New South Wales Supreme Court CITATION : Gomez v Webb [2002] NSWSC 923 CURRENT JURISDICTION: Common Law Division Professional Negligence List FILE NUMBER(S) : SC 20350/01 HEARING DATE(S) : 27 September 2002 JUDGMENT DATE : 8 October 2002 PARTIES : Joseph Wenceslaus Gomez (Plaintiff) Douglas Webb, Roger Cornforth, Paul Wholohan, Michael Star, Walter Casson, D'arcy Kelly, Richard Allsop, Stephen Rogers, Warwick Langley, Lee Jackson, Alexander Wakefield, David Hartstein, Gregory Bush, and Peter Briggs - t/as Holman Webb (Defendants) JUDGMENT OF : Studdert J COUNSEL : M. Campbell (Plaintiff) T. Faulkner (Defendants) SOLICITORS : Dominic David Stamfords (Plaintiff) Mallesons Stephen Jaques (Defendants) Fair Trading Act LEGISLATION CITED : Limitaton Act Civil Liability Act CASES CITED : FAI General Insurance v Southern Cross Exploration NL & Ors (1987-88) 77 ALR 411 DECISION : See para 38 IN THE SUPREME COURT OF NEW SOUTH WALES COMMON LAW DIVISION PROFESSIONAL NEGLIGENCE LIST STUDDERT J Tuesday 8 October 2002 20350/01 JOSEPH WENCESLAUS GOMEZ v DOUGLAS WEBB – t/as HOLMAN WEBB & ORS JUDGMENT 1 HIS HONOUR: This is an application for an extension of time for the service of a statement of claim. The application is opposed. 2 The statement of claim was filed on 27 April 2001. It was actually served on 8 March 2002. The statement of claim was thus served within the period of twelve months provided for by Pt 7 r 7 but not within the period provided for by Pt 14C r 7. Was compliance with the latter rule required? 3 Part 7 r 7 provides for originating process to be valid for a period of twelve months from the date upon which it is filed unless the court otherwise orders. However Pt 7 r 7(3) provides that the rule is subject to Pt 14C r 7. 4 The language of Pt 14C r 7 is as follows: "For the purposes of service, an originating process that contains a claim for professional negligence shall be valid for four months from the date on which it is filed unless the court otherwise orders." 5 Part 14C r 3 provides for the machinery for a cause to be entered in the Professional Negligence List and ordinarily a party filing a statement of claim achieves the objective of entering the proceedings in the Professional Negligence List by adding the words "Professional Negligence List" under the heading and title of the originating process (Pt 14C r 3). 6 The statement of claim filed in the present case did not contain those additional words "Professional Negligence List". However this does not mean that the requirements of Pt 14C r 7 are avoided. Originating process that contains a claim for professional negligence attracts the application of Pt 14C and the requirement that the process be served within four months from the date of filing. Unquestionably the statement of claim the subject of the present application contains a claim for professional negligence as defined in Pt 14C r 1. 7 There was then a requirement in the present case for the statement of claim to be served by 26 August 2001, and this was not done. 8 Two days before the date of service of the statement of claim, that is on 6 March 2002, a registrar of this court made the following orders when counsel for the plaintiff appeared before the registrar: "1. Order that these proceedings be entered in the Professional Negligence List. 2. Order that the Statement of Claim be served within seven days by delivery of sealed copies of the same to Messrs Holman Webb and Co., Solicitors…" 9 Was the second of the above orders adequate to address the requirements of Pt 14C r 7? 10 In my opinion, it was not. Whilst the order of the registrar provided for service of the statement of claim within a specified period, that order made ex parte was not directed to the validity of the originating process. 11 The notice of motion presently before the Court recognises the present need to address Pt 14C r 7 and Mr Campbell has submitted on behalf of the plaintiff that it would be appropriate for the Court to act under Pt 2 r 3 to make an order extending the period of validity of the process for the purposes of service until the date upon which it was served, namely 8 March 2002. 12 It is common ground that the Court is being asked to exercise its discretion and it is necessary to record something of the background in this matter. 13 The evidence placed before the Court on this application is to be found in two affidavits. The earlier of these affidavits is that of Subendra Vimalarajah affirmed on 4 September 2002. The application came before the Court on 6 September when I afforded the plaintiff the opportunity of an adjournment to add to the evidence to be found in that affidavit. Hence the matter was adjourned to 27 September 2002, and prior to that date an affidavit affirmed by the plaintiff was filed on 24 September 2002. Mr Campbell also placed before the Court the statement of claim in the earlier proceedings which led to the plaintiff's statement of claim. 14 From the material I have identified, the following events can be recorded. In March 1996 the State Bank of New South Wales commenced proceedings in this court by way of statement of claim. Those proceedings were against Dr Gomez, the plaintiff in the present proceedings. The statement of claim pleaded the execution by the present plaintiff of mortgages over properties at Auburn, St Ives, Eastwood, Lalor Park and Leichhardt. That statement of claim further pleaded defaults under the mortgages and a claim was made for recovery of moneys advanced, allegedly approximately $3 million, and, in the alternative, orders for possession of the properties were sought. Dr Gomez consulted the defendants in the present proceedings to act on his behalf in resisting the claim of the bank. It appears from the plaintiff's statement of claim in the present proceedings that the bank's action came to an end when consent orders were made favouring the bank on 29 April 1998. In the present proceedings, the plaintiff pleads that the defendants breached their retainer, were negligent, and breached their fiduciary duty. A claim is also made in reliance upon s 42 of the Fair Trading Act. It is alleged by the plaintiff that the defendants failed to advise him of available defences and cross claims and that they did not alert him to the hearing on 29 April 1998. The consent orders made on 29 April 1998 were allegedly made without the plaintiff's instructions. That, in broad terms, identifies the nature of the relief which the plaintiff seeks in the statement of claim the subject of the present notice of motion. 15 Why was that statement of claim not served in the time provided for by Pt 14C r 7? The explanation for that is to be found in correspondence attached to the plaintiff's affidavit. The plaintiff was advised by the solicitors who first acted for him prior to and after the statement of claim filed on 27 April 2001 that a period of twelve months was available within which to serve that pleading. The plaintiff was so advised by those former solicitors by letter dated 12 April 2001 and again by letter dated 1 May 2001. The plaintiff's former solicitors in these proceedings served notice of intention of ceasing to act in February 2002 and in the same month the plaintiff's present solicitors assumed conduct of the matter. It was on their instructions that counsel sought and obtained the order from the registrar on 6 March 2002. I am satisfied then that the plaintiff was not aware of the provisions of Pt 14C r 7 when the time for service under that rule expired. I accept that the plaintiff was acting on the advice of his former solicitors that he had twelve months within which to serve his statement of claim. 16 What was the reason for wanting to defer service when the plaintiff commenced his action? This also emerges from the affidavits. It seems that the bank recovered judgment in its proceedings against Dr Gomez in an amount in excess of $3,000,000.00, and in due course the mortgaged properties were sold, for less than that sum. Indeed, there was an appreciable shortfall in excess of $500,000.00, so the bank issued a bankruptcy notice out of the Federal Court. The plaintiff sought to have the bankruptcy notice set aside and was involved in lengthy litigation in the Federal Court directed to this end. The plaintiff failed in his application to set aside the bankruptcy notice at first instance and he also failed in his appeal when the Full court of the Federal Court ordered that the appeal be dismissed on 15 April 2002. 17 In his affidavit in support of the notice of motion the plaintiff affirmed in paras 8 and 9: "8. As a consequence of the proceedings in the Supreme Court Matter No. 11595 of 1996, proceedings initiated by me against the State Bank and the Federal Court bankruptcy proceedings I was under severe financial pressure and following the advice of my then solicitors I decided that the appropriate course, to follow, was to, file the Statement of Claim against the defendant in these proceedings to preserve my rights with regard to the limitation period but wait until I had resolved my position as to the Bankruptcy Notice. 9. I also say that the proceedings referred to in the previous paragraphs combined with my profession as General Practitioner involving practices at three different locations caused a serious strain on my time resources to the extent that it was very difficult to maintain the current proceedings at that time." 18 The plaintiff was not required for cross examination on his affidavit and I accept for the purposes of the present application the content of the above paragraphs. Mr Campbell has submitted that in the circumstances it would be appropriate for the Court to exercise its discretion in favour of the plaintiff. Mr Campbell drew attention to the width of Pt 2 r 3 and to what Wilson J said about the rule in FAI General Insurance v Southern Cross Exploration NL & Ors (1987-88) 77 ALR 411 at 417: "The plain meaning of these words is very wide. The court may extend 'any time' fixed by 'any…order' and may do so as well after as before the time expires and even though the application to extend is not made until after the time has expired. As Baggallay LJ said in Carter (Carter v Stubbs [1886] QBD 116) of the analogous English rule, it gives 'very full discretionary power; indeed, I can hardly imagine a more extended discretion'. It is a remedial provision which confers on a court a broad power to relieve against injustice…" 19 Mr Campbell submitted there was a reasonable explanation for the non service within the time provided for by the relevant rule, and that it would be just to extend the time for service. 20 In resisting the relief sought, Mr Faulkner first drew attention to the provisions of Practice Note 104 relating to the Professional Negligence List and in particular to para 17 which is in these terms: "It may be anticipated that, on an application for extension of the time for service of the statement of claim under Pt 14C r 7, an order will not be made unless all reasonable efforts have been made to serve the statement of claim." 21 The above paragraph contemplates the situation where efforts to effect service have been made but have proved unsuccessful. 22 Part 14C r 7 clearly reflects an intention that proceedings in the Professional Negligence List will be pursued with due expedition and that defendants named in proceedings will be promptly made aware that the proceedings are on foot. Hence any statement of claim is to be served within four months and not twelve months as provided by Pt 7 r 7. 23 The plaintiff in the present case, albeit acting on wrong advice, issued his proceedings simply to preserve his situation and to avoid any problems under the Limitation Act. 24 It has been acknowledged by the parties that the plaintiff had only three years within which to bring proceedings under the Fair Trading Act. It follows that if this application fails and therefore proceedings have to be instituted, that claim under the Fair Trading Act will be barred. The remaining claims in negligence and breach of contract are claims in respect of which s 14 of the Limitation Act, 1969 applies. The plaintiff may bring proceedings concerning causes of action so founded within six years of the time the cause of action accrued. 25 The nub of any claim the plaintiff may have appears to centre on the allegedly unauthorised resolution of the bank's claim in April 1998, but alleged breaches of the defendants' obligations are pleaded as occurring earlier in the course of the defendants' professional relationship with the plaintiff. Some of the alleged breaches may well have occurred outside the six year limitation period, namely those as to advice given and not given, and to the failure to plead available defences and cross claims. Because of this the distinction between when a cause of action arises in contract as opposed to tort may well assume significance. 26 Of course, if the plaintiff is required to commence proceedings again, the application of the Civil Liability Act, 2002 would be enlivened and it would be encumbent upon any solicitor or barrister then providing legal services for the plaintiff to hold a reasonable belief, on the basis of provable facts and a reasonably arguable view of the law, that the claim has reasonable prospects of success. Mr Faulkner submitted that it would be in the interests of all parties to the litigation that evaluation of that type be undertaken before further costs are incurred in relation to the litigation the subject of the statement of claim. 27 Mr Faulkner further submitted that if the statement of claim presently relied upon is the subject of an order in the plaintiff's favour on the notice of motion, the defendants will move to have it struck out. Mr Faulkner referred to para 13 of the pleading where the plaintiff has particularised his loss and damage as being: "1. The difference between the sale price achieved by the bank and the market value of the plaintiff's properties listed in the consent orders. 2. By the entry of the consent orders, the plaintiff's claims against the bank were extinguished." 28 As to the first of the above matters, Mr Faulkner submitted that what the plaintiff is seeking to do is in effect to have this court redetermine what has already been determined in the proceedings in the Federal Court. The basis upon which the plaintiff sought to set the bankruptcy notice aside was that the bank sold the properties for less than their value. The judge at first instance, in declining to set the bankruptcy notice aside, rejected the allegations of Dr Gomez that the bank had failed to take reasonable steps to obtain proper prices for his properties, and the Full Federal Court dismissed the appeal: [2002] FCA 442. In the unanimous judgment of the appellate court there is a reference (in para 24) to this concession by Dr Gomez: "It was acknowledged on behalf of Dr Gomez, however, that the New South Wales courts have consistently imposed on a mortgagee the less stringent duty of acting in good faith in the exercise of the power of sale, and not to act in reckless disregard of a mortgagor's interests." 29 The appellate court concluded it judgment (in para 27): "The reality of sale prices actually obtained at auction, together with the justifiable rejection by the primary judge of the allegations of Dr Gomez of an absence or insufficiency of reasonable steps taken by the Bank to obtain proper sale prices in the first place, present, in our view, an inseparable obstacle to the appellant satisfying the Court of the existence of a viable counterclaim, set-off or cross-demand in accordance with the principle expounded in Ebert and Guss v Johnstone." (Ebert v The Union Trustee Company of Australia Ltd (1960) 104 CLR 346; and Guss v Johnstone (2000) 171 ALR 598). 30 In relation to the second of the matters of damage particularised, Mr Faulkner submitted that the statement of claim was deficient in that it did not express the basis for that assertion that the plaintiff's claim against the bank were extinguished. There is not to be found in that statement of claim a statement of the material facts upon which that claim is being advanced. 31 Mr Campbell, in response to Mr Faulkner's submissions as to the substance of the pleading, argued that the issue which the plaintiff's claim against the defendants would raise differs from that with which the Federal Court was concerned because in the plaintiff's pending claim the court would not be concerned with the mortgagee's responsibilities to the mortgagor in the exercise of the former's power of sale. Rather the focus would be upon what prices the plaintiff could have obtained had he been the vendor. 32 Then, as to the alleged shortcomings concerning the particulars expressed in para 13 of the statement of claim, Mr Campbell submitted that the matter raised should not influence the court to refuse the order sought in para 1 of the notice of motion. 33 Whilst the notice of motion included a claim for an order concerning the filing of an amended statement of claim, Mr Campbell did not pursue any application for that order in his submissions and no proposed amended statement of claim was presented. Nor did Mr Campbell address the subject of amendments which the plaintiff wished to pursue. 34 I am not now dealing with an application under Pt 13 r 5 or under Pt 15 r 26 and whilst I have recorded Mr Faulkner's submissions as to the form of the pleading and Mr Campbell's response to those submissions, upon reflection I do not consider that this is the occasion for examining the statement of claim as though this was an application either under Pt 13 r 5 or under Pt 15 r 26. I am, nevertheless, mindful that if the order sought in para 1 of the notice of motion is made, the defendants may well apply to have the pleading struck out. 35 Not without some hesitation, and notwithstanding para 17 of Practice Note 104, I have concluded that I should grant the extension of time sought by the plaintiff in para 1 of the notice of motion. Each case must be considered having regard to its own particular facts and circumstances and I accept that the plaintiff was misled by his then solicitors as to the period within which he was required to serve his statement of claim. This was not a case of a knowing disregard for the provisions of Pt 14C r 7, and having weighed Mr Faulkner's able submissions to the contrary, I consider that the interests of justice would be served by extending time. 36 In relation to the costs of this application, Pt 52A r 17 assumes relevance: "Where a party applies for an extension of time, unless the Court otherwise orders, he or she shall after the conclusion of the proceedings, pay the costs of and occasioned by the application, or any order made on or in consequence of the application." 37 The respondents have behaved responsibly in resisting this application, and although the plaintiff has been successful, I consider he should be required to pay the respondent's costs of the motion. As to such costs, I decline to make any special order as to the time within which they ought to be paid. Formal orders 38 1. I order that time for valid service of the statement of claim filed on 27 April 2001 be extended until 8 March 2002. 2. I order the plaintiff to pay the defendants' costs of the motion. ********** Last Modified: 10/09/2002 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.