Cormie v Orchard[2001] QCA 546

SUPREME COURT OF QUEENSLAND

1. THE COURT: This is a plaintiff’s appeal against an order granting leave to a defendant to amend his defence so as to raise a defence under the Limitation of Actions Act 1974.  The order also permits the plaintiff to proceed to join a second defendant to the action, in respect of whom the plaintiff had previously filed a notice of discontinuance.  The making of such an order was opposed by the plaintiff and the second defendant.

2. The appellant (“the plaintiff”) was injured in a workplace incident in Moree in July 1985. It is common ground that legal proceedings for damages had to be brought in a court in New South Wales, and that the appropriate limitation period for such a claim was six years. The plaintiff sued her employer in a New South Wales court and eventually settled her claim for $60,000. However she claims that negligent or misleading conduct by her solicitor (“the first solicitor”) resulted in her settling for an inadequate sum. In the fullness of time she commenced an action against the first solicitor and against another firm of solicitors (“the second solicitor”) from whom she had sought advice concerning bringing proceedings against the first solicitor. She alleges that the second solicitor gave incorrect or misleading advice in relation to the expiry of the limitation period in respect of her claim against the first solicitor. Her statement of claim alleges that as a result of such advice she failed to initiate proceedings against the first solicitor in time.

3. The relevant chain of misadventure seems to have commenced upon the first solicitor assuming (possibly on instructions from the plaintiff) that the accident had occurred on 16 July 1985. That information was passed on to the New South Wales solicitors who issued proceedings on the plaintiff’s behalf in that State on 15 July 1991. It was not until the time of hearing of the claim (November 1995) that the plaintiff’s work diary was disclosed indicating that the date of the accident was 2 July 1985. The plaintiff alleges that she then settled the action for less than she would otherwise have obtained because it appeared that it had not commenced within time. Otherwise, she alleges, she would have recovered damages in excess of $160,000. She has therefore sued the first solicitor in the present proceedings for damages for lost opportunity to pursue her New South Wales’ claim for damages, and alternatively, her second solicitor for damages for lost opportunity to obtain damages against her first solicitor.

4. Shortly after the settlement of the original claim in November 1995, the plaintiff contacted the second solicitor to investigate the possibility of making a claim against the first solicitor. The second solicitor failed to advise her that she had six years from July 1991 to commence proceedings against the first solicitor (ie that such proceedings could be commenced until June or July of 1997). She alleges that the second solicitor gave negligent or misleading advice to the effect that the limitation period had already expired on 3 July 1994.

5. Consequently the plaintiff abstained from suing the first solicitor. It was not until 24 December 1998 that the present action was commenced on her behalf against the first solicitor and the second solicitor, by which time a limitation plea was available to the first solicitor. The actions against the two solicitors are true alternatives. If the action against the first solicitor is not statute barred, the plaintiff cannot succeed against the second defendant, but may succeed against the first defendant; if it is statute barred, she cannot succeed against the first defendant but may succeed against the second defendant. It is to be noted that the claims against both solicitors are based upon negligence, and alternatively, upon misleading conduct under s 38 of the Fair Trading Act 1989.

6. For present purposes it is assumed that the date of the original incident was 2 July 1985. The plaintiff’s action against her employer should have been commenced in a New South Wales court on or before 2 July 1991. The date upon which her cause of action against her first solicitor accrued is the date upon which damage was first suffered by reason of that solicitor’s negligence. That date would seem to be 2 July 1991 which is the date on which the right to sue was lost by reason of such alleged negligence. Accordingly, an action against the first solicitor should have been commenced within six years from that date, that is to say on or before 2 July 1991.  That is also the date when damage first occurred to the plaintiff by reason of the allegedly negligent advice of the second solicitor, as that is the date upon which they lost the ability to sue her first solicitor free of the obstacle of a limitation defence.  On the evidence provided in the present application the plaintiff’s right of action under the Fair Trading Act became subject to a limitation defence three years after the date on which the cause of action accrued.^[1]   A six year limitation however exists in relation to her claim of negligence against that solicitor.  Accordingly, it seems to me that on the information provided in respect of the present application the limitation period in respect of the Fair Trading Act claim against the second solicitor would have expired on 2 July 2000, and in respect of her cause of action in negligence it will expire on 2 July 2003.

7. In the event, the plaintiff’s action against both the first and the second solicitor, which was commenced on 24 December 1998, was commenced in time in respect of both causes of action against the second solicitor, but was out of time in respect of the claims against the first solicitor.

8. Although the first solicitor was entitled to plead the Statute of Limitations, it did not do so. Its failure to do so is said to have been through oversight, although the evidence in this respect is sparse. This is a little curious, as the statement of claim, in presenting the details of the claim against the second solicitor expressly conceded that the claim against the first solicitor was out of time, and the prospect of the action being defeated by such a plea was expressly conceded.

9. The action progressed. By 9 May 2001 the pleadings were closed and a request for trial date had been made. The plaintiff’s solicitors considered that because the first defendant had not raised the limitation period in its defence, the alternative claim against the second solicitor must fail as it was based on the premise that the plaintiff would be defeated by a plea of the first solicitor under the Limitation of Actions Act.  The plaintiff’s present solicitors then obtained her instructions to discontinue her claim against the second defendant.  This in our view was a perfectly reasonable course to adopt.  In the events as they appeared to be by reason of the non pleading of the limitation defence on behalf of the first solicitor, it was desirable that the plaintiff’s potential liability for the second solicitor’s costs of the action should be minimised.

10. The following correspondence ensued. By letter dated 9 May 2001 the plaintiff’s present solicitors wrote -

“Based on the current pleadings and given that the matter has now been certified as ready for trial, our client offers to discontinue her claim against your client with each party bearing its own costs.

The offer is open until 4.00pm on Friday 18 May 2001.

No such offer is being made to the first defendant.” 

11. The same day the second defendant’s solicitors responded –

“I have your letter of 9 May 2001.  Your offer to settle is accepted.  I enclose Discontinuance against the Second Defendant for your execution and return without delay.

You will be advised of its filing date in due course.”

12. A notice of discontinuance was then prepared and was filed on 11 May 2001. The first defendant’s solicitors were then advised of this fact “as a matter of courtesy”. Some issue was taken in the proceedings below concerning the alleged invalidity of the notice of discontinuance in that it was not endorsed with the consent of the first defendant.^[2]  However we do not understand any issue to be taken on this appeal with the learned Trial Division judge’s ruling to the effect that this was an irregularity only, and that the discontinuance should be taken to have been effective.

13. Soon after the discontinuance, the action was set down for hearing. The solicitors for the first solicitor then gave notice of intention to amend the defence to plead that the plaintiff’s cause of action against the first solicitor was statute barred. Accordingly, an application was brought before a judge of the Trial Division seeking leave to amend the defence in this respect. The application was in due course served on both the plaintiff and the second solicitor.

14. The order against which the present appeal is brought contains two components –

1. The grant of leave to the first solicitor to amend his defence to plead the Statute of Limitations.

2. Directions permitting the plaintiff to cause the second solicitor to be joined as second defendant in the action.

15. Subrules 74(4) and 74(5) of the UCPR provide -

“Amendment of proceedings after change of party

74(4) If an order is made including or substituting a person as a defendant or respondent, the proceedings against the new defendant or respondent starts on the filing of the amended copy of the originating process.

(5) However, for a limitation period, the proceedings against the new defendant or respondent is taken to have started when the proceeding started against the original defendant or respondent unless the court otherwise orders.”

16. Since the making of the order the second solicitor has been rejoined unconditionally as second defendant. Although it opposed such an order below on the ground that there was a binding settlement between it and the plaintiff, it has not chosen to appeal against the order. After being made a respondent to the present appeal, it indicated a willingness to abide the court’s decision. In the interim however its solicitors told the plaintiff’s solicitors that it now intends to raise a limitation defence under the Fair Trading Act 1989^[3].  Shortly before the hearing of the appeal they advised that they would “abide by the Court of Appeal’s decision in relation to:-

1. Whether there was a compromise between the plaintiff and the second solicitor; and

2. Whether the second solicitor is “capable of raising a defence to the Fair Trading Act allegation.”

17. The latter question of course depends upon whether the second defendant could successfully persuade a court to “otherwise order” under r 74(5), as for example by obtaining an order that the proceeding against it be taken to have started when the order for joinder was made. That of course is not a matter in respect of which this court could bind any future court to make any particular decision. We cannot say more at this point than that it is difficult to see how such an application could succeed. That, however, may be cold comfort for the plaintiff. Whilst this particular area of prejudice to the plaintiff is slender, it is not something that can be entirely dismissed.

18. Shortly stated, her Honour granted the relief sought by the first solicitor because she considered that the lateness of the application “should not prevail over the injustice of precluding the first defendant from pleading what appears to be an unarguable defence when the plaintiff is still in a position to pursue her alternative claim against the second defendant.” Her Honour observed that the limitation period for the plaintiff’s claim against the second solicitor had not yet expired. The court’s attention does not appear to have been drawn to the shorter period of limitation in respect of the Fair Trading Act claim, or to the effect of r 74(5).  Neither was her Honour’s attention drawn to r 69(2), which applies to the substitution of a party after the end of a limitation period.  The application seems to have been treated simply as one for amendment after the filing of a request for trial date, which requires leave of the court under r 380.

19. As a consequence of the order the trial dates commencing 30 July 2001 were vacated and it was ordered that costs of the adjournment be reserved.

20. Before turning to the ultimate question as to whether her Honour erred in making this particular order, it is desirable to determine the effect of the arrangement for discontinuance between the plaintiff and the second solicitor.

Effect of correspondence concerning discontinuance

21. Mr Keane QC submitted for the appellant plaintiff that her Honour erred in failing to conclude that there was a compromise agreement between the plaintiff and the second defendant, and that the plaintiff was now irreparably prejudiced by exposure to a plea by the first defendant under the Limitation of Actions Act.  The respondent’s answer to this is that the parties used the term “discontinuance” in the sense contemplated by the UCPR, and that the plaintiff remains entitled to pursue its cause of action against the second defendant now that it has been once again included as a defendant in the action.  Rule 310(1) relevantly states –

“A discontinuance…under this part is not a defence to another proceeding on the same or substantially the same ground.”

22. The present rules are consistent with a long held view of the nature of a discontinuance as not destroying a claimant’s right of action. The correspondence does not stipulate for release of any of the plaintiff’s causes of action. Mr Keane however placed reliance upon the use of the words “to settle” in the letter written on behalf of the second solicitor. That however does not in my view alter the nature of the offer that was being accepted. The original offer was unambiguous and it was accepted. The second defendant’s reference to “offer to settle” was merely its description of the plaintiff’s offer. The second defendant did not seek anything which the plaintiff had not offered and it is clear that the parties simply made an arrangement under which a discontinuance would be filed in accordance with the Rules of Court and the second defendant would not make any claim for costs. Legal authority is not necessary to answer the present point, but it is worth mentioning that the circumstances of The Owners of the Cargo of the Kronprinz v The Owners of the Kronprinz^[4] bear a strong resemblance to those of the present case, and is not properly distinguishable.  We reject the submission that the second solicitor’s acceptance should be characterised as a counter-offer.

23. There is no merit in the appellant’s submission that the plaintiff is precluded by a compromise agreement from pursuing her rights against the second solicitor.

Whether the order should have been made

24. The combination of the two orders has a dramatic effect upon the plaintiff’s action. The plaintiff has in effect been driven, against her will, to pursue the second defendant in place of the first defendant. The key to compensating the plaintiff for her loss of rights against the first solicitor is the bringing in of another unwilling party against whom the plaintiff is said to have equally good rights. At first glance it is a little surprising that on the eve of trial, a belated application by a defendant to plead a statute of limitation should be allowed, especially after the plaintiff’s circumstances had changed by reason of that defendant’s failure to plead in a timely way. Under such circumstances we should think that such an application should not succeed unless it is very clear that the plaintiff will not be prejudiced.

25. In the first place an order of the present kind subjects a party desirous of concluding the matter to a loss of the trial date. Prejudice of that kind is not necessarily fatal, but it should not be underestimated either. It has been recognised that factors that militate against allowing late amendments include the strain of litigation upon litigants, anxiety from facing new issues, raising false hopes, and the dashing of the legitimate expectation that the trial will resolve the issues.^[5]  Clearly it would have been a sound exercise of discretion simply to refuse the belated application for amendment and to let the action go to trial between the remaining parties in the manner in which it had theretofore been prepared. Of course it does not necessarily follow that her Honour erred in making the more complicated order that is now under consideration, but it would in our view be erroneous to frame such an order if the plaintiff were thereby subjected to additional risks or potential prejudice.

26. The causes of action against the respective solicitors are different and are based upon different evidence. It may well be that the remedy against the second defendant is equally as good as that against the first defendant; but it is impossible to know whether or not the second solicitor has a better or more feasible explanation for its conduct than the first solicitor has in respect of his. We therefore consider that the factor of choice of remedy and choice of defendant is not entirely neutral in that at least there is some potential for prejudice which cannot be thoroughly dispelled. In this context it is relevant to note that there is at least a possibility that the second defendant could raise a limitation point in respect of the claim under the Fair Trading Act, although on the material before us, that possibility must be regarded as very remote.  It was submitted for the plaintiff that the disadvantage of losing this alternative cause of action, to which a plea of contributory negligence is not available, is a real one.  However contributory negligence has not been pleaded in relation to the alternative claim based on negligence, and it seems to us that this particular point does not in the end yield more than a very theoretical form of prejudice to the plaintiff’s rights.

27. The second part of the order seems plainly to have been a coercive provision to induce the plaintiff to effect the joinder favoured by the court, in circumstances where neither the first defendant nor the plaintiff had applied for joinder of the second defendant. Presumably the court was unwilling to join the party of its own motion, and the order was therefore framed in this way.

28. The learned judge attempted to frame an order which would ensure that an order for costs would prevent the plaintiff being prejudiced. Of course an order for costs is not a universal means for the purchasing of an indulgence.^[6]  In the event the only order for costs made in the present matter was that the first defendant pay the other parties’ costs of the application on an indemnity basis.  We were informed that counsel for the first solicitor had indicated a willingness to submit to an order which would ensure that the plaintiff would not be penalised in costs by reason of the late pleading.  However her Honour did not pursue that suggestion, largely it would seem because it was impossible to foresee future events, including whether the plaintiff would in fact apply for joinder of the second solicitor

29. Now that the joinder has been effected, the implications in relation to costs are quite complex. If the plaintiff’s claim against the first solicitor fails, there is nothing to prevent him from seeking an order for costs of the action, although it seems likely that the trial judge would take into account the circumstances which preceded the amendment. But before making an order of the present kind it was we think necessary to frame an order that avoids such risks and that would protect the plaintiff from liability for such costs. The necessary order would have required the first defendant to pay on an indemnity basis the plaintiff’s costs thrown away as a result of the first defendant’s failure to plead the limitation defence including –

1. the plaintiff’s costs of the action against the first defendant from 29/10/99 until judgment on this appeal;

2. the plaintiff’s costs thrown away by the adjournment of the trial appointed to commence on 30/07/01 (including the costs of the order made on 27/7/01);

3. if the plaintiff recovers a judgment against the second defendant, the plaintiff’s costs of the action against the second defendant up until the discontinuance of the action against the second defendant on 11/05/01.

4. any costs that the plaintiff may be ordered to pay the first defendant incurred before the amendment which may be irrecoverable against the second defendant.

30. In our view if an order were to be made permitting the first defendant to amend his pleading, it ought to have included such stipulations. But why make such an order at all? In order to overcome an oversight on the part of the first defendant’s solicitors radical and complex changes have been wrought to the action, and the plaintiff now has had a very different situation thrust upon her due to no fault on her part or on the part of her advisers. The result of making such an order was to deprive the plaintiff of a trial very shortly before it was due to commence. This cannot now be remedied, but it is a relevant factor serving to indicate that the order should not have been made. The combined circumstances suggest to me that the discretion in the court to permit late amendments to pleadings in this instance miscarried.

31. We have therefore concluded, not without some misgiving, that although this was a ruling on a matter of practice or procedure upon which a wide discretion is reposed in the primary judge, the order in question was inappropriate and gave the erring party an undue advantage at the expense of the other parties. The appeal should be allowed.

Orders

1. The appeal is allowed.

2. The respondent Orchard should pay the appellant’s costs of the appeal to be assessed.

3. The order of 20 July 2001 should be set aside and replaced with an order granting leave to bring the amended application but dismissing the first defendant’s application to amend his defence and further ordering the first defendant to pay the costs of the plaintiff and of the second defendant of that application to be assessed on the standard basis.