CATCHWORDS Practice and procedure - extension of time fot filing statement of claim - prejudice to defendant - relevance of deliberate refraining by defendant from applying to have action dismissed for want of prosecution. MICHAEL CHARLES McKANNA Ve ASPECT HOMES PTY. LIMITED No. A.C.T. G48 of 1983 Coram: Blackburn, Sheppard & Neaves JJ. 16 November 1983 Canberra IN THE FEDERAL COURT OF AUSTRALIA AUSTRALIAN CAPITAL TERRITORY No. A.C.T. G48 of 1983 DISTRICT REGISTRY GENERAL DIVISION ON APPEAL FROM THE SUPREME COURT OF THE AUSTRALIAN CAPITAL TERRITORY BETWEEN: MICHAEL CHARLES McKANNA Appellant AND: ASPECT HOMES PTY. LIMITED Respondent ORDER Judges Making Order: Blackburn, Sheppard & Neaves JJ. Date of Order: 16 December 1983 Where Made: Canberra THE COURT ORDERS that: 1. the appeal be allowed. 2. The order of the Supreme Court be set aside. 3. In lieu thereof, order that the appeal from the Registrar be dismissed. 4. The statement of claim already filed be struck out. 5. The respondent pay the appellant's taxed costs of the appeal and of the proceedings before the Registrar and the judge of the Supreme Court. ' THE COURT: On 12 April 1977 the respondent to this appeal issued a writ out of the Supreme Court of the Australian Capital Territory against the appellant. The writ bore this general indorsement "The plaintiff's claim is for damage (sic) for breach of duty by the defendant as a director of the plaintiff". An appearance was entered on 20 April 1977. Order 24 rule 1 of the Rules of the Supreme Court requires that the plaintiff shall deliver a statement of claim within 14 days after appearance. On 2 May 1983, more than six years after appearance, the respondent, as plaintiff, applied under Order 64 rule 5(1) of the Rules for an extension of time for the delivery of a statement of claim which made allegations about the conduct of the defendant as a director of the plaintiff between 2 May 1975 and 8 March 1977. The application was heard by the Registrar of the Court, who refused it, supporting his decision with reasons in writing. Appeal was brought to a Judge of the Court under Order 61 rule 5, which provides inter alia that such an appeal shall be by way of hearing de novo of the application. The learned judge upheld the appeal and, on terms, extended the time for delivery of the statement of claim. The respondent accordingly filed and delivered the statement of claim. The defendant in the action appeals against the learned judge's decision. The procedural history of the action is lamentable. At the time of appearance the defendant's solicitors requested a statement of claim; the plaintiff's solicitors' reply was that the statement of claim was being settled by counsel. Six months later, the defendant's solicitors asked whether the plaintiff intended to proceed; the reply was that the statement of claim would be filed within seven days. Five months later, the defendant's solicitors informed the plaintiff's solicitors that they would apply to have the action dismissed for want of prosecution unless a statement of claim were filed within seven days. The result was an exchange of correspondence which the learned judge regarded as an agreement that a statement of claim would not be required for the time being. This exchange of correspondence (which included the forwarding of a statement of claim with the request that the defendant consent to its late filing) took place in April, May and June 1978, and the effect of the agreement was that since there was a possibility of criminal proceedings against the defendant in respect of the matters on which the plaintiff relied, no further steps would be taken in the action until the eriminal proceedings were complete. Consent to the late filing was neither given nor refused, and no statement of claim was filed. It is to be noted that this agreement was reached at the request of the defendant, to which the plaintiff acceded. The plaintiff's solicitors wrote once in June 1978, once in July 1978, and once in August 1978, to the Deputy Crown Solicitor, to discover whether criminal proceedings would be taken against the defendant, but were not given that information. Three years later, on 21 August 1981, the plaintiff's solicitors gave notice of intention to proceed and indicated their intention of proceeding "with all possible haste"; the letter stated their intention of proceeding to judgment by default if the defendant had not "taken appropriate steps at the expiration of one month". This was, of course, absurd, as it is not possible to sign judgment in default unless a statement of claim has been delivered. The defendant's solicitors replied by letter dated 31 August 1981 requesting that a statement of claim be filed; at the same time pointing out, not unreasonably, that owing to the lapse of time it might take some time for them to get instructions. If the plaintiff's solicitors had then at once presented to the defendant's solicitors a statement of claim for endorsement of consent, and in default of consent applied for an order extending time, they surely must have succeeded. The defendant's explicit request for a statement of claim would have made it difficult to justify opposition to the application. Instead, the plaintiff's solicitors on 18 September 1981 once again wrote asking whether the defendant would consent to the filing of a statement of claim out of time. Not having received a reply, the plaintiff's solicitors wrote again on 5 December 1981 making the same request; this time they intimated that the statement of claim would "in all probability" be different from the draft (as they described lt) which they had sent three years before. On 15 December 1981 the defendant's solicitors asked that a draft of the proposed statement of claim should be sent to them so that they could take instructions on whether they would consent to 1ts late filing. In view of the intimation of 5 December, this was an entirely reasonable request, but no answer was received to it. Eleven months later, in November 1982, the plaintiff's solicitors again gave notice of intention to proceed. The defendant's solicitors pointed out in reply that their letter of 15 December 1981 had not been answered, only to be told that the statement of claim was in the process of being settled by counsel. It was received by the plaintiff's solicitors from counsel on 24 December 1982 and almost three months later they sent 1t to the defendant's solicitors with a request that they should consent to its being filed out of time. Consent not being forthcoming, the plaintiff gave notice on 11 April 1983 of the motion which in due course led to this appeal. We agree with the learned judge that from mid-1978 to mid-1981 the non-delivery of the statement of claim was in pursuance of an agreement between the parties that it would not be delivered or expected, and we think that the plaintiff, as it had a perfect right to do, unequivocally put an end to this situation by its solicitors' letter of 21 August 1981. The learned judge based his decision to extend the time on not being satisfied that prejudice to the defendant had been eStablished; he was fortified 1n this decision by a tactical course taken by the defendant, which, the learned judge considered, "contradicted any justification based on prejudice to the defendant". That course was a deliberate withholding by the defendant of any application to have the action dismissed for want of prosecution. In September 1981 the defendant sought counsel's advice on the desirability of this step, and was advised not to take 1t until the expiration of the limitation period. The advice was adopted. Presumably, the calculation of the limitation period was made on the basis of the indorsement on the writ, together with such allegations as were made in the statement of claim which the plaintiff's solicitors had sent to the defendant's solicitors in May 1978. The nature of the plaintiff's claim disclosed by the 1983 statement of claim, which has now been filed, is, to say the least, unusual; it may be a matter for argument whether any, and if so what, period of limitation applies to ut. But both parties to the appeal are content that the Court should decide it on the assumption that the appropriate limitation period 1s six years. It thus becomes necessary to consider the law relating to the dismissal of actions for want of prosecution, not because such an application is before the Court, but because the learned judge made the defendant's refraining from making such an application one of the facts relevant to the exercise of his discretion. The leading authority on the subject is Birkett v. James (1978) A.C. 297, in which the House of Lords approved, applied, and developed principles which had been expounded by the Court of Appeal in Allen v. Sir Alfred McAlpine & Sons Ltd. (1968) 2 Q.B. 229. The principles for which these two cases are authority are conveniently, and in our opinion correctly, set out in Williams' Supreme Court Practice, vol. 1, pp. 1410, 1411. One of those principles we state in Williams' words: "As a rule the non-expiry of the limitation period 1s a conclusive reason for not dismissing an action for want of prosecution. The reason is that were the action to be dismissed, there 1s nothing to prevent the plaintiff commencing a second action for the same cause of action within the limitation period, save in the exceptional circumstances that the bringing of the second action would constitute an abuse of process." The rationale of this principle is explained by Lord Diplock in Birkett v. James (supra) at pp.319-322. In our opinion it must follow from this principle that a defendant is not to be put at a disadvantage by the Court on the ground that he advisedly refrained from applying for the dismissal of the action before the expiration of the limitation period. The situation may well be different if the defendant's conduct is misleading, or in breach of an undertaking; but that is not the situation in this appeal. It seems to us, therefore, that the learned judge exercised his discretion on a wrong principle when he held that the deliberate refraining by the defendant, until the expiry of the limitation period, from applying for the dismissal of the action, "contradicted any justification based on prejudice to the defendant". Counsel for the respondent contended that the appellant had suffered no real prejudice by the lapse of time, except such as was of his own making. It was said that the defendant could have taken the steps necessary for the defence of the action long ago, and that he had instead done nothing. The fallacy in this argument, we think, is that the plaintiff's default has at all times been in delivering a statement of claim, which must be the-basis of the whole action. How can the defendant reasonably be expected to prepare a defence against a claim of which he knows only what is expressed in the general indorsement on the writ - an indorsement which does not mention any dates? It was suggested that the defendant's solicitors should have used the statement of claim which had been sent to them with a letter which formed part of the exchange of correspondence in mid-1978, as a basis for taking instructions, obtaining statements of witnesses, and generally preparing the defence. In our opinion it is unreasonable to expect a defendant to unecur the expense of instructing his solicitors to prepare a defence to a statement of claim which (a) has not been filed; {b) has been sent to them only for the purpose of seeking consent to its late filing; and (c) is promptly followed by an agreement that the action should remain in suspense till further notice. Any failure to incur expense in those circumstances was shown to be justified when more than three years later the defendant's solicitors were told that a different statement of claim would be relied on. Counsel for the respondent also relied on the appellant's conduct at the time of the renewal of activity in August 1981. As has already been mentioned, the defendant's solicitors wrote on 31 August requesting the filing of a statement of claim. The last paragraph of that letter was this: "In view of the fact that nothing further has happened in this matter for some considerable time, it may be difficult for us to obtain instructions within a month, and we therefore would be pleased if you would inform us of any intended action to proceed in the matter." At about the same time (as it now appears) the author of the letter was taking counsel's advice on the desirability of applying to have the action dismissed for want of prosecution. In our opinion the latter fact is irrelevant; solicitors are perfectly entitled to take counsel's opinion on any subject under the sun at any time without thereby putting their clients at risk of procedural prejudice, or of being accused of lack of frankness. Counsel contended, further, that the letter of 31 August 1981 could be relied on by the plaintiff as inconsistent with the defendant's objection to the application, made nearly two years later, to file the statement of claim. In our opinion this argument cannot possibly succeed. The letter is no more than an anticipatory request that, if and when a statement of claim is delivered, the defendant will be given some indulgence in the time for filing a defence. It cannot imply a promise not to object to the filing of a statement of claim; a fortiori a statement of claim presented nearly two years later. The plaintiff cannot reasonably have relied on that letter as implying any such promise. There is therefore in our opinion no reason or excuse shown for the plaintiff's extraordinarily late production of its statement of claim. The time when it should have been filed was shortly after the defendant's solicitors' letter of 31 August 1981, which was written immediately after the plaintiff itself put an end to the three years' truce. On the other hand, the evidence that the defendant has, by reason of the lapse of time, suffered prejudice in the proper conduct of his defence, is not contradicted. There are witnesses who cannot now be identified, and others who cannot now be located, and the memories of those who can be located must be failing in respect of events which occurred from 1975 to 1977. In this matter our inference 1s different from that of the learned judge. We are not impressed by the fact, relied on by counsel for the appellant, that a number of the appellant's own relevant documents were for a considerable time in the 10. hands of the Corporate Affairs Commission, and were later in error returned to a director of the respondent. There 1s no evidence that this fact prevented the appellant from reading or copying the documents. But in our opinion the appellant need not rely on this circumstance. In our opinion, and with due respect to him, the learned judge erroneously exercised his discretion to allow the late filing of the statement of claim, in that he wrongly held it against the appellant that the appellant deliberately refrained until the limitation period had expired, from moving to have the action dismissed. That was a course which the appellant was entitled to take without procedural prejudice to himself. This Court now has to exercise its own discretion, and in our opinion it should do so by refusing to extend the time for filing the statement of claim. We therefore uphold the appeal, set aside the order of the Supreme Court, and in lieu thereof order that the appeal from the Registrar be dismissed. The statement of claim, which was filed in pursuance of the order of the Supreme Court, must be struck out. The respondent should pay the appellant's taxed costs of the appeal and of the proceedings before the Registrar and the learned judge. I certify that this and the 9 preceding pages are a true copy of the Reasons for Judgment herein of the Court. 7) [Mich fb/12{ 23 Associate