Babcock & Brown P/L & Ors v Arthur Andersen

PARTNERSHIP - ACTIONS BY AND AGAINST PARTNERS - actions and proceedings against firms and individual partners - in name of firm or of individual partners - where partnership had been dissolved - whether actions in breach of contract or negligence could be brought against the former partners in the firm name - whether cause of action in negligence accrued before or after dissolution of partnership

PROCEDURE - SUPREME COURT PROCEDURE - Queensland - rule 114 of the Uniform Civil Procedure Rules - service - service in relationship to a partnership - where partnership had been dissolved for more than five years when proceeding commenced - whether it was necessary to serve former partners individually

PROCEDURE - SUPREME COURT PROCEDURE - Queensland - rule 24 of the Uniform Civil Procedure Rules -claim - where former partners and insurer were aware of prospect of a claim against them - where the plaintiffs made a decision not to serve the claim initially - where two renewals of claim granted - whether the court should exercise its power to set aside orders renewing claim - whether there was good reason to renew the claim

Income Tax Assessment Act 1936 (Cth), s 251M

Income Tax Assessment Act 1997 (Cth), ss 703-15 and 995-1(1)

Partnership Act 1891 (Qld), ss 5, 12, 13, 15, 20, 26, 41, and 65

Partnership Act 1891-1975 (SA), ss 9, 10, 12 and 17

Partnership Act 1958 (Vic), ss 5, 13, 14, 16, 21, 27, 42

Rules of the Supreme Court 1971 (WA), Order 18 r 4(3)

Supreme Court of Queensland Act 1991 (Qld), ss 88 and 89

Supreme Court of Queensland Act 1991 (Qld) Rules of the Supreme Court, Order 54 , rr 1 and 5

Uniform Civil Procedure Rules 1999 (Qld), rr 5, 16, 24, 64, 69, 69, 74, 83, 85, 86, 87, 88, 89, 114, 116, 118, and 667

Rules of the Supreme Court 1962 (UK) ("RSC"), Order 81 r 1

Rules of the Supreme Court 1875 (UK) ("RSC"), Order XLVIII.a

Rules of the Supreme Court 1877 (UK) ("RSC"), Order IX r 6

Chohan Clothing Company (Manchester) Ltd v Fox Brooks Marshall (a firm) [1997] EWCA Civ 2684; [1997] All ER (D) 62, considered

Madden v Kirkegard Ellwood & Partners [1983] 1 QdR 649, considered

MAM Mortgages Ltd (in liq) v Cameron Bros (a firm) [2002] QCA 330, applied

Muirhead v The Uniting Church in Australia Property Trust (Q) [1999] QCA 513, considered

Queensland Southern Barramundi v Ough Properties Pty Ltd [2000] 2 QdR 172, cited

State of South Australia v Peat Marwick Mitchell & Co (1997) 24 ACSR 231, not followed

The IMB Group Pty Ltd (in liq) v Australian Competition and Consumer Commission [2007] 1 QdR 148; [2006] QCA 407, applied

Tobin v Dodd [2004] WASCA 288, considered

Western National Bank of City of New York v Perez, Triana & Co [1891] 1 QB 304, considered

D Kelly SC and SR Cooper for former partners in the firm Arthur Andersen

McCullough Robertson for former partners in the firm Arthur Andersen

[1] MARGARET WILSON J: In 2001 the first plaintiff co-ordinated a consortium of investors who were intending to bid for the acquisition for the lease of the Dalrymple Bay Coal Terminal from the State of Queensland. The defendant, a large firm of chartered accountants and tax agents, gave advice on a number of matters associated with the bid over a number of months. The plaintiffs allege that some of that advice was given negligently, and they have sued the defendant in contract, tort and breach of statutory duty of care.[1]

[2] There are two applications before the Court relating to service of the originating process and orders made renewing the claim.

[3] The port facility is on land owned by the State of Queensland or entities wholly owned by the State. Ports Corporation of Queensland ("PCQ"), a corporation wholly owned by the State, originally held the plant associated with the port facility.

[4] PCQ and the Original Users were parties to a series of User Agreements, which set out the terms and conditions attaching to the use of the port facility and the tonnage of coal to be shipped through it. Under the agreement each User was required to pay a User Fee calculated on both a variable Terminal Infrastructure Charge (calculated on the tonnage actually shipped through the port facility) and a fixed Take or Pay component (where the User shipped less than the annual tonnage it was entitled to ship through the port facility).

[5] In 1999 PCQ became obliged to pay the Original Users a Rebate by way of reduction of the Take or Pay component.

[6] In 2001 the State Government formed DBCT Holdings Pty Ltd as part of a planned restructure of the use of the port facility. It leased the land on which the port facility exists to DBCT Holdings Pty Ltd. PCQ transferred the plant to that company.

[7] In or about May 2001 the consortium submitted a bid to be selected as the long-term lessee of the port facility. On 2 August 2001 the third plaintiff was incorporated in anticipation of the bid being successful. The bid succeeded, and the acquisition was completed on 14 September 2001.

[8] The second plaintiff took a 50 year lease of the port facility (including relevant plant) from DBCT Holdings Pty Ltd, which it then sub-leased to the third plaintiff.

[9] The User Agreements were novated to the third plaintiff, which was obliged to pay PCQ quarterly Novation Payments. The third plaintiff assumed responsibility for paying the Original User Rebates.

[10] A holding trust (Prime Infrastructure Trust) and a holding company (Prime Infrastructure Management Limited) were established to acquire the Trust and the third plaintiff. Prime Infrastructure Management Limited was listed on the Australian Stock Exchange on 13 June 2002, the initial public offering being by way of stapled security.

[11] Arthur Andersen gave advice by letters addressed to "Mr S. O'Kane, Babcock & Brown Pty Ltd" on a number of issues between 7 May 2001 and 24 September 2001. The advice in issue relates to the tax deductibility of "Novation Payments" and "Original User Payments". It was included in a letter of advice dated 7 May 2001 and in a consolidation of earlier advices dated 24 September 2001, both of which referred to the provision of opinions to "the Babcock & Brown Consortium". Ultimately the Commissioner of Taxation disallowed the deductions on the basis that the payments were capital in character, and accordingly issued notices of assessment to the third plaintiff and amended notices of assessment to Babcock & Brown Infrastructure Limited ("BBIL")[3] in 2007. On 31 October 2007 those companies commenced proceedings in the Federal Court (New South Wales Registry) challenging the assessments. Pending resolution of those proceedings, 50% of the contested tax liabilities has been paid - the third plaintiff has paid $10.492 million and BBIL has paid $51.176 million.

(i) Babcock & Brown Pty Ltd, now called Babcock & Brown Asset Holdings Pty Ltd. This company was incorporated on 11 January 1982. It is a subsidiary of Babcock & Brown Limited (Administrators Appointed), the ultimate holding company;

(ii) BBI (DBCT) Investor Services Pty Ltd as trustee for the BBI (DBCT) Trust. This company was incorporated on 6 June 1991. It is an indirectly owned subsidiary of Babcock & Brown Infrastructure Limited ("BBIL"). It was previously called Babcock & Brown Investment Services Limited as trustee for the CL-NQ Trust and Prime Infrastructure (DBCT) Investor Services as trustee for Prime Infrastructure (DBCT) Trust; and

(iii) BBI (DBCT) Management Pty Ltd. This company was incorporated on 2 August 2001. It is a wholly owned subsidiary of BBIL, and was previously called CL-NQ Management Pty Ltd and Prime Infrastructure (DBCT) Management Pty Ltd.

[13] The firm Arthur Andersen was constituted under Victorian law pursuant to a Partnership Agreement effective 30 June 1991. It was dissolved on 26 May 2002. At the time of its dissolution, the firm had 123 partners, two of whom (Messrs Robertson and Madden) were appointed as "administration partners" to wind up the business.[4]

[14] The proceeding was commenced by the filing of a claim and statement of claim on 7 September 2007. By r 24 of the Uniform Civil Procedure Rules 1999 (Qld) ("UCPR") the claim remained in force for one year starting on the day it was filed.

[15] On 5 September 2008 Messrs Robertson and Madden were served with the claim and statement of claim. On the same day the plaintiffs made an ex parte application to the Registrar to renew the claim for three months. The Registrar made the order sought.

[16] On 26 November 2008 the plaintiffs filed an application for an order pursuant to r 116 (which is concerned with substituted service) that delivery of the claim and statement of claim to Messrs Robertson and Madden on 5 September 2008 be deemed effective service on the defendant. They served the application on McCullough Robertson, who were the Brisbane town agents for Baker & McKenzie, the solicitors for Arthur Andersen. McCullough Robertson did not appear on the application, as it did not affect Messrs Robertson and Madden, the only partners who had been served. On 1 December 2008, the plaintiffs filed an amended application seeking, in the alternative, an order that the claim be renewed for one year commencing 6 December 2008. That day, Martin J refused to make the order for substituted service but renewed the claim for a further six months commencing on 6 December 2008.

[17] In the ensuing months the plaintiffs served a large number, but not all, of the former partners of the firm.

[18] On 31 March 2009 Daubney J ordered that the proceeding be entered on the Supervised Case List. Messrs Robertson and Madden and some other former partners were given leave to apply for the setting aside of the renewals on 5 September and 1 December 2008. His Honour directed that, until further order, the defendants Robertson, Madden and the other partners who had been served not be required to file a notice of intention to defend or a conditional notice of intention to defend.

[19] On 6 April 2009 the first plaintiff purported to assign to BBI (DBCT) Investor Services Pty Ltd "its cause of action for breach of contract and negligence, and any other right, title and interest in any other cause of action against Arthur Andersen, as particularised in [this proceeding]".[5]

[20] By an application filed on 17 April 2009 and amended on 29 April 2009 the plaintiffs sought orders for substituted service on "those former partners identified as not having been served in section 3 of exhibit PWS-25 to the affidavit of Phillip Smith sworn on 29 April 2009[6] and any other person who was a partner of the Defendant on 24 September 2001". (Emphasis added.) There were 27 persons named in the relevant part of the exhibit.

[21] On 30 April 2009 the defendant filed the first of the applications presently before the Court, seeking inter alia a declaration that delivery of the claim and statement of claim to Messrs Robertson and Madden on 5 September 2008 did not constitute service on the firm and setting aside the renewals made on 5 September 2008 and 1 December 2008.

[22] By 5 May 2009, 96 former partners had been served. On that day the Chief Justice ordered substituted service on those former partners who were identified as not having been served in section 3 of exhibit PWS-25 to the affidavit sworn by Mr Smith on 29 April 2009 "and any other person who was a partner of the Defendant on 14 September 2001" - by posting copies to Mr Salgo (a solicitor and partner of Baker & McKenzie) and Messrs Robertson and Madden. (Emphasis added.)

[23] Daubney J gave directions for the further conduct of the proceeding on 5 June 2009 and 23 July 2009.

[24] On 7 August 2009 the plaintiffs filed the other application now before the Court, seeking inter alia a declaration that for the purposes of UCPR r 83 a partnership in the name Arthur Andersen existed between 26 May 2002 (the date of dissolution) and 8 September 2007 (the day after the proceeding was commenced), declarations about the effectiveness of the service on Messrs Robertson and Madden, and an order that 143 named persons be joined as defendants.

[25] On 11 November 2009 Philippides J made an order for substituted service of the plaintiff's application filed on 7 August 2009 on 143 persons (including Messrs Robertson and Madden).

[26] The application by Messrs Robertson and Madden filed on 30 April 2009 was amended on 23 November 2009. The 121 persons named in Schedule A to the amended application were added as applicants, and some amendments were made to the orders ought. In written submissions filed after the oral hearing, leave to amend it further by adding two names to Schedule A and making further amendments to the orders sought was requested.[7] I grant that leave.

[27] Accordingly, the first application is by Messrs Robertson and Madden and 123 other persons, all of whom were served with the claim and statement of claim either personally or by substituted service pursuant to the Chief Justice's order of 5 May 2009. The application is for the following orders -

"1. A declaration that the delivery of the claim and statement of claim to Messrs Madden and Robertson on 5 September 2008 did not constitute service on the Firm.

1. An order that the order made by the registrar on 5 September 2008 be set aside.

2. An order that the order of Martin J made on 1 December 2008 be set aside.

3. A declaration that as at the date of expiry of the claim the plaintiffs had not made reasonable efforts to serve the defendants and there existed no good reason to renew the claim within the meaning of rule 24(2) UCPR.

4A. A declaration that service on the Schedule A Applicants after 7 September 2008 did not constitute effective service.

1. In the case of Messrs Robertson and Madden, an order permanently staying or dismissing the claim for breach of contract against Messrs Robertson and Madden.

2. In the case of Messrs Robertson and Madden, an order permanently staying or dismissing the claim in negligence against Messrs Robertson and Madden.

3. In the case of Messrs Robertson and Madden, an order permanently staying or dismissing the claim for breach of statutory duty against Messrs Robertson and Madden.

7A. An order dismissing the proceedings against the Schedule A Applicants.

1. The plaintiffs pay the costs of Messrs Robertson and Madden and of the Schedule A Applicants of the application.

2. The plaintiffs pay the costs of Messrs Robertson and Madden and of the Schedule A Applicants of the proceeding.

3. Such further or other order or direction as the court may consider appropriate."

[28] The plaintiffs' application filed on 7 August 2009 is for the following orders -

"1. A declaration that for the purposes of rule 83 of the Uniform Civil Procedure Rules 1999 (Qld) in respect of those proceedings there existed between and including 26 May 2002 and 8 September 2007 a partnership in the name of Arthur Anderson.

A declaration that for the purposes of rule 83 of the Uniform Civil Procedure Rules 1999 (Qld) the proceedings were validly brought against the defendant in the partnership name.

A declaration that service of the proceedings on Martin Madden and Stuart Robertson on 5 September 2008 constituted valid service on each of the partners in the partnership when the originating process was issued.

Further or in the alternative a declaration that each of Martin Madden and Stuart Robertson had the authority of each of the partners of Arthur Anderson as at 26 May 2002 to accept service on behalf of them on 5 September 2008.

Further or in the alternative an order pursuant to rule 69 of the Uniform Civil Procedure Rules 1999 (Qld) that each person referred to in schedule A to this application be included as a defendant in these proceedings.

Further to the Order in paragraph 5, pursuant to rule 116 of the Uniform Civil Procedure Rules 1999 (Qld), each person referred to in schedule A to this application be taken to have been duly served in accordance with rule 116 of the Uniform Civil Procedure Rules 1999 (Qld), by the Applicant effecting service of the Claim and Statement of Claim and a copy of any Order for substituted service (the 'Court Documents') by:

(a) posting a copy of the Court Documents to Mr Andrew Salgo, Partner of Baker & Mackenzie lawyers, level 27, 50 Bridge Street, Sydney NSW 2000;

(b) posting a copy of the Court Documents to Mr Stuart Robertson at the Ernst & Young Centre, 680 George Street, Sydney NSW 2000; and

(c) posting a copy of the Court Documents to Mr Martin Madden at Level 5, Chifley Tower, 2 Chifley Square, Sydney NSW 2000;

1. Such further or other orders as the Court deems necessary.

2. That the respondents pay the applicant plaintiff's costs of and incidental to this application."

The schedule to the plaintiffs' application contains the names of 143 persons the plaintiffs contend were partners in Arthur Andersen between 7 May 2001 and the dissolution of the firm, including Messrs Robertson and Madden.[8] Of those 143 persons, 131 were represented at the hearing, being the 125 persons who are the applicants in the other application, and six others.

[29] A partnership is, of course, not a separate legal entity. A plaintiff may either sue partners in their individual names or sue them in the partnership (or firm) name. Rule 83 of the UCPR provides -

(1) Two or more partners may start a proceeding in the partnership name.

(2) A proceeding against persons alleged to be partners may be brought against the alleged partnership in the partnership name.

(3) The partnership name used in a partnership proceeding must be the name of the partnership when the cause of action arose.

(4) For a partnership registered under the Partnership Act 1891, the name of the partnership when the cause of action arose is the name in which the partnership was registered when the cause of action arose.

(5) Unless the court orders otherwise, a partnership proceeding must continue in the partnership name and not in the name of the individual partners."

[30] In Chohan Clothing Company (Manchester) Ltd v Fox Brooks Marshall (a firm)[9] Evans LJ said of the Rules of the Supreme Court 1962 (UK) ("RSC"), O 81 r 1, was to the same effect as r 83(1) and (2) of the UCPR, that it enabled a party "to use the firm's name as a form of shorthand and for convenience". That echoed what Lindley LJ had said of an earlier provision[10] in Western National Bank of City of New York v Perez, Triana & Co[11] -

"When a firm's name is used, it is only a convenient method for denoting those persons who compose the firm at the time when that name is used, and a plaintiff who sues partners in the name of their firm in truth sues them individually, just as much as if he had set out all their names."

(1) Despite an originating process being against a partnership, a notice of intention to defend must not be filed in a partnership name.

(2) A partner who is served with an originating process against a partnership may file a notice of intention to defend only in the partner's own name.

See rule 114 (Service in relation to a partnership).

(3) However, the proceeding continues in the name of the partnership.

Except for a person who files a conditional notice of intention to defend under rule 86, a person may file a defence for the partnership in the partnership name only."

[32] Enforcement against partnership property and against individual partners is dealt with in the Supreme Court of Queensland Act 1991 (Qld) ss 88 and 89, which provide -

Despite section 89, the court may vary an order against a partnership in the partnership name to make it an order against the persons who were partners when the cause of action arose.

(1) An order against partners suing or sued in the name of the partnership may be enforced against any 1 or more of the following-

(b) a partner who filed a notice of intention to defend;

(d) a person who the court has decided is a partner;

(e) a person who has been individually served as a partner with the originating process and who has not filed a notice of intention to defend.

(2) This section has effect subject to the Partnership Act 1891, section 65[12]"

(1) On application by a person seeking to enforce an order against partners in the partnership name, the court may give leave for the order to be enforced against a person who is liable to satisfy the judgment.

(2) The application must be served on the person against whom the order is sought to be enforced.

(3) Despite chapter 4, the person may be served outside Australia without leave.

(4) If, on the hearing of the application, the person denies liability, the court may decide liability summarily or give directions about how liability is to be decided."

[33] In Tobin v Dodd,[13] a decision of the Full Court of the Supreme Court of Western Australia, EM Heenan J said[14] -

"Where partners of a firm are sued in their individual names, rather than in the firm name, the obligation is on the plaintiff to ascertain who were the individual members of the partnership at the date of the accrual of the cause of action and to sue them all in their own names - Harris v Beauchamp Bros.[15] The practical difficulties which this entails, not least of which are difficulties of service, could be overcome if the partners are sued in the firm name. Other advantages of suing in the firm name include the ability to enforce any ensuing judgment against partnership property.[16] As the appellant has sued some, but not all, of the partners in the firm at the date of the alleged breach of duty he may have to face these procedural difficulties, and may even be forced to join all the partners before proceeding further with this action. This is because the liability of partners is joint[17] and the consequent ability of those partners who have been joined in the action to apply to the court for an order staying the proceedings until all other persons so jointly liable with them are added as defendants.[18]"

[34] In Queensland, before the introduction of the UCPR, the rules about proceedings by or against partnerships were contained in Order 54 of the Supreme Court of Queensland Act 1991 (Qld) Rules of the Supreme Court. Order 54 r 1 was to the same effect as r 83(1), (2) and (3) of the UCPR. In Madden v Kirkegard Ellwood & Partners[19] Kelly J (with whom Lucas and Hoare JJ agreed) held that an action might be brought against partners in the firm name even after dissolution of the partnership, if the cause of action had accrued before dissolution.[20] In this respect there is no material difference between O 54 of the old rules and r 83 of the UCPR, and I consider that under r 83 a proceeding may be brought against partners in the firm name when the cause of action arose, even though the firm has been dissolved by the time the proceeding is commenced.

[35] A cause of action for breach of contract accrues at the date of the breach, while a cause of action in negligence does not accrue until the plaintiff suffers loss or damage. The plaintiffs pleaded in their statement of claim[21] -

"11. The defendant was in breach of the said implied terms of its engagement, in breach of its said duty of care in giving the Advice, and in breach of its said statutory duty in that:

(a) the Advice omitted to identify and assess the risk of its being wrong;

(b) the Advice was given without due care and skill, in that it was given without reading the relevant documents which the defendant was engaged to read, or alternatively ought to have read, in order to properly provide the Advice.

1. Had the defendant advised the plaintiffs correctly, or warned of the risks, the Transaction would not have been implemented and consideration would have been given to implementing a different transaction to obviate those risks.

2. Subsequently, the defendant prepared and lodged tax returns on behalf of the plaintiffs, and the Commissioner of Taxation has assessed the plaintiffs to additional tax and interest for income tax year of the Transaction and following years.

3. In the premises, by reason of the additional ongoing income tax liabilities incurred as a result of entry into the Transaction in reliance on the Advice, the plaintiffs incurred loss in entering into the Transaction. The loss in entering into the Transaction will be quantified and particulars supplied before trial."

[36] Questions of when the causes of action accrued were not fully argued on this application. The plaintiffs' counsel conceded that it is likely that the limitation period for a claim in contract has expired.[22] But it was clear that the plaintiffs wish to contend that the limitation period for the claim in tort did not start to run until the tax assessments were issued in 2007[23] - in other words, that the causes of action in tort did not accrue until 2007. The claim for breach of statutory duty assumed little if any importance in the applications. The effect of the relevant provision, repealed in 2009,[24] was to require a negligent tax agent to indemnify his client against a fine or penalty imposed by the Commissioner of Taxation, and none has been imposed here.

[37] By 2007, the partnership had been dissolved. If the cause of action in tort did not accrue until then, could the claim in tort be brought against the former partners in the firm name?

[38] In MAM Mortgages Ltd (in liq) v Cameron Bros (a firm)[25] the Court of Appeal considered an application for joinder of former partners after the expiration of the limitation period. McPherson JA, with whom Jerrard JA and White J agreed, said -

"According to O 54, r 1, read with the decision in Madden v Kirkegard Ellwood & Partners,[26] an action against the partners in the firm name was competent only if the partnership had not been dissolved at the date when the cause or causes of action accrued, which was at earliest in or about December 1994... . By then, the partnership had already been dissolved on 30 June 1991 and, after that date, the name Cameron Bros signified Dascam Pty Ltd and not the three individual partners who had previously traded under that name. The action against the firm of Cameron Bros in negligence was therefore brought 'against the name of the wrong person as a party'. It should have been brought against the individual partners David, Richard and John Cameron (or his executors) in their own names. If this had been done when the writ issued on 23 February 1996, the actions in negligence against those persons would not have been statute-barred."[27]

[39] In State of South Australia v Peat Marwick Mitchell & Co[28] Olsson J adopted a different approach in considering the meaning of "at the time the cause of action accrued" in the Supreme Court Civil Rules 1987 (SA) r 36.01.[29] His Honour said -

"The content of that subrule must be considered against the background of the provisions of ss 9, 10, 12 and 17 of the Partnership Act 1891 - 1975 (SA)[30]. Relevantly for present purposes, they enact that:

- A partner is liable only for debts and obligations of a firm incurred while that person remains a partner. Any actual loss arising on breach of contract must, therefore, actually have occurred whilst the partner was a partner, if that person is to be held liable in respect of it.

- A partner who is admitted, as such, into an existing firm does not thereby become liable to its creditors 'for anything done before he became a partner'.

- A partner who retires from a firm does not thereby cease to be liable for its 'debts or obligations incurred before his retirement'.

- In the case of tort, the statute stipulates that, where, by any act or omission of any partner acting in the ordinary course of the business of a firm, or with the authority of the co-partners, loss or injury is caused to any person, not being a partner in the firm, the firm is liable therefore to the same extent as the partner so acting or omitting to act: s 10. As in the case of a claim in contract, liability attaches to those persons who were partners at the time of the breach which caused the relevant damage, notwithstanding that the breach may not become actionable until actual loss or damage results from it.

It follows, then, that, for the present purposes, the critical dates, in terms of partner liability, are those at which relevant breaches are said to have occurred. A firm, and all persons then partners in it, may be liable, as at the date of any breach, for the ultimate consequences of that breach in terms of loss or damage. However, the Partnership Act does not, on the face of it, render one firm liable for the acts or omissions of another firm at some prior or later in point in time, simply because the two firms may have some common partners."

"In this regard a literal reading of SCR r 36.01 could give rise to an anomalous situation; and one which is in conflict with the sections of the Partnership Act to which I have referred. As I have already pointed out, that statute fixes liability for both contact and tort, as between partners in a firm, as at date of breach; and this is so notwithstanding that, so far as a person wronged is concerned, a legally enforceable cause of action does not accrue until the relevant breach of duty gives rise to actual loss or damage.

It seems to me that SCR r 36.01 must be construed on the basis adopted by Moffitt J in Pacific Acceptance Corp Ltd v Forsyth (No 1).[31] This is a commercial cause and the rules require to be construed in a practical and commonsense manner - so as to facilitate (and not frustrate) the due and efficient disposal of litigation. As a matter of plain commonsense, it must be construed so as to give effect (and not run counter) to the express provisions of the Partnership Act 1891-1975 (SA), which it was patently intended to implement.

In a case such as this I am disposed to read subr (1), where it refers to partners 'at the time the cause of action accrued', as connoting the time at which, pursuant to ss 10 and 17 of the Partnership Act 1891-1975 (SA),[32] those partners became liable for the ultimate consequences of the relevant breaches of duty committed. In the case of tort what is involved is, in practical terms, a contingent liability for damages which eventually flows from the relevant breach. Any other approach would result in a situation that partners could be sued in a firm name for a liability arising from a breach of contract, but may possibly not be so sued, in the firm name, in tort arising from that same breach. Such a situation runs counter to the express scheme of the statute."

[40] This Court should apply what McPherson JA said in MAM Mortgages. On the assumption the cause of action in contract accrued when the advice was given (that is, before the dissolution of the partnership), the claim in contract has been correctly commenced against the partners in the firm name. But, unless the cause of action in tort accrued before the dissolution of the partnership, it was not open to the plaintiffs to name "Arthur Andersen" as the defendant to the claim in tort.

[41] If a plaintiff sues partners in the partnership name, then the originating process must be served in accordance with r 114 of the UCPR, which provides -

(1) An originating process against a partnership must be served--

(b) on a person at the principal place of business of the partnership in Queensland who appears to have control or management of the business there; or

(c) for a partnership registered under the Partnership Act 1891--at the registered office of the partnership.

(2) If the originating process is served under subrule (1), each of the partners who were partners in the partnership when the originating process was issued, including a partner who was outside Queensland at the time, is taken to have been served.

(3) The originating process must also be served on any person the plaintiff seeks to make liable as a partner but who was not a partner when the originating process was issued."

[42] When this proceeding was commenced, the partnership had been dissolved for more than five years. Was service on Messrs Robertson and Madden enough, or was it necessary to serve the former partners individually?

[43] The UCPR require personal service of originating process. There are only a few exceptions, including service on a partnership,[33] acceptance of service by a solicitor,[34] and service in accordance with a contract between the parties to the litigation.[35] And, of course, a defendant may waive the requirement for personal service by filing an unconditional notice of intention to defend.[36]

[44] It is not necessary to decide whether, as among the partners, Messrs Robertson and Madden were authorised to accept service on behalf of the others. If they had that authority, they were not bound to exercise it. It was not a method of service permitted by the procedural law, and in the absence of waiver it was ineffective as against those not personally served.

[45] Order 54 r 5 of the former Rules of the Supreme Court provided -

(1) When persons are sued as partners in the name of their firm under rule 1, the originating proceeding shall be served either upon some 1 or more of the partners, or at the principal place, within the jurisdiction, of the business of the partnership upon some person having at the time of service the control or management of the partnership business there; and, subject to these rules, such service shall be deemed good service upon the firm so sued, whether any of the members thereof are out of the jurisdiction or not.

(2) However, in the case of a co-partnership which has been dissolved to the knowledge of the plaintiff before the commencement of the action, the originating proceeding shall be served upon every person within the jurisdiction sought to be made liable."

[46] There are two important differences between O 54 r 5 and r 114 of the UCPR:

(i) Under O 54 r 5 service in one of the ways mentioned was "deemed good service upon the firm so sued". Under r 114 if service is effected in one of the ways mentioned "each of the partners who were partners in the partnership when the originating process was issued....is taken to have been served"; and

(ii) Under O 54 r 5(2), if the partnership had been dissolved to the knowledge of the plaintiff before the commencement of the action, the originating process had to be served on every person within the jurisdiction sought to be made liable. Rule 114(3) contains no express reference to a partnership dissolved to the knowledge of the plaintiff; instead it requires service on any person sought to be made liable who was not a partner when the originating process was issued.

[47] Order 54 r 5 followed then current English rules.[37] Earlier English rules had not contained the proviso about a partnership dissolved to the knowledge of the plaintiff before the commencement of the proceeding,[38] and judges had raised concerns about service on partners of firms that had been dissolved. Where the partnership was subsisting, it was likely that service in one of the ways mentioned would result in partners aware of the proceeding bringing it to the notice of or otherwise protecting the other partners, but where the partnership had been dissolved or there had been changes in its membership or place of business, that was not necessarily so. See, for example, the remarks of Cotton LJ in Ex parte Young, In re Young[39] and those of Watkin Williams J in Davis v Morris.[40] Hence the introduction of the proviso.

[48] Under O 54 r 5 an action could be brought against a partnership in the firm name after dissolution of the partnership. A plaintiff unaware of the dissolution might serve the originating process in one of the ways mentioned in the first paragraph of the rule. A plaintiff aware of the dissolution before commencing the action had to serve each of the partners sought to be made liable.

[49] Under the UCPR a proceeding may be brought against a partnership in the firm name after dissolution of the partnership. But, whether or not aware of the dissolution before commencing the proceeding, the plaintiff must serve all the partners sought to be made liable individually.

[50] Section 42 of the Partnership Act 1958 (Vic)[41] provides -

"42. After the dissolution of a partnership the authority of each partner to bind the firm and the other rights and obligations of the partners continue notwithstanding the dissolution so far as may be necessary to wind up the affairs of the partnership and to complete transactions begun but unfinished at the time of the dissolution but not otherwise:

Provided that the firm is in no case bound by the acts of a partner who has become bankrupt but this proviso does not affect the liability of any person who has after the bankruptcy represented himself or knowingly suffered himself to be represented as a partner of the bankrupt."

[51] In Queensland Southern Barramundi v Ough Properties Pty Ltd[42]de Jersey CJ held that the cognate Queensland provision authorised a partner of a former firm to start a claim in the firm name as necessary to wind up the affairs of the partnership.

[52] The partnership was dissolved on 26 May 2002. From that time, the former partners were no longer carrying on business in common with a view to profit.[43] Neither s 42 of the Partnership Act 1958 (Vic) nor the provisions of the Partnership Agreement about voluntary dissolution[44] could be construed as continuing the partnership or as constituting some other partnership for the purposes of the UCPR.

(1) A claim remains in force for 1 year starting on the day it is filed.

(2) If the claim has not been served on a defendant and the registrar is satisfied that reasonable efforts have been made to serve the defendant or that there is another 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.

(3) The claim may be renewed whether or not it is in force.

(4) However, the court's leave must be obtained before a claim may be renewed for a period any part of which falls on or after the fifth anniversary of the day on which the claim was originally filed.

(5) Before a claim renewed under this rule is served, it must be stamped with the court's seal by the appropriate officer of the court and show the period for which the claim is renewed.

(6) Despite subrule (1), for any time limit (including a limitation period), a claim that is renewed is taken to have started on the day the claim was originally filed."

[54] There are three sources of the Court's power to set aside an order renewing a claim-

(i) UCPR r 16(d) which provides that the Court may set aside an order extending the period for service of an originating process;

(ii) UCPR r 667(2)(a) which provides that the Court may set aside an order made in the absence of a party; and

(iii) the inherent jurisdiction of the Court.[45]

[55] The hearing of an application to set aside the renewal of a claim is a hearing de novo at which further evidence is admissible. The application must be determined upon a consideration of the whole of the material.[46]

[56] A notice in the following terms appeared in the Victoria Government Gazette on 6 June 2002 -

Notice is hereby given pursuant to Section 41 of the Partnership Act 1958 (Vic.) that the partnership of Arthur Andersen (trading as Andersen) has been dissolved effective from 11.59 p.m. on 26 May 2002.

[57] The former partners and their insurer were aware of the prospect of a claim against them for more than two years before the Commissioner disallowed the deductions. On 30 May 2005 Mr Robertson gave the partners' insurers notice of circumstances which might give rise to a claim. The notification listed a number of possible claimants, including the three plaintiffs in this proceeding. It referred to the ATO's having commenced a tax audit of Prime, and the likelihood of its examining the efficacy of the tax treatments of the Novation Payments.

[58] The Commissioner of Taxation disallowed the deductions. BBIL and the third plaintiff lodged notices of objection, and the Commissioner disallowed those objections on 3 September 2007.

[59] The claim was filed on 7 September 2007 - a week before the sixth anniversary of the completion of the transaction for the acquisition of the coal terminal. The solicitors for the plaintiffs were Freehills, and the member of that firm responsible for the litigation was Mr Darwin, who was based in its Brisbane office.

[60] The former partners of Arthur Andersen monitored the Court registry to detect proceedings against them. Mr Robertson (one of the administration partners) and Mr Donald Green (the partner responsible for the consolidating advice of 24 September 2001) learnt of the proceeding three days after the claim was filed. The administration partners were in touch with their lawyers immediately, and they sent information about the litigation to the former partners.

[61] The plaintiffs made a deliberate decision not to serve the claim. In an affidavit made on 5 September 2008 in support of the first application for renewal, Mr Darwin referred to the Federal Court proceedings and went on -

"...I was instructed last year (before the earliest date that a limitation period might have expired) to file the claim in this matter against the Defendant (but not to serve the claim on the Defendant in the hope that the Federal Court Proceedings were resolved favourably for the Plaintiffs before the time for serving the claim expired)."[47]

The Federal Court proceedings were handled by Freehills' Melbourne office. They were not commenced until almost two months after the claim in this proceeding was filed. Mr Darwin had no reasonable ground for thinking that they would be resolved before the claim in this proceeding became stale.

[62] In mid-July 2008 Mr Darwin received instructions to investigate how service might be effected on Arthur Andersen, given that the partnership had been dissolved.[48] He formed the view that arguably service on one partner would constitute proper service under UCPR r 114(1), but that the safest option would be to serve all of the former partners.

[63] Mr Darwin's investigations seem to have been surprisingly superficial. In his affidavit made on 5 September 2008 in support of the first renewal he referred to the defendant as "the former international accounting partnership Arthur Andersen" and to "obvious difficulties in serving every member of the former Arthur Andersen".[49] In an affidavit made on 26 November 2008 he said -

"At the time the Arthur Andersen partnership was dissolved, it was one of the five largest accounting firms in the world. In an article on 1 April 2002, two months before the partnership was dissolved, Fortune magazine ran an article which reported that Arthur Andersen had 4,700 partners.... It would obviously be highly impractical, inconvenient and probably impossible to serve all persons that were partners of Arthur Andersen at the time the advice was given or when the partnership was dissolved."[50]

[64] His subjective belief that the dissolved firm was an international firm with thousands of partners all over the world was based on -

(a) his general impression that it was an international firm;

(b) his friendship with someone who went to Chicago to attend what he called "Andersen's University";

(c) his knowledge that the same friend went to work for Arthur Andersen in Moscow; and

(d) his understanding that the demise to Arthur Andersen had been caused by international events.

[65] On 1 September 2008 he had a conversation with one of the former partners, Mr Laxon, in which he learnt that Messrs Robertson and Madden "remained partners in some form for the purpose of dealing with matters such as this", and that the defendant was usually represented Baker & McKenzie, a Sydney firm of lawyers, and in particular Mr Salgo, who was a partner in that firm. Three days later Mr Darwin telephoned Mr Salgo, who said he was generally aware of the matter, but had no instructions in it, and would seek them. Mr Salgo telephoned back to say that while he did not have instructions to accept service, Messrs Robertson and Madden were willing to receive any document delivered to them without any admission or denial that such delivery constituted service on the defendant, and that he expected to receive instructions to consider the position.[51]

[66] The claim and statement of claim were delivered to Messrs Robertson and Madden on 5 September 2008. The first renewal of the claim was granted that day.

[67] During late October and November 2008 Mr Darwin unsuccessfully sought an acknowledgement from Baker & McKenzie that service on them was good service on the defendant. Their town agents (McCullough Robertson) acknowledged service on behalf of Messrs Robertson and Madden only. They reached agreement on a "stand still arrangement" broadly to the effect that the plaintiffs did not require a defence to be filed unless and until the Federal Court proceedings were resolved against the taxpayers. On 26 November 2008 Mr Darwin filed an application for substituted service.

[68] On 28 November 2008 Mr Darwin received a facsimile from McCullough Robertson informing him that the Arthur Andersen partnership which had been dissolved on 26 May 2002 was an Australian partnership with 112 partners at the time of dissolution.

[69] Only then did he cause a number of searches to be performed in relation to the named defendant - a Google search, an ASIC search, an Australian Business Register search, and a Business Names Extract. He had considerable difficulty in reconciling the results of the searches with what he had been told by McCullough Robertson.

[70] The second renewal was granted on 1 December 2008 (for six months commencing 6 December 2008).

[71] Subsequently Baker & McKenzie accepted service on behalf of a large number of the former partners. The Chief Justice's order for substituted service (made on 5 May 2009) was for service on those persons who were partners on 14 September 2001 (the date the transaction for acquisition of the coal terminal was completed) and who had not been personally served by posting copies of the claim and statement of claim and the order to Mr Salgo and Messrs Robertson and Madden.

[72] The Court may renew a claim only if (relevantly) there is a "good reason" for doing so. The determination of that question is akin to the exercise of a judicial discretion, and regard must be had to all the circumstances of the case, including the legislative context and principles developed by judicial decisions.[52]

[73] In The IMB Group Pty Ltd (in liq) v Australian Competition and Consumer Commission[53] Keane JA (with whom the other members of the Court of Appeal agreed) said -

**"**It will be noted that r 24(1) establishes the general proposition that a claim is to be in force for the purpose of service for one year. The principal purpose of r 24(1) is obviously to afford a plaintiff ample opportunity to effect service upon the defendant. Rule 24(2) makes provision for renewal in cases where there is good reason for renewing the claim even though it has not yet been served on the defendant. Rule 24(2), in turn, is subject to the qualifications in r 24(4) and r 24(5).

Importantly for the present case, it must be borne in mind that the discretion conferred by r 24(2) of the UCPR falls to be exercised in a context which includes r 5 which states the philosophy of the UCPR. Rule 5 of the UCPR provides:

'(1) The purpose of these rules is to facilitate the just and expeditious resolution of the real issues in civil proceedings at a minimum of expense.

(2) Accordingly, these rules are to be applied by the courts with the objective of avoiding undue delay, expense and technicality and facilitating the purpose of these rules.

(3) In a proceeding in a court, a party impliedly undertakes to the court and to the other parties to proceed in an expeditious way.

(4) The court may impose appropriate sanctions if a party does not comply with these rules or an order of the court.'"

[74] The Court of Appeal had earlier considered the principles applicable to r 24 of the UCPR in Muirhead v The Uniting Church in Australia Property Trust (Q).[54] Pincus JA, with whom Davies JA agreed said -

"Authorities on rules of a similar sort were discussed by Stephen J in Van Leer Australia Pty Ltd v Palace Shipping KK.[55] There Stephen J adopted statements of principle from South Australia and Canada[56] in dealing with such an application. In summary, the views which his Honour applied were:

(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'.

The last principle was applied by the Full Court of the Supreme Court [of Western Australia] in Brown v Coccaro.[57] Further, Van Leer, although a decision of a single judge, acquires some additional authority from the references to it in Foxe v Brown[58] and in Mondial Trading Pty Ltd v Interocean Marine Transport Inc.[59]"

His Honour did not refer to r 5. However, that rule is an important part of the legislative context in which r 24 appears, and since the Court of Appeal's later decision in The IMB Group Pty Ltd (in liq) v Australian Competition and Consumer Commission and the High Court's decision in Aon Risk Services Australia Limited v Australian National University,[60] there can be no doubt that the philosophy it expresses must guide the exercise of the discretion in r 24. That said, His Honour's summary continues to afford a useful checklist, albeit not an exhaustive one, of factors relevant to the exercise of the discretion.

[75] The claim was filed four days after the Commissioner of Taxation gave his decision on the notices of objection and seven days before the sixth anniversary of the completion of the transaction on or around 14 September 2001.

[76] The plaintiffs made a deliberate decision not to serve it, in the vain hope that yet to be commenced Federal Court proceedings would be resolved in their favour before it became stale. Conduct of that sort was met with stern criticism by the Court of Appeal in The IMB Group Pty Ltd (in liq) v Australian Competition and Consumer Commission. The prospect of Federal Court proceedings between the third plaintiff and BBIL on the one hand and the Commissioner of Taxation on the other was no impediment to the formulation of the plaintiffs' claim against Arthur Andersen, however germane its outcome was to the success of that claim.[61] The plaintiffs could have sought directions of this Court to ensure they were not subjected to an intolerable burden of dealing with proceedings in the two Courts simultaneously. But -

"...what the plaintiffs were plainly not entitled to do was unilaterally arrogate to themselves the benefit of a stay of proceedings in the Supreme Court in defiance of r 5(3) of the UCPR."[62]

[77] The former partners of Arthur Andersen had been aware of the possibility of a claim by the plaintiffs as early as 30 May 2005. Mr Robertson and Mr Green were aware of the claim within three days of its being filed. At least by September 2008, their solicitor Mr Salgo of Baker & McKenzie, was "generally aware" of it. This was a factor in favour of the renewals.

[78] They were under no obligation to facilitate service. Messrs Robertson and Madden as the Administration Partners may well have had the authority of the other partners to accept service, or to instruct Baker & McKenzie to accept service, but they were not obliged to do so. It is nevertheless ironical that a large number ultimately gave Baker & McKenzie instructions to accept service on their behalf, and that the form of substituted service on the others ordered by the Chief Justice was posting to Mr Salgo and Messrs Robertson and Madden.

[79] In principle the existence of an apparently worthwhile claim is a factor favouring renewal.

[80] Counsel for the former partners submitted that the merits of the plaintiffs' claim are doubtful, while acknowledging that an application for renewal or to set aside a renewal is not an occasion for a determination of the merits of a claim.[63]

[81] The statement of claim does not distinguish the roles and interests of the various plaintiffs. It begins with an allegation that the plaintiffs were at all material times duly incorporated, with no mention of the third plaintiff not being incorporated until 2 August 2001. It refers to the plaintiffs collectively as having engaged the defendant to provide advice about the then proposed acquisition of the coal terminal, and as having been advised by the defendant by its partners Donald Green and Michael Frazer. It refers to the defendant undertaking to give the advice, knowing (actually or constructively) that the plaintiffs would rely on it in entering the transaction and assuming a duty of care to them collectively. It refers to the plaintiffs collectively entering into the transaction in reliance on the advice and suffering loss by doing so.

[82] The facts were much more complex than those alleged in the statement of claim. Counsel for the former partners pointed to these matters (inter alia) -

(a) Arthur Andersen's retainer was with the first plaintiff;

(b) the first plaintiff arranged its affairs so that no relevant tax liability attached to it: it did not rely on the advice to its detriment;

(c) the second plaintiff had no cause of action against Arthur Andersen when the claim was filed, and relies on an assignment of the first plaintiff's rights with effect only from 6 April 2009; and

(d) there is no suggestion that the second or third plaintiff was a member of the consortium, and the third plaintiff could not have been as it was not incorporated until 2 August 2001;

(e) Arthur Andersen did not assume responsibility for its advice to the second or third plaintiff.[64]

Counsel also raised issues about the scope of the retainer (that it was to advise on a particular structure proposed by the first plaintiff rather than to recommend a structure or advise on a hierarchy of risks attaching to different structures) and the absence of negligence.[65]

[83] If this proceeding is to continue, the plaintiffs will have to make major amendments to their statement of claim. Given the complexity, and the extent to which it was canvassed in the affidavits and submissions, there would be an air of unreality about having regard only to the pleading in determining the present applications. In the circumstances the Court cannot make any meaningful assessment of the plaintiffs' prospects of success, which should be treated as a neutral factor in the exercise of its discretion.

[84] As Keane JA recognised in The IMB Group Pty Ltd (in liq) v Australian Competition and Consumer Commission,[66] the question of prejudice is central to any review of a renewal under r 24.

[85] The former partners have not pointed to any specific prejudice resulting from the renewals. Rather, they invoke the general prejudice presumed to flow from the lapse of time eloquently described by McHugh J in Brisbane South Regional Health Authority v Taylor.[67] In The IMB Group Pty Ltd (in liq) v Australian Competition and Consumer Commission[68] Keane JA said -

"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'."

[86] The advice was given in relation to a specific and unique transaction.[69] The case seems to be one based largely on documents, and given the former partners' apprehension that such a claim might be made against them and their knowledge of the proceeding from a few days after the claim was filed, it is most unlikely that any documents have been destroyed or lost. While not underestimating the sometimes intangible effects of the passage of time and the prolongation of litigation on the quality of justice, in all the circumstances I am unpersuaded that prejudice to the former partners should carry as much weight as it might in other cases.

[87] The utility of renewal is affected by the expiration of applicable limitation periods. However, doubts about whether a limitation period has expired should not be finally resolved on applications such as these.

[88] The expiration of applicable limitation periods does not necessarily preclude renewal. The Court is reluctant to renew a claim after the expiration of a limitation period if doing so would deprive a defendant of a defence. Where there is uncertainty whether the limitation period has expired, it is relevant that renewal may deprive the defendant of a defence.[70] On the other hand, the fact that, because the limitation period has expired, a plaintiff has lost the opportunity to pursue a worthwhile claim cannot without more constitute "good reason" for renewal.[71]

[89] The limitation period for a claim in contract probably expired on 7 May 2001 or 24 September 2001 - that is, before the first renewal.[72] The expiration of the limitation period for a claim in negligence depends on when loss was sustained; it is at least arguable that it has still not expired. In their statement of claim the plaintiffs alleged that they had suffered loss in "entering into" the transaction, although at the hearing their counsel foreshadowed arguments that loss was not suffered until the tax assessments were issued in 2007.

[90] That the limitation periods in both contract and tort might have expired before the claim was renewed is a factor against the renewals. On the other hand, that the limitation period in tort may still be running supports the renewals.

[91] Have weighed all of these factors, I have concluded that the renewals should be upheld.

[92] I summarise my conclusions so far as follows -

(i) Assuming the cause of action in contract accrued in 2001, the claim in contract was correctly brought against "Arthur Andersen".

(ii) Unless the cause of action in tort accrued before the dissolution of the partnership, the claim in tort was wrongly brought against "Arthur Andersen": all of the partners sought to be made liable should have been named as defendants.

(iii) Because the partnership was dissolved before the proceeding was commenced, the claim had to be served on each partner sought to be made liable.

(iv) Messrs Robertson and Madden were served before the claim became stale.

(v) The claim was properly renewed on 5 September 2008 and 1 December 2008.

(vi) All of the other partners as at 14 September 2001 except the late Mr Eccleston were served before the expiration of the second renewal (some by substituted service).

[93] The former partners sought the stay or dismissal of the claims against them. As I understood their counsel's submissions, that part of their application was premised on the renewals being set aside and only Messrs Robertson and Madden having been served. I have found against them on both of those matters.

[94] In the circumstances, I do not propose to rule on the stay application, or the application to dismiss the claim, in the absence of further submissions.

[95] The plaintiffs sought an order that each of the 143 persons listed in the schedule to their application be included as defendants in the proceeding. They are the persons the plaintiffs contend were partners in the firm between 7 May 2001 and dissolution. All but twelve of them were represented on the hearing of the application for their inclusion as defendants.

(1) The court may at any stage of a proceeding order that--

(b) any of the following persons be included as a party--

(ii) a person whose presence before the court would be desirable, just and convenient to enable the court to adjudicate effectually and completely on all matters in dispute connected with the proceeding.

(2) However, the court must not include or substitute a party after the end of a limitation period unless 1 of the following applies--

(a) the new party is a necessary party to the proceeding because--

(iii) the proceeding was started in or against the name of the wrong person as a party, and, if a person is to be included or substituted as defendant or respondent, the person is given notice of the court's intention to make the order; or

(iv) the court considers it doubtful the proceeding was started in or against the name of the right person as a party, and, if a person is to be included or substituted as defendant or respondent, the person is given notice of the court's intention to make the order;..."

(1) Unless the court orders otherwise, an application by a person seeking to be included as a party must be supported by an affidavit showing the person's interest in -

(b) a matter in dispute to be decided between the person and a party to the proceeding.

(2) Unless the court orders otherwise, an application to include a person as a defendant or respondent must be served on all existing parties and on the person."

"74 Amendment of proceedings after change of party

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

(5) However, for a limitation period, a proceeding by or against a new party is taken to have started when the original proceeding started, unless the court orders otherwise."

[97] If, contrary to my view, a claim on a cause of action which accrued before dissolution of the partnership may not be brought against the former partners in the firm name after dissolution, then all of the claims have been wrongly started against "Arthur Andersen".

[98] Assuming I am correct in holding that claims to enforce causes of action which accrued before dissolution may be started against the former partners in the firm name, it is nevertheless unclear when the cause of action in tort accrued. If it did not accrue until after dissolution, then the claim in tort has been wrongly started against "Arthur Andersen".

[99] The claims in contract and tort should be heard and determined at the same time. Even if the limitation period for one or more of the claims has expired, it is desirable, just and convenient that the former partners be included as defendants so that they may be heard and determined at the same time.

[100] Accordingly there should be an order that those 131 of the persons listed in the schedule to the plaintiff's application who were represented at the hearing be included as defendants in the proceeding. The making of such an order would be consistent with the approach to a similar problem adopted by McPherson JA in MAM Mortgages Ltd (in liq) v Cameron Bros (a firm).[73]

[101] Counsel for the plaintiffs sought an order for substituted service of the claim and statement of claim on the 143 former partners, by posting copies of those documents, together with a copy of any order for substituted service, to Mr Salgo and to Messrs Robertson and Madden.[74] Such an order should be made with respect to the 131 persons who were represented at the hearing.

[102] I will hear counsel on the form of the orders and on costs.

[1] Income Tax Assessment Act 1936 (Cth) s 251M, repealed by Tax Agents Services (Transitional Provision and Consequential Amendments) Act 2009 (Cth).

[2] This summary is taken from the affidavit of Michael Ryan, filed on 9 June 2009, and the Objection Forms exhibited to that affidavit (court documents numbers 33 and 32).

[3] With effect from 1 July 2002, BBIL was nominated as the "head company" of a consolidated group including the third plaintiff within the meaning of that term in s 995-1(1) and ss 703 - 715 of the Income Tax Assessment Act 1997 (Cth), and so was jointly and severally liable with the third plaintiff for the latter's tax liabilities.

[4] Partnership Agreement article 32, referred to in Applicant's Outline of Written Submissions filed 23 November 2009 (court document number 73), para. 1. A copy of the Partnership Agreement is Confidential Exhibit AMS - 2 to the affidavit of Andrew Michael Salgo filed 12 May 2009 (court document number 26).

[5] Affidavit of Michael Ryan filed 9 June 2009 (court document number 32), para 53.

[6] Affidavit of Phillip Wayne Smith filed 29 April 2009 (court document number 17).

[7] Written Reply of the "Arthur Andersen Applicants" filed by leave on 7 December 2009 (court document number 78), para. 38.

[8] Application filed 7 August 2009 (court document number 42) Schedule A; Plaintiffs' Submission in Response 7 December 2009 (court document number 77), para. 55.

[9] [1997] EWCA Civ 2684; [1997] All ER (D) 62.

[10] Rules of the Supreme Court 1877 (UK), Order IX r 6.

[11] [1891] 1 QB 304 at 314. See also Noble Lowndes and Partners (a firm) v Hadfields Ltd [1939] 1 Ch 569; Chambers v Henriques Bros (1887) 9 ALT 53.

[12] Partnership Act 1891(Qld) s 41 concerns limited partnerships.

[13] [2004] WASCA 288.

[14] [2004] WASCA 288 at [49].

[15] [1893] 2 QB 534 at 536.

[16] Partnership Act 1895 (WA) s 28; see Partnership Act 1891 (Qld) s 26; Partnership Act 1958 (Vic) s 27.

[17] Partnership Act 1895 (WA) s 16; see Partnership Act 1891 (Qld) s 12; Partnership Act 1958 (Vic) s 13.

[18] Rules of the Supreme Court 1971 (WA) Order 18 r 4(3); UCPR (Qld) r 64(2).

[19] [1983] 1 QdR 649.

[20] See also In re Wenham; Ex parte Battams [1900] 2 QB 698; Anderson rice (a firm) v Robert Bride (1995) 61 FCR 529 at 532, 538-540; Equiticorp Finance Group Ltd (in statutory management) v Russell McVeagh McKenzie Bartleet & Co (1995) 8 PRNZ 583 at 585; Ex parte Young, In re Young (1881) 19 Ch D 124 at 136 per Brett LJ; 131 per Lord Selborne LC; contra 134 per Cotton LJ.

[21] Statement of claim filed with claim on 7 September 2007 (court document number 1) paras 11-14.

[22] Outline of Submissions on behalf of the Respondents filed 23 November 2009 (court document number 74) para. 63.

[24] Income Tax Assessment Act 1936 (Cth) s251M, repealed by Tax Agents Services (Transitional Provision and Consequential Amendments) Act 2009 (Cth).

[25] [2002] QCA 330.

[26] [1983] 1 Qd R 649, 655-656.

[27] [2002] QCA 330 at [30].

[28] (1997) 24 ACSR 231 at 253 - 254

[30] Partnership Act 1891 (Qld) ss 12, 13, 15 and 20; Partnership Act 1958 (Vic) ss 13, 14, 16 and 21.

[31] (1967) 85 WN (Pt 1) (NSW) 662 at 673-4.

[32] Partnership Act 1891 (Qld) ss 13 and 20; Partnership Act 1958 (Vic) ss 14 and 21.

[36] UCPR r 105(2); Pioneer Concrete (North Coast) Pty Ltd v Bennett [1973] QdR 544.

[37] See Rules of the Supreme Court 1875 (UK) ("RSC"), Order XLVIII.a.

[38] See Rules of Court 1875 ("the Judicature Rules") (UK) Order IX r 6.

[39] (1881) 19 Ch D 124 at 135.

[40] (1882-83) 10 QBD 436 at 446.

[41] Partnership Act 1891 (Qld) s 41.

[42] [2000] 2 QdR 172.

[43] See the definition of "partnership" in Partnership Act 1891 (Qld) s 5; Partnership Act 1958 (Vic) s 5.

[44] Article 32 of the Partnership Agreement pertained to voluntary dissolution. Under article 32.2 the Administration Partners (Messrs Robertson and Madden) had the duty and power to wind up the firm's business. Their express powers extended to the management of litigation involving the firm or any of its partners.

[45] Woods v Sheriff of Queensland (1895) 6 QLJ 163 at 164; Re QRP Construction Pty Ltd [1973] QdR 157 at 162 - 163; Re Criminal Proceeds Confiscation Act 2002 (Qld) [2003] QCA 249; [2004] 1 QdR 40 at 45 - 46; [2003] QCA 249; Taylor v Taylor (1979) 143 CLR 1; [1979] HCA 38.

[46] Major v Australian Sports Commission [2001] QSC 320 at [55]; MQF v Corry [2000] QSC 416 at [9]; Arthur Andersen Corporate Finance Pty Ltd v Buzzle Operations Pty Ltd (in liq) [2009] NSWCA 104 at [14]; Farrell v Delaney (1952) 52 SR (NSW) 236 at 238.

[47] Affidavit of Mark Damien Darwin filed 5 September 2008 (court document number 3) para. 4.

[48] Afridavit of Mark Damien Darwin filed 9 June 2009 (court document number 34) para. 14.

[49] Affidavit of Mark Damien Darwin filed 5 September 2008 (court document number 3) para. 9.

[50] Affidavit of Mark Damien Darwin filed 26 November 2008 (court document number 5) para. 15.

[51] Affidavit of Mark Damien Darwin filed 5 September 2008 (court document number 3) paras 6 and 7.

[52] See generally, Arthur Andersen Corporate Finance Pty Ltd v Buzzle Operations Pty Ltd (in liq) [2009] NSWCA 104 at [28] and following per Ipp JA.

[53] [2006] QCA 407; [2007] 1 QdR 148 at [26] - [27]; [2006] QCA 407. See also Benz v Clough [2008] QCA 125 at [11].

[54] [1999] QCA 513.

[55] [1981] HCA 11; (1981) 180 CLR 337.

[57] (1993) 10 WAR 391 at 400.

[58] [1984] HCA 69; (1984) 59 ALJR 186 at 189.

[59] (1985) 60 ALJR 277.

[61] The IMB Group Pty Ltd (in liq) v Australian Competition and Consumer Commission [2006] QCA 407; [2007] 1 QdR 148 at [56]; [2006] QCA 407.

[62] The IMB Group Pty Ltd (in liq) v Australian Competition and Consumer Commission [2006] QCA 407; [2007] 1 QdR 148 at [57]; [2006] QCA 407.

[63] The IMB Group Pty Ltd (in liq) v Australian Competition and Consumer Commission [2006] QCA 407; [2007] 1 QdR 148 at [38]; [2006] QCA 407.

[64] Applicant's Outline of Written Submissions filed 23 November 2009 (court document number 72) paras 116, 119-120, 121, 126 and 129.

[65] Applicant's Outline of Written Submissions filed 23 November 2009 (court document number 72) paras 131 and 135.

[66] [2006] QCA 407; [2007] 1 QdR 148 at [48]; [2006] QCA 407.

[67] [1996] HCA 25; (1996) 186 CLR 541 at 551; [1996] HCA 25.

[68] [2006] QCA 407; [2007] 1 QdR 148 at [51]; [2006] QCA 407.

[69] Contrast the work of auditors discussed in Bishopsgate Insurance Australia Limited v Deloitte Haskins & Sells [1999] 3 VR 863 at [56].

[70] Licul v Corney [1976] HCA 6; (1976) 50 ALJR 439 at 445; [1976] HCA 6; Jones v Jebras [1968] QdR 13; Van Leer Australia Pty Ltd v Palace Shipping KK [1981] HCA 11; (1981) 180 CLR 337 at 344 - 345; Victa Ltd v Johnson (1975) 10 SASR 496 at 503 - 504. Cf. Hoddinott v Persimmon Homes (Wessex) Ltd [2007] EWCA Civ 1203; [2008] 1 WLR 806.

[71] The IMB Group Pty Ltd (in liq) v Australian Competition and Consumer Commission [2006] QCA 407; [2007] 1 QdR 148 at [47] and [48]; [2006] QCA 407; Muirhead v The Uniting Church in Australia Property Trust (Q) [1999] QCA 513 at [13] per Williams J.

[73] [2002] QCA 330.