Burzynski and Ors v DeGuerre Pty Ltd and Ors (Ruling)

[2011] VCC 863

IN THE COUNTY COURT OF VICTORIA Revised

Not Restricted

AT MELBOURNE
CIVIL DIVISION
DAMAGES AND COMPENSATION LIST

GENERAL DIVISION

Case No. CI-10-00378

SIGMUND BURZYNSKI

AND OTHERS (as per the attached Schedule)	Plaintiffs
v
DEGUERRE PTY LTD (Trading as MOMENTUM FINANCIAL GROUP) (ACN 083 385 531)
AND OTHERS (as per the attached Schedule)	Defendants

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JUDGE:	HIS HONOUR JUDGE MISSO
WHERE HELD:	Melbourne
DATE OF HEARING:	10 June 2011
DATE OF RULING:	22 June 2011 (Revised)
CASE MAY BE CITED AS:	Burzynski & Ors v DeGuerre Pty Ltd & Ors (Ruling)
MEDIUM NEUTRAL CITATION:	[2011] VCC 863

RULING
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Catchwords: PRACTICE AND PROCEDURE – application to extend the time for service of the writ - Rule 5.12 – Writ filed with a general indorsement – application to file and serve an amended statement of claim – whether the causes of action pleaded in the Amended Statement of Claim are wider than the general indorsement on the Writ – Rule 14.03(1) and (2) - whether amendment should be permitted where the cause of action is statute barred.

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APPEARANCES:	Counsel	Solicitors
For the Plaintiffs	Mr D McWilliams	GK Law
For the First and Fifth Defendants	Mr M Robins	Minter Ellison

SCHEDULE OF PARTIES

SIGMUND BURZYNSKI	First Plaintiff
and
JEAN BURZYNSKI	Second Plaintiff
and
ASSOCIATED PSYCHOLOGY SERVICE PTY LTD
(ACN 074 598 959	Third Plaintiff
and
PORT PHILLIP PSYCHOLOGY PTY LTD
(ACN 069 228 182)	Fourth Plaintiff
and
BURZYNSKI ENTERPRISES PTY LTD
(ACN 107 149 182)	Fifth Plaintiff
and
TEVALE PTY LTD
(ACN 074 598 959)	Sixth Plaintiff
and
ESTABROOK PTY LTD
(ACN 074 599 447)	Seventh Plaintiff
v
DEGUERRE PTY LTD (Trading as MOMENTUM FINANCIAL GROUP,
formerly C A RESULTS and AINSWORTH BUSINESS SOLUTION)
(ACN 083 385 531)	First Defendant
and
SCOTT ANDREW AINSWORTH	Second Defendant
and
MARK WILLIAM AINSWORTH	Third Defendant
and
WILLIAM EDWARD AINSWORTH	Fourth Defendant
and
SCOTT ANDREW KITCHEN	Fifth Defendant
HIS HONOUR:

Introduction

1          The plaintiff filed a Writ on 4 February 2010 with a general indorsement. It named five defendants. It was served on the first and fifth defendants.

2          Mr Williams of Counsel, who appeared for the plaintiffs, applied to have the time for service of the Writ extended, and to file and serve an Amended Statement of Claim. Mr Robins of Counsel, who appeared for the first and fifth defendants, resisted the application.

Time for Service

3          The Writ was filed on 4 February 2010. Rule 5.12(1) provides that a writ is valid for service for one year after the day it is filed. Therefore, the Writ was not valid for service after 4 February 2011.

4          The plaintiffs made an application to extend the time for service pursuant to Rule 5.12(2). According to a date stamp applied by the staff in the County Court Registry, the application was lodged on 9 or 16 May 2011.[1]

[1]             For some inexplicable reason, one of the documents lodged by the plaintiffs bears two date stamps.

5          The application was supported by an affidavit sworn by Mr Gad Kolsky, solicitor for the plaintiffs. The affidavit was sworn on 6 May 2011. Essentially, the reason advanced by Mr Kolsky for the plaintiffs’ failure to serve the Writ in time was the need to obtain expert evidence regarding aspects of the claim against the second, third, fourth and fifth defendants, and additionally, that because of a flood affecting his office, he lost originals of the documents relevant to this proceeding, requiring him to obtain copies.

6          Mr McWilliams referred me to a letter from Mr Kolsky to Quayles[2] dated 27 April 2011 instructing it to lodge the Writ, Statement of Claim and a Form 60 in the County Court. Form 60 is the general form of order authorised by the Rules of Court extending time for the service of a writ. It is unclear to me what Quayles did with the documents, because Mr Kolsky's affidavit is sworn after the day of the letter and on 6 May 2011, and the date stamp applied by staff in the Registry of the County Court is 9 and 16 May 2011.

[2]             I was not provided with an explanation of the service provided by Quales. I infer that it is a firm providing a service to solicitors to lodge documents.

7          I can only infer that either no attempt was made to lodge the documents, or it was unsuccessful, until either 9 or 16 May 2011.

8          Ordinarily, in the County Court in any event, applications to extend the time for service are made ex parte. The Judge to whom the application was referred refused to make the order sought on an ex parte basis, with the result that the application was referred to a directions hearing before me on 10 June 2011.

9          Rule 5.12(3) provides that an order extending time can be made before or after the writ has expired.

Should Time Be Extended?

10        Mr Robins submitted that the plaintiff must demonstrate that there is a good reason for the time to be extended. That proposition is supported by a number of authorities referred to in ‘Williams’ Civil Procedure.[3]

[3]             paragraph 5.12.25. Mr Robins referred me to the authorities in the paragraph in his outline of submissions

11        In Ramsay v Madgwicks (a firm),[4] Young CJ referred to the test to be applied by comparing the former ORDER 8, Rule 1 with the current rule. The former rule specifically referred to the Court or Judge being satisfied that reasonable efforts had been made to serve the defendant, “or for other good reason” as the test to be applied in determining whether to extend the time for service of a writ.[5]

[4] [1989] VR 1

[5]             Followed in Protec Pacific Pty Ltd v Steuler Industriewerke GmbH [2007] VSC 93, per Hansen J

12        The reason advanced by the plaintiffs, which they submit are good reasons, are contained in Mr Kolsky's affidavit. The first reason was to protect the plaintiffs’ interests before the relevant limitation period ran its course. The second reason was the necessity for the plaintiff to obtain expert evidence regarding “certain aspects” with respect to the second, third, fourth and fifth defendants. What is referred to as “certain aspect s” is not explained in the affidavit; however, I infer that it means the question of the liability of the second, third, fourth and fifth defendants for the losses which the plaintiffs allege they have sustained as a consequence of the conduct of those defendants.

13        Mr Robins criticised the affidavit of Mr Kolsky as advancing no good reasons. He referred to the issue of the retention of an expert, and referred me to correspondence from his instructing solicitor reminding Mr Kolsky that a report of an expert had been promised, but had not been provided.

14        Whilst I am not entirely satisfied that the reasons advanced by Mr Kolsky are good reasons, I propose to order that the time for service of the Writ be extended.

15        The Civil Procedure Act 2010 refers to an overarching purpose in section 7(1), which is in the following terms:

“The overarching purpose of this Act and the rules of court in relation to civil proceedings is to facilitate the just, efficient, timely and cost- effective resolution of the real issues in dispute.”

16        Section 9(1) refers to the Court being obliged to further the overarching purpose, amongst which are the just determination of the civil proceeding; the efficient conduct of the business of the Court; the efficient use of judicial and administrative resources and the timely determination of the civil proceeding.[6]

[6]             paragraphs (a), (c), (d) and (f)

17        Refusing the application is not a bar to the plaintiffs filing another writ based upon the same causes of action against the second, third and fourth defendants. It seems to me that I must have regard to the provisions of the Civil Procedure Act 2010 in the determination of this application.

18        The refusal of the application will lead to a degree of dislocation between the existing proceeding and any new proceeding. It will inevitably lead to an application being made pursuant to Rule 9.12 for consolidation of the two proceedings. It will involve one trial with potentially two judgments and two separate sets of orders which might create some tension and degree of conflict in the orders.

19        In my view, the purpose served by the Civil Procedure Act 2010 is to avoid this sort of unintended consequence by a rigid application of the Rules of Court.

The Cause/s of Action

20        The general indorsement comprises six paragraphs. Despite the fact that it is a general endorsement, it does not comply with the Rules of Court. It should comply with Rule 13.01(2), which requires a pleading to be divided into paragraphs numbered consecutively with each allegation, insofar as it is practicable, to be contained in a separate paragraph.

21        In my view, even a general indorsement of the length of this general indorsement must comply with the Rules of Court. Non-compliance leads to difficulty in the expression of the cause of action and equally, difficulty for the reader to comprehend what cause of actions are raised by the pleading.

22        The pleader of the general indorsement deserves criticism for not having drafted the general indorsement in a conventional manner.

23        Despite my irritation in the way in which it has been drafted, it now falls to me to determine what the causes of action actually are in order to deal with the application made by Mr McWilliams to amend the Statement of Claim and the objection taken by Mr Robins that there are fresh allegations which are wider than what is contained in the general indorsement, and therefore, they should not be allowed.

24        In summary, the general indorsement pleads the following:

• The defendants are accountants and tax agents.

• Between 1991 and 2009, the plaintiffs retained the defendants, or one or more of them.

• The retainer was relevant to work which the defendants performed in relation to the Burzynski Staff Superfund, Burzynski Discretionary Trust and the Estabrook Unit Trust.

• The defendants, or one or more of them, negligently and/or in breach of their retainer and/or in breach of their fiduciary duty failed to undertake each of the steps referred to in paragraphs (a)-(e) sub-joined to the fourth paragraph.

• Alternatively, the defendants, or one or more of them, made representations concerning the lodgment of taxation returns which amounted to misleading and deceptive conduct.

• In the first paragraph the pleader pleads the causes of action in damages for negligence and/or breach of contract and/or breach of fiduciary duty and/or misleading or deceptive conduct contrary to the Trade Practices Act 1974 and/or the Fair Trading Act 1999.

25        The Amended Statement of Claim is a very elaborate pleading drawn by Mr McWilliams which pleads facts upon which it is alleged that there was a breach of agreement, breach of a duty of care, and misleading and deceptive conduct.

26        Mr Robins submitted that paragraphs 11A, 11B and 18A of pleadings are wider than the general indorsement amounting to fresh allegations.

27        Paragraph 11A pleads that the first defendant, or alternately the partnership defendants (defined in paragraph 8A), would provide services referred to in paragraphs (a)-(h) sub-joined to paragraph 11A. Paragraph 11B pleads that the first defendant, or alternatively the partnership defendants, were to advise the first, second and seventh plaintiffs about the purchase of units in the Estabrook Unit Trust.

28        Paragraph 18A alleges, as an alternative to paragraph 18 which pleads a breach of duty of care, that the first defendant, or alternately the fifth defendant, and alternately the partnership defendants, were guilty of wilful or reckless disregard of the plaintiffs’ interests in connection with advice by the Australian Taxation Office.

29        Mr Robins referred me to Rule 14.03, which is in the following terms:

“(1)	Where a statement of claim is served in a proceeding commenced by writ, the plaintiff may therein alter, modify or extend the claim as indorsed on the writ without amendment of the indorsement.
(2)	The Court may, by order, allow the plaintiff to serve a statement of claim the effect of which will be to add a new cause of action to or substitute a new cause of action for a cause of action disclosed in the writ.”

30        Mr Robins submitted that “these claims … are manifestly new and substantially different from those in the general indorsement”. In my view, that observation is correct. However, adding a new cause of action is permitted by Rule 14.03(2). The authorities which Mr Robins referred to me are all very well, but I am bound by Rule 14.03(2) and must give effect to it. I see no impediment to permitting the plaintiffs to plead the new causes of action.

31        Mr Robins also referred to a settled practice that an indorsement cannot be amended to add a new claim after the expiry of the relevant limitation period. He referred to Rubinstein v Truth & Sportsmen Ltd[7] in which Adam J referred to that settled practice.[8]

[7] [1960] VR 473

[8]             at 475

32        The allegations pleaded in paragraph 11A are premised on conduct on the part of the first defendant, or alternatively the partnership defendants, from about 1 November 2001. In accordance with the settled practice, I will not allow the amendment in that form. However, I will entertain further submissions from Mr Williams to re-plead paragraph 11A to avoid infringing that settled practice.

Orders
33	I propose to order that the time for service of the Writ be extended for one month from the date upon which I hand down this ruling. It is my view that the plaintiffs have had more than adequate time to formulate their claim against the defendants and should now be in a position to prosecute that claim.
34	I propose to give leave to the plaintiffs to file and serve an Amended Statement of Claim in the form provided to me by Mr McWilliams, subject to further argument relevant to paragraph 11A, and otherwise in relation to the submission made by Mr Robins that the particulars provided in the Amended Statement of Claim are, in some respects, vague and incomplete.
35	I do not propose to order that the plaintiffs serve an expert report. I am of the view that interlocutory orders should be agreed between the parties, or by orders of the Court, which will include an order for the exchange of expert reports.

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