New South Wales Supreme Court CITATION : Berger Investments Group Limited v Coccoon Pty Limited [2010] NSWSC 1015 HEARING DATE(S) : 31 August 2010 JUDGMENT DATE : 6 September 2010 JURISDICTION : Common Law JUDGMENT OF : Harrison AsJ (1) That the statement of claim and the amended statement of claim be served by express post to Mr Andrew Heseltine at his residential address in Queensland. (2) The fifth defendant is to be notified of this order within 14 days. DECISION : (3) The fifth defendant has until the expiration of 28 days after service of the process to apply to have the orders relating to service of the statement of claim and amended statement of claim set aside. (4) The proceedings are stood over for a status conference at 9.00 am on 18 October 2010 before the registrar. (5) The notices to produce are stood over to 18 October 2010 at 9.00 am before the registrar. (6) Costs are reserved. CATCHWORDS : EXTEND TIME for service of statement of claim - SUBSTITUTED SERVICE Civil Procedure Act 2005 LEGISLATION CITED : Fair Trading Act 1987 (NSW) Trade Practices Act 1974 (Cth) Uniform Civil Procedure Rules 2005 CATEGORY : Procedural and other rulings ACN 081 123 140 Pty Ltd (Under External Administration) v Landerer & Company [2009] NSWSC 1121 Arthur Andersen Corporate Finance Pty Ltd v Buzzle Operations Pty Ltd (in liq) [2009] NSWCA 104 Dagnell v JL Freedman & Co [1993] 1 WLR 388 Franklin House Ltd v ANI Corporation Ltd (2/11/94 Windeyer J unreported) CASES CITED : Kleinwort Benson Ltd v Barbrak Ltd [1987] AC 597 Pell v Hodges [2007] NSWCA 234 Rich v Long [2008] NSWSC487 Rich v Packer; Rich v Long [2007] NSWSC 1290 Tolcher v Gordon [2005] NSWCA 135, 53 ACSR 442 Wakim v Coleman [2010] NSWCA 221 Berger Investments Group Limited (First Plaintiff) Gabriel Berger (Second Plaintiff) David Berger (Third Plaintiff) PARTIES : Coccoon Pty Limited (First Defendant) Richard Heseltine (Second Defendant) Susan Heseltine (Third Defendant) P T Samur (Emas) Furindo (Fourth Defendant) Andrew Heseltine (Fifth Defendant) FILE NUMBER(S) : SC 2006/261156 COUNSEL : C Jackson (Plaintiffs) S Roberts (First, Second & Third Defendants) SOLICITORS : Charles G Roth (Plaintiffs) Makinson & d'Aprice Lawyers (First, Second & Third Defendant) IN THE SUPREME COURT OF NEW SOUTH WALES COMMON LAW DIVISION ASSOCIATE JUSTICE HARRISON MONDAY, 6 SEPTEMBER 2010 2006/261156 BERGER INVESTMENTS GROUP LIMITED & ORS v COCCOON PTY LIMITED & ORS JUDGMENT (Extend time for service of statement of claim on fifth defendant - substituted service) 1 HER HONOUR: By notice of motion filed 31 May 2010, the plaintiffs seek firstly, an order that time for service of the originating process upon the fifth defendant be extended; secondly, that the plaintiffs have leave for substituted service of the amended statement of claim filed on 29 March 2010 upon the fifth defendant; thirdly, that personal service upon the fifth defendant be dispensed with; fourthly, that personal service upon Andrew Heseltine of the amended statement of claim be effected by forwarding the amended statement of claim by express post to XXXXXXXX Queensland; fifthly that service of the amended statement of claim in the manner set out in order (4) be deemed effective service; and sixthly, an order that the fifth defendant be notified of the order within 14 days, and also notified that he had until the expiration of 28 days after service of the process to set aside the order. 2 The first plaintiff is Berger Investments Group Limited. The second plaintiff is Gabriel Berger. The third plaintiff is David Berger. Gabriel Berger and Daniel Berger are father and son. The first defendant is Coccoon Pty Limited. The second defendant is Richard Heseltine. The third defendant is Susan Heseltine. The fourth defendant is P T Samur (Emas) Furindo. The fifth defendant is Andrew Heseltine. Richard Heseltine and Andrew Heseltine are brothers. The plaintiffs relied on the affidavits of Charles George Roth affirmed 31 May 2010 and 30 August 2010. 3 The first to third defendants oppose an order that time for service upon Andrew Heseltine of the originating process be extended (order (1)). However if that order is made, then they do not oppose orders 2 to 5 being made and agree with order 6. In other words, they agree that Andrew Heseltine be served with the amended statement of claim and be given an opportunity to set aside the order. While the first to third defendants are parties to these proceedings, the orders sought do not directly concern them, except so far as they may cause further delay in having these proceeding finalised. Background 4 On 1 October 2003, Gabriel and David Berger's company Berger Investments Group Ltd purchased a homewares store from Coccoon. The plaintiffs allege that the business lost significant sums and was unsuccessful. The plaintiffs say that they were induced to purchase the business by representations made to them by or on behalf of Coccoon, and in particular, about exclusive supply arrangements that Coccoon had with P T Samur. P T Samur is an Indonesian company of which Richard Heseltine and Andrew Heseltine were directors. The plaintiffs claim damages for misrepresentations and breaches of the Trades Practices Act 1974 (Cth) and Fair Trading Act 1987 (NSW). The plaintiffs also plead that Richard Heseltine and Andrew Heseltine both guaranteed the company's performance and that this guarantee was not honoured. 5 On 16 February 2006 these proceedings were commenced. In March 2006 Coccoon, Richard Heseltine and Susan Heseltine were served with the originating process. The first to third defendants set out a chronology by which they say that the plaintiff has been tardy in complying with court timetables. The plaintiffs concede that there have been delays in the conduct of these proceedings and that if Andrew Heseltine is served this may delay the hearing while he prepares his case. 6 The protracted history of the case management is set out in the chronology and need not be repeated here. The plaintiffs also submitted that Coccoon, Richard Heseltine and Susan Heseltine have largely acquiesced in the delays and have yet have not taken any further steps to advance their defence. On 29 March 2010 the plaintiffs filed an amended statement of claim pursuant to leave granted by the court. Even though more thanfive months have now elapsed, the first to third defendants have not filed defences. Recently, two notices to produce addressed to Richard Heseltine were served upon his solicitor. The first was served on 12 August 2010 and the second on 28 August 2010. These notices to produce seek copies and originals of all communications and documents between any one or more of the defendants and Andrew Heseltine or his wife directly or indirectly in the period 20 December 2005 and 31 July 2010 be produced to the court. No documents have been produced in answer to these notices to produce and no real explanation was provided as to why this was so. The relevant provisions of the Uniform Civil Procedure Rules ("UCPR") 7 Rule 6.2(4)(a) provides that a statement of claim filed in the Supreme Court is valid for service six months after the date it was filed. 8 Rule 10.20(2)(a) provides that the statement of claim must be personally served. 9 Rule 10.21(1) describes personal service as: "effected by leaving a copy of the document with the person or, if the person does not accept the copy, by putting the copy down in the person's presence and telling the person the nature of the document." 10 Rule 12.11(1) reads: "12.11 Setting aside originating process etc (1) In any proceedings, the court may make any of the following orders on the application of a defendant: (a) an order setting aside the originating process, (b) an order setting aside the service of the originating process on the defendant, (c) an order declaring that the originating process has not been duly served on the defendant, …" 11 Rule 1.12 states: "1.12 Extension and abridgment of time (1) Subject to these rules, the court may, by order, extend or abridge any time fixed by these rules or by any judgment or order of the court. (2) The court may extend time under this rule, either before or after the time expires, and may do so after the time expires even if an application for extension is made after the time expires." 12 Rule 10.14 provides for substituted service generally. It reads: "Substituted and informal service generally (1) If a document that is required or permitted to be served on a person in connection with any proceedings: (a) cannot practicably be served on the person, or (b) cannot practicably be served on the person in the manner provided by law, the court may, by order, direct that, instead of service, such steps be taken as are specified in the order for the purpose of bringing the document to the notice of the person concerned. (2) An order under this rule may direct that the document be taken to have been served on the person concerned on the happening of a specified event or on the expiry of a specified time. (3) If steps have been taken, otherwise than under an order under this rule, for the purpose of bringing the document to the notice of the person concerned, the court may, by order, direct that the document be taken to have been served on that person on a date specified in the order. (4) Service in accordance with this rule is taken to constitute personal service." Attempts to serve Andrew Heseltine 13 On 12 February 2006, 6 August 2009, 6 April 2010 and 19 April 2010, ASIC searches conducted as to the whereabouts of Andrew Heseltine all gave the same result, namely the same residential address in Queensland. Hence, it appears that between 12 February 2006 and 19 April 2010 (a period of over four years) Andrew Heseltine has had the same residential address in Queensland. 14 On 21 March 2006 the plaintiff's solicitor's process servers reported that service of the statement of claim addressed to Hylton Andrew Heseltine had not been effected. On 16 March 2006 at 6.25am their agent attended address in Queensland and spoke with a female occupant who claimed that Andrew Heseltine did not reside at the address and now lived in Indonesia. She stated that she had not seen him for some time and did not have an address for him in Indonesia. 15 On 23 December 2006 the process server was again unsuccessful. The plaintiff's agent returned to the same address and spoke with Andrew Heseltine's wife who stated that he lived in Indonesia and only visited approximately once a year. His wife also advised that she had virtually no contact with him in Indonesia as he had a small factory out in the jungle. 16 Then nothing happened so far as service was concerned for a period of about four years. The plaintiffs' counsel submitted that his solicitor accepted that Andrew Heseltine was in Indonesia. However, the subpoenaed documents produced by the Department of Immigration & Citizenship, which I shall refer to in more detail later in the judgment, reveal that was not the case. As it turns out, Mr Andrew Heseltine did not spend nearly all of the year in a small factory in the jungle in Indonesia. When the plaintiff instructed new counsel efforts resumed to serve Andrew Heseltine with the originating process. 17 On 9 April 2010 the process server reported that service of the amended statement of claim addressed to Andrew Heseltine had not been served. The process server reported that on 8 April 2010 at 3.25 pm their agent had attended the given address and observed a male, approximately 40 years of age with black hair, a round face and facial hair, get into a car with a female. The agent attempted to serve the documents, however, the male and female were already in the vehicle. The male driver would not stop and apparently nearly ran over the agent in his haste to get away. A calling card was left at the address requesting that Andrew Heseltine contact the agent. On 8 April 2010 at 8.10 pm the agent re-attended the given address, however he was unable to locate any persons at home. The agent observed a VW Polo parked at the address. The calling card previously left had been removed. 18 On 9 April 2010 at 7.15 am the agent returned to the address a third time but was again unable to locate any persons at home. A search of the White Pages revealed that Andrew Heseltine still lived at that address. The process server had dialled the telephone number and spoken to a female who confirmed that Andrew resided that the address. However, she stated that he was currently in Indonesia and his return date was unknown. The woman would not provide any further details and the call was terminated. As attempts to serve Andrew Heseltine with the originating process have been unsuccessful, the plaintiffs have now sought an order for substituted service. 19 On 20 August 2010 the solicitor acting for the plaintiffs attended the court registry and inspected the subpoenaed documents produced by the Department of Immigration & Citizenship. While those documents showed that Andrew Heseltine had numerous absences from Australia during the period 1 July 2005 to 31 July 2010, they revealed that he was in Australia from 7 March 2006 to 25 April 2006; 22 December 2006 to 29 January 2007; and 1 April 2010 to 3 May 2010, that is, during the periods of time when efforts were being made to serve the statement of claim upon him. The law 20 The parties referred to Rich v Packer; Rich v Long [2007] NSWSC 1290; Rich v Long [2008] NSWSC487; Pell v Hodges [2007] NSWCA 234; Arthur Andersen Corporate Finance Pty Ltd v Buzzle Operations Pty Ltd (in liq) [2009] NSWCA 104; and ACN 081 123 140 Pty Ltd (Under External Administration) v Landerer & Company [2009] NSWSC 1121. I would also add the recent decision of Wakim v Coleman [2010] NSWCA 221 (2 September 2010). 21 In Pell v Hodges, Basten JA stated (at [30] – [32] and [44]): "30 The discretion conferred by UCP r.1.12 is not in terms fettered, but a plaintiff seeking an extension of time must establish a proper or adequate reason for this being granted: Franklin House Ltd v ANI Corporation Ltd (2/11/94 Windeyer J unreported); Kleinwort Benson Ltd v Barbrak Ltd [1987] AC 597, 622-3. Proof is required of a satisfactory explanation for the delay. 31 In Tolcher v Gordon [2005] NSWCA 135, 53 ACSR 442 Tobias JA, who gave the principal judgment, held (p.457, para [78]) that a defendant did not have a prima facie right to retain the benefit of the expiry of the limitation period because that would fetter the otherwise unfettered discretion relevant in that case. By parity of reasoning it would also be an unjustified fetter on this discretion to accord any prima facie right to a plaintiff because of her legitimate interest in the prosecution of her case. 32 While a defendant has no prima facie right to retain the benefit of the expiry of the limitation period this is a relevant factor: Tolcher v Gordon (above) at 443 para [3], 453, paras [56], [60], but the Judge did not refer to it as such. … 34 The significance of this matter to her Honour's decision is emphasised by her statement that she doubted "whether a change of solicitors and some difficulty in obtaining expert reports, without more, amounts to a satisfactory explanation for the delay." She had previously pointed out that the failure to warn case did not substantially depend on expert opinion, and that the delay in obtaining such reports was the only reason advanced in support of the application." 22 In Arthur Andersen, Ipp JA (with whom Tobias and McColl JJA agreed), provided an extensive analysis of the proper exercise of discretion, such as the discretion provided by UCPR r 1.12. His Honour referred to ss 56, 57 and 58 of the Civil Procedure Act 2005 and stated (at [36]-[37] and [43]): "36 Sections 56, 57, 58 and 59 require a judge, exercising a discretion under UCPR r 1.12, to have regard to whether a party, seeking the exercise of the discretion in its favour, has: (a) diligently pursued the object of disposing of the proceedings in a timely way; (b) used, or could reasonably have used, available opportunities under the rules or otherwise, to avoid delay; and (c) reasonably implemented the practice and procedure of the court with the object of eliminating any lapse of time between the commencement of the proceedings and their final determination. 37 In addition, in my opinion, when exercising the discretion conferred by UCPR r 1.12 regard must be had to the policy behind the limitation statute applicable. This point was made by Hodgson JA in Tolcher v Gordon [2005] NSWCA 153; 53 ACSR 442 (at [3], 443): "Although the 3-year period is a limit for the commencement of such proceedings, not service of the proceedings, in my opinion an important aspect of the public policy behind the limitation period is that potential defendants should be made aware of claims against them within a reasonable time; so that in my opinion, delay in service of such proceedings, in contravention of the rules, is particularly serious if it occurs after the expiration of the 3-year limitation period. A liquidator who does not commence proceedings until just before expiry of the limitation period should in my opinion be especially diligent in pursuing prompt service of the proceedings."' 43 Accordingly, the Court should consider, when exercising a discretion such as that under UCPR 1 1.12, the attempts that have been made at service, the length of the delay, the reasons for the delay, whether the delay was deliberate, whether notice was given to the defendant, the conduct of the parties generally, and the hardship or prejudice caused to the plaintiff by refusing the renewal or to the defendant by granting it." 23 In Rich v Packer; Rich v Long, Young CJ in Eq (as he then was) set out what has been referred to as "the English approach" to the extension of time for service of originating process. At [22] to [28] his Honour explained: "22 None of the cases referred to the principle that was said to be fundamental by the House of Lords in Dagnell v JL Freedman & Co. However, reference was made to the earlier House of Lords decision in Kleinwort Benson Ltd v Barbrak Ltd [1987] AC 597. In that case the English Procedure was followed. 23 The English Procedure permits the defendants to be heard on the question at a time when they have appeared or conditionally appeared and their status before the court is unquestioned. 24 There are, of course, two great weaknesses in the English Procedure. First, the court does not have the benefit of competing arguments from the proposed defendants. Secondly, if the extension were refused before the original time limit ran out, the plaintiffs could just serve the initiating process. If the extension is granted and later the defendants successfully move to set the extension aside, the plaintiffs may be without remedy. 25 However, the English Procedure now seems too firmly entrenched to be altered. 26 In a case where the initiating process may not be served for some time, the English Procedure also means that considerable time may elapse before the defendants come to know of the process and, by that time, they may have suffered prejudice, for instance by discontinuing their tail off insurance cover. 27 Both the Kleinwort Benson case and the Hoddinott's case point out that it is wise to realise that there are three classes of case where an extension of time for service is sought. The first case is where the limitation period is yet to expire, the second is where the limitation period is expired, but the initiating process is still valid for service, the third is where the limitation period has expired, but the initiating process is no longer valid for service. 28 In the second class of case, as here, the English Court of Appeal in Hoddinott's case held that the right of the defendants not to be disturbed outside the limitation period plus six months is often the determinative factor . " 24 As previous stated, so far as the first to third defendants are concerned, they agree that the English procedure should be followed. But that is not to the point. The court's task here is to determine whether the plaintiffs should be permitted to extend the period of time for service of the originating process on another defendant, namely Andrew Heseltine. The plaintiffs submitted that in this case, "good reason" lies firstly, in the fact that service was attempted within a month of filing of the originating process at Andrew Heseltine's place of residence; and secondly, given the close business and familial relationship between Richard Heseltine and Andrew Heseltine and that these proceedings concern a business of which both men were directors, it is inconceivable that Richard Heseltine would not have informed Andrew Heseltine of the proceedings. However, there is no direct evidence to this effect. The notices to produce may have shed some light on whether Andrew Heseltine had actually known about these proceedings but as no documents were produced and no explanation given as to why this fact is so, this remains unclear. 25 I have formed the view that Andrew Heseltine has been avoiding service of the initiating process because the immigration records show that he has not spent nearly all of this time over the last four years in Indonesia, despite the assertions of a female at his residence. While there has been considerable delay in attempting serving Andrew Heseltine, he has certainly made considerable effort to evade service. Overall, I accept that the plaintiff has provided a good reason to extend time for service of the statement of claim. 26 In the exercise of my discretion, it is my view that this Court should adopt a variation upon the English approach that is substituted service is effected upon Andrew Heseltine and he then has 28 days after service of the originating process to apply to set aside this order. By forwarding the original statement of claim and the amended statement of claim by express post to his residential address in Queensland, I am satisfied that the documents will in all reasonable probability, if not certainty, be brought to his attention. 27 Hence, I make an order for substituted service that the statement of claim and the amended statement of claim be served by express post to Mr Andrew Heseltine at his residential address in Queensland. I order that service of these documents be deemed effective service. I also order that the fifth defendant be notified of this order within 14 days. Mr Andrew Heseltine has until the expiration of 28 days after service of the process to apply to have the orders relating to service of the statement of claim and amended statement of claim set aside. The proceedings are stood over for a status conference at 9.00 am on 18 October 2010 before the registrar. The notices to produce are stood over to 18 October 2010 at 9.00 am before the registrar. Costs are reserved. The Court orders: (1) That the statement of claim and the amended statement of claim be served by express post to Mr Andrew Heseltine at his residential address in Queensland. (2) The fifth defendant is to be notified of this order within 14 days. (3) The fifth defendant has until the expiration of 28 days after service of the process to apply to have the orders relating to service of the statement of claim and amended statement of claim set aside. (4) The proceedings are stood over for a status conference at 9.00 am on 18 October 2010 before the registrar. (5) The notices to produce are stood over to 18 October 2010 at 9.00 am before the registrar. (6) Costs are reserved. ********** 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.