High Top Pty Ltd v Kay Sheila Lawrence
[2010] QCA 270
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- Appeal Determined (QCA)
- High Top Pty Ltd v Kay Sheila Lawrence[2010] QCA 270
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High Top Pty Ltd v Kay Sheila Lawrence[2010] QCA 270
High Top Pty Ltd v Kay Sheila Lawrence[2010] QCA 270
SUPREME COURT OF QUEENSLAND
PARTIES: | |
FILE NO/S: | SC No 3147 of 2008 |
Court of Appeal | |
PROCEEDING: | General Civil Appeal |
ORIGINATING COURT: | |
DELIVERED ON: | 8 October 2010 |
DELIVERED AT: | Brisbane |
HEARING DATE: | 16 June 2010 |
JUDGES: | McMurdo P, Chesterman and White JJA Separate reasons for judgment of each member of the Court, each concurring as to the order made |
ORDER: | The appeal is dismissed with costs. |
CATCHWORDS: | PROCEDURE – SUPREME COURT PROCEDURE – QUEENSLAND – PROCEDURE UNDER UNIFORM CIVIL PROCEDURE RULES AND PREDECESSORS – TIME – DELAY SINCE LAST PROCEEDING – where appellant filed claim but did not serve on defendants within the year – where claim renewed by registrar pursuant to r 24 of the Uniform Civil Procedure Rules 1999 (Qld) – where fourth defendant/respondent to the appeal successfully challenged renewal of claim and the order for renewal was set aside – whether the primary judge asked himself the right question in determining the application, namely whether the appellant had an “apparently worthwhile” claim – whether prejudice was suffered by the respondent by reason of delay Uniform Civil Procedure Rules 1999 (Qld), r 5, r 16(d), r 24 Arthur Andersen Corporate Finance Pty Ltd v Buzzle Operations Pty Ltd (in liq) [2009] NSWCA 104, cited Gillies v Dibbetts [2001] 1 Qd R 596; [2000] QCA 156, cited Hightop Pty Lty & Anor v Caffe Pty Ltd & Ors [2009] QSC 402, approved Jones v Jebras & Hill [1968] Qd R 13, considered Muirhead v The Uniting Church in Australia Property Trust (Q) [1999] QCA 513, considered Regie Nationale des Usines Renault SA v Zhang (2002) 210 CLR 491; [2002] HCA 10, cited Simpson v Saskatchewan Government Insurance Office (1967) 65 DLR (2d) 324, cited The IMB Group Pty Ltd (in liq) v Australian Competition and Consumer Commission [2007] 1 Qd R 148; [2006] QCA 407, applied Van Leer Australia Pty Ltd v Palace Shipping KK (1981) 180 CLR 337; [1981] HCA 11, applied Victa Ltd v Johnson (1975) 10 SASR 496, applied |
COUNSEL: | P J Davis SC, with M A Hoch, for the appellants B O'Donnell QC, with P D Lane, for the respondent |
SOLICITORS: | Allens Arthur Robinson for the appellants Barry Nilsson Lawyers for the respondent |
[1] McMURDO P: This appeal should be dismissed with costs. Subject to the following observations, I agree with White JA's reasons.
[2] One of the appellants' principal contentions is that the primary judge erred in refusing their application to renew their claim against the respondent under Uniform Civil Procedure Rules (UCPR) r 24 by embarking upon an assessment of whether their claim had "substantial prospects of success". Their contention is based on this Court's previous statement in The IMB Group Pty Ltd (in liq) & Ors v ACCC[1] when considering the question of renewal of a claim under r 24(2):
"An apparently worthwhile action is, of course, a factor favouring the positive exercise of the court's discretion where the action can proceed without prejudice to the defendant."[2]
[3] To address the appellants' contention, it is necessary to put in context the primary judge's consideration of whether the appellants' claim against the respondent had "substantial prospects of success".
[4] The primary judge's reasons begin by setting out the relevant facts surrounding the appellants' claim[3] and the relevant rules[4] and legal principles.[5] His Honour then referred to the IMB Group case and noted:
"An 'apparently worthwhile action' is a factor favouring renewal of the claim. However, an application for renewal is not an occasion for determining the merits of the claim and it will often be difficult to come to a reliable view that a plaintiff's claim is so strong that a serious injustice would result if it were not allowed to proceed."[6]
[5] The judge next set out the matters relied on by the appellants to explain their delay in commencing their claim,[7] their delay in serving it once filed,[8] and their explanation for subsequent delay.[9] His Honour found that the appellants had provided some explanation for their delay in the late commencement of their claim;[10] a satisfactory explanation for not serving the claim when issued;[11] and a reasonable explanation for their own conduct in the delay which occurred after the proceedings issued (although some criticism could be made of the conduct of their former solicitor during this period but that should not significantly count against the appellants).[12]
[6] His Honour next considered the appellants' claim against the vendors for damages for misleading conduct under the Trade Practices Act 1974 (Cth) which was based on a number of alleged representations.
[7] As to the alleged representation about wages paid to staff, the judge noted: "Although I am conscious that this is simply an application to renew the claim, the limited material available suggests the [appellants] have substantial prospects of success on this part of their claim."[13] His Honour then dealt with the alleged franchise representation, concluding that, while there were some uncertainties about this part of the appellants' claim, "it may well have reasonable prospects of success".[14] His Honour next discussed that part of the appellants' claim referred to as "the net profit representation" and concluded that the appellants would "have difficulty in succeeding on this aspect of their claim".[15] Although the information was "relatively sparse", his Honour considered that the appellants had "some real prospect of success on [the] aspect of their claim"[16] referred to as "the bad debts representation." The judge found that the appellants' "self-managed business representation" involved questions of credit which were difficult to assess but at this stage "it could not be said that the [appellants] had no substantial prospects of succeeding on it".[17] As to the appellants' claim referred to as "the wastage representation", the judge determined that, on the material available, it did not appear "to be a matter which would provide any substantial basis for a successful claim for misleading conduct".[18] The judge ultimately concluded that "therefore, in respect of a number of aspects of their claim, the [appellants] appear to have substantial prospects of succeeding against the [vendors]".[19]
[8] His Honour next considered the question of prejudice in the appellants' claim against the vendors,[20] concluding that he did "not consider that significant weight should be attributed to the prejudice asserted by the [vendors]" and that "At least in respect of some of the claims against the [vendors], the [appellants] appear to have reasonable prospects of success".[21] The judge ultimately found that the explanation for delay, considerations of prejudice, and the appearance of reasonable prospects of success as to at least some of the claims against the vendors, would justify allowing the appellants to renew their claim against the vendors.[22] There is no appeal from that decision.
[9] The judge then turned to the appellants' claim against the respondent. It is in this context that, after referring to the appellants' allegations in their claim against the respondent, his Honour made the statement criticised by the appellants: "It is difficult to come to a preliminary view about the prospects of success in the action against [the respondent], so far as it related to advice about whether to buy the Bakery."[23] The judge next turned to the question of prejudice in the appellants' claim against the respondent, concluding that the destruction of the respondent's file notes, after the expiry of the limitation period and prior to being served with the appellants' claim, was "likely to significantly affect the prospect that her evidence will be accepted; and there is a substantial risk that she can not now recall important communications recorded in the notes".[24]
[10] His Honour explored both the appellants' explanation for delay,[25] and whether the respondent had contributed to the prejudice she suffered,[26] before determining that he should give considerable weight to the prejudice she had suffered by reason of the delay in the service of appellants' claim on her. The judge was also mindful that he did not have material before him which enabled him "to form a preliminary view that the [appellants'] claim against [the respondent] has substantial prospects of success".[27] After taking these and the other matters into account, the judge finally found that the appellants had not shown good reason to renew their claim against the respondent.[28]
[11] The IMB Group case rightly states that an "apparently worthwhile action" is a factor favouring the positive exercise of the court's discretion in renewing an unserved claim under r 24(2) where the action can proceed without prejudice to the defendant.[29] But the IMB Group case does not state, and is not authority for, the proposition that, where it is possible to make such a determination in an application under r 24(2), it is an error to consider the strength of a plaintiff's claim. On the contrary, the IMB Group case suggests that if a plaintiff's claim is so strong that a serious injustice would result were it not allowed to proceed, that would be a persuasive reason, in the absence of some significant prejudice to the defendant, to allow the claim to proceed by renewing it.[30] Together with a satisfactory explanation for delay and absent competing circumstances, these matters would, in the terms of r 24(2), constitute "another good reason to renew the claim".
[12] In any case, in my opinion, the primary judge's consideration of the question whether he was able "to come to a preliminary view about the prospects of success in the [appellants'] action" against the respondent was entirely consistent with the judge exploring the question of whether the appellants' action against the respondent was, in the terms used in the IMB Group case, "apparently worthwhile".
[13] The learned primary judge made neither an error nor a slip in determining whether the appellants had shown "good reason to renew the claim" against the respondent under r 24(2) by considering, as one relevant factor, whether the appellants had placed sufficient material before him to enable him "to form a preliminary view that the [appellants'] claim against [the respondent] has substantial prospects of success".[31]
[14] I agree with the orders proposed by White JA.
[15] CHESTERMAN JA: I agree that the appeal should be dismissed with costs, for the reasons given by White JA.
[16] WHITE JA: The appellants, who are the plaintiffs in the proceedings, appeal against an order made in the Trial Division setting aside an order of the registrar made on 1 June 2009 to renew their claim against the fourth defendant and dismissing the proceedings against that defendant.
[17] The first, second and third defendants (who are not parties to this appeal), as well as the fourth defendant, brought applications pursuant to r 16(d) of the UniformCivil Procedure Rules 1999 (Qld) (‘UCPR’) to have the order for the renewal of the claim as against them set aside. They were unsuccessful but have not appealed the dismissal of their application.
[18] There is no substantial dispute, for the purpose of this appeal, about the facts and circumstances giving rise to the proceedings, save for one or two matters. Rather, the dispute relates, to a large extent, to the capacity of the parties to have a fair trial. The appellants accept that the onus was on them to demonstrate to the primary judge that there was “good reason” to renew the claim pursuant to r 24(2).
Factual basis for the proceedings and orders
[19] In late 2001 Mr Karl Walker was desirous of acquiring a business, largely, it seems, for tax minimisation reasons. He sought the advice of the fourth defendant, Ms Kay Lawrence, an accountant, who had previously given him advice about the establishment of the Karl Walker Trust in 1998. Mr Walker received an information package about Solo Pane Bakery in early 2002 from a business sales representative. Mr Walker discussed its acquisition with Ms Lawrence, showing her the information pack. Mr Walker met with Mr and Mrs Sale, the second and third defendants, who were behind the company Caffe Pty Ltd, the first defendant and owner of Solo Pane. Mr and Mrs Sale made certain alleged representations about the business, particularly about product wastage and the amount of time a non-operator owner would need to devote to it.
[20] Mr Walker was particularly anxious to have no personal tax liability arising out of the acquisition of the business and accepted Ms Lawrence’s advice about how he should structure his financial affairs to achieve this. He deposed that Ms Lawrence encouraged him to buy the business, although her memo to Mr Walker of 30 January 2002 shows that she raised numerous points for him to consider and noted a number of queries on the copy of Caffe’s Profit and Loss Statement for the six months to December 2001 and the Schedule of Expenses for the same period. She concluded her memo, “If there is anything further required, please let me know”.[32]
[21] Mr Walker incorporated High Top Pty Ltd (of which he was the sole director), the first appellant/plaintiff, to purchase the business. On 9 April 2002 High Top contracted with Caffe to purchase Solo Pane. The terms of the contract gave the purchaser a period of 14 days for due diligence after an adjoining café owner had agreed not to exercise his right of first refusal. It seems that the due diligence period expired on 14 May 2002. The primary judge concluded that:[33]
“The material strongly suggests that the plaintiffs chose not to carry out due diligence, but, by arrangement with Caffe, to rely on the information in the information pack, and Caffe’s accountant would liaise with Ms Lawrence and provide an opinion as to whether the information in the information pack was a true and fair representation of the Bakery’s trading activities. Caffe’s accountant was Mr David Le Sueur, of Tatnell DLS. On 30 April 2002, Mr Le Sueur sent a letter (the April 2002 letter) to the directors of Caffe, commenting in some detail on the information. It is apparent from that letter that the financial information in the information pack was not in fact identical with that in the income tax returns, but was the product of a substantial number of adjustments, said to reflect the trading activities of the Bakery, (also described as the core Bakery trading activities). In particular, directors’ salaries, described in two places in the letter as “Wages Administration” and in one place as “Wages-Administration”, were said to have been added back.”
Mr Walker contends that Ms Lawrence neither provided him with that letter nor discussed its contents with him. Ms Lawrence provides evidence which strongly suggests that she did send it to Mr Walker.
[22] The contract settled on 31 May 2002 for a purchase price of $345,000. Shortly after taking over the bakery business, Mr and Mrs Walker experienced problems on many fronts. They had hoped to operate the business with the existing staff and without much personal involvement themselves, but that proved impossible.
[23] Ms Lawrence advised Mr Walker that the Karl Walker Trust, the second appellant/plaintiff, should lease the business from High Top for tax minimisation purposes and in September 2002 that occurred.
[24] In early 2003 Mr Walker consulted a solicitor, Mr Chris Bridge of Bridge Brideaux Solicitors, about misrepresentations concerning the payment of wages to staff by the vendor.
[25] In April 2003 Mr Walker required an operation for a brain tumour but was back working in the business after a short recuperative period. Many cash injections were required to keep the business going.
[26] In March 2004 the lease for the bakery at Springwood expired and the landlord declined to renew it. Mr Walker moved the bakery to leased premises at Annerley. Things did not improve and in April 2005 Solo Pane was sold for $50,000, effectively the value of the plant and equipment. Mrs Walker was diagnosed with a recurrence of breast cancer and developed Graves’ disease.
[27] Mr Walker was also experiencing problems with the Australian Tax Office about overdue taxes owed by the Karl Walker Trust. To that end he retained a solicitor, Mr Stephen Russell of Russell and Company, on 26 August 2005. On that day Mr Russell wrote to Ms Lawrence seeking her file about the acquisition of the business. The exact terms of the request and Ms Lawrence’s response were central to the appellant’s contentions. Mr Russell wrote:[34]
“We have been retained this morning to act on behalf of Mr and Mrs Walker in relation to their income tax affairs, and also their (unfortunately very unsuccessful) purchase of a bakery business a few years ago. We understand that the business no longer operates.
Mrs Walker tells us that you have a file in relation to the acquisition of that business, and in particular that the file contains documents which record representations as to turnover, profitability etc. made by the vendor of the business and/or by his agent.
We are seeing Mr and Mrs Walker at 4.00pm on Monday, 29 August 2005. We would be very grateful if you could retrieve the file and make it available to us before that time.
Mrs Walker will have called you to authorise you to provide the documents to us.
Please do not hesitate to call if you need any further information.”
Ms Lawrence wrote on the letter “I spoke to KBW. He auth [unreadable] of files for $55. KL 9.50am 30.8.5”.
[28] Ms Lawrence deposes that she obtained Mr Walker’s authority to release “relevant documents” to the solicitor. She notes that the letter did not suggest any dissatisfaction with her services in relation either to tax affairs or the purchase of the business by the appellants. Ms Lawrence deposes that she:
“… copied some documents to send to them but I can no longer recall which documents. I am sure, however, that I did not send copies of all of my file notes”.[35]
She believed that Mr Walker collected the documents from her office.
[29] In early 2008 the dispute with the Australian Tax Office was finalised and it was not, it seems, until then that Mr Walker gave instructions to Mr Russell to explore the current proceedings. In conference with senior counsel, 8 April 2008 was agreed to be the date upon which any claim against the defendants would be statute barred.[36] A claim and statement of claim were issued against Caffe Pty Ltd, Mr and Mrs Sale and Ms Lawrence on 7 April 2008. They were not served.
[30] On 20 August 2008 Mr Walker’s and the Karl Walker Trust’s tax file which also contained notes about the acquisition of the bakery business was destroyed by professional document managers in accordance with the ordinary procedures in place in Ms Lawrence’s accountancy practice. On 8 October 2008 Russell and Company wrote to Ms Lawrence, putting her on notice that proceedings against her and the vendors had been commenced in the Supreme Court but that they were being reformulated and would be served “in the near future”. Ms Lawrence was recommended to give notice to her insurers.
[31] On 1 June 2009 the claim was renewed ex parte by the registrar for 12 months to 7 April 2010. The statement of claim was amended on 22 June 2009. Proceedings were served on the registered office of Caffe Pty Ltd and a copy provided to Mr Sale 25 June 2009. Mrs Sale was personally served on 9 July 2009, Mr Sale on 23 July 2009 and Ms Lawrence on 7 July 2009.
Grounds of appeal
[32] The appellants complain that the primary judge erred in asking himself the wrong question, namely whether the claim against the fourth defendant had “substantial prospects of success” rather than whether they had an “apparently worthwhile” claim (Grounds 1 and 2); alternatively, he erred in holding that expert evidence was necessary to enable a determination of “substantial prospects of success” (Grounds 3 and 4). The appellants further complain that the primary judge erred in concluding that prejudice or significant prejudice had been suffered by the fourth defendant by reason of the delay in the service of the proceedings; this was so particularly because she had been put on notice in August 2005, and was asked to make available her file in relation to the acquisition of the business, and had chosen not to provide copies of all her file notes (Grounds 5 and 6). The appellants complain generally that the decision was unreasonable (Ground 7).
Notice of contention
[33] The respondent has filed a notice of contention that the decision below ought to be affirmed on other grounds than those articulated by the primary judge. In brief they are:
● the appellants have breached their undertakings to the court and to the other parties to proceed expeditiously with the proceedings in accordance with r 5 of the UCPR;
● the appellants’ explanation for not serving the respondent promptly upon the commencement of proceedings was unsatisfactory and a factor against renewal;
● the policy behind the statutory limitation period, which dictates how the discretion should be exercised, ought to have been considered;
● the appellants failed to discharge the onus of showing that a fair trial could still take place notwithstanding the delay;
● the appellant made a deliberate decision to allow the claim to become stale after the limitation period had expired, which is a factor against renewal;
● the limitation period had expired before the application to renew the claim was heard.
Approach to renewal of originating process
[34] Rule 24(1) of the UCPR provides that a claim remains in force for one year starting on the day it is filed. Rule 24(2) provides, relevantly:
“If the claim has not been served on a defendant and the registrar is satisfied … that there is … good reason to renew the claim, the registrar may renew the claim for further periods, of not more than 1 year at a time, starting on the day after the claim would otherwise end.”
By r 24(3) a claim may be renewed whether or not it is in force. As necessary, r 7, which permits the extension of time as set under the rules, and r 367, the general power to make orders about a proceeding, may be called in aid when an issue arises about renewing a claim.[37]
[35] The primary source of power to renew a claim is plainly r 24. It confers a discretion to renew if “good reason” is shown. While such a discretion is undoubtedly wide, it is not “at large” and must “be exercised in the context of and by reference to” the legislative framework in which it appears.[38] Furthermore, as observed by Gleeson CJ, Gaudron, McHugh, Gummow and Hayne JJ in Regie Nationale des Usines Renault SA v Zhang,[39] judicial discretion:
“… is to be exercised in accordance with principle. The principles to be applied are encompassed within the doctrine developed by judicial decision. They are not extraneous to it.”
It is by reference to authoritative decisions expounding the discretion that meaning may be given to the expression “good reason” where it appears in r 24(2). As to the requirement that r 24 must be considered in its legislative context, in The IMB Group Pty Ltd (in liq) v Australian Competition and Consumer Commission,[40] Keane JA (as his Honour then was) observed that r 24(2) must be read, and the discretion exercised, in a context which includes r 5.[41] Rule 5 states the philosophy of the UCPR, requiring parties to proceed expeditiously and, amongst other things, to avoid undue delay. Thus any conduct of proceedings by a party which entails unexplained or inexcusable delay cannot expect to be vindicated by a court (or the registrar) exercising the discretion granted in r 24(2).
[36] The reasoning of Bray CJ in Victa Limited v Johnson,[42] approved by Stephen J in Van Leer Australia Pty Ltd v Palace Shipping KK[43] and Mason J in Foxe v Brown,[44] expresses the appropriate understanding of a procedural rule which permits renewal of originating process after the expiration of the limitation period. Bray CJ said:[45]
“Once the writ is issued within the period, the Statute of Limitations is ousted or rather never comes into operation. It is not the statute, which the court must obey on what it thinks is its proper interpretation, but the rule of court which takes over then. That rule has the discretion built into it and that discretion is to be exercised judicially, indeed, but not fettered by inflexible prescriptions. … What has expired is in reality not the limitation period but the period which would have been the limitation period if no writ had ever been issued. What the failure to serve a writ within twelve months gives the defendant is no more than a right to contend that the Court in the exercise of its discretion should not renew the writ. The efficacy of the writ does not expire absolutely at the end of the twelve months, it only expires if and in so far as the Court sees fit not to renew it. … I will not attempt an exhaustive category of [good] reasons. That would probably be impossible and would certainly be undesirable. Prominent, however, amongst the matters for the consideration of the Court, apart from whatever attempts have been made at service, will be the length of the delay, the reasons for the delay, the conduct of the parties and the hardship or prejudice caused to the plaintiff by refusing the renewal or to the defendant by granting it.”
[37] In Van Leer Stephen J also approved the similar reasoning of Culliton CJ in Simpson v Saskatchewan Government Insurance Office[46] who concluded that “the words ‘for other good reason’ … should be given a broad and liberal interpretation” and that there is “no better reason for granting relief than to see that justice is done”.[47]
[38] In Muirhead v The Uniting Church in Australia Property Trust (Q),[48] Pincus JA usefully summarised the principles extracted by Stephen J in Van Leer from the judgments of Bray CJ and Culliton CJ:[49]
“(1)There is a tendency to relax rigid time limits where that is legally possible and where it can be done without prejudice or injustice to other parties.
(2)The discretion may be exercised although the statutory limitation period has expired.
(3)Matters to be considered include the length of delay, the reasons for it, the conduct of the parties and the hardship or prejudice caused to the plaintiff by refusing renewal or to the defendant by granting it.
(4)There is a wide and unfettered discretion and there is “no better reason for granting relief than to see that justice is done”.”
[39] There was some discussion by counsel in their written submissions about the extent to which Pincus JA’s analysis differed from that of Williams J (as his Honour then was) who had written the principal judgment. Davies JA agreed with Williams J, subject to the remarks of Pincus JA. Williams J considered that where the limitation period had expired, the relevant principles, when considering whether or not to renew, were no different from those relevant to an application to extend the limitation period or for leave to proceed when the limitation period had expired.[50] His Honour cited Traj v The Cannery Board.[51] Connolly J, with whom Carter and Moynihan JJ agreed, there said that:[52]
“… the factors relevant to the exercise of the discretion to permit amendments under O 32 r 1 are similar to those relevant to applications under O 9 r 1 and O 90 r 9.”
Connolly J relied on the decision of Gibbs J in Jones v Jebras and Hill[53] for that proposition. As Pincus JA noted in Muirhead, Gibbs J did not go so far. Gibbs J had observed in considering whether there was a good reason why the originating process should be renewed, that it was “quite analogous” to the question which arises under an application for leave to proceed after three years.[54] His Honour was considering the different strands of authority relating to the exercise of the discretion to renew. He was principally concerned with authorities which laid down that “exceptional circumstances” needed to be shown for the discretion to be exercised in favour of renewal. That was a matter canvassed and laid to rest by Stephen J in VanLeer. Gibbs J was also considering recent amendments to O 9 r 1 which, for all material purposes, was the same as the present r 24(2) and which gave a wider discretion to the court than the previous rule. Of the amendments Gibbs J observed:[55]
“… and the amendments [of analogous rules] together reveal an intention to ensure that procedural errors and delays will not necessarily be fatal but may be rectified if the justice of the case warrants it.”
[40] There is no different approach derived from Jones v Jebras and Hill to renewal and it is unnecessary and, ultimately, likely to prove unhelpful to go beyond r 24(2) and the authorities concerned with the exercise of the discretion to renew for good reason in the legislative context of r 5.
[41] On the issue of prejudice which will often, as here, be the principal concern for a court to weigh, Keane JA observed in The IMB Group:[56]
“It is to be emphasised that the ultimate objective of the UCPR is the facilitation of a judicial determination of a dispute fairly and justly on its merits. This objective cannot be achieved if, by reason of the lapse of time, it is no longer possible for each party to have a fair opportunity to present its case. If there is reason for concern that the lapse of time is a real impediment to the fair presentation of a party’s case, that is a deficit in the case of an applicant for the grant of an indulgence in the form of an exemption from the operation of “the general rule that a court will not exercise its discretion in favour of renewal”.”
The approach of the primary judge
[42] His Honour set out Pincus JA’s summary of the relevant principles in Muirhead and the provisions in r 5, including r 5(3) that “a party impliedly undertakes to the court and to the other parties to proceed in an expeditious way”.[57] His Honour referred to the observation in The IMB Group that:[58]
“An apparently worthwhile action is, of course, a factor favouring the positive exercise of the court’s discretion where the action can proceed without prejudice to the defendant”.
His Honour also noted, following The IMB Group, that an application for renewal is not an occasion for determining the merits of the claim.[59]
[43] His Honour then proceeded to consider the various contentions advanced by the parties by reference to the explanation for delay; non-service of the claim when filed; the explanation for subsequent delay; the strength of the claim against the vendors; the prejudice asserted by the vendors; the claim against Ms Lawrence and the prejudice asserted by her.
[44] It is necessary only to make some passing comment on the analysis of the facts insofar as they relate to the renewal of the claim against the vendors. His Honour noted that although the personal circumstances of Mr Walker provided some explanation for the delay in the pursuit of a potential claim against the defendants, there was no real explanation as to why between August 2005 and early 2008 the solicitor did not take any action to advance the subject matter of the claim.[60] His Honour decided that the explanation for not serving the claim when issued, that the solicitor, who was experienced in litigation, had formed the view that the defendants should not be served, was sufficient.[61]
[45] His Honour then discussed the delay after the proceedings were filed on 7 April 2008. He noted that Mr Walker had deposed that whenever he received requests for information or documents from Mr Russell he had done his best to answer those requests. His Honour concluded that as time passed the matter should have been pursued with greater diligence and Mr Russell should have ensured, in his client’s interest, that the claim did not become stale.[62] His Honour could also have added, expressly, that by not serving within the limitation period, the solicitor was putting his client at real risk that the claim might not be renewed. His Honour dealt with the submission that the appellants may have had an action against the solicitor as a response to the prejudice of the loss of their action. As noted in The IMB Group,[63] citing Muirhead,[64] the denial of an opportunity to pursue an apparently worthwhile action is a feature present in every case where recourse is had to r 24 where the relevant limitation period has expired. His Honour concluded that the vendors had given a reasonable explanation “so far as their own conduct is concerned” for the delay which occurred after the proceedings issued and that criticism against their former solicitor should not count significantly.[65] In this, his Honour was generous to the appellants.
[46] His Honour examined the strength of the claim against the vendors and concluded that there appeared to be “substantial prospects of succeeding” against them.[66] He then turned to prejudice against the vendors and concluded that they had not established that they did not have available to them adequate sources of information relating to the operation of the bakery when it was owned by Caffe Pty Ltd.
[47] His Honour then considered the claim against Ms Lawrence. He set out the allegations that she was negligent because she did not advise the appellants to obtain Caffe’s financial records in order to verify the matters represented in the information pack; because she did not properly advise about the effect of the letter in April 2002 from Caffe’s accountant; and that she gave negligent advice which resulted in Mr Walker’s liability to the Australian Tax Office.
[48] His Honour concluded:[67]
“It is difficult to come to a preliminary view about the prospects of success in the action against Ms Lawrence, so far as it related to advice about whether to buy the Bakery. It seems inherently unlikely that she advised Mr Walker not to buy the Bakery, and her affidavit does not suggest this. Nor does she suggest that she advised Mr Walker that further investigations of its profitability should be carried out. Nor does she suggest that she did not give advice to Mr Walker relating to tax matters, which resulted in the business being purchased and carried on in the way described by Mr Walker. However, much will depend on the communications between her and Mr Walker. Also, it would be difficult to come to a view, on the basis of the allegations made, about whether she was negligent, in the absence of expert evidence.”
[49] In his final conclusion his Honour said:[68]
“I am also mindful that I do not have before me material which enables me to form a preliminary view that the plaintiffs’ claim against Ms Lawrence has substantial prospects of success.”
The appellants contend that his Honour applied too stringent a test and thereby fell into error. Earlier, when setting out the applicable principles, his Honour had referred to the need for “an apparently worthwhile action”[69] and clearly understood that that was the correct approach. He had commented that an application for renewal is not an occasion for determining the merits of the claim “and it will often be difficult to come to a reliable view that a plaintiff’s claim is so strong that a serious injustice would result if it were not allowed to proceed”.[70] He did use the expression “substantial prospects of success” when he was speaking of the claim against the vendors but was not suggesting that that was the test to be applied, rather that the material available suggested that the appellants had an apparently strong case against the vendors. I am persuaded that in making the impugned observation in the concluding remarks, his Honour made a slip but nothing in the analysis of the claim against Ms Lawrence suggests that his Honour misunderstood that a worthwhile claim only needed to be shown as one of the factors to be weighed when exercising the discretion to renew.
[50] The appellants also challenge his Honour’s reference to the need for expert evidence in weighing the merits of the claim against Ms Lawrence. This seems to be nothing more than a comment that it would be necessary to have opinion evidence from a professional accountant about what was entailed in giving advice about the purchase of a business and the tax implications.
[51] His Honour considered the question of prejudice. He noted that Ms Lawrence had deposed that she had made detailed notes of all her conversations with Mr Walker, including notes on the information he provided and the advice she gave. Her notes had been stored in an archive box which was destroyed on 20 August 2008 in accordance with her usual practice, that is, six years after the date of the tax return. He noted Ms Lawrence’s belief that not all of her file notes had been copied and sent to Mr Russell in August 2005. She remembered conversing with Mr Walker “but with the passage of time, she no longer has a complete recollection of what was said by each of them. She does not indicate what recollection she has”.[71] His Honour made the point that the appellants had not identified the documents received from Ms Lawrence in August 2005 or demonstrated that it was likely that those notes were the relevant notes or the entirety of the notes. His Honour concluded:[72]
“In my view, the instructions given to Ms Lawrence and the precise terms in which she gave advice, could well be of considerable importance in the determination of the claim against her. The loss of her file may well prejudice the conduct of her defence, though it is conceivable the documents might also have provided further support for the plaintiffs’ claim. Even if it be assumed that Ms Lawrence has a substantial recollection of her conversations with Mr Walker, the absence of the notes is likely to significantly affect the prospect that her evidence will be accepted; and there is a substantial risk that she can not now recall important communications recorded in the notes.”
[52] His Honour accepted that there was an adequate explanation for the delay up to the time of the service of proceedings on Ms Lawrence. As to prejudice his Honour concluded:[73]
“So far as prejudice is concerned, it is submitted against Ms Lawrence that she had been asked to provide a copy of her file to the former solicitor; that she had provided some but not all of the documents on that file, without advising the former solicitor of that; and that she caused the file to be destroyed, without confirming that the documents on it were not required for the purposes of any litigation. On that basis, it is submitted that she is the cause of, or has significantly contributed, to any prejudice that might have accrued by reason of destruction of the file.
While there is some merit in these submissions, three years passed after the August 2005 letter, without any further communication to Ms Lawrence. On balance, it seems to me that I should give considerable weight to the prejudice which has accrued to her by reason of the delay in service of the proceedings.”
[53] Although his Honour regarded the evidence of a worthwhile cause of action against Ms Lawrence as not strong, it was not the dominant factor which operated on his discretion but rather the prejudice arising from the delay and the loss of her records. What his Honour observed, if not in these terms, was that the combination of the delay, together with the destruction of the file made the prospect of a fair trial for Ms Lawrence doubtful. By the time the matter came before the primary judge, more than seven years had passed since the vital conversations between Mr Walker and Ms Lawrence. Both Mr Russell and Mr Walker refer to the fact that it was not until the taxation issues with the Australian Tax Office had been settled in 2008 that they turned their minds to proceedings against the vendors and Ms Lawrence. By “then”, Mr Walker deposed, he felt that he had been induced into the purchase of the business by misrepresentations and poor advice. There is no suggestion that he made or kept contemporaneous detailed statements or notes of the conversations. Ms Lawrence did so but those notes were destroyed. She has been criticised for not, at the least, making enquiries about whether the file was required for litigation. The letter in August 2005 gives no hint that she might be the subject of some future proceedings. Having sent the documents selected from the tax file which apparently answered the request, and without further communication, she was entitled to conclude that nothing more was required. She was criticised for not sending her entire file but the file was a taxation file, not a file relating to the purchase of the business and the solicitor’s request limited the documents sought in that way. It seems likely that Mr Walker collected those documents from Ms Lawrence. He made no further request.
[54] There is no discernable error in his Honour’s conclusion that Ms Lawrence would be prejudiced in a manner that could not be rectified should the order for renewal be allowed to stand.
[55] As to the final ground of appeal, there is nothing unreasonable about the primary judge’s decision.
[56] It is unnecessary to consider the notice of contention in view of the conclusion on the appeal.
[57] I would dismiss the appeal with costs.
Footnotes
[1] [2007] 1 Qd R 148; [2006] QCA 407.
[2] At [1], [48], [64].
[3] Hightop Pty Ltd & Anor v Caffe Pty Ltd & Ors [2009] QSC 402, [2]-[22].
[4] Above, [23] and [28].
[5] Above, [25]-[27].
[6] Above, [29].
[7] Above, [31]-[36].
[8] Above, [37]-[40].
[9] Above, [41]-[45].
[10] Above, [36].
[11] Above, [40].
[12] Above, [47].
[13] Above, [52].
[14] Above, [57].
[15] Above, [58].
[16] Above, [59].
[17] Above, [60]-[61].
[18] Above, [62].
[19] Above, [63].
[20] Above, [64]-[71].
[21] Above, [77].
[22] Above.
[23] Above, [73].
[24] Above, [74]-[76].
[25] Above, [78].
[26] Above, [79].
[27] Above, [78]-[80].
[28] Above, [80].
[29] The I.M.B. Group Pty Ltd (in liq) & Ors v ACCC [2007] 1 Qd R 148, 159; [2006] QCA 407 , [48].
[30] Above, 155-156, [38].
[31] Hightop Pty Ltd & Anor v Caffe Pty Ltd & Ors [2009] QSC 402, [73], [80].
[32]AR 128-9.
[33] Hightop Pty Lty & Anor v Caffe Pty Ltd & Ors [2009] QSC 402 at [13].
[34] AR 81.
[35] AR 75.
[36] Time was, in fact, likely to have run after the expiration of the due diligence period, but nothing turns on it.
[37] Gillies v Dibbetts [2001] 1 Qd R 596; [2000] QCA 156.
[38] Arthur Andersen Corporate Finance Pty Ltd v Buzzle Operations Pty Ltd (in liq) [2009] NSWCA 104 at [28] per Ipp JA.
[39] (2002) 210 CLR 491 at 503; [2002] HCA 10 at [22].
[40] [2007] 1 Qd R 148; [2006] QCA 407.
[41] Ibid at 153.
[42] (1975) 10 SASR 496 at 500.
[43] (1981) 180 CLR 337; [1981] HCA 11.
[44] (1984) 59 ALJR 186; [1984] HCA 69.
[45] (1975) 10 SASR 496 at 503-4.
[46] (1967) 65 DLR (2d) 324.
[47] Ibid at 332.
[48] [1999] QCA 513.
[49] Ibid at [4].
[50] Ibid at [28].
[51] [1990] 1 Qd R 494.
[52] Ibid at 496.
[53] [1968] Qd R 13.
[54] Ibid at 23.
[55] Ibid.
[56] [2007] 1 Qd R 148 at 159. To similar effect where no limitation period had expired (but there was very lengthy delay) see Batistatos v Road and Traffic Authority of NSW (2006) 226 CLR 256; [2006] HCA 27 at [70].
[57] Hightop Pty Ltd & Anor v Caffe Pty Ltd & Ors [2009] QSC 402 at [26], [28].
[58] [2007] 1 Qd R 148 at 159.
[59] Hightop Pty Ltd & Anor v Caffe Pty Ltd & Ors [2009] QSC 402 at [29].
[60] Ibid at [36].
[61] Ibid at [40].
[62] Ibid at [44].
[63] [2007] 1 Qd R 148 at 158-9.
[64] [1999] QCA 513 at [13].
[65] Hightop Pty Ltd & Anor v Caffe Pty Ltd & Ors [2009] QSC 402 at [47].
[66] Ibid at [63].
[67] Ibid at [73].
[68] Ibid at [80].
[69] Ibid at [29], citing The IMB Group.
[70] Ibid at [29].
[71] Ibid at [74].
[72] Ibid at [76].
[73] Ibid at [79]-[80].