Mckanna, Michael Charles v Aspect Homes Pty Ltd

[1983] FCA 397

CATCHWORDS

Practice and procedure - extension of time fot filing statement of claim - prejudice to defendant - relevance of deliberate refraining by defendant from applying to have action dismissed for want of prosecution.

MICHAEL CHARLES McKANNA

V.

ASPECT HOMES PTY. LIMITED

NO. A.C.T. G48 Of 1983

Coram: Blackburn, Sheppard & Neaves JJ.

16 November 1983

Canberra

IN THE FEDERAL COURT OF AUSTRALIA

AUSTRALIAN CAPITAL	TERRITORY	No. A.C.T.	G48 of	1 9 8 3
DISTRICT REGISTRY GENERAL DIVISION

ON APPEAL FROM THE SUPREME COURT OF

THE AUSTRALIAN CAPITAL TERRITORY

BETWEEN: MICHAEL CHARLES MCKANNA

Appellant

- AND : ASPECT HOMES PTY. LIMITED

Respondent

O R D E R

Judges Making Order:	Blackburn, Sheppard & Neaves JJ.
Date of Order:	16 December 1 9 8 3
Where Made:	Canberra

THE COURT ORDERS that:

1. the appeal be allowed.

2. The order of the Supreme Court be set aside.

3 . In lieu thereof, order that the appeal from the

Reglstrar be dismissed.

4 .	The statement of clam already filed be struck out.
5.	The respondent pay the appellant's taxed costs of
the appeal and of the proceedings before the Reglstrar and the ludge of the Supreme Court.

!

I THE COURT:

On 12 April 1977 the respondent to this appeal issued a writ Out of the Supreme Court of the Australian Capital Territory against the appellant. The writ bore this general indorsement

"The plaintiff's claim is for damage

(sic) for breach of duty by the

defendant as a director of the

plaintiff".

An appearance was entered on 2 0 April 1977. Order 24 rule 1 of the Rules of the Supreme Court requires that the plaintiff shall deliver a statement of c l a m within 1 4 days after appearance. On 2 May 1983, more than six years after appearance, the respondent, as plaintiff, applied under Order

6 4 rule 5 ( 1 ) of the Rules for an extension of time for the

delivery of a statement of claim which made allegations about

the conduct of the defendant as a director of the plaintiff

between 2 May 1975 and 8 March 19.77.

The application was heard by the Registrar of the

Court, who refused it, supporting his decision with reasons in

writing. Appeal was brought to a Judge of the Court under

Order 61 rule 5, which provides inter alia that such an appeal

shall be by way of hearmg de novo of the application. The

learned judge upheld the appeal and, on terms, extended the

tune for delivery of the statement of clam. The respondent

accordingly filed and dellvered the statement of claim. The

defendant in the action appeals against the learned ~udge's

declslon.

The procedural hlstory of the actlon is lamentable.

At the time of appearance the defendant's solicltors requested a statement of claim; the plaintiff's solicltors' reply was

2.

that the statement of claim was being settled by counsel. Srx months later, the defendant's solicitors asked whether the plaintiff intended to proceed; the reply was that the statement of claim would be filed within seven days. Five months later, the defendant's solicitors informed the plaintiff's solicitors that they would apply to have the action dismissed for want of prosecution unless a statement of claim were filed within seven days. The result was an exchange of correspondence which the learned judge regarded as an agreement that a statement of claim would not be required for the time being. Thls exchange of correspondence (which

included the forwarding of a statement of claim with the request that the defendant consent to its late filing) took place in Aprll, May and June 1978, and the effect of the agreement was that since there was a possibility of criminal proceedings against the defendant in respect of the matters on which the plaintiff relied, no further steps would be taken in the act ion until the criminal proceedings were complete. Consent to the late filing was neither given nor refused, and no statement of claim was filed. It is to be noted that this agreement was reached at the request of the defendant, to whlrh the plalntiff acceded. The plaintiff's solicitors wrote once in June 1978, once in July 1978, and once in August 1978, to the Deputy Crown Solicltor, to discover whether crlminal PrOCeedlnqS would be taken against the defendant, but were not glven that Information.

3 .

Three years later, on 21 August 1981, the

plaintiff's solicitors gave notice of intention to proceed

and Indicated their intention of proceeding "with all

possible haste"; the letter stated their intention of

proceeding to judgment by default if the defendant had not

"taken approprlate steps at the expiration of one month".

Thls was, of course, absurd, as it is not possible to slgn

judgment in default unless a statement of claim has been

delivered. The defendant's solicitors replied by letter dated

31 August l981 requesting that a statement of claim be filed;

at the same time pointing out, not unreasonably, that owing to

the lapse of time it might take some time for them to get

lnstructlons. If the plaintiff's solicitors had then at once presented to the defendant's solicitors a statement of claim for endorsement of consent, and in default of consent applied

for an order extending time, they surely must have succeeded.

The defendant's explicit request for a statement of claim would have made it difficult to justify opposition to the

appl lca t ion.

Instead, the plaintlff's sollcltors on 18 September

I

1981 once again wrote asklng whether the defendant would

consent to the fillng of a statement of claim out of time.

Not havlng recelved a reply, the plaintlff's solicitors wrote

again on S December 1981 maklng the same request; this tune

they intlmated that the statement of claim would "in all

probablllty" be different from the draft (as they described

It) which they had sent three years before. On 15 December

Q

4 .

1981 the defendant's solicitors asked that a draft of the

proposed statement of claim should be sent to them so that they could take instructions on whether they would consent to its late filing. In view of the intimation of 5 December,

thls was an entirely reasonable request, but no answer was

received to it.

Eleven months later, in November 1982, the

plaintiff's solicitors again gave notice of intention to proceed. The defendant's solicitors pointed out in reply that their letter of 15 December 1981 had not been answered, only to be told that the statement of claim was in the process of being settled by counsel. It was received by the plaintiff's solicitors from counsel on 24 December 1982 and almost three months later they sent it to the defendant's solicitors with a request that they should consent to its being filed out of time. Consent not being forthcoming, the plaintiff gave notice on 11 April 1983 of the motion which in due course led

to this appeal.

We agree with the learned ~udge that from mid-1978

to mid-1981 the non-delivery of the statement of claim was in

pursuance of an agreement between the parties that it would not be delivered or expected, and we think that the plaintiff, as It had a perfect right to do, unequivocally put an end to this situation by its solicitors' letter of 21 August 1981.

5.

The learned judge based his decislon to extend the

time on not being satisfied that prejudice to the defendant had been established; he was fortified In this decision by a

tactical course taken by the defendant, which, the learned

judge considered, "contradlcted any justification based on

prejudice to the defendant". That course was a deliberate

withholding by the defendant of any application to have the

action dismissed for want of prosecution. In September 1981

the defendant sought counsel's advice on the desirability of

this step, and was advised not to take it until the expiration

of the limitation period. The advlce was adopted.

Presumably, the calculation of the limitation period

was made on the basis of the indorsement on the writ, together

with such allegations as were made in the statement of claim

which the plaintiff's solicitors had sent to the defendant's

solicitors in May 1978.- The nature of the plaintiff's claim _ .

disclosed by the 1983 statement of claim, which has now been filed, is, to say the least, unusual; it may be a matter for argument whether any, and if so what, period of limitatlon

applies to it. But both parties to the appeal are content

that the Court should declde it on the assumptlon that the

approprlate limitation perlod 1s six years.

It thus becomes necessary to consider the law

relating to the dismissal of actions for want of prosecutlon, not because such an application 1s before the Court, but

6.

because the learned judge made the defendant's refraining from

making such an application one of the facts relevant to the

exercise of his discretion. The leading authorlty on the

subject is Birkett v. James (1978) A.C. 297, in which the

House of Lords approved, applled, and developed principles which had been expounded by the Court of Appeal in Allen v.

Sir Alfred McAlpine fi Sons Ltd. (1968) 2 Q.B. 229. The

principles for which these two cases are authority are

conveniently, and in our opinion correctly, set out in Williams' Supreme Court Practice, vol. 1, pp. 1410, 1411. One

of those principles we state in Williams' words:

"As a rule the non-expiry of the

llmitation period is a conclusive

.

reason for not dismissing an action

for want of prosecution. The reason

is that were the action to be

dismissed, there is nothing to

prevent the plaintiff commencing a

I

second action for the same cause of

action within the limitation period,

save in the exceptional circumstances

that the bringing of the second action

would constitute an abuse of process."

The rationale of this principle is explained by Lord Diplock in Birkett v. James (supra) at pp.319-322.

In our opinion it must follow from thls prlnciple

that a defendant 1s not to be put at a disadvantage by the

Court on the ground that he advlsedly refrained from applying for the dismissal of the action before the expiratlon of the llmitation period. The situation may well be different if the

defendant's conduct is misleading, or in breach of an

undertaking; but that is not the situatlon In this appeal.

l .

It seems to us, therefore, that the learned judge

exercised his dlscretion on a wrong principle when he held that the deliberate refraining by the defendant, until the

expiry of the limitation period, from applying for the

dismissal of the action, "contradicted any justification based

on prejudice to the defendant".

Counsel for the respondent contended that the appellant had suffered no real prejudice by the lapse of time,

except such as was of his own making. It was said that the defendant could have taken the steps necessary for the defence of the actlon long ago, and that he had instead done nothing. The fallacy in this argument, we think, is that the plaintiff's default has at all times been in delivering a

statement of claim, which must 'be the. basis of the whole

action. How can the defendant reasonably be expected to

prepare a defence against a claim of which he knows only what

is expressed in the general indorsement on the writ - an

suggested that the defendant's solicltors should have used the

statement of claim which had been sent to them wlth a letter

which formed part of the exchange of correspondence In

mid-1978, as a basis for taking instructlons, obtainlng

statements of wltnesses, and generally preparlng the defence.

indorsement which does not mention any dates? It was incur the expense of instructing his sollcitors to prepare a defence to a statement of claim which (a) has not been flled;

(b) has been sent to them only for the purpose of seeking

8.

consent to its late filing; and (c) is promptly followed by an

agreement that the action should remain in suspense till

further notice. Any failure to incur expense in those circumstances was shown to be justified when more than three years later the defendant's solicitors were told that a

I

different statement of claim would be relied on.

Counsel for the respondent also relied on the

appellant's conduct at the time of the renewal of activity in

August 1981. As has already been mentioned, the defendant's

solicitors wrote on 31 August requesting the filing of a statement of claim. The last paragraph of that letter was this :

"In view of the fact that nothing further

has happened in this matter for some

considerable time, it may be difficult for

us to obtain instructions within a month,

and we therefore would be pleased if you

would inform us of any intended action to

proceed in the matter."

At about the same time (as it now appears) the author of the letter was taking counsel's advice on the desirability of

applying to have the action dismissed for want of

prosecution. In our oplnion the latter fact is irrelevant;

solicitors are perfectly entitled to take counsel's opinion on

any subject under the sun at any time without thereby putting

their cllents at rlsk of procedural pre~udlce, or of belng

accused of lack of frankness. Counsel contended, further,

that the letter of 31 August 1981 could be relied on by the

plaintiff as inconsistent with the defendant's objection to

the appllcation, made nearly two years later, to file the

9.

statement of claim. In our opinion this argument cannot

possibly succeed. The letter is no more than an anticlpatory request that, if and when a statement of claim is delivered, the defendant will be given some indulgence in the time for filing a defence. It cannot imply a promise not to object to the filing of a statement of claim; a fortiori a statement of claim presented nearly two years later. The plaintiff cannot

reasonably have relied	on that letter	as implying any such
promise.

There is therefore in our opinion no reason or

excuse shown for the plalntlff's extraordinarily late

production of its statement of claim. The time when it should

have been filed was shortly after the defendant's solicitors'

letter of 31 August 1981, which was written immediately after

the plaintiff itself put an end to the three years' truce. On

the other hand, the evidence that the defendant has, by reason

of the lapse of time, suffered prejudice in the proper conduct

of his defence, is not contradicted. There are witnesses who

cannot now be identified, and others who cannot now be

located, and the memories of those who can be located must be

failing in respect of events which occurred from 1975 to

1917. In this matter our lnference is different from that of

the learned judge.

We are not lmpressed by the fact, relled on by

counsel for the appellant, that a number of the appellant's

own relevant documents were for a considerable time in the

10.

hands of the Corporate Affairs Commission, and were later in error returned to a director of the respondent. There 1 s no evidence that this fact prevented the appellant from reading

or copying the documents. But in our opinion the appellant

need not rely on this circumstance.

In our opinion, and with due respect to him, the

learned judge erroneously exercised his discretion to allow the late filing of the statement of claim, In that he wrongly held it against the appellant that the appellant deliberately refrained until the limitation period had explred, from moving

to have the action dismissed. That was a course which the

appellant was entitled to take without procedural prejudice to

himself. This Court now has to exercise its own discretion, and in our opinion it should do so by refusing to extend the

time for filing the statement of claim. .

l

We therefore uphold the appeal, set aside the order

of the Supreme Court, and in lieu thereof order that the

appeal from the Registrar be dismissed. The statement of claim, whlch was filed in pursuance of the order of the Supreme Court, must be struck out. The respondent should pay

the appellant's taxed costs of the appeal and of the

proceedings before the Registrar and the learned judge.

I certify that this and the 9

precedlng pages are a true copy

of the Reasons for Judgment

herein of the Court

.A ,?Aid,

Assoclate

/h// 21 J-3