Gilles v Palmieri

The orders to be made by this Court

The question then arises what order should be made in place of those made by the primary judge. The problem confronted by the applicants emerges from the following chronology.
The solicitors had a satisfactory explanation for not commencing proceedings before December 2012. On 13 December 2012, this Court delivered judgment in proceedings in which the solicitors were parties: Pritchard v DJZ Constructions Pty Ltd [2012] NSWCA 413. Their involvement in the litigation created a risk that they might be prevented from pursuing their claim to recover costs due to be paid by the respondents. The delivery of the Court of Appeal judgment removed the possible impediment.
The evidence established that throughout the second half of 2013 a series of Calderbank offers passed between the applicants and the solicitors for the respondents concerning the outstanding question of costs. On two occasions, the applicants threatened commencing proceedings (the first time "within seven days", and the second time "immediately" and "without further notice"). The respondents made it clear that any such proceedings would be defended, and would result in a cross-claim for losses, including costs paid to the applicants. There is then evidentiary silence as to the delay which occurred throughout the whole of 2014. The statement of claim was ultimately filed on the last day before the expiration of the limitation period, 27 November 2014 (putting to one side whether there was an acknowledgment).
Thereafter an almost complete absence of explanation for the delay continued in the first half of 2015. However, the solicitor gave evidence that at least in the early part of the period for service, the failure to serve a statement of claim was a conscious decision on her part. She said: "Q: So when you say at paragraph 45, 'I did not serve a statement of claim', that was a conscious decision on your part not to do so? A: In the early part of the, of the process, yes, I was hopeful that the proceedings could be resolved without having to go [to] that step."
In June 2015 there was a further exchange of Calderbank offers, not all of which are in evidence. It will be recalled that this was the period when the six months provided for under the rules for service was coming to an end. On 2 June 2015, in a letter to the respondents' solicitors, the applicants' solicitor referred to a facsimile dated 2 June 2015 and stated: "the offer that you have made does not contain sufficient details for our client to be able to give it proper consideration. Mr Palmieri has previously made this offer and the following further information in support of the offer was requested from him on 15 May 2015".
The letter then sought details relating to the process of assessment and the total sum received by Mr Palmieri and DJZ Constructions in respect of work done by Giles Payne & Co. The letter said that until such information had been provided, they were not in a position to consider the offer made. The letter then went on to explain in some detail the calculations of assessed costs which the author maintained would have been expected to have been received. The letter stated that the respondents should have received at least $47,000 and "in our experience should have received approximately $58,047.07" [sic].
By letter dated 10 June 2015, the respondents' solicitors responded to the request for information, and advised that approximately $39,000 had been received on account of the costs included in the invoices dated 28 March 2008, 28 March 2009 and 5 June 2009.
There was no suggestion that, at the times in which Calderbank letters were being exchanged and information was being provided to the applicants, the respondents appreciated that the applicants had commenced proceedings against them.
The solicitor gave this answer to one of a series of questions asked by the primary judge: "[W]hen I was corresponding with the solicitors for Mr Palmieri my focus was on the costs assessment. It wasn't that I was deliberately ignoring the statement of claim, it wasn't at the forefront of my mind. At the forefront of my mind was the negotiations on costs and trying to resolve that by obtaining as much information as possible from Navado Lawyers on behalf of the first and second respondents."
However, as set out above, in answer to questions posed by counsel for the respondents, the solicitor denied that she had held off serving the statement of claim because she wanted to gain information in the interim.
The applicable principles are well established. Plainly the power to extend the time for valid service is to be exercised having regard to ss 56-59 of the Civil Procedure Act 2005 (NSW). It is relevant to consider "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 parties]": Arthur Andersen Corporate Finance Pty Ltd v Buzzle Operations Pty Ltd (in liq) [2009] NSWCA 104 at [43]. The onus lies upon the applicants to show "good reason" to extend time: see Wakim v Coleman [2010] NSWCA 221 at [38].
The present litigation discloses the following matters all of which point against extending the time for service. 1. Much of the period of delay is unexplained by the applicants (I have in mind the whole of 2014, leading up to filing on 27 November 2014 and the first half of 2015) in circumstances where the applicants had threatened, on two occasions in 2013, to sue. 2. I would infer that the decision to file on 27 November 2014 was a conscious decision to file on the last day before the limitation period (at least arguably) expired. 3. There is nothing to suggest that the respondents were told that proceedings had been commenced against them. 4. The evidence from the solicitor was unsatisfactory, at least in part. In particular, the words "I had incorrectly diarised the final date" do not readily bear the meaning which she sought to ascribe to them, namely, a "mental cross" as part of a "mental exercise". This was something which only became clear following the service of a notice to produce and the cross-examination reproduced above. 5. There is no evidence at all from the applicants themselves (Mr Gilles and Mr Eliades). It is to be recalled that this is not the typical case where a solicitor acting for a creditor makes an error for which the client should not be held responsible. This was a case where the creditors chose not to retain a separate firm of solicitors to act them. Rather, the firm acted for itself. Indeed, Mr Gilles verified the statement of claim as the Senior Partner of the firm on the day it was filed. 6. I accept the unchallenged evidence that an employed solicitor believed, wrongly, that she had nine months to serve the statement of claim. However, there was no evidence from either of the partners of the firm, who (I would infer) must have made the decision to sue on the day before the limitation period arguably expired, who must have been involved in the subsequent decision to take steps to obtain a costs assessment (because of the cost incurred at that stage) and who I would infer gave instructions that the statement of claim not be served immediately. It is not established that they shared their employee's erroneous belief.
Just as was the position in Arthur Andersen Corporate Finance v Buzzle Operations Pty Ltd (in liq) at [104], I conclude that the cogency of the case in refusing to extend time is far stronger than the case for granting it. The Court is required to have regard to the degree of expedition with which the applicants have approached the proceedings, and the degree to which the applicants' lack of expedition has arisen from circumstances beyond their control: see Civil Procedure Act, s 58(1), (2)(b)(ii) and (iii). There has been a substantial and at least in part conscious delay by the applicants, including after commencing proceedings, parts of which remain unexplained, and which is not addressed merely by pointing to the absence of demonstrated prejudice to the respondents. Although the primary judge's discretion miscarried, the correct substantive order was made.
That said, the order for indemnity costs was based upon the false premise that the application was (to use the words of the primary judge) "completely misconceived" because "I don't think I do have the power to extend". To that extent the appeal must be allowed, and the indemnity costs order replaced with an ordinary order as to costs. Otherwise, the appeal should be dismissed. Although there were errors made by the primary judge, they were contributed to by the way the application was presented, and I would also propose that costs follow the event, the question of indemnity costs being an insignificant aspect of the written and oral submissions.
It is inappropriate to determine (a) whether the 1987 or 2004 Legal Profession Act applies, (b) whether there was an acknowledgement such as to avoid the operation of the Limitation Act, and (c) the issues raised by the respondents in relation to identity and proper costs disclosure to them by the applicants. I do not wish to encourage further litigation, but those issues may arise subsequently between the parties, and on different evidence and with fuller submissions than have been provided to this Court. In those circumstances, it is best to say nothing about these matters, none of which can bear on the orders made today. Nor is it necessary to address in any detail various unsatisfactory aspects of the preparation of the White Folder, which included a partial reproduction of the solicitor's affidavit, with some pages altered, and new pages included which had not been in evidence before the primary judge, a matter to which counsel for the respondents drew the Court's attention, but did not seek to take any further. It suffices to note that the potential seriousness of altering the appeal books was referred to in ACES Sogutlu Holdings Pty Ltd (in liq) v Commonwealth Bank of Australia [2014] NSWCA 402; 89 NSWLR 209 at [159].
The orders which I propose are: 1. Grant leave to appeal. 2. Dispense with the requirements to file and serve a notice of appeal. 3. Appeal allowed in part. 4. Set aside order 5 made on 4 December 2015, and in lieu thereof order that the plaintiffs pay the defendants' costs of the proceedings (including the costs of the notices of motion filed on 16 September 2015 and 27 October 2015). 5. Otherwise dismiss the appeal. 6. The appellants pay the respondents' costs of the appeal (including the application for leave to appeal).
SACKVILLE AJA: I agree with Leeming JA.

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