Bjelica Investments Pty Ltd v TC Waters Pepper and Co Pty Ltdand:Campbell, Andrew Ryrie and :Lee, Thong Sum - [2003] NTSC 67

Bjelica Investments Pty Ltd v TC Waters Pepper & Co Pty Ltd & Ors
[2003] NTSC 67
PARTIES:BJELICA INVESTMENTS PTY LTD

v
TC WATERS PEPPER & CO PTY LTD
AND:
CAMPBELL, Andrew Ryrie
AND:
LEE, Thong Sum

TITLE OF COURT:  SUPREME COURT OF THE NORTHERN TERRITORY
JURISDICTION:  SUPREME COURT OF THE NORTHERN TERRITORY EXERCISING TERRITORY JURISDICTION
FILE NO:211 of 1996
DELIVERED:  12 June 2003
HEARING DATES:  23 May 2003
JUDGMENT OF:  MARTIN CJ
CATCHWORDS:
JURISDICTION, PRACTICE AND PROCEDURE
Limitation of time – breach of contract and negligence – prejudice – discretion of court for extension of time.
Limitation Act 1995 (NT), s 44(3)
Sola Optical Australia Pty Ltd v Mills (1987) 163 CLR 628; Paramasivam v Flynn (1998) 90 FCR 489, referred.
Brisbane South Regional Health Authority v Taylor (1996) 186 CLR 541, applied.
Campbell v United Pacific Transport Pty Ltd (1966) QDR 465 at 474; Cowie v State Electricity Commission of Victoria (1964) VR 788 at 793; Mason v Murray’s Charter Coaches & Travel Services Pty Ltd (1998) 88 FCR 308, considered.
REPRESENTATION:
Counsel:
Plaintiff:D Frances
1^st Defendant:  B O’Loughlin
2^nd Defendant:  W Roper
3^rd Defendant:  K Curry
Solicitors:
Plaintiff:David Francis & Assoc
1^st Defendant:  Cridlands
2^nd Defendant:  Clayton Utz
3^rd Defendant:  Morgan Buckley
Judgment category classification:      C
Judgment ID Number:  mar0328
Number of pages:  18

mar0328
IN THE SUPREME COURT
OF THE NORTHERN TERRITORY
OF AUSTRALIA
AT DARWIN
Bjelica Investments Pty Ltd v TC Waters Pepper & Co Pty Ltd
[2003] NTSC 67
No. 211 of 1996

BETWEEN:
BJELICAN INVESTMENTS PTY LTD

Plaintiff
AND:
T C WATERS PEPPER & CO PTY LTD

First Defendant
AND:
ANDREW RYRIE CAMPBELL
Second Defendant
AND:
THONG SUM LEE
Third Defendant

CORAM: MARTIN CJ
REASONS FOR JUDGMENT
(Delivered 12 June 2003)

The plaintiff claims damages from the first defendant (“the agent”), the second defendant (“the vendor”) and the third defendant (“the solicitor”) arising from its purchase from the vendor of land in Darwin.

It asserts that the agent, as agent for the vendor, represented the land as an area substantially in excess of its true area and that it suffered loss as a consequence. As against the third defendant, the plaintiff alleges breach of contract and negligence in the discharge of his duty as a solicitor.
On 1 November 2001 I dealt with an appeal from the Master who had refused an application by the second defendant for summary judgment against the plaintiff. The Master had, however, struck out parts of the statement of claim which effectively put an end to the causes of action concerning that defendant. That was done because of the operation of the three year limitation period imposed by s 12 of the Limitation Act 1995 (NT), and the failure by the plaintiff to secure an extension of time pursuant to s 44 of that Act which the Master had dealt with contemporaneously.
Upon the hearing of that appeal, I also considered a fresh application by the plaintiff for extension of time based upon different grounds to those advanced before the Master, and held that the plaintiff had satisfied the requirements of s 44(3)(b)(i) in relation to the ascertainment of material facts.
Before deciding whether the extension of time sought would be granted, however, there remained the question as to whether, in all the circumstances of the case, it was just to grant it (s 44(3)). I invited further submissions and the parties were at liberty to present evidence on that issue. I ordered that that question be dealt with prior to trial.
Further progress has been delayed due to a number of factors including the fallout from HIH insurance collapse which affected the first defendant, as these reasons will later show.
The plaintiff filed an affidavit. The only evidence concerning the residual discretion from the defendants was presented by the agent. The second and third defendants advanced submissions relying in part upon the evidence produced by the first defendant, and secondly upon the consequences which would flow to them if an extension of time to bring the action against the first defendant was not granted such that, if that course was allowed, there should be no grant of extension of time in respect of either of them.
In his affidavit of 22 August 2002 Nichola Bjelica, on behalf of the company, deposed to circumstances surrounding the purchase of the land. The sale was completed on 15 October 1993, being the date upon which I ruled the cause of action, if any, arose. Mr Bjelica says that after the date of completion he ascertained that the area of the land was less than that which it had been represented to be by the agent and that he then put the agent on notice and sought compensation for the shortfall. What transpired in the course of discussions between Mr Bjelica and those representing the agent is in dispute, which is not necessary to resolve now, except to say that the agent was aware of the potential claim shortly after the date of completion.
The plaintiff then says, through Mr Bjelica, that between 1994 and 1996 it had intended to institute proceedings against the first defendant for recovery of damages in respect of the shortfall, but that Mr Bjelica was not concerned at the delay because he mistakenly understood that the relevant limitation period for the institution of legal proceedings was five years. He says it was not until he consulted with his solicitors on 1 October 1996 that he was informed that the relevant limitation period was three years. The writ was issued on 18 October 1996, that is, three days beyond the limitation period of three years.
For the first defendant, Michael Joseph Mooney deposes in an affidavit of 28 March 2003, as follows:
·     During the period 30 June 1993 to 30 June 1994 the agent held a professional indemnity insurance policy under which the insurer, HIH, indemnified it for all claims made on it by reason of any act, error or omission. The indemnity did not cover the agent for the first $1,000 of each claim.
·     It was appointed agent for the mortgagee in possession (the vendor) for sale by auction which was conducted on 15 September 1993. The auction did not succeed. The contract between the vendor and the plaintiff was entered into later.
·     In about November 1993 a claim for $200,000 in damages was made by Mr Bjelica on behalf of the plaintiff to the agent in relation to the purchase of the property. Details of that claim were forwarded by the agent to HIH on 11 November 1993. The agent for HIH acknowledged receipt of the information and advised that nothing further was intended to be done at that stage, but it would appreciate being kept advised.
·     On 15 December 1993 the plaintiff complained to the Disputes and Complaints Committee of the Real Estate Institute of the Northern Territory concerning the agent’s alleged conduct and the Committee informed the agent that it was not a matter upon which the Committee could make a ruling.
·     The defendant heard nothing further from the plaintiff until it was served with the writ on 23 April 1997, about six months after it was issued.
·     In the meantime, in February 1997, there was a transfer of shares from one of the original shareholders to each of Mr Mooney and Mr Pepper the other original subscribers. Mr Mooney says that since nothing had been heard about the claim the subject of the dispute for quite some time no provision was made in the sale of those shares for any potential liability which might arise in the event that the agent was found liable for the claim.
·     The writ was forwarded to the insurer, with reference to prior correspondence, and the agent enquired as to what it should then do, particularly in the light of the previously disclosed negotiations for the sale of all of the shares in the agent.
·     The insurer instructed the solicitors, now on the record for the agent, to act on its behalf and investigate the subject matter of the plaintiff’s claim, as a result of which the agent was informed that it was not required to do anything further in relation to the proceedings. Mr Mooney says he was advised in about late April 1997 that the agent’s only potential liability for the claim the subject of the proceedings would be the excess of $1,000.
·     On 30 April 1997 Mr Mooney and Mr Pepper sold to Restate Pty Ltd, as trustee for the Restate Real Estate Trust, as purchaser all of their shares in the agent. There was a contemporaneous dealing with regard to the sale of the associated business. In that regard Mr Mooney says that it was assumed by all parties that the insurer would indemnify the agent for the plaintiff’s claim and, if not successful, there would be no further cost to be borne in the proceedings by either the agent, Restate Pty Ltd, Mr Pepper, Mr Mooney or Mooney Pepper Pty Ltd other than the payment of the excess.
·     On 15 March 2001 provisional liquidators were appointed to HIH and the agent was then effectively uninsured. Since that time it has been conducting the litigation in that capacity. It made application for assistance for support under the Commonwealth Government’s HIH Claims Support Scheme which provides ninety percent of the policy benefits which would have been received if HIH had not been placed into liquidation.
The agent now understands that its application to the Scheme has been successful and that QBE Insurance will stand in the place of HIH, but that it will be only indemnified to the extent of ninety percent of the agent’s liability as found. The value of the loss claimed by the plaintiff is yet to be established, but there is evidence of valuations which put it at between $70,000 and $90,000. Counsel for the agent says that instead of being liable for $1,000, being the excess on the original policy, the agent may now be liable for up to $9,000 plus interest and costs.
Mr Mooney has received advice from his solicitors as to the witnesses that may be required upon the hearing of the action. They are all living in Australia and their whereabouts are known, but, it is noted that Mr Pepper, who would be the principal witness, now resides in Victoria and is aged 71 years. It is not suggested that any of the witnesses suffer from any infirmity of mind.
In his affidavit Mr Bjelica says that he did not believe the delay which occurred in the commencement of the proceedings by the plaintiff has caused the defendants any prejudice, because at all material times, since about October or November of 1993, the defendants have been aware of the fact that he was concerned at the discrepancy regarding the area of the land and that he intended to take legal action in respect of it. Discovery has been had between the parties and interrogatories delivered and answered by Mr Bjelica.
The question of what amounts to a fact material to the plaintiff’s case for the purposes of the legislation of this type was determined by the High Court in Sola Optical Australia Pty Ltd v Mills (1987) 163 CLR 628. The question of whether the trial Judge erred in the exercise of his discretion to extend the time within which the action could be instituted was not then in issue (p 639).
Matters going to the exercise of that discretion, fell for determination in Brisbane South Regional Health Authority v Taylor (1996) 186 CLR 541. The Queensland legislation there in question provided for preconditions to be met before the Court came to exercise a discretion, which was couched in terms that “the court may order that the period of limitation for that action be extended …”. The Territory legislation embodied in s 44(3) of the Limitation Act provides that the court may extend the limitation period if it is satisfied on the material fact issue and “that in all the circumstances of the case, it is just to grant the extension of time.” I do not consider that there is any material difference between the approach which is to be taken by this Court in respect of the Territory legislation and that taken by their Honours in Brisbane South Regional Health Authority v Taylor.
In that case Mrs Taylor sought an extension of time within which to bring an action against the Health Authority as being vicariously liable for the conduct of a doctor in 1979, in failing to explain the choices available to her when she was faced with the decision of whether to undergo surgery. She did not discover until 1994 that the diagnosis made in 1979 was wrong. The doctor was thought to be in Hong Kong, but he had not been located. Notes apparently made by the doctor at the time of his consultations with Mrs Taylor were available.
There is an issue in this case as to what facts and circumstances are relevant to the exercise of the court’s discretion, and, in particular, whether the share transactions and potential consequences of the HIH failure are matters which can be taken into account.
The plaintiff must satisfy the court that grounds exist for exercising the discretion in its favour. There is an evidentiary onus on the defendant or defendants to raise any consideration telling against the exercise of the discretion, but the ultimate onus of satisfying the court that time should be extended remains on the applicant (Brisbane South Regional Health Authority v Taylor per Toohey, Gummow JJ at p 547). Their Honours cite with approval the position as stated by Gowans J in Cowie v State Electricity Commission of Victoria (1964) VR 788 at 793 in a passage endorsed by Gibbs J in Campbell v United Pacific Transport Pty Ltd and Ors (1966) QDR 465 at 474:
“It is for the respondent to place in evidence sufficient facts to lead the court to the view that prejudice would be occasioned and it is then for the applicant to show that these facts do not amount to material prejudice.”
See also per McHugh J at p 551 and 554 with whom Dawson J agreed at p 544.
Relevant prejudice to the defendant is to be assessed by reference to the situation at the time of the application (per Toohey and Gummow JJ at p 548 and McHugh J at p 556). The whole of the period from the time the cause of action arose to the time of the hearing of the application is to be considered, not just the time which has elapsed between the time at which the action could have been commenced within the limitation period and the time of the hearing of the application.
Toohey and Gummow JJ at p 549 – 550 reject the proposition that the prejudice to be suffered by a plaintiff by not being given an extension of time is not to be weighed against that proven on the part of the defendant. Prejudice to the plaintiff, if the application is refused, “cannot be enough of itself to warrant an extension of time; in truth there would be no discretion to be exercised.” McHugh J at p 555 observed that:
“The justice of a plaintiff’s claim is seldom likely to be strong enough to warrant a court in reinstating a right of action against a defendant who, by reason of delay in commencing the action, is unable to fairly defend itself or is otherwise prejudiced in fact and who is not guilty of fraud, deception or concealment in respect of the existence of the action.”
I do not accept that the plaintiff is without fault. It recognised it may have had a cause of action before the end of 1993, but did not institute the action until just after the period of limitation expired. I do not accept that its mistake as to the limitation period absolves it of fault. That delay was due to its fault.
Cases reported since Brisbane South Regional Health Authority v Taylor have discussed and identified what are said to be differences in approach by the members of the Court. The plaintiff relies upon those apparent differences so as to submit that some of the matters referred to in par 10 are not relevant to the exercise of the discretion.
In Mason v Murray’s Charter Coaches & Travel Services Pty Ltd (1998) 88 FCR 308 at p 333, Sackville J identified the difference as follows:
“Both Dawson and McHugh JJ seem to have accepted that an applicant cannot succeed unless he or she negates significant prejudice (at 544, 555 – 556). On the other hand, Toohey and Gaudron JJ said (at 550) that the “real question is whether the delay has made the chances of a fair trial unlikely.” Kirby J stressed the need to consider the factual circumstances of each case, including any claimed disadvantage, while recognising that “it would be rare that the passage of time does not cause at least some disadvantage to prospective defendants” (at p 556).
At p 317 in Mason v Murray’s Charter Coaches & Travel Services Pty Ltd Higgins J relied upon what fell from McHugh J and Dawson J in asserting that:
“Weight must be accorded to the reasonable and legitimate expectation of a potential defendant that claims can no longer be made after the relevant time limit has expired.”
Differences in approach were also drawn to attention by the Full Court of the Federal Court in Paramasivam v Flynn (1998) 90 FCR 489 at p 509, but the court did not find it necessary to resolve the question in that case. Similarly, in Pomeroy v Thwaites Witham Pty Ltd (2001) 79 SASR 489, the members of the Full Court of the Supreme Court of South Australia drew attention to Brisbane South Regional Health Authority v Taylor, but as no submissions had been heard upon it, they considered it was not the case in which to decide which of the approaches canvassed in that case was the appropriate one (per Doyle CJ par 35-36). The matter was outlined in greater detail by Gray J commencing at par 78 and his Honour concluded that the correct approach had not been settled, noting that in most cases since Brisbane South Regional Health Authority v Taylor and in the case then under consideration, the application of either test had led to the same conclusion.
As did Gray J, I think it appropriate that I should now set out those passages in the judgments in the High Court in Brisbane South Regional Health Authority v Taylor which have led to the debate.
At p 550 Toohey and Gummow JJ said:
“The real question is whether the delay has made the chances of a fair trial unlikely. If it has not there is no reason why the discretion should not be exercised in favour of the respondent. The respondent says that it may still prove possible to locate Dr Chang, that in any event he would have to rely on his notes and furthermore that if he cannot be located the medical records would be admissible in evidence pursuant to s 92 of the Evidence Act 1997 (Q).”
Discussions in the following cases appear to have attributed to their Honours a conclusion that the only question is whether the delay has made the chances of a fair trial unlikely. With respect, I do not see it that way. That passage, in my opinion, was used in context of the circumstances of the case where the only real question was whether the delay made the chances of a fair trial unlikely. That their Honours did not intend that to be the exclusive test in all cases, I think, is demonstrated by what they had to say at p 548 concerning the court’s discretion to extend the time for the bringing of an action once any preconditions have been met. They said:
“A material consideration (the most important consideration in many cases) is whether, by reason of the time that has elapsed, a fair trial is possible.”
They did not go on to consider what may be other material considerations.
McHugh J at pp 552 – 554 identified a number of other considerations in the following:
“Courts and commentators have perceived four broad rationales for the enactment of limitation periods. First, as time goes by, relevant evidence is likely to be lost. Secondly, it is oppressive, even ‘cruel’, to a defendant to allow an action to be brought long after the circumstances which gave rise to it have passed. Third, people should be able to arrange their affairs and utilise their resources on the basis that claims can no longer be made against them. Insurers, public institutions and businesses, particularly limited liability companies, have a significant interest in knowing that they have no liabilities beyond a definite period. As the New South Wales Law Reform Commission has pointed out:
‘The potential defendant is thus able to make the most productive use of his or her resources and the disruptive effect of unsettled claims on commercial intercourse is thereby avoided. To that extent the public interest is also served.’
Even where the cause of action relates to personal injuries, it will be often just as unfair to make the shareholders, ratepayers or taxpayers of today ultimately liable for a wrong of the distant past, as it is to refuse a plaintiff the right to reinstate a spent action arising from that wrong. The final rationale for limitation periods is that the public interest requires that disputes be settled as quickly as possible.
In enacting limitation periods, legislatures have regard to all these rationales. A limitation period should not be seen therefore as an arbitrary cut-off point unrelated to the demands of justice or the general welfare of society. It represents the legislature’s judgment that the welfare of society is best served by causes of action being litigated within the limitation period, notwithstanding that the enactment of that period may often result in a good cause of action being defeated. Against this background, I do not see any warrant for treating provisions that provide for an extension of time for commencing an action as having a standing equal to or greater than those provisions that enact limitation periods. A limitation provision is the general rule; an extension provision is the exception to it. The extension provision is a legislative recognition that general conceptions of what justice requires in particular categories of cases may sometimes be overridden by the facts of an individual case. The purpose of a provision such as s 31 is ‘to eliminate the injustice a prospective plaintiff might suffer by reason of the imposition of a rigid time limit within which an action was to be commenced’. But whether injustice has occurred must be evaluated by reference to the rationales of the limitation period that has barred the action. The discretion to extend should therefore be seen as requiring the applicant to show that his or her case is a justifiable exception to the rule that the welfare of the State is best served by the limitation period in question. Accordingly, when an applicant seeks an extension of time to commence an action after a limitation period has expired, he or she has the positive burden of demonstrating that the justice of the case requires that extension.”
Dawson J agreed with McHugh J but added (at 544)”
“The section confers a discretion upon a court to extend time and that discretion should only be exercised in favour of an applicant where, in all the circumstances, justice is best served by so doing. The onus of satisfying the court that the discretion should be exercised in favour of an applicant lies on the applicant. To discharge that onus the applicant must establish that the commencement of an action beyond the limitation period would not result in significant prejudice to the prospective defendant. I agree with McHugh J that, once the legislature has selected a limitation period, to allow the commencement of an action outside that period is prima facie prejudicial to the defendant who would otherwise have the benefit of the limitation.”

At p 569 Kirby J said:
“Although attempts have been made to spell out the criteria to be taken into account in judging whether or not an order extending time should be made, care must be taken in the use of such criteria because of the different expression of the relevant provisions of limitation statutes. Furthermore, the factual circumstances of cases are infinitely various.”
I do not consider that I have to make a choice as to what has been called the different approaches adopted by their Honours. I do not consider that what fell from Toohey and Gummow JJ, read as a whole, operates so as to exclude the wider view put by McHugh J and supported by Dawson J and Kirby J.
The question is also debated at some length in Cubillo v Commonwealth of Australia and Gunner v Commonwealth of Australia (2001) 183 ALR 249 commencing at par 432.
The agent and owner were both aware of the plaintiff’s claim from a date at about the time the alleged cause of action arose. They had ample opportunity to seek out potential witnesses and record their statements. The letter of 11 November 1995 from the agent to the insurer demonstrates that. Although irrelevant upon this application, Mr Bjelica has filed and served an affidavit telling his version of the events and circumstances surrounding the events prior to the purchase and the discovery of the discrepancy. The evidence of each of the plaintiffs and the agent as to the critical issues are plainly marked out.
The share transfers did not of themselves bring about any prejudice to the agent in respect of the plaintiff’s claim. They were transactions entered into between shareholders on the first occasion and shareholders and a third party on the second. No shareholder is a party to the action.
The purchasers of the shares in the first transaction are no longer shareholders, their shares were sold on the second transaction evidenced by the agreement of 30 April 1997, a few days after the writ was served. Clause 9 of that agreement contains an indemnity given by the vendors of the shares to the agent in respect of all losses, damages, costs, penalties or expenses sustained by the agent after completion resulting from any claim for damages arising from breach of contract or tort. The parties dealt with each other in full knowledge that the claim was being pursued and made their arrangements accordingly.
Completion of that agreement by transfer of shares in exchange for the price was set for 30 April 1997, and there is no evidence that it took place at any other time. The terms of the indemnity, which clearly enough covers this claim, was not to hold unless there was a claim to be indemnified made upon any of the vendor shareholders of the company within three years of completion. There is no evidence that any such claim was made. I must infer that the vendor of shares will suffer no detriment in that regard.
The agent, however, stands to suffer loss calculated at ten percent of any judgment in favour of the plaintiff plus interest and costs because of the consequences of the HIH collapse. The sum of that detriment could amount to thousands of dollars. The present shareholders will, to that extent, be prejudiced by the diminution of the value of their shares. That prospective prejudice to the agent and shareholders has arisen as a consequence of the HIH collapse which intervened some years after the cause of action arose and the service of the writ. It arose during the period of relevant delay and will crystallise if the plaintiff is successful in establishing liability and obtaining an award for damages.
Counsel for the agent submits that that is the kind of event which Justice McHugh envisaged when he spoke of the rationale for the enactment of a limitation period, especially so that people should be able to arrange their affairs and utilise their resources on the basis that claims can no longer be made against them, and, further, because businesses, particularly limited liability companies, have a significant interest in knowing that they have no liabilities beyond a definite period.
Had it not been for the HIH collapse, the agent would have been in no worse a position now than it would have been at any other relevant time. The extent of the potential liability, however, has increased significantly in money terms. To what extent that has inhibited the agent’s ability to conduct its business is not disclosed.
I do not think that the agent has made out a case going to prejudice in relation to the share dealings and insurance problems. None of those things were brought about by the delay. Even though occurring during the period of the delay, they were external matters having nothing to do with the plaintiff or having no sufficient connection to its procrastination.
To shut the plaintiff out because of default of an insurer would be unjust. Were it otherwise, a defendant could rely upon any circumstance occurring in the relevant period which left it financially worse off in order to resist the plaintiff’s application for extension of time.
The other ground for advancing prejudice goes to the conduct of a fair trial by reason of the effect of delay upon a recollection of events by the agent’s witnesses, but in all the circumstances I do not consider that to be a significant factor.
If the application to extend time for the issue of the writ against the agent was refused, then consideration would have to be given to the position of the vendor and the solicitor, but the issue does not arise because I am satisfied that in all the circumstances it would be just to extend the time for the issue of the writ to the date upon which it was issued.
The application to extend time is granted.
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