Ward J in Clarecastle also collected a number of statements about the role of prejudice, which included:
(a) that ordinarily prejudice should be of paramount importance, but the absence of prejudice is not itself decisive; it is rather a relevant factor to be taken into account in the exercise of the general discretion;
(b) whether there is an adequate explanation for the delay is only one factor to be taken into account in considering where the interests of justice lie;
(c) the absence of any specific prejudice to the defendant is of more weight, although prejudice may exist without its being able to be identified because facts which were once known may now be forgotten, or their significance may not now be appreciated.
 Consideration of delay on the part of a liquidator as part of the discretionary mix can be gleaned from many cases (including the judgment of Finn J in Taylor v Woden). Identifying operative delay and assessing its seriousness is a necessarily fact dependent analysis, but from the cases, reference has often been made to matters such as the complexity of the company’s affairs and records (or lack thereof); the financial resources to fund an investigation; and the complexity of the investigation including whether advice is needed and whether examinations are necessary or desirable.
- The application is opposed by the second, third and fourth respondents on the following bases:
- the delay in the conduct of the liquidation is due to the conduct or lack of action by both the former liquidators and the applicant,
- the applicant has not recently done anything or discovered anything new in the liquidation, which was not known by at least July 2018,
- the applicant does not disclose any particular steps which he intends to take which would require an extension of time, and
- the extension is unnecessary because the liquidator was in a position to commence proceedings prior to the expiration of the time period.
- A preliminary matter which arises is the admissibility of a particular communication by the applicant. It is appropriate to deal with that first.
“we already have a good barrister briefed” – is this admissible?
- On 31 May 2021, Mr Orth exchanged emails with Ben Warren, a director of Ellem Warren – the solicitors acting for Mr Baskerville. The exchange concerned, in part, the s 530B notice and Mr Orth’s response to it. In an email sent at 4.39 pm, Mr Warren, in robust terms, told Mr Orth that:
- he had failed to comply with the s 530B notice,
- that “putting your head in the sand will not make us stop”,
- that his “I know nothing” defence is untrue, and
- “One way or another, we will source the evidence to prove what happened to the fee proceeds from your ‘advice’, then we will sue you and Rachel [Mr Orth’s wife] for it.”
- After the three paragraphs in that vein, Mr Warren commenced a paragraph with the words: “On a ‘without prejudice’ basis …”. He went on to invite Mr Orth to make an offer.
- Mr Orth responded at 5:55 pm in which he said, among other things, that he would consider a discussion to settle.
- Warren responded at 7:37 pm. In that email, he commenced with the words “without prejudice” and went on:
“You can call it false (or incorrect) assumptions if you like but:
- when we sent the s.530B request to Mr Holzworth we received a prompt and fairly complete response, including source documents, explaining why his entities were paid the funds they received; in contrast, nothing from you;
- You already conceded during the ASIC investigation (see attached, and the enforceable undertaking you executed) that you were responsible for ‘one size fits all’ (negligent, non-compliant) advice;
- the HUB24 records we’ve sourced show who the ‘Advisor’ for each client was between 2014 and September 2016; i.e. we can match you to the clients/creditors of Professional Representatives Pty Ltd.
The only ‘piece of the puzzle’ we are yet to fill in is where the negligent advice money went after it was paid to SNG5 Pty Ltd. As indicated below, we expect a lot of it went to you and (sole shareholder) Rachel personally. We will obtain relevant bank records soon regardless of whether or not you cooperate. However, there is little time left to negotiate a settlement before that happens if you start the ball rolling this week with:
(a) SNG5 (Real Wealth) bank statements,
(b)documentation explaining the transfer of funds from Professional Representatives Pty Ltd to SNG5;
(c)documentation explaining transfers between SNG5 and either you and/or Rachel; and
(d)a reasonable offer.
- In the final paragraph of that email, he said:
“Provide the above this week and we can potentially avoid the need and cost of public examinations and then the unreasonable director-related and/or transfer to defeat creditors transaction court claims against you and Rachel. Otherwise, we already have a good barrister briefed to prepare the claim and that claim should be ready to file against you and Rachel well before 30 June 2021.”
- The respondents submitted:
- The statement “… we already have a good barrister briefed to prepare the claim and that claim should be ready to file against you and Rachel well before 30 June 2021” is at odds with the suggestion that the applicant could not have commenced a proceeding within time.
- There was nothing about the correspondence that was without prejudice.
- All the email did was request documents relating to SNG5 Pty Ltd and a “reasonable offer”.
- Even if the email were otherwise privileged, then, if the Court would be misled if the evidence were not received then the privilege should not apply.
- The applicant submitted:
- The email sent by the applicant’s solicitor was marked “without prejudice”.
- The email is not something the applicant’s solicitor would expect to be before the Court, given the without prejudice nature of the communication.
- It would be unfair to the applicant’s solicitor to tender the email because it was said that it was without prejudice.
- The email, viewed in its context, is part of an email chain between the applicant’s solicitor and the second respondent about settlement discussions (albeit preliminary settlement discussions).
“The law relating to communications without prejudice is of course familiar. As a matter of policy the law has long excluded from evidence admissions by words or conduct made by parties in the course of negotiations to settle litigation. The purpose is to enable parties engaged in an attempt to compromise litigation to communicate with one another freely and without the embarrassment which the liability of their communications to be put in evidence subsequently might impose upon them. The law relieves them of this embarrassment so that their negotiations to avoid litigation or to settle it may go on unhampered. This form of privilege, however, is directed against the admission in evidence of express or implied admissions. It covers admissions by words or conduct. For example, neither party can use the readiness of the other to negotiate as an implied admission. It is not concerned with objective facts which may be ascertained during the course of negotiations. These may be proved by direct evidence. But it is concerned with the use of the negotiations or what is said in the course of them as evidence by way of admission. For some centuries almost it has been recognized that parties may properly give definition to the occasions when they are communicating in this manner by the use of the words “ without prejudice ” and to some extent the area of protection may be enlarged by the tacit acceptance by one side of the use by the other side of these words.”
- At the time of those exchanges, the parties would have reasonably anticipated that litigation could occur. The effect of the authorities at common law is that the privilege applies to offers to negotiate and expressions of willingness to do so; it is not necessary that there be an offer capable of acceptance. Mr Warren invited an offer, and Mr Orth was willing to consider doing that. It follows that, in the ordinary course, the exchanges would be privileged from production.
- There are exceptions to the general rule. Some of these were carefully catalogued by Robert Walker LJ in Unilever Plc v Proctor & Gamble Co:
“… there are numerous occasions on which, despite the existence of without prejudice negotiations, the without prejudice rule does not prevent the admission into evidence of what one or both of the parties said or wrote. The following are among the most important instances.
(1)As Hoffmann L.J. noted in Muller’s case, when the issue is whether without prejudice communications have resulted in a concluded compromise agreement, those communications are admissible. Tomlin v. Standard Telephones and Cables Ltd.  1 W.L.R. 1378 is an example.
(2)Evidence of the negotiations is also admissible to show that an agreement apparently concluded between the parties during the negotiations should be set aside on the ground of misrepresentation, fraud or undue influence. Underwood v. Cox (1912) 4 D.L.R. 66, a decision from Ontario, is a striking illustration of this.
(3)Even if there is no concluded compromise, a clear statement which is made by one party to negotiations and on which the other party is intended to act and does in fact act may be admissible as giving rise to an estoppel. That was the view of Neuberger J. in Hodgkinson & Corby Ltd. v. Wards Mobility Services Ltd.  F.S.R. 178, 191 and his view on that point was not disapproved by this court on appeal.
(4)Apart from any concluded contract or estoppel, one party may be allowed to give evidence of what the other said or wrote in without prejudice negotiations if the exclusion of the evidence would act as a cloak for perjury, blackmail or other ‘unambiguous impropriety’ (the expression used by Hoffmann L.J. in Forster v. Friedland (unreported), 10 November 1992; Court of Appeal (Civil Division) Transcript No. 1052 of 1992). Examples (helpfully collected in Foskett’s The Law & Practice of Compromise, 4th ed. (1996), para. 9–32) are two first-instance decisions, Finch v. Wilson (unreported), 8 May 1987 and Hawick Jersey International Ltd. v. Caplan, The Times, 11 March 1988. But this court has, in Forster v. Friedland and Fazil-Alizadeh v. Nikbin (unreported), 25 February 1993; Court of Appeal (Civil Division) Transcript No. 205 of 1993, warned that the exception should be applied only in the clearest cases of abuse of a privileged occasion.
(5)Evidence of negotiations may be given (for instance, on an application to strike out proceedings for want of prosecution) in order to explain delay or apparent acquiescence. Lindley L.J. in Walker v. Wilsher, 23 Q.B.D. 335, 338 noted this exception but regarded it as limited to ‘the fact that such letters have been written and the dates at which they were 2445written.’ But, occasionally, fuller evidence is needed in order to give the court a fair picture of the rights and wrongs of the delay.
(6)In Muller’s case (which was a decision on discovery, not admissibility) one of the issues between the claimant and the defendants, his former solicitors, was whether the claimant had acted reasonably to mitigate his loss in his conduct and conclusion of negotiations for the compromise of proceedings brought by him against a software company and its other shareholders. Hoffmann L.J. treated that issue as one unconnected with the truth or falsity of anything stated in the negotiations, and as therefore falling outside the principle of public policy protecting without prejudice communications. The other members of the court agreed but would also have based their decision on waiver.
(7)The exception (or apparent exception) for an offer expressly made ‘without prejudice except as to costs’ was clearly recognised by this court in Cutts v. Head, and by the House of Lords in Rush & Tompkins Ltd. v. Greater London Council  A.C. 1280, as based on an express or implied agreement between the parties. It stands apart from the principle of public policy (a point emphasised by the importance which the new Civil Procedure Rules, Part 44.3(4), attach to the conduct of the parties in deciding questions of costs). There seems to be no reason in principle why parties to without prejudice negotiations should not expressly or impliedly agree to vary the application of the public policy rule in other respects, either by extending or by limiting its reach. In Cutts v. Head  Ch. 290, 316 Fox L.J. said:
‘what meaning is given to the words ‘without prejudice’ is a matter of interpretation which is capable of variation according to usage in the profession. It seems to me that, no issue of public policy being involved, it would be wrong to say that the words were given a meaning in 1889 which is immutable ever after.”
- The fourth exception set out above – that of “a cloak for perjury, blackmail or other ‘unambiguous impropriety’” – is also the law in Australia, but it is usually described in a less tendentious way.
- In McFadden v Snow, Kinsella J admitted a letter that would ordinarily have attracted “without prejudice” privilege. He did so because the applicant relied upon an assertion that he had not received a reply to a letter. The applicant had received a reply, but it was in a letter marked “without prejudice” and which contained an offer of settlement. He said: “It appears to me that I must admit this letter to disprove the statement in the affidavit which I have underlined that the claimant had received no reply to his letter. The alleged failure to receive a reply is highly significant … The privilege that may arise from the cloak of “without prejudice” must not be abused for the purpose of misleading the Court and on that ground I admitted the letter to negative the inference that otherwise might quite erroneously have been raised in the claimant’s favour.”
- In Pitts v Adney, Walsh J expressed his “emphatic agreement” with the remarks of Kinsella J set out above. He said:
“It is of importance that the rule protecting from disclosure, discussions taking place in an endeavour to put an end to pending litigation should, in general, be applied. But it is, after all, a rule based upon public policy. It cannot be permitted to put a party into the position of being able to cause a Court to be deceived as to the facts, by shutting out evidence which would rebut inferences upon which that party seeks to rely.”
- In Lohar Corp Pty Ltd v Dibu Pty Ltd, the New South Wales Court of Appeal considered a dispute about the sale of a block of flats. The vendor gave a notice to complete to the purchaser and made time of the essence. The purchaser failed to complete, negotiations followed, and the vendor gave a further seven days in which to complete. That notice was not complied with, and the vendor terminated the contract. The trial judge found that the second notice to complete was inadequate in the absence of any evidence as to the nature of the negotiations.
- Hutley JA, with whom Street CJ agreed, said: “The reason why there was no evidence of the nature of negotiations was that they were “without prejudice” and counsel considered that evidence as to their contents could not be given. I am unable to see why these negotiations of which nothing was known except their duration could render a seven day notice unreasonable. His Honour went on to refer to McFadden v Snow and Pitts v Adney and said:
“If the negotiations between the parties in this case had led to the respondent abandoning its efforts to obtain finance or to have rejected available finance so that the appellant was in the position to take an unprincipled advantage of a situation which it had induced in the course of the without prejudice negotiations evidence of this would, in my opinion, have been admissible on the basis that the natural inference that more negotiations would not have terminated or delayed the respondent’s preparations for a settlement, would in the particular context have been false. In other words, if the respondent had sought to tender evidence of the negotiations to establish that it was because of the conduct of the appellant that it was unable to settle, it would have been admissible. It cannot gain advantage from its silence when that is its own choice.”
- Those statements are obiter, but they demonstrate the considered view of a majority of the court with respect to the law as it stood before the introduction of the Uniform Evidence Act 1995 (NSW). Similar views have been expressed about the principle as it is contained in s 131(2)(g) of the Uniform Evidence Act. I do not rely on them save as support for a consistent approach.
- In JA McBeath Nominees Pty Ltd v Jenkins Development Corporation Pty Ltd, Ryan J referred to Pitts v Adney with approval. His Honour’s reasons on that point were obiter. In a footnote in Liu v Chan, Fraser JA observed that in JA McBeath Nominees Macrossan CJ had dissented on this point, and Kelly SPJ had decided the appeal upon different grounds, so Ryan J’s reasons are not authoritative. That, of course, does not mean that they were wrong. They were consistent with earlier authority. The principle which has been identified was applied by Douglas J in O'Neill v Martini.
- The respondents rely, in their submissions, on the assertion that the applicant “already [had] a good barrister briefed to prepare the claim and that claim should be ready to file against you and Rachel well before 30 June 2021” as an admission that the applicant had all the material necessary to commence an action at or about that time. The respondents did not refer to an earlier part of that email which might also be thought to be inconsistent with the assertion that the applicant needed more time and more material, namely, where Mr Warren says: “The only ‘piece of the puzzle’ we are yet to fill in is where the negligent advice money went after it was paid to SNG5 Pty Ltd”. As that was not the subject of submissions, I will not take it into account.
- The without prejudice privilege will be validly invoked when the following elements are satisfied:
- there is a dispute – or litigation is anticipated – between two or more parties,
- there is some form of communication,
- the communication is a genuine attempt to settle the dispute or to engage in a process that might lead to resolution, and
- the communication contains admissions or assertions about either or both factual allegations and legal propositions relating to the dispute.
- The applicant contended at the hearing of this matter that more time was needed to collect documents and prepare the matter before any step (yet to be identified) could be taken. It is not necessary that I find that the applicant deliberately intended to mislead the court. I do not make such a finding because, among other things, the applicant was not in a position to deal with that contention, and this matter was heard in the applications list which is not conducive to the resolution of matters of that kind. Nevertheless, the assertion made in the email of 31 May is clear.
- It was an important part of the applicant’s case that he was not in a position to proceed against anyone because further work needed to be done. The admission in Mr Warren’s email is to the contrary. If Mr Warren’s admission had been made in error then it would have been open to the applicant to say, for example, that Mr Warren was mistaken or, for some other reason, the statement about being ready to proceed should not have been taken at face value or that he was just puffing. That did not occur. It is appropriate to admit the statement as evidence going to the truth of the assertion that the applicant was not ready to proceed. The statement is admissible.
- I will proceed on the basis that the applicant, through his solicitors, did tell Mr Orth that he was ready to commence an action against him. Underlying that assertion is the representation that the applicant had all the necessary material.
Has there been an adequate explanation for the delay?
- In his affidavit, Mr Baskerville says that he has identified the following matters from his review of the records:
- the company provided financial services to its clients, including options trading and being an authorised distributor of financial products for superannuation funds,
- the company held an Australian Financial Securities Licence from March 2013 to June 2018,
- Mr Orth was the responsible manager of that AFSL,
- SNG5 was an authorised representative of the company’s AFSL from May 2013 to November 2016,
- the company has no assets,
- the company has seven creditors owed an aggregate amount of $344,733.04,
- as SNG5 is an authorised representative of the company’s AFSL, the company is liable for SNG5’s conduct in accordance with s 917B of the Act,
- SNG5 or the company or both potentially have a further 750 creditors with claims of an unknown value,
- HUB24 Custodial Services Ltd paid the company $5,259,982.75 for “advice” provided by various advisors, including $3,772,624.92 for “advice” purportedly provided by Mr Orth as an agent of SNG5,
- the following amounts were paid from the company’s bank accounts:
- between July 2014 and June 2016, through 46 transactions, $5,795,277.38 was paid into SNG5’s bank accounts,
- between July 2014 and September 2016, $1,337,755.64 was paid to Real Wealth Protect Pty Ltd - Mr Orth is the sole director and Secretary of Real Wealth Protect, and Orth Holdings Pty Ltd is the sole shareholder; Mr Orth and his wife have had control and ownership of that entity at various times,
- between February 2015 and June 2016, $365,062.13 was paid to Mr Orth personally.
- Mr Baskerville says that the company and SNG5 are likely to have claims against Mr Orth for breaches of his director’s duties and of sections 180-183, 588FF, 912A, Division 2 of Part 7.7A and Division 1 of Part 9.4B of the Act.
- At the time of the 46 transactions involving the payment of $5,795,277.38 into SNG5’s bank accounts, Mr Orth was one of two directors of the company and the sole director of SNG5, and his wife held 50 per cent of the shares in the company and 100 per cent of the shares in SNG5.
- The amounts referred to by Mr Baskerville are, of course, substantial. He says he has not been able to identify any records or legitimate reason for the transfer of $5,795,277.38 from the company to SNG5. He says, not unreasonably, but some of those transactions may well have been uncommercial or unreasonable director-related transactions and that SNG5 should be a party to the claims.
- The respondents submit that the conduct which should be considered is that of SNG5, and that may well be the case. They further submitted that the inactivity, even if it is due to being unfunded, does not assist because, as early as July 2018, in the Second Report to Creditors the then liquidator advised that she had received the Macquarie bank account statement, that she had not identified any unfair preferences, that she had not identified any uncommercial transactions that she had identified payments totalling approximately $8.3 million which appear to have been paid to related entities and that she would review whether those transactions were unreasonable and commercially recoverable and that the liquidators expected the liquidation to take between six and 12 months from that time.
- Much of the respondent’s submission was concerned, not unreasonably, with what was said to have been the cooperation already evinced by Mr Orth and that he had no further documents to provide. It was also argued that the applicant’s case was vague in that he does not descend to any particularity as to what he intends to do should an extension be granted.
- The respondents argue that this court should conclude that the main (perhaps only) reason for this application is the hope that, should an extension be granted, there is something that the applicant could do – something which could have been done but has not due to the dilatory conduct referred to above.
- The applicant responds to that by agreeing that he is not presently able to articulate the nature of the claims that might be brought but relies upon what Finn J said in Taylor v Woden Constructions Pty Ltd:
“Where the liquidator is not in the position to consider the merits but has proper grounds for inquiring into the matter because of suspicion it invites (or that is cast on it) or of the explanation it requires, then provided he can satisfactorily explain his delay in inquiring sufficiently into the matter, he should not be closed out from an extension because he is unable to say he has a meritorious claim. In some instances, as here, it will be sufficient if he can say ‘I do not know if I do, but there is reason to inquire’.”
- The ground which Finn J identified is subject, as his Honour said, to the proviso that the liquidator must satisfactorily explain the delay. I have considered all the submissions made, in particular:
- that the winding up of the company was unfunded,
- that the reinstatement of SG5 opened up other avenues for the liquidator,
- what was said by the earlier liquidator in the Report to Creditors,
- the admission made by Mr Warren about the applicant’s capacity to proceed, and that
- there is a large amount of money involved.
- It remains the case that there are two periods where little, if anything, was done:
- February 2019 to April 2020 where, apart from an absence of funds, there is no explanation for an omission to engage in any useful work, and
- April 2020 to March 2021 where the only work done was a “thorough review of the file” and “identification” of claims.
- For the two years and one month from February 2019 there is either no explanation or no satisfactory explanation for the delay which has been created. The delay may, in part, lie at the feet of the previous liquidators, but that does not assist the current liquidator.
- The liquidation is unfunded but that cannot be other than a factor to consider. Section 588FF(3)(b) does not distinguish between funded and unfunded liquidations.
- I accept that, given the reinstatement of SG5, Mr Orth may be required to provide further assistance and, thus, the issue of prejudice does not weigh as heavily as it would if there were to be an end to all matters concerning these entities. Prejudice is one of a number of matters to be taken into account and is not of paramount importance.
- The statement made by Mr Warren that the applicant could have commenced proceedings by 30 June this year is evidence that there was sufficient material to allow action to be taken. Even if one does not go that far, the contradiction in the applicant’s position means that he has not discharged the onus.
- I consider that the applicant has not provided a satisfactory explanation for the delay and that it would not be fair and just in all the circumstances for the limitation period to be extended.
- The application is dismissed. I will hear the parties on costs.
BP Australia Limited v Brown (2003) 58 NSWLR 322 at 357  per Spigelman CJ (Mason P and Handley JA agreeing).
Fortress Credit Corporation (Australia) II Pty Ltd v Fletcher (2015) 254 CLR 489 at 505-506  per French CJ, Hayne, Kiefel, Gageler and Keane JJ.
 NSWSC 608.
See, for example, Clout v Andi-Co Australia Pty Ltd (2013) 96 ACSR 512; Re Dudley, Freshwater Bay Investments Pty Ltd (in liq) (2021) 152 ACSR 532.
New Cap Reinsurance Corporation Ltd (in liq) v Reaseguros Alianza SA (2004) 186 FLR 175.
Re Clarecastle Pty Ltd (in liq) (2011) 255 FLR 435 at 481 .
 FCA 687.
Glengallan Investments Pty Ltd v Andersen  1 Qd R 233 at 248-249  per Williams JA (McPherson JA and Ambrose J agreeing).
(1959) 99 CLR 285.
Ibid at 291-292 per Dixon CJ, Webb, Kitto and Taylor JJ.
Trade Practices Commission v Arnotts Ltd (1989) 88 ALR 69 at 72-73 per Beaumont J.
 1 WLR 2436 at 2444-2445.
(1951) 69 WN (NSW) 8.
 NSWR 535.
Ibid at 539.
(1975) 1 BPR 9177.
 2 Qd R 121.
 QCA 25.
 QSC 198.
 FCA 1228.
- Published Case Name:
Baskerville v Baskerville & Ors
- Shortened Case Name:
Baskerville v Baskerville
 QSC 292
15 Nov 2021
- White Star Case: