Citation : KENSIT & ANOR -v- POPPERWELL & ORS [2007] WASC 163

Practice and procedure - Stale writ invalid for the purpose of service - Test for extending the validity of writ - Whether master erred in exercising remedial discretion to grant an extension - Turns on own facts

Rules of the Supreme Court 1971 (WA) O 2 r 1, O 7 r 1

Supreme Court Act 1935 (WA) s 60(1)(f)

1 BUSS JA: On 20 May 2008, Murray AJA and I heard an application for leave to appeal from Master Sanderson's decision to exercise the discretion under O 7 r 1(2) of the Rules of the Supreme Court 1971 (WA) to extend the validity of a writ issued by the respondents against the appellants beyond 12 months after the date of its issue.

2 At the conclusion of the argument on 20 May 2008, the court granted leave to appeal, allowed the appeal and made ancillary orders, with reasons to be published later. These are my reasons.

3 On 26 May 2005, the respondents issued the writ of summons in question against the appellants and two other defendants.

The Plaintiff's [sic] claim against the Defendants, jointly and severally is for:

1. damages and for equitable relief arising out of negligence, breach of statutory duty, breach of contract, breach of fiduciary duty and breach of duty of trust and confidence;
2. Interest, pursuant to Section 32 of the Supreme Court Act 1935;
3. Costs

5 On 26 May 2006, the respondents' solicitors purported to serve the writ on the appellants.

6 A writ is valid for 12 months beginning with the date of its issue: O 7 r 1(1). In the present case, the writ was valid up to and including 25 May 2006. When the writ was purportedly served it was stale.

7 On 20 June 2006, the respondents applied to have the validity of the writ extended by 3 months, and the purported service of the writ on 26 May 2006 validated as regular service.

8 The appellants opposed the respondents' application on the following grounds:

(a) the respondents had not established any proper basis for the court to exercise its discretion to extend the writ's validity; and

(b) the writ was defective, and liable to be struck out, in any event.

9 The writ does not disclose any of the material facts of the respondents' claim against the appellants. Some of these facts were disclosed some years earlier in a letter dated 17 April 2003 from the respondents' former solicitors, Galic & Co, to the first appellant. The letter asserts that the first appellant was retained to act on behalf of the respondents in the second half of 1999 in relation to the settlement of the sale of a hotel premises and associated business. Apparently, the respondents subsequently rescinded the sale contract and vacated the hotel at a time which is not mentioned. In the letter it is asserted, in substance, that the first appellant acted negligently:

(a) by failing to issue certain requisitions upon the title to the land being sold, which the respondents say would have revealed an encroachment across a boundary by an underground fuel tank; and

(b) by failing to advise the respondents not to go into possession pending completion by the vendor of certain work orders imposed by the local government.

The letter also asserts that, in 2002, the first appellant failed to inform the respondents of a conflict of interest it had in acting for them. The letter states that the respondents 'intend to claim damages for negligence including but not limited to their losses associated with the purchase of the hotel'. The letter does not mention the second appellant. Nor does it mention any claim for breach of statutory duty, breach of contract, breach of fiduciary duty or breach of duty of trust and confidence against the first appellant.

10 On 20 June 2006, the respondents' solicitor at that time, Mr Nicholas Lindsay, who was then an employee of SC Nigam & Co, filed an application to extend the validity of the writ and validate the service purportedly effected on the appellants. In an affidavit sworn 20 June 2006 in support of the application, Mr Lindsay deposed that on taking instructions from his clients he 'ascertained that the plaintiffs' [ie, respondents'] cause of action against the first and second defendants [ie, appellants] arose on or about 11 August 1999 and he advised the plaintiffs [ie, respondents] to file a writ of summons to preserve the plaintiffs' [ie, respondents'] claim against all of the potential defendants'.

11 On 21 August 2006, the Supreme Court made an order permitting SC Nigam & Co to cease acting as the respondents' solicitors. On 9 October 2006, another solicitor entered a notice of change of solicitor for the respondents.

12 The application to extend the validity of the writ and to validate its irregular service was listed for hearing before Master Sanderson on 12 March 2007. On that date the learned Master adjourned the hearing to enable the respondents to file a supplementary affidavit for the purpose of explaining the delay in the service of the writ. A further affidavit of Mr Lindsay was filed on 4 May 2007. The application was listed again for hearing before Master Sanderson on 18 June 2007. Mr Lindsay was cross-examined.

13 On 30 July 2007, the learned master granted the respondents' application. He made orders that the validity of the writ issued on 26 May 2005 be extended, that the purported service of the writ on 26 May 2006 be validated, and that the respondents pay the appellants' costs of the application from 21 August 2006, such costs to be taxed if not agreed.

14 The appellants did not contest an order validating service of the writ on 26 May 2006, if an order was made extending the validity of the writ.

15 The learned master's decision was interlocutory in nature and, in consequence, the appellants require leave to appeal. See s 60(1)(f) of the Supreme Court Act 1935 (WA).

16 In general, an applicant for leave to appeal must demonstrate that the relevant decision was wrong or at least attended with sufficient doubt to justify the grant of leave, and that substantial injustice would occur if the decision were left unreversed. See Wilson v Metaxas [1989] WAR 285, 294. It must be emphasised, however, that these are not rigid or exhaustive requirements, and leave may be granted if, in all the circumstances, it is in the interests of justice to grant leave. See The State of Western Australia v Bond Corporation Holdings Ltd (1991) 5 WAR 40, 56 - 57.

Appellate review of a discretionary judgment

17 The principles of law which regulate the circumstances in which an appellate court may review the exercise of a judicial discretion apply to the learned master's decision to exercise the discretion conferred by O 7 r 1(2). The correctness of his decision can only be challenged by demonstrating error in the decision-making process in the manner explained by Dixon, Evatt and McTiernan JJ in House v The King [1936] HCA 40; (1936) 55 CLR 499:

It is not enough that the judges composing the appellate court consider that, if they had been in the position of the primary judge, they would have taken a different course. It must appear that some error has been made in exercising the discretion. If the Judge acts upon a wrong principle, if he allows extraneous or irrelevant matters to guide or affect him, if he mistakes the facts, if he does not take into account some material consideration, then his determination should be reviewed and the appellate court may exercise its own discretion in substitution for his if it has the materials for doing so. It may not appear how the primary judge has reached the result embodied in his order, but, if upon the facts it is unreasonable or plainly unjust, the appellate court may infer that in some way there has been a failure properly to exercise the discretion which the law reposes in the court of first instance. In such a case, although the nature of the error may not be discoverable, the exercise of the discretion is reviewed on the ground that a substantial wrong has in fact occurred (504 - 505).

18 The learned master noted that there was a dispute between the parties as to whether the limitation period in respect of the respondents' claim had expired or not. In pars 6 and 16 of his affidavit sworn 20 June 2006, Mr Lindsay deposed to his belief that the limitation period had expired. Paragraph 10 of the respondents' original written submissions in support of their application appear to be consistent with this belief. However, in the course of his oral submissions to the learned master, counsel for the respondents refused to concede that the limitation period had expired. In these circumstances, the learned master decided to proceed in relation to the limitation period on the following basis:

Given that there is a difficulty in ascertaining either from the indorsement of claim or from the evidence what cause of action the plaintiffs put against the first and second defendants, it is appropriate to proceed on the basis that the limitation period had not expired at the date when the writ became stale and service was effected [6].

19 The learned master then turned his attention to the issue of delay and whether the delay in question had been satisfactorily explained. He noted that in par 7 of his affidavit sworn 20 June 2006, Mr Lindsay said that service of the writ was withheld 'pending investigations as to whether or not to discontinue proceedings against any of the defendants' [9]. The learned master found that the respondents' solicitor 'took little or no steps in the 12 months after the issue of the writ to advance the [respondents'] claim' [10]. Also, he found that the respondents' solicitor provided 'no satisfactory explanation ... for the delay in serving the writ of summons' [13]. This was despite the respondents' solicitor having received correspondence from the Supreme Court in relation to service of the writ. The solicitor replied to the Supreme Court in an misleading fashion by inserting, falsely, that investigations in relation to the respondents' claim were continuing (when, in fact, no investigations had been commenced) [11] - [12]. The learned master concluded that there was no doubt that no satisfactory explanation had been provided for the delay in serving the writ [13]. He added that, even taking the most benign view of Mr Lindsay's lack of activity in relation to the claim, 'there can be no possible [satisfactory] explanation for not serving the writ within time' [13].

20 The learned master summarised the appellants' argument against the granting of the application, as follows:

In their submissions, the first and second defendants relied on a number of matters which they said stood against any extension being granted. First, it was said that the claim still only had the vaguest of descriptions despite the fact it is now almost eight years since the claim arose. Second, there was no valid reason for delaying in serving the writ - no purpose was served by doing so. Accordingly, there is no possible explanation for the delay in serving the writ. Thirdly, it is said that an extension will allow the first and second defendants to have a professional negligence claim dangling over them with all the attendant insurance complications [19].

21 The learned master then set out the basis for his decision:

While each of these points may be valid in their own right, none really amounts to a significant prejudice suffered by the defendants. This might be contrasted with the position in Monteleone where the appellant's claim was for damages for personal injury. As McLure JA points out in her reasons, the failure to serve the writ meant that the defendants were denied the opportunity to have the appellant's soft tissue injuries investigated by medical practitioners. It must be acknowledged that in this case the fact that eight years have now passed means that the chances of properly investigating the circumstances of the alleged negligence or other cause of action which arose around August 1999 have diminished. But the case relates - it would seem - to a commercial transaction which was documented. While the recollections of individuals may be of significance, the passing of time would not irreparably damage the defendants' position.

On balance then, I am satisfied that the interests of justice require that the validity of the writ be extended. In their written submissions, the defendants say that if the discretion to extend the writ's validity is exercised, then they do not oppose an order validating the previous service. Subject to hearing from counsel, I will make orders accordingly [20] - [21].

The learned Master erred in law by exercising his discretion pursuant to order 7 rule 1(2) of the Rules of the Supreme Court to extend the validity of the writ issued by the respondents beyond 12 months after the date when it was issued, where:

(a) there was no adequate explanation for the respondents' failure to serve the writ within 12 months after it was issued, and the respondents' legal representative had taken no steps to further investigate the respondents' claim or to serve the writ within that period;

(b) the writ was so defective that it was impossible to tell whether any limitation period may have expired, save in respect of the respondents' contractual claim where the limitation period had expired.

23 The respondents did not file a notice of contention seeking to challenge any of the learned master's findings of fact (for example, his finding that there was no satisfactory explanation for the delay in serving the writ) or seeking to uphold his decision on any other ground.

(1) Where in beginning or purporting to begin any proceedings or at any stage in the course of or in connection with any proceedings, there has, by reason of anything done or left undone, been a failure to comply with the requirements of these Rules, whether in respect of time, place, manner, form or content or in any other respect, the failure shall be treated as an irregularity and shall not nullify the proceedings, any step taken in the proceedings or any judgment or order therein.

(2) Subject to paragraph (3) the Court may, on the ground that there has been such a failure as is mentioned in paragraph (1), and on such terms as to costs or otherwise as it thinks just, set aside either wholly or in part the proceedings in which the failure occurred, any step taken in those proceedings or any document judgment or order therein or exercise its powers under these Rules to allow such amendments (if any) to be made and to make such order (if any) dealing with the proceedings generally as it thinks fit.

(1) For the purpose of service, a writ ... is valid in the first instance for 12 months beginning with the date of its issue ...

(2) Where a writ has not been served on a defendant, the Court may by order extend the validity of the writ from time to time for such period, not exceeding 12 months at any one time, beginning with the day next following that on which it would otherwise expire, as may be specified in the order, if an application is made to the Court before that day or such later day (if any) as the Court may allow.

(3) Before a writ the validity of which has been extended under this rule, is served it must be marked with an official stamp showing the period for which the validity of the writ has been so extended.

(4) Where the validity of a writ is extended by order made under this rule, the order shall operate in relation to any other writ (whether original or concurrent) issued in the same action which has not been served so as to extend the validity of that other writ until the expiration of the period specified in the order.

26 In Bell Group NV (In liq) v Aspinall (1998) 19 WAR 561, the Full Court of the Supreme Court of Western Australia considered O 7 rr 1 and 2, the equivalent English rule and relevant authorities including Kleinwort Benson Ltd v Barbrak Ltd [1987] 1 AC 597, Ramsay v Madgwicks [1989] VicRp 1; [1989] VR 1, Coyne v Sun Securities Ltd (1992) 8 WAR 218 and BP Australia Ltd v Westernfield Tanker SA (Unreported, WASC, Library No 6325, 13 June 1986). In their joint judgment, Pidgeon, Walsh and Owen JJ observed that two tests for the extension of the validity of a writ have been formulated. First, whether there is 'good reason' to act. Secondly, whether the extension is required 'to see that justice is done'. Their Honours said:

There has been some uncertainty as to whether the proper formulation of the test is 'good reason' or whether the extension is required 'to see that justice is done'. Cases such as Ramsay v Madgwicks [1989] VicRp 1; [1989] VR 1 and Coyne follow Kleinwort Benson in espousing the 'good reason' formula. BP Australia Ltd v Westernfield Tanker SA suggests that the 'interests of justice' is the appropriate test. We note that in Brown v Coccaro (1993) 10 WAR 391 Ipp J (with whom Wallwork J agreed) referred (at 400) to the formulation of the test in BP with approval. It was probably obiter because the contentious issue there was whether an application for renewal could be made more than 12 months after the expiry of the initial validity period. We do not think there is much to be gained by entering into a semantic debate because it may be a distinction without a difference. To the extent that there is anything in it, we would be inclined to adopt the view expressed by Ipp J in Brown, namely that the court has a wide and unfettered discretion which is to be applied to see that justice is done. In any such investigation, the court is to have regard to the 'balance of hardship'. Accordingly, there is no inconsistency or incompatibility between the test espoused in Brown and the exposition of the applicable test in Kleinwort Benson (575).

27 In Brealey v Board of Management Royal Perth Hospital [1999] WASCA 158; (1999) 21 WAR 79, Ipp J (with whose reasons Malcolm CJ was in general agreement) noted that when O 2 r 1 is used to remedy an irregularity in connection with the extension, renewal or service of a writ, the broad discretion normally available under that subrule must be exercised with care and caution because O 7 r 1 embodies a clear policy which should not be subverted by mechanical resort to O 2 r 1 [45]. His Honour held, relevantly for present purposes:

(a) Order 2 r 1 enables the court to prevent manifest unfairness arising from the need to adhere rigidly to the time limits imposed by O 7 r 1(2). However, the power under O 2 r 1 should not be exercised unless it is established that, without such remedial relief, injustice will occur. The application should not be granted unless the justice of the case requires a departure from the policy underlying O 7 r 1 [50].

(b) Other considerations governing the exercise of discretion under O 7 r 1 (that is, apart from the limitations provided by the time limits) include the length of the delay, whether the delay was caused by mistake and whether such mistake is excusable, the nature of attempts made at service, the hardship or prejudice caused to the plaintiff by refusing the renewal or to the defendant by granting it [52].

The court has a wide and unfettered discretion to see that justice is done.

28 In Brealey, Ipp J (and the other members of the court) held that the decision at first instance to refuse to extend the validity of the writ was correct. His Honour said:

In the present case the delay on the part of the appellant involved a very considerable period. The appellant has failed to give a satisfactory explanation for that delay. It was quite deliberate, there being no question of mishap or oversight. The prejudice suffered by the appellant were the validity of the writ not to be extended would be self-inflicted. Were the validity of the writ to be extended the prejudice the respondent would suffer would not be insignificant. In my opinion, good reason to exercise the discretion under O 7 r 1 has not been shown and I am not persuaded that the interests of justice require the exercise of a remedial discretion under O 2 r 1. I would dismiss the appeal [68].

29 The respondents submitted that the learned master's decision was reasonably open to him, and should not be disturbed, having regard to the following:

(a) In his affidavit sworn 20 June 2006, Mr Lindsay deposed to his belief that 26 May 2006 (and not 25 May 2006) was the last day on which the writ was valid. This belief appears to have been based on the remarkable view that a period of 12 months commencing on 26 May 2005 runs up to and including 26 May 2006. According to the respondents, Mr Lindsay's erroneous belief constituted a satisfactory explanation for the failure to serve the writ before it became stale.

(b) The appellants were informed of the nature of the respondents' claim in the letter dated 17 April 2003 from the respondents' former solicitors, Galic & Co.

(c) A plaintiff is entitled to delay service of a writ until the last moment.

(d) Service on the appellants was purportedly effected on the day after the writ became stale, and an application was made promptly for an exercise of the discretion under O 7 r 1(2).

(e) The appellants will not suffer any significant prejudice or unfairness as a result of the validity of the writ being extended.

(f) The granting of relief to the respondents does not preclude the appellants from applying to strike out the indorsement.

(g) The granting of relief to the respondents does not preclude the appellants from asserting that some or all of the causes of action sought to be relied on by the respondents are statute-barred.

(h) The prejudice to the respondents in being precluded from pursuing their claim against the appellants significantly exceeds any prejudice which the appellants might suffer from the relief granted pursuant to the respondents' application.

30 In my opinion, the learned master's exercise of the remedial discretion to extend the validity of the writ was, with respect, attended by error. First, the learned master did not weigh the countervailing considerations for the purpose of determining whether the interests of justice required the exercise of the remedial discretion. In particular, he did not identify with precision, or at all, the prejudice which the respondents would suffer if relief was not granted. Secondly, although the learned master decided that 'it is appropriate to proceed on the basis that the limitation period had not expired at the date when the writ became stale and service was effected' [6], he did not take that factor into account in evaluating whether an extension was required to see that, as between the parties, justice was done. These errors permit and require this court to set aside the learned master's exercise of the remedial discretion. This court may exercise its own discretion, it having the necessary materials for doing so.

31 During oral argument before this court, counsel for the respondents was asked whether, at the hearing before the learned master, he chose not to rely on the expiration of any applicable limitation period as an aspect of prejudice to the respondents. Counsel's response to this question was as follows:

To the best of my recollection, and I don't have my notes nor the transcript, I saw it as being in two parts, one, there was the six-year limitation period which Mr Nicholas Lindsay had deposed to, that was one part of a potential cause of action which suffered from the limitation defect.

I went beyond that and identified separate and distinct causes of action which had potentially different limitation periods and so perhaps 'a bob each way' is a better way to put it (ts 14).

32 The factors which are in favour of an extension of the validity of the writ are these:

(a) The statutory limitation period applicable to one or, perhaps, more of the alleged causes of action which the respondents wish to litigate against the appellants may have expired as at the date when the writ became stale.

(b) By the letter dated 17 April 2003, the appellants were given some particulars of the respondents' claim.

(c) The purported service of the writ was effected only one day after it became stale.

(d) The respondents applied promptly for an extension of the validity of the writ.

33 The factors which are against an extension of the validity of the writ are as follows:

(a) No statutory limitation period applies to the alleged causes of action for breach of fiduciary duty or breach of duty of trust and confidence, and equity would not apply a limitation period by analogy in respect of those alleged causes of action.

(b) Neither the indorsement of claim (which is plainly defective), nor the affidavit material filed by the respondents, enables this court to assess reliably whether the statutory limitation period which is applicable to the alleged causes of action for negligence, breach of statutory duty and breach of contract had expired as at the date on which the writ became stale. A minute of amended or substituted indorsement of claim was not produced to the learned master or this court. The respondents are therefore responsible for the uncertainty which attends this important issue.

(c) The respondents, in deciding not to serve the writ until the last moment, chose to live by technicalities, and therefore must be taken to have accepted the risk of dying by them if they failed to observe the time limits imposed by O 7 r 1(2).

(d) The respondents, having decided not to serve the writ until the last moment for the purpose of enabling them to investigate whether they had reasonable causes of action against the appellants, did not make productive use of the 12 month period for that purpose. Rather, as the learned master found, the respondents' solicitor 'took little or no steps in the 12 months after the issue of the writ to advance the [respondents'] claim' [10].

(e) As the learned master concluded, there was no satisfactory explanation for the respondents' delay in serving the writ. Mr Lindsay's apparent belief that 26 May 2006 (and not 25 May 2006) was the last day on which the writ was valid may be an explanation but it is not, in the circumstances, satisfactory.

(f) Any prejudice suffered by the respondents if the validity of the writ were not to be extended would be self-inflicted.

(g) Although the appellants are able to point only to general, as distinct from particular, prejudice, this may well be attributable, in part, to the respondents' failure properly to draw their claim. The letter dated 17 April 2003 provides some particulars in relation to the respondents' alleged cause of action against the first appellant in negligence, but it does not mention the second appellant. Nor does it mention any claim for breach of statutory duty, breach of contract, breach of fiduciary duty or breach of duty of trust and confidence against the first appellant.

34 After assessing the factors which are in favour of an extension of the validity of the writ and those factors which are against the extension, I have concluded that the respondents' application should be dismissed. The factors militating against an extension decisively outweigh the factors

militating in favour of it. The interests of justice, including the 'balance of hardship' between the parties, do not require the exercise of the court's remedial discretion. The respondents cannot reasonably complain of any unfairness resulting from the refusal of an extension.

35 It is appropriate, in the present case, to grant leave to appeal. The appellants have established that the learned master's decision was wrong. Also, the factors I have enumerated which are against an extension of the validity of the writ form a sufficient basis for concluding that it is in the interests of justice to grant leave.

36 For these reasons, I joined in the orders made on 20 May 2008.

37 MURRAY AJA: I have had the advantage of reading in draft the reasons for decision published by Buss JA. They express completely for me the reasons why I joined in the orders made on the hearing of this application for leave. I have nothing to add.