New South Wales Supreme Court CITATION : MARONIS HOLDINGS LTD & ANOR v. NIPPON CREDIT AUSTRALIA LTD & ORS [2000] NSWSC 482 CURRENT JURISDICTION: EQUITY FILE NUMBER(S) : SC 1946/94 HEARING DATE(S) : 30/05/00 JUDGMENT DATE : 2 June 2000 Maronis Holdings Limited - First Plaintiff Girvan Corporation (New Zealand) Ltd (In Liq.) - Second Plaintiff Nippon Credit Australia Ltd - First Defendant Paul Francis Petersen - Second Defendant PARTIES : Warren Alexander Duncan - Third Defendant Allan Raymond Ambler - Fourth Defendant Christopher Raymond McCulloch - Fifth Defendant Robert Vincent Ramsay - Sixth Defendant Brian Wilson and 46 others (t/as Clayton Utz) - Seventh Defendant JUDGMENT OF : Bryson J at 1 COUNSEL : B. Rayment QC/J.E. Marshall/J. Kennett for Plaintiffs SOLICITORS : Henry Davis York for Plaintiffs Allen Allen & Hemsley for First Defendant CATCHWORDS : LIMITATION OF ACTIONS - application for leave to file cross-claim - cross-claim of first defendant against plaintiffs - claim for principal and interest under mortgage over property at centre of principal proceedings - whether period for filing cross-claim was that for filing defence - where numerous amended statements of claim whether full interest over entire period recoverable. Conveyancing Act 1919 s 51A LEGISLATION CITED : Limitation Act 1969 ss 11, 13, 14(1), 42(1), 43, 63, 74 Real Property Act 1900 s 36 Supreme Court Rules Pt 6 r 10(2), Pt 15 r 3(1), Pt 20 r 2A(2) CASES CITED : Nelson v Wyong Shire Council (1989) 68 LGRA 164 Weldon v Neal (1887) 19 QBD 394 DECISION : See para 23 IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION BRYSON J. FRIDAY 2 JUNE 2000 1946/94 - MARONIS HOLDINGS LIMITED & ANOR v NIPPON CREDIT AUSTRALIA PTY LIMITED & ORS JUDGMENT 1 HIS HONOUR: The first defendant Nippon Credit by Claim 3 of Notice of Motion filed on 26 May 2000 applied for leave to file the eighth cross-claim in the proceedings, in which Maronis, the first plaintiff, would be the cross-defendant, and Nippon Credit would claim a money judgment for principal and interest outstanding under the mortgage dated 1 June 1989 over the Cross Roads property, which is the mortgage at the heart of the plaintiffs' claim in this litigation. The cross-claim would allege that there was an event of default by Maronis under the mortgage on 31 January 1990 when the principal amount outstanding was $15 million that Nippon Credit notified Maronis of the default on 14 February 1990 and demanded immediate payment of the principal debt plus interest from Girvan Australia on 17 April 1990, with notices of demand to Maronis on 18 April 1990. Particulars are not included in the eighth cross-claim but I was told that it is claimed that no principal or interest was ever paid by Maronis, that interest ran from 1990 to the present time, and that the obligation was reduced by the proceeds of the sale of the Cross Roads property in 1998. 2 If Nippon Credit obtains leave to file the cross-claim, it will have the advantage of s. 74 of the Limitation Act 1969, and for the purposes of time bars under that Act the cross-claim against Maronis will be taken to have been brought on the date in 1994 when the plaintiffs commenced the proceedings. The limitation periods which Nippon Credit says are relevant are twelve years for the recovery of principal under s. 42(1) of the Limitation Act (which cannot have expired) and six years for the recovery of interest under s. 43, which in new proceedings commenced now would bar interest which accrued before 1994. 3 The amount of interest claimed and potentially affected by interaction of the Limitation Act with my decision can only be a relatively small part of the claim, but may well be a significant sum of money having regard to the size of the principal. 4 It is on the whole unlikely that the cross-claim if fully particularised would claim interest which accrued more than six years ago, in view of Nippon Credit's opportunity to choose to which parts of Maronis' obligations money recovered from the sale should be allocated; the likelihood is that Maronis has used its opportunity and will use any continuing opportunity to make an allocation against the oldest interest. (A limiting factor may be that by 1998 interest for the period for 1990 to 1992 would have been extinguished under s. 63 of the Limitation Act). 5 The possible adverse impact on Maronis of bringing s. 74 into operation in respect of interest from 1990 to 1994, or perhaps for only part of that period, is a significant discretionary consideration adverse to the application. 6 The obstacle to the filing of the eighth cross-claim creating the need for leave to be granted is that the time available under Pt 6 r 10(2) of the Supreme Court Rules to file a cross-claim has expired. That time was "… the time fixed for filing … defences". At first sight it may seem that this time expired long ago: see Pt 15 r 3(1) (14 days after the time for appearance). However the effect of Pt 20 r 2A(2) is that each of the plaintiffs' Amended Statements of Claim (and I think there have been four) has opened up a new period of 14 days for Nippon Credit to file a defence and cross-claim; the last amended statement of claim was filed on 2 May 2000 and the time for filing a cross-claim expired only on 16 May 2000; so the application for leave was made 10 days after that expiry. It does not seem appropriate that delay should bring significant adverse effects on Nippon Credit's application, bearing in mind that the plaintiffs have repeatedly obtained leave to make amendments to their statements of claim; adherence to prescribed times has not been a prominent consideration in the conduct of these proceedings. Discretionary considerations favourable to the application include the short time by which Nippon Credit has exceeded the opportunity recently opened to it. 7 There is a need for the plaintiffs to establish the quantum of their damages at the hearing which I have appointed to commence on 10 July. To do that they will, on one prominently available view of the calculation of their damages, have to establish what liability they have incurred to Nippon Credit according to the terms of the mortgage. This is not the only way in which the plaintiffs will put their case; they can be expected to put forward an alternative in which their damages are ascertained by valuing the security property which was lost; but the plaintiffs will also encounter the need to establish the total of their liability under the mortgage. Expediency suggests that Nippon Credit's claims in this respect should be in issue in the same proceedings rather than that the same issue of quantum should be raised in two different sets of proceedings. 8 Nippon Credit's solicitor referred me to the decision of Giles J in Nelson v. Wyong Shire Council (1989) 68 LGRA 164. In that case Giles J gave leave to bring a cross-claim for contribution against another defendant out of time. The circumstances in detail are not closely similar to the circumstances of this case. His Honour referred, at 170, to the law relating to leave to amend an existing pleading in a way which would defeat a statute of limitations and to the practice laid down by Lord Esher MR in Weldon v. Neal (1887) 19 QBD 394 at 395. (This practice no longer applies to such amendments having regard to the provisions of Pt 20 r 4. No corresponding provision in the Rules relates to extension of time to file a cross-claim or other pleading where the extension would bar a statute of limitations). The reasons which led Lord Esher to speak of an amendment which would defeat the statute and take away an existing right from the defendant as "a proceeding which, as a general rule, would be, in my opinion, improper and unjust" are also applicable to an extension of time which had a similar effect. Lord Esher spoke in terms of a general rule, and his observations do not relate to the existence of power to allow an amendment, but to the practice in the manner of exercising the discretion to do so. Nippon Credit's solicitor claimed that the holding of Giles J at 170-171 was favourable to his case. Although the facts are quite different, in this case as in Nelson the question raised by the cross-claim would have to be determined in the case as it presently stands. 9 Allowing an eighth cross-claim will increase the already great complexity of the hearing and the difficulties of conducting it. These difficulties are moderated by the consideration that the plaintiffs will probably seek to establish what their liability is on the issue of quantum. It will be necessary to give time at the hearing not only to matters of calculation which can be expected to be simple, but also to facts which require to be proved in detail and are conceivably open to challenge about how earlier recoveries were allocated. I expect that allowing the eighth cross-claim will increase the complexity and length of the hearing to some extent, but I do not regard this as a very significant discretionary factor. If separate proceedings were commenced now they would have a strong claim to be heard at the same time as the present proceedings. 10 Maronis' counsel contended that a consideration relevant to the grant of leave is the question which must be decided in the proceedings, that is whether the plaintiffs are entitled to equitable relief against the mortgage, so that the mortgage should be treated as ineffective or that Maronis should be awarded some equitable remedy which will completely off-set its obligations. Maronis' counsel contended that the appropriate way to deal with the application is that it should be brought forward and debated as part of the hearing, and that it should not be determined now. 11 It was contended that the application should be decided when the Court is in a position to see and decide the relevance of the circumstances surrounding the giving of the mortgage and what Maronis alleges is inequitable behaviour on the part of Nippon Credit itself. Alternatively, Maronis' counsel suggested that Nippon Credit should be required to bring forward its claim by way of a separate action. 12 Maronis' counsel pointed out that other defendants or cross-defendants who are not parties to this notice of motion may seek to take part in argument relating to recovery under the mortgage, as they would have an indirect interest to minimise recovery. They also have an indirect interest in the present notice of motion. When the notice of motion was filed I observed, in the presence of their legal representatives, that their attendance on the notice of motion was not required, but they might attend as advised. None of them did attend, and in my view it was not unreasonable of them to decide not to resist the notice of motion but to expect that Maronis would oppose the application with vigour, as has happened. 13 Maronis' counsel also put that, in relation to new proceedings to be commenced by Nippon Credit now, it would be reasonably open to debate that the claim for the principal is time barred. The argument is that by subs. 14(1)(a), a limitation period of six years applies to "a cause of action founded on contract…not being a cause of action founded on a deed". Section 13 applies the shorter of two time bars applicable under Pt 2 of the Act. The argument would conclude that where principal is claimed under a mortgage which is not a deed, the limitation period of six years applies. "Mortgage" is defined in subs 11(1) but not exhaustively and "Deed" is also a defined expression. It was contended that the presumption in s. 51A of the Conveyancing Act 1919 of due execution of a deed is available only against a purchaser in good faith; if Maronis establishes that the mortgage was not duly executed but needs the assistance of s. 51A, and that Nippon Credit was not a purchaser in good faith, the argument would be that the claim for principal is within paragraph (a) of subs. 14(1), not being founded on a deed. 14 I do not think that the outcome of this chain of argument is in any way clear. It would be necessary to consider the effect of s. 36(11) of the Real Property Act 1900 and of registration of the mortgage. 15 My judgment, after weighing the discretionary considerations put forward is that notwithstanding that there are some disadvantages in doing so, and that Maronis will be prejudiced to some extent by the loss of opportunities to argue some matters, I should extend the time for filing the cross-claim. An important factor has been that in my view refusing the application would give undue weight to the relatively short period by which Nippon Credit has exceeded the time available under the Rules. 16 At the conclusion of the hearing on Tuesday 30 May I announced that I would give my decision on 2 June. On 1 June when my reasons had been prepared Maronis' counsel sent me a written submission raising a point not raised earlier. I regard this as a very unfortunate development, as it is important to me that I should have time and opportunity to reflect on the whole of the submissions so as to perceive their relative importance. The state of preparations for trial makes it important that the application should be decided now. Court business would be unworkable if the presentation of further submissions when the Court comes to give judgment developed into a practice or a forensic technique. 17 The submission is that Pt 2 r 2 does not empower the Court to extend the time for filing a cross-claim in the present circumstances. It was submitted that without express words the rule should not be understood to be intended to authorise an extension which would take away vested rights. It was contended that leave to cross-claim out of time would attract s 74 of the Limitation Act 1969, so that, at the least, Maronis would lose the benefit of the effluxion of six years for recovery of interest and extinguishment under s 63 of interest which fell due before June 1994, six years before the present opportunity to commence new proceedings. Counsel pointed to Pt 20 r 1(3A) as an example where such an intention was clearly expressed; there is no parallel expression for the power to extend time in Pt 2. 18 The contention is hypothetical, and depends on a showing which has not been made that extending the time and allowing the cross-claim will in fact enable the cross-claimant to recover some interest which is otherwise time barred. In the body of the published judgment I said that that may be so, although the probability is that Nippon Credit has taken any available opportunity to allocate payments so as to minimise or wholly to pay out that interest. It has not been shown that Maronis will be deprived of any actual immunity which it now has, whereas the limitation or lacuna in the power to extend time argued for would extend only to a cross-claim which had that effect. 19 Counsel referred first to the judgment of Mason CJ Brennan, Gaudron and McHugh JJ in Coco v. The Queen (1994) 179 CLR 427 at 436-8, where their Honours set out the basis in judicial authority for the statement, at 436, "Statutory authority to engage in what otherwise would be tortious conduct must be clearly expressed in unmistakable and unambiguous language." The subject of their Honours' decision and of the authorities to which they referred is the construction of statutory provisions where an apparent construction would erode fundamental common law rights (the expression used in Plenty v. Dillon (1991) 171 CLR 635 at 654), basic immunities which are the foundation of our freedom (the expression used in Wheeler v. Leicester City Council [1985] AC 1054 at 1065), the citizens common law rights (their Honours' own expression at 436) and a fundamental right, freedom and immunity (at 437), and in Bropho v. Western Australia (1990) 171 CLR 1 at 18 "overthrow fundamental principles, infringe rights or depart from the general system of law." Not all the authorities to which their Honours referred use language which emphasises the fundamentality of rights protected, but they did give it emphasis in their own words. 20 It is interesting that in one of their Honour's citations, Raymond v. Honey [1983] 1 AC 1 at 14, Lord Bridge of Harwich referred as basic to the principle "that a citizen's right to unimpeded access to the courts can only be taken away by express enactment." Counsel also referred to Clissold v. Perry (1904) 1 CLR 363 at 373 where Griffith CJ spoke of "… a general rule to be followed in the construction of statutes such as that with which we are now dealing that they are not to be construed as interfering with vested interests unless that intention is manifest". The Court was there dealing with a statute which authorised the resumption of interests in land. Counsel also referred to Johnston Fear & Kingham v. The Commonwealth (1943) 67 CLR 314 at 329 (McTiernan J) and to the discussion of the beneficial operation of statutes of limitation and the influence of delay by McHugh J in Brisbane South Regional Health Authority v. Taylor (1996) 186 CLR 541 at 551-6. 21 In the context of this application the fundamental common law rights which claim attention are Nippon Credit's rights to recover an alleged debt payable to it under a document which is treated as a deed, and to bring proceedings in the court to do so. Both are fundamental common law rights. Statutory time bars of various kinds have existed since medieval times, but the immunities which they create are not fundamental common law rights. The workings of s.63 of the Limitation Act can give rise to vested immunities; but in my opinion it is not possible to classify such a vested immunity as one of the fundamental common law rights addressed by their Honours in Coco v. The Queen. Statutory immunities stand or fall according to the operation of the general body of statute law, without giving any particular primacy to the statute which created them. The susceptibility of statutory time limitations to adverse operation of procedural decisions of courts has long been known and recognised: it was referred to in Weldon v. Neale, where it was treated as a general but not universal principle that adverse operations of that kind should not be brought about by procedural decisions. 22 In the machinery of the Limitation Act the workings of s 74 can plainly produce outcomes in which what would otherwise be defences under other sections of the Act with extinguishment under s 63 will be overcome. Section 74 and other provisions of the Limitation Act do not enter into the subject of when and how a claim may be made by way of set-off, counter-claim or cross-action, and leave to their own operation and do not adopt whatever time limits exist in the procedural law of courts, differing from court to court and from time to time, as must have been well known to those drafting s 74. Section 74 leaves any defence or immunity for which other provisions of the Limitation Act provide subject to whatever circumstances may exist in which a claim may be made by way of set-off, counter-claim or cross-action. The existence of rules of court or other provisions allowing times, limiting times and allowing extensions of times for bringing such claims is of course well known, and in my opinion it must have been understood that provisions of that kind would continue to have effect and would continue to establish at what time cross actions may be brought so as to attract the operation of para (b) of s 74. 23 In my opinion there is no implied limitation of the power to extend time of the kind for which Maronis' counsel contends. Last Modified: 09/26/2000 DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated.