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[2012] NSWSC 1001
Supreme Court of NSW
2012-08-02
Schmidt J
Original judgment source is linked above.
Judgment 1By motion filed in December 2011, the defendant, Mr Tsolakis, sought orders under Rule 13.4 of the Uniform Civil Procedure Rules 2005, dismissing the proceedings or in the alternative orders under Rule 14.28 striking out the statement of claim filed by the plaintiffs, Mr and Mrs Constantinidis in October 2011. Mr Tsolakis' case was initially that there was no cause of action, that the proceedings were brought out of time, that time having expired between September to December 2007. By motion filed in February 2012, Mr and Mrs Constantinidis sought orders under Part 16 of the Rules, that default judgment be entered in their favour, in circumstances where Mr Tsolakis did not file a defence within the time provided by the Rules.
Mr and Mrs Constantinidis' motion 2Mr and Mrs Constantinidis' case was that Mr Tsolakis motion was an abuse of process. Their statement of claim had been settled by senior counsel; they had attempted to serve it upon Mr Tsolakis' solicitors in October 2011, as well as posting it to Mr Tsolakis. A notice of appearance was filed on 10 November. The obligation imposed by Rule 14.3.1 to file a defence within 28 days was triggered, but had not been complied with. In the circumstances, the orders which they sought would be made. 3I am satisfied that the orders sought by Mr and Mrs Constantinidis may not be granted. One of the effects of the orders which Mr Tsolakis pursues, is to excuse him from the requirement of filing a defence. It would plainly be an unnecessary expense to require him to put on a defence, if Mr and Mrs Constantinidis' claim was to be struck out, or Mr and Mrs Constantinidis were to be given the opportunity to replead, an opportunity which they indicated they wished to pursue, if the view were taken that there was any difficulty with their pleading. 4In those circumstances, the relief which they seek may not be granted.
5Mr Tsolakis was formerly Mr and Mrs Constantinidis' solicitor. Their statement of claim pleads a retainer between the parties for Mr Tsolakis to act on the purchase of an off the plan residential unit in July 2001; that Landcorp NSW Pty Ltd ('Landcorp') was then the registered proprietor of the property; that they entered the contract for the purchase in September 2001, for a price of $350,000; that the settlement was to complete no later than 30 June 2004; that $180,000 was paid prior to settlement and that the purchase was never completed. 6It is claimed that between September 2001 and February 2004, they instructed Mr Tsolakis to lodge caveats over the property at Rockdale. A caveat was only lodged in February 2004. It is also pleaded that Mr Tsolakis advised Mr and Mrs Constantinidis that they should obtain secondary security for the money advanced under the contract, a caveat over other property owned by one of the directors of Landcorp being an acceptable form of security. The caveat was lodged in October 2005, but was not an acceptable form of security, for reasons pleaded, which include the failure to obtain the proprietor's consent to lodgement of the caveat. 7It is further pleaded that in breach of the contract, Landcorp advertised the unit for sale in January 2003 and that between September 2001 and February 2004, Mr Tsolakis was instructed to act for Mr and Mrs Constantinidis on the breach of the contract. 8It is further claimed that on 30 June 2004, Landcorp did not complete the contract and was in breach of it. From June 2004 to October 2005, Mr and Mrs Constantinidis instructed Mr Tsolakis to commence proceedings in respect of the breach. Unbeknownst to them, proceedings were not commenced, despite repeated false statements up to May 2005, that they had been commenced and would be shortly heard. 9It is claimed that in April 2004, Landcorp commenced proceedings for removal of the caveat over the Rockdale property; that Mr Tsolakis accepted service of the process, but did not notify Mr and Mrs Constantinidis; and that he represented that he was upholding their interests under the contract, as plaintiffs in proceedings brought against Landcorp and its directors, in relation to the breach of the contract. It is claimed that the representations were false; no proceedings were commenced against Landcorp, but proceedings were commenced against them by Landcorp, in respect of the caveat. 10It is claimed that in October 2004, Mr Tsolakis advised Mr and Mrs Constantinidis to consent to the removal of the caveat, so that Landcorp could register a strata plan, creating legal title, whereupon a new caveat would immediately be lodged; that Mr and Mrs Constantinidis consented; that the caveat was removed; and that Mr Tsolakis represented that a new caveat had been lodged, but that representation was false. 11It is also claimed that in August 2005, Mr Tsolakis consented to the discontinuance of Landcorp's proceedings, without notifying Mr and Mrs Constantinidis, or advising them of their rights to bring any cross-claim; that it was in October 2005, that Mr Tsolakis revealed that the proceedings against Landcorp had not been commenced, but would be shortly commenced; and that no such proceedings were ever commenced. 12It is further claimed that Mr and Mrs Constantinidis paid Mr Tsolakis some $60,000 as fees in relation to the Landcorp contract, which he represented would be held in trust for use in the Landcorp proceedings; and that no receipts, bills, disbursements or third party payments were ever provided in respect of those moneys. 13It is also claimed that on 4 October 2005 Mr and Mrs Constantinidis obtained access to the Court file in the proceedings Landcorp had brought against them; that on 5 October 2005, Mr Tsolakis told them that he would cease to act for them and that they should take their complaints to Lawcover. 14It is also claimed that Mr Tsolakis refused to produce the written contract to Mr and Mrs Constantinidis after 5 October; and that he had lost or destroyed that contract, causing them to lose remedies which they might otherwise have had against Landcorp, its receivers and liquidators. 15Mr and Mrs Constantinidis also claim that Mr Tsolakis breached the duty of care which he owed them, between July 2001 and 4 October 2005, in various identified ways. The losses which Mr and Mrs Constantinidis claim they suffered, despite taking steps available to them to mitigate their losses, are specified. Damages in a total amount of $33,143,000 are pursued.
Mr Tsolakis' case 16In a judgment given on 2 September 2011, Davies J dealt with a claim brought by Mr and Mrs Constantinidis against another solicitor who had acted for them after Mr Tsolakis ceased to act, in relation to the same Landcorp transaction (see Constantinidis v Kehagiadis [2011] NSWSC 974). After analysing the claims which Mr and Mrs Constantinidis advanced by their statement of claim in those proceedings and the evidence as to the documents of title and the two mortgages held over the land in question, by entities not parties to those proceedings, his Honour observed at [50]: "50 In my opinion, it is very clear that the Plaintiffs did not lose their rights to this property by anything to do with the caveats which were lodged, nor by the failure to deal with lapsing notices in respect of those caveats. Donovan Oates as registered mortgagee had priority over the interests of the Plaintiffs. No matter what the caveats said with respect to s 74H(5)(i) they could not ultimately have prevented the sale by the mortgagee in possession." 17Mr Tsolakis relied on this conclusion and the similarity between the case which he submitted Mr and Mrs Constantinidis seek to advance against him, and that which they advanced in the proceedings dealt with by Davies J, to argue that their claim against him was doomed to fail and untenable, so that they should not be permitted to replead. 18It was submitted that the conclusions which Davies J had reached, were equally applicable to Mr Tsolakis. By their own admissions the plaintiffs had engaged Ms Kehagiadis in October 2005, at a time when proceedings could have been commenced against Landcorp, or indeed Mr Tsolakis. Mr Tsolakis relied on what Davies J observed In Kehagiadis at [60]: "60 Since the Landcorp matters arose at the earliest in September 2001 (see para 45 of the Amended Statement of Claim) and any breaches by Mr Tsolakis are likely to have been later, the limitation period for suing Mr Tsolakis had not expired at the time the Defendant ceased to act for the Plaintiffs. Accordingly, if what is contained in paras 71-77 concerns negligence for not having instituted proceedings against Mr Tsolakis (as seems likely) they are doomed to fail. If it is only about costs (the other possibility) it is doomed to fail. Accordingly, this matter should not be allowed to be repleaded." 19In written submissions it was also submitted that it followed that any cause of action available to Mr and Mrs Constantinidis on the face of the pleadings had long expired, given the provisions of s 14 of the Limitation Act 1969. 20At the hearing, it was conceded, however, that the proceedings were commenced on 4 October 2011, in circumstances where it was claimed by Mr and Mrs Constantinidis, that they had obtained knowledge of various relevant matters, which had been concealed from them, only on 4 October 2005. It was also conceded that where there are disputed facts, ordinarily the Court would proceed with great caution in striking out a matter on the basis that the claim had been brought out of time. 21Nevertheless, it was submitted that it was apparent on their own pleadings, that Mr and Mrs Constantinidis' claims in relation to the contract had accrued on the date that they had entered the contract, without adequate security, where available documents showed that the vendor did not actually own the property. The date of accrual of the claims advanced in tort, it was submitted, was when they had suffered loss on handing over their money in September 2001. It followed that on the pleadings, the claim in relation to the transaction had not been brought within time. 22As to the claims in relation to the litigation, in respect of which on the pleadings relevant matters were first discovered on 4 October 2005, it was submitted that there were two difficulties. The first was that the fraud exception under s 55 had not been pleaded, in the event that some fraudulent concealment was sought to be relied on; and secondly, even it were, the proceedings were not brought within time. The event that it was claimed had caused loss, on the pleadings had occurred on 23 August 2005, although it was conceded that a claim for payment wrongly sought in October 2005, could also conceivably provide a foundation for a claim. Even so, it was submitted that time in respect of that claim had expired on 3 October 2011. In the result, the proceedings commenced on 4 October 2011 had been brought one day out of time. 23These submissions rested on the argument that properly construed, s 55 required that if the limitation period could somehow be extended, it required that 4 October not be counted. In the event, the only claim which might be repleaded so as to bring it within time, was that relating to payment of trust moneys. It was accepted, however, that in so far as the difficulty with that claim was a pleading problem, in the circumstances Mr and Mrs Constantinidis would be given an opportunity to replead. 24In written submissions filed after the hearing, it was conceded that 3 October 2011 was a public holiday in New South Wales and that accordingly, the last day of filing the claim was in the circumstances, 4 October. It was thereupon submitted that: "7. As a result of that factual discovery, the Defendant does not press the contention that, if your Honour were to grant leave to re-plead, and a viable pleading emerged which properly alleged fraudulent concealment, then that would on its face (without evidentiary contest) be time-barred as a consequence of s 55 of the Limitation Act. To avoid doubt, the Defendant's concession relates only to this issue, and the Defendant maintains his contentions as to the obstacle of causation and time bars for the claims as to loss caused by entry into the agreement in any event, and as to abuse of process."
Mr and Mrs Constantinidis' case 25It was Mr and Mrs Constantinidis' case, that Mr Tsolakis was not entitled to rely on the findings made by Davies J. That decision was submitted to have been flawed as a matter of law and reached without all of the evidence. Mr and Mrs Constantinidis submitted that by his submissions Mr Tsolakis had conceded that he had acted improperly and unprofessionally and that they had a case against him. 26Mr and Mrs Constantinidis complained that when Landcorp did not deliver the unit, as promised in June 2004, Mr Tsolakis did nothing to remedy the situation and actively misled them, by informing them that court cases were active and that caveats securing their interests had been filed. Money was recoverable from Landcorp between 30 June 2004 and October 2005, but Mr Tsolakis failed to act. Mr Tsolakis was negligent in failing to advise them of the possibility that the mortgagee had obtained priority over them by registration of its mortgage. He lost the contract for sale of land; allowed them to pay money to Landcorp without checking the ownership of the land; and failed to bring proceedings in a timely way, with the result that they had lost the money paid to Landcorp and the use and ownership of the unit and rental which they could have earned. 27They also complained that Mr Tsolakis failed to inform them of proceedings brought against them by Landcorp to remove a caveat which had been placed over the unit; that he had allowed the caveat to be lifted, so that a strata plan could be registered; and that he failed to reinstate the caveat. Mr and Mrs Constantinidis also relied on admissions made by Mr Tsolakis in April 2005, that he had misled them in relation to the proceedings. 28They claimed that they had brought their proceedings within time and that properly construed s 55 did not require that the proceedings be commenced by 3 October 2011.
Mr and Mrs Constantinidis must be given leave to replead 29The principles discussed in General Steel Industries Inc v Commissioner for Railways (NSW) [1964] HCA 69; (1964) 112 CLR 125 must be applied, when considering a submission that a pleading does not plead an arguable case. Having that test in mind and given what transpired at the hearing and subsequently, there can be no question that Mr and Mrs Constantinidis must have an opportunity to replead their case. 30It is apparent that Mr and Mrs Constantinidis' case against Mr Tsolakis is very different to that which they sought to pursue against Ms Kehagiadis. They do not, for example, seek to advance claims in respect of a duty of care pursuant to the Revised Professional Conduct and Practice Rules 1995. It is various breaches of retainer, as well as allegations of negligence in relation to advice given about the acquisition of the unit, obtaining security and pursuit of litigation by and against them, which they seek to pursue. I cannot see that the statement of claim does not plead an arguable case in relation to these matters. 31The case presently sought to be advanced, does not concern a mere failure to lodge an adequate caveat, but rather failure to ensure that Mr and Mrs Constantinidis had adequate security in respect of the payment of $180,000 which they made under the Landcorp contract; the failure to take proceedings as instructed in respect of the contract breached in 2004; the failure to inform them of various crucial matters, including that proceedings which they had instructed be pursued, had not had been commenced and that proceedings had been brought against them; as well as other allegations of misrepresentation and misconduct, including in relation to $60,000 which Mr Tsolakis received in October 2005. 32Davies J found in Kehagiadis that from the outset, a mortgagee had priority over Mr and Mrs Constantinidis' interests. That lies at the heart of their complaints against Mr Tsolakis. It is claimed that he did not take steps necessary in the circumstances, to ensure that their interests were protected and he thereafter further failed them, in relation to their pursuit of the breach of their contract and the ligation brought against them. That is quite a different case to that which they sought to advance against Ms Kehagiadis. 33Also necessary to be considered, however, is the impact of the Limitation Act on the case which they seek to pursue. Section 14 of that Act imposes a limitation period of six years in respect of claims advanced in relation to both a cause of action founded on contract and in tort. Section 55 operates to extend that limitation period in certain circumstances. Mr and Mrs Constantinidis seek to rely on that provision and it is conceded that it may be available to them in respect of at least some of their claims. 34It was on 4 October 2005 that Mrs Constantinidis inspected the Court's file in relation to the proceedings brought against them, on their case for the first time learning that day various relevant things, as to what Mr Tsolakis had done and failed to do and how he had misled them. It was on 5 October 2005 that his retainer came to an end. On their pleadings it seems that they had, however, earlier learnt that Mr Tsolakis had not brought proceedings on their behalf, as he was instructed to do. Even earlier, they had learned about Landcorp's breach of contract. It is difficult to see in those circumstances, that even the provisions of s 55 of the Limitation Act, can assist them in respect of all of the claims they seek to pursue. 35It follows from Mr Tsolakis' concessions, that the proceedings may not be struck out, but that Mr and Mrs Constantinidis must be given leave to replead. Which of their current claims can by repleading, be brought within time, even given a reliance on s 55 is a matter which they must consider carefully and address adequately in their amended pleadings, because pursuit of any claims which are beyond time and have been extinguished by operation of s 63(1) of the Limitation Act, will inevitably face further strike out applications. 36This is the result of the operation of provisions of the Limitation Act. Relevant to consider are s 14(1), s 55 and s 63. They relevantly provide: "14 General (1) An action on any of the following causes of action is not maintainable if brought after the expiration of a limitation period of six years running from the date on which the cause of action first accrues to the plaintiff or to a person through whom the plaintiff claims: (a) a cause of action founded on contract (including quasi contract) not being a cause of action founded on a deed, (b) a cause of action founded on tort, including a cause of action for damages for breach of statutory duty, (c) a cause of action to enforce a recognizance, (d) a cause of action to recover money recoverable by virtue of an enactment, other than a penalty or forfeiture or sum by way of penalty or forfeiture. 55 Fraud and deceit (1) Subject to subsection (3) where: (a) there is a cause of action based on fraud or deceit, or (b) a cause of action or the identity of a person against whom a cause of action lies is fraudulently concealed, the time which elapses after a limitation period fixed by or under this Act for the cause of action commences to run and before the date on which a person having (either solely or with other persons) the cause of action first discovers, or may with reasonable diligence discover, the fraud deceit or concealment, as the case may be, does not count in the reckoning of the limitation period for an action on the cause of action by the person or by a person claiming through the person against a person answerable for the fraud deceit or concealment. 63 Debt, damages etc (1) Subject to subsection (2), on the expiration of a limitation period fixed by or under this Act for a cause of action to recover any debt damages or other money, the right and title of the person formerly having the cause of action to the debt damages or other money is, as against the person against whom the cause of action formerly lay and as against the person's successors, extinguished. (2) Where, before the expiration of a limitation period fixed by or under this Act for a cause of action to recover any debt damages or other money, an action is brought on the cause of action, the expiration of the limitation period does not affect the right or title of the plaintiff to the debt damages or other money: (a) for the purposes of the action, or (b) so far as the right or title is established in the action. (3) This section does not apply to a cause of action to which section 64 or section 65 applies." 37Also relevant to considered is s 36 of the Interpretation Act 1987 which provides: "36 Reckoning of time (1) If in any Act or instrument a period of time, dating from a given day, act or event, is prescribed or allowed for any purpose, the time shall be reckoned exclusive of that day or of the day of that act or event. (2) If the last day of a period of time prescribed or allowed by an Act or instrument for the doing of any thing falls: (a) on a Saturday or Sunday, or (b) on a day that is a public holiday or bank holiday in the place in which the thing is to be or may be done, the thing may be done on the first day following that is not a Saturday or Sunday, or a public holiday or bank holiday in that place, as the case may be.(3) If in any Act or instrument a period of time is prescribed or allowed for the doing of any thing and a power is conferred on any person or body to extend the period of time: (a) that power may be exercised, and (b) if the exercise of that power depends on the making of an application for an extension of the period of time - such an application may be made, after the period of time has expired." 38In Segal v Young [2001] NSWCA 141, the operation of s 14 was considered. There it was observed: "19 On a common sense approach, the issue is not one of subtlety. The paramount principle is that the statutory period limitation period is six years and a plaintiff is entitled to the full period within which to bring proceedings. Anything less than the full six year period will result in a plaintiff not being granted the time afforded by the statute. At common law, a day is not divisible and fractions of a day are not recognised: Prowse v McIntyre. Thus, if a limitation period expires on a given day, the cause of action is regarded as having been extinguished as from the next day. 20 The approach that I propose is in accord with the principle that "[a] limitation provision, because it derogates from the ordinary rights of individuals, should be strictly construed" (per Mason CJ, Deane, Toohey and Gaudron JJ in Australian National Airlines Commission v Newman (1987) 162 CLR 466 at 471). In accordance with this principle, where ambiguity exists, limitation statutes are construed favourably to plaintiffs." 39In Mr and Mrs Constantinidis' case, s 55 operates in respect of the s 14 limitation period in relation to any claim where there was relevant fraud, deceit or concealment on Mr Tsolakis' part. In that event, the period before the date on which they first discovered, (or with reasonable diligence could have discovered) his fraud, deceit or concealment, does not count. On their case, that date, in relation to at least some of their claims, was 4 October 2005. No later date has been relied on. 40The provision made in s 36(1) of the Interpretation Act, that a period of time, dating from the day from which the s 14 limitation period ran, is reckoned exclusive of that day, does not apply to the day on which the extended period provided in s 55 expires. In this case, that date is 3 October 2005, it being 4 October when Mr and Mrs Constantinidis discovered what Mr Tsolakis had done and failed to do in relation to various litigation, upon Mrs Constantinidis' inspection of the Court file. By s 55 the period before 4 October, that is the period ending on 3 October does not count for the purpose of the limitation period. 41As discussed in Young v Segal, fractions of a day are not recognised either at common law, or in these statutory provisions, so that Mr and Mrs Constantinidis submission that it was only late in the afternoon of 4 October that they learned of what Mr Tsolakis had done in relation to the litigation, is not of relevance. 42It follows that but for the operation of s 36(2) of the Interpretation Act, in respect of 3 October 2011, which was a public holiday, the extended limitation period flowing on the facts in this case would have expired on 3 October 2011. Because of the effect of that provision, the limitation period expires on 4 October 2011. 43In the circumstances it is plain Mr and Mrs Constantinidis must have an appropriate opportunity to replead. In doing so they must restrict themselves to a pursuit of claims which have not been extinguished by operation of s 63(1) of the Limitation Act. That is any claims in respect of which there is no argument available that the 6 year limitation period was extended to 4 October 2005. 44As I understand the case they seek to advance, that precludes, at least, their pursuit of the claims in relation to Mr Tsolakis' negligence in relation to the original transaction, because those claims accrued before 4 October 2005. There is no claim as to the original transaction, that Mr and Mrs Constantinidis only learned of what Mr Tsolakis had done and failed to do, when Mrs Constantinidis inspected the Court's file in relation to the proceedings brought against them by Landcorp on 4 October 2005. In that event, that claim was statute barred, when the proceedings were commenced on 4 October 2011, the provisions of s 55 of the Limitation Act not being available to be relied on. 45Otherwise, as I have said, Mr and Mrs Constantinidis must take care to ensure that their pleadings are restricted to those of their claims which were not statute barred on 4 October 2011, when the proceedings commenced.
Costs 46Mr and Mrs Constantinidis must bear the costs of the two motions, that reflecting the usual order, that costs follow the event. They must thus bear both the cost of the dismissal of their motion and the cost of being given the opportunity which they sought, to replead, upon the statement of claim being struck out.
Orders 47For the reasons given, I order:
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: 30 August 2012
Constantinidis
Tsolakis