Court of Appeal Supreme Court New South Wales Medium Neutral Citation: Zervas v Burkitt [2019] NSWCA 112 Hearing dates: 13 May 2019 Decision date: 17 May 2019 Before: Gleeson JA Decision: (1) Leave be granted to the appellant under s 471B of the Corporations Act 2001 (Cth) nunc pro tunc to commence and proceed with the appeal against Ultimate Car Rentals Australia Pty Ltd (in liquidation). (2) Leave be granted to the cross-appellant under s 471B of the Corporations Act 2001 (Cth) nunc pro tunc to commence and proceed with the cross-appeal against Ultimate Car Rentals Australia Pty Ltd (in liquidation). (3) In lieu of personal service, service on the second respondent/third cross-respondent of the notice of appeal and the notice of cross-appeal and notice of contention respectively, together with any applicable notice pursuant to the Service and Execution of Process Act 1992 (Cth) to be effected in each case by: (a) sending the documents to the second respondent/third cross-respondent by prepaid ordinary post addressed to Unit 4, 32 Millswyn Avenue, Hampton Park, Victoria, 3976; (b) leaving a copy of the documents with a person apparently over the age of 16 years at Unit 4, 32 Millswyn Avenue, Hampton Park, Victoria, 3976 or if no such person is present, leaving the documents at that address. (4) A copy of this order be served with the notice of appeal and notice of cross-appeal respectively. (5) The notice of appeal and notice of cross-appeal to be respectively taken to have been served upon the second respondent/third cross-respondent on the expiry of seven days after the last of the dates upon which there has been compliance with orders 3(a) and 3(b). (6) The time for service of the notice of appeal and the notice of cross-appeal respectively upon the second respondent/third cross-respondent be extended to 21 days after the date of this order. Catchwords: APPEAL – appeal and cross-appeal – application for leave to proceed against respondent company in liquidation – Corporations Act 2001 (Cth), s 471B – choice between ordinary litigation or proof of debt procedure APPEAL – appeal and cross-appeal – application for substituted service on respondent – where initiating process to be served in another state – where service is likely to bring proceedings to the attention of the intended recipient Legislation Cited: Australian Consumer Law, s 236 Civil Liability Act 2002 (NSW), ss 34, 35 Corporations Act 2001 (Cth), ss 471B, 500(2) Service and Execution of Process Act 1992 (Cth), ss 8, 12, 15(1), 130 Uniform Civil Procedure Rules 2005 (NSW), r 10.14 Cases Cited: Amos Removals & Storage Pty Ltd v Small (1981) 2 NSWLR 525 Atkinson v Crowley [2011] NSWCA 194 Attard v James Legal Pty Ltd [2010] NSWCA 311; (2010) 80 ACSR 585 BPM Pty Ltd v HPM Pty Ltd (1996) 14 ACLC 857 Cassegrain v Gerard Cassegrain & Co Pty Ltd (in liq) [2012] NSWCA 435 Chappel v Coyle (1985) 2 NSWLR 73 Chief Commissioner of State Revenue v CCM Holdings Trust Pty Ltd [2014] NSWCA 42 Commissioner of Taxation of the Commonwealth of Australia v 4 Doonan Street Collinsville Pty Ltd (in liq) [2016] NSWCA 69 Distinctive FX 9 Pty Limited v Statewide Developments Pty Limited [2012] NSWCA 393 DSG Holdings Australia Pty Ltd v Helenic Pty Ltd [2014] NSWCA 96; (2014) 99 ACSR 121 Flo Rida v Mothership Music Pty Ltd [2013] NSWCA 268 Hopgood v Willan [1938] 2 All ER 196 Humber & Co v John Griffiths Cycle Co [1901] 85 LT 141 Naaman v Sleiman [2015] NSWCA 259 Oceanic Life Ltd v Insurance and Retirement Services Pty Ltd (in liq) (1993) 11 ACSR 516 Ogilvie-Grant v East (1983) 7 ACLR 669 Ong v Lottwo Pty Ltd [2013] SASCFC 57; (2013) 116 SASR 280 Re Gordon Grant and Grant Pty Ltd [1983] 2 Qd R 314 Skinner v Jeogla Pty Ltd [2001] NSWCA 15; (2001) 37 ACSR 106 Texts Cited: M Leeming, Authority to Decide: The Law of Jurisdiction in Australia (The Federation Press, 2012) Category: Procedural and other rulings Parties: Fotis Zervas (Appellant / Second Cross-Respondent) Miles Burkitt (First Respondent / Cross-Appellant) Michael Amro (Second Respondent / Third Cross-Respondent) Ultimate Car Rentals Australia Pty Ltd (in liquidation) (Third Respondent / First Cross-Respondent) Representation: Counsel: Mr D Edney (Appellant / Second Cross-Respondent) Mr C P O'Neill (First Respondent / Cross-Appellant) Solicitors: J Kartsounis & Co (Appellant / Second Cross-Respondent) Hicksons Lawyers (First Respondent / Cross-Appellant) File Number(s): 2018/367709 Decision under appeal Court or tribunal: District Court of New South Wales Jurisdiction: Civil Citation: [2018] NSWDC 328 Date of Decision: 2 November 2018 Before: Levy SC DCJ File Number(s): 2016/194972 [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.] Judgment 1. GLEESON JA: Applications are made by the appellant (Mr Fotis Zervas) and the cross-appellant (Dr Miles Burkitt) for orders for substituted service of the notice of appeal and notice of cross-appeal on the second respondent/third cross-respondent (Mr Michael Amro), and for leave to proceed against the third respondent/first cross-respondent, Ultimate Car Rentals Australia Pty Ltd (Ultimate), a company in liquidation. Background 1. A brief outline of the proceedings in this Court will assist in providing the relevant context to these applications. 2. The appeal and cross-appeal concern a judgment of Levy SC DCJ, delivered on 2 November 2018: Burkitt v Ultimate Car Rentals Australia P/L [2018] NSWDC 328. The dispute in the proceeding below related to a 2006 F430 Spider Ferrari motor vehicle owned by Dr Burkitt, who gave possession of the vehicle to Ultimate and Mr Zervas for the purpose of hiring out the vehicle in the course of Ultimate's car rental business. Dr Burkitt alleged that he was induced to do so following certain representations by Mr Zervas on behalf of Ultimate that the vehicle was or would be covered by insurance. 3. During the bailment, the vehicle came into the possession of Mr Amro for detailing. Mr Amro, in the company of a young female acquaintance, lost control when driving the vehicle for purposes unrelated to his possession of the vehicle. The vehicle was written off having been damaged beyond repair. 4. In the District Court, the primary judge found that Ultimate did not have insurance for damage to the vehicle, and that Ultimate and, it seems, Mr Zervas engaged in misleading or deceptive conduct. His Honour also upheld Dr Burkitt's claim in bailment. He found that the proportionate liability provisions in the Civil Liability Act 2002 (NSW), ss 34 and 35 applied to that part of Dr Burkitt's bailment claim relating to the value of the vehicle after the salvage value had been offset. His Honour concluded that Ultimate, Mr Zervas and Mr Amro were concurrent wrongdoers and apportioned liability between them, awarding judgment against Ultimate and Mr Zervas, including pre-judgment interest, in the total sum of $183,620.94 and judgment against Mr Amro, including pre-judgment interest, in the total sum of $119,135.96. His Honour ordered Ultimate, Mr Zervas and Mr Amro to pay Dr Burkitt's costs equally as between themselves. 5. On 7 November 2018, Ultimate was placed in liquidation by a court-ordered winding up and Mr Neil Cussen was appointed liquidator. There is evidence from the liquidator that he is unfunded in the liquidation. 6. The essential issue raised by the appeal is a challenge to the primary judge's finding that Mr Zervas was a party to the bailment of the vehicle. Mr Zervas contends that the only parties to the bailment were Dr Burkitt and Ultimate. If Mr Zervas is successful that will affect Ultimate's right of contribution against Mr Zervas in relation to the existing judgment. Plainly, Ultimate is properly joined to the appeal: Hopgood v Willan [1938] 2 All ER 196 at 199. 7. The essential issue raised by the cross-appeal is whether, having found that Ultimate and, it seems, Mr Zervas engaged in misleading or deceptive conduct in representing to Dr Burkitt that the vehicle was or would be covered by insurance, his Honour erred in failing to find on the misleading or deceptive conduct claim that Ultimate and Mr Zervas were jointly and severally liable to Dr Burkitt for the entire loss claimed by Dr Burkitt of $260,000 plus interest. It should be observed that the pleaded case by Dr Burkitt was that Ultimate engaged in the misleading or deceptive conduct and Mr Zervas was liable as an accessory pursuant to s 236 of the Australian Consumer Law. The primary judge did not expressly deal with the accessorial liability claim against Mr Zervas. Leave to proceed 1. Section 471B of the Corporations Act 2001 (Cth) provides: 471B. While a company is being wound up in insolvency or by the Court, …. a person cannot begin or proceed with: (a) a proceeding in a Court against the company or in relation to the property of the company; …. except with the leave with of the Court and in accordance with such terms (if any) as the Court imposes. 1. Here, the liquidator neither consents nor opposes the grant of leave to proceed. 2. There are authorities that a "defensive proceeding" is not subject to the requirement of leave under s 471B or s 500(2) of the Corporations Act: BPM Pty Ltd v HPM Pty Ltd (1996) 14 ACLC 857, Anderson J citing the reasoning of Lord Davey in Humber & Co v John Griffiths Cycle Co (1901) 85 LT 141 (Humber). BPM Pty Ltd v HPM Pty Ltd involved a "defensive procedural measure", relevantly, an application for security for costs by a respondent to an appeal. 3. Whether the reference in Humber to a "defensive proceeding" encompasses prosecuting an appeal was doubted, but not finally determined in Skinner v Jeogla Pty Ltd [2001] NSWCA 15; (2001) 37 ACSR 106 at [20] (Spigelman CJ) and [59] (Ipp AJA). 4. In Distinctive FX 9 Pty Limited v Statewide Developments Pty Limited [2012] NSWCA 393 at [13], Beazley JA (as her Honour then was) reviewed the authorities and concluded: Notwithstanding the uncertainty expressed in these authorities, I am of the opinion that when regard is had to the Civil Procedure Act and the UCPR, the bringing of an appeal (or, I should add, a summons for leave to appeal) is the commencement of a proceeding for which leave is required pursuant to s 471B. 1. That approach has been followed in this Court thereafter: Cassegrain v Gerard Cassegrain & Co Pty Ltd (in liq) [2012] NSWCA 435 at [31]; Chief Commissioner of State Revenue v CCM Holdings Trust Pty Ltd [2014] NSWCA 42 at [3]; Naaman v Sleiman [2015] NSWCA 259 at [82]; Commissioner of Taxation of the Commonwealth of Australia v 4 Doonan Street Collinsville Pty Ltd (in liq) [2016] NSWCA 69 at [31]. Mr Zervas and Dr Burkitt both accept that they need leave and it is appropriate to proceed upon that basis. There is no need to consider whether and the extent to which the requirement for leave might not apply, such as to "defensive proceedings". 2. The considerations relevant to a decision whether to grant leave under s 471B are discussed by McPherson J (Campbell CJ and Sheahan J agreeing) in Ogilvie-Grant v East (1983) 7 ACLR 669. The purpose of the requirement of leave is to ensure that a company in liquidation is not subjected to a multiplicity of actions which would be both expensive and time-consuming, as well as in some cases unnecessary. Ordinarily, claims against such companies should be pursued by means of the proof of debt process. The requirement for leave directs attention to the choice between ordinary litigation and the more streamlined procedure of a proof of debt: DSG Holdings Australia Pty Ltd v Helenic Pty Ltd [2014] NSWCA 96; (2014) 99 ACSR 121 at [55] (Leeming JA, Meagher JA and Bergin CJ in Eq agreeing). 3. The relevant factors affecting the exercise of the discretion to grant leave to proceed cannot be stated exhaustively: Ogilvie-Grant v East at 672; Re Gordon Grant and Grant Pty Ltd [1983] 2 Qd R 314 at 317; Attard v James Legal Pty Ltd [2010] NSWCA 311; (2010) 80 ACSR 585 at [136]. The particular factors raised for consideration in the present case are: the amount and seriousness of the claim; the degree of complexity of the legal and factual issues involved; the stage to which the proceedings, if already commenced, may have progressed; whether the cost of the hearing would be disproportionate to the company's resources; whether the company was insured against the liability in respect of which the plaintiff is suing; and any delay. 4. I am satisfied that there are good reasons why departure from the proof of debt procedure is justified in the present case. The issues raised by the appeal and the cross-appeal reveal a serious dispute concerning the parties to the bailment, and the accessorial liability of Mr Zervas. The appeal and the cross-appeal both involve claims for not insignificant amounts, being approximately $183,000 and $260,000 respectively. Plainly, the more convenient procedure for the determination of the dispute is ordinary litigation, rather than the proof of debt process, given that the proceedings in this Court involve challenges to a judgment in the court below. 5. As a practical matter, the proceedings will not involve a distraction for the liquidator, since that the liquidator has indicated that he is unfunded and does not propose to take an active part in the proceedings. Although Ultimate is uninsured, that is a neutral factor in the present case. The consequence for Ultimate of either Mr Zervas or Dr Burkitt succeeding in this Court would be an impact on Ultimate's rights of contribution against Mr Zervas, or an increase in the quantum of the judgment against Mr Zervas and Ultimate. However, the effect on Ultimate's right of contribution against Mr Zervas is theoretical, rather than real, because Ultimate is not in a position to pay any judgment to Dr Burkitt. 6. As to delay, the applications have been brought promptly after the commencement of the appeal filed on 1 February 2019 and the cross-appeal filed on 28 March 2019. 7. The Court may grant leave nunc pro tunc: Oceanic Life Ltd v Insurance and Retirement Services Pty Ltd (in liq) (1993) 11 ACSR 516; Ong v Lottwo Pty Ltd (in liq) [2013] SASCFC 57; (2013) 116 SASR 280 at [59]. It is appropriate to make such an order in the present case given that the appeal and cross-appeal were both commenced after Ultimate was placed into liquidation on 7 November 2018. Substituted service 1. Mr Zervas and Dr Burkitt each seek orders for substituted service on Mr Amro at an address in Victoria. The effect of the Service and Execution of Process Act 1992 (Cth) (SEPA) is that there is now general power to serve any person within the Commonwealth of Australia with process issued out of the courts of any state or territory, as well as the federal courts. That is, the power to effect personal service is now extended without limitation beyond the borders of each State, in effect, to the territorial boundaries of the Commonwealth. 2. The relevant provisions of SEPA are: s 15(1) which provides that "[a]n initiating process issued in a State may be served in another State", and s 12 which provides "service of process under this Act … has the same effect … as if the process had been served in the place of issue". In addition, s 130 provides that "[t]he jurisdiction that a court … has because of service of process under this Act is not affected by any limitation arising under a law of a state concerning the locality in which the process may be served". 3. One further provision should be mentioned. Section 8(4) of SEPA provides: Subject to this Act, this Act applies to the exclusion of a law of a State (the relevant State) with respect to: (a) the service or execution in another State of process of the relevant State that is process to which this Act applies; … 1. The expressed legislative intention in SEPA is that the federal law should have exclusive operation, subject to the minor exceptions contained in the Act, relevantly in the present case with respect to substituted service: s 8(1); See generally, M Leeming, Authority to Decide: The Law of Jurisdiction in Australia (The Federation Press, 2012) 192. 2. As to substituted service, Uniform Civil Procedure Rules 2005 (NSW) (UCPR), r 10.14 provides as follows: (1) If a document that is required or permitted to be served on a person in connection with any proceedings: (a) cannot practicably be served on the person, or (b) cannot practicably be served on the person in the manner provided by law, the court may, by order, direct that, instead of service, such steps be taken as are specified in the order for the purpose of bringing the document to the notice of the person concerned. (2) An order under this rule may direct that the document be taken to have been served on the person concerned on the happening of a specified event or on the expiry of a specified time. (3) If steps have been taken, otherwise than under an order under this rule, for the purpose of bringing the document to the notice of the person concerned, the court may, by order, direct that the document be taken to have been served on that person on a date specified in the order. (3A) An application for an order under this rule must be supported by an affidavit by the applicant that includes: (a) a statement as to the applicant's knowledge of the whereabouts of the person to be served, and (b) a statement as to any communications that have occurred between the applicant and the person to be served since the cause of action in the proceedings arose (including any communications by telephone, fax or electronic mail). (4) Service in accordance with this rule is taken to constitute personal service. 1. Mr Amro did not appear in the District Court proceedings where an order was made for substituted service of the statement of claim on Mr Amro at four addresses and via a mobile telephone number. The evidence establishes that only one of those addresses is presently relevant and the mobile phone number has been disconnected. The evidence also establishes the respective attempts at service of the notice of appeal and the notice of cross-appeal on Mr Amro at an address in Hampton Park, Victoria where it seems, Mr Amro's mother resides. 2. Mr David Holland, process server engaged by the solicitors for Mr Zervas, deposed to unsuccessfully attempting to serve the notice of appeal and Red Appeal Book on Mr Amro at Unit 4, 32 Millswyn Avenue, Hampton Park, Victoria (the Hampton Park property) on 19, 20 and 23 March 2019. On 20 March 2019, he spoke with a person who identified as Mr Amro's mother and she stated that he was out. Mr Holland left his calling card for her to pass on to Mr Amro but had not received any response as at 28 March 2019. 3. Mr Wayne Bourke, process server engaged by the solicitors for Dr Burkitt, deposed to unsuccessfully attempting service of the notice of cross-appeal on Mr Amro at the Hampton Park property on five occasions between 4 and 6 April 2019. On 4 April 2019, he spoke with a female person who confirmed that Mr Amro lived at that address "but he is rarely home". That person refused to provide a mobile phone number for Mr Amro. On 6 April 2019, the female person indicated that Mr Amro, "is not here", said that she did not know when he would next be home, but agreed to accept the process server's card and to ask Mr Amro to call the process server. Mr Bourke deposed that he had not received a return call from Mr Amro as at 8 April 2019. 4. I am satisfied that the notice of appeal and the notice of cross-appeal cannot practically be served personally on Mr Amro. I am further satisfied that it is reasonably likely that the proposed method of substituted service by post and by a further copy of the documents being left at the Hampton Park property will bring the proceedings to Mr Amro's attention: Chappel v Coyle (1985) 2 NSWLR 73 at 86; Amos Removals & Storage Pty Ltd v Small (1981) 2 NSWLR 525 at 529; Atkinson v Crowley [2011] NSWCA 194 at [38]; Flo Rida v Mothership Music Pty Ltd [2013] NSWCA 268 at [37]. Conclusion and Orders 1. It is appropriate to grant relief substantially in the terms sought by each of Mr Zervas and Dr Burkitt. Accordingly, the Court orders that: 1. Leave be granted to the appellant under s 471B of the Corporations Act 2001 (Cth) nunc pro tunc to commence and proceed with the appeal against Ultimate Car Rentals Australia Pty Ltd (in liquidation). 2. Leave be granted to the cross-appellant under s 471B of the Corporations Act 2001 (Cth) nunc pro tunc to commence and proceed with the cross-appeal against Ultimate Car Rentals Australia Pty Ltd (in liquidation). 3. In lieu of personal service, service on the second respondent/third cross-respondent of the notice of appeal and the notice of cross-appeal and notice of contention respectively, together with any applicable notice pursuant to the Service and Execution of Process Act 1992 (Cth) to be effected in each case by: 1. sending the documents to the second respondent/third cross-respondent by prepaid ordinary post addressed to Unit 4, 32 Millswyn Avenue, Hampton Park, Victoria, 3976; 2. leaving a copy of the documents with a person apparently over the age of 16 years at Unit 4, 32 Millswyn Avenue, Hampton Park, Victoria, 3976 or if no such person is present, leaving the documents at that address. 1. A copy of this order be served with the notice of appeal and notice of cross-appeal respectively. 2. The notice of appeal and notice of cross-appeal to be respectively taken to have been served upon the second respondent/third cross-respondent on the expiry of seven days after the last of the dates upon which then has been compliance with orders 3(a) and 3(b). 3. The time for service of the notice of appeal and the notice of cross-appeal respectively upon the second respondent/third cross-respondent be extended to 21 days after the date of this order. ********** DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 17 May 2019