Andresakis and Skouteris trading as Andresakis & Associates v Alexus Holdings Pty Ltd

CATCHWORDS: PROCEDURE - District Court Rules Pt 1 r 7A - order made setting aside preliminary dismissal order - preliminary dismissal order made because of breaches of District Court Practice Note 33 and procedural directions - application to set aside approximately 3 years after preliminary dismissal order made - primary judge accepted substantial part of that period explained by fact plaintiff's former solicitors failed to inform it of preliminary dismissal order - 2 month unexplained delay in application to set aside preliminary dismissal order after plaintiff became aware of it - no actual prejudice to defendants if order set aside - held - question whether preliminary dismissal order should be set aside turns on demands of justice between the parties - court has regard to whether a satisfactory explanation and excuse for the delay in making the application has been provided, with explanation for the original failure, and whether it has been cured, both being germane - factors such as the availability of a claim against former solicitors, expiration of the limitation period and blameworthiness of plaintiff and/or legal representatives relevant but not determinative (D)

Fair Trading Act 1987 Limitation Act 1969 Motor Accidents Act 1988 LEGISLATION CITED: Trade Practices Act 1974 (Cth) District Court Rules 1973 District Court Amendment (Dismissal and Strike Out) Rule 2000 Supreme Court Rules 1970

Australian Broadcasting Corporation v O'Neill [2006] HCA 46 Bamforth v Betcke & Ors [2003] NSWCA 116 Batistatos (by his Tutor Rosebottom) v Roads & Traffic Authority (NSW) [2006] HCA 27; (2006) 80 ALJR 1100 Birkett v James [1978] AC 297 Blackburn v Allianz Australia Ltd [2004] NSWCA 385; (2004) 61 NSWLR 632 Brisbane South Regional Health Authority v Taylor [1996] HCA 25; (1996) 186 CLR 541 Commonwealth of Australia v Smith [2005] NSWCA 478 Daroczy v B & J Engineering Pty Ltd (In liq) (1986) 83 FLR 423 Design & Survey Neon Pty Ltd v Davies [2004] NSWCA 274 Diaz & Anor v Truong [2002] NSWCA 265; (2002) 37 MVR 158 Erhardt v Bhatia [2002] NSWCA 388 House v The King [1936] HCA 40; (1936) 55 CLR 499 Mace v Murray [1955] HCA 2; (1955) 92 CLR 370 CASES CITED: McKenna v McKenna [1984] VR 665 Micallef v ICI Australia Operations Pty Ltd [2001] NSWCA 274 Morrison & Anor v Judd (Court of Appeal, unreported, 10 October 1995) Newcastle City Council v Batistatos; Roads & Traffic Authority of New South Wales v Batistatos [2005] NSWCA 330 Noja v Civil & Civic Pty Ltd (1990) 26 FCR 95 Repco Corp Ltd v Scardamaglia [1996] 1 VR 7 Saad v Robins & Sons Pty Ltd [2003] NSWCA 87 Soper v Matsukawa [1982] VR 948 State of Queensland v J L Holdings Pty Ltd [1997] HCA 1; (1997) 189 CLR 146 Stollznow v Calvert [1980] 2 NSWLR 749 The Hancock Family Memorial Foundation Ltd v Fieldhouse [2005] WASCA; 93 (2005) WAR 398 Tsiadis v Patterson [2001] VSCA 138; [2001] 4 VR 114 Wilson v Kochate Pty Ltd trading as Caradon Ski Park [2003] NSWCA 25 Witten v Lombard Australia Ltd (1968) 88 WN (Pt 1)(NSW) 405 Zhao v Posa & Ors [2004] NSWCA 184

PARTIES: Angelo Andresakis and Peter Skouteris trading as Andresakis & Associates - Appellants Alexus Holdings Pty Ltd - Respondent

COUNSEL: Mr D Davies SC with Ms R Pepper - Appellants Mr I S Wylie - Respondent

SOLICITORS: Colin Biggers & Paisley - Appellants Mavrakis & Associates - Respondent

IN THE SUPREME COURT OF NEW SOUTH WALES COURT OF APPEAL CA 40732/05 DC 5947/01

GILES JA HODGSON JA McCOLL JA

Thursday 2 November 2006 ANGELO ANDRESAKIS & PETER SKOUTERIS T/AS ANDRESAKIS & ASSOCIATES v ALEXUS HOLDINGS PTY LTD

Judgment 1 GILES JA: I agree with McColl JA. 2 HODGSON JA: I agree with McColl JA. 3 McCOLL JA: The appellants appeal by leave from a decision of Neilson DCJ in which his Honour acceded to the respondent's Notice of Motion to extend time pursuant to District Court Rules 1973 Pt 3 r 2 to bring an application under DCR Pt 1 r 7A(5) to set aside a Preliminary Dismissal Order made by Bowden ADCJ on 9 July 2002.

Statement of the Case 4 By Statement of Claim filed on 19 January 2001 the respondent claimed that the appellants, its former solicitors, had acted in breach of contract and in breach of their duty of care, as well as having engaged in conduct proscribed by s 52 of the Trade Practices Act 1974 (Cth) and s 42 of the Fair Trading Act 1987 in relation to the sale of two units owned by the respondent in a residential development in Drummoyne. 5 Thereafter, as the primary judge said, "the proceedings … did not have a very happy course." The appellants requested further and better particulars on 21 August 2001 but, before they were supplied, the matter was the subject of a case management list review on 26 November 2001. At that review the respondent was ordered to provide answers to particulars by 3 December 2001 whereupon the appellants were to file their defence. Orders were made concerning discovery and inspection of documents, for the exchange of experts' reports on liability and quantum. The respondent was to serve such reports by 7 January 2002 and the appellants were to respond by 18 February 2002. There was to be a status conference on 25 January 2002. The respondent delivered some of the particulars requested by the appellants on 24 January 2002; further particulars were delivered on 19 June 2002. At the time of the application before the primary judge his Honour concluded "some particulars are still outstanding." 6 At a status conference on 25 January 2002 an order was made that discovery be completed on or before 28 January 2002, the respondent was ordered to serve experts' reports by 25 February 2002 and the appellants were to serve their experts' reports by 11 March 2002. The matter was listed for directions on 3 April 2002. An order was apparently made at that review that any party not ready to take a hearing date (presumably on 3 April 2002) was to show cause meaning, as the primary judge interpreted the order, to show cause why the case should not be dismissed for want of prosecution or the appropriate pleading struck out. 7 The appellants then sought security for costs by way of a Notice of Motion first listed on 22 March 2002 but, by consent, stood over to 4 April 2002. Neither party appeared before Bowden ADCJ on 3 April 2002, the date of the directions hearing previously fixed and his Honour stood the matter over to the directions hearing on 4 April 2002 noting, according to the primary judge, that there was a Notice of Motion returnable on that day. 8 On 4 April 2002 when the security for costs motion was before Bowden ADCJ both parties were represented. According to the primary judge the Court file bore a notation of an undertaking by Theo Alexakis, a director of the respondent, to pay the appellants' costs and, having noted that undertaking, Bowden ADCJ dismissed the Notice of Motion but ordered the respondent to pay the appellants' costs. His Honour then made what the primary judge described as "the usual show cause order" (see Micallef v ICI Australia Operations Pty Ltd [2001] NSWCA 274 at [31]). The show cause hearing was adjourned to 1 May 2002 and came before Boyd-Boland ADCJ. His Honour noted the respondent had not supplied certain particulars and ordered they be answered within 21 days. He also ordered that the respondent's expert report be served within 21 days and a list of documents provided within 7 days. He adjourned the matter to 19 July 2002 when both parties were required to show cause why the matter should be not dismissed or the defendant's defence struck out. 9 The matter came before Bowden ADCJ on 19 July 2002. Both parties were represented, the respondent by its then solicitor, Mr Vardas. His Honour noted breaches of Practice Note 33 and of directions made on previous occasions by the Court, held that there were "no special circumstances shown" and noted there was "no limitation problem". Accordingly he dismissed the action pursuant to DCR Pt 18 r 3 and ordered the respondent to pay the appellants' costs. 10 By Notice of Motion dated 2 May 2005 filed on 8 June 2005 the respondent sought orders reinstating the proceedings, vacating the costs order made in July 2002 and asking that the costs of the application be costs in the cause. By amended Notice of Motion filed in Court without objection on 29 July 2005 and pursuant to leave granted by Naughton DCJ, the respondent sought orders reinstating the proceedings, extending the time for making an application under DCR Pt 1 r 7A(5) to the date of hearing the motion, setting aside the Preliminary Dismissal Order made on 19 July 2002, vacating the costs order made in July 2002 and that the costs of the application be costs in the cause (the "reinstatement application"). The amended Notice of Motion sought other orders which it is unnecessary to consider. The relief granted was granted pursuant to the prayers for relief to which I have referred. 11 The primary judge described the case the respondent advanced in support of the reinstatement application as follows: "Essentially the case agitated by the plaintiff is that the principal of the plaintiff, Mr Alexakis, had never been told of the making of the preliminary dismissal order by the Court on 19 July 2002 and indeed, representations were made to him throughout 2002, 2003 and 2004 by his former solicitor, Mr Vardas, that the matter was being prepared for trial and prosecuted. Mr Alexakis instructed Mr George Vardas in 2001. In June 2001, Mr Alexakis had a telephone conversation with Mr Vardas in which the latter said to him that the proceedings had been commenced and that there would have to be a waiting period of six weeks in order to hear from the solicitors for the defendant. It is quite true that the proceedings were commenced on 19 June 2001, as I have already indicated. During the six weeks after the commencement of proceedings, Mr Alexakis made several telephone calls to Mr Vardas during which he would ask Mr Vardas had he heard anything from the defendants or their solicitors. The answer he would receive was 'Not as yet'. After the expiry of the six-week period, Mr Alexakis continued to telephone Mr Vardas, usually on a weekly basis and enquire as to what was happening about the plaintiff's claim. The response from Mr Vardas was that he had not yet heard anything and that he would let Mr Alexakis know in due course what was happening. In other words there was procrastination. It does not appear to have been drawn to the attention of Mr Alexakis that the defendant's solicitors had requested particulars. What I have already recited from Mr Alexakis's affidavit, would take one towards the end of the year 2001. After that time, Mr Alexakis delivered to Mr Vardas all documents in the plaintiff's possession which related to the plaintiff's claim. Mr Alexakis also went to Mr Vardas' office on a number of occasions in order to prepare an affidavit in the matter which he said he signed 'in the early part of 2002'. That would have been, clearly, prior to the preliminary dismissal order. That documents were provided by Mr Alexakis to Mr Vardas is fairly clear from the fact that Mr Vardas filed a list of documents on behalf of the plaintiff, but on 18 July 2002, the day before the preliminary dismissal order was made. The remaining interaction between Mr Alexakis and Mr Vardas is set out in Mr Alexakis's affidavit which I will quote: '11. For the next year or so, I contacted Vardas on a regular basis and, once again, usually weekly. On quite a few occasions, Vardas was unavailable and I was required to leave a message. On other occasions, if I spoke with Vardas, I would say to him words to the effect: 'Where are we up to with Andresakis?' He would say to me words to the effect: 'It's listed in Court, for a direction' or 'We are waiting on Andresakis's affidavits.' Or, 'We are waiting on the expert's advice.'

On other occasions during the period, if I had been able to speak with Vardas on the telephone, I would go to his office in an effort to speak with him personally. At these times he would say words to the effect: 'Theo, I got your messages. I haven't had a chance to call you back. I'm endeavouring to chase up the matter.'

As time went by, I was becoming more and more concerned at the amount of time that it was taking for this matter to come to a hearing. By reason of my concern, I continued to ring Vardas weekly in an effort to push the matter along.

In the early part of 2004, I was asked by Vardas to attend his office in order that we could prepare another Affidavit in this matter. At this time, Vardas said to me words to the effect: 'We need to prepare and file your Affidavit to finalise the evidence. Then they will come back to us with a hearing date.'

In order to prepare the Affidavit, I went to Vardas's office on a couple of occasions. On the last occasion I signed the Affidavit. At this time, Vardas said to me words to the effect: 'We will file this and then we should get the hearing date.'

After swearing the Affidavit, I continued to contact Vardas in relation to the matter. He said to me words to the effect: 'We are waiting on a hearing date.'

In or around December 2004, I telephoned Vardas in relation to this matter at which time he said to me words to the effect: 'I have been suspended by the Law Society. I can't practice at present. You are going to have to take your file away. I can send it to Mavrakis for you.' " 12 Mr Alexakis was not required for cross-examination. Neither party adduced any evidence from Mr Vardas. The primary judge concluded that it was open to the appellants to have called Mr Vardas "if he was in a position to rebut what fell from Mr Alexakis in his affidavit." In the absence of any contradiction of Mr Alexakis' version of the events to which he had deposed, the primary judge concluded that Mr Vardas had not informed Mr Alexakis of the Preliminary Dismissal Order and: "… in fact represented to him, after the making of the preliminary dismissal order, that the case was still on foot, that he was still preparing it and that the hindrance in having the matter heard and determined was the failure of the Court to allocate a hearing date. The information conveyed to Mr Alexakis was either false or misleading by way of omission …" 13 Thereafter it appears Mr Alexakis retained Mr Mavrakis, his current solicitor, who ascertained the file was with the Law Society receiver and had to await its release by that body. Mr Mavrakis finally received the file in late February 2005. Mr Alexakis attended a conference with him at which Ms Orsini, a solicitor employed by Mr Mavrakis, was also present. After a telephone call, which the primary judge inferred was to the Registry of the District Court, Mr Mavrakis advised Mr Alexakis "that the plaintiff's claim 'has been struck out'." Ms Orsini deposed, in her affidavit, to a conversation between Mr Mavrakis and Mr Alexakis in which the former said he would have to speak with Mr Vardas to "see what had happened" about the proceedings. 14 On 18 March 2005 Ms Orsini wrote to the Registrar of the District Court asking to inspect the Court file and enclosing a notice of change of solicitor. The primary judge noted "that inspection could not be held until 29 March 2005 for budgetary reasons which are a constant plague in the District Court." He concluded that Ms Orsini's inspection of the file "would have indicated to her that the Preliminary Dismissal Order was made by Acting Judge Bowden on 19 July 2002 pursuant to Pt 18 r 3 for breaches by the plaintiff's former solicitor of the Practice Note 33 and orders made from time to time by way of case management." 15 His Honour concluded "there then is an unfortunately unexplained delay". This observation related to the absence of an explanation for the fact that the originating Notice of Motion was dated 2 May 2005 but was not filed until 8 June 2005. In addition, it appears, Mr Alexakis swore his affidavit on 3 May 2005 and Ms Orsini swore her first affidavit on 4 May 2005. 16 During what the primary judge described as the "delay of another month before the Notice of Motion was filed", he concluded, "… a significant thing occurred". This was a reference to his Honour's view that the respondent's original cause of action became statute barred on 14 May 2005. His Honour noted "it would have been open to the current plaintiff to recommence proceedings at any time before 14 May 2005". He observed that "that does not appear to have been drawn to the attention of Mr Alexakis nor does it appear to have been of any major consideration to the plaintiff's current solicitors." 17 The primary judge accepted that after Mr Alexakis became aware in December 2004 that his solicitor could no longer act for him, arrangements were made for the file to be transferred to Mr Mavrakis and that, in substance, the delay caused by the Christmas/New Year holiday period, the long court vacation and the fact that the file was with the Law Society receiver meant that it was not until late February 2005 that the file was received. His Honour appears also to have accepted that the period between the telephone call to the District Court Registry, the inspection of the District Court file and the discovery after that inspection the nature of the preliminary dismissal order, was reasonable. He described the period between 29 March 2005 and 8 June 2005 as an "unexplained delay" which was "unfortunate but probably explicable by the failure of the plaintiff's current solicitors to appreciate the urgency with which there was need to act." 18 The reinstatement application was heard on 12 August 2005. The primary judge delivered an ex tempore judgment. Towards the conclusion of his reasons his Honour apologised for their brevity but noted that it was twenty to five on a Friday afternoon. He enquired of counsel whether either sought any further reasons for judgment and was told none were required. 19 The primary judge considered seven matters in order to determine how to exercise his discretion: the personal blamelessness of the respondent, for the delay up to February 2005 when the respondent became aware of the Preliminary Dismissal Order (the "first period of delay"), the "unexplained delay" between late February 2005 and the filing of the Notice of Motion (the "second period of delay"), the costs which had been, and would be, incurred by the appellants, the expiration of the limitation period, whether the appellants were actually prejudiced, the availability to the respondent of an action against its former solicitor and the interests of justice. 20 As to the first issue his Honour held that "the law is quite clear that the fault of a solicitor for a party should not be visited on the litigant", applying Stollznow v Calvert [1980] 2 NSWLR 749 at 753 where Moffitt P rejected a submission that the default of a solicitor leading to delay should be vicariously attributed to the plaintiffs "so that, despite the absence of any personal fault, he should be held to blame and the proceedings necessarily dismissed." 21 The primary judge then said that in his view the relevant period of time he should consider was from late February to 8 June when the reinstatement application was filed. It is apparent, therefore, that his Honour accepted the respondent's explanation for the first period of delay. However he then admonished himself, observing that it was apparent from Moffitt P's judgment in Stollznow that there were "other factors in addition to the personal blamelessness of a party which ought be considered." 22 His Honour accepted that the delay up to 29 March 2005 was acceptable and said "in the exercise of discretion, I also should so accept the delay between 29 March 2005 and the filing of the current Motion on 8 June 2005." 23 He then turned to the question of costs but was apparently satisfied as to that issue from the fact that Mr Alexakis, through his counsel, gave an undertaking that he would be personally responsible for any order for costs made against the respondent and also by the fact that, by analogy with an application to extend a limitation period under the Limitation Act 1969, the appropriate costs order of the Motion would be that the respondent should pay the defendant's costs. He concluded that the incurring of costs was not a relevant factor. 24 As to the expiration of the limitation period his Honour noted it had expired approximately three weeks before the Motion was filed and concluded it was "of little moment." 25 As to prejudice, Ms R Pepper, who appeared for the appellants, conceded she could point to no actual prejudice accruing to the appellants, they having been on notice of the claim since 2001. His Honour was of the view that steps "would have been put in train in 2001 and/or 2002 which may well have preserved any documents and the like or memories as to transactions that are said to give rise to the plaintiff's cause of action." In addition he noted that as the defendants were legal practitioners, "one might think they have fairly well trained memories and, one might think, people who have adequate records." He distinguished their position from that of "many defendants or the servants or agents of defendant companies, who may not be trained lawyers or used to remembering things or keeping documents." 26 As to the submission that the respondent would have a good cause of action for negligence and/or breach of contract against its former solicitor, his Honour regarded that submission as "curious" but noted that it was, "in any event, … contrary to sound policy and good law." He applied a passage from Birkett v James [1978] AC 297, at 324, where Lord Diplock said, "… there has been a consensus of judicial opinion in the Court of Appeal that the question of what remedy, if any, the plaintiff will have against his solicitors if his action is dismissed is an irrelevant consideration". His Honour, accordingly, concluded "the existence of a putative cause of action against Mr Vardas is an impermissible consideration and … one that I could not possibly make without being able to hear from Mr Vardas …". 27 Finally, his Honour turned to the interests of justice and said: "Any subject is entitled to invoke the Queen's Courts to try his action, to have his case heard and determined, to resolve any disputes. Here the plaintiff company has effectively been denied the right to seek to enforce its alleged cause of action because of a default by its previous solicitor and a failure of that previous solicitor to advise the plaintiff company of the making of the preliminary dismissal order. The course of justice requires, in my view, unless there are good reasons shown to the contrary, that I should permit the plaintiff to proceed with the action. Its dismissal was brought about not on, my reading of the evidence, because of any act or default of the plaintiff itself or the principals but rather the acts or defaults of the plaintiff's then solicitor." 28 He extended the time for making application under Pt 1 r 7A(5) to 8 June 2005, and set aside the Preliminary Dismissal Order (the "reinstatement order"). He ordered the respondent to pay the appellants' costs of the motion and made consequential directions it is unnecessary to repeat.

Submissions on Appeal 29 The appellants complain about each of the bases upon which the primary judge exercised his discretion in favour of the respondent. 30 Mr D Davies of Senior Counsel, who appeared on appeal with Ms R Pepper, but not below, submits that in excusing the first period of delay up to late February 2005 on the basis that the respondent's solicitor's default should not be attributed to the blameless respondent, the primary judge erroneously confined his consideration of that period. Rather, he submitted, his Honour's focus should have been on the three-year delay in making the reinstatement application. He pointed to the injustice flowing from granting the application after a lengthy period during which the appellants were entitled to understand the claim had been dismissed and was one to which they did not need to give any more attention: Design & Survey Neon Pty Ltd v Davies [2004] NSWCA 274 at [91]; Newcastle City Council v Batistatos; Roads & Traffic Authority of New South Wales v Batistatos [2005] NSWCA 330 at [8], [56]-[57]. 31 Mr Davies argued that once the 28 day period DCR Pt 1 r 7A(5) allowed for an application to set aside a Preliminary Dismissal Order had expired, a court considering a reinstatement application had to focus on the explanation for the delay in making the application and even if so satisfied had to determine whether the dismissal order should be set aside: Design & Survey Neon Pty Ltd v Davies (at [35]) per Santow JA: Bamforth v Betcke & Ors [2003] NSWCA 116 at [54]. 32 This submission appeared to be faintly made at least in respect of the first period of delay, as Mr Davies accepted that that period was explained by the respondent's ignorance of the Preliminary Dismissal Order, coupled with the logistical constraints in accessing the District Court file. Mr Davies' principal argument insofar as default in "excusing explanation" was concerned, was that the respondent had failed to explain the second period of delay. 33 Mr Davies submitted that the primary judge's characterisation of the second period of delay as being "probably explicable by the failure of the plaintiff's current solicitors to appreciate the urgency with which there was need to act", constituted impermissible speculation. He emphasised the requirement of a satisfactory excusing explanation: Stollznow v Calvert (at 751-752); Witten v Lombard Australia Ltd (1968) 88 WN (Pt 1)(NSW) 405 at 412. He argued it was highly relevant to the exercise of the reinstatement discretion that the respondent provide a credible and satisfactory explanation for all periods of delay. He contended that the fact the respondent and its legal advisers did not provide an explanation for their delay during the second period should have led the primary judge to draw an inference that evidence on this point would not have assisted the respondent. 34 Mr Davies next submitted that by focusing on the respondent's blamelessness for the first period of delay, the primary judge failed to consider properly, or at all, the effect that a delay of over three years in reinstating the proceedings had on the appellants both generally, and having regard to the fact that the limitation period had expired. He criticised the primary judge's characterisation of the expiration of the limitation period as "of little moment" and argued the appellants were reasonably entitled to assume from 28 days after the proceedings were struck out, that the claim had been concluded and, in particular, that after 14 May 2005 "there was no possibility that the claim could be brought", a factor of particular importance (Design at [91] and Batistatos at [56] and [59]) but to which the primary judge failed to pay adequate regard. 35 Mr Davies argued that the primary judge failed to take into account, or give sufficient weight to, the respondent's failure to cure its earlier defaults. He relied upon the fact that the respondent had not paid the costs of the application for security for costs, despite Mr Alexakis' personal undertaking to do so, and that, in breach of directions, no expert evidence had been served and the respondent had not provided complete particulars. 36 Mr Davies next complained about the primary judge's rejection of the existence of a putative cause of action against Mr Vardas as an impermissible consideration and, in any event, one he could not make without being able to hear from that solicitor. He argued that the primary judge's reliance upon Birkett v James impermissibly constrained the exercise of the flexible judicial discretion which depended upon the facts of each case. He contended that the availability of such an action against Mr Vardas ought to have allayed the primary judge's concern that by denying the respondent the relief sought in the Motion, it would be denied relief generally in relation to the facts giving rise to the proceedings. 37 Finally Mr Davies submitted the primary judge took into account three irrelevant considerations: the fact that the appellants were legal practitioners, the surmise that the prospect of commencing new proceedings before 14 May 2005 was not drawn to Mr Alexakis' attention and the proposition that "justice must not only be done but must be seen to be done." 38 As to the first matter, Mr Davies argued that, absent any evidence to the contrary, the appellants ought to have been treated as any other party who was likely to suffer the "usual prejudice" as to the fading of memories attributed to members of the community generally and, further, that the primary judge erred in considering, in this respect, that the period to take into account was 2002 to 2005, rather than 1999 (when any cause of action accrued) to 2005. 39 As to the prospect of commencing new proceedings, Mr Davies contended that the primary judge's conclusion in this respect had no evidentiary foundation, yet appeared to have been used by his Honour to assist in finding that the respondent was blameless and thus an appropriate beneficiary of a reinstatement order. 40 As to the interests of justice, Mr Davies submitted the primary judge failed to have any, or any adequate regard to the appellants' interests. He argued it was unjust to make the reinstatement order in circumstances where:

(a) the respondent did not explain the second period of delay;

(b) during that period the appellants gained the benefit of any cause of action against them becoming statute barred;

(c) the fact that overall period of delay was in excess of three years;

(d) the defaults occasioning the dismissal of the proceedings had not been cured at the time the Motion was heard; and

(e) the respondent was not without a remedy as it had a prima facie cause of action against its past and/or current solicitors occasioned by, inter alia, their delay. 41 Mr I S Wylie, who appeared for the respondent, submitted that the primary judge's decision was plainly correct and that justice to the respondent required a substantive hearing. He emphasised the discretionary nature of the primary judge's decision and the principle that this Court should not interfere with the exercise of that discretion unless satisfied the decision was plainly wrong. In particular he contended the weight to be attached to relevant considerations was a matter on which reasonable minds might differ. He argued that this Court could not be satisfied that the primary judge effectively disregarded material considerations or that the exercise of his discretion was so unreasonable or unjust as to point to appealable error: Commonwealth of Australia v Smith [2005] NSWCA 478 at [154] per Santow JA (Handley JA agreeing). 42 Mr Wylie submitted it was appropriate for the primary judge to have primary regard to the just determination of the real issues which, in the absence of any assertion or evidence that the appellants were unlikely to be afforded a fair trial, necessitated a hearing of its claim on its merits. 43 As to the matters of default upon which the appellants relied, Mr Wylie contended that costs had not been paid because they had not been taxed or otherwise properly pursued by the appellants and noted that Mr Alexakis had given an undertaking protecting the appellants' position as to costs during the hearing of the reinstatement application. As to expert evidence, he drew attention to the fact that an expert's report from Mr Neville Moses had been served prior to the hearing of the reinstatement application, although the respondent was not able to establish that it had been served on or about the date it bore (2 August 2002) as a result of its former solicitor's defaults. He also relied on a letter from the respondent's solicitors to the appellants' solicitors of 26 July 2005 enclosing a copy of Mr Moses' statement and advising, in substance, that they had attempted to contact Mr Moses but had been advised that he was away until the first week in August 2005. Finally Mr Wylie pointed out that the appellants' evidence on the reinstatement application had not complained about any default insofar as particulars were concerned. 44 As to the second period of delay, Mr Wylie drew attention to the affidavits the respondent had filed in support of the reinstatement application deposing to the action taken in the period March-July 2005 none of which referred to any awareness by it or its new solicitors of the imminent, or any, expiry of any limitation period. None of the deponents were cross-examined. He submitted that the proper inference to be drawn was that the respondent and its solicitors were unaware that the limitation period might expire on 14 May 2005. 45 Mr Wylie also submitted the potential significance of the second period of delay only emerged in the course of submissions before the primary judge. He drew attention to instructions he communicated to the primary judge in the course of the hearing to the effect that: "… the basic reason for the delay in filing the Motion and in the two periods between March and May and May and June was that [the respondent's solicitors] were seeking assistance from Mr Vardas, seeking his cooperation and seeking his assistance before the [respondent's] new solicitors actually signed off on and filed and proceeded with the Motion … there was no cooperation from Mr Vardas and that delayed matters." 46 Mr Wylie submitted that the prejudice to the respondent if the reinstatement application had not succeeded substantially outweighed any prejudice to the appellants having regard to the following matters:

(a) it could not be disputed that the respondent had a good cause of action and a reasonably arguable case; its pleadings had never been challenged, it had served expert evidence (albeit not in ideal form) and the merits of its claim were not challenged before the primary judge or previously in the District Court;

(b) the appellants had been on proper notice of the respondent's claim "from the outset", proceedings had been commenced and progressed through interlocutory stages of pleadings, particulars and discovery were given "many years before the possible application of any time bar"; the appellants had adduced no evidence of prejudice and conceded the absence of actual prejudice on their part on the hearing;

(c) the respondent was blameless, had been misled by its former solicitor and had sought at all times to prosecute the matter with despatch;

(d) the appellants and their insurers are "sophisticated litigants" and there was no suggestion they suffered any prejudice other than the possible application of a time bar in their favour;

(e) the respondent substantially cured its former solicitor's apparent default prior to the hearing before the primary judge. 47 Mr Wylie submitted that the expiration of the limitation period should be placed in the context that the Preliminary Dismissal Order was based on the view that there was "no limitation problem". He argued that in making that observation it was clear that Bowden ADCJ had not intended to prevent the respondent from having its claim heard. 48 Next Mr Wylie argued that, in any event, the primary judge erred in concluding that the proceedings would have become statute barred on 14 May 2005. He contended, too, that in considering the significance of the expiration of the limitation period, the Court ought take into account the prejudice to the respondent in that had the reinstatement application been unsuccessful it would have lost its claim without being heard on the merits: see Wilson v Kochate Pty Ltd t/as Caradon Ski Park [2003] NSWCA 25 at [16]-[18] per Ipp JA (Stein and Hodgson JJA agreeing); The Hancock Family Memorial Foundation Ltd v Fieldhouse [2005] WASCA 93; (2005) WAR 398 at [100] and [109]. 49 Finally Mr Wylie submitted that the primary judge considered the entire period which had elapsed since the Preliminary Dismissal Order was made and the significance he attributed to the delay in exercising his discretion was in accord with authorities and not unreasonable or unjust in the circumstances.

Consideration 50 The District Court file records a notation against the date 19 July 2002: "Breaches of P/N 33 & Directions of Court on previous occasions. No special circumstances shown. No Limitation problem. Action Dism. Pt 18. P to pay D's costs." 51 The reference to "P/N 33" was a reference to District Court Practice Note 33, paragraph 3.3.1 of which stated: " 3.3.1 To enable the Court to meet its objectives set out above it will be necessary to insist on strict compliance with time standards, time tables and Court orders. In the event of failure to comply the Court will give parties a proper opportunity to be heard as to the reason, however, in the absence of special circumstances non-compliance is likely to result in cases being dismissed … it could also result in the Court refusing to make orders … which would result in a case not fitting into the Court time standards."

It is apparent that the reference in the District Court file note to "special circumstances" was a reference to this paragraph. 52 The reference to "Pt 18" was to DCR Pt 18 r 3(1) which, as at 19 July 2002, provided: " Want of prosecution Where a plaintiff makes default in complying with any order or direction as to the conduct of the proceedings, or does not prosecute the proceedings with due despatch, the Court may, on application by any party or of its own motion, dismiss the proceedings or make such other order as the Court thinks fit." 53 Rule 7A, on which the reinstatement application depended, was added to Pt 1 of the District Court Rules by the District Court Amendment (Dismissal and Strike Out) Rule 2000 (Government Gazette 85 of 7 July 2000, p 6127). It commenced on 1 September 2000. It provided: "7A. (1) In this rule:

'preliminary dismissal order' means an order made by the Court dismissing proceedings other than an order dismissing proceedings after there has been a trial or hearing on the merits of the case or an application to dismiss the proceedings.

(2) The Court is not to make a preliminary dismissal order in respect of any proceedings unless it is satisfied that the parties to the proceedings have been appropriately notified that the order may be made.

(3) A preliminary dismissal order does not have effect: (a) if an application is not made under subrule (5) - until a period of 28 days has elapsed after the making of the order, or

(b) if an application is made under subrule (5) - unless the Court confirms the order under subrule (6) or (7).

(4) The Court may, at the time it makes a preliminary dismissal order or subsequently, make such other orders as it thinks fit to ensure that any party to the proceedings in respect of which the dismissal order is made is appropriately notified of the making or consequences of the order.

(5) Any party to proceedings in respect of which a preliminary dismissal order is made may, within the period of 28 days after the making of the order, apply to the Court to set aside the order.

(6) On any such application, the Court may set aside the preliminary dismissal order or confirm the order as it thinks fit.

(7) The Court may, if it thinks fit, confirm a preliminary dismissal order if: (a) the party who has made an application to have the order set aside does not appear at the hearing of the application, or

(b) an application to set aside the order is withdrawn or otherwise not proceeded with." 54 The 19 July 2002 order was made by the Court of its own motion, and, was, accordingly, a "Preliminary Dismissal Order", having been made in circumstances where there had been no trial or hearing on the merits of the case nor an application to dismiss the proceedings: DCR Pt 1 r 7A(1). A Preliminary Dismissal Order did not have effect if application was not made under DCR Pt 1 r 7A(5) until a period of 28 days had elapsed after it was made or, if application was made under sub-rule (5) unless the Court confirmed the order under either sub-rule (6) or (7): DCR Pt 1 r 7A(3). A party to proceedings in respect of which a Preliminary Dismissal Order was made could apply to set it aside within 28 days of it being made and on any such application, the Court could set aside the order or confirm it "as it thinks fit": DCR Pt 1 r 7A(5) and (6). The Court could extend the time within which an application could be made to set aside the order: DCR Pt 3 r 2. The latter rule confers a remedial discretion to extend time with a view to avoid injustice: Design & Survey Neon Pty Ltd v Davies (at [38]) per Santow JA. 55 The reinstatement application involved the exercise of discretion on a matter of practice and procedure. Appellate intervention is constrained by the principles in House v The King [1936] HCA 40; (1936) 55 CLR 499 at 505, as recently articulated by Heydon JA (Sheller JA and Studdert AJA agreeing) in Micallef v ICI Australia Operations Pty Ltd & Anor (at [45]). Thus to succeed on appeal the appellants must demonstrate that the primary judge erred in exercising his discretion in that he: "(a) made an error of legal principle; (b) made a material error of fact; (c) took into account some irrelevant matter; (d) failed to take into account, or gave insufficient weight to, some relevant matter, or (e) arrived at a result so unreasonable or unjust as to suggest that one of the foregoing categories of error had occurred, even though the error in question did not explicitly appear on the face of the reasoning". The appellants did not rely upon category (e) and, accordingly, it can be set aside for present purposes. 56 Furthermore, the Court may only interfere with the primary judge's decision if it reaches "a clear conclusion that by reason of some error, whether of fact or law, the primary judge not only has taken a view different from that which the judges of the Court of Appeal would have taken if they had been in his place, but has failed properly to exercise the discretion committed to him": Mace v Murray [1955] HCA 2; (1955) 92 CLR 370 at 378.

57 Part 1 r 7A has been considered in decisions in this Court, passages in most of which were relied upon severally by the parties. 58 In Zhao v Posa & Ors [2004] NSWCA 184, Giles JA (Tobias JA agreeing) explained how DCR Pt 18 r 3(1) and Pt 1 r 7A operated within the case management regime of District Court Practice Note 33. He said (at [49]-[50]):

"49. [T]he show cause procedure within the case management regime is, as Practice Note 33 demonstrates, part of the court's resolve to ensure that actions proceed efficiently and expeditiously. The court intervenes and does not leave the course of the proceedings to one or even all of the parties. 50. A plaintiff (or other party) in default will be conscious of possible dismissal on the court's initiative warned by para 5.8.2 of Practice Note 33. A show cause notice … will emphasise that consciousness …" 59 In Erhardt v Bhatia [2002] NSWCA 388 the Court entertained an appeal, pursuant to leave, from decisions of Bowden ADCJ made on 7 July 2000 and 8 June 2001 each of which had dismissed applications by the plaintiff to set aside a Pt 18 r 3(1) order made by McLoughlin ADCJ on 23 May 2000 for want of appearance by the plaintiff. In both applications before Bowden ADCJ the plaintiff had sought relief pursuant to Pt 18 r 3(4) which then empowered the Court, on application, to set aside a Pt 18 r 3(1) order, although by the time the second application was heard, Pt 18 r 3(4) had been replaced by Pt 1 r 7A. 60 Heydon JA concluded (at [58]), by analogy with the joint judgment of Dawson, Gaudron and McHugh JJ in State of Queensland v J L Holdings Pty Ltd [1997] HCA 1; (1997) 189 CLR 146 (at 154, 155), that on an application to set aside a Pt 18 r 3 order, "even if … complete justice to the party in default may not necessarily be the paramount consideration, justice to the party in default is at least a relevant consideration." (emphasis in original). 61 The Pt 18 r 3 order in Erhardt had been made after the limitation period had expired in circumstances where it was argued (see [58]) the plaintiff's possible success in an application to extend the limitation period if fresh proceedings were commenced was "fraught with peril". Heydon JA concluded (at [59]) that in circumstances where the plaintiff and her advisers had been "if not wholly diligent, at least much more diligent" (than the same party in Micallef's case), there were explanations for why orders were contravened, no hearing date had been vacated, particulars supplied were within the pleaded case and there was no actual prejudice to the defendant, "the demands of justice between the parties" favoured setting aside the dismissal order "in view of the injury it causes to the plaintiff and in view of the want of prejudice to the defendant which would flow from setting it aside". 62 Wilson v Kochate Pty Ltd t/as Caradon Ski Park was another plaintiff's appeal from an unsuccessful reinstatement application. The preliminary dismissal order was made on 24 October 2001 after the expiration of the limitation period, again on an occasion when there was no appearance by, or on behalf of, the plaintiff. The notice of motion seeking to set the preliminary dismissal order aside was filed on 5 February 2002. The plaintiff's solicitor sought to excuse his non-attendance in October 2001 by saying (see [13]) that he was under the "wrong impression that counsel would attend that hearing." He only ascertained that the preliminary dismissal order had been made when he communicated with the opponent's solicitors on 21 December 2001. 63 Ipp JA (Stein and Hodgson JJA agreeing), in an ex tempore judgment, said (at [17]) that the prejudice the plaintiff would suffer were her application dismissed was "obvious … the limitation period has expired and she would not be able to recommence proceedings … [s]he would lose her claim, without being heard on the merits." In his Honour's view (at [18]) it was " … not so easy to determine the prejudice that would be suffered by the [defendant] were the application to be granted." 64 Ipp JA (at [16]) characterised the solicitor's conduct in not finding out what had occurred on 24 October and his failure to take steps to set aside the preliminary dismissal order until late January 2002 as "gross carelessness" and a "blatant disregard for the Rules of Court", both of which were "serious matters … rightly taken into account by his Honour in determining the application". However, those matters were not determinative and while a factor "to be taken into account in doing justice between the parties, due regard had to be given to the actual prejudice that would be suffered by the claimant were the application to be dismissed, and the actual prejudice that would be suffered by the opponent were the application to be upheld."

65 The primary judge had found that "additional prejudice", detrimental to the defendant, was created because "upon the expiry of time limited for an application to set aside [the preliminary dismissal order], [the opponent] was entitled to assume [the claimant] had abandoned her action." Ipp JA observed (at [20]) that the opponent had made no attempt to inform the claimant of what had occurred on 24 October, advice he expected would, as a matter of common professional courtesy, have been communicated shortly after 24 October 2001: see (at [28]). He said (at [21]) that "there was no overt act on the part of the claimant that could have led to the opponent assuming that the action had been abandoned…[so that] [t]he opponent must have suspected that the claimant's omission to attend court on 24 October 2001 was due to inadvertence on her part, and that inadvertence might have persisted." He concluded (at [22]) that the primary judge had erred in concluding that the opponent was entitled to infer that the claimant had abandoned her action, then said: "23 I do not regard the mere reinstatement of the claim as relevant prejudice to the opponent. The effect of any successful application for dismissal of an action* will be that the action will be reinstated and the potential liability of the defendant will continue. The disappointment and inconvenience that will inevitably result do not, in law, constitute relevant prejudice. " (emphasis added). *[sic, as in original, this was no doubt intended to refer to a successful application to set aside a preliminary dismissal order]. 66 Ipp JA concluded (at [30]) that the primary judge had not considered the prejudice to the plaintiff if the preliminary dismissal order was not set aside and had erred in concluding the delay had caused prejudice to the opponent. He ordered the proceedings be reinstated. 67 The appellants placed considerable weight on the proposition that plaintiffs seeking a reinstatement order must show that they had "got their house into order", relying upon this Court's decision in Bamforth v Betcke & Ors. In that case Bowden ADCJ made a preliminary dismissal order on 12 March 2001 following the plaintiffs' defaults in complying with orders or directions. The proceedings had been commenced the day before the expiry of the limitation period and, accordingly, the preliminary dismissal order was made after that period had expired. The plaintiffs sought a reinstatement order by notices of motion filed on 9 October 2001. Bowden ADCJ heard the applications on 7 December 2001 and on 14 December 2001, on terms, set aside the preliminary dismissal orders.

68 The appellants argued (see [49]) that Bowden ADCJ had erred in law in setting aside the dismissal order in the absence of "excusing explanations" for failures to comply with directions to provide particulars and for their failure to apply within the 28 day period referred to in r 7A(5). Giles JA observed (at [52]) that Pt 1 r 7A "applies to preliminary dismissal orders made in many different circumstances". He confined his observations to "dismissal orders following a plaintiff's failure to comply with orders or directions." His Honour then said: "53. I first assume application under Pt 1 r 7A(5) within the twenty-eight day period. Where a dismissal order was because of the plaintiff's failure to comply with orders or directions, explanation and excuse before the dismissal order can be set aside does not have the same significance as it has in other circumstances. The gravity of the failure may count for or against the plaintiff, and if an explanation excusing the failure is given the plaintiff may enjoy greater prospects of success in the application. But the purpose in giving the dismissal order suspended effect, and making it open to be set aside or confirmed, is not just to give the plaintiff an opportunity to explain the failure. The plaintiff has had that opportunity, and the making of the dismissal order marks that the plaintiff has not provided a satisfactory explanation. Rather, the primary purpose is to enable the plaintiff to put his house in order and persuade the court that, notwithstanding the failure, the proceedings should be permitted to continue. In an application under Pt 1 r 7A(5), the focus is on curing the failure, not explaining it.

54. When there is added failure to apply under Pt 1 r 7A(5) within the twenty-eight day period, and extension of that period is necessary, again what matters is not explanation and excuse for the failure leading to the dismissal order, but explanation and excuse for the delay in making the application. Explanation for the original failure, of course, may colour and be relevant to any explanation for the delay, but the focus is on the latter ." (emphasis added) 69 As can be seen Giles JA drew a careful distinction between the "house in order" proposition which primarily applied to applications made within the 28 days during which the operation of the preliminary dismissal order was suspended, and later applications where the focus was on explaining the delay in making the application, albeit that explanation for the original failure (and, of course, whether it had been cured) remained germane. That was, therefore, properly the focus of the primary judge's consideration in this case, although he also had regard to the housekeeping issues raised by the appellants. 70 Design & Survey Neon Pty Ltd v Davies was another case in which a preliminary dismissal order was made where the limitation period had expired by the time of the application to reinstate the proceedings approximately two and a half years later. The primary judge acceded to the reinstatement application, set aside the preliminary dismissal order and made related orders, including one that the respondent/plaintiff pay the appellant/defendant's costs of the reinstatement application. 71 The plaintiff's solicitors had ceased to act for him when he failed to respond to correspondence sent to his last address as known to them. He had experienced a long period of drug abuse and breakdown in a personal relationship, the drug abuse had resulted in frequent changes to his address: see [76]. At the time his solicitors were seeking to correspond with him, he was residing at an address different from that known to them. Accordingly he was not notified in fact of the possibility that an order might be made dismissing his action (see [77]), although Bryson JA (Handley JA agreeing) concluded (at [78]) that he had been "appropriately notified" as "a letter had been sent to him at the last known address notified when his first solicitors gave Notice of Ceasing to Act." The plaintiff did not consult new solicitors until March 2003. They applied on 19 August 2003 to set aside the preliminary dismissal order: see [81]. 72 Bryson JA concluded (at [83]-[84]) that the primary judge's decision to set aside the preliminary dismissal order was influenced by errors of fact "of considerable importance" (that the plaintiff was injured whilst in the defendant's employ) and ought, in the exercise of discretion, be set aside and the Court of Appeal should exercise the discretion anew. 73 The respondent sought to explain his failure to attend to the conduct of the proceedings from about August 2000 until March 2003 by reference to his drug abuse and then, from about early 2002, to his view that he should rehabilitate himself from drug use. The appellant could not maintain that it had incurred any particular prejudice due to the respondent's delay: see [88]. 74 Bryson JA observed (at [88]) that "dismissal of the proceedings had given an indication [to the appellant] that it no longer needed to concern itself with the claim" and that "extension of time would revive after more than six years a claim for which the statutory period of limitation is three years. After saying (at [89]) that the delay which called for explanation was that in making the application to set aside the preliminary dismissal order, Bryson JA said (at [91]) that the respondent had been "out of contact with [his] first solicitors", '… did not take any useful step to conduct his lawsuit from August 2000 on, and in particular did not do so between March 2001 when the proceedings were dismissed and March 2003 when he consulted his new solicitors". He then observed: "If he had thought about it, it should have seemed obvious to him that inattention like this might well lead to dismissal of the proceedings and to the appellant's being told that it no longer needed to concern itself with the claim; as in fact happened. Two years is a long time in a District Court action. It is also a long time for a defendant summoned to answer a claim and make a defence by a Court exercising the powers of the State to be left believing that the proceedings had been dismissed. It is unjust for a defendant left for so long to understand that a claim against it had been dismissed and it did not need give any more attention to it to be told that the claim had been revived, and that it must defend [it]. The respondent was at all time aware that he a pending claim; he chose to give his attention to other matters. Some of those other matters indeed had a strong claim on his attention; restoration of his personal relationship and his own rehabilitation must attract sympathy; drug addiction does not. None of these claims on his attention has much weight when balanced against the indication given to the appellant, for years, that the case was over." (emphasis added).

The appellants place great reliance upon the underlined portion of this passage. 75 In concluding (at [94]) that the discretion to extend the time in which to apply to set aside the preliminary dismissal order should not be exercised in favour of the respondent, Bryson JA said: "It would be small tyranny to tell the appellant, more than two years after the proceedings were dismissed, that the appellant should have stood waiting while the respondent devoted his attention to his drugs and his complex private life, and that now that the respondent's attention has returned to the matter in hand the appellant must attend to it too. In my judgment this is not the right way to use public power." 76 Santow JA dissented. He concluded that the appellant had not demonstrated a basis warranting appellate intervention. While he accepted that the primary judge had made an error of fact, he concluded (at [50]) that the primary judge's decision was not "so materially affected by that error as to justify a fresh exercise of discretion to the contrary." In concluding (at [55]) that "the result in this case [was not] so manifestly unjust or unreasonable as to suggest an error on the face of the reasoning" his Honour observed: "Undeniably two and a half years is a significant delay. But it is by no means the lengthiest delay seen in our Courts - Saad ** for instance involved a delay of some eleven years in commencing proceedings. The appellants were unable to point the primary judge to any specific prejudice suffered by them as a result of the delay, relying merely on general prejudice …". ** Saad v Robins & Sons Pty Ltd [2003] NSWCA 87, an application for leave to commence common law proceedings out of time . 77 This review of authorities demonstrates that on an application to set aside a Preliminary Dismissal Order made for failure to comply with order or directions:

(a) the question whether the proceedings should be reinstated turns on what the demands of justice require between the parties;

(b) in an application made during the 28 days limited by DCR Pt 1 r 7A(5), the focus is on whether the applicant has cured the failure;

(c) in an application made after the 28 days limited by DCR Pt 1 r 7A(5), the focus is on whether a satisfactory explanation and excuse for the delay in making the application has been provided, with explanation for the original failure, and whether it has been cured, both being germane;

(d) factors such as the blameworthiness of either the applicant and/or his or her legal representative, the expiration of the limitation period and the availability of a secondary cause of action against a party's legal representatives, are relevant but not determinative factors. 78 An additional observation should be made about the significance of the assumed expiration of the limitation period. Mr Davies properly referred to statements in authorities dealing with applications for an extension of a limitation period concerning the significance of that fact: see, for example, Brisbane South Regional Health Authority v Taylor [1986] NSWCA 25; (1996) 186 CLR 541 at 552 per McHugh J. 79 Those statements have particular resonance in such applications where the focus is on whether the time bar should effectively be relaxed. However, as I have explained, a reinstatement application following the making of a Preliminary Dismissal Order focuses on what is appropriate to do justice between the parties. The discretion conferred by DCR Pt 1 r 7A(6) to set aside a Preliminary Dismissal Order is not confined by factors such as the expiration of the limitation period. Rather, it operates in circumstances where, as Giles JA explained in Zhao v Posa, the order was made as part of the District Court's case management regime. In the present case, as the respondent points out, the file noted that there was "no limitation problem". It would be harsh, in my view, in those circumstances to allow the assumed expiration of the time bar to determine the outcome of a reinstatement application, the necessity for which was occasioned by the respondent's solicitors' default.

80 I acknowledge it was somewhat peremptory for the primary judge to describe the expiration of the limitation period as of "little moment". However, it should be recalled that this was an ex tempore judgment delivered late on a Friday afternoon. It ought receive a benevolent construction where that is reasonably available: Australian Broadcasting Corporation v O'Neill [2006] HCA 46 at [185] per Heydon J. 81 I turn to the appellants' complaint about the primary judge's application of Birkett v James (at 324) to reject, as irrelevant, the respondent's putative, but secondary, cause of action against his former solicitor. Mr Davies submitted, in substance, that Birkett v James was no longer the law in New South Wales insofar as it had formulated a test for striking out proceedings as constituting an abuse of process in the limited circumstances referred to by Lord Diplock (at 318). This result followed, he contended, from the rejection of those tests in Micallef v ICI Australia Operations Pty Ltd & Anor and Batistatos (by his Tutor Rosebottom) v Roads & Traffic Authority (NSW) [2006] HCA 27; (2006) 80 ALJR 1100. Although neither Micallef or Batistatos considered the passage in Birkett v James (at 324) upon which the primary judge relied, Mr Davies submitted the effect of their rejection of Birkett v James deprived it of authority on any other point. 82 It is unnecessary to consider this argument. This controversy has already been addressed in this Court in Morrison & Anor v Judd (Court of Appeal, unreported, 10 October 1995) a decision which was not cited to the primary judge nor by either counsel in this Court. 83 Morrison & Anor v Judd concerned an application for substituted service and for an extension of time within which to serve a statement of claim pursuant to Pt 2 r 3 of the Supreme Court Rules 1970. In considering whether to extend time Master Malpass took into account, but accorded little weight to, the secondary remedy, the plaintiff could have against her legal advisers who, he inferred, were responsible for the "inordinate delay" in serving the statement of claim. On appeal Spender AJ held any secondary cause of action the plaintiff might have against her solicitors was irrelevant. 84 In this Court Kirby P (Meagher and Powell JJA agreeing) concluded Spender AJ had erred in this respect. Kirby P noted that in Birkett v James the House of Lords was divided on the question of the relevance of a secondary remedy. While Lord Diplock had accepted (at 324) that it was not a relevant consideration, Lord Salmon (at 330) could not agree that the availability of a secondary remedy "can never deserve any consideration" although he accepted "that it cannot carry much weight." Kirby P noted that there had been an ambivalence of judicial authority on the point in Australia but concluded he preferred Lord Salmon's view which accorded with that of Lush J (with whom Gray J agreed) in Soper v Matsukawa [1982] VR 948 at 954 and McGarvie J's view in McKenna v McKenna [1984] VR 665 at 680. Kirby P said: "The availability of an action against a negligent legal representative is relevant because commonsense says that it is so. It means that the litigant, who may be wholly or mainly innocent, is not put out of court without some chance of redress, however difficult that chance may be to enforce. To that extent an injustice, which might otherwise occur to the litigant, may be capable of being avoided. However, precisely because of the kind of difficulties which Smith J listed in Scardamaglia , it is a consideration which 'cannot carry much weight'." 85 The reference to Justice Smith was a reference to his Honour's decision in Repco Corp Ltd v Scardamaglia [1996] 1 VR 7 at 15: "While it might be said that on the evidence before the court the rights against the legal representatives appear to be strong, there is no admission of negligence by the legal representatives and the issues that may arise in any such action have not been investigated or pursued fully in these proceedings. In any event, confining Mr Scardamaglia to an action against the legal representatives would carry with it its own prejudice. He would be able to seek compensation not in respect of his injuries, but for his loss of his right to sue Repco. He would find himself having to prove two cases - the original case against Repco and a further case, the case against the legal representatives. The proceeding would, therefore, be more time consuming and more costly. There would also be a real risk, that, if successful, any sum recovered would be less than any sum that he would have recovered in the original proceeding: for any damages awarded would be for the lost chance to recover damages in the proceeding against Repco: Johnson v Perez (1988) 166 CLR 351; Nikolaouv v Papasavas Philips & Co (1989) 166 CLR 394." 86 The passage to which Kirby P referred in Repco Corp Ltd v Scardamaglia was also endorsed by this Court in Blackburn v Allianz Australia Ltd [2004] NSWCA 385; (2004) 61 NSWLR 632 (at [47]). That case concerned the question whether a plaintiff should be given leave to commence proceedings out of time pursuant to s 52(4) of the Motor Accidents Act 1988, a question which turned, in part, upon whether she had given "a full and satisfactory explanation" to the court for the delay: s 52(4B); s 40(2) Motor Accidents Act. The plaintiff was seven years old when she was injured in December 1997. The solicitor who acted for her was under the impression until early 2002 that the three-year limitation period within which proceedings seeking the recovery of damages following a motor accident could be brought did not apply to infants, she having apparently assumed that the running of the limitation period was suspended during the plaintiff's infancy: s 52, Limitation Act 1969; cf s 52(5), Motor Accidents Act 1988. The plaintiff sought to explain the delay in commencing proceedings, in part, on the basis of the solicitor's misapprehension as to the law. Sheller JA (Mason P and Hodgson JA agreeing) held (at [49]) that the delay had been satisfactorily explained. He observed (at [47]) that "[a]n explanation that the parent of the solicitor was lazy or incompetent could scarcely be a satisfactory explanation…[a]s already mentioned there may be a claim against the dilatory parent or the incompetent solicitor but there are marked disadvantages to this which were described by Smith J, in Repco Corp Ltd v Scardamaglia". 87 Diaz & Anor v Truong [2002] NSWCA 265; (2002) 37 MVR 158 was another application for leave to commence motor accident proceedings out of time, in circumstances where a solicitor acting for the injured infant plaintiff wrongly believed time did not run until she reached adulthood. Foster AJA referred approvingly (at [116]) to Morrison & Anor v Judd and observed it was "frequently said that it may be unfair to relegate the client to a far less satisfactory claim against his solicitor, when, through no fault of his own, he would lose a superior right to sue the actual tortfeasor." 88 In Noja v Civil & Civic Pty Ltd (1990) 26 FCR 95 (at 109-110), the Full Court of the Federal Court of Australia held that in considering an application for an extension of a limitation period, it was relevant to consider whether an applicant ought to pursue a remedy against his or her legal practitioner (alleged secondary wrong-doers) rather than against the primary wrong-doer. The Court approved Kelly J's approach in Daroczy v B & J Engineering Pty Ltd (In liq) (1986) 83 FLR 423 at 438 that: "The possibility of an action against the plaintiff's solicitors in respect of the delay has to be considered. On the whole, I think the proper view to take is that the alleged primary wrong-doers (the suppliers) should be looked to rather than the alleged secondary wrong-doers (the solicitors). In taking this view, I follow, with great respect, the general view taken in Birkett v James [1978] AC 297. At the same time I accept that there may be occasions when a proper balance between the blame which ought to be attributed to a plaintiff's solicitor and prejudice to a defendant would mean that an applicant under s 36 of the Ordinance ought to be required to pursue his remedy against his solicitor rather than against the primary wrong-doer." 89 The Court, (at 110) also said, "[T]he prejudice to the respondents did not extend beyond the general prejudice which would result from their being deprived of a defence under the Limitation Ordinance". (emphasis added). 90 Most recently in Tsiadis v Patterson [2001] VSCA 138; [2001] 4 VR 114 (at [27]) Buchanan JA (with whom Ormiston JA agreed) held that in considering an application for extension of time within which to bring an action it was appropriate "to have regard to the ability of an applicant to recover damages from a former solicitor whose default has made the application necessary." He added that "[t]he weight to be given to the availability of a cause of action against a solicitor will depend upon the circumstances of each case." In observations which echoed Smith J in Repco Corp Ltd v Scardamaglia, he said (at [28], footnotes omitted): "The weight to be given to the availability of a cause of action against a solicitor will depend upon the circumstances of each case. The liability of a solicitor is not to be equated with that of the original wrongdoer, and accordingly I do not think it is correct to conclude that an applicant with a good prospect of successfully suing his solicitor will suffer no prejudice if his application is refused . The liability of the solicitor will be determined not only by the likelihood of establishing liability on the part of the original wrongdoer, but also by the terms of the solicitor's retainer, the instructions given by the client from time to time and by the manner in which the solicitor's work has been performed. If the plaintiff is successful in an action against the solicitor, the damages to be awarded are not based upon an assessment of the losses, pain and suffering caused by the injury sustained by the plaintiff, but are commensurate with the value of the lost chance to recover damages from the original tortfeasor. Proceedings against the solicitor will be more complex and expensive than proceedings against the original wrongdoer. Usually the likelihood that the applicant will succeed in an action against his or her solicitor cannot be known with any precision when an application under s.23A of the Act is decided. In the present case it appears that Turner was in breach of the obligations which he owed to the respondent, but that view is one based upon hearing only the respondent's version of her engagement of Turner and the events of the succeeding years, for of course no evidence was led or submissions made on behalf of the solicitor . The matters referred to by Smith, J. in Repco Corporation Ltd. v. Scardamaglia should not lead to a plaintiff's potential cause of action against a negligent solicitor being completely ignored, but rather affect the weight to be given to the availability of the cause of action." (emphasis added) 91 Callaway JA (at [6]) was prepared to assume, without deciding, "that the likelihood of [the plaintiff] having a good cause of action against her former solicitor may be taken into account with due caution." 92 Accordingly it is correct to say that the primary judge erred in dismissing the prospect that the respondent had a cause of action against its former solicitors as "an impermissible consideration". It was a relevant consideration, but one whose weight depended on the circumstances. The authorities to which I have referred have accorded the prospect of a secondary cause of action little weight, partly because of the difficulty of evaluating the prospects of success. Although the primary judge dismissed the secondary cause of action as irrelevant, he did advert to the prospect of success of such an action in commenting (at [23]) that he could not evaluate the putative cause of action without hearing from Mr Vardas. I do not understand his Honour to have meant that it was necessary to hear from Mr Vardas in order to address any cause of action against him; only that, without hearing from Mr Vardas, he could not in this case satisfactorily come to an evaluation. This was, in my view, an appropriate response to this issue which reflected the considerations identified in Repco Corp Ltd v Scardamaglia and Tsiadis v Patterson. 93 Thus, while I am of the view that the primary judge erred in his application of legal principle on this issue, his error was not a material one having regard to the slight weight which could, in the circumstance, have been accorded to the possible alternative cause of action. Having regard to my view that his Honour did not otherwise err, I would not have taken a view different from him based on this factor alone: Mace v Murray. 94 As to the appellants' remaining complaints in my view, the primary judge applied the correct test in determining what was appropriate to do justice between the parties. Once his Honour accepted the respondent's explanation that it was both ignorant of the Preliminary Dismissal Order and had been diligent in following up its solicitors to ascertain the progress of the matter, the primary judge was entitled to conclude that the respondent had satisfactorily explained the first period of delay. Bryson JA's observations in Design & Survey Neon Pty Ltd v Davies concerning the significance of two years elapsing in a District Court action must be understood in the context of a case where the plaintiff had, in effect, been indifferent to pursuing his claim. That is not this case. 95 As to the second period of delay, it appears the primary judge overlooked the instructions the respondent's counsel communicated to him during argument to the effect that, in addition to the matters referred to in the respondent's affidavits concerning steps taken between March and June 2005, it had been seeking assistance from Mr Vardas, which was not forthcoming. However that matter was not relied upon by the respondent in this Court either, and it is not appropriate to consider it as an explanation for the second period of delay. However, in my view, the primary judge was entitled to infer that the "unexplained delay" in this period stemmed from a failure on the part of the respondent's current solicitors to appreciate the urgency with which there was need to act. Furthermore, the second period of delay was comparatively short (approximately two months) compared to the period of explained delay (just short of three years). In my view, once it can be seen that the primary judge was entitled to weigh the expiration of the limitation period in the light of all the relevant facts, he did not err in excusing the second period of delay. 96 As to the question of curing earlier defaults, this was a matter which, as I have explained, was relevant, although not the primary focus of the application. The primary judge was entitled to accept Mr Andresakis' undertaking as to the costs, and there was an explanation why Mr Moses' affidavit had not been brought up to date which was consistent with diligence on the part of the respondent's present solicitors. Thus, to the extent there were extant defaults, they were not of significance. As to the issue of outstanding particulars, contrary to Mr Wylie's submission, the issue was raised, albeit in oral argument rather than in the appellants' solicitor's affidavit. The complaint was that particulars 10, 13 and 15 in a request dated 21 August 2001 had not been provided. However this submission overlooked a letter from the respondent's previous solicitors dated 19 June 2002 which appears to have provided those details. The matter was rightly treated by the primary judge as not requiring attention. 97 The primary judge did consider the possible prejudice to the appellants but, in circumstances where they accepted that they could point to no actual prejudice, considered whether either the expiry of the limitation period or the effluxion of time per se were sufficient to militate against the Court exercising its discretion to set aside the Preliminary Dismissal Order. He did not err, in my view, in concluding that they were not. 98 As to Mr Davies' submission that the fact the appellants were legal practitioners was an irrelevant consideration in my view it was of some, albeit marginal, relevance. As a matter of commonsense it might well be thought that solicitors would have detailed records of their dealings with clients so that his Honour was correct to surmise that one might think they would have "adequate records" and, one would also hope, "fairly well trained memories". These inferences were available to the primary judge, particularly in the absence of evidence from the appellants of any actual prejudice flowing from the effluxion of time. 99 In my view the primary judge did not err in setting aside the Preliminary Dismissal Order. 100 The appeal should be dismissed with costs.

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