FEDERAL COURT OF AUSTRALIA

Ford, in the matter of Careers Australia Group Ltd (in liq) v Mansfield [2022] FCA 173

ORDERS

THE COURT ORDERS THAT:

1.    The plaintiffs’ interlocutory process filed on 14 February 2022 be returnable on 18 February 2022 at 9.30am and proceed ex parte.

2.    Pursuant to rr 10.42, 10.43(2) and 10.44 of the Federal Court Rules 2011 (Cth) (Federal Court Rules), the plaintiffs be granted leave to serve the sealed originating process as filed on 15 December 2021 and the affidavit of Martin Francis Ford sworn on 15 December 2021 (together, the Documents) on the sixth defendant in the Czech Republic.

3.    Pursuant to r 10.24 or alternatively r 10.49 of the Federal Court Rules, the plaintiffs be granted leave to serve the Documents on the sixth defendant by:

(a)    emailing the Documents (in English) to:

(i)    the sixth defendant at ‘michael.jasansky@bxrp.com’; and

(ii)    Ms Catherine Macrae at ‘Catherine.Macrae@minterellison.com’ and Mr Brendon Watkins at ‘Brendon.Watkins@minterellison.com’ (the MinterEllison Email Addresses); and

(b)    sending a copy of the Documents (in English) to MinterEllison by post to the address GPO Box 769 Melbourne VIC 3001 Att: Mr Brendon Watkins / Ms Catherine Macrae (MinterEllison Postal Address).

4.    Pursuant to rr 10.42, 10.43(2) and 10.44 of the Federal Court Rules, the plaintiffs be granted leave to serve the Documents on the seventh defendant in Singapore.

5.    Pursuant to r 10.24 or alternatively r 10.49 of the Federal Court Rules, the plaintiffs be granted leave to serve the Documents on the seventh defendant by:

(a)    emailing the Documents to:

(i)    the seventh defendant at ‘richard.gati@bxrp.com’; and

(ii)    the MinterEllison Email Addresses; and

(b)    sending a copy of the Documents to the MinterEllison Postal Address.

6.    Pursuant to rr 10.42, 10.43(2) and 10.44 of the Federal Court Rules, the plaintiffs be granted leave to serve the Documents on the eleventh defendant in the United Kingdom in accordance with Article 10(a) of the Hague Convention, by sending a copy of the Documents by international registered post with return receipt to the address ‘York House’, 1 Seagrave Road, London, SW6 1RP, United Kingdom.

7.    Pursuant to rr 10.42, 10.43(2) and 10.44 of the Federal Court Rules, the plaintiffs be granted leave to serve the Documents on the twelfth defendant in the United Kingdom in accordance with Article 10(a) of the Hague Convention, by sending a copy of the Documents by international registered post with return receipt to the address ‘The Harley Building’, 79 New Cavendish Street, London, England, W1W 6XB.

8.    The sixth, seventh, eleventh and twelfth defendants are to file a notice of address for service in accordance with r 5.02 of the Federal Court Rules within 10 business days after service upon them of the Documents as provided for in these orders.

9.    The proceeding is to continue by way of pleadings.

10.    The plaintiffs are to file and serve a statement of claim:

(a)    on the first to fifth and eight to tenth defendants by 23 February 2022; and

(b)    on the sixth, seventh, eleventh and twelfth defendants by 18 March 2022.

11.    The proceeding is to be listed for further case management at 9.30am on 28 March 2022.

12.    Costs be reserved.

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

REASONS FOR JUDGMENT

O’BRYAN J:

Introduction

1    By interlocutory application dated 14 February 2022, the plaintiffs sought orders for the service of the originating process and supporting affidavit on certain defendants to this proceeding who are natural persons residing overseas and overseas-domiciled companies. In respect of the natural persons, the plaintiffs further sought orders for substituted service on those defendants.

2    I heard the application on 18 February 2022 and made orders largely in the form sought by the plaintiffs. These are my reasons for making those orders.

3    Following the preparation of these reasons, I have identified certain accidental omissions from the orders made, being references to all applicable provisions of the Federal Court Rules 2011 (Cth) (Federal Court Rules) under which the orders were made. With the publication of these reasons, I have corrected the orders pursuant to r 39.05(h).

Background

4    The plaintiffs in the proceeding are Martin Francis Ford in his capacity as liquidator of Careers Australia Group Limited (In Liquidation) (CAG) and other companies in the same group (the Group), as well as the companies within the Group (together, the plaintiffs). The Group, prior to its external administration, conducted a business of providing education and vocational services in Australia.

5    The first to eighth defendants (the director defendants) were the directors of CAG at various relevant times. The ninth defendant was the Company Secretary of CAG and a director of certain of its subsidiaries and the tenth defendant was the Chief Financial Officer of CAG and a director of certain of its subsidiaries (together, the officer defendants). The eleventh defendant (White Cloud Advisors) and the twelfth defendant (BXR Advisory) (together, the shareholder defendants) are United Kingdom domiciled corporations which were associates of the major investors in CAG (through its principal shareholder, Cirrus Business Investments Ltd (Cirrus)).

6    On 15 December 2021, the plaintiffs commenced this proceeding by the filing of an originating process and an affidavit sworn by the liquidator on 15 December 2021 (Ford Affidavit) which annexes a draft statement of claim.

7    The plaintiffs allege, broadly, that:

(a)    each of the director defendants breached his or her duties to CAG (imposed at common law, in equity and under the Corporations Act 2001 (Cth) (Corporations Act)) by causing or permitting CAG to declare and pay a dividend of $40 million to Cirrus in December 2015 (the Dividend);

(b)    the shareholder defendants were involved (within the meaning of s 79 of the Corporations Act) in the contraventions by the director defendants with respect to the payment of the Dividend;

(c)    each of the director defendants and the officer defendants breached their duties, inter alia, with respect to monitoring the financial position of the Group, responding to operational challenges facing the Group, and permitting relevant companies within the Group to trade and incur debts, such contraventions occurring as early as 1 January 2016; and

(d)    each of the director defendants contravened s 588G of the Corporations Act by failing to prevent CAG and other companies in the Group from incurring debts when those companies were or became insolvent in the period from 31 October 2016 onwards.

8    The relief sought in the originating process includes damages, equitable compensation or compensation pursuant to ss 588M, 598 and 1317H of the Corporations Act.

The present application

9    In the originating process, it was foreshadowed that interlocutory orders regarding service of the originating application and supporting affidavit would be sought relating to the third to eighth defendants (who are natural persons residing overseas) and the shareholder defendants (which are overseas-domiciled companies). At the hearing of this application, the plaintiffs informed the Court that service has been accepted by local solicitors for the third, fourth, fifth, and eighth defendants and accordingly, no orders in respect of service on those defendants were sought. However, the plaintiffs required leave of the Court to serve the documents on the sixth defendant, Michael Jasansky, the seventh defendant, Richard Gati, and the shareholder defendants (together, the remaining defendants).

10    By their interlocutory application dated 14 February 2022, the plaintiffs sought orders granting leave to serve the originating process and the Ford Affidavit (annexing the draft statement of claim) on the remaining defendants, who are outside Australia, and for orders for substituted service of those initiating documents on each of Mr Jasansky and Mr Gati.

11    In support of their application, the plaintiffs read the Ford Affidavit and an affidavit of Colleen Anne Platford, a Partner of Gilbert + Tobin, sworn on 14 February 2022 (Platford Affidavit). There were no objections to either affidavit and the witnesses were not cross-examined.

12    Ms Platford gave evidence that:

(a)    on the basis of searches of ASIC records maintained in respect of CAG and extracts from the transcripts of their respective public examinations pursuant to ss 596A and 596B of the Corporations Act (annexed to the Platford Affidavit), she believes that:

(i)    Mr Jasansky resides in the Czech Republic; and

(ii)    Mr Gati resides in Singapore; and

(b)    on the basis of searches of records maintained by Companies House, the executive agency sponsored by the government of the United Kingdom, she understands that the shareholder defendant companies are registered in the United Kingdom.

Applicable rules and legal principles

13    Part 10 of the Federal Court Rules deals with service. Within Pt 10, Div 10.1 addresses personal service, while Div 10.2 addresses service other than by personal service and Div 10.4 addresses service outside Australia.

Substituted service under Div 10.2

14    Rule 10.24, within Div 10.2, provides that if it is “not practicable” to serve a document on a person in a way required by the Federal Court Rules, a party may apply to the Court without notice for an order (among other things) substituting another method of service. While inconvenience to a party is not sufficient to meet the threshold of r 10.24, it is not necessary for an applicant to prove that it is impossible or futile to effect personal service before an order for substituted service can be made: Electrolux Home Products Pty Ltd v Delap Impex Ltd [2013] FCA 600; 103 IPR 421 at [72]-[78] per Katzmann J; Commissioner of Taxation v Zeitouni [2013] FCA 1011; 306 ALR 603 (Zeitouni) at [66] per Katzmann J; Titan Enterprises (Qld) Pty Ltd v Cross [2016] FCA 664 at [17] per Edelman J.

15    In Zeitouni, Katzmann J summarised the approach taken to impracticability (and the term used in the former rules – “impractical”) in a number of cases (at [67]-[70]):

[67]    In Humane Society Allsop J doubted that it was incumbent on an applicant for an order for substituted service to prove that personal service was impossible or futile. In Statewide Secured Investments Pty Ltd v Tarrant [2011] FCA 1067 at [9] Flick J thought it was not. So did Dodds-Streeton J in British American Tobacco Australasia Ltd v Taleb (No 1) [2012] FCA 1065 at [25]–[29]. In Mercator Property Consultants Pty Ltd v Christmas Island Resort Pty Ltd (Nicholson J, 14 July 1998, unreported) (Mercator) it was sufficient that service on a corporation in Singapore would take approximately 4–6 months. In Humane Society Allsop J said (at [14]) that on one view “impractical” (the term used in the former rules) simply denoted “not sensible or realistic”. In Oswal Gilmour J took that very approach.

[68]    In Kokos (at [18]) French J accepted that it was impractical to personally serve Mr Yeo, whom the ACCC wished to join as a respondent because although the ACCC knew he had been in Japan on a 3-year working visa, it had been unable to obtain an address at which he could be served. The reasons for judgment indicate that neither Mr Yeo nor his solicitors would provide an address for service and neither the Department of Foreign Affairs and Trade nor the Australian Embassy in Japan was able to make inquiries on the ACCC’s behalf. Like Leonard Zeitouni, Mr Yeo had come and gone from Australia on more than one occasion in the previous 12 months. No attempt was made to serve him in Japan for this reason.

[69]    In Rohalo Pharmaceutical Pty Ltd v RP Scherer SpA (1994) 15 ACSR 347 at 366 Lindgren J held that it was not practical to require personal service where there were special circumstances making it “desirable that the litigation be progressed quickly and efficiently”. In Australian Securities and Investments Commission v China Environment Group Ltd [2013] FCA 286 (China Environment) Besanko J accepted a submission from ASIC that it was not practicable in the circumstances of urgency which attended its claim for interlocutory relief. Both these cases concerned applications for deemed service. There is, however, no reason why a different approach should be taken to the meaning of impracticable in the context of an application for substituted service.

[70]     In Unilever Australia Ltd v PB Foods Ltd [2000] FCA 798 (Unilever), which was also an application to set aside an order for substituted service, counsel conceded that substituted service could be ordered to ensure quick service where, for example, there was the risk of dissipation of property or the like. That was a risk in Mercator and, as will be seen, it was also a risk here.

16    The concept of “impracticability” is also used in r 10.23, which provides for deemed service. As Katzmann J observed in Zeitouni at [69], there is no reason to think that the meaning of impracticable in this context should be different to that in r 10.24. In Kosmos Capital Pty Ltd v Turiya Ventures LLC [2019] FCA 528, Jackson J made the following observations about the meaning of “practicable” in the context of r 10.23(a) (at [50]):

… the word ‘practicable’ has a wide meaning which will depend on the circumstances of the particular proceeding: Australian Securities and Investments Commission v China Environment Group Ltd [2013] FCA 286 at [11]-[15]. Rule 10.23 does not require the applicant to prove the impossibility of service of documents upon a party in accordance with the rules, or that further attempts to effect service in accordance with the rules would be futile or not sensible or feasible: Speedo Holdings BV v Evans [2011] FCA 1089 at [12]. The question is not whether reasonable effort has been shown by the applicant over a particular period, but whether at the date on which the application regarding service is made, the applicant, using reasonable effort, is unable to serve the respondent personally: Foxe v Brown (1984) 58 ALR 542 at 547 as applied in O'Neil v Acott (1988) 59 NTR 1 at 2. Evidence of attempts to serve, attempts to speak by telephone and lack of knowledge of whereabouts will be relevant to the question of practicability: see eg Ross v Cotter [2015] FCA 310 at [2].

Service in a foreign country under Div 10.4

17    Within Div 10.4, r 10.42 of the Federal Court Rules provides that, subject to r 10.43, an originating application may be served on a person in a foreign country in a proceeding that consists of, or includes, any one or more of the kinds of proceeding mentioned in the table in that rule.

18    Rule 10.43(1) provides that service of an originating application on a person in a foreign company is effective for the purpose of a proceeding only if:

(a)    the Court has given leave under subr (2) before the application is served; or

(b)    the Court confirms the service under subr (6); or

(c)    the person served waives any objection to the service by filing a notice of address for service without also making an application under r 13.01.

19    Subrule (2) provides as follows:

A party may apply to the Court for leave to serve an originating application on a person in a foreign country in accordance with a convention, the Hague Convention or the law of the foreign country.

20    Subrule (4) requires that, for leave to be granted pursuant to subr (2), the Court must be satisfied of the following three matters:

(a)    the Court has jurisdiction in the proceeding;

(b)    the proceeding is of a kind mentioned in r 10.42; and

(c)    the party has a prima facie case for all or any of the relief claimed in the proceeding.

21    Rule 10.44(1) provides that a party may apply for leave to serve a document filed in or issued by the Court, other than an originating application, on a person in a foreign country in accordance with a convention, the Hague Convention (the Convention on the Service Abroad of Judicial and Extrajudicial Documents in Civil or Commercial Matters, concluded at the Hague on 15 November 1965) or the law of the foreign country.

22    Rule 10.49 makes specific provision for substituted service outside Australia, as follows (emphasis added):

If service was not successful on a person in a foreign country, in accordance with a convention, the Hague Convention or the law of a foreign country, a party may apply to the Court without notice for an order:

(a)    substituting another method of service; or

(b)     specifying that, instead of being served, certain steps be taken to bring the document to the attention of the person; or

(c)     specifying that the document is taken to have been served:

(i)     on the happening of a specified event; or

(ii)     at the end of a specified time.

23    It is apparent that r 10.49 contemplates that, before an order for substituted service in a foreign country is made, leave will first have been given under r 10.43(2) to effect service in the foreign country in accordance with a convention, the Hague Convention or the law of the foreign country and that service in accordance with the applicable method will have been unsuccessful.

24    Reference should also be made to r 10.45, within Div 10.4, which provides:

The other provisions of Part 10 apply to service of a document on a person in a foreign country in the same way as they apply to service on a person in Australia, to the extent that they are:

(a)     relevant and consistent with this Division; and

(b)     consistent with:

(i)     if a convention applies—the convention; or

(ii)     if the Hague Convention applies—the Hague Convention; or

(iii)     in any other case—the law of the foreign country.

The interaction between rr 10.24 and 10.49

25    In the present case, the plaintiffs seek orders for substituted service on Mr Jasansky and Mr Gati under r 10.24 (the general rule for substituted service) and/or r 10.49 (the specific rule for substituted service outside Australia).

26    By virtue of r 10.45, r 10.24 (substituted service) will apply to foreign service provided that the rule is consistent with Div 10.4 and the applicable convention or foreign law governing foreign service: Zeitouni at [21] per Katzmann J.

27    In considering the question of consistency, it is well established that it is inappropriate for a court to consider any application for substituted service overseas unless leave for service outside Australia has been given pursuant to r 10.43: see Zeitouni at [26]-[32] per Katzmann J, and the cases cited therein. As set out above, the grant of leave to serve on a person outside Australia is conditional upon the matters set out in r 10.43(4), namely, that the Court has jurisdiction in the proceeding, that the proceeding is of a kind mentioned in r 10.42, and the party has a prima facie case for relief. To grant an order for substituted service under r 10.24 without first granting leave to serve outside of Australia under r 10.43 would be to apply r 10.24 in a manner inconsistent with Div 10.4. The reason for this lies in the essential role of service in enlivening the Court’s jurisdiction.

28    At common law, the Court’s jurisdiction in actions in personam depends on a defendant’s presence in the geographical jurisdiction of the Court (this Court’s jurisdiction being Australia-wide). This common law position is, however, subject to statutory extensions to jurisdiction that provide for the service of process outside of the jurisdiction where there is some link between the forum and the subject matter involved: Re Deposit and Investment Co Ltd (1991) 30 FCR 463 at 464 per Lockhart J, citing Laurie v Carroll (1958) 98 CLR 310 (Laurie v Carroll) per Dixon CJ, Williams and Webb JJ (at 322-323). It is for this reason that an order for substituted service should not be made in relation to a person outside the jurisdiction who has not been the subject of an order for leave to serve outside of the jurisdiction. Such an order would, in effect, circumvent the requirement (codified by r 10.43) for the Court to be satisfied that it is appropriate to extend its jurisdiction to a person located overseas: Laurie v Carroll at 332. The power to order substituted service cannot be used as a way of effecting service outside the jurisdiction for want of any other power to do so: Park v Tschannen [2016] FCA 137; 341 ALR 452 (Park) at [10]-[11] per Edelman J, citing Southwell v Maladina [2002] FCA 802; 194 ALR 51 per Dowsett J; Wilding v Bean [1891] 1 QB 100 at 102; and Laurie v Carroll at 325.

29    A question that has not been finally resolved is whether r 10.24 can be relied on in respect of substituted service outside of Australia, even in circumstances where leave has been granted under r 10.43, or whether r 10.24 is necessarily inconsistent with Div 10.4 (within the meaning of r 10.45). The matter of substituted service outside Australia is addressed by r 10.49 which permits substituted service if service on the person in a foreign country in accordance with a convention or the relevant foreign law was not successful. This requires that some attempt must first be made to serve in accordance with the relevant convention or foreign law: Park at [15]. In contrast, r 10.24 permits substituted service if “it is not practicable to serve a document on a person in a way required by the Federal Court Rules” and does not require that some attempt first be made to serve in another manner.

30    In Park, Edelman J contemplated (at [16]) that r 10.49 requires steps to have been taken to attempt service because of principles of international comity, as well as the importance of personal service (and the need for some reason to depart from it). His Honour stated:

It would not be consistent with comity for an agreed regime to provide for a form of service outside the jurisdiction if the laws of that jurisdiction permitted a party immediately to substitute an alternative form of service. As Dixon CJ, Williams and Webb JJ remarked, if the position were otherwise, “the strict conditions regulating and limiting service out of the jurisdiction upon defendants abroad would be ineffective; for they could be avoided by obtaining an order for substituted service within the jurisdiction”: Laurie v Carroll [1958] HCA 4; (1958) 98 CLR 310, 325. Another reason is the importance of personal service and the need for some reason to exist before orders are made for departure from it. As the High Court observed at 323 in Laurie, service was historically closely associated with jurisdiction and it had been assumed that the foundation of jurisdiction was physical power. That historical foundation is one of the reasons for the importance of personal service. The other is its foundations in natural justice.

31    In that case, however, orders for substituted service were only sought under r 10.49 and Edelman J did not need to decide whether r 10.24 should be considered inapplicable in respect of foreign substituted service because it dispenses with the need to attempt service.

32    In a number of decisions, this Court has concluded that orders for substituted service outside Australia may be made under r 10.24 where leave to serve out of the jurisdiction has been obtained under r 10.43: see Australian Competition and Consumer Commission v Kokos International Pty Ltd [2007] FCA 2035 at [18] per French J (in respect of the predecessor provisions); Humane Society International Inc v Kyodo Senpaku Kaisha Ltd [2007] FCA 124 (Humane Society) at [6]-[7] per Allsop J; Commissioner of Taxation v Oswal [2012] FCA 1507; 91 ATR 684 at [32] per Gilmour J; Zeitouni at [60] per Katzmann J; and Australian Information Commission v Facebook Inc [2020] FCA 531; 144 ACSR 88 (AIC v Facebook) per Thawley J at [66]. I consider it appropriate to follow those decisions. In any event, if r 10.24 were to be considered inapplicable in the circumstances of service outside Australia by reason of inconsistency with r 10.49, the Court would have power to make an order for substituted service under r 10.49 in equivalent circumstances by exercising power under r 1.34 to dispense with the requirement that personal service be attempted before substituted service can be effected: see, for example AIC v Facebook at [66]; Connelly (liquidator), in the matter of CIMC Rolling Stock Australia Pty Ltd (in liq) v One Rail Australia (FLA) Pty Ltd (No 3) [2021] FCA 1183 (Connelly) at [72]-[74] per Downes J. In Park (at [18]), Edelman J considered that, while there may be instances where the power in r 1.34 could be exercised to dispense with the requirement under r 10.49 for personal service to be attempted, such instances are likely to be rare. His Honour went on to say (at [18]):

One rare example might be a case where there is real urgency for service and where the evidence suggests an impossibility or serious impracticability in service by the means contemplated in the Convention. This is not such a case, even taking into account the need for the Trustee to commence the bankruptcy process and the commencement, but current delay, in the public examination.

33    Under s 37M of the Federal Court of Australia Act 1976 (Cth) (Federal Court Act), the Court’s procedural powers are to be exercised in the way that best promotes the overarching purpose, which is to facilitate the just resolution of disputes according to law and as quickly, inexpensively and efficiently as possible. Having regard to that requirement, a range of circumstances are likely to bear upon the question whether substituted service outside Australia should be ordered where service under a relevant convention or foreign law has not first been attempted. Those circumstances will include those identified by Edelman J in Park, specifically principles of international comity as well as the importance of personal service in founding jurisdiction. However, recognition should also be given to the radical changes that have occurred in the last 20 years in every day methods of communication, whereby the vast majority of communication occur electronically by email or similar methods. In my view, in considering an application for substituted service outside of the jurisdiction, a Court should take into account factors including: the subject matter of the proceeding (particularly whether it involves business or commercial matters) and the nature of its connection to Australia; the difficulties and cost associated with attempting to serve the defendant outside Australia in accordance with r 10.43; the urgency of service; the nature of the defendant’s connection to Australia in the context of the proceeding and the defendant’s facility with the English language; and the likelihood that the method of substituted service will bring the documents to the attention of the defendant.

Leave to serve documents outside of Australia

34    The plaintiffs sought leave pursuant to r 10.43 to serve the originating process and Ford affidavit on the remaining defendants. For leave to be granted, two requirements need to be satisfied. First, under r 10.43(3), the plaintiffs are required to file an affidavit stating the name of the foreign country where the person to be served is likely to be and the permitted methods of service under an applicable convention, the Hague Convention or the law of the foreign country. Second, under r 10.43(4), the plaintiffs are required to establish that the Court has jurisdiction in the proceeding, that the proceeding is of a kind referred to in r 10.42, and that the plaintiffs have a prima facie case. For the following reasons, I am satisfied that leave should be granted and I made orders accordingly.

Rule 10.43(3) requirements

35    In compliance with rule 10.43(3), the plaintiffs relied on the Platford Affidavit. As noted earlier, in that affidavit Ms Platford gave evidence that Mr Jasansky resides in the Czech Republic, Mr Gati resides in Singapore and the shareholder defendant companies are registered in the United Kingdom.

36    Ms Platford also gave evidence to the effect that Article 10(a) of the Hague Convention permits service of judicial documents by postal channels directly to persons abroad, provided the State of destination does not object, and that the Czech Republic and the United Kingdom are signatories to the Hague Convention but Singapore is not.

37    Accordingly, the shareholder companies can be served by international registered post with return receipt to their respective registered offices, as permitted by the Hague Convention (in circumstances where the United Kingdom has recorded no objection to service in that manner as prescribed by Article 10(a) of the Hague Convention).

38    Unlike the United Kingdom, the Czech Republic has objected to Article 10(a) of the Hague Convention and, consequently, postal service is not permitted. Ms Platford gave evidence that, in order to serve Mr Jasansky in accordance with the Hague Convention, it is necessary inter alia to translate the originating process and the Ford Affidavit into Czech, apply to a Registrar of this Court to make a request for service to the Central Authority in the Czech Republic and to forward the relevant documents to that authority, have the Central Authority in the Czech Republic serve the documents personally or otherwise in accordance with the applicable law of the Czech Republic, and thereafter provide a Certificate of Service to the Registrar of this Court. Ms Platford also gave evidence that the Hague Convention website states that the time for execution of a request for service is “generally 2 – 4 months”.

39    Singapore is not a signatory to the Hague Convention. Ms Platford gave evidence that there is no applicable convention or treaty with Singapore. Absent an order for substituted service from this Court, the originating process and the Ford Affidavit must be served in accordance with the laws of Singapore. These laws permit service via a letter of request from a foreign court or tribunal or by a method of service authorised by the Supreme Court of Judicature Act Rules of Court, which, absent “special reasons”, require personal service by a Singaporean solicitor or solicitor’s clerk.

Rule 10.43(4) requirements

Jurisdiction

40    I am satisfied that the Court has jurisdiction in the proceeding. It is apparent from the originating process and the Platford Affidavit that the causes of action in the proceeding arise under the Corporations Act and under the general law. Pursuant to s 39B(1A)(c) of the Judiciary Act 1903 (Cth), the Federal Court has original jurisdiction in any civil matter arising under any laws made by the Commonwealth Parliament. Further, the Corporations Act explicitly confers jurisdiction upon the Federal Court: s 1337B(1). I accept that the general law claims arise from the same substratum of facts and therefore lie within the accrued jurisdiction of the Federal Court: Fencott v Muller (1983) 152 CLR 570 at 604-605 per Mason, Murphy, Brennan and Deane JJ.

A proceeding under r 10.42

41    I am also satisfied that the proceeding is of a kind referred to in r 10.42. It is sufficient that the proceeding falls within any single item in the table of r 10.42: Australian Competition and Consumer Commission v Yellow Page Marketing BV [2010] FCA 1218 at [23]; Australian Competition and Consumer Commission v Facebook, Inc [2021] FCA 244 (ACCC v Facebook) at [24]. Ms Platford gave evidence that the plaintiff companies: (i) were incorporated and registered in Australia; (ii) had their registered offices in Australia; and (ii) carried on business almost wholly in Australia. Moreover, the majority of the creditors of the plaintiff companies are located in Australia.

42    Accordingly, I accept that the claims fall within at least the following categories of the table in r 10.42:

(a)    the proceeding is based on a cause of action arising in Australia (item 1);

(b)    the proceeding is based on a contravention of the Corporations Act committed in Australia (item 12) or, at the very least, is based on a contravention of the Corporations Act seeking relief in relation to damage suffered wholly or partly in Australia (given that the plaintiff companies and most of the creditors are based in Australia) (item 13); and

(c)    the plaintiffs seek remedies under the Corporations Act (item 15).

Prima facie case

43    In respect of the third requirement, being the need to demonstrate a prima facie case, the relevant principles are well settled and were summarised by Colvin J in Ford v Advanced Energy Minerals Ltd [2021] FCA 995 at [9]-[10]:

[9]    The requirement to establish a prima facie case must be understood in the context in which it arises and inferences from matters relied upon may be more readily drawn than they may otherwise be at trial: Tiger Yacht Management Ltd v Morris [2019] FCAFC 8; (2019) 268 FCR 548 at [46]. The purpose of the requirement is to ensure that it is demonstrated that there is controversy the resolution of which warrants the use of the Court’s processes and justifies the involvement of the foreign respondent: Suzlon Energy v Bangad (No 3) [2012] FCA 123 at [35]. Determining whether there is a prima facie case for the purposes of the application should not call for a substantial inquiry. A prima facie case for relief is made out if, on the material before the Court, inferences are open which, if translated into findings of fact, would support the relief claimed: Ho v Akai Pty Ltd (in liq) [2006] FCAFC 159; (2006) 247 FCR 205 at [10] (and cases there cited).

[10]     It is not necessary to demonstrate merit in all of the claims made in the proceeding: Tiger Yacht at [45].

44    The plaintiffs submitted, and I accept, that it is sufficient to address the claims with respect to the Dividend (which is brought against all of the remaining defendants) and the insolvent trading claim (which is brought against the director defendants, including Mr Jasansky and Mr Gati).

45    The breach of duty and involvement causes of action with respect to the Dividend are pleaded at [48]-[122] of the draft statement of claim. Those causes of action are broadly based on the following allegations (as set out in the draft statement of claim and substantiated by the Platford Affidavit):

(a)    CAG’s Constitution precluded the company from paying a dividend other than out of its profits;

(b)    as at 30 June 2015, CAG’s total accumulated profits were approximately $6.6 million, being substantially less than the Dividend (of $40 million) that was declared and paid;

(c)    the Dividend was paid out of borrowings from Westpac Banking Corporation (Westpac) drawn down contemporaneously with the payment;

(d)    separately, at the time of the payment of the Dividend: (i) the Group was obliged to repay the sum of $60 million to Westpac by March 2017; (ii) the Group’s revenue was expected to decline in the immediate future; and (iii) there was uncertainty as to the impact of the changing regulatory landscape and how it would affect the Group, such that the payment of the Dividend materially prejudiced its ability to pay creditors and was in contravention of s 254T of the Corporations Act;

(e)    by causing or permitting CAG to pay the Dividend in contravention of the terms of its Constitution and / or s 254T of the Corporations Act, the director defendants breached their duties to CAG;

(f)    Mr Jasansky and Mr Gati were associated with BXR Advisory and the third, fourth and eighth defendants (Messrs Martin-Lof, Watkins and Clark) were associated with White Cloud Advisors;

(g)    the Dividend was paid:

(i)    upon the request, or at the behest, of the entities associated with BXR Advisory and White Cloud Advisors, who were the largest investors in Cirrus and who were the largest recipients of the Dividend; and

(ii)    for the purpose of returning capital invested in CAG by the entities associated with BXR Advisory and White Cloud Advisors, and to keep their investors satisfied;

(h)    it may be inferred that each of BXR Advisory and White Cloud Advisors was involved in the director defendants having breached their duties to CAG by paying the Dividend (and each had the requisite knowledge of these matters given that the knowledge of its associated respective director defendants can be imputed to it).

46    By reason of the above, I am satisfied that there is a prima facie case that each of CAG’s directors (including the overseas directors) breached their duties to CAG, and further that each of the shareholder defendants were involved in the director defendants’ breaches of their duties, which involvement caused or contributed to the loss suffered by CAG as a result of the payment of the Dividend. Ms Platford stated that at present, no discovery, order for production or other form of documentary disclosure has been sought from or issued against either of the overseas shareholder defendants. Ms Platford stated that it is her expectation that, upon the production of relevant documents by White Cloud Advisors and BXR Advisory, further information will be available to support the allegations made by the Plaintiffs with respect to the involvement claims against those defendants. I am satisfied that, in the circumstances, the allegations in the draft statement of claim and the evidence provided by Ms Platford is sufficient to establish a prima facie case.

47    The insolvent trading cause of action is pleaded at [314]-[334] of the draft statement of claim and rests upon the following propositions:

(a)    the plaintiff companies were insolvent at all times from 31 October 2016 until the appointment of administrators on 25 May 2017;

(b)    the applicable directors of the plaintiff companies knew, or ought reasonably to have known, that the companies were insolvent; and

(c)    the directors did not prevent the plaintiff companies from continuing to trade and incur debts during this period.

48    The draft statement of claim contains detailed particulars of insolvency. Moreover, Ms Platford gives evidence of the deteriorating financial position of the Group including the changing regulatory environment in 2016 (leading to declining revenue of the Group), the suspension of critical funding payments by the Commonwealth in September 2016 and November 2016, and ongoing trading losses suffered by the Group commencing in about mid-2016, information as to which was provided to the director defendants and officer defendants in detailed Board papers and finance reports (annexed to the Platford Affidavit). Finally, the liquidator has previously prepared a solvency opinion (also annexed to the Platford Affidavit) that provides a detailed analysis supporting the conclusion that the plaintiff companies were insolvent from 31 October 2016 onwards.

49    In my view, there is on this material an available inference that the plaintiff companies incurred debts while they were insolvent and that the applicable directors of the plaintiff companies (including Mr Jasansky and Mr Gati) contravened s 588G of the Corporations Act. I am therefore satisfied that a prima facie case for relief is made out in respect of the insolvent trading claim.

Conclusion

50    The Court retains a residual discretion to refuse leave to serve overseas even if the requirements of r 10.43(4) of the Federal Court Rules are otherwise established: Humane Society at [30]; Connelly at [66]. In the circumstances, especially given that the proceeding will continue against the other defendants, I consider that there is no good reason to refuse leave. I therefore granted leave to the plaintiffs to serve the remaining defendants overseas.

Substituted service

51    In light of the evidence given by Ms Platford regarding the complexities in facilitating personal service in the Czech Republic and Singapore, the plaintiffs sought orders for substituted service on Mr Jasansky and Mr Gati under rr 10.24 and / or 10.49 of the Federal Court Rules. The plaintiffs sought leave to serve the originating process and Ford Affidavit by email to each of Mr Jasansky and Mr Gati and by post and email to their former solicitors, MinterEllison.

52    As discussed above, the authorities establish that an order for substituted service outside Australia may be made under either r 10.24 or r 10.49, in circumstances where leave pursuant to r 10.43 has first been granted. The criterion for the grant of leave under r 10.24 is that personal service is impracticable. For the reasons that follow, in my view personal service is impracticable and it is therefore appropriate to make orders for substituted service under r 10.24.

53    First, the evidence establishes that there is a not insignificant risk that an attempt of personal service on either of Messrs Jasansky or Gati would be futile. The plaintiffs do not have up to date knowledge of their residential addresses. Ms Platford gave evidence that the information available to the liquidator and his legal representatives is based on information in ASIC records as at the date of Mr Ford’s appointment in mid-2017 and has not been updated since. Accordingly, personal service under the Hague Convention or Singaporean law may not be able to be effected. Moreover, even if the relevant information as to Mr Jasansky’s and Mr Gati’s addresses remained current, there is a real risk (especially in the case of Mr Gati, who the evidence shows undertook extensive travel in 2021) that these individuals may not be present at their regular place of residence.

54    Second, there is likely to be lengthy delay in effecting service upon Mr Jasansky by the means contemplated by the Hague Convention and in effecting service upon Mr Gati in accordance with Singaporean law. Even if personal service is achievable, service in this manner is likely to take many months in circumstances where:

(a)    in the case of Mr Jasansky, the documents would need to be translated into Czech and arrangements made to have service effected by the Czech Central Authority; and

(b)    in the case of Mr Gati, a solicitor would need to be engaged in Singapore to serve the documents.

55    Further, as other judges of this Court have done, I also take judicial notice under s 144(1)(a) of the Evidence Act 1995 (Cth) of worldwide delays in inter and intra-state movement caused by the COVID-19 pandemic, which could cause the expected timeframes for foreign service to be further extended: see for example, Connelly at [77]; ACCC v Facebook at [43] per Griffiths J.

56    Third, I accept that the plaintiffs would incur significant cost in arranging service on Mr Jasansky and Mr Gati in accordance with the Hague Convention and Singaporean law respectively. Having regard to the overarching purpose in s 37M of the Federal Court Act, in particular the object of ensuring that disputes are resolved as inexpensively and efficiently as possible, I consider that the incurring of those costs is unnecessarily burdensome in the present circumstances.

57    Fourth, this is a proceeding brought by Australian companies in liquidation and their liquidator and there is a public interest in the liquidation (including this litigation) being finalised as soon as possible: Connelly at [78]. This is particularly so in circumstances where there are multiple other defendants who have already been served and have entered an appearance.

58    Fifth, Messrs Jasansky and Gati have a close connection to Australia in the context of the proceeding as they were both directors of CAG and are sought to be sued in that capacity. Examinations of Messrs Jasansky and Gati under Pt 5.9 of the Corporations Act in connection with the examinable affairs of the Group were conducted in English. Further, from Ms Platford’s review of Group Company records, it appears that meetings of the CAG board of directors, as well as correspondence and discussions in respect of the business affairs of the Group, were conducted by the directors in English. On the basis of these matters, I find that both Mr Jasansky and Mr Gati are proficient in English.

59    Sixth, the existence of the claim against Messrs Jasansky and Gati will be entirely unsurprising to them. Not only have they been sent emails referring to the commencement of this proceeding, but they were each the subject of examination under Pt 5.9 of the Corporations Act with respect to the examinable affairs of the Group (including possible claims and recovery actions) as recently as September 2021.

60    Finally, it is relevant to consider whether the proposed form of substituted service will bring the initiating documents to the person’s attention: British American Tobacco Australasia Limited v Taleb (No 1) [2012] FCA 1065 at [30] and [34]; Zeitouni at [84]; Rowe (by next friend Guscott) v Barton as Trustee for Barton Family Trust trading as Sealwerx WA [2021] FCA 196 at [9] and [11]. I consider that there is a very high probability that service by email to the individuals will bring the initiating documents to the attention of Messrs Jasansky and Gati. In this regard, the evidence shows that:

(a)    each of Mr Jasansky and Mr Gati, while he was a director of CAG, used a “@bxrp.com” email address to email the other directors;

(b)    in March 2021, the same email addresses as were used previously by Messrs Jasansky and Gati were used to serve documents in accordance with substituted service orders in the proceeding by which examinations were conducted in respect of the Group (with no “return to sender” or “non-delivery” responses);

(c)    Mr Gati and Mr Jasansky still appear on BXR Group’s website and, in September 2021 during the examinations, each of them confirmed that, at that time, he was still affiliated with BXR; and

(d)    further emails to their addresses in late January 2022 again elicited no “return to sender” or “non-delivery” responses, and a read receipt was sent by Mr Gati’s email server.

61    I also consider that there is a very high probability that service by post and email to their former solicitors, MinterEllison, will bring the initiating documents to the attention of Messrs Jasansky and Gati. On the application, the Court received into evidence a letter from MinterEllison stating that neither Mr Jasansky nor Mr Gati has engaged or sought to engage MinterEllison to act for them after the examinations and that MinterEllison does not have and does not anticipate receiving any future instructions from either Mr Jasansky or Mr Gati in respect of the Group (in connection with the proceeding or otherwise). Notwithstanding those statements, the evidence shows that MinterEllison acted for Mr Gati in the examination proceeding until at least 22 September 2021 and acted for Mr Jasansky in the examination proceeding until at least 13 December 2021. I accept the plaintiffs’ submission that MinterEllison would be capable of contacting Messrs Jasansky and Gati so as to bring the matter to their attention especially in circumstances where MinterEllison only recently acted for them and provided the plaintiffs’ solicitors with authenticated examination transcripts signed by Messrs Jasansky and Gati on 13 December 2021 and 22 September 2021 respectively.

62    In all the circumstances, I accept that it is not practicable to serve Mr Jasansky in accordance with the Hague Convention nor Mr Gati in accordance with the laws of Singapore and that it is appropriate to make an order for substituted service, either pursuant to r 10.24 or pursuant to r 10.49 (exercising my power under r 1.34 to dispense with the requirement that personal service be attempted before substituted service can be effected). I consider that the order, in the circumstances of this case, best promotes the overarching purpose. The proceeding involves a commercial claim by an Australian company in insolvency against former directors of that company in circumstances where communications between the directors and the company were regularly conducted by email using a business email address which, the evidence discloses, continues to be in use for business purposes.

Conclusion

63    For the foregoing reasons, I made orders granting the plaintiffs leave to serve the originating process and the Ford Affidavit on each of the remaining defendants outside of Australia. Those orders should properly refer to rr 10.42, 10.43(2) and 10.44 (and not just r 10.42). Further, in respect of Messrs Gati and Jasanksy, in recognition of the impracticability of facilitating personal service on each of these defendants, I made orders permitting substituted service. Those orders should properly refer to r 10.24, alternatively r 10.49.

Associate:

Dated:    3 March 2022

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