| JURISDICTION : DISTRICT COURT OF WESTERN AUSTRALIA LOCATION : PERTH CITATION : DENWEST NOMINEES PTY LTD & ORS -v- IRDI [2003] WADC 168 CORAM : COMMISSIONER GILES HEARD : 6 DECEMBER 2002 DELIVERED : 6 AUGUST 2003 FILE NO/S : CIV 2326 of 2000 BETWEEN : DENWEST NOMINEES PTY LTD (ACN 056 445 998) MICHAEL JOHN WALKER
PAULINE KAY WALKER
Plaintiffs
AND
AGOSTINO IRDI
Defendant
Catchwords: Application to set aside renewal of writ - Order 12 r 6 - Date for commencement of limitation period in contract, tort and equity
Legislation: Limitation Act 1935, s 27, s 38(1)(c)
Rules of the Supreme Court1971, O 12 r 6
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Result:
Application granted Representation:
Counsel:
Plaintiffs : Mr K M Penkin
Defendant : Mr S F Popperwell
Solicitors:
Plaintiffs : Kevin Penkin & Associates
Defendant : Pynt & Partners
Case(s) referred to in judgment(s):
Commercial Developments Pty Ltd (t/as as Don Rogers Motors Pty Ltd) v Mercantile Mutual Insurance (Workers' Compensation) Ltd (1991) 5 WAR 208
Hawkins v Clayton (1988) 164 CLR 539
Smith & Anor v Town and Country Bank & Ors, unreported; FCt SCt of WA; Library No 970716; 18 December 1997
Wardley Australia Ltd v Western Australia (1992) 175 CLR 514
Webster v Lampard (1993) 177 CLR 598
Case(s) also cited:
Brealey v Board of Management Royal Perth Hospital (1999) 21 WAR 79
Cartledge v E Jopling & Sons Ltd [1963] AC 758
Cheney & Anor v Duncan (2001) 34 MVR 28
Krawszyk v Graham [1966] SASR 73
Pirelli General Cable Works Ltd v Oscar Faber & Partners (a firm) [1983] 2 AC 1
Ramsay v Madgwicks (a firm) [1989] VR 1
Sampson v Zucker, unreported; FCt SCt of NSW; BC9606395; 11 December 1996
Scarcella v Lettice (2000) 51 NSWLR 302
Van Leer Australia Pty Ltd v Palace Shipping KK (1981) 180 CLR 337
Victa Ltd v Johnson (1975) 10 SASR 496
Wilson v Rigg (2002) 36 MVR 451
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1 COMMISSIONER GILES: This is an application by the defendant to set aside an order made by his Honour Judge H H Jackson to extend the validity of a writ of summons. Alternatively it is sought that the service of the writ be set aside.
2 The events which have led to this application occurred in 1992. 3 The facts said to underpin this dispute are largely derived from an affidavit sworn by Mrs Stewart on 14 August 2002. I am conscious that none of this material has been tested. However, the defendant has filed no further affidavit contesting the evidence put before the court by the plaintiff despite orders permitting him to do so made by Deputy Registrar Hewitt on 5 November 2002. I have therefore proceeded on the assumption that the plaintiffs' allegations are ultimately accepted on the trial of the action (Webster v Lampard (1993) 177 CLR 598 at 608). 4 The plaintiffs in these proceedings are Michael John Walker and Pauline Kay Walker, a married couple and their company, Denwest Nominees Pty Ltd ("Denwest"). The defendant is their former solicitor. 5 On 10 July 1992 Mrs Walker says that she instructed the defendant to act for her, her husband and Denwest in respect of a land and business transaction. 6 The Walkers had decided to purchase the Cunderdin Roadhouse business and the freehold title to the land. The business and land were owned by Mr James Stewart and Mrs Kerry Stewart. 7 The Walkers then formed a company as a vehicle for the purchase, being Denwest Nominees Pty Ltd, and were registered as sole directors and shareholders. This they say was on the defendant's advice. 8 Mrs Walker attests that she instructed the defendant to prepare an agreement for purchase of the business and land for a total of $250,000 being $110,000 for the business and $140,000 for the land. 9 Mrs Walker signed the agreement on 10 July 1992. The agreement was signed by the Stewarts on 13 July 1992 with settlement scheduled for 27 July 1992. 10 According to Mrs Stewart's affidavit the agreement drafted by the defendant, and signed by the Stewarts and the Walkers included a term to the effect that:
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(a) If Denwest or Mrs Stewart did not have sufficient funds to complete the purchase of the Land by the time settlement was scheduled to take place, the Stewarts would lease the Land to Denwest or Mrs Stewart on the terms specified in the Agreement. (b) If Denwest or Mrs Stewart did not have sufficient funds to complete the purchase of the Land by the time settlement was scheduled to take place, the Stewarts would grant to Denwest or Mrs Stewart an option to purchase the Land at a price of $140,000 within two years ("the Option"). 11 In late July 1992 the plaintiffs realised they would have insufficient funds to complete the sale. Mrs Walker says that she then instructed the defendant to prepare a lease agreement, which would provide for her and her husband to occupy the land, with an option to purchase the land for $140,000. 12 In circumstances that are not clear, it is alleged that the defendant also accepted instructions to act for Mr and Mrs Stewart in respect of the lease and settlement. 13 Settlement of the business took place on 27 July 1992. The Walkers signed the lease on 29 September 1992. 14 The lease is not before the court. It appears to be common ground that an option to purchase the land in favour of the plaintiffs was not included in the lease. Mrs Stewart says that the defendant told her that such an option could not be put in the lease. 15 Mrs Walker says that in about September or October 1993 the plaintiffs decided to exercise the option. However, Mr Stewart advised the plaintiffs that the price of the land would be $250,000 not $140,000 as had allegedly been agreed. This part of the dispute has been named "the Option dispute". 16 The defendant declined Mr and Mrs Walker's request that he act for them in respect of the Option dispute. They then engaged Mr Byrne, a solicitor, who advised them that the defendant had been negligent in his preparation of the lease. The date upon which the plaintiffs received this advice is not entirely clear. On the evidence presently before the court the earliest possible date is 4 January 1994 when the Walkers first engaged Mr Byrne. However, I think it is most likely that by 17 January 1994, they were informed that the defendant should be advised that he had been negligent.
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17 On 29 September 1994 Mr Byrne issued proceedings in the Supreme Court on behalf of the plaintiffs to enforce the Option. The basis of this claim was the agreement. On 10 February 1995, the Stewarts commenced Local Court proceedings seeking recovery from the plaintiffs for moneys allegedly owed on the lease.
18 On 26 April 1995, the Stewarts and the plaintiffs entered into a deed of settlement settling the Option dispute, the Supreme Court proceedings and the Local Court proceedings. The deed included an agreement for the plaintiffs to acquire the land for $157,000. 19 The plaintiffs wished to proceed against the defendant and on 27 April 1995, instructed Mr Byrne to do so. Unfortunately it appears that little or no action was taken on the claim, for many years. The delay led to a complaint to the Legal Practitioners Complaints Committee. 20 A writ was eventually filed in the District Court on 7 September 2000 commencing these proceedings. The writ was however not served. 21 On 16 November 2001, the plaintiffs engaged Mr Kevin Penkin in respect of the proceedings against the defendant. Mr Penkin communicated with the defendant and his insurers, in an attempt to settle the matter. The insurers requested Mr Penkin not to serve the writ because they wished to investigate the claim further, with a view to a possible settlement. As a consequence the writ remained unserved. 22 On 14 August 2002, the plaintiffs made an ex parte application for renewal of the writ of summons which was acceded to by his Honour Judge H H Jackson in Chambers on 18 September 2002. 23 The defendant was served with the writ on 2 October 2002 and entered a conditional appearance on 11 October 2002. He then brought this application before the court.
The defendant's case 24 The defendant now seeks pursuant to O 12 r 6 either to set aside the order of his Honour Judge H H Jackson renewing the writ or to set aside the service of the writ. He argues that the claim was statute-barred at the date of its issue on 7 September 2000. Even if this is wrong, he argues that the writ should not have been renewed because there is no satisfactory explanation as to why the writ was not served within 12 months of its issue, or of the failure by the plaintiffs to apply for its renewal before it had expired.
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25 An option to purchase land is, the defendant submits, an interest in land in its own right. It is a negotiable interest, and can be assigned for value.
26 It is, the defendant submits the time at which this right is lost that the cause of action accrues. The basis of the claim in contract and tort, is the failure of the defendant to include the right to an option in the lease, allegedly against his instructions. 27 The plaintiffs' statement of claim asserts that the defendant has: 28 The Limitation Act 1935 provides that actions shall be commenced "within the time herein expressed after the cause of such actions, suits or other proceedings respectively". For actions for any "simple contract" and other actions founded on tort the time prescribed is six years s 38(1)(c)(v) and s 38(1)(c)(vi). 29 The defendant submits that the limitation period for the alleged breach of contract runs from the date of the breach, which it argues was on 29 September 1992 when the plaintiffs signed the lease. If this is right, time expired on 29 September 1998, almost 2 years prior to the date of issue of the writ. 30 The defendant further argues that the limitation period for the action in negligence runs from the date upon which the plaintiffs first suffered loss or damage. The defendant says this date was also 29 September 1992. 31 In respect of the plaintiffs' claim for breach of fiduciary duty the defendant contends that while there is no formal limitation period, "equity follows the law", and the court should apply the limitation period by analogy where the remedy sought corresponds to the remedy at law. 32 That rule, the defendant submits should apply unless it is unconscionable to do so. The plaintiffs first became aware of the defendant's alleged failure to include the option in the lease at the latest, on 4 January 1994. Even if this were the appropriate date for commencement of the limitation period, (which is not conceded by the defendant) the effect of the six-year limitation period is that the cause of
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action expired on 4 January 2000, still some months prior to the issue of the writ, on 7 September 2000. 33 The defendant argues the interests of justice are not served by the renewal of the writ because there is an absolute bar to the claim which would prevent the plaintiffs from succeeding, no matter how meritorious their claim may be otherwise be. 34 The defendant says even if he is wrong on the limitation point the writ should not have been renewed. This is because the plaintiffs have not explained why no action was taken by them personally to serve the writ, when it was clear that their solicitor was delaying this step of the proceedings.
The plaintiffs' case 35 Mr Penkin for the plaintiffs submits that the cause of action in contract and tort did not arise until 26 April 1995, when the various actions between the Stewarts and the Walkers were settled. Until this date, Mr Penkin submits that the loss was not realised, but was only contingent or prospective. The Stewarts might never have attempted to exercise the option they believed they had. 36 He also submitted that in order for the court to make a ruling about the limitation period point, there is a need for further evidence before the court. 37 Furthermore, he explains the delay in prosecuting the matter was largely the fault of the plaintiffs' former solicitor, and that the plaintiffs should not bear the burden of this default. The delay in serving the writ, once Mr Penkin was instructed, was due to the request by the insurers not to serve the writ, and pressure of work in his own office.
The basis of this application 38 The present proceedings came about by way of an application by the defendant pursuant to O 12 r 6, which provides: "(1) A defendant in any cause may enter a conditional appearance denying the jurisdiction of the court or reserving the right to apply to the court to set aside the originating process, or the notice thereof, or the service or (sic) the originating process, or notice thereof on the
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ground of any informality or irregularity which renders the originating process or the service thereof invalid, and shall not therefore be deemed to have submitted to such jurisdiction, except as to the costs occasioned by the appearance or by any application under this Rule. (2) The defendant shall forthwith apply to the Court to have the question raised by his conditional appearance decided, and if such an application is not made within 14 days from the entry of the conditional appearance, or if the application be dismissed, the conditional appearance shall, unless the court otherwise orders, become and operate as an unconditional appearance." 39 The nub of the defendant's case in the application before me is that the court lacks jurisdiction to hear the claim, or the writ suffers from an "irregularity" which renders it invalid, because the causes of action expired prior to the issue of the writ. 40 I have considered carefully the question of whether this application is premature. This is particularly in light of the comments by the majority in Wardley Australia Ltd v Western Australia (1992) 175 CLR 514 about the undesirability of having limitation arguments determined in advance of the hearing of the action. In that decision, the majority made this clear: "We should, however, state in the plainest of terms that we regard it as undesirable that limitation questions of the kind under consideration should be decided in interlocutory proceedings in advance or the hearing of the action, except in the clearest of cases. Generally speaking, in such proceedings, insufficient is known of the damage sustained by the plaintiff and of the circumstances in which it was sustained to justify a confident answer to the question." (at 533) 41 Denying litigants the right to air their claims is an extremely serious step and should only be done when the claim is unequivocally and completely hopeless. The decision-maker must then try to forecast what other evidence might possibly emerge during the proceedings which could be relevant to the question of when the causes of action accrued. Predicting evidence, the nature of which is now not known, is a difficult task. 42 I also gave close attention to this issue because of the submission by Mr Penkin that not all the relevant facts were before the court to allow the
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matter to be determined. Indeed I pressed Mr Penkin to identify what those factual matters might be. Mr Penkin did not identify any other issues about which facts might be adduced, which would impact on the question of time limits. For myself, I could not identify any. 43 While no doubt it would be considerably easier to allow the claim to proceed and leave the limitation period issue for another day, I cannot see how anything crucial to that argument could change by the adducing of additional factual material. 44 This application calls upon the court to decide when each or the three alleged causes of action arose, on the statement of claim and the plaintiffs' affidavit.
Contractual claim 45 The plaintiffs' statement of claim dated 21 December 2000, asserts that the defendant had an express contractual duty to prepare a lease and option to purchase agreement in accordance with their instructions (par 16). It also alleges that on or about late July 1992, the plaintiffs instructed the defendant to prepare the lease and option agreement between the plaintiffs and the Stewarts (par 10). 46 While I have not seen the lease, it appears to be common ground that it did not contain any reference to the option. 47 As previously indicated the Limitation Act 1935 requires an action in contract to be commenced within six years "after the cause …" of such action (s 38). What is "the cause" of the contractual action against the defendant and when did it arise? 48 The plaintiffs say the relevant date was on the settlement of the Option dispute and the other dispute in the Supreme Court on 26 September 1995. This is when it is agreed the plaintiffs had known the extent of their success in their claim against the Stewarts. Up until this point, they did not, nor could they know whether they were going to suffer any measurable loss as a consequence of the defendant's actions. 49 This submission confuses two issues. The first is the question of when the loss is suffered. The second is the quantum of that loss. As submitted by the defendant, an option to purchase land is an interest in land. It is a thing of value. Its value might fluctuate over time. That is true of most things of value. But that fluctuation in value is not the same thing as the right being lost. On the Walkers' version of the facts they
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thought they were acquiring an option to purchase, and they did not. That is when the damage occurred. 50 In my opinion, and assuming the facts are as stated by the Walkers, the breach occurred at the time the defendant failed to include the term in the lease, or alternatively failed to advise them how else they may protect their right to acquire the land in the future at the agreed price. This was at the very latest, on 29 September 1992 when the agreement was signed. The limitation period ended on 29 September 1998, well before the writ was issued.
Claim in tort 51 A cause of action in negligence accrues when damage is suffered (Hawkins v Clayton (1988) 164 CLR 539 at 599 per Gaudron J). The determination of that date is however, very much reliant on the particular circumstances. The plaintiffs' counsel argues for 26 September 1995, as being the date of the accrual of the action in tort, being the date upon which the Option dispute was settled between the Walkers and the Stewarts. 52 The judgment of the High Court in Hawkins v Clayton (supra) is put by the plaintiffs' counsel as support for this date. I do not think it assists. In that case a solicitor failed to inform the executor and beneficiary of a will, that the will had been made, until six years after the testatrix's death, thereby allowing the main asset to deteriorate in value. The solicitor was sued in negligence by the beneficiary. 53 The majority of the court (Brennan, Deane and Gaudron JJ) held that the six-year limitation period did not bar the action. Their reasons for doing so differed, but were strongly influenced by the fact that the solicitor had concealed the existence of the will: "Yet, if the argument founded on the Limitation Act, is right, the solicitors' breach of duty, persisted in throughout all or most of the limitation period, has successfully produced an exemption from their liability to compensate an executor for loss which their breach of duty caused. It is not an attractive argument. If the argument be right, there is an incentive for a solicitor whose breach of a duty imposed by law causes damage to an executor to conceal it from the executor until six years have passed, even though further damage may accrue from day to day so long as the concealment continues. The argument does not sit easily
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with the public perception sedulously cultivated by professional societies, that the professional standards of solicitors assure substantial protection in the administration of the estates of deceased clients. … Whether the raising of the Limitation Act in a case like the present is regarded as appropriate or not, the issue raises questions which depend on the answer to a technical question: when does a cause of action in tort for breach of a duty to disclose first accrue? The majority of the Court of Appeal held that such a cause of action first accrues when damage occurs irrespective of the claimant's knowledge (per Kirby P) or as soon as the wrongful act has caused some damage beyond what can be regarded as negligible: per Glass JA. There is no doubt that most causes of action for negligence first accrue when the plaintiff first suffers damage caused by the defendant's breach of duty. … This case, however, is not an ordinary case in which a plaintiff is not temporally the last element of the cause of action to occur. Unlike the ordinary case, the last element to occur in a case of the present kind is the nominated executor's assumption of the office of executor. Until that occurs, the cause of action is not complete. For the purposes of s.14(1)(b) of the Limitation Act, 'time runs from the accruer of the cause of action, but a cause of action does not accrue unless there be some one who can institute the action': Meyappa Chetty v Supramanian Chetty; and see Thomson v Clanmorris (Lord). Until the nominated executor assumes the office of executor, the cause of action does not accrue and time does not begin to run. If a cause of action is itself an asset which devolves on the executor or arises from an infringement of the proprietary or possessory rights of an executor in respect of the estate, the executor's ignorance of his title would not prevent the time from running: cf. Knox v Gye. But where no action can be brought by the nominated executor until he assumes office, time runs only from that event. Time commenced to run in this case only from Mr Hawkins' assumption of the office in March 1981. The action was commenced within six years thereafter. The defence
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based on the Limitation Act fails." (Per Brennan J at 561 - 561.) (See also Gaudron J at 598 – 602.) 54 The plaintiffs are not assisted by this analysis. The "last element" in their case was the time at which damage was caused – that is, when the defendant delivered a lease for their signature which did not include the option to purchase. 55 Some comfort could perhaps be drawn by the plaintiffs from the reasoning of Deane J in Hawkins v Clayton (supra). He was of the view that the limitation period ran from the date upon which the beneficiary first discovered the existence of the will. This is because: "… it could not have been the legislative intent that the effect of provisions such as (the Limitation Act) should be that a cause of action for a wrongful act should be barred by lapse of time during a period for which a wrongful act itself precluded the bringing of proceedings." (at 590) 56 If it were proved that the defendant deliberately omitted the option to purchase in order to benefit the Stewarts, and then deliberately concealed the omission from the Walters thereafter this argument might have some application. However, the Stewarts first became aware of the omission of the option to purchase in September or October 1993, and were advised that the defendant had been negligent in January 1994. These dates do not produce a result favourable to the plaintiffs. 57 Both counsel relied on Wardley Australia Ltd v Western Australia (supra), in which the High Court considered the three-year limitation period provided for in the Trade Practices Act 1974 (C'th). That case depended upon the interpretation of an agreement to indemnify a bank made by the Western Australian State Government arising out of the collapse of the Rothwells Bank. 58 The terms of the indemnity itself were seen by the court as determining the date upon which the action in misrepresentation accrued. The indemnity provided that before the bank could claim on the indemnity, it must proceed against Rothwells, with the amount of any deficiency remaining then being the subject of a claim under the indemnity. 59 The High Court held that the cause of action accrued, and limitation period commenced if and when the bank's relevant net loss was quantified. Until then, the liability was "contingent and executory".
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60 In the present case, the plaintiffs first suffered loss or damage when the lease agreement was signed by them (29 September 1992) omitting the option to purchase. They thought they were acquiring the right to purchase the land in the future for $140,000. Instead they acquired no such right. Their legal position was affected to their detriment in two ways.
61 First, they had no right to require the owners to convey the property to them. Second if the owners did wish to sell the property, they would not be obliged to sell it to the purchasers for a particular sum (of $140,000) but could ask for any price they chose. 62 My view is that in tort, the loss was suffered on either of the last two dates. The better view in my opinion is the first date, when the lease was signed. This was the point at which the plaintiffs lost their right to enforce an option to buy for $140,000.
Claim for breach of fiduciary duty 63 The plaintiffs' statement of claim alleges that the defendant owed them fiduciary duties to act in good faith, not to place himself in a position of conflict of interest and to act in the best interests of the plaintiffs (par 19). It is further alleged in par 22 that the defendant: (i) "knowingly and intentionally" preferred the interests of the Stewarts to those of the plaintiffs; (ii) continued to act for the Stewarts and the plaintiffs notwithstanding that having regard to the true nature of the transaction their interests conflicted; (iii) deliberately concealed the true nature of the transaction from the plaintiffs. 64 Damages, or in the alternative, equitable compensation is sought, of $60,224.65. 65 The District Court has limited jurisdiction to grant equitable relief pursuant to s 55 and s 57 of the District Court Act, and s 25 of the Supreme Court Act in relation to a matter that is within jurisdiction (Commercial Developments Pty Ltd (t/as as Don Rogers Motors Pty Ltd) v Mercantile Mutual Insurance (Workers' Compensation) Ltd (1991) 5 WAR 208 at 217.
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66 The defendant submits that "equity follows the law" such that it should adopt the six year limitation period imposed by the common law.
67 Speaking of this maxim, the authors Meagher, Gummow and Lehane (Equity: Doctrines and Remedies, 4th ed) say: "The Jacobean Statute of Limitations did not apply to equitable suits. Nonetheless, in appropriate circumstances, the courts of equity would hold that an equitable claim was barred by lapse of the requisite period of time, if there existed an analogous legal right which would have been defeated by a plea of the statute in an action at law. (at par 3-040) 68 It will be noted that the learned authors tempered their remarks with the words "in appropriate circumstances". They do not contend for the rule as being absolute or all-embracing. The well-known exception to this rule is in the case of fraud, which has concealed the breach from the beneficiary. 69 The plaintiffs' statement of claim includes the allegation that the defendant "deliberately concealed the true nature at the transaction" from them. The meaning of this is somewhat unclear. However, it does appear to suggest that the plaintiffs believe that the defendant deliberately omitted the option to purchase from the lease because he had also accepted instructions from the Stewarts, and chose to favour their interests. Furthermore, it suggests that the defendant deliberately concealed his omission of the option to purchase from the lease. 70 The legal position in Western Australia as to limitation periods in the event of fraudulent concealment of a cause of action, or a fraud involved in the wrongful act itself was discussed comprehensively in Smith & Anor v Town and Country Bank & Ors, unreported; FCt SCt of WA; Library No 970716; 18 December 1997 at 48 – 51. A claim for equitable compensation is analogous to a claim for damages at common law. Equity would apply the analogy of the common law limitation period (at 49). 71 Section 27 of the Limitation Act 1935 applies to permit an equitable claim to run from "… the time at which such fraud is, or with reasonable diligence might have been discovered." While this may, depending on the ultimate facts, apply, it still does not assist the plaintiffs.
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72 The plaintiffs first became aware of the omission of the option to purchase from the lease agreement in September or October 1993. They were advised the defendant may have been negligent in January 1994.
73 These dates do not produce a six-year limitation period which reaches the date of lodgement of the writ.
Conclusion 74 In my view the causes of action in contract and tort pleaded by the plaintiffs in their statement of claim became statute barred, prior to the lodgement of the writ. Furthermore, claim for breach of fiduciary duty against the defendant is also barred. 75 The other issue is whether as a matter of discretion the writ ought to have been extended. Because I have considered the matter on other grounds I have not dealt extensively with this issue. For the record, however, had the action not been barred by the lapse of time, I would have exercised my discretion in favour of allowing the writ to be renewed. The plaintiffs have pursed these matters diligently, except for a period of illness suffered by Mrs Walker. The delay is pursuing the matter has been the fault of their former solicitor, and they should not have to bear this burden, where the discretion of the court can be exercised in their favour. 76 I will hear counsel as to the appropriate form of orders and costs.
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