Anpor Holdings Pty Ltd v Fredrick Swaab
[2011] NSWSC 1591
•14 December 2011
Supreme Court
New South Wales
Medium Neutral Citation: Anpor Holdings Pty Ltd v Fredrick Swaab & Ors [2011] NSWSC 1591 Hearing dates: 14.12.10, 01.02.11, 11.02.11 Decision date: 14 December 2011 Jurisdiction: Common Law Before: Hidden J Decision: Plaintiff's motion to extend time for service of statement of claim refused. Statement of claim set aside, proceedings dismissed.
Catchwords: CIVIL PROCEDURE - application for extension of time to serve statement of claim - limitation period expired Legislation Cited: Trade Practices Act 1974 (Cth)
Limitation Act 1969 (NSW)
Civil Procedure Act 2005Cases Cited: Tolcher v Gordon [2005] NSWCA 135
Arthur Andersen Corporate Finance Pty Ltd v Buzzle Operations Pty Ltd [2009] NSWCA 104
Victa Limited v Johnson (1975) 10 SASR 496
Richards v Cornford (No. 3) [2010] NSWCA 134
Weston v Publishing and Broadcasting Ltd [2009] NSWSC 1235Category: Principal judgment Parties: Anpor Holdings Pty Ltd (plaintiff)
Fredrick Swaab (first defendant)
Harry Snow (second defendant)
Marilyn Hauptmann (third defendant)
Richard Ottley (fourth defendant)Representation: Counsel
L Katsinas (plaintiff)
DP Pritchard SC (defendants)
Solicitors
John Tomaras, JT Law Pty Ltd (plaintiff)
Gregory Hilton Couston, Middletons (defendants)
File Number(s): 2009/297830
Judgment
The plaintiff, Anpor Holdings Pty Ltd, is a property development company. I shall refer to it as "Anpor." The defendants are the partners in a firm of solicitors, Swaab Attorneys. Before me are motions by the plaintiff and the defendants. To understand them, it is necessary to sketch the history of the proceedings.
For a period between 2003 and 2004, the defendants acted for Anpor in relation to the development and sale of a number of apartments which were the subject of a substantial development in Waitara. On 21 December 2007, Anpor issued a statement of claim in this court seeking damages for professional negligence by the defendants. It was alleged, among other things, that they were in breach of their duty of care in their advice to Anpor concerning the terms of sale documentation, including certain option deeds. It is not necessary for present purposes to explore the foundation of the claim. The damages sought by Anpor were of the order of $20 million.
On 28 August 2008, by consent, Anpor was ordered to provide security for costs in the amount of $700,000 by specified dates. It was unable to satisfy that order and on 3 July 2009 Rothman J granted an application by the defendants to dismiss the proceedings. These have been referred to by the parties as "the earlier proceedings."
The present proceedings were instituted by statement of claim on 30 October 2009. In addition to the earlier claim for breach of duty, Anpor pleads a cause of action under s 82 of the Trade Practices Act 1974 (Cth) alleging misleading and deceptive conduct by the defendants through their failure to disclose that the firm's professional indemnity insurance cover was limited to $1.5 million, an amount wholly inadequate to meet the damages claim.
The present statement of claim was filed at a time when relevant limitation periods under s 14 of the Limitation Act 1969 (NSW) and s 82 of the Trade Practices Act were close to expiry. The causes of action pleaded accrued on various dates between about November 2003 and the end of March 2004.
However, it was not until 10 May 2010 that the statement of claim was purportedly served upon the defendants by letters enclosing it addressed to each of them and delivered to the reception desk at the firm's office. This did not meet the requirement of personal service of originating process imposed by UCPR r 10.20(2). By r 10.21(1) personal service is effected by leaving a copy of the document with the person to be served or, if that person does not accept the document, by putting it down in the person's presence and telling the person what it is. More importantly, the statement of claim was then stale because it had not been served within 6 months of its being filed, as required by r 6.2(4). The 6 month period had expired on 30 April 2010, 10 days before the delivery of the copies of the statement of claim to the defendants' office.
Hence the present motions. On 27 May 2010, the defendants filed a motion seeking an order pursuant to r 12.11(1)(a) setting aside the statement of claim, and the dismissal of the proceedings. On 10 June 2010, Anpor filed a motion seeking an extension of the time for service of the statement of claim. However, at the hearing it relied upon an amended notice of motion of 7 July 2010 seeking:
(i) an order pursuant to r 10.14(3) that the statement of claim be taken to have been served on the defendants on 10 May 2010,
(ii) in the alternative, an order pursuant to r 1.12 "or otherwise that validity for the purpose of the statement of claim ... be extended to a date 14 days after the making of this order."
The evidence
For Anpor, affidavits of the company's sole director, Alfred Wong, and its current solicitor, John Tomaras, were read. In November 2009, Mr Tomaras took over the carriage of the matter from Anpor's previous solicitor, Mr Ted Tzovaras. Mr Wong also gave oral evidence. For the defendants, affidavits of their solicitor, Mr Graham Jackson, setting out the history of the proceedings, were read. Objection was taken to some of the material in Mr Jackson's affidavits relating to the conduct of the earlier proceedings, on the basis that it was irrelevant for present purposes. I admitted the evidence provisionally, on the basis that I would deal with the objection in my judgment.
Central to the resolution of both motions is the evidence of Mr Wong. Put shortly, his evidence was that at some time after the dismissal of the earlier proceedings he instructed Mr Tzovaras to commence fresh proceedings. Between about July and about November 2009, he had discussions with two financial institutions about funding the litigation, but no firm arrangement was made. On 12 October 2009, the Australian Taxation Office served a statutory demand on Anpor for an outstanding GST debt of almost $2.5 million. Anpor was not in a financial position to satisfy this debt, and Mr Wong instructed Mr Tzovaras to suspend the fresh proceedings.
In that same month, Mr Tzovaras warned Mr Wong that his action against the defendants would soon be statute barred. Mr Wong instructed him to commence the fresh proceedings but not to serve the statement of claim until he determined whether or not to place Anpor in voluntary administration. It was in these circumstances that the current statement of claim was issued but not served. On 21 December 2009, he resolved to place the company under administration. On 5 January 2010, the company's creditors resolved at a meeting that Anpor should execute a deed of company arrangement ("DOCA"), and that deed was executed on 24 February 2010.
For almost the whole of the period between mid-February and mid-May 2010 Mr Wong was out of the country for the purpose of attending to business and family matters in China. Nevertheless, he was in e-mail contact with Mr Tomaras and with Ms Wai Kim Kok, Anpor's in-house counsel.
On 21 April 2010, Mr Tomaras appeared for Anpor at a conference hearing of the proceedings before Registrar Bradford. He told the registrar that the statement of claim had not been served and sought an adjournment so that it could be. The matter was stood over to 12 May 2010. On 21 April, Mr Tomaras informed Ms Kok about his appearance before the registrar by letter attached to an e-mail, and Ms Kok forwarded that e-mail and attachment to Mr Wong the same day. According to Mr Wong, he was having some difficulty receiving e-mails on his Blackberry mobile phone. When this e-mail arrived he was unable to open the attachment. He then overlooked the e-mail until he accessed it on or about 7 May. On that day he instructed Mr Tomaras to serve the statement of claim.
In his affidavit he deposed that he was not aware of the requirement to serve the statement of claim within 6 months of its filing until Mr Tomaras informed him of the defendants' notice of motion to dismiss the proceedings. However, he did not adhere to this in oral evidence. He acknowledged having been told of this requirement in October 2009 and that he knew "full well" that unless the statement of claim was served within 6 months, his "case against Swaab would be lost." However, he said that he subsequently forgot that requirement, adding that it was something of which he would have expected to be reminded by his solicitor.
He agreed that e-mails sent by his then solicitor concerning the proceedings were copied to him while he was in China and that it was his practice to read them. Among those was an e-mail of 2 November 2009 to his brother, to which the statement of claim was attached and which noted the requirement of a practice note that it should be served "promptly to allow ample time for Directions Hearing preparation." Two days later, on 4 November, an e-mail was sent to a potential litigation funder, which also attached a copy of a notice from the registry, dated 30 October, appointing 21 April 2010 as the date for the conference hearing and expressing their expectation that the parties' solicitors "will have discussed the case before the conference hearing ... ." It was put to him that he must have understood from these e-mails that the statement of claim would have to have been served at the latest before 21 April 2010, because of the requirement that the solicitors for the parties discuss the matter prior to the conference hearing. I found his answers to this line of questioning rambling and unresponsive.
Asked why he had waited until the end of October to recommence the proceedings, he said that he had been unable to secure the necessary funding and, because of Anpor's financial difficulties, he was seriously thinking of putting the company into administration. He agreed that after the DOCA was entered into towards the end of February 2010, he was in charge of the company and able to conduct the litigation. Nevertheless, by the time the present motions came on for hearing no progress had been made in the quest for litigation funding. However, he said in cross-examination that he was "quietly confident" that funding could be obtained "subject to a particular transaction happening." Because of that revelation, I granted an adjournment of the hearing so that evidence of that funding prospect might be obtained.
By the resumed hearing date, Mr Wong had filed a supplementary affidavit deposing that $200,000 could be paid into court within 5 days of any appropriate order being made and that a further $200,000 would be available several months later. The affidavit was silent about the source of the funds. In answer to a notice to produce and a subpoena seeking all documents identifying the provider of the funds, Anpor's solicitor responded that there were no such documents. In oral evidence, Mr Wong confirmed that there was "no written documentation." He claimed that the two amounts of $200,000 were expected from the same source. It was only after some exploration of this issue in cross-examination that he volunteered that $200,000 "earmarked for this purpose", was sitting in an account of a company with which he was associated, Greater Pacific Pty Ltd, of which his brother was a director. He acknowledged that he had no documentation to corroborate that assertion.
Later that day, in the course of final submissions, counsel for Anpor, Mr Katsinas, was apparently supplied with a Greater Pacific bank statement, and he announced that Mr Wong's brother was in court and was able to give evidence about an arrangement concerning the $200,000. To pursue this matter, the brother would have to have provided an affidavit and the defendants would have needed the opportunity to consider any response to it. Not surprisingly, counsel for the defendants, Mr Pritchard SC, opposed any further adjournment, and I refused it.
I found Mr Wong's evidence about this somewhat chimerical sum of $400,000 entirely unsatisfactory, and it confirmed the impression I had already formed of his credibility. I did not find him an impressive witness, and I have reservations about his account. His assertion in the affidavit that he was not aware of the 6 month time limit for filing the statement of claim until after the defendants' present motion was filed is inconsistent with his concession in oral evidence that he had been aware of that time limit since October 2009, an inconsistency for which no explanation was forthcoming. While I appreciate that he had a good deal to cope with in the affairs of the company in late 2009 and early 2010, I cannot accept without question his evidence that he simply forgot about the time limit before it was too late. He had earlier acknowledged in cross-examination that he was a man with considerable commercial experience, that he had previously been involved in litigation, and that he was aware of the importance of complying with the procedural requirements of courts in the conduct of litigation.
Authorities
I am indebted to Mr Pritchard for his extensive reference to authority, both in written and oral submissions, concerning the broad power to extend time conferred by r 1.12. It is not necessary to refer to all of it. The focus was upon cases, like the present, in which proceedings had been instituted just within the relevant limitation period but the originating process had not been served within the prescribed time thereafter. Each case was concerned with an application to extend the time for service made after the limitation period had expired.
In Tolcher v Gordon [2005] NSWCA 135, the delay in service was attributable partly to the difficulty in funding the litigation but also to an earlier unsuccessful attempt at service. The Court of Appeal reversed the decision of the judge at first instance to refuse the application for extension of time. It is unnecessary to examine the facts of the case. The leading judgment was given by Tobias JA, with whom Hodgson and Ipp JJA agreed. Put shortly, Tobias JA held that the primary judge had fallen into error by taking into consideration the public policy behind the relevant limitation period, given that the proceedings had been instituted within that period. His Honour analogised the case to a want of prosecution matter, in which it was only the delay in prosecuting the action that was relevant to the exercise of the court's discretion: [96]ff.
While agreeing with Tobias JA and generally with his reasons, Hodgson JA saw the fact that the proceedings were instituted just before the expiry of the limitation period as relevant: [2]. The plaintiff had brought the proceedings in his capacity as the liquidator of a company. Hodgson JA said at [3]:
"Although the three-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 three-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."
In Arthur Andersen Corporate Finance Pty Ltd v Buzzle Operations Pty Ltd [2009] NSWCA 104, the Court of Appeal reversed an order of the primary judge which had the effect of extending time for the service of the statement of claim. Again, the facts of the case need not be recited. At [41] Ipp JA, with whom Tobias and McColl JJA agreed, cited with approval the following observations of Bray CJ concerning the relationship between a limitation period and the discretion to renew a stale writ in Victa Limited v Johnson (1975) 10 SASR 496:
"It is not correct to say that the defendant has acquired an absolute right to immunity when a writ issued within the limitation period is not served within twelve months of its issue and the limitation period has in the meantime expired. What has expired is in reality not the limitation period but the period which would have been the limitation period if no writ had ever been issued. What the failure to serve a writ within twelve months gives the defendant is no more than a right to contend that the Court in the exercise of its discretion should not renew the writ. The efficacy of the writ does not expire absolutely at the end of the twelve months, it only expires if and in so far as the Court sees fits not to renew it.
The Rule first directs the Court to inquire whether reasonable efforts have been made to serve the defendant. If they have, it seems to me that the Court should renew the writ. If not, the Court has to consider whether other good reasons exist for the renewal. I will not attempt an exhaustive category of such reasons. That would probably be impossible and would certainly be undesirable. Prominent, however, amongst the matters for the consideration of the Court, apart from whatever attempts have been made at service, will be the length of the delay, the reasons for the delay, the conduct of the parties and the hardship or prejudice caused to the plaintiff by refusing the renewal or to the defendant by granting it."
Ipp JA also adopted the statement of principle of Hodgson JA in Tolcher v Gordon quoted above, seeing no conflict between Hodgson JA's observations and the reasoning of Tobias JA in that case: [37] - [39]. Tobias JA, of course, was also a member of the bench which decided the Arthur Andersen case.
Following the reference to the passage from the judgment of Bray CJ in Victa Limited v Johnson , Ipp JA said at [43]:
"Accordingly, the Court should consider, when exercising a discretion such as that under UCPR r 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."
One of the reasons advanced for the delay in service in that case related to litigation funding. This led Ipp JA to observe at [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.
At [93], his Honour added that a "deliberate decision to allow a statutory limitation period to expire would be a powerful factor against" the grant of an application for extension of time for service. In that event, his Honour said, it would ordinarily be "difficult to provide an explanation for that decision sufficiently cogent to warrant a grant of leave."
Finally, speaking of the discretion to extend time generally under r 1.12, his Honour referred to the familiar provisions relating to the efficient conduct of litigation in ss 56 - 59 of the Civil Procedure Act 2005, saying at [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."
That approach has been emphasised by the Court of Appeal in subsequent decisions, including Richards v Cornford (No. 3) [2010] NSWCA 134. In that case, among other things, Allsop P referred to the stress which litigation can engender. At [42] his Honour noted that the litigious process "is inherently stressful for any party, in particular an individual." He added that "the reality of the personal strain of litigation is now clearly recognised by the courts", citing a number of authorities.
Submissions
For Anpor, Mr Katsinas submitted that, in the light of the company's difficulty in funding the litigation, it was reasonable to delay the institution of the present proceedings until a time when they were close to becoming statute barred. Moreover, for the same reason it was reasonable to defer serve of the new statement of claim. The company had been unable to provide the security for costs ordered by Rothman J, and its future was uncertain because of the substantial debt to the Australian Taxation Office.
Mr Katsinas cited the judgment of Barrett J in Weston v Publishing and Broadcasting Ltd [2009] NSWSC 1235, in which an extension of time to serve a statement of claim was granted because of the need for a liquidator to obtain litigation funding, and to abide the judgment in related proceedings so that the findings of fact in that case could be reviewed before deciding to proceed in the case at hand. It was in this context that his Honour referred at [8] to Tolcher v Gordon and the Arthur Andersen case, as follows:
"There was discussion in Tolcher v Gordon [2005] NSWCA 135; (2005) 53 ACSR 442 and Arthur Andersen Corporate Finance Pty Ltd v Buzzle Operations Pty Ltd [2009] NSWCA 104 about the weight that should, in cases such as the present, be afforded to a desire not to proceed until the outcome of some other proceeding is known or attempts to obtain litigation funding have been successful. As to the latter matter, the observation in the later case (at [82]) that it would be inappropriate to allow an extension of time for service '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' stands in contrast to the statement in the earlier case (at [107]) that 'it would have been both imprudent and irresponsible for the claimants to institute the proceedings without having litigation funding in place' (the reference to institution of the proceedings was, in the context, a reference to service)."
In the circumstances of the case, Barrett J found the latter observation to be apposite: [9].
For a significant period after the company's position was settled by the DOCA, Mr Wong was out of the country attending to business and family affairs. Mr Katsinas asked me to accept Mr Wong's evidence that he had forgotten about the prescribed time for service of the statement of claim and that, when it came to his attention, he promptly instructed Mr Tomaras to serve it. It was only 10 days after the expiry of the prescribed time that service was sought to be effected in the manner I have described. This is not a case, Mr Katsinas argued, where a plaintiff had deliberately allowed a statement of claim to become stale.
Finally, Mr Katsinas acknowledged the defendants' psychological burden in having to defend the proceedings, but submitted that this would be far outweighed by the prejudice Anpor would suffer if its motion were dismissed. Pursuit of its substantial claim would then be statute barred and, as a result, the requirements of the DOCA would not be able to be satisfied and the company would go into liquidation.
For the defendants, Mr Pritchard placed some reliance upon what was said to be the delay by Anpor in the earlier proceedings. It was this evidence which was objected to by Mr Katsinas. In the event, I find it unnecessary to explore that issue because I am able to decide these motions on the evidence relating to the present proceedings.
Mr Pritchard submitted that Anpor could draw no comfort from the fact that it was only 10 days after the expiration of the 6 month time limit that service was sought to be effected by delivery of copies of the statement of claim to the defendants' office. He pointed out that that was not valid service, and Mr Katsinas put no argument to the contrary. Strictly speaking, said Mr Pritchard, the statement of claim has still not been served.
However, the time which elapsed after the expiration of the 6 month limit before service was attempted is in no sense decisive of this matter. Of more importance is Mr Pritchard's submission that Mr Wong's explanation for failing to meet that time limit is unconvincing. It was not his case that Anpor had deliberately allowed the statement of claim to become stale. The document was not served immediately after it was filed because of the financial position of the company at the time and its inability to fund the litigation, but Mr Pritchard relied upon the evidence that Mr Wong was then well aware that the case would be lost unless it was served within the prescribed period. Mr Pritchard distinguished the present case from the decision of Barrett J in Weston v Publishing and Broadcasting Ltd , to which I have referred. In that case Barrett J accepted that the delay in serving the statement of claim was a responsible decision in the circumstances. Moreover, the application to serve the statement of claim out of time was made within the relevant limitation period.
Mr Pritchard relied upon that part of the judgment of Ipp JA in the Arthur Andersen case which emphasised the need for parties to conduct litigation efficiently, and conformably with the relevant provisions of the Civil Procedure Act . He noted that the defendants are four natural persons carrying on their profession as a firm of solicitors, and referred to the strain which litigation of this kind places upon them recognised by Allsop P in Richards v Cornford . On the issue of prejudice, he submitted that to allow the extension the time for service sought by Anpor would expose the defendants to prejudice because it would deprive them of the benefit of a limitation period which would otherwise accrue in their favour, a factor recognised as significant by Tobias JA in Tolcher v Gordon at [127].
Decision
I have given this matter anxious consideration. Obviously, the stakes for the parties on both sides of the record are high. I am persuaded by the submissions of Mr Pritchard that the proper exercise of my discretion must favour the defendants.
Anpor has been unable to provide any satisfactory explanation for the delay in serving the statement of claim. Its case is dependent upon the evidence of Mr Wong, and I have earlier expressed my reservations about his credibility. It is clear that he had contact with his solicitor while he was out of the country between February and May 2010, and was kept abreast of developments in the proceedings by receiving copies of relevant e-mails. I suspect that he abandoned his claim in his affidavit that he was unaware during that period of the 6 month time limit for serving the statement of claim because he knew that, in the light of those e-mails, that claim could not be sustained. I suspect, equally, that it was for that reason that he fashioned his account that he forgot about the 6 month requirement and had difficulty accessing the e-mail of 21 April. Put shortly, his evidence provides no acceptable basis upon which to exercise my discretion in Anpor's favour.
The litigation has gone on long enough. The defendants are entitled to the benefit of the statutory bars which now stand in the path of further proceedings. They have already incurred considerable costs, and the observations of Allsop P in Richards v Cornford concerning the personal strain of litigation are obviously apposite.
Although it is not essential to my conclusion, I might add that I entertain grave doubt that Anpor could ever fund this litigation. If it were to continue, no doubt a further application would be made for security for costs. Even if Anpor did have access to $400,000, that would be unlikely to be sufficient to meet such an order, let alone to fund the prosecution of the proceedings.
Anpor's motion is dismissed. The statement of claim is set aside, and the proceedings are dismissed. If necessary, I shall hear the parties on costs.
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Decision last updated: 19 December 2011
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