Challenge to judge who found “deliberate delinquency”

What happens when a judge denies a fully funded liquidator their opportunity for a little forensic strategising? An appeal is what.

“the advice received by the liquidator did not contain any advice that a failure to serve the originating process within the time prescribed by r. 2.7 may cause the applicants to breach the Court’s rules as to service of originating process;” – Grounds of Appeal, 01/08/2024.

For Sydney liquidator Neil Cussen, who in July had a raft of voidable transaction proceedings dismissed by Federal Court judge David O’Callaghan, the disappointment of being denied was last week elevated to high dudgeon when the good justice declared Cussen had indulged in a “deliberate and knowing delinquency” in respect of his handling of the proceedings and ordered that Cussen pay most of the defendants’ costs on the indemnity basis.

The comminatory tone of his honour’s reasons in Cussen, in the matter of Monarch Tower Pty Ltd (in liq) v Sinoace Holdings Ltd (No 2) [2024] FCA 1309 published on November 13 should however in no way be inferred to have been influenced by Cussen’s counter attack, launched in the form of a Notice of Appeal of his honour’s July 4 judgment filed by Mills Oakley on August 1.

The judge ruled that Cussen arrogated to himself control over when service on defendants of an originating process and supporting affidavits should occur in respect of proceedings he commenced in January this year in circumstances where the voidable transactions he is pursuing occurred in 2017.

The costs orders followed his honour ruling that the entirety of Cussen’s proceedings in Cussen, in the matter of Monarch Tower Pty Ltd (in liq) v Sinoace Holdings Ltd [2024] FCA 716 should be be dismissed.

A copy off the notice appeal obtained by iNO lists six grounds of appeal, including that the judge erred in finding that service of the originating process was only able to be effected on or before 28 January 2024.

Cussen originally commenced his action in March 2023 and at that time Justice O’Callaghan made an order extending the time for making an application under s 588FF(1) of the Act up to 22 January 2024 with respect to “any voidable transaction involving the Company.

By five separate originating processes filed on 22 January 2024, Cussen sought to bring applications under s 588FF(1) against some of the persons named in the 9 March 2023 order, and sixteen others not named.

But Cussen, who had public examinations for many of the respondents scheduled for April, felt there were potential forensic and strategic advantages to be had by holding off serving the originating processes and supporting affidavits and so, backed by advice from Mills Oakley, he chose not to serve by the February 2 deadline set by Justice O’Callaghan.

One can imagine how the judicial nose, so confronted, might find itself out of joint.

Nor would the magisterial proboscis have been restored to symmetry by Ground three of the appeal, which declares that Justice O’Callaghan had no basis for dismissing Cussen’s proceedings because he had no reason to conclude that they were an abuse of process.

Then there’s Ground Four, in which Cussen argues that the judge “erred in refusing the applicants’ application for leave, now for then, to extend the time for service of the originating process on the respondent, to the time when they were in fact served with the originating process, by reason that in exercising his power to refuse that application, His Honour concluded, against the weight of the evidence, that the liquidator arrogated to himself control over when service should occur and took it upon himself to decide when service should occur, given that the evidence disclosed that:

“It was only on 30 January 2024 that the liquidator obtained advice regarding the existence of the option of making an application to the Court to extend time for service of the originating process,

“the advice received by the liquidator did not contain any advice that a failure to serve the originating process within the time prescribed by r. 2.7 may cause the applicants to breach the Court’s rules as to service of originating process,

“the applicants sought to, and substantially did, comply with the direction made by Anderson J on 25 January 2024 to notify the respondent (among others) of the email from the Court which identified the return date of the originating process of 2 February 2024.”

A date for the hearing of the application for leave appeal has yet to be set but those who so recently won indemnity costs orders against the Olvera Advisors principal will need to wait.

Further reading:

Liquidator who loitered hit with indemnity costs order