Berger Investments Group Pty Ltd v Coccoon Pty Ltd

Supreme Court of NSW|2011-02-21|Before: Kirby J, Group P, Mr J

The application before Harrison AsJ 23The plaintiffs' application for an extension of time for service of the statement of claim was heard by Harrison AsJ on 31 August 2010. It proceeded ex parte in the sense that Mr Andrew Heseltine was not present, nor represented. The first, second and third defendants were represented by counsel and opposed the application (para 3). 24Her Honour gave judgment on 6 September 2010 ( Berger Investments Group Limited v Coccoon Pty Limited [2010] NSWSC 1015). Having described the background, she said this on the question of delay (para 6): "[6] The protracted history of the case management is set out in the chronology and need not be repeated here. The plaintiffs also submitted that Coccoon, Richard Heseltine and Susan Heseltine have largely acquiesced in the delays and have (as yet) not taken any further steps to advance their defence. On 29 March 2010 the plaintiffs filed an amended statement of claim pursuant to leave granted by the court. Even though more than five months have now elapsed, the first to third defendants have not filed defences. Recently, two notices to produce addressed to Richard Heseltine were served upon his solicitor. The first was served on 12 August 2010 and the second on 28 August 2010. These notices to produce seek copies and originals of all communications and documents between any one or more of the defendants and Andrew Heseltine or his wife directly or indirectly in the period 20 December 2005 and 31 July 2010 be produced to the court. No documents have been produced in answer to these notices to produce and no real explanation was provided as to why this was so." 25Harrison AsJ described the attempts made to serve Andrew Heseltine in March and December 2006 and again in April 2010 (supra paras 13-15). Her Honour referred to documents subpoenaed by Mr Roth from the Department of Immigration and Citizenship in respect of departures from and arrivals in Australia by Andrew Heseltine in the period 1 July 2005 to 31 July 2010. Mr Roth's affidavit of 30 August 2010 included the following paragraph which summarised the position (Ex 2): "5. The documents produced by the Department of Immigration & Citizenship also showed that Andrew Heseltine was in Australia in the following periods:- (a) 7 March 2006 to 25 April 2006; (b) 22 December 2006 to 29 January 2007; and (c) 1 April 2010 to 3 May 2010." 26In short, the documents demonstrated that Andrew Heseltine was in Australia on 16 March 2006, when the first attempt at service was made, and again on 23 December 2006, when the process servers attempted service for a second time. He had also been present on 8 April 2010 when the process servers had attempted to serve a man in a white convertible vehicle who drove off. Her Honour, based upon that evidence, stated her view in these terms (para 25): "25. I have formed the view that Andrew Heseltine has been avoiding service of the initiating process because the immigration records show that he has not spent nearly all of this time over the last four years in Indonesia, despite the assertions of a female at his residence. While there has been considerable delay in attempting (to serve) Andrew Heseltine, he has certainly made considerable effort to evade service. Overall, I accept that the plaintiff has provided a good reason to extend time for service of the statement of claim."

The application to discharge the order for extension 27The present application is brought under UCPR r12.11(1) which is in these terms: " 12.11 Setting aside originating process etc (1) In any proceedings, the court may make any of the following orders on the application of a defendant: (a) an order setting aside the originating process, (b) an order setting aside the service of the originating process on the defendant, (c) an order declaring that the originating process has not been duly served on the defendant, (d) an order discharging: (i) any order giving leave to serve the originating process outside New South Wales, or (ii) any order confirming service of the originating process outside New South Wales, (e) an order discharging any order extending the validity for service of the originating process... " 28Such an application is not an appeal against the decision of Harrison AsJ. It is a hearing de novo ( Arthur Andersen Corporate Finance Pty Ltd v Buzzle Operations Pty Ltd (in liq) [2009] NSWCA 104 at para 14; Weston v Publishing and Broadcasting Limited [2010] NSWSC 1288 per Barrett J at 22-28), although the decision of Harrison AsJ is relevant and available on the application. The plaintiffs, as the moving party seeking an extension, bear the onus. They must establish that the extension is warranted. Good cause must be shown. In The I.M.B. Group P/L (in liq) v ACCC [2006] QCA 407, Keane JA, in the context of a similar statutory rule, expressed the issue in these words (at 31): "[31] In setting aside the renewal of 4 February 2004, the learned primary judge applied r 24(2) in accordance with the approach sanctioned by this Court in Muirhead v The Uniting Church in Australia Property Trust (Q) . In that case, Williams J (as his Honour then was), with whom Davies JA agreed, said that the plaintiffs must establish "some good reason why the case should be excepted from the general rule that the court will not exercise its jurisdiction in favour of renewal"."

The test to be applied 29The rule conferring power to extend time (UCPR r1.12) is expressed in the following broad terms: " 1.12 Extension and abridgment of time (1) Subject to these rules, the court may, by order, extend or abridge any time fixed by these rules or by any judgment or order of the court. (2) The court may extend time under this rule, either before or after the time expires, and may do so after the time expires even if an application for extension is made after the time expires." 30The discretion, although broad, is not at large. It must be exercised in the context of the statute conferring power and the principles developed in judicial decisions ( Arthur Andersen (supra) para 28). In NSW there are the following provisions in the Civil Procedure Act 2005 (and similar provisions in Queensland and Western Australia): " 56 Overriding purpose (1) The overriding purpose of this Act and of rules of court, in their application to civil proceedings, is to facilitate the just, quick and cheap resolution of the real issues in the proceedings. (2) The court must seek to give effect to the overriding purpose when it exercises any power given to it by this Act or by rules of court and when it interprets any provision of this Act or of any such rule. (3) A party to civil proceedings is under a duty to assist the court to further the overriding purpose and, to that effect, to participate in the processes of the court and to comply with directions and orders of the court... 57 Objects of case management (1) For the purpose of furthering the overriding purpose referred to in section 56 (1), proceedings in any court are to be managed having regard to the following objects: (a) the just determination of the proceedings, (b) ... (c) ... (d) the timely disposal of the proceedings, and all other proceedings in the court, at a cost affordable by the respective parties. (2) This Act and any rules of court are to be so construed and applied, and the practice and procedure of the courts are to be so regulated, as best to ensure the attainment of the objects referred to in subsection (1). 58 Court to follow dictates of justice (1) In deciding: (a) whether to make any order or direction for the management of proceedings, including: ... (iii) any other order of a procedural nature, and ... (b) the terms in which any such order or direction is to be made, the court must seek to act in accordance with the dictates of justice. (2) For the purpose of determining what are the dictates of justice in a particular case, the court: (a) must have regard to the provisions of sections 56 and 57, and (b) may have regard to the following matters to the extent to which it considers them relevant: ... (v) the use that any party has made, or could have made, of any opportunity that has been available to the party in the course of the proceedings, whether under rules of court, the practice of the court or any direction of a procedural nature given in the proceedings... 59 Elimination of delay In any proceedings, the practice and procedure of the court should be implemented with the object of eliminating any lapse of time between the commencement of the proceedings and their final determination beyond that reasonably required for the interlocutory activities necessary for the fair and just determination of the issues in dispute between the parties and the preparation of the case for trial." 31Commenting upon these provisions Ipp JA in Arthur Andersen said this (the other members of the court agreeing) (at 36): "[36] Sections 56, 57, 58 and 59 require a judge, exercising a discretion under UCPR r 1.12, to have regard to whether a party, seeking the exercise of the discretion in its favour, has: (a) diligently pursued the object of disposing of the proceedings in a timely way; (b) used, or could reasonably have used, available opportunities under the rules or otherwise, to avoid delay; and (c) reasonably implemented the practice and procedure of the court with the object of eliminating any lapse of time between the commencement of the proceedings and their final determination." 32Further, in exercising the discretion, the judge should have in mind the principles developed in judicial decisions. In Arthur Andersen , reference was made to the remarks of Bray CJ in Victa Limited v Johnson (1975) 10 SASR 496, where the following was said (at 504): " The rule first directs the Court to inquire whether reasonable efforts have been made to serve the defendant. If they have, it seems to me that the Court should renew the writ. If not, the Court has to consider whether other good reasons exist for the renewal. I will not attempt an exhaustive category of such reasons. That would probably be impossible and would certainly be undesirable. Prominent, however, amongst the matters for the consideration of the Court, apart from whatever attempts have been made at service, will be the length of the delay, the reasons for the delay, the conduct of the parties and the hardship or prejudice caused to the plaintiff by refusing the renewal or to the defendant by granting it." 33These remarks were approved by Stephen J in Van Leer Australia Pty Ltd v Palace Shipping KK [1981] HCA 11; (1981) 180 CLR 337. In Muirhead v The Uniting Church in Australia Property Trust (Q) [ 1999] QCA 513 Pincus JA (Davies JA agreeing) helpfully summarised the principles emerging from the judgment of Stephen J in Van Leer Australia in the following propositions (at para 4): "(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 " ." 34In Arthur Andersen (supra) Ipp JA identified particular matters that are relevant to the exercise of the discretion to extend time under UCPR r1.12. His Honour said this (at 43): "[ 43] Accordingly, the court should consider, when exercising a discretion such as that under UCPR r 1.12, the attempts that have been made at service, the length of the delay, the reasons for the delay, whether the delay was deliberate, whether notice was given to the defendant, the conduct of the parties generally, and the hardship or prejudice caused to the plaintiff by refusing the renewal or to the defendant by granting it."

The evidence on the discharge application 35Let me first describe the evidence relied upon by each party on the application to discharge the order to extend time. The plaintiffs tendered the two affidavits of Mr Roth that had been before Harrison AsJ (Ex 1 and Ex 2). They also tendered documents from the court file demonstrating that an application had been made to Assistant Registrar Howe in December 2006 to extend the time for service of the statement of claim by a further 60 days (Ex 3). 36The defendants relied upon four documents. The first was a chronology that had been prepared by the solicitor for the first, second and third defendants in the application before Harrison AsJ (Ex A). It set out the procedural steps that had been taken and the directions hearings held. The second was a copy of the written submissions of counsel who appeared for the plaintiffs before Harrison AsJ (Ex B). They included a statement concerning the test to be applied, in terms similar to the wording criticised by Ipp JA in Arthur Andersen (supra). However, Harrison AsJ set out the authorities in her judgment at some length. It was not suggested that she had mistaken the test. The submissions of counsel before her appear to me irrelevant. 37The third document tendered on behalf of the fifth defendant was a statement by the second plaintiff, Gabriel Berger, of 4 June 2008 (Ex C). The statement was relevant to the causes of action and when they arose. That in turn was relevant to whether the action was statute barred at the time of the application for extension. I will return to that issue below. The fourth document (Ex D) was an affidavit of Tean Kerr providing the background to the application.

The submissions of the parties 38Counsel for the fifth defendant prepared helpful written submissions. It is convenient to begin with those submissions. He identified three matters that, he suggested, "weigh heavily" against the exercise of the discretion to extend time. They were: First, the extent of the delay; Secondly, the statute of limitations, and whether the claims, or any of them, were statute barred; Thirdly, the absence of prejudice to the plaintiff. 39I will deal with each matter in turn. 40First, it was submitted that the obligations under ss 56-59 of the Civil Procedure Act required dispatch. Here, there was "inordinate delay", initially put at "almost 4 years". During argument, taking account of the extension given by Assistant Registrar Howe in December 2006, the estimate was moderated to more than three years. Whatever the precise figure, there was significant delay and it was "inexcusable". Counsel for the fifth defendant said this (para 10): "10. ...The Court can only conclude that, knowing that service had not been effected on the Fifth Defendant, the Plaintiffs made a deliberate choice to proceed in the prosecution of the proceedings in his absence." 41Counsel added (para 14): "14. A deliberate decision to delay service is a powerful factor against the grant of an order extending time for service: Buzzle at [92]-[94]. As Keane JA observed in IMB Group at [53], the purpose of rules permitting extensions of time for service is to preserve proceedings which might otherwise become stale through no fault of the plaintiff and that a party who deliberately chooses to refrain from serving a claim will rarely be able to show good cause to warrant the renewal of the claim..." (emphasis in original) 42In this matter, according to the defendant, the plaintiff advanced two "excuses" for the delay. The first was that the fifth defendant had evaded service on 16 March and 23 December 2006. Accepting that he had, as Harrison AsJ found, that would explain the delay until the end of 2006 or perhaps a little beyond. It did not explain the delay until 31 May 2010, when the notice of motion to extend time was filed. Nor did it explain why an order for substituted service was not obtained (cf s 58 (2)(v) of the Civil Procedure Act ). 43The second "excuse" was inadvertence on the part of the plaintiffs' solicitor, Mr Roth. The written submissions of the fifth defendant suggested that such an explanation was "a most unlikely one". However, even if it were accepted, it was no explanation. Counsel said this (para 11(a)): "[I]nadvertence could only be relevant if the failure to serve was inadvertent (eg the wrong address was supplied to a process server, which mistake was later discovered). Here, however, Mr Roth knew the SOC had not been served in time but did nothing about it; nor did he seek an extension of time for service until 4 years later. The failure to serve within time was not inadvertent, it was deliberate..." (emphasis in original) 44In any event, there was, the defendant submitted, "inordinate and inexcusable delay of some 9 months", between the time counsel drew the matter to Mr Roth's attention (in September 2009) and the application for an extension (in May 2010). 45Secondly, dealing with the fifth defendant's arguments on the Limitation Act 1969, the cause of action against the fifth defendant was (at least in part) statute barred at the time of the application. The plaintiffs pleaded breaches of contract. The breaches, according to the fifth defendant, "occurred in significant measure prior to 31 May 2004", so that it was already out of time when the notice of motion to extend time was filed on 31 May 2010. Reference was made to the statement of Gabriel Berger (the second plaintiff) (Ex C). The problems concerning the Limitation Act were not "disclosed" to Harrison AsJ or averted to by her Honour in her judgment. Counsel for the fifth defendant said this (para 20): "20. ...the expiry of the limitation period is an extremely relevant consideration. It is a "fundamental principle" that a defendant has a right to be served (if at all) within the statutory period of limitation plus the period for the validity of a writ: Dagnell v JL Freeman & Co [1993] 1 WLR 388 at 393C, 396D per Lord Browne-Wilkinson, referred to with approval by Young CJ in Eq in Rich v Long [2008] NSWSC 487 at [12]." 46The final matter, put on behalf of the fifth defendant, was that the plaintiffs had not demonstrated prejudice, if time were not extended. The action against Andrew Heseltine was not a direct or primary claim. It was derivative. It was a claim against a joint guarantor. The plaintiffs simply sought "another pocket" from which they may recover, were they to establish breach. However, they would only need another pocket if any judgment they obtained could not be satisfied by execution against the other defendants. No evidence has been led to suggest that this may happen. 47The plaintiffs responded to these arguments by drawing attention to the repeated references to "justice" in ss 56-59 of the Civil Procedure Act . It is not just about time, although time is certainly important. It is also about justice, in determining the real issues on liability. Those issues plainly involved the fifth defendant, as well as the other defendants. The Court is enjoined by s 58 to follow the dictates of justice, including the degree of injustice that would be suffered were the orders for extension refused (s 58(2)(vi)). 48Here, according to the plaintiffs, there would be real injustice to the plaintiffs if Mr Andrew Heseltine were not a party to the action. He deliberately and repeatedly evaded service and now seeks to take advantage of an oversight of the plaintiffs' solicitor following his evasion of service. He seeks to do so even though he does not suggest any particular prejudice to himself.

Resolution 49I should begin with the issue of justice and the involvement of the fifth defendant in the circumstances giving rise to this claim. The action involves the purchase by the plaintiffs of a furniture and homewares business at Chatswood. The business was owned by Coccoon Pty Limited (first defendant), a company with two directors, Richard and Susan Heseltine (second and third defendants). One assumes that Susan Heseltine is Richard's wife. Representations as to profitability are said to have been made by or on behalf of the first three defendants. On the plaintiffs' case, profitability was dependent upon the supply of furniture by P.T. Samur (Emas) Furindo (the fourth defendant), the Indonesian supply company. It was a term of the agreement that the plaintiffs would have the exclusive rights to market furniture from the Indonesian supplier in the greater Sydney metropolitan area. 50The sale documents were executed 1 October 2003. After the plaintiffs assumed control of the operation, stock was supplied that was not of merchantable quality. Worse, orders were placed and were not filled in time. Because, under the terms of their agreements with the defendants, the plaintiffs' right to reduced prices was dependent, after two years, upon the volume of orders placed, the plaintiffs were disadvantaged. After 4 January 2005, supply was said to have ceased (Amend St of C para 24). 51What, then, was the fifth defendant's involvement? Although the information is incomplete, it appears that the business was a "family business", in which different members of the family played different roles. The fifth defendant was said to have been involved in a number of aspects: First , he and his brother Richard were the directors of the fourth defendant, P.T. Samur (Emas) Furindo, the Indonesian supply company. Secondly , on 1 October 2003 a supply agreement was executed by Berger Investments Group Pty Ltd (first plaintiff) and P.T. Samur (Emas) Furindo (fourth defendant). Within the agreement there was a written guarantee which each brother signed "as though they had personally undertaken to perform those undertakings" ( Amend St of C para 25). Thirdly , on 1 October 2003 a "deed of restraint" was entered where the signatories included Richard and Susan Heseltine (second and third defendants) and Andrew Heseltine (fifth defendant). One gathers that the Heseltines agreed to restrain their operations (at least within the greater Sydney metropolitan area), so as not to encroach upon the benefits which the plaintiff had been given under the agreement (St of C para 8). Fourthly , the amended statement of claim alleges that Richard Heseltine, speaking for himself and purporting to speak on behalf of his brother, Andrew, reassured the purchasers that the representations made as to supply, merchantability and exclusivity would be kept. The amended statement of claim included as a misrepresentation (para 8(x)), that Richard and Andrew Heseltine would ensure that they (the representations) were honoured because they were directors of the Indonesian company. 52In the narrative provided by Mr Gabriel Berger (Ex C) there are references to the fifth defendant and his involvement. For instance on the issue of supply, the following conversation is alleged to have taken place (para 62): "62. After the several conversations that I had with AH concerning non-supply of product, which were to the effect of that set out in paragraphs 60 and 61, in yet another such conversation, the following interchange took place between myself and AH: GB: "I am not getting proper service from you." AH: "Why should I (supply) Indonesian furniture at cost?" GB: "Because that is the Agreement." AH: "But I never got a cent from the money you paid Richard." GB: "That's between you and Richard to sort out."" 53On the subject of the plaintiffs' alleged exclusive right to market the Indonesian furniture in the greater Sydney metropolitan area, Mr Berger said this (Ex C para 106): "From August 2004 onwards, I had conversations with RH and AH with words to the effect: AH: "We are having a lot of success selling table and chair settings from our Indonesian factory to restaurants." RH: "We have just landed a large order for 400 tables and chairs to a restaurant in Parramatta." GB: "But we have exclusivity for Coccoon furniture from your Indonesian factory for the Greater Sydney Area." RH: "I will do what I want."" 54I accept that, on the plaintiffs' case, the fifth defendant was intimately involved in the arrangements. I also accept that there is the danger of distortion and injustice should he be excluded. Of course, if he were excluded as a party, he may still be called as a witness. If he were called by his brother, there is the obvious risk of partiality, he having no personal stake. That, it must be said, is not uncommon in litigation. Nonetheless, the truth as to the precise arrangement between the parties, including the brothers, and the difficulties encountered, is more likely to emerge if Mr Andrew Heseltine remains a party and has a stake in the outcome. 55Counsel for Mr Andrew Heseltine submitted that there was no prejudice to the plaintiffs because their action against his client arose out of a guarantee. It was a derivative claim, where they would only suffer loss were they unable to satisfy judgments they may obtain from the first, second or third defendants. However, I am not persuaded. Even if one were simply to focus upon the guarantee, there is, I believe, prejudice to the plaintiffs. Two guarantors are better than one. Things may change between now and the time an attempt is made to execute any future judgment. There is prejudice in not being able to select that defendant best able to satisfy the judgment when the time comes to execute. Here, both are said (and it is not contested) to have signed the written guarantee as to the performance of the Indonesian company. Both were directors of that company. Counsel for the fifth defendant acknowledged that the performance of the Indonesian company and the continuity of supply were likely to be major issues at the trial (T9). 56But more than that, in a practical sense, in this case, as in most cases, there are likely to be settlement negotiations. The contribution of two guarantors to any fund that may resolve this dispute is likely to be greater than one, increasing the prospects of resolution. So there is, I believe, the potential for injustice. There is also prejudice. 57Let me turn to the arguments advanced by the fifth defendant concerning the extent of the delay and the Limitation Act . On any view, the delay was significant. It exceeded three years. Two causes of that delay have been identified, namely the actions of the fifth defendant in evading service and the inaction of the plaintiffs' solicitor in failing to seek, before 31 May 2010, an order for substituted service and an extension of time. 58Counsel for the fifth defendant described the actions of his client in evading service as a "red herring" since, relevantly, it occurred in March and December 2006 and therefore only accounted for a small part of the delay. 59However, in my view, the actions of the fifth defendant cannot be so lightly dismissed. The statement of Mr Roth, filed before Harrison AsJ in the ex parte application, annexed the reports of the process servers. On 16 March 2006 and again on 23 December 2006 the process server was plainly provided with misinformation by the "female occupant" of the fifth defendant's Queensland house. On each occasion, at a time that Mr Andrew Heseltine was living in Australia, the agent was told that he was in Indonesia and effectively uncontactable. 60The plaintiff, having obtained leave to amend the statement of claim on 29 March 2010, attempted to serve that document. Again they did so at a time when Mr Andrew Heseltine was in Australia. The report from the agent described a man "(approximately) 40 years, black hair, round face and facial hair", who resisted the receipt of the document, such that the agent was nearly run over. Harrison AsJ drew the inference that Mr Andrew Heseltine had "certainly made considerable effort to evade service". 61The fifth defendant now seeks to discharge the order extending time for service of the statement of claim on him. No affidavit has been filed by him dealing with these allegations. He was born in July 1966. He was a little over 40 years old at the time of the incident in April 2010. The inference drawn by Harrison AsJ therefore can be confidently accepted. He evaded service on each occasion in the circumstances described. On each occasion, he created the need for an order for substituted service. 62Now, obtaining such an order is not a complicated procedure. Mr Roth is an experienced solicitor (T13). He had, in the context of other matters, obtained such orders (T14). On his account, somehow the matter slipped between the cracks and was overlooked, until he was reminded by counsel in September 2009. 63There was some challenge to Mr Roth's evidence (T24). However, I accept his account, that notwithstanding instructions from his clients to pursue the fifth defendant, the matter was overlooked. The last unsuccessful attempt to serve the fifth defendant was on 23 December 2006, a few days after the law vacation commenced. I accept that the delay, at least before September 2009, was not deliberate either on the part of Mr Roth or his clients. 64What significance should attach to inadvertent delay arising from the failure of a solicitor to take necessary steps to consummate the instructions given by his client? In Arthur Andersen (supra) Ipp JA helpfully identified matters relevant to the exercise of the discretion to extend time. The list included "whether the delay was deliberate" (para 43; supra 34). His Honour's choice of words was itself deliberate. It reflected the authorities that he examined and set out in his judgment. It is perhaps useful, in this context, to turn to those authorities. 65Arthur Andersen (2009) (supra) and the Queensland case relied upon in the course of that judgment, The I.M.B. Group P/L (in liq) (2006) (supra), were both cases of deliberate delay. In The I.M.B. Group case the plaintiff was associated with a rugby league team that the company hoped to market through a related company. The Trade Practices Commission was concerned about its plan and commenced proceedings in the Federal Court. The ACCC partially succeeded at first instance but the decision was overturned on appeal in February 2003, when the plaintiff was vindicated. 66Whilst the trial process was underway, the plaintiff, in September 1999, filed a statement of claim against the ACCC, alleging misconduct in the exercise of its functions. However, the statement of claim was not served. Rather, the plaintiff sought from the Registrar ex parte, and was given, extensions of time at roughly six monthly intervals. In August 2004, the Registrar refused a further renewal. Ultimately, by a complicated path, the issue came before a judge of the Supreme Court who set aside the Registrar's last renewal of the statement of claim. Keane JA (on appeal) summarised the judge's reasons for doing so in these words (para 37): "[37] ... In truth, his Honour was simply not persuaded that the plaintiffs had shown that there was "good reason" to except the plaintiffs from the general rule having regard to the period of delay in serving the claim, the possibility of prejudice to the ACCC's prospects of a fair trial, and the deliberate nature of the plaintiffs' failure to comply with the obligations imposed on them by r 5(3) . His Honour's approach to the issue was orthodox. In reaching his conclusion on a balance of the relevant considerations, the learned primary judge did not fall into error as the plaintiffs asserted in argument in this Court..." (emphasis added) 67In Arthur Andersen (supra) the liquidator of Buzzle Operations Pty Ltd (in liq) commenced proceedings against Arthur Andersen, a firm of accountants, claiming damages in both tort and contract. The statement of claim was filed in May 2006. The limitation period in tort had expired "some time in the second-half of 2006" and earlier in the case of contract (para 6). The statement of claim was not served at that time. Some years earlier, the liquidator had entered an agreement with a litigation funder who, subject to conditions, was prepared to finance such an action. The trial judge found that the delay by the liquidator in serving the statement of claim arose from his concern that any damages awarded to Buzzle Operations may not be recoverable. The trial judge regarded that concern as reasonable (para 22) and therefore dismissed the motions to discharge the orders extending time. 68Ipp JA, on appeal, reviewed the authorities, including The I.M.B. Group case in the Queensland Court of Appeal. In respect of that case his Honour said this (para 32): "[32] ... In that case the Queensland Court of Appeal was concerned with the renewal of a statement of claim where there had been considerable (and deliberate) delay in service...". 69His Honour continued (para 33): "[ 33] Keane JA, after pointing out that the plaintiffs had deliberately decided to refrain from serving their statement of claim, proceeded (at [54], 160]: "Whatever the position may have been ... in the absence of a provision such as r 5(3) of the UCPR , the presence of r 5(3) means that the approach pursued by the plaintiffs in the present case should not be vindicated by the court." And (at [57], 161) he said: "What the plaintiffs were plainly not entitled to do was unilaterally to arrogate to themselves the benefit of a stay of proceedings in the Supreme Court in defiance of r 5(3) of the UCPR ."" (emphasis added) 70Having then referred to the statutory context within NSW, Ipp JA quoted the following extract from the judgment of Stephen J in Van Leer Australia Pty Ltd (supra) (para 42): " [The delay] bears at least three aspects: first, it involved a very considerable period, secondly, it was quite deliberate, there being no question of mishap or oversight ; thirdly, no notice was given to the defendant in this case... ." (emphasis added) 71Immediately thereafter Ipp JA listed the considerations which he believed relevant to the exercise of the discretion to extend time, including "whether the delay was deliberate" (supra para 34). 72Ipp JA went on to consider whether there was error by the trial judge. The heading that he included in his judgment and his comments are instructive. He said this: " Error in not taking into account that Mr Wily deliberately decided to delay service [92] The judge did not take into account the fact that Mr Wily made a deliberate decision to delay proceedings. In Itek Graphix Pty Limited v Elliott (2002) 54 NSWLR 207, with the concurrence of Spigelman CJ and Sheller JA, I observed at ([91], 225): "A deliberate decision to allow a statutory limitation period to expire would be a powerful factor against the grant of leave. Where a deliberate decision to allow the period to expire has been made, ordinarily it would be difficult to provide an explanation for that decision sufficiently cogent to warrant the grant of leave." [93] In my opinion, for the reasons set out in Itek Graphix Pty Limited , a deliberate decision to allow a writ to become stale after a limitation period had expired would be a powerful factor against the grant of the order sought (see also Van Leer at 350). Any prejudice suffered, in such circumstances, were the writ not to be extended, would be self-inflicted." 73Later, in identifying the factors that persuaded him that the appeal should be allowed, his Honour described one factor in these words (para 103): " (d) the deliberate decision made by Buzzle to allow the delay to occur, first, in the knowledge that the limitation period would soon expire and, secondly, after the limitation period had expired;"

The delay after September 2009 74The fall back position of the fifth defendant concentrated on the period between September 2009, once Mr Roth had been alerted to the problem in respect of service, and the application made on 31 May 2010. Mr Roth did not say when, in September, he was alerted. Assuming in his favour that he was told at the end of September, the delay was at least 8 months. Mr Roth said that, at mentions before a Registrar, he informed the Court on a number of occasions that he intended to pursue the issue of service on the fifth defendant. The complication, from his viewpoint, was that counsel had advised that the statement of claim required amendment. Obtaining an amendment required leave. There was no evidence as to how long it took for counsel to draft the amended statement of claim. 75A notice of motion was filed on 17 March 2010 and heard by Harrison J on 23 March 2010. Leave was granted on 29 March 2010. The amended statement of claim was filed the same day. A further search was then made with ASIC on 6 April 2010. It disclosed the same residential address for Mr Andrew Heseltine in Queensland. 76The plaintiffs' solicitor again arranged for process servers to attempt service. They did so on 8 April 2010 in the circumstances already described (supra para 15). A description was provided of the person who evaded service by driving off. One infers that it was the fifth defendant. The notice of motion was then filed on 31 May 2010 seeking both an extension of time and an order for substituted service at the Queensland address. 77None of this was handled with quite the sense of urgency that one would have expected of someone who acknowledged that, through inadvertence, his clients' instructions had been overlooked. That is a matter to be weighed in the ultimate exercise of discretion.

The limitation argument 78I have been dealing with the first issue raised by the fifth defendant, concerning the length of the delay. Let me move to the second issue which concerned the Limitation Act . Attention was drawn to a number of matters in the statement of claim, in the context of the six-year limitation period. The agreements for the sale of the business and the supply of furniture were signed on 1 October 2003. The representations were allegedly made sometime before that. The amended statement of claim unfortunately does not identify (in paragraphs 20-23) when breaches of the agreements are alleged to have occurred. One must, according to counsel for the fifth defendant, turn to the statement of Mr Gabriel Berger (Ex C) for insight into the date of each alleged breach. Mr Berger (para 57) referred to "my very first furniture sale on 14 November 2003" in the context of undertakings said to have been given to supply specified goods "pre Christmas". However, according to the plaintiffs, no deliveries were made from the Indonesian factory until 30 April 2004 (Ex C para 59). The deliveries when made did not include certain items. Others were faulty (Ex C para 64). 79Counsel for the fifth defendant, against this background, submitted that "the ... breaches occurred in significant measure prior to 31 May 2004" and were therefore statute barred by the time of the application to extend. 80That submission may well be accurate in respect of a number of the alleged breaches relating to the failure to supply particular items or the quality of the goods supplied in the early containers. However, to put the matter in perspective, the first container from Indonesia was said to have been delivered in April 2004, by which time Berger Investments Group had paid $21,697 (Ex C para 68). However, the major complaint of the plaintiffs, in the amended statement of claim, appears to be that after 4 January 2005 supply from the Indonesian company ceased altogether. There is no limitation issue in respect of such a breach, if it can be established. For convenience I repeat paragraph 24 of the amended statement of claim: "24. In breach of an express term of the contract, goods were not supplied to the First Plaintiff at all after the receipt of the fifth container from Indonesia (IC5) on 4 January 2005." 81Ipp JA in Arthur Andersen (supra) stated that, in exercising the discretion conferred by UCPR r1.12, regard must be had to the policy behind the limitations statute. Reference was made to the judgment of Hodgson JA in Tolcher v Gordon [2005] NSWCA 135 where the following was said at [3]: "Although the three-year period is a limit for the commencement of such proceedings, not service of the proceedings, in my opinion an important aspect of the public policy behind the limitation period is that potential defendants should be made aware of claims against them within a reasonable time; so that in my opinion, delay in service of such proceedings, in contravention of the rules, is particularly serious if it occurs after the expiration of the three-year limitation period. A liquidator who does not commence proceedings until just before expiry of the limitation period should in my opinion be especially diligent in pursuing prompt service of the proceedings." (emphasis added) 82Here, there can be no doubt that soon after the fifth defendant successfully evaded service in March 2006 (if not, before), Mr Andrew Heseltine was aware of the substance of the plaintiffs claim through his family. 83Although general prejudice may be presumed from the lapse of time ( Brisbane South Regional Health Authority v Taylor (1996) 186 CLR 541 at 550, 555-6; The IMB Group (in liq) (Supra) para 51), there is no evidence of specific disadvantage to Mr Andrew Heseltine arising from delay. Again these are matters to be weighed in the exercise of discretion. 84Ultimately, balancing these matters I have reached the same conclusion as her Honour Harrison AsJ, that the extension of time should be given to the plaintiffs. In declining the application to discharge the order previously made to extend time, I am conscious that such an order will inevitably add to the delay. However, it can reasonably be assumed, I believe, that on many issues, and especially issues in respect of damages (including expert reports), the interests of the fifth defendant will be substantially the same as the other defendants, so that the time is not likely to be lost whilst the fifth defendant pursues such matters independently.

Orders 85I therefore make the following orders:

The notice of motion of the fifth defendant of 21 October 2010 is dismissed;
The costs of the application should be the plaintiffs' costs in the cause. DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 11 March 2011

Service of the statement of claim 11The statement of claim, having been filed on 16 February 2006, was served on Coccoon Pty Limited (first defendant) and its directors, Richard and Susan Heseltine (second and third defendants). Appearances were entered on behalf of the first three defendants on 17 March 2006. The fourth defendant (P.T. Samur (Emas) Furindo) was not registered as a foreign company in Australia (T17). For reasons that the solicitor for the plaintiffs, Mr Roth, could not recall, a copy of the statement of claim was "served" upon the fourth defendant by leaving a copy with the accountants for Coccoon Pty Limited (T17). However, no appearance has been entered on behalf of the fourth defendant. Mr Roth, in evidence before me, said this (T18): "Q.Your clients, I take it, were content to leave the matter at that and not undertake any further steps to bring the fourth defendant into the proceedings? A.That's correct. Sorry who? Q.The fourth defendant, the Indonesian company? A.Correct." 12Mr Roth added (T18): "A. ...It was a deliberate attempt, sorry it was a deliberate instruction from my clients not to pursue the fourth defendant." 13Before the statement of claim was filed, the solicitor for the plaintiffs made a search with ASIC in relation to the fifth defendant, Andrew Heseltine. The search revealed that he was born in Zimbabwe in July 1966 and was a director of two companies. He was said to live in Oldfield Place, Brookfield, Queensland. A commercial process server in Queensland was asked to effect service. On 21 March 2006 he reported that he had been unsuccessful. His letter included these words (Exhibit 1 Annexure F): "Further to our correspondence of 3rd March 2006 we advise on 16/03/06 at 6:25 am our agent attended the address of ... Oldfield Place, BROOKFIELD QLD and spoke with a female occupant who claimed that MR HESELTINE does not reside at the address and now lives in Indonesia. She stated that she had not seen him for some time and did not have an address for him in Indonesia." 14A statement of claim is valid for six months after it has been filed (UCPR r6.2(4)(a)) and must be served personally (UCPR r10.20(2)(a)). On 6 December 2006 Mr Roth filed a notice of motion seeking an extension of time for service on Mr Andrew Heseltine for a further 60 days (Ex 3). On 14 December 2006, Assistant Registrar Howe made the order extending time. Commercial agents were again instructed to serve Mr Andrew Heseltine. On 23 December they reported that they had not been able to do so. Their letter included the following: (Ex 1 Annex G): "Please be advised that our agent has not been able to locate Richard Heseltine at either the Spring Hill or Bulimba addresses provided by you. This morning our agent attended at the residential address of ... Oldfield Place, Brookfield and spoke with Heseltine's wife, who stated that he lives in Indonesia and only visits the Brookfield address approximately once a year. The wife stated that she has virtually no contact with him in Indonesia, as he has a small factory out in the jungle. We will now place this matter on hold for seven days pending your further instructions." 15No further instructions were given until April 2010. On 22 February 2010 the plaintiffs, at a directions hearing, raised the need to amend the statement of claim. The motion to amend was heard by Harrison J on 23 March 2010. Judgment was given on 29 March 2010 ( Berger Investment Group Limited v Coccoon Pty Ltd [2010] NSWSC 221), allowing amendment. In the amended statement of claim, Andrew Heseltine was again included as a defendant (the fifth defendant). Commercial agents were once more asked to effect service. On 9 April 2010 they reported to Mr Roth in these terms (Ex 1 Annex H): "On 08/04/10 at 3:25 pm our agent attended the given address of ... OLDFIELD PLACE, BROOKFIELD QLD 4069 and observed a male (approx 40 years, black hair, round face and facial hair) and a female get into a car (white convertible MKL). Our agent attempted to serve the documents; however, the male and female were already in the vehicle, the male driver would not stop and nearly ran our agent over in his (haste) to get away. A calling card was left at the address requesting Andrew Heseltine contact our agent. On 8/04/10 at 08.10 pm our agent re-attended the given address; however, he was unable to locate any persons at home. Our agent noted a VW polo ...LMJ parked at the address. The calling card previously left there had been removed; however, to date our agent has not received any reply. On 09/04/10 at 7:15 am our agent returned to the given address; however, again he was unable to locate any persons at home." 16Application was made by a notice of motion filed on 31 May 2010 to extend time for service and for an order for substituted service. The Queensland address of the fifth defendant had meanwhile been confirmed by further searches with ASIC in August 2009 and April 2010 (Ex 1).

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