FEDERAL COURT OF AUSTRALIA

ION Limited, in the matter of ION Limited (Subject to Deed of Company Arrangement) (No 2) [2012] FCA 561

THE COURT ORDERS THAT:

1.    The application made by interlocutory process dated 2 February 2012 be refused.

2.    The applicant pay the respondents’ costs of the application.

Note:    Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

REASONS FOR JUDGMENT

Introduction

1    The applicant, Hanna Kowalski, as trustee for the Kowalski Family Trust seeks an extension of time in which to appeal from the rejection by the deed administrators of ION Ltd (subject to deed of company arrangement) (“ION”) of her proof of debt for the sum of $3,509.90. That amount is the total price of two lots of 1000 ION shares purchased on 25 June 2004 and 1 July 2004 respectively, prior to ION’s financial collapse and entry into administration on 7 December 2004. The applicant alleges that but for ION’s misleading or deceptive conduct and/or breach of its statutory disclosure obligations, she would not have purchased the now valueless shares.

2    The applicant’s interlocutory process filed on 2 February 2012, seeks, pursuant to s 1312(1) of the Corporations Act 2001 (Cth) (“the Act”) and Rule 14.1 of the Federal Court (Corporations) Rules 2000 (Cth) (“Corporations Rules”):

1.    An extension of time in which to appeal against Colin Nicols’ (‘the deed administrator’) decision, dated 19 April 2011, to reject the Applicant Creditors claim against ION on the grounds that on 19 April 2011 Colin Nicols’ committed a FRAUD on the Applicant Creditor when he rejected her claim against ION.

2.    In the alternative, the Applicant Creditor seeks an extension of time to appeal against Colin Nicols’ (‘the deed administrator’) decision, dated 19 April 2011, to reject the Applicant Creditors claim against ION on the grounds that the interests of justice requires that the Applicant Creditor be granted an extension of time.

3    Section 1321 of the Act provides:

1321    Appeals from decisions of receivers, liquidators etc.

(1)    A person aggrieved by any act, omission or decision of:

(a)    person administering a compromise, arrangement or scheme referred to in Part 5.1; or

(b)    a receiver, or a receiver and manager, of property of a corporation; or

(c)    an administrator of a company; or

(ca)    an administrator of a deed of company arrangement executed by a company; or

(d)    a liquidator or provisional liquidator of a company;

may appeal to the Court in respect of the act, omission or decision and the Court may confirm, reverse or modify the act or decision, or remedy the omission, as the case may be, and make such orders and give such directions as it thinks fit.

(2)    Paragraph (1)(b) does not apply to a corporation that is an Aboriginal and Torres Strait Islander corporation.

4    Rule 14.1 of the Corporations Rules provides:

14.1    Appeal from act, omission or decision of administrator, receiver or liquidator etc (Corporations Act s 554A, s 1321)

(1)    All appeals to the Court authorised by the Corporations Act must be commenced by an originating process, or interlocutory process, stating:

(a)    the act, omission or decision complained of; and

(b)    in the case of an appeal against a decision — whether the whole or part only and, if part only, which part of the decision is complained of; and

(c)    the grounds on which the complaint is based.

(2)    Unless the Corporations Act or the Corporations Regulations otherwise provide, the originating process, or interlocutory process, must be filed within:

(a)    21 days after the date of the act, omission or decision appealed against; or

(b)    any further time allowed by the Court.

(3)    The Court may extend the time for filing the originating process, or interlocutory process, either before or after the time for filing expires and whether or not the application for extension is made before the time expires.

(4)    As soon as practicable after filing the originating process, or interlocutory process, and, in any case, at least 5 days before the date fixed for hearing, the person instituting the appeal must serve a copy of the originating process, or interlocutory process, and any supporting affidavit, on each person directly affected by the appeal.

(5)    As soon as practicable after being served with a copy of the originating process, or interlocutory process, and any supporting affidavit, a person whose act, omission or decision is being appealed against must file an affidavit:

(a)    stating the basis on which the act, omission or decision was done or made; and

(b)    annexing or exhibiting a copy of all relevant documents that have not been put in evidence by the person instituting the appeal.

5    The respondent deed administrators, Keith Alexander Crawford (substituted as a respondent for Colin Nicol by an order made on 5 March 2012) and Peter McKenzie Anderson, opposed the extension application.

6    By another interlocutory process filed on 2 February 2012, the applicant seeks, inter alia, as principal relief pursuant to s 447A and s 447E of the Act, that the deed administrators’ decision to reject in whole her formal proof of debt lodged on 15 February 2011, communicated on 19 April 2011, be reversed, and that the proof of debt be admitted in the sum of $3,509.90, on the grounds that:

5.1    throughout 2004 ION Limited, by acts and omissions, engaged in conduct which was deceptive and misleading or which was likely to be deceptive and misleading, in contravention of the provisions of the Trade Practices Act 1974 (Cth), the Corporations Act 2001 (Cth) and the Australian Securities & Investments Commissions Act 2001 (Cth) (‘the contraventions’);

5.2    throughout 2004 ION Limited failed to disclose matters to the financial markets in breach of its obligations as a publicly listed company pursuant to section 674 of the Corporations Act 2001 (Cth) and ASX listing rule 3.1 (‘the failures’);

5.3    the applicant creditor purchased shares in ION during 2004 amount set out in the proof of debt lodged by the applicant creditor;

5.4    the amount claimed by the applicant creditor in its proof of debt is the loss and damage caused by those contraventions and failures.

7    The applicant also exhibited to an affidavit a proposed amended interlocutory process seeking principal relief by way of appeal under s 1321 of the Act against the rejection of her proof of claim.

8    The interlocutory processes refer only to the deed administrators’ decision to reject the applicant’s proof of debt communicated on 19 April 2011. There were, however, two rejection notices rejecting the applicant’s proof of claim. The first rejection notice dated 19 April 2011 erroneously stated that the applicant had failed to provide further information on causation and reliance in respect of her claim. The first rejection notice was superseded by a second rejection notice dated 6 May 2011, under cover of a letter in which the deed administrators acknowledged and apologised for their earlier error and again advised of their decision to reject the applicant’s proof.

9    The respondents thus did not rely on the first rejection notice. It was clear, however, from the affidavits and submissions of the applicant, who was not legally qualified, that she also sought an extension of time to appeal against the second rejection notice dated 6 May 2011, and the extension application proceeded before me on that basis.

10    At the hearing of the extension application, the applicant appeared in person by telephone.

11    The applicant relied on the following material in support of the extension application:

1.    affidavit of Hanna Kowalski dated 20 December 2011;

2.    affidavit of Hanna Kowalski sworn on 31 January 2012;

3.    affidavit of Hanna Kowalski sworn on 6 March 2012;

4.    affidavit of Hanna Kowalski sworn on 21 March 2012; and

5.    outline of argument dated 6 March 2012.

12    The affidavits of Jonathan Joseph sworn on 2 March 2012 and 16 March 2012, and written submissions dated 16 March 2012, were filed in opposition to the extension application.

Time limits on appeal under ion doca

13    The ION deed of company arrangement (“ION DOCA”) executed on 27 May 2005 incorporates a regime for the declaration and distribution of dividends, including any appeal against, inter alia, the rejection of proof of debts, and time limits applicable to an appeal.

14    I considered the regime (which incorporates or applies various provisions of the Act, Corporations Regulations 2001 (Cth) and the Corporations Rules) in detail in ION Limited, in the matter of ION Limited (Subject to Deed of Company Arrangement) [2011] FCA 1513 on 20 December 2011.

15    The regime incorporates, inter alia, reg 5.6.54 of the Corporations Regulations, which relevantly provides:

(1)    Within 7 days after the liquidator has rejected all or part of a formal proof of debt or claim, the liquidator must:

(a)    notify the creditor of the grounds for that rejection in accordance with Form 537, and

(b)    give notice to the creditor at the same time:

(i)    that the creditor may appeal to the Court against the rejection within the time specified in the notice, being not less than 14 days after service of the notice, or such further period as the Court allows; and

(ii)     that unless the creditor appeals in accordance with subparagraph (i), the amount of his or her debt or claim will be assessed in accordance with the liquidator's endorsement on the creditor's proof.

(2)    A person may appeal against the rejection of a formal proof of debt or claim within:

(a)    the time specified in the notice of the grounds of rejection; or

(b)    if the Court allows – any further period.

(3)    The Court may extend the time for filing an appeal under subregulation (2), even if the period specified in the notice has expired.

16    The period specified under reg 5.6.54 takes precedence over the time limit imposed by r 14.1 in a winding up.

17    The time specified in the second rejection notice for filing an appeal was "no later than 14 days after the service of this notice". The second rejection notice was sent by prepaid post on or about 6 May 2011. By s 160 of the Evidence Act 1995 (Cth), service is presumed to have been effected on the fourth working day thereafter, unless evidence raising doubt about the presumption is adduced.

18    The challenged rejections of proof in this case were sent to the applicant on 19 April 2011 and 6 May 2011. The period specified under reg 5.6.54 takes precedence over the time limit imposed by r 14.1 of the Corporations Rules in a winding up. In the present case, whether time is calculated under the regulation or the Corporations Rules, the applicant’s entitlement to appeal expired no later than 27 May 2011.

19    The applicant did not lodge an appeal on or about that date. Rather, her challenge by interlocutory process was filed over eight months out of time.

20    Under both reg 5.6.54 and r 14.1, the court may extend the time in which to appeal.

21    In Derwinto Pty Ltd (in liq) v Lewis (2002) 42 ACSR 645, Austin J discussed authorities on the court’s power to grant an extension of time in which to appeal from a rejection of a proof of debt.

22    His Honour stated at [46] to [48]:

The plaintiffs submitted that the court should use its power under Corporations Rule 14.1 to extend the time for appealing against the notice of rejection to 19 December 2001, the day on which the present proceeding was commenced. In Re Estate of Knight (a bankrupt); Rocom International Pty Ltd (in liq) v Prentice [2002] FCA 604, Tamberlin J granted an extension of time to a creditor to file an application for review of a decision by a trustee in bankruptcy to reject a proof of debt. The case was cited to me as a useful illustration of the factors relevant to applications of this kind.

Tamberlin J referred to the judgment of Kirby J in Jackamarra v Krakouer (1998) 195 CLR 516 at 539–43 ; 153 ALR 276 at 294–7 (see also, by analogy, Kabushiki Kaisha Universal v Aristocrat Leisure Industries Pty Ltd (1998) AIPC [91]-[396] (Branson J) affirmed Kabushiki Kaisha Universal v Aristocrat Leisure Industries Pty Ltd (Unreported, Federal Court of Australia, Tamberlin J, 20 March 1998), and said that the factors relevant to an application for an extension of time include the following:

• that the discretion to grant an extension is broad and flexible;

• whether it is just in all the circumstances to grant an extension;

• whether the time limits are of a substantive or procedural nature;

• whether the case is arguable;

• respective prejudice to the parties;

• length of delay;

• responsibility and reasons for the delay;

• whether the delay was intentional or the result of a bona fide mistake; and

• whether the delay was caused by the litigant or legal advisers.

Counsel for the plaintiffs submitted that the principal factors might usefully be grouped under the headings:

(a) delay — including the length and nature of the delay, and the responsibility and reasons for it;

(b) prejudice to the respective parties; and

(c) whether the claim is arguable.

I am content to adopt this approach.

23    Derwinto v Lewis has subsequently been approved in authorities including Mine & Quarry Equipment International Ltd v McIntosh [2005] QSC 59 at [12], Re Newtronics Pty Ltd (in liq) [2011] VSC 349 at [6] and Brennan v McGrath [2011] NSWSC 561 at [5] and [7].

Background

24    On 6 September 2005, the applicant lodged a formal proof of claim and registration form against ION for the sum of $3,509.90, which stated:

25    By letter dated 12 September 2005, Colin Nicol, as deed administrator, acknowledged the applicant’s proof of claim. He advised that the deed administrators would seek to determine whether a transferee shareholder whose claim against the company in external administration was based on misleading and deceptive conduct or breach of statutory disclosure requirements was a creditor, and if so, whether such a claim was postponed to other shareholders. The letter stated that the determination of those questions could take some time.

26    The deed administrators awaited the outcome of the High Court appeal in Sons of Gwalia Ltd v Margaretic (2007) 231 CLR 160 (“Sons of Gwalia”), before adjudicating a large number of proofs of debt (approximately 3,300) lodged by ION shareholders, including that of the applicant. Following the High Court’s decision in Sons of Gwalia in January 2007, the deed administrators investigated the factual matters raised by shareholders in their initial proofs.

27    Having completed their forensic investigations, the deed administrators, by letter dated 20 October 2010, advised the applicant of their key findings relevant to shareholder claims adjudication, and invited her to revise her initial proof in the light of their report if she so wished.

28    On 2 December 2010, the deed administrators received a revised proof of the applicant’s debt or claims (“revised proof”) and her statutory declaration made on 25 November 2010.

29    The applicant’s revised proof stated the amount claimed as $3,509.90 and under “comments” stated “I purchased my shares on the market where I was deceived and mislead by ION, its servants and its agents”.

30    The applicant’s shareholder claim form indicated that she had previously submitted a proof of debt and did not wish to submit a revised proof of debt. In the ION share trading history section of the shareholder claim form, the applicant stated that she bought two lots of 1000 shares on 25 June 2004 and 1 July 2004, for $1.67 and $1.80 per share respectively.

31    In the shareholder claim form, the applicant further stated that her claim was in relation to share purchases on or prior to 9 September 2004. In response to the request for information about ION’s conduct, the applicant stated that she bought the shares on the market and was deceived and misled by ION. In response to the request for information about causation, the applicant stated, “I would not have purchased the shares if I had been fully informed about ION’s financial position by ION, its servants and agents”.

32    By a letter to the applicant dated 3 February 2011 sent by prepaid post, the deed administrators stated that her revised proof did not contain sufficient information about the precise conduct of ION said to have caused her loss, and how and when ION’s alleged conduct affected her behaviour in relation to her ION share trading, as requested in sections 4.5 and 4.2 of the shareholder claim form. The letter requested a response by 28 February 2011.

33    On 15 February 2011, the applicant, by facsimile, provided further information to the deed administrators as requested. In particular, she expanded her statements in relation to causation and reliance.

34    In relation to ION’s conduct, the applicant stated:

Prior to 9-9-2004, ION was guilty of misleading or deceptive conduct which was contrary to section 52 of the Trade Practices Act 1974 (Cth), and/or s 120A of the Australian Securities and Investments Commission Act 2001 (Cth) and ION failed to disclose certain matters to the financial markets, in breach of its obligations as a publicly listed company, pursuant to s 674 of the Corporations Act 2001 (Cth) and ASX Listing Rule 3.1.

35    In relation to reliance, the applicant stated:

On 25-6-2004 and on 1 July 2004, I would not have purchased the 2000 ION shares if I had been fully informed about ION’s true financial position by ION, its servants and agents.

36    On or about 19 April 2011, the deed administrators sent by prepaid post a letter dated 19 April 2011 to the applicant, enclosing the first rejection notice (Form 537 – Rejection of Formal Proof of Debt or Claim).

37    The first rejection notice relevantly stated:

Your claim against the ION DOCA Group as set out in your formal proof of debt has been disallowed in full

38    The first rejection notice set out the grounds for disallowance of the applicant’s revised proof, including the following:

The information provided in support of your claim is insufficient to establish any claim against ION and your claim is therefore rejected in full.

39    The first rejection notice also stated:

As you have failed to provide any further information in support of your claim, the Deed Administrators must determine your claim on the basis of the information submitted”.

40    The first rejection notice stated:

If you are dissatisfied with my determination as set out above, you may appeal against it, no later than 14 days after the service of this notice, or, if the Court allows, within any further period, to the Federal Court of Australia. If you do not do so, your claim will be assessed in accordance with this determination.

41    It was not disputed that the assertion in the first rejection notice that the applicant had failed to provide any further information was incorrect.

42    By a letter to the deed administrators dated 27 April 2011, in response to the first rejection notice, the applicant stated:

I inform you and I put on record that on 15 February at 4.36 pm I faxed a copy of the section 4 - Details of claim, and all of the other documents that you had asked me to provide to you, to fax No. (03) 9038 3199.

43    By an email dated 6 May 2011 to Mr Nicol (as representing the deed administrators) the applicant asserted, inter alia, that the allegations made by the deed administrators in the first rejection notice were “totally false and misleading and unconscionable”.

44    By a letter to the applicant dated 6 May 2011, sent by prepaid post, the deed administrators enclosed the revised second rejection notice (Form 537 Notice of Rejection of Formal Proof of Debt or Claim).

45    The deed administrators’ letter stated, inter alia, that:

The Deed Administrators confirm that they received the additional information provided by you by facsimile dated 15 February 2011 in support of your proof of debt, and that they gave due consideration to that additional information in the assessment of your claim.

I apologise that the Notice of Rejection enclosed with my letter of 19 April 2011 did not make that clear. In the circumstances, please find enclosed a revised Notice of Rejection which supersedes and replaces the previous Notice of Rejection sent to you.”

46    The second rejection notice stated:

This Notice of Rejection supersedes and replaces the Notice of Rejection sent to you dated 19 April 2011.

47    The second rejection notice further stated:

2    Your claim against the ION DOCA Group as set out in your formal proof of debt or claim has been disallowed in full.

3(a)    Shareholders wishing to make a claim against ION for misleading or deceptive conduct or breach by ION of its continuous disclosure obligations were required to specify in respect of each relevant share trade:

(i)    the alleged misconduct of ION on which the shareholders relies, including the date on which that conduct is said to have occurred; and

(ii)    precisely how and when ION's alleged conduct affected your behaviour in relation to the relevant shares and caused your loss.

…

(e)    The information provided in support of your claim (including that provided on 15 February 2011) remains insufficient to establish any claim against ION and your claim is therefore rejected in full.”

4    If you are dissatisfied with my determination set out above, you may appeal against it, no later than 14 days after the service of this notice or, if the Court allows, within any further period, to the Federal Court of Australia. If you do not do so, your claim will be assessed in accordance with this determination.

48    Protracted correspondence between the applicant and the deed administrators ensued, in the course of which the applicant, with no apparent basis, repeatedly accused the deed administrators of “deliberate” fraud, unconscionable conduct and criminality; threatened to report them to the Australian Securities and Investments Commission (“ASIC”) and the police; and alleged that the deed administrators’ conduct was contrary to the orders of the court made on 14 October 2010.

49    In the course of the correspondence, the deed administrators denied the allegations of impropriety or breach of orders, explained their conduct and reiterated, on numerous occasions, that if the applicant were dissatisfied with their decision to reject her proof, she could appeal no later than 14 days after service of the rejection notice or such further period as the court allowed. The deed administrators also advised the applicant to seek legal advice in relation to her rights of appeal.

50    By an email dated 2 September 2011 (noted to have been faxed to ASIC on 9 September 2011) the applicant complained to ASIC of Mr Nicol’s rejection of her claim and his alleged refusal to give her specific reasons in writing for the rejection. The applicant asserted that “Mr Nicol has deliberately and unconscionably committed a FRAUD on me”. The letter requested ASIC to investigate Mr Nicol, as “he may have also committed a FRAUD on other ION shareholders”.

51    The Conduct and Breach Reporting Branch of ASIC, by letters to the applicant dated 12 September 2011 and 13 September 2011 respectively, acknowledged her complaint.

52    By an email to ASIC dated 8 December 2011, the applicant asked when ASIC’s investigation of her complaints about Mr Nicol’s allegedly illegal conduct would be completed.

53    Mr Joseph, of the lawyers for the deed administrators, deposed:

29.    Following receipt of the Revised Notice of Rejection, Mrs Kowalski has sent numerous items of correspondence to the Deed Administrators, and to Allens on behalf of the Deed Administrators, in which she has made various assertions in support of her apparent position that the Deed Administrators’ determination of her Revised Proof of Debt, as set out in the Revised Notice of Rejection, is invalid or otherwise improper. The Deed Administrators, or Allens on behalf of the Deed Administrators, have, as appropriate, responded to each such item of correspondence to state why these assertions made by Mrs Kowalski are misconceived. A summary of this correspondence is set out in chronological date order in paragraphs 30 to 47 below, including reference to relevant matters included in this correspondence.

30.    On 18 May 2011, Mrs Kowalski sent by fax to the Deed Administrators a letter dated 18 May 2011. In this letter, she asserted, among other things, that, by reference to the alleged grounds set out in that letter, the Deed Administrators “have deliberately and consciously commit[ted] a FRAUD on me...”. …

31.    On or about 20 May 2011, the Deed Administrators sent by prepaid post to Mrs Kowalski a letter dated 20 May 2011 by way of response to Mrs Kowalski's letter of 18 May 2011. …

32.    In this letter, the Deed Administrators stated that:

“I do not understand the basis on which you seek to rely on the orders made by Mrs Justice Dodds-Streeton on 14 October 2010 to support your assertion that the Deed Administrators have acted in an inappropriate or improper manner (or, for that matter, in any other inappropriate or improper way) in relation to your claim.

I take this opportunity to remind you that, as noted in paragraph 4 of the Notice of Rejection, if you are dissatisfied with my determination as set out therein, you may appeal against it, no later than 14 days after the service of the notice or, if the Court allows, within any further period, to the Federal Court of Australia. If you do not do so, your claim will be assessed in accordance with my determination as set out in the Notice of Rejection. If you wish to pursue this matter further, I suggest you seek legal advice concerning your rights of appeal.”

33.    On 24 May 2011, Mrs Kowalski sent by fax to the Deed Administrators a letter dated 24 May 2011 in which she made various allegations of impropriety against the Deed Administrators. …

34.    On or about 1 June 2011, the Deed Administrators sent by prepaid post to Mrs Kowalski a letter dated 1 June 2011 by way of response to Mr Kowalski's letter of 24 May 2011. …

35.    This letter concluded in the following terms:

“I would hope that, having regard to my comments above and the attached copy of the Orders of Mrs Justice Dodds-Streeton made on 14 October 2010, it is now clear to you that the Deed Administrators have not acted in a misleading or fraudulent manner (or, for that matter, in any other inappropriate or improper way) in relation to your proof of debt generally nor, in particular, in providing you with the Revised Notice of Rejection.

If, despite the above, you are minded to consider the possibility of an appeal regarding my determination as set out in the Revised Notice of Rejection or more generally, I reiterate my suggestion that you seek legal advice concerning your rights to do so.”

36.    On 8 July 2011, Mrs Kowalski sent by fax to the Deed Administrators a letter dated 8 July 2011. …

37.    This letter referred to a letter Mrs Kowalski apparently sent by fax to the Deed Administrators dated 6 June 2011. I am informed by the Deed Administrators’ professional staff and believe that the Deed Administrators’ office has no record of receipt of this fax on or around 6 June 2011.

38.    On or about 11 July 2011, the Deed Administrators sent by prepaid post to Mrs Kowalski a letter dated 11 July 2011 responding to Mrs Kowalski's letter of 8 July 2011. …

39.    This letter noted (among other things) that the Deed Administrators have no record of receipt of Mrs Kowalski's fax sent on 6 June 2011. It concluded in the following terms:

“If you are considering an appeal against my adjudication, I once again reiterate my recommendation that you seek legal advice concerning your rights to do so.”

40.    On 14 July 2011, Mrs Kowalski sent by fax to the Deed Administrators a letter dated 14 July 2011.

41.    This letter enclosed a copy of Mrs Kowalski's letter to the Deed Administrators dated 6 June 2011. Mrs Kowalski's letter dated 6 June 2011 made various allegations of impropriety against the Deed Administrators. …

42.    On or about 18 July 2011, the Deed Administrators sent by prepaid post to Mrs Kowalski a letter dated 18 July 2011 responding to Mrs Kowalski's letter of 14 July 2011 and the copy of Mrs Kowalski's letter dated 6 June 2011 enclosed with that letter. This letter noted (among other things) that the Deed Administrators have no record of receipt of Mrs Kowalski's fax sent on 6 June 2011. It concluded in the following terms:

“If you are considering an appeal against my adjudication, I once again reiterate my recommendation that you seek legal advice concerning your rights to do so”.

43.    On 14 August 2011, Mrs Kowalski sent by fax to the Deed Administrators a letter dated 14 August 2011. In this letter, Mrs Kowalski again asserted, among other things, that Mr Nicol has “committed a fraud on me”. …

44.    On or about 16 August 2011, the Deed Administrators sent by prepaid post to Mrs Kowalski a letter dated 16 August 2011 responding to Mrs Kowalski's letter of 14 August 2011. …

45.    This letter concluded in the following terms:

“If you are considering an appeal against my adjudication, I once again reiterate my recommendation that you seek legal advice concerning your rights to do so”.

46.    On 17 August 2011, Mrs Kowalski sent by fax to the Deed Administrators a letter dated 17 August 2011. In this letter, Mrs Kowalski again asserted, among other things, that Mr Nicol had committed “a FRAUD” on Mrs Kowalski. The Deed Administrators responded to Mrs Kowalski's letter by letter dated 19 August 2011 sent by prepaid post to Mrs Kowalski. …

47.    On 24 August 2011, Mrs Kowalski sent by fax to the Deed Administrators a letter dated 24 August 2011. … In this letter, Mrs Kowalski again asserted, among other things, that Mr Nicol had committed “a FRAUD” on Mrs Kowalski.

54    Mr Joseph also deposed to correspondence between the deed administrators, its lawyers, the applicant and the Court, in relation to the deed administrators’ application for directions made on 7 December 2011, as to whether, inter alia, they could properly declare interim and final distributions under the ION DOCA without (subject to some exceptions) provisioning for disallowed claims for which the time to appeal had expired. (The exceptions comprised claimants (including the applicant) whose claims had been disallowed but who had either made or foreshadowed an appeal or an application for an extension of time in which to do so).

55    When the deed administrators advised the applicant of the hearing scheduled for 20 December 2011, she indicated a wish to be heard and was granted leave to appear by telephone, but ultimately did not do so.

56    On 20 December 2011, in the directions application, I ordered, inter alia, that:

1.    The Deed Administrators are justified in declaring a third interim distribution…without making provision for any potential distribution…in respect of the disallowed claims of current and former shareholders of ION Limited…save for the disallowed claims of the following current and former shareholders:

…

(d)    each of the shareholders listed in part 2 of Schedule 2, PROVIDED THAT, in the case of each such shareholder, they make application to any Court of competent jurisdiction on or before 10 February 2012 for an extension of the time in which to appeal the Deed Administrators' determination of their claim(s)…

(The applicant was included in the relevant schedule).

57    Following correspondence between the parties, on 2 February 2012, the applicant (who had sworn and filed an affidavit on 20 December 2011) filed the interlocutory process and her affidavit in support sworn on 31 January 2012. The interlocutory process was returnable on 5 March 2012 but (as the applicant required time to consider the respondents’ material) was fixed for hearing on 15 May 2012.

Material in support of application

58    By her affidavit sworn on 20 December 2011, the applicant deposed to correspondence between the parties, including her revised proof and the deed administrators’ erroneous statement in the first rejection notice that she had failed to provide any further information to support her claim. The applicant described the erroneous statement as unconscionable and fraudulent, and asserted that as she had provided the deed administrators with sufficient information, her claim should have been accepted in full.

59    By her affidavit sworn on 31 January 2012, the applicant sought an extension of time to appeal against Mr Nicol’s decision to reject her claim against ION “on grounds that on 19 April 2011 Colin Nicol committed a FRAUD on me”. The applicant reiterated that the deed administrators’ decision was fraudulent and that Mr Nicol committed a “FRAUD” on her when he rejected her claim.

60    In her affidavit sworn on 6 March 2012, the applicant asserted that Mr Nicol “deliberately, consciously and fraudulently” stated in the notice of rejection dated 19 April 2011 that she had failed to provide further information and asserted, on the basis of SZFDE v Minister for Immigration and Citizenship (2007) 232 CLR 189 (citing Lazarus Estates Ltd v Beasley [1956] 1 QB 702 at 712–3) that advantages obtained by fraud may never be retained, as fraud unravels all transactions.

61    Before me, the applicant asserted that the deed administrators’ erroneous statement, although promptly corrected with an apology, constituted fraud, as “it was almost like they wanted to ignore it”. The applicant stated that she felt that she had been “toyed with” in conducting her case.

62    The applicant did not deny that the deed administrators had repeatedly advised her of a right to appeal but stated that she “really didn’t believe them” and complained that they had not advised her under which provision she could appeal. The applicant also asserted that her delay in filing an appeal and applying for an extension was due to her attempts to resolve the claim herself, as she lacked funds, by making a complaint to ASIC, which had dragged out.

63    In her outline of argument dated 6 March 2012, the applicant again repeatedly asserted that Colin Nicol rejected her claims on 19 April and 6 May 2011 and thereby committed fraud, and the court was thereby obliged to find in her favour if it wanted justice to be done.

64    In her affidavit sworn on 21 March 2012, the applicant alleged that Mr Joseph deliberately and consciously failed to include copies of certain documents (being Mr Nicol’s letters to the applicant dated 12 September 2005 and 22 September 2008, the order made on 14 October 2010, two pages of Guidance Notes for online claims, one page of a fax sent from the applicant and a complete copy of her letter dated 24 August 2011). The import of the alleged omissions was not stated. Before me, when asked the relevance of Mr Joseph’s alleged deliberate omission of documents from his exhibits, the applicant responded that the omitted documents proved that she was trying to resolve the matter with the deed administrators.

65    In her affidavit sworn on 21 March 2012, the applicant also asserted, inter alia, that:

31    …I had read and relied on specific announcements or information published by ION that was misleading or deceptive when I decided to purchase the ION shares on the grounds that are found in the exhibit HK-1 to my affidavit dated 6 March 2012.

…

31.1    …I had consistently read and relied on announcements and information generally published by ION, such that any non-disclosure by ION of a matter that it was required to disclose might have been a cause of my decision to make my decision to purchase my ION shares on the grounds that are found in the exhibit HK-1 to my affidavit dated 6 March 2012.

...

32    …I had heard “broadcast” representations, such as announcements and information that ION had made or disclosed to the market, which had come to my attention, at the relevant time that I had made my decisions to purchase my ION shares on the grounds that are found in exhibit HK-1 to my affidavit dated 6 March 2012.

…

66    The applicant further asserted that:

1.    the respondents were wasting ION’s money by opposing her application;

2.    Mr Joseph’s affidavits were self-serving;

3.    the respondents, in written submissions, failed to mention her affidavit sworn on 20 December 2011;

4.    the respondents failed to dispute any of the facts that were found in any of her affidavits and had thus accepted them;

5.    on 25 November 2010, the applicant provided Mr Nicol with a statutory declaration dated 25 November 2010, and a further copy of the Security Reference Number (“SRN”) provided on 26 September 2008, but he did not determine her claim as he was bound to do;

6.    the applicant provided details of ION’s conduct and causation in response to the deed administrators’ request;

7.    Colin Nicol committed a fraud on 19 April 2011 and 6 May 2011, acted unconscionably and illegally rejected the applicant’s claims;

8.    the applicant relied on authorities to the effect that no judgment or order can stand if obtained by fraud, which unravels everything and vitiates all transactions;

9.    the applicant did not need any extension of time to appeal against the two fraudulent and unconscionable decisions, but if she did, the interests of justice required that it be granted;

10.    the respondents were wrongdoers, did not have clean hands and the court should not assist them;

11.    the applicant had an arguable case, would be prejudiced if not granted an extension, the delay was that of the respondents and was not intentional, but a bona fide mistake;

12.    the applicant was not a lawyer, could not afford legal advice and was awaiting the outcome of her complaint to ASIC about Mr Nicol; and

13.    the Sons of Gwalia administrators had accepted a claim on the same basis as that now made against ION.

Discussion

67    There was no basis for the applicant’s assertion that an appeal (and hence an extension) were unnecessary because the deed administrators’ decision was vitiated by fraud. An appeal from a decision of the deed administrators is not directed at error, but is rather a de novo determination by the court of the substance of the claim against the company on which the applicant’s proof of debt was based. (See Tanning Research Laboratories Inc v O’Brien (1990) 169 CLR 332 at 340-1 per Brennan and Dawson JJ). More fundamentally, there is no basis whatsoever for the applicant’s allegations of fraud or other misconduct on the part of the deed administrators.

68    Nor, in my opinion, should an extension of time in which to appeal be granted.

69    The delay of over eight months was lengthy, particularly relative to the short period of time envisaged by the applicable regulations and rules.

70    I reject the applicant’s assertion that the deed administrators were responsible for the delay. As the applicant acknowledged, the deed administrators and their lawyers repeatedly advised her of the right to appeal, the time limits and the possibility that the court would allow further time. There was no reasonable basis for the applicant’s assertion that she did not believe the deed administrators’ advice. Nor did the applicant’s complaint to ASIC in September 2011 explain her failure to take action in relation to an appeal in the preceding months, or preclude such action concurrently with the complaint. Rather than taking action, the applicant engaged in protracted correspondence with the deed administrators and their lawyers, in the course of which she repeatedly made extremely serious but unfounded allegations of fraud, criminality, illegality and misconduct. In my opinion, the applicant bore full responsibility for the lengthy delay, and advanced no adequate explanation for it.

71    The prejudice the applicant will suffer if refused an extension of time in which to bring an appeal, which, if successful, would secure the right to prove for a rateable share of $3,509.90, is outweighed by the prejudice the respondents would incur by the costs (which are likely greatly to exceed the quantum of the claim) and inconvenience of defending the applicant’s claim, particularly as, in my opinion, the applicant’s appeal was not, on the basis of the material before the court, reasonably arguable.

72    Relevant authority establishes that a shareholder claimant such as the applicant must specifically identify the allegedly misleading representations, show how they came to her attention at the relevant time and how they contributed to inducing the purchase. In De Bortoli Wines Pty Ltd v HIH Insurance Ltd (in liq) (2011) 281 ALR 454, Stone J discussed what a shareholder claimant alleging misleading or deceptive representations pursuant to s 52 of the Trade Practices Act 1974 (Cth) in relation to a share purchase must show.

73    Her Honour stated that while an applicant’s personal reliance on the alleged contravening conduct was unnecessary to establish a compensable loss, “reliance at some point is necessary to provide the causative link to the loss claimed” (at [60]). Where personal reliance provided the link between the loss suffered and the contravening conduct, it might, depending on the circumstances, be possible to infer reliance from the fact that the company engaged in misleading or deceptive conduct and the fact that the applicant invested in the shares. Stone J noted, however, that any factual inference must be weighed in the light of all the evidence (at [73]).

74    Stone J stated that if the claimant did not allege personally directed representations, “it will be at least necessary for the representee to show that the representations had come to his or her attention at the relevant time. It is not sufficient merely to show that representations were made and certain conduct occurred later” (at [109]).

75    In the present case, the applicant failed to provide specific information in support of her claim. The revised proof contained very general assertions in relation to causation about ION’s conduct and her own actions. The further information the applicant supplied on 27 April 2011 added no additional factual details but merely referred to statutory provisions.

76    As the respondents submitted, the applicant continued to assert only unidentified misleading or deceptive information and wrongful failure to disclose, without specific information as to how it affected her decision to purchase. She at no stage identified any specific announcement, information or broadcast representations published by ION which came to her attention or which she read or relied on in deciding to purchase shares; or any non-disclosure by ION which may have caused her decision to purchase.

77    Nor, as the applicant’s share purchases occurred prior to 10 September 2004, is she assisted by the deed administrators’ acknowledgement that after that date, ION’s shares would probably have ceased to trade had ION made proper disclosure to the market.

78    While the applicant’s frustration at the rejection of her claim is understandable, it does not excuse the applicant’s repeated, unreasonable and baseless allegations of fraud or other grave misconduct by the deed administrators and others. Such reprehensible conduct fortifies, but is unnecessary to, the conclusion that an extension of time should not be granted in this case.

79    In my opinion, the application should be refused.

Associate:

Dated:    30 May 2012