New South Wales Supreme Court CITATION : ACN 081 123 140 Pty Ltd (Under External Administration) v Landerer & Company [2009] NSWSC 1121 HEARING DATE(S) : 8 October 2009 JUDGMENT DATE : 23 October 2009 JURISDICTION : Common Law JUDGMENT OF : Harrison AsJ (1) The plaintiffs' amended notice of motion filed 5 June 2009 is dismissed. DECISION : (2) The statement of claim is set aside. (3) The plaintiffs are to pay the defendants' costs as agreed or assessed. CATCHWORDS : PROCEDURE - miscellaneous procedural matters - other matters – orders sought to set aside originating process – orders sought to fix date of service of statement of claim – leave sought to file and serve amended statement of claim – delay in service – requirement of personal service - statement of claim served out of time – statement of claim set aside LEGISLATION CITED : Civil Procedure Act 2005 Uniform Civil Procedure Rules 2005 CATEGORY : Procedural and other rulings Arthur Andersen Corporate Finance Pty Ltd v Buzzle Operations Pty Ltd (in Liq) [2009] NSWCA 104 Foxe v Brown [1984] HCA 69 Franklin House Ltd v ANI Corporation Ltd NSWSC, 2 November 1994, Windeyer J, unreported Itek Graphix Pty Limited v Elliott (2002) 54 NSWLR 207 CASES CITED : Kleinwort Benson Ltd v Barbrak Ltd [1987] AC 597 Pell v Hodges [2007] NSWCA 234 Tolcher v Gordon [2005] NSWCA 135; 53 ACSR 442 Van Leer Australia Pty Ltd v Palance Shipping KK [1981] HCA 11; (1994) 180 CLR 337 Victa Limited v Johnson (1975) 10 SASR 496 White v Weston [1968] 2 QB 647; [1968] 2 All ER 842; [1968] 2 WLR 1459 ACN 081 123 140 Pty Limited (Under External Administration) (First Plaintiff) PARTIES : Finnbell Pty Limited (ACN 093 339 130) (Second Plaintiff) Landerer & Company (First Defendant) Leslie Michael Steven Pozniak (Second Defendant) FILE NUMBER(S) : SC 20356/2008 COUNSEL : N Bilinsky (Plaintiffs) G Curtin (Defendants) SOLICITORS : Levitt Robinson (Plaintiffs) Landerer & Company (Defendants) IN THE SUPREME COURT OF NEW SOUTH WALES COMMON LAW DIVISION PROFESSIONAL NEGLIGENCE LIST ASSOCIATE JUSTICE HARRISON FRIDAY, 23 OCTOBER 2009 20356/2008 - ACN 081 123 140 PTY LTD (under external administration), FINNBELL PTY LTD (ACN 093 339 130) v LANDERER & COMPANY & ANOR JUDGMENT (Extend time or set aside originating process) 1 HER HONOUR: There are two notices of motion before me. By notice of motion filed 1 May 2009, the defendants seek that the originating process be set aside pursuant to Rule 12.11 of the Uniform Civil Procedure Rules 2005 ("UCPR"). 2 By amended notice of motion filed 5 June 2009, the plaintiffs seek firstly, an order that service of the statement of claim filed 20 August 2008 be deemed to have occurred on 21 August 2008; secondly, in the alternative, that service of the statement of claim filed 20 August 2008 be deemed to have occurred on 4 September 2008; thirdly, in the alternative, that time for service of the statement of claim filed 20 August 2008 be extended to 3 March 2009; fourthly, in the alternative, that time for service of the statement of claim filed 20 August 2008 be extended to such date as the court may determine or for such period as the court may determine; fifthly, pursuant to order 4 that service be effected by delivery of a sealed copy of the statement of claim to the offices of Middletons, solicitors for the defendants; sixthly, that leave be granted to the plaintiffs to file and service the amended statement of claim; and seventhly, pursuant to order 6 that service be effected by delivery of a sealed copy of the amended statement of claim to the offices of Middletons, solicitors for the defendants. I shall deal with the plaintiffs' notice of motion first and then the defendants' motion, if necessary. 3 The first plaintiff is ACN 081 123 140 Pty Limited (under external administration) and the second plaintiff is Finnbell Pty Limited (ACN 093 339 130) ("the plaintiffs"). The first defendant is Landerer & Company and the second defendant is Leslie Michael Steven Pozniak ("the defendants"). The plaintiffs relied on four affidavits of its director, Michael Widdup sworn 1 May 2009, 4 June 2009, 2 July 2009, 13 July 2009 and 2 October 2009. The defendants relied on the affidavit of Leslie Pozniak sworn 16 July 2009. Both Mr Michael Widdup and Mr Peter Carlisle, the plaintiffs' former solicitor, gave evidence and were cross examined. 4 The plaintiffs have instructed a number of solicitors who have filed Notices of Ceasing to Act. On 3 September 2009, the current solicitors for the plaintiffs were instructed. 5 On or about 20 August 2008, Mr Michael Widdup became the sole director of each of the plaintiff companies. Mr Ian Widdup, Michael Widdup's father, retired as director of both plaintiffs on 27 March 2008. He not been re-appointed. 6 On 20 August 2008, the plaintiffs filed their statement of claim that alleges professional negligence, breach of contract and misleading and deceptive conduct against their former solicitors, the defendants. This statement of claim was filed arguably on the last day prior to the expiration of the limitation period. 7 Mr Michael Widdup's explanation for delay [affidavit 4 June 2009] is in short, that there was confusion between the plaintiffs and their previous legal representatives, Carlisle Attorneys, as to who would serve the statement of claim (at [2]-[3]). Mr Widdup stated, "Prior to the filing of the Statement of Claim on 20 August 2008 I sought the assistance of Carlisle Attorneys in the drafting thereof. After [the] Statement of Claim had been drafted I uplifted the Statement of Claim from the offices of Carlisle Attorneys and caused the Statement of Claim to be filed in the Supreme Court Registry. At the stage I had intended that the companies would proceed with this matter without legal representation. Shortly after the filing of the Statement of Claim I decided that legal representation was desirable and again instructed Carlisle Attorneys with the general carriage of this matter. At that stage the Statement of Claim had not been formally served and I assumed that Carlisle Attorneys would attend to formal service. Subsequently I became aware that Carlisle Attorneys had not served the Statement of Claim in their belief that prior to reinstructing them in the matter I had already caused the Statement of Claim to be formally served. Once it became realised that the Statement of Claim had not been formally served I directed Carlisle Attorneys to provide a copy to the solicitors for the Defendants forthwith which I understand was received by the Defendants' solicitors on or about 3 March 2009." 8 This explanation is totally at odds with the former solicitor's file notes. The relevant file notes have been extracted and appear below. 9 In a file note dated 21 August 2008, Mr Carlisle referred to a telephone conversation with Mr Ian Widdup following a conference he had had with Michael Widdup and Ian Widdup on 20 August 2008. It reads: "Subsequently about 6.35pm I received a call from Ian Widdup. He told me that the Registrar had permitted the filing of the Statement of Claim and he had sealed copies. He said he would bring them back to me the next morning. I told him not to serve them that night. I said we could discuss service the next day (it was too late to serve them that night in any event). …" 10 By email dated 22 August 2008, Mr Carlisle wrote to Mr Ian Widdup stating: "I confirm the plaintiffs' wishes to not serve the Statement of Claim. However this wish should be reconsidered in the light of the attached advise (sic) of Counsel." Relevantly, counsel's advice stated: "I refer to your request to further advise about filing and service. … In relation to filing and service, in my view time ceased to run when valid proceedings are filed, because that is when they are "brought" for the purposes of the Limitation Act. The proceedings are brought when they are filed (UCPR 6.2 which provides that one may commence proceedings by filing a claim. They may then be served within the time permitted by the rules, which is 6 months (UCPR 6.2). In case I am wrong you should serve it anyway as soon as possible. You can always tell them that you will not require them to file a Defence immediately." 11 By email dated 22 August 2008, Mr Carlisle wrote to Mr Ian Widdup stating: "… I would be pleased to discuss in conference whether the plaintiffs wish to reverse their previous wishes not to serve the Statement of Claim. …" 12 On 22 August 2008, Mr Carlisle sent, by email, a further letter to Ian Widdup. It read: "Please see attached email from counsel dated last night. … I confirm the Plaintiffs' wishes to not serve the Statement of Claim. However this wish should be recognised in the light of the attached advise (sic) of Counsel." 13 On 9 September 2008, Mr Carlisle wrote to Ian Widdup stating: "… It was contemplated that you would not serve the Statement of Claim but rather seek to have the Statement of Claim reviewed again with further material by another Junior Counsel and Senior Counsel. Subsequently I advised that the Defendant's became aware of the commencement of the proceedings and in these circumstances I recommended that every effort be undertaken expeditiously with a view to having Counsel review the Statement of Claim in the light of the further material brought to my office by you and the light of the further material otherwise briefed to Counsel." 14 On 12 February 2009 (some eight days prior to the expiration of six months after filing the statement of claim), Mr Carlisle wrote to Ian Widdup. The letter relevantly stated: "These proceedings came before the Court on 11 February 2009 for a directions listing conference. The Defendants had to date not been served as discussed although, I am aware that the Defendants have some knowledge of the proceedings and their commencement." 15 On 9 April 2009 (after the six month period had elapsed), by email and post, Mr Carlisle wrote to Ian Widdup. It relevantly stated: "The Uniform Civil Procedure Rules ("UCPR") provide that originating process is valid for service for 6 months after the date on which it is filed. The Statement of Claim in these proceedings was filed on 20 August 2008. As previously forewarned, if a Statement of Claim is not properly served within the time frame provided by the Rules, the Statement of Claim becomes stale. The timeframe is 6 months. A clerk from our office attended to the delivery of the Notice of Motion, Statement of Claim and Amended Statement of Claim to the Offices of Landerer & Company in early March this year. We will return to you shortly with more certainty in relation to the circumstances surrounding the delivery of these documents and the Defendants' response. However, as I have advised you, this delivery may not constitute personal service, and in any event it was undertaken when we came onto the Court records, that is on 3 March 2009. To date, you have declined to provide me with your instructions concerning personal service of the Statement of Claim." 16 Personal service upon Mr Leslie Michael and Steven Pozniak, the second defendant has still not been effected. 17 On 26 May 2009, by email and mail, Mr Carlisle wrote to Ian Widdup. The letter relevantly stated: "At the outset, Rule 10.20 of the UCPR 2005 states that except as otherwise provided by these rules: "any originating process … must be personally served" … The exceptions to the requirements for personal service to not apply in this situation and as such, the general rule is that all originating process must be served personally on each Defendant. … It is insufficient to merely leave the document with a third party for delivery to the person intended to be served. The position will be different where such a mode of delivery is at the instigation of the person to be served. Also, it may be that the Court will confirm informal service if satisfied that the contents of the document were in fact brought to the attention of the Defendant or his lawyers. …" 18 During cross examination, Mr Michael Widdup conceded that in the ordinary course of events, he would have seen correspondence referred to above. He admitted that he knew that the statement of claim was not served because his father instructed Mr Carlisle not to serve it. Mr Carlisle solicitor, when giving evidence, had his attention drawn to documents he had written and when asked about them replied that he was not able to add anything other than "the document speaks for itself". 19 It is my view that the plaintiffs' through Messrs Widdup, senior and junior, made a deliberate decision not to serve the statement of claim despite being aware that they had a period of six months within which to do so. Their legal representatives told then on a number of occasions that they must serve the statement or claim yet they chose not to do so. 20 However, the defendants did have knowledge of the existence of the statement of claim on the day after it was filed, namely 21 August 2009. The second defendant, Mr Pozniak, had received a copy of a notice of hearing from this Court's registry. A file number appeared on the letter but the names of the parties did not. On the same day, Mr Pozniak telephoned the registry and ascertained the names of the parties. On 29 August 2008, he spoke to Mr Carlisle and commented: "By the way, I've received a Notice of Conference hearing from the Supreme Court apparently in relation to further proceedings commenced by your clients against me and this firm but I haven't been served with anything." Mr Carlisle replied: "I don't know anything about that. I've had nothing to do with it." Mr Pozniak said: "Can you find out from your clients what the proceedings are all about." Mr Carlisle replied: "I will speak with my clients and get back to you." Mr Carlisle did not get back to Mr Pozniak. 21 On 19 November 2008, Mr Carlisle and Mr Pozniak had another conversation where Mr Pozniak said: "…By the way, you never got back to me about the further proceedings commenced by your clients against me and this firm. We still have not been served with the Statement of Claim. Are the proceedings going ahead? Are we going to be served or not? Mr Carlisle replied" "The proceedings are going ahead and I have now been retained in the matter. You will be served but I'm just waiting to be put into funds." 22 On 3 March 2009, Mr Pozniak received a telephone call from a person who identified herself as Paris Frangakis from Carlisle Attorneys. Ms Frangakis enquired whether she could deliver to Mr Pozniak a letter from Mr Carlisle. That evening a letter addressed to Mr Pozniak was hand delivered to Tina Mollica, a secretary employed by Landerer & Co, as Mr Pozniak had already left the officer by that time. The letter, addressed to Mr Pozniak, enclosed a copy of the plaintiffs' notice of motion filed 3 March 2009, a copy of the statement of claim filed 20 August 2008 and a notice of appearance filed 3 March 2009. The relevant provisions of the Uniform Civil Procedure Rules 23 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. 24 Rule 10.20(2)(a) provides that the statement of claim must be personally served. 25 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 down the copy in the person's presence and telling the person the nature of the document." 26 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, …" and 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." 27 The plaintiffs submitted that Rule 1.12 requires the exercise of a judicial discretion not fettered by inflexible prescriptions: Victa Limited v Johnson (1975) 10 SASR 496 (at 503), approved in Foxe v Brown [1984] HCA 69; (1984) 58 ALR 542; (1984) 59 ALJR 186; (1984) 2 MVR 283; Van Leer Australia Pty Ltd v Palace Shipping KK (1994) 180 CLR 337 (at 343 -344). However, that discretion is to be exercised within the context of the statute which has conferred the discretion and according to precedent: Arthur Andersen Corporate Finance Pty Ltd v Buzzle Operations Pty Ltd (in Liq) [2009] NSWCA 104 (at [28]). 28 The parties referred to Pell v Hodges [2007] NSWCA 234 and Arthur Andersen v Buzzle as authorities that explain the considerations the court must take into account when considering whether to extend the six month period pursuant to UCPR r 1.12. 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." 29 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]): "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."' 30 In so far as the policy behind the limitation period, Ipp JA stated (at [68] [69]): "68 In weighing delay after a limitation period has expired, regard must be had to the public policy behind the limitation period. His Honour did not take that policy into account and erred thereby. 69 The point was crisply made by Handley AJA (with whom Tobias JA and Basten JA agreed) in Pell v Hodges [2007] NSWCA 234 (at [44]): "A plaintiff who issues proceedings just before the limitation period and only then has the merits of the case investigated should not have any expectation of obtaining an extension of time to enable investigations to continue. There should also be no expectation that time spent in this way after the statement of claim has been issued, especially after it has become stale, will be accepted as an adequate explanation for such delays."' 31 Ipp JA concluded (at [82], [92]-[93]): "82 In my view it would be inappropriate to allow an extension of time for the service of a writ or statement of claim where a significant cause of the delay has been the willingness of the plaintiff to do nothing about service while awaiting a decision from a litigation funder as to whether or not to provide the necessary funds. Were that to be regarded as a good reason to extend time, the Court would be allowing plaintiffs to arrogate to non-parties the right to decide the period by which the time for service of a writ should be extended. That would be fundamentally in conflict with the Court's duty to exercise, alone, the discretion conferred upon it. … 92 The judge did not take into account the fact that Mr Wily made a deliberate decision to delay proceedings. In Itek Graphix Pty Limited v Elliott (2002) 54 NSWLR 207, with the concurrence of Spigelman CJ and Sheller JA, I observed at ([91], 225): "A deliberate decision to allow a statutory limitation period to expire would be a powerful factor against the grant of leave. Were a deliberate decision to allow the period to expire has been made, ordinarily it would be difficult to provide an explanation for that decision sufficiently cogent to warrant the grant of leave." 93 In my opinion, for the reasons set out in Itek Graphix Pty Limited , a deliberate decision to allow a writ to become stale after a limitation period had expired would be a powerful factor against the grant of the order sought (see also Van Leer at 350). Any prejudice suffered, in such circumstances, were the writ not to be extended, would be self-inflicted." 32 The plaintiffs submitted that firstly, in contrast to the delay in Van Leer, where delay in service was 23 months, or in Pell v Hodges where the delay was 4 months, the length of the delay in service (11 days) was not egregious; secondly, there was no deliberate intention or decision on the part of Mr Michael Widdup, to allow the statement of claim to become stale as he was generally confused on the subject of service; thirdly, once he became aware that service had not occurred within 6 months, Mr Michael Widdup gave instructions the plaintiffs' solicitors to promptly serve the defendants; fourthly, from 21 August 2008 onwards, the defendants were well aware of the proceedings and had acquired a copy of the statement of claim; fifthly, the defendants will not be denied a defence that would otherwise be available to them but the plaintiffs will suffer the significant prejudice of being statute barred; and sixthly, the delay in notification of the defendants by way of formal service does not outweigh the prejudice to the plaintiff if the proceedings were allowed to lapse. 33 The defendants submitted that the requirement of personal service is an important step in ensuring that a party received proper notice of the proceedings and is part of the fundamental requirements of natural justice or due process: White v Weston [1968] 2 QB 647; [1968] 2 All ER 842; [1968] 2 WLR 1459. The defendants submitted that, although they are aware of the proceedings and are in possession of a copy of the statement of claim, service has not be effected within the time allowed by UCPR r 6.2(4)(a). The defendants further submitted that formal service is an importance part of the process as then a defendant is put on formal notice that a plaintiff intends to prosecute proceedings. Personal service also entitles a defendant to file an appearance and then have available to him, her or it, all of the processes of the court necessary for the just, quick and cheap disposal of the proceedings. For these reasons the defendants say that the plaintiffs' statement of claim should be set aside pursuant to UCPR r 12.11(1). 34 I accept that the defendants had notice of the proceedings shortly after the statement of claim was filed. I also accept that if the time for service is not extended and the statement of claim is set aside, the plaintiffs' proceedings are most likely statute barred. However, I certainly do not accept that Mr Michael Widdup's explanation that there was confusion between him, his father and the plaintiffs' companies solicitor as to service of the statement of claim. During the six month period when service had to be effected pursuant to Rule 6.2(4)(a), Messrs Widdup senior and junior, were advised by their legal representative on a number of occasions to serve the statement of claim yet they deliberately chose not to do so. In other words they flouted the rules in circumstances where the statement of claim was filed arguably one day shy of the three year limitation period. This behaviour does not accord with the principles set out in ss 56, 57 and 59 of the Civil Procedure Act 2005. The plaintiffs were intent upon creating delay in commencing prosecuting these proceedings. 35 In my view the plaintiffs' deliberate decision to allow the statement of claim to become stale after the limitation period has expired is a powerful factor against extending the time for service. Further, in my view Michael Widdup's explanation for delay is not satisfactory. The plaintiffs' amended notice of motion is dismissed. I make an order that the originating process, the statement of claim be set aside. 36 Costs are discretionary. Costs usually follow the event. The plaintiffs are to pay the defendants' costs as agreed or assessed. The Court orders (1) The plaintiffs' amended notice of motion filed 5 June 2009 is dismissed. (2) The statement of claim is set aside. (3) The plaintiffs are to pay the defendants' costs as agreed or assessed. ********** 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.