Osborne v Osborne Ice Works No. DCCIV-99-1396

[2000] SADC 134

GRAHAM ANGUS OSBORNE v OSBORNE ICE WORKS PTY LTD
[2000] SADC 134

Judge Lunn
Civil

The participants in the dispute

1. The defendant, Osborne Ice Works Pty Ltd (“the Company”), was incorporated in 1953.  Until his death in December 1998 Mr George Osborne (“the father”) was a director of the Company and its manager.  During this time the only other director was his wife (“Mrs Osborne”), but she had no significant role in the Company’s activities.  By and large the Company was the alter ego of the father.  There are three children of the father and Mrs Osborne, being Marilyn Osborne (“Marilyn”), the plaintiff and Neville Osborne (“Neville”).  Each of the five family members held shares in the Company.  It had no other shareholders.

2. The Company has carried on a profitable business as an investor.  Until about late 1989 the primary accounting records of the Company were prepared by the father in an apparently fairly rough and rudimentary way.  The secondary records, such as ledgers, journals, balance sheets, profit and loss accounts and the like, were prepared by a professional accountant, Mr Guthrie, and his staff, and apparently from such primary records and information as were given to them by the father.  Mr Guthrie also prepared and kept the minute book and statutory records of the Company.  Mr Guthrie died in about 1989 and ever since D G Scott & Co (“Scotts”), another firm of accountants, have done this work for the Company.  Prior to 1990 there was an account with the Hindmarsh Building Society No 92150302 (“the Hindmarsh account”) which was in the name of the father, but which either wholly or partly contained money belonging to the Company.  In his dealings with money and property the father did not necessarily strictly differentiate between what belonged to the Company and what belonged to him personally.  Many of his dealings were in cash.

History of relevant events

1. In 1995 the plaintiff separated from his wife and they became involved in contested proceedings in the Family Court.  He then bought a house in Coffin Bay for $135,000.  To finance the purchase he borrowed $30,000 from the Hindmarsh Building Society at 17.75% per annum interest and $48,000 from the Company.  To secure this latter loan he gave the Company a second mortgage over the Coffin Bay property which on its terms required him to pay interest at 5% per annum and to repay the loan and interest by monthly instalments of $259.  However, the father did not insist on him making such monthly payments and they were not made.  There is no record of any interest payable under this mortgage being either paid or debited to the plaintiff’s running loan account in the books of the Company.  In 1986 the plaintiff paid these amounts totalling $36,815 to the Company in reduction of the mortgage principal.  In about that year the plaintiff arranged with the father for the Company to pay out the first mortgage to the Hindmarsh Building Society over the Coffin Bay house.  This was done by a payment of $30,600 which apparently came out of Hindmarsh account.  There is no evidence whether or not some of this money used by the Company for this purpose beneficially belonged to the father.  From about March 1986 until November 1986 the plaintiff made a number of payments into the Hindmarsh account through a branch of the Hindmarsh at Port Lincoln.  In the secondary records of the Company these payments were not apparently shown as credits against the plaintiff’s loan account.  In 1985 and 1986 the father personally lent cash of some thousands of dollars to the plaintiff on a number of occasions, but the total amount lent is now in dispute.  These loans were not documented and insofar as there were any records of them they are no longer available.  It is unclear whether the father treated some of the money paid to him by the plaintiff as repayments of such loans.

2. In about 1987 the plaintiff left Coffin Bay and subsequently rented out the house to a Mr Lowe.  He claimed Mr Lowe paid the weekly rent of $100 into the Hindmarsh account at its agency in Port Lincoln.  There is no documentary evidence to support this.  The ledger sheet for the plaintiff’s loan account in the records of the Company shows some money being credited to it out of the Hindmarsh account, but it does not tally with what the plaintiff says should have been credited.

3. Prior to mid 1987 the Company had in a number of financial years declared dividends to its shareholders and these had been credited to their respective shareholder’s dividend accounts in the ledgers of the Company.  Shortly prior to 30 June 1987 the plaintiff had a credit of $12,522 in his dividend account from such accumulated dividends.  In preparing for a hearing in the Family Court he spoke to Mr Guthrie about his beneficial interest in the Company.  The ledger records a withdrawal from his account of $10,500 apparently prior to 30 June 1987.  The plaintiff claimed that by arrangement with Mr Guthrie and the father this amount was credited in reduction of his mortgage principal, but no corresponding entries appear in the ledger sheet for the mortgage loan.  The father, Mr Guthrie and the plaintiff each gave evidence in the Family Court in December 1987, but there was no evidence before me about what figures were put forward there.  The plaintiff conceded that there were discussions with the father prior to the Family Court trial about the rate of interest payable by him on his loan from the Company being increased to 15% per annum, but he did not say that any such variation of the terms of the mortgage was ever finalised.

4. In about August 1989 the plaintiff sold the Coffin Bay house for $165,000.  At settlement on 11 September 1989 it was necessary for him to tender a discharge by the Company of its mortgage over the property.  He approached his father to obtain such a discharge.  The father, after doing some paperwork, asserted that the amount then owing by the plaintiff on the mortgage was a figure which the plaintiff can no longer remember, but which he thought might have been between about $45,000 to $50,000.  This was substantially more than the plaintiff believed it to be.  At the time he apparently believed it was likely to be a little over $30,000.  He told his father that there were other repayments and credits which the father had not taken into account in his calculations.  No agreement was reached between them about the precise amount payable by the plaintiff.  To enable the settlement to occur on time the plaintiff agreed in broad terms that $60,000 would be paid from the settlement moneys in exchange for the discharge and they would sort out later the precise amount of the debt owed to the Company and how much would be repayable to the plaintiff from the overpayment.

5. On 31 August solicitors in Port Lincoln acting for the plaintiff on the conveyance issued a settlement statement showing $60,000 being payable for the discharge of the mortgage to the Company.  On 11 September immediately after the settlement those solicitors sent to the plaintiff a bank cheque for $60,000 payable to the Company.  The plaintiff immediately gave this cheque to the father.  There is no evidence about how this cheque was negotiated.  The evidence discloses that on 14 September $40,000 was placed in an at call account in the name of the Company with Executor Trustee Ltd which was then paying interest of about 17% per annum on such deposits.  At the same time $20,000 was also deposited with Executor Trustee Ltd in the name of the father.  There was no dispute that these two deposits emanated from the bank cheque for $60,000, but there is no evidence about how it occurred or why the father put $20,000 from it into his own name.  In the books of the Company there is a journal entry of 30 June 1990 crediting $40,000 only in reduction of the mortgage loan account of the plaintiff, and not $60,000.

6. No further discussions occurred between the plaintiff and the father about resolving the proper amount of the debt and how much the plaintiff had overpaid the Company in discharging the mortgage.  There were major issues to be resolved between them.  Later in 1989 the father suffered two strokes as a result of which he became partly paralysed.  His memory and speech were impaired by the strokes.  It is not clear on the evidence how severely he was disabled.  There was no medical evidence adduced on the topic.  In early 1990 he entered a nursing home where he remained until his death in December 1998.  Over those years his condition progressively deteriorated.  He remained a director of the Company until his death and he continued to sign the annual reports of the Company.  However, from about the time of his strokes Marilyn took over the management and primary book work of the Company and acted as a defacto director and manager of it.

7. On 17 December 1990 Scotts wrote to the plaintiff and the Company indicating that on the secondary records of the Company the amount which it owed to the plaintiff was $7,561.  They acknowledged that this did not take into account “the additional $20,000 apparently paid by (the plaintiff) directly into (the father’s) account.”  They sought instructions “from the directors/family” if there were to be adjustments made to the loan account balances but no such instructions were ever given.  Thereafter, the plaintiff requested from Scotts all of the documents of the Company relating to the calculation of his loan account.  On 5 February 1991 Scotts sent him a letter showing how the balance of $7,561 was arrived at and enclosing copies of various relevant pages from the ledgers and journals of the Company, some handwritten notes, whose status is uncertain, and a copy of the deposit advice from Executor Trustee Ltd.  At about this time the plaintiff had a discussion with Marilyn in which he alleged that there was more money owing to him by the Company, but she responded to the effect that the records of the Company did not disclose anything more than that $7,561 was owing.  The plaintiff spoke about it on some occasions to Scott & Co, who were also then his accountants.  The attitude of Scott & Co was that it was a matter for the family members to sort out between themselves.  On 28 September 1993, as a result of raising the matter again with Scotts, the plaintiff wrote to Scotts as follows:

   “I refer to discussions with Mr T Hirth regarding outstanding monies owing to me from (the Company).  As no progress has been made with other parties relating to this matter, I am therefore registering a claim for the return of this money being overpayment of discharge of mortgage on the property at ........ Coffin Bay ...... I believe to the best of my knowledge this amount to be approximately $28,000 plus interest accrued since that date.”

Scotts replied by a letter of 7 October in which they indicated that they had forwarded a copy of the plaintiff’s letter to Mrs Osborne and Marilyn and said:

“We will endeavour to address the matter at the time of finalising the Company’s Financial Statements to 30.6.93.”

Thereafter Scotts showed the plaintiff’s claim for $28,000 plus interest as a contingent liability of the Company.  This was not any admission of liability by the Company.  On 13 December 1993 Scotts wrote to the members of the family enclosing the 1993 accounts, which showed the amount owed to the plaintiff at $7,561 and which included a paragraph:

“(The plaintiff) ....... has registered a claim on the Company for repayment of $28,000 (plus interest) which he believes is owing to him by the Company.  This matter has been noted in the Directors’ Report.  We suggest that the shareholders of the Company organise a meeting to discuss this claim in an attempt to resolve the issue.  Such a meeting should be minuted.”

In a similar letter on 28 November 1996 enclosing the 1996 accounts Scotts stated:

“Until advised otherwise, the note in the accounts regarding the contingent liability relating to the claim on the Company by (the plaintiff) the $28,000 will remain.  Please advise us of any progress to resolve this issue.”

Neither the plaintiff nor any other family member took any steps to attempt to resolve the issue.  On one occasion the plaintiff mentioned his claim to his mother who replied to the effect that they could not do anything about it while the father was in his disabled condition.  However, there was never any hope that the father would recover from his strokes.  After the death of the father a shareholders’ meeting was held on 6 January 1999 at which the plaintiff, Marilyn and Neville were appointed as directors of the Company in addition to Mrs Osborne.  At that meeting the existence of the claim was mentioned by Mr Hirth of Scotts who was present.  He suggested that there be a family meeting to discuss it and indicated he was prepared to act as a mediator, although that offer was not taken up.

1. Three meetings of the plaintiff, his mother, brother and sister were held between June and September 1999 at which they attempted to resolve the plaintiff’s claim on his loan account and also other matters that were in dispute, including how much was owed by the plaintiff on loans which had been made by the father personally and on a claim by the Company against the plaintiff for some insurance moneys which he had received.  At these meetings various documents were submitted by the plaintiff and Marilyn setting out calculations of amounts which were in dispute.  No resolution of the disputes was achieved.  The plaintiff issued his summons against the Company on 27 September 1999.  Mrs Osborne died on 3 October 2000 which was before the trial commenced on 6 November 2000.

The Company’s financial records

1. The resolution of the issues raised in this case would require a reconstruction of the Company’s ledger accounts relating to the plaintiff in the period between 1985 and 1989.  Some such ledger and journal sheets from the Company’s secondary records have been adduced in evidence.  It is unclear whether there may be other ledgers and journals which could be relevant, but which have been lost or suppressed.  It is likely that the ledgers and journals which have been adduced in evidence are not entirely correct.  They were apparently prepared by an employee of Mr Guthrie and their completeness and accuracy depends upon what information and primary records were supplied by the father to Mr Guthrie.  The primary records, such as they might have been, were not adduced in evidence.  Scotts do not now have them and the practice would have been to have returned them to the Company after the secondary records were written up.  Such primary records as still existed at the time the father suffered his strokes passed into the possession of Marilyn.  In a letter of 12 October 1993 to Scotts she said that:

   “The whereabouts of the relevant bank/deposit books necessary to verify his repayments, was not known …..”

She and Neville did not give evidence and no explanation was offered about why they could not have done so.  However, in the whole of the circumstances I am not prepared to draw any adverse inference that she or Neville fraudulently destroyed or suppressed relevant evidence.  The plaintiff’s counsel submitted that it was in the power of the defendant to reconstruct the banking records of the defendant from documents which could be obtained from its bank.  However, it was also open to the plaintiff to have sought such documents under Rule 60.01 and RR81.03 and 81.11.  As over eleven years have elapsed since the relevant events I cannot be confident that even if such expensive lines of investigation had been pursued they would necessarily have produced any worthwhile evidence.  There is no direct evidence of the relevant primary records and no significant adverse inference is to be drawn against the defendant from the lack of them.  Similarly, the plaintiff no longer had his records relating to the proceedings in the Family Court in 1987.  Again it would have been open to either party to have subpoenaed the Family Court file but neither did so.  For transactions which occurred more than eleven years ago obviously contemporaneous documents are by far the best evidence of what occurred.  I accept that in their letter of 5 February 1991 Scotts supplied all of the relevant documents of which they were then aware.  Their impartiality was not challenged.  However, these documents are not so apparently reliable as to enable a confident resolution of the matters in issue by reference to them.

The issues

1. The issues which the plaintiff seeks to have resolved in this action are as follows:

2. Whether between February 1986 and November 1986 he made payments totalling $5,250 into the Hindmarsh account in reduction of his loan from the Company.  The ledger of the Company does not reflect such payments, or at least, a major part of them.  It is possible that some part of them was appropriated by the father to money owed to him personally.

1. Whether rent payments totalling $8,300 were paid into the Hindmarsh account between January 1988 and September 1989 by the tenant of the Coffin Bay property in reduction of the plaintiff’s loan from the Company.  Similar points arise on this as in 1 above.

1. Whether $10,500 was applied from the credit in the plaintiff’s shareholders’ dividend account in the Company in about the second half of 1987 in reduction of his mortgage loan.  The shareholders’ dividend account ledger records a withdrawal of funds of $10,500 but there is no corresponding credit to the plaintiff’s mortgage loan ledger account.  The main questions are whether this payment to the plaintiff was effected by the Company in some other way and why the father did not apparently bring it into account in his calculations in 1989 of how much the plaintiff owed to the Company.

1. Whether interest was chargeable by the Company at 15% per annum by virtue of some variation agreement possibly concluded in late 1987.  In the ledger sheet of the Company for the mortgage loan no amount for accrued interest, whether at 5% or 15%, has been debited against the plaintiff in calculating in what he owes.  The issue turns upon what was said between the plaintiff and the father on the topic and the significance of some subsequent calculations of the debt incorporating a figure of 15% for interest.

1. Whether the $20,000 which finished up in the personal account of the father in Executor Trustee on 14 September 1989 was part of a payment by the plaintiff to the Company on account of the mortgage debt.  This turns on precisely what happened to the bank cheque for $60,000 after it was handed to the father and why the father apparently thought it was proper for him to put $20,000 from it into his own name.

1. How much cash was lent by the father personally to the plaintiff and what, if any, amounts received by the father were appropriated against such loans.

The company did not dispute that there was a balance of $7,561 owing to the plaintiff on his loan account and he was entitled to judgment for at least this sum.

The witnesses

1. There were only two witnesses, who were the plaintiff and Ms Kelly from Scotts.  I accept the evidence of Ms Kelly.  I find the plaintiff to have been an honest, but not a completely reliable, witness.  He did not have an appreciation of the legal distinctions between the Company and the father or of the processes for the declarations of dividends.  I was not satisfied that he had a good memory of conversations which took place eleven and more years ago.  There were significant discrepancies between what was pleaded on his instructions about those discussions and his actual evidence on them.  He was not an objective or impartial witness.  Although no corroboration is required for the plaintiff’s versions of his discussions with the now deceased father, I am required to scrutinise his evidence about such conversations, which are impossible to be contradicted by the father, with particular care: Halsburys Laws of Australia, volume 13, para 195-8340.

1. Some rough and disjointed calculations made by the father, which were properly described as “scribblings”, were tendered on the basis that they were documents produced, and discussed, at some of the meetings in 1999.  I did not accept them as business records or as having any presumption of accuracy attaching to them.  It is unclear when they were prepared and with reference to what other material.  All they show is that there was a substantial difference of opinion between the plaintiff and the father about how much was owing by the plaintiff to each of the Company and the father personally.

Admissibility of settlement discussions under Section 67c of the Evidence Act

1. In the evidence and cross examination of the plaintiff no objection was taken to evidence from him about what was said and done in the three meetings in 1999 and to various documents which were used at those meetings being tendered. As will be related later, after the conclusion of the plaintiff’s evidence I allowed him to amend his Statement of Claim to plead various matters occurring in those meetings as being the ascertainment by him of new material facts for the purpose of his application for an extension of time under s48 of the Limitation of Actions Act (“the LAA”). I then allowed counsel for the defendant to object to the admission of that evidence under s67c of the Evidence Act on the basis that it was now sought to be used by the plaintiff for a purpose which was not before the Court at the time the evidence was adduced. I heard argument on the point and reserved my decision on it to be dealt with in these reasons.

1. Section 67c(1) provides:

   “Subject to this section, evidence of a communication made in connection with an attempt to negotiate the settlement of a civil dispute, or a document prepared in connection with such an attempt, is not admissible in any civil or criminal proceedings.”

The plaintiff’s counsel relied upon the following parts of s67c(2):

“(2)   Such evidence is, however, admissible if .......

(b)... the substance of the evidence has been disclosed with the express or implied consent of the parties to the dispute; or

(c)    the substance of the evidence has been partly disclosed with the express or implied consent of the parties to the dispute, and full disclosure of the evidence is reasonably necessary to -

(i).... enable a proper understanding of the other evidence that has already been adduced; or

(ii)    avoid unfairness to any of the parties to the dispute; ……..

(f)     the evidence tends to contradict or qualify evidence that has already been admitted about the course of an attempt to settle the dispute ……”

Before the amendment was made it was clear to me that the defendant’s counsel had not objected to the admission of the evidence about the three meetings because she wished to make use on other issues in the trial of various things which were said and done by the plaintiff at those meetings, such as his initial failure to raise the alleged dividend payment of $10,500 as part of his loan repayments and his apparent acceptance of an interest rate of 15% per annum. The failure of the defendant to object was an implied consent under (2)(b). However, there was no consent to the admission of this evidence on the issue under s48 of the LAA as at the time the evidence was given that issue had not been raised. I do not see why the consent under (2) cannot be for the admission of the evidence on certain issues but not on other issues. Nothing in Chapman v Allan (1999) 74 SASR 274 at 287-290 is inconsistent with this. Alternatively, if that is not correct in law, the consent can be vitiated by the introduction of new issues into the trial and the Judge then has the right to exclude evidence previously given for all purposes. In view of the decision which I reach below I need not have resort to the evidence about what occurred at the meetings and the documents relating to them for any other purpose. If s67c does mean that the evidence about the meetings given by consent is before the Court thereafter for all purposes, it would have been a ground to have refused the plaintiff leave to amend. Accordingly, I rule that s67c(1) makes the evidence of what occurred at the three family meetings in 1999 and the documents which were used at those meetings inadmissible at least for the purposes of proving paragraph 14.1A of the Statement of Claim.

When did the debt become due?

1. The plaintiff pleaded that there was an oral agreement between him and the father that the excess of the amount paid to the Company for the discharge of the Coffin Bay mortgage was a loan by the plaintiff to the Company and that “the Company would repay to the plaintiff the amount of the overpayment once that amount had been calculated by (the father) for and on behalf of the (Company) and until such time as the overpayment had been calculated and repaid to the plaintiff the overpayment would remain as a loan by the plaintiff to the (Company) and “would earn good interest.”  Understandably, the plaintiff did not have a precise recollection about the actual words of the conversation between himself and his father in about August 1989 about what was to happen to the overpayment.  I am not satisfied that the plaintiff has a reliable recollection of the words used.  I find that what was said was no more than the plaintiff would pay over somewhat more than was necessary to satisfy the debt and they would sort out later the precise amount which was to be paid back to the plaintiff.  There was no need for the father to have an opportunity to calculate the amount payable as he already had arrived at a figure which he asserted was owed.  What was in contemplation was that both of them would have to sit down with their respective records, as inadequate as they probably were, and would try and reach an agreement or a compromise on the amount owing.  They had a good relationship and did not want to quarrel.  However, the plaintiff was not prepared to accept what the father said was the amount owing unless he agreed with it.  No time frame was discussed within which the issue was to be resolved.  However, insofar as some term might be implied that the parties were to have a reasonable opportunity to negotiate about the issue before the moneys became due and payable to the plaintiff, that period would only have been some weeks at the most.  Even if there was such a term of the arrangement, it expired well before the end of 1989.  If for some reason the Company had not negotiated as was contemplated, it could not have resisted an action for payment of the amount owing on the basis that the plaintiff did not have the right to bring it until the Company had calculated the amount for itself as that would not have been reasonable.

2. The plaintiff’s contention at trial was that there was a contractual term creating a condition precedent to the money becoming due and payable by the Company to the plaintiff which was that either there had to be proper negotiations to fix the amount payable or the plaintiff had to demand payment.  The law on the subject was set out by King CJ in Re Brookers (Australia) Ltd (1986) 41 SASR 380 at 382, where he said:

   “It is trite to say that where there is a simple loan of money, the debt is due and payable immediately and from day to day from the time of the making of the loan, and that the cause of action therefore arises immediately upon the loan of the money.  This position is unchanged by the fact that there is an express agreement making the loan repayable on demand, on request or on call; the debt is nevertheless due and payable immediately.  …….  If, however, the agreement between the parties is that the loan is repayable only upon the happening of a certain event or upon compliance with a condition precedent to liability, the debt is not immediately due and payable and the cause of action does not arise until the happening of the event or compliance with the condition. …….  An agreement that liability to repay does not arise until an actual demand is made may be express or implied or may be inferred from the circumstances and the conduct of the parties; it may be implied from their relationship. …….”

In my view the overpayment became due and payable by the Company to the plaintiff upon that overpayment being received by the Company, or at the latest a few weeks thereafter if there was an implied term to allow for a period of negotiation.  While it might have been polite for the plaintiff to have requested repayment before he instituted proceedings, there was nothing, either express or implied, which put his claim into the exceptional class of those where a formal demand was a condition precedent for the liability arising.  Accordingly, I find that the plaintiff’s cause of action as pleaded arose by no later than the end of 1989.  I reject that it did not arise until he had sent the letter of 28 September 1993.

Limitation of Actions Act

1. As will be mentioned below, at the commencement of the trial the defendant amended its Defence to plead that the plaintiff’s claim was barred under s35 of the LAA as not being commenced within six years after the cause of action accrued, although it acknowledged that the admitted balance of $7,561 on the loan account was not so barred because there had been a sufficient acknowledgment of it by its subsequent published accounts. As I have found that the cause of action arose by no later than the end of 1989 this plea in bar must succeed unless the plaintiff can obtain an extension of time under s48 of the LAA.

2. Under s48(3)(b) of the LAA the Court cannot extend the time unless it is satisfied:

   “that facts material to the plaintiff’s case were not obtained by him until some point of time occurring within twelve months before the expiration of the period of limitation ……”

The plaintiff pleaded that such a fact material to his case was that on or about 8 December 1998 he discovered that his father had died.  A fact is material to a plaintiff’s case if it is both relevant to the issues to be proved if the plaintiff is to succeed in obtaining an award of damages sufficient to justify bringing the action and is of sufficient importance to be likely to have a bearing on the case: Sola Optical Australia Ltd v Mills (1987) 163 CLR 628 at 636-7. The fact of the father’s death does not satisfy the first leg of this test. The father’s continued existence or death had no direct or indirect bearing on any of the issues raised by the pleadings. The issues were the same whether he was alive or dead. The position is analogous to that in Re Kilkenny Engineering Pty Ltd (1976) 13 SASR 258 where it was held that the winding up of the defendant company was not a fact material to the plaintiff’s case for the purposes of s48(3)(b)(i). Accordingly, the plaintiff has not satisfied that subsection on this ground.

1. As mentioned above, after the close of his evidence the plaintiff amended to plead another alternative fact material in order to satisfy s48(3)(b)(i) relating to various things that were allegedly done at the three meetings in 1999 and from the contents of documents put forward in those meetings. However, as I have excluded all that evidence s48(3)(b)(i) cannot be satisfied on this ground.

2. The plaintiff further pleaded that he had satisfied the alternative under s48(3)(b)(ii) that his “failure to institute the action within the period of limitation resulted from representations or conduct of the defendant, or a person whom the plaintiff reasonably believed to be acting on behalf of the defendant, and was reasonable in view of those representations or that conduct and any other relevant circumstances.” He pleaded that the Company through its agent Scotts represented to him “from 1991 that the amount of the overpayment would be calculated and agreed upon”. I do not find that any such representation was made by Scotts. Rather Scotts continued to say that the family had to sort it out between themselves. The plaintiff did not do anything about this until after his father’s death. From at least February 1991 Scotts’ position was that the records of the Company, as known to them, only gave him an entitlement to $7,561. The plaintiff’s failure to institute his action within the requisite six years did not result from any representations to him by Scotts. It was not reasonable for the plaintiff to have not instituted the action based on anything which was said or done by Scotts.

3. As the plaintiff has not satisfied either s48(3)(b)(i) or (ii) of the LAA he cannot obtain any extension of time under s48. However, in case those findings should be challenged on appeal, I also deal with the additional requirement in s48(3) that he must show “that in all the circumstances of the case it is just to grant the extension of time.” This involves the exercise of a broad judicial discretion by the Court to ensure that a just result will be reached in the circumstances: Sola Optical Australia Ltd v Mills (above) at 637; Wright v Donatelli (1995) 65 SASR 307 at 321. The defendant’s counsel submitted that on the decision of the High Court in Brisbane South Regional Health Authority v Taylor (1996) 186 CLR 541, as applied by the New South Wales Court of Appeal in Holt v Wynter, [2000] NSWCA 143, unreported, on similar but not identical interstate legislation, an application for an extension of time should be refused if it would result in significant prejudice to the defendant. There is no reported authority applying that statement of the law to the exercise of the discretion under s48(3) of the LAA.

4. The defendant pleaded that it had been prejudiced in its defence of the claim by the deaths of the father, Mrs Osborne, Mr Guthrie and/or the loss and destruction of the primary accounting and banking records of the Company. There is no ground to believe that Mrs Osborne could have given significant evidence if she had still been alive. It would seem that Mr Guthrie had died before the cause of action arose. As mentioned above the absence of the primary accounting and banking records of the Company is a major obstacle to a just determination of the issues. However, the Company did not adduce evidence which was apparently available to it to overcome at least some of these problems if that evidence would have benefited its case. The only substantial prejudice shown by the Company is the unavailability of the father to give evidence. If the claim had been brought in time, there is a reasonable possibility that he could have given some evidence to support the state of the Company’s records between 1987 and 1989 and have explained why $20,000 from the sale of the Coffin Bay house was invested in his name. While I accept that his strokes significantly impaired his memory and ability to give evidence I cannot be satisfied that they necessarily precluded him from giving any admissible evidence. There is a reasonable possibility that he could have given some useful evidence if he had still been alive, albeit that it may have been distasteful for his family to have subjected him to such an ordeal in his disabled state. Nevertheless, it is impossible to conclude that justice can be done for the Company on the issues before the Court where it has been deprived by the plaintiff’s delay of some reasonable possibility of being able to explain what occurred through the evidence of the father. The effect of refusing the extension will be to deprive the plaintiff of a possible entitlement to a significant sum of money, but that must be viewed against a possible injustice to the Company of ordering it to pay out more money to the plaintiff than he is entitled to when it could not effectively defend itself against the claim without evidence from the father. A fair trial of the issues is not possible at this point of time in the absence of the father. Even if the plaintiff had brought himself within either s48(3)(b)(i) or (ii), I would still have refused him an extension of time in the grounds that in all of the circumstances of the case it was not just to grant it.

Interest

1. The plaintiff’s primary claim for interest was that there was a contractual obligation on the Company to pay him “good interest” on the overpayment as from 11 September 1989. I find that s35 of the LAA bars his claim to such interest on a contractual basis. However, he is entitled to pre-judgment interest under s39 of the District Court Act. There was no plea, or proof, of any tender before action by the Company. Such interest is to be awarded at a commercial rate and for the period in which the defendant has had the benefit of the money, but the Court has a discretion to reduce the period where the plaintiff has unjustifiably delayed pursuing his claim; Stewart v Jacobsen (2000) 209 LSJS 174. Consistently with what I have found above, the plaintiff should not receive interest for the period prior to instituting the action. It is also relevant that the Company had not charged any interest to the plaintiff on his debt prior to 11 September 1989. I fix a lump sum in lieu of interest of $530 for the period from the commencement of the action until judgment. There will be judgment for the plaintiff for $8,091.

Pleading of issues under Limitation of Actions Act

1. The smooth trial of this action was blighted by the failure of either party to plead properly prior to trial the issues arising under the LAA. This is not the only case I have encountered in recent years where there has not been a proper appreciation of what is required for such pleadings.

2. Prior to the commencement of the trial the Company had not pleaded that the plaintiff’s claim was barred by s35 of the LAA. However, strangely it did plead that there was no acknowledgment of the debt under s42 of the Act which would avoid the operation of s35. It was an improper plea as it should only have been pleaded in a rejoinder if the plaintiff had pleaded in a reply that any plea in the defence under s35 was avoided by an acknowledgment of the debt within s42. The failure to plead s35 meant that s35 could not operate to bar the plaintiff’s claim: Ganzis v Ganzis [1963] SASR 194; Robinson v Craven (1994) 63 SASR 267.

3. The plaintiff had pleaded in his reply that if s35 of the LAA did apply then he sought an extension of time under s48. If a plaintiff seeks an extension of time under s48, it cannot do so by first pleading it in the reply. Section 48(4) of the LAA provides:

   “Where an extension of time is sought pursuant to this section in respect of the commencement of an action, the action may be instituted in the normal manner but the process by which it is instituted must be endorsed with a statement to the effect that the plaintiff seeks an extension of time pursuant to this section.”

This is a mandatory requirement that the claim for the extension must be endorsed upon the summons. It is somewhat illogical that a plaintiff must endorse it on the Summons when any issue of the claim being barred by the LAA does not arise until the defendant pleads the LAA, but that is what the statute requires. It is not compliance with the statute merely to include it in the reply. Furthermore it is an improper use of the reply as that should only contain material in replication to matters raised by the defence and should not be used to raise a new cause of action.

1. The greater problem with the plaintiff’s pleading under s48 was that it merely sought an extension of time under s48, but it did not plead any facts which gave rise to an entitlement under s48. Rule 46.04(1)(b) requiring a party to plead the material facts on which the party relies applies equally to a claim under s48 as it does to any other relief sought by the plaintiff: Golois v Shiptown Pty Ltd (1994) 175 LSJS 475. Not only does it require the pleading of any facts which are to be relied upon under s48(3)(b)(i) and any representation or conduct of the defendant under (3)(b)(ii), but it also requires a pleading of the facts which the plaintiff relies upon to show under (3) “that in all the circumstances of the case it is just to grant the extension of time.”

1. Amendments were allowed by me to rectify the defects and to raise the issues under s35 and s48 although with some delay to the trial. Later in the trial it became apparent that the Company was alleging that it had suffered prejudice as a result of the plaintiff’s delay which made it unjust that any extension should be granted. These were facts which the defendant was required to plead under RR46.04(1)(b) and 46.12(4). Again amendments were allowed in the course of the trial for this to be done.

2. The need to make such amendments in the course of a trial disrupts the trial and deflects the Court and counsel from proper concentration on the issues to be determined. Judges are not obliged to exercise their discretion to allow such amendments in the course of the trial. In future I may apply R2.05 to refuse such amendments, or adjourn the whole trial until the pleadings are in order. As related above, substantial complications arose in relation to s67c of the Evidence Act because of a second amendment which the plaintiff made during the course of the trial to raise an alternative basis on which to ground his claim for an extension of time.