Mistring Pty Ltd v Certain Underwriters at Lloyds

[2017] NSWDC 394

District Court

New South Wales

• Amendment notes

Medium Neutral Citation:	Mistring Pty Ltd and Anor v Certain Underwriters at Lloyds and Anor [2017] NSWDC 394
Hearing dates:	24 November 2017
Date of orders:	15 December 2017
Decision date:	15 December 2017
Jurisdiction:	Civil
Before:	Letherbarrow SC DCJ
Decision:	Extensions of time declined. Plaintiff’s statement of claim dismissed.
Catchwords:	Extension of time for service of statement of claim; discretionary considerations; conscious decision not to serve statement of claim; length of delay; reasons for delay; whether delay deliberate; conduct of parties; prejudice
Legislation Cited:	Civil Procedure Act; ss 56-60 Uniform Civil Procedure Rules; r 1.12 and r 6.2(4)(b)(ii) Practice Note DC (Civil) Practice No. 1
Cases Cited:	Arthur Andersen Corporate Finance Pty Ltd v Buzzle Operations Pty Ltd (in liq) [2009] NSWCA 104 Agricultural & Rural Finance Pty Limited v Kirk & Anor [2011] NSWCA 67 Brisbane South Regional Health Authority v Sharon Annette Taylor (1996) HCA 25; (1996) 186 CLR 541 Tolcher v Gordon [2005] NSWCA 153 Wakim v Coleman [2010] NSWCA 221 Andresakis and Skouteris trading as Andresakis & Associates v Alexus Holdings Pty Ltd [2006] NSWCA 294 Gordon v Norwegian Capricorn Line (Australia) Pty Ltd [2007] VSC 517
Category:	Procedural and other rulings
Parties:	Mistring Pty Limited (First Plaintiff) Nabone Pty Limited (Second Plaintiff) Certain Underwriters at Lloyds (First Defendant) Garaty Murnane Insurance Brokers Pty Ltd (Second Defendant)
Representation:	Counsel: P Afshar (First and Second Plaintiffs) A Horvath (First and Second Defendants) ADC Legal Litigation Lawyers (First and Second Plaintiffs) Clyde & Co Australia (First Defendant) McCabes (Second Defendant)
File Number(s):	2017/86910
Publication restriction:	None

JUDGMENT

Introduction

1. Before the court are three motions. The first was filed by the second defendant on 15 September 2017. The remaining two were filed by the plaintiffs and the first defendant on 6 October 2017.

2. Whilst the three motions seek different orders, the common issue is whether the Court should exercise its discretion pursuant to rule 1.12 of the Uniform Civil Procedure Rules (the UCPR) to extend the time for service of the plaintiffs’ statement of claim as against either or both defendants.

The evidence

3. In support of the extensions sought, Mr Afshar, counsel for the plaintiffs, read two affidavits. The first is from a Mr David Nabarro, sworn 19 October 2017. Mr Nabarro is the sole director of the second plaintiff and deposes that he is authorised to make such affidavit on behalf of both plaintiffs. The second affidavit is from a Mr Tim Wang, affirmed on the same date. Mr Wang is the solicitor with carriage of the matter on behalf of the plaintiffs’ solicitors.

4. In opposing the extensions, Ms Horvath, counsel for both defendants, also read two affidavits. The first is from a Mr David Amentas, affirmed 27 October last. Mr Amentas is the first defendant’s solicitor on the record. The second is from a Mr Andrew James Sharpe, sworn 1 November last. Mr Sharpe is the second defendant’s solicitor on the record.

5. In addition, Ms Horvath tendered a letter from the second defendant's solicitors to those of the plaintiffs’, dated 14 September last. This letter became Exhibit 1.

6. Mr Afshar and Ms Horvath also handed up written submissions which I marked MFI 1 and MFI 2 respectively.

The nature of the substantive proceedings

7. The plaintiffs conduct, inter alia, a water treatment business under the name Integral Water Treatment Solutions. In 2006, they approached Mr Troy Garaty, the principal of the second defendant, an insurance broking company, to procure insurance for that business. Mr Garaty then procured a policy of insurance for the plaintiffs with the first defendant for the period of 25 May 2010 to 25 May 2011. In so doing, he represented to the plaintiffs that it covered their business, inter alia, for the clean-up costs of a spillage. In June 2011, the first defendant declined a claim by the plaintiffs under such insurance policy, arguing that it did not cover the plaintiffs for clean-up costs.

The statement of claim and its service

8. The plaintiffs’ statement of claim was filed on 21 March 2017. The copy on file reveals that the plaintiffs sue the first defendant for breach of contract and the second defendant for breach of contract and negligence.

9. It is common ground, that pursuant to rule 6.2(4)(b)(ii) of the UCPR, the time for service of the statement of claim was one month from the date of filing, namely by 22 April 2017.

10. The evidence establishes that the first defendant was served on 21 August 2017 and the second defendant was served on 23 August 2017.

11. Accordingly, the plaintiffs seek extensions of the time for service until the August dates mentioned.

The facts

12. There is little relevant dispute as to the facts leading up to the service of the statement of claim and the following summary represents my findings in this regard.

13. On 25 March 2011, a fire destroyed the plaintiffs’ water treatment plant and factory premises in Kurnell, despite fire crews pouring over two million litres of water on the fire. This water washed out chemicals from the plant which spilled onto the neighbouring environment. As a result, the Environmental Protection Agency and the Office of the Environment and Heritage became involved and apparently engaged Cleanway Environmental Services Pty Ltd (Cleanway) to undertake the clean-up. In May 2011, Cleanway sought over $1.6 million in clean-up costs from the plaintiffs. Further, another company, Transpacific Industries (Transpacific), sought additional monies in relation to the disposal of waste water.

14. In mid June 2011, the first defendant’s then solicitors advised by letter that it would not indemnify the plaintiffs pursuant to the policy in question. Such refusal to indemnify was repeated in further letters of 15 July 2011, 1 September 2011 and 9 November 2011. In about December 2011, litigation was commenced against the plaintiffs by Transpacific with the relevant statement of claim being served in January 2012. Throughout these periods, Mr Garaty continued to assure the plaintiffs that he would be able to convince the first defendant to indemnify it.

15. In February 2012, Mr Garaty offered to assist the plaintiffs draft a letter of demand directed at himself for the purposes of facilitating a claim by the plaintiffs against the second defendant's professional indemnity insurer. In this regard Mr Nabarro sent Mr Garaty a clean letterhead of the subject business upon which Mr Garaty drafted a letter which he then sent back to Mr Nabarro who signed it. This letter stated that since the fire “it has now come to light that the policy that (the Second Defendant) provided us contains an exclusion for the clean-up costs associated with an accidental and unforeseen pollution spill, effectively giving us no pollution cover at all.”

16. In August 2012, the plaintiffs were served with a statement of claim from the EPA seeking over $1.2 million in relation to Cleanway’s clean-up costs.

17. By letter dated 30 May 2013, the first defendant again denied indemnity.

18. Up until December 2013, the plaintiffs contested the EPA claim at their own expense and such claim was ultimately settled for approximately $485,000 inclusive of costs.

19. In about February 2014, Mr Nabarro told Mr Garaty that the plaintiffs wanted to sue the first defendant. Mr Garaty indicated that he still hoped to "pressure the underwriters to accept the claim". In these circumstances, Mr Nabarro instructed the plaintiffs’ solicitors to "hold off commencing legal action for the time being…"

20. Between 2014 and June 2016 Mr Garaty continued to suggest that he would eventually be able to persuade the first defendant to indemnify the plaintiffs.

21. Between October 2016 and January 2017, Mr Nabarro enlisted the assistance of an insurance claims dispute advocate who had some dealings with the second defendant's professional indemnity insurer in an unsuccessful attempt to resolve the situation.

22. In late 2016 and early 2017, the insurance claims dispute advocate also attempted to resolve the situation by engaging in some form of internal dispute resolution process operated by the first defendant but on the 6 January 2017 it reiterated its refusal to indemnify the plaintiffs.

23. Thereafter, the plaintiffs retained their current solicitors, ADC Legal, a firm based in Victoria, for advice and the statement of claim in question was issued, as mentioned, on 21 March 2017. The day before, Mr Wang wrote an email to Mr Amentas requesting, inter alia, whether he had instructions to accept service for either of the defendants. The same day, Mr Amentas replied by email, that he had instructions to accept service for the first defendant. Later that same day, Mr Wang stated in a further email that he anticipated filing the statement of claim the following day and “will serve same on your firm shortly thereafter.” As stated, such service did not occur until some five months had elapsed.

24. Prior to the statement of claim being filed, in late 2016 the plaintiffs’ board made a decision to amalgamate their businesses which were operated through five separate entities in various Australian states and territories. This amalgamation was then put into effect between January and August 2017. This reduced the plaintiffs’ cash flow which Mr Nabarro said became “very tight”. At the time that the statement of claim was filed, but apparently after the emails referred to in the latter paragraph were sent, Mr Nabarro informed Mr Wang of these cash flow problems who then advised him that the plaintiffs had the “option of filing the statement of claim to stay within the limitations period, and then serve the statement of claim once the amalgamation had been effected" by which time the plaintiffs would be “able to allocate adequate funds to run the proceedings effectively and efficiently.” In this regard, Mr Wang incorrectly advised Mr Nabarro that the statement of claim did not become stale until 6 months had elapsed from its filing. This occurred because he was unaware of the provisions of r 6.2(4)(b)(ii) in the UCPR and had apparently assumed that the position was the same as it is in Victoria, where he practices, and where the relevant period is 6 months, rather than 1 month.

25. Mr Nabarro accepted this “option” and when the amalgamation was eventually completed in August 2017, he instructed the plaintiffs’ solicitors to serve the statement of claim on the defendants.

26. In the meantime, by email dated 20 June 2017, Mr Amentas asked Mr Wang to “please advise whether proceedings have been filed, and if so, when you expect to serve the proceedings.” There was no response to this email.

The Law

27. UCPR r 1.12 provides as follows:

(1) Subject to these rules, the court may, by order, extend or abridge any time fixed by these rules or by any judgment or order of the court.

(2) The court may extend time under this rule, either before or after the time expires, and may do so after the time expires even if an application for extension is made after the time expires.

28. In Arthur Andersen Corporate Finance Pty Ltd v Buzzle Operations Pty Ltd (in liq) [2009] NSWCA 104, the relevant principles to be applied in the exercise of the discretion to extend the time for service pursuant to rule 1.12 were extensively discussed by Ipp JA with whom the McColl JA and Tobias JA agreed. In Agricultural & Rural Finance Pty Limited v Kirk & Anor [2011] NSWCA 67, Tobias JA with whom Macfarlan JA and Sackville AJA agreed, at [94] approved Ipp JA's analysis in Buzzle and adopted the following statement of Ipp JA at [43] as setting out the" governing principle”:

“…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.”

29. In his analysis in Buzzle, Ipp JA at [27] found error in the primary Judge’s categorisation of the relevant discretion as being a "broad one" which "may be exercised for any reason". Rather, at [28] his Honour emphasised;

“The discretion is to be exercised in the context of and by reference to the statute by which it is conferred (and any other statute that is relevant to the legislative context) and in accordance with principles developed by judicial decisions.”

30. In this regard, Ipp JA at [30] referred to the approach of McHugh J in Brisbane South Regional Health Authority v Sharon Annette Taylor (1996) HCA 25; (1996) 186 CLR 541 and approved the following statement of McHugh J at 554;

“The object of the discretion, to use the words of Dixon CJ in [ Klein v Domus Pty Limited(1963) 109 CLR 467 at 473], ‘is to leave scope for the judicial or other officer who is investigating the facts and considering the general purpose of the enactment to give effect to his view of the justice of the case’. In determining what the justice of the case requires, the judge is entitled to look at every relevant fact and circumstance that does not travel beyond the scope and purpose of the enactment authorising an extension of the limitation period.”

31. At [35], Ipp JA also referred to sections 56 to 59 of the Civil Procedure Act 2005 (NSW) (the CPA), which relevantly provide as follows:

“56 Overriding purpose 

(1) The overriding purpose of this Act and of rules of court, in their application to civil proceedings, is to facilitate the just, quick and cheap resolution of the real issues in the proceedings. 

(2) The court must seek to give effect to the overriding purpose when it exercises any power given to it by this Act or by rules of court and when it interprets any provision of this Act or of any such rule. 

(3) A party to civil proceedings is under a duty to assist the court to further the overriding purpose … . 

… 

57 Objects of case management 

(1) For the purpose of furthering the overriding purpose referred to in section 56 (1), proceedings in any court are to be managed having regard to the following objects: 

…

(d) the timely disposal of the proceedings, and all other proceedings in the court, at a cost affordable by the respective parties. 

(2) This Act and any rules of court are to be so construed and applied, and the practice and procedure of the courts are to be so regulated, as best to ensure the attainment of the objects referred to in subsection (1). 

58 Court to follow dictates of justice 

(1) In deciding: 

(a) whether to make any order or direction for the management of proceedings, including: 

…

(iii) any other order of a procedural nature,

…

the court must seek to act in accordance with the dictates of justice.

(2) For the purpose of determining what are the dictates of justice in a particular case, the court: 

(a) must have regard to the provisions of sections 56 and 57, and 

(b) may have regard to the following matters to the extent to which it considers them relevant: 

(i) …

(ii) the degree of expedition with which the respective parties have approached the proceedings, including the degree to which they have been timely in their interlocutory activities,

(iii) the degree to which any lack of expedition in approaching the proceedings has arisen from circumstances beyond the control of the respective parties,

(iv) …

(v) the use that any party has made, or could have made, of any opportunity that has been available to the party in the course of the proceedings, whether under rules of court, the practice of the court or any direction of a procedural nature given in the proceedings,

….

59 Elimination of delay

In any proceedings, the practice and procedure of the court should be implemented with the object of eliminating any lapse of time between the commencement of the proceedings and their final determination beyond that reasonably required for the interlocutory activities necessary for the fair and just determination of the issues in dispute between the parties and the preparation of the case for trial.”

32. Accordingly, applying sections 56 to 59 of the CPA, Ipp JA at [36] found that a judge in exercising the discretion under UCPR r 1.12 is also required to have regard to whether the 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.

33. At [37] Ipp JA repeated the importance of taking into account the policy behind the relevant limitation statute and approved the following statement made by Hodgson JA in Tolcher v Gordon [2005] NSWCA 153 at [3];

“Although the 3-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 3-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.”

34. In Wakim v Coleman [2010] NSWCA 221, the Court of Appeal at [35] upheld the primary judge’s decision that a party seeking an extension under the subject rule bore the onus of demonstrating a “good reason” for doing so. In doing so, the Court did not refer to Buzzle. At [18] the Court also stated that the limitation of the period that an originating process is valid for service is an important protection for defendants.

The parties’ arguments

35. On behalf of the plaintiffs, Mr Afshar submitted that the relevant discretion pursuant to rule 1.12 is unfettered. Nevertheless, in exercising such discretion he referred to the factors set out in Buzzle, each of which he argued should result in the discretion being exercised in favour of the plaintiffs.

36. Firstly, he argued that the length of delay in question was a period of about four months, being that between expiration of the one month service period and the time when the subject statement of claim was served on the defendants. Mr Afshar submitted that this was quite a short period.

37. Secondly, Mr Afshar argued that the reasons for the delay did not fall at the feet of the plaintiff but rather their solicitor who gave honest but mistaken advice as to the relevant service period. Mr Afshar argued that such delay was not therefore deliberate or contrived and that the plaintiffs chose what they considered was a legitimate "option" of delaying service for a few months whilst they amalgamated their businesses and that as soon as this was completed they gave instructions to serve both defendants.

38. Thirdly, Mr Afshar argued that both defendants, but in particular the second defendant, contributed to the delay in the commencement of the proceedings as they encouraged the belief that the claim might be settled without recourse to litigation. In this regard, and with respect to the first defendant, Mr Afshar referred to it apparently agreeing to the internal dispute resolution process referred to above.

39. Fourthly, Mr Afshar argued that both defendants were clearly made aware of the circumstances of the fire at around the time it occurred including the size and nature of the claims being made for clean-up costs.

40. Fifthly, apparently in relation to the strength of the plaintiffs claim, Mr Afshar argued that Mr Garaty’s drafting of the letter for the plaintiffs to send to the second defendant’s professional indemnity insurer amounts to an admission as to the “central issue” in the claim against the second defendant.

35. Sixthly, Mr Afshar argued that the action was commenced within the limitation period and that this is not a situation where an extension thereof is being sought.

36. Seventhly, as to the issue of prejudice, Mr Afshar argued that unless the order is made there is a likelihood that the plaintiffs claim will be barred by the relevant limitation periods which constitutes a very significant prejudice. On the other hand, he submitted that the evidence led by the defendants as to the prejudice that they would suffer if the order is made, is weak.

37. Finally, Mr Afshar relied upon the provisions of sections 56, 57 and 58 of the CPA as support for the making of the order without elaborating.

38. On behalf of the defendants, Ms Horvath also took the court through the factors referred to in Buzzle.

39. As to the attempts made by the plaintiffs at service, Ms Horvath pointed out that there were no such attempts prior to August 2017 and that this is not a case where the plaintiffs had any difficulty in locating the defendants.

40. As to the length of delay, Ms Horvath argued that this was far from minor being of the order of five months or five times the usual one month service period. She also pointed out that it was not until 6 October 2017 that the plaintiff filed the subject motion which represents a total delay of almost 7 months. In this regard, she argued that it was apparent that the plaintiffs only filed the subject motion in consequence of the second defendant filing its own motion seeking, inter alia, that the plaintiff’s proceedings be dismissed due to them not being served in time.

41. Ms Horvath also relied on the above mentioned statement by Hodgson JA in Tolcher that plaintiffs who do not commence proceedings until just before the expiration of the limitation period should be especially diligent in pursuing the prompt service thereof. Here, she argued that thinking they had 6 months for service, the plaintiffs still waited 5 months before doing so.

42. In addition, she argued that the delay in the present matter was contrary to the provisions of sections 56 to 59 of the CPA and also contrary to this court’s Civil Practice Note which aims to have all cases completed within 12 months of filing.

43. As to the reasons for the delay and whether that delay was deliberate, Ms Horvath argued that the plaintiffs’ decision not to serve the statement of claim was clearly deliberate and was taken in circumstances where by January 2017, at the latest, they were well aware that all their attempts to resolve the dispute with the defendants had failed. Further, she argued that the plaintiffs were aware by March 2017 that the limitation periods were soon to expire which is why they then provided their solicitors with instructions to file the statement of claim. Next, Ms Horvath argued that the plaintiffs’ reason for not serving the statement of claim was "wholly unsatisfactory" namely that they had other "business priorities which, in some unidentified fashion, impacted on their appetite for litigation". As to this, she referred to the decision of Wakim as authority for the proposition that a plaintiff's choice to use its funds to advance a business priority rather than the orderly progression of the proceedings is not a “good reason” for delaying the service of a statement of claim.

44. Ms Horvath also submitted that both the plaintiffs and Mr Nabarro breached their duty under section 56(3) of the CPA in that they “failed to assist the Court in furthering one of the overriding purposes of the CPA, namely, to facilitate the quick resolution of the real issues in the proceedings.”

45. Ms Horvath also argued that neither of the defendants were in any way responsible for, or encouraged, the delay in service of the statement of claim. As to its delay in filing, she argued that the first defendant in no way contributed to this as it repeatedly denied liability in writing on numerous occasions over several years commencing in 2011.

46. As to whether the defendants had been given notice, Ms Horvath argued that the level of detail provided to both defendants was not high and this was a neutral factor.

47. As to the general conduct of the parties, Ms Horvath was critical of the fact that the proceedings were not filed until March 2017, being almost 6 years from the time the plaintiffs commenced suffering the relevant loss and then they waited another five months before serving the proceedings and then another two months before filing their motion. In this regard, she also referred to the abovementioned email from Mr Amentas to Mr Wang asking the former to "please advise whether proceedings have been filed, and if so, when you expect to serve the proceedings," to which there was simply no reply.

48. Ms Horvath further argued that the plaintiffs have adduced no evidence which would indicate that the subject proceedings, prior to their commencement, are at an advanced state of preparation for trial as is required by both the UCPR and this Court’s Civil Practice Note.

49. As to the plaintiff's argument that it would be severely prejudiced by the order not being made, Ms Horvath argued that this "of itself is not particularly exceptional or compelling" but is rather "a necessary consequence of the application of the staleness rule".

50. Ms Horvath also argued that the limitation period for the plaintiffs claim as against the first defendant, which is limited to one in contract, expired in June 2017 at the latest, being six years after the first defendant initially denied liability to the plaintiffs. She also argued that the limitation period for the plaintiff’s claim against the second defendant in contract expired in May 2016 with the claim in tort expiring, at the latest, in June 2017. Accordingly, she argued that if “the Court extends the time for service of the statement of claim, in circumstances where the limitation has expired, it is tantamount to extending the limitation period.”

51. Apart from presumptive prejudice such as the difficulty in obtaining statements from witnesses in relation to events as long ago as May 2010, Ms Horvath also argued that the "significant (specific) prejudice" identified by Mr Sharp in his affidavit "cannot be gainsaid". In this regard, Mr Sharp refers to the fact that he has not yet been able to obtain a full copy of the files held by the second defendant, and to the anticipated difficulty that would face any expert retained by the second defendant in relation to expressing opinions about, inter alia, what alternative insurance policies were available on the insurance market of May 2010.

52. Ms Horvath also argued that any prejudice caused to the plaintiffs by the court's refusal to make the order sought would be effectively overcome by the fact that the plaintiffs had a clear cause of action against their own solicitors for negligent advice in advising them incorrectly as to the time in which the relevant statement of claim had to be served.

Consideration

59. As can be seen from my summary of the law set out above, Mr Afshar’s submission that the discretion contained within rule 1.12 is unfettered, which was the view adopted by the primary judge in Buzzle, was rejected in the Court of Appeal as per Ipp JA at [27] and [28]. Ipp JA at [43] then went on to set out the discretionary considerations to which the court should have regard in an application such as the present. In so doing, I do not believe that Ipp JA was limiting such discretionary considerations to those to which he then referred but there seems little doubt he was of the view that such matters were to be the primary considerations. Further, Ipp JA at [35] – [36] made it plain that such considerations were to be examined in the light of sections 56-59 of the CPA and any other relevant statutory context.

60. Accordingly, I will now examine such considerations in their relevant legislative context.

61. As to the attempts that were made at service of the statement of claim in question, there were none. In this regard, this is not a case where either defendant could not be located or in any way avoided service.

62. As to the length of the delay, whilst the statement of claim was served about five months after issue, this nevertheless represents a period of five times that allowed for service. This, in my opinion, is significant, as is the fact that the relevant limitation periods expired after filing and before service. Further, approximately another two months elapsed before the plaintiffs filed their motion seeking an extension of the service period.

63. As to the reasons for the delay, these seem to relate largely to the incorrect advice given by Mr Wang as to the time available for service and the decision by the plaintiffs to accept the "option" that he advised therefore existed, namely to refrain from serving the subject statement of claim for up to six months to enable their cash flow position to be improved. It is clear that these reasons had nothing to do with any conduct of either defendant.

64. In Wakim, the plaintiff loaned a large amount of money to his brother thereby depriving himself of sufficient funds to “refine” an “ambit claim” which was pleaded in the statement of claim prior to its service. The court at [36] – [37] regarded such an act as one reason not to exercise the discretion in question.

65. Here, the plaintiffs’ apparent business decision to delay service of the statement of claim, effectively for as long as they thought possible, is not in accordance with the provisions of sections 56 to 59 of the CPA. Further, just how “tight” cash flow was is unknown, as is the size of the monies they would have had to pay in relation to costs if they had started the proceedings in time. Overall, I do not regard this business decision as a “good reason” to delay service.

66. In addition, whilst it appears that the second defendant, through Mr Garaty, encouraged the plaintiffs to refrain from suing either defendant over a period of several years by assuring the plaintiffs that it would eventually be able to persuade the first defendant to grant indemnity, any such hope had dissipated entirely by January 2017, being some months prior to the filing of the statement of claim. In other words, there is no causal connection between the plaintiffs’ decision not to serve the statement of claim and any encouragement of the second defendant.

67. With respect to the conduct of the first defendant, I am not satisfied that it did anything to encourage the plaintiffs not to sue, let alone to delay service once it issued proceedings. Indeed, the first defendant's solicitor in June 2017 chased up the plaintiffs’ solicitor enquiring as to whether the pleadings had been issued and if so when they would be served, but received no response. Whilst there was some attempt by the plaintiffs through the insurance claims dispute advocate it retained in late 2016 and early 2017 to attempt to resolve the situation through some form of internal dispute resolution process operated by the first defendant, on the evidence, this does not seem to have been at the instigation of, or in any way encouraged by the first defendant but rather seems to have been the plaintiffs’ utilisation of a general process of dispute resolution that the first defendant had in place. In any event, this attempt had failed by January 2017 when the first defendant reiterated its position denying indemnity.

68. As to the question of whether the delay in serving the statement of claim was deliberate, there is no doubt on the evidence that a conscious decision was taken by the plaintiffs to delay service until its amalgamation had been completed with the consequential upturn in its cash flow. On the other hand, whilst this decision was clearly a deliberate one, it was taken on the basis of the above-mentioned incorrect advice.

69. As to whether notice of the claim was given to the defendants, there is no doubt that each were made aware of the fire and its consequences not long after they occurred although the precise level of detail passed on by the plaintiffs is somewhat unclear.

70. As to the general conduct of the parties, a number of matters are worth noting. Firstly, the plaintiffs were aware of any rights they had as against both defendants shortly into the relevant limitation periods but ultimately did not commence any proceedings until almost the expiration thereof. More importantly, despite being aware that it had commenced proceedings shortly before the expiration of such limitation periods, the plaintiffs were not as stated by Hodgson JA in Tolcher "especially diligent in pursuing prompt service of the proceedings," even in circumstances where it was operating under an incorrect belief that it had six months to do so. Further, as mentioned, the plaintiffs’ solicitor did not respond to the first defendant's solicitor’s email chasing up the service of any proceedings which had been issued. In these respects, as already noted, neither the plaintiffs nor their solicitor acted with the appropriate degree of expedition envisaged by the provisions of sections 56 to 59 of the CPA. In short, neither diligently pursued the timely disposal of the proceedings.

71. In addition, paragraphs 1.1 and 2.1 of this Court’s Civil Practice Note No. 1, which have been in the same form since 2009, provide as follows:

1.1 The Court aims to have cases completed within 12 months of commencement.

……..

2.1    Plaintiffs must not commence proceedings until they are ready to comply with the requirements of the Uniform Civil Procedure Rules (UCPR) and the Court’s practice notes for preparation and trial. This means that, except in special circumstances, the plaintiff’s preparation for trial must be well advanced before filing the statement of claim.

72. There is no evidence before me that the plaintiff’s claim against either defendant is at an advanced state of preparation. Indeed, in argument Mr Afshar conceded this but indicated from the bar table that the matter could be quickly prepared in the future.

73. Further, it is now some nine months since the subject proceedings were issued and there is no prospect that they will meet or go anywhere near meeting, this Court’s stated aim of being completed within 12 months of commencement.

74. In addition, the plaintiffs also had the option of serving the proceedings quickly and then seeking a stay thereof until the amalgamation had been finalised and there is no explanation as to why this option was not taken. Indeed, this alternative available under the rules does not even seem to have been considered.

75. I now turn to the issue of hardship or prejudice likely to be caused to the plaintiffs by refusing the extensions sought or to the defendants by granting them. Whilst, as Mr Afshar put it, there is a "likelihood that the plaintiffs claim will be barred by the relevant limitation periods" if the extensions are not granted, as such periods expired between the filing and service of the statement of claim, the defendants will, if the extensions are granted, lose the benefit of a limitation defence. In my view, these factors are relatively evenly balanced.

76. However, there also exists some presumptive prejudice in granting the extensions sought, namely that associated with the dimming of witnesses’ memories since 2010. Whilst this prejudice is not substantial it is also not insignificant. The same applies, in my view, to the actual prejudice referred to by Mr Sharpe.

77. As to Ms Horvath’s argument that any prejudice caused by a failure to grant the extensions sought can be effectively ameliorated by the plaintiffs suing their solicitors, it has been held that whilst this is a relevant consideration, its weight depends upon the particular circumstances: see Andresakis and Skouteris trading as Andresakis & Associates v Alexus Holdings Pty Ltd [2006] NSWCA 294 at [92] per McColl JA, Giles JA and Hodgson JA agreeing. In that case, McColl JA went on to note at [92] that the relevant authorities to which her Honour had referred "have accorded the prospect of a secondary cause of action little weight, partly because of the difficulty of evaluating the prospects of success." It would therefore seem such a prospect may have greater weight if it can be evaluated and such evaluation is positive. As Forrest J in Gordon v Norwegian Capricorn Line (Australia) Pty Ltd [2007] VSC 517 (Gordon) stated at [114]:

“…I also regard the existence of a viable, indeed, strong cause of action against the plaintiff's original solicitors as being a significant consideration."

78. In the present matter, the plaintiffs’ solicitors’ advice as to the applicable service period was plainly wrong and is accepted as such. It was a necessary and easy task for the plaintiffs’ Victorian based solicitor Mr Wang to check the relevant New South Wales rules prior to advising the plaintiffs in which case the current situation would simply have not arisen. On the evidence before me, the plaintiffs would therefore seem to have a “viable, indeed, strong cause of action” against their solicitors should I refuse the extensions. Whilst I would not go as far as Forrest J did in Gordon and regard this as a “significant consideration,” it is relevant and of some weight.

79. A further consideration not directly mentioned in Buzzle should also be taken into account, namely the strength of the plaintiffs’ case against each defendant. In relation to the first defendant, Mr Afshar did not make any submissions in this regard. However, the affidavit evidence discloses, inter alia, differing opinions from Senior Counsel as to whether the policy covers the damage in question and/or whether the exclusion clause referred to operates against the plaintiffs. In these circumstances and on the material presently available, I am unable to reach any useful view as to the strength of the plaintiffs’ case against the first defendant.

80. As to the plaintiffs’ claim against the second defendant, as mentioned, Mr Afshar argued that the letter drafted by Mr Garaty and signed by Mr Nabarro, in effect, constitutes an admission of negligence on behalf of the second defendant vis-a-vis the plaintiffs. Whether this is ultimately held to be so or whether the unusual circumstances of this letter’s creation leads to a Court holding that it constitutes a breach of the second defendants duties to its insurer, allowing the latter to avoid indemnity, cannot be determined. Further, as with the first defendant, I am unable to reach any useful view as to the strength of the plaintiffs’ case against the second defendant on the material presently available.

Conclusion

81. Having weighed all relevant considerations referred to, especially in light of sections 56 to 59 of the CPA and this Court’s Practice Note, the considerations against exercising the discretion, in my view, outweigh those in favour of doing so with respect to both defendants.

Orders

82. Accordingly, I make the following orders:

1. I decline to extend the time for service of the plaintiffs’ statement of claim as against either defendant.

2. The plaintiffs’ statement of claim is dismissed.

3. Order the plaintiffs’ to pay the defendants’ costs of the proceedings including the three subject motions.

4. The exhibits are returned herewith.

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Amendments

08 February 2018 - corrected formatting

Decision last updated: 08 February 2018