Hightop Pty Ltd & Anor v Caffe Pty Ltd & Ors [2009] QSC 402

PROCEDURE - SUPREME COURT PROCEDURE - QUEENSLAND - PROCEDURE UNDER RULES OF COURT - TIME - DELAY SINCE LAST PROCEEDING - renewal of claim -where defendants apply to have the ex parte order renewing the plaintiffs' claim set aside -adequacy of explanation - issues of prejudice caused to the defendants - whether the plaintiffs have provided an adequate reason for delay in commencing proceedings - whether the plaintiffs have provided an adequate reason for not serving proceedings shortly after commencement - whether the plaintiffs have provided an adequate explanation for the delay serving the amended pleadings - where the plaintiffs provide several reasons for the delay - whether blame should be attributed to the plaintiffs for the delay in serving the proceedings - role of solicitor - consideration of the legal principles arising from rr 5, 24 Uniform Civil Procedure Rules 1999 (Qld) - whether the claim against the defendants should be renewed

PROCEDURE - SUPREME COURT PROCEDURE - QUEENSLAND - PROCEDURE UNDER RULES OF COURT - TIME - OTHER MATTERS - whether the plaintiffs have substantial prospects of success on their claim against the defendants - relevance to the determination of whether the claim against the defendants should be renewed

PROCEDURE - SUPREME COURT PROCEDURE - QUEENSLAND - PROCEDURE UNDER RULES OF COURT - TIME - OTHER MATTERS - prejudice to the first, second and third defendants - whether the plaintiffs' delay has caused prejudice to the first, second and third defendants - where records relevant to the plaintiffs' claim have since been disposed of or have become unavailable - whether the lost documents or computer files would contain information that would be important in contesting the claim - whether prejudice has arisen due to passage of time -whether the claim against the first, second and defendants should be renewed

PROCEDURE - SUPREME COURT PROCEDURE - QUEENSLAND - PROCEDURE UNDER RULES OF COURT - TIME - OTHER MATTERS - prejudice - where the fourth defendant destroyed the plaintiffs' file relating to the purchase of the business without first obtaining instructions to do so and without advising the plaintiffs' former solicitor - where the plaintiffs allege that the fourth defendant is negligent - whether the destruction of documents causes prejudice to the fourth defendant's defence - where a preliminary view of the prospects of success against the fourth defendant cannot be formed - whether the claim against the fourth defendant should therefore be renewed

Muirhead v Uniting Church in Australia Property Trust [1999] QCA 513, applied

Porzuczek v Toowoomba District Health Services [2007] QSC 177, considered

Van Leer Australia Pty Ltd v Palace Shipping KK [1981] HCA 11; (1981) 180 CLR 337, applied

Vlies v Commonwealth of Australia [2004] QSC 404, considered

Trade Practices Act 1974 (Cth), s 75b

Uniform Civil Procedure Rules 1999 (Qld), r 5, r 24

McKays solicitors for the first, second and third applicants

[1] P LYONS J: The plaintiffs commenced these proceedings by a claim filed on 7 April 2008. The claim not having then been served, the plaintiffs obtained an order made ex parte on 1 June 2009 for the renewal of the claim until 7 April 2010. The defendants have applied to have that order set aside, their grounds including that the plaintiffs have not provided an adequate explanation for the delay, and that prejudice in the conduct of their defence has arisen from the delay.

[2] The claim arises out of the sale of a business in 2002.

[3] Caffe entered into a contract dated 9 April 2002 for the sale to Hightop of a bakery business, known as the Solo Pane Bakery (the Bakery), then conducted at Springwood. The purchase price was $345,000.

[4] Mr and Mrs Sale are the directors of Caffe (I shall refer to Mr and Mrs Sale and Caffe together as the vendor group). Mrs Sale has given evidence in an affidavit that she was not a director of Caffe at the time of the sale of the Bakery. However, it is clear that she worked in the Bakery. Her signature appears on the sale contract, as vendor. The plaintiffs give evidence of her involvement in the making of pre-contractual representations about the business. A letter from Caffe's accountant dated 30 April 2002, addressed to its directors and intended for the purchaser of the Bakery, commenced, "Dear Rob and Paula", reflecting the first names of Mr and Mrs Sale.

[5] Mr Walker is a director of Hightop. He is also the trustee of the Karl Walker Trust (the trust).

[6] Ms Lawrence was in 2002 practising as an accountant, her clients including Hightop and Mr Walker.

[7] For the purpose of the sale, a document describing the business of Solo Pane Bakery was made available to potential purchasers (the information pack). It was prepared by Mr Peter Landon, then of Hallmark Business Sales. It seems relatively uncontentious that in about January 2002 the information pack was provided by Hallmark to Mr Walker, in connection with the potential sale of the Bakery.

[8] The information pack stated that the information had been supplied by the vendor of the business. It included the following:-

(a) A statement that the Bakery was fully managed by a day manager and a head baker, so that it would ideally suit a non-baking investor (as the then current owners were said to be). However, the information pack stated that the owner's wife handled wages, payment of bills and debt collection from home; and worked a shift from time to time to ensure business practices and goals were being met;

(b) A statement that the lease expired on 8 February 2004, but included an option for a further five years;

(c) Financial information for the years ending 30 June 2000, 30 June 2001, and the six month period ending 31 December 2001, described as prepared by the clients for income tax purposes;

(d) A statement of Franchise Income, included in the financial information, which in the final six month period was $25,689.29 and in the 2001 year, was $11,265.14;

(e) The amount of bad debts, also included in the financial information.

[9] The reference to Franchise Income is a reference to the fact that the business originally included the Bakery and a retail café. The retail café became the subject of a franchise to another party, resulting in the Franchise Income. The fact that there is no such income in the 2000 year, and the relationship between that income for the 2001 year and the income for the six months to 31 December 2001, would seem to be explained by the fact that the franchise was established in about May 2001.

[10] Mr Walker sought Ms Lawrence's advice about the purchase of the Bakery. He gave her a copy of the information pack. By a document dated 30 January 2002, she provided some comments. She also extracted two pages from the information pack, on which she wrote a number of queries.

[11] Mr Walker's evidence is that prior to Hightop entering into the contract he had some discussions with Mr and Mrs Sale about the business.

[12] Mr Walker also says that Ms Lawrence gave him advice about taxation matters. Mr Walker wanted to ensure that he would have no personal liability to the tax office. He states that Ms Lawrence then arranged for the incorporation of Hightop, and, according to Mr Walker, advised that it be the purchaser of the business, with Mr Walker as trustee of the trust to be the operator.

[13] The contract made provision for what might be described as a due diligence period, which, in the event, expired on 14 May 2002. The material strongly suggests that the plaintiffs chose not to carry out due diligence, but, by arrangement with Caffe, to rely on the information in the information pack, and Caffe's accountant would liaise with Ms Lawrence and provide an opinion as to whether the information in the information pack was a true and fair representation of the Bakery's trading activities. Caffe's accountant was Mr David Le Sueur, of Tatnell DLS. On 30 April 2002, Mr Le Sueur sent a letter (the April 2002 letter) to the directors of Caffe, commenting in some detail on the information. It is apparent from that letter that the financial information in the information pack was not in fact identical with that in the income tax returns, but was the product of a substantial number of adjustments, said to reflect the trading activities of the Bakery, (also described as the core Bakery trading activities.) In particular, directors' salaries, described in two places in the letter as "Wages Administration" and in one place as "Wages-Administration", were said to have been added back.

[14] The contract was completed on 31 May 2002. Mr Walker deposes that business difficulties became apparent in a short time. Wages were significantly greater than anticipated. There were serious problems with bad debts. In early 2003 it became necessary to inject a further $100,000 as working capital. The loan to purchase the business had to be refinanced. Mr Walker, his wife, and his daughter all had to work in the Bakery, in an endeavour to keep the business afloat.

[15] On the expiry of the lease, for reasons not fully explained, it was not renewed, and the business was transferred to premises at Annerley. In April 2005, Mr Walker decided not to continue, and sold the business for $50,000, the price essentially reflecting the value of the plant and equipment.

[16] In the time since the purchase of the business, Mr and Mrs Walker both experienced some significant health problems. They are discussed more fully later in these reasons.

[17] Mr Walker experienced some difficulties with the Australian Taxation Office. On 26 August 2005, he instructed a solicitor (to whom I shall refer as the former solicitor) to act for him in relation to this matter. He became the subject of some significant tax debts, and the solicitor dealt with the Australian Taxation Office on Mr Walker's behalf in respect of these debts between August 2005 and early 2008. Mr Walker attributes a tax debt of some $341,000 to advice from Ms Lawrence about arrangements which were made in connection with the purchase of the Bakery.

[18] On 26 August 2005, the former solicitor wrote to Ms Lawrence (the August 2005 letter). He stated that he had been retained (on that day) to act on behalf of Mr and Mrs Walker in relation to their income tax affairs, and in relation to the unsuccessful purchase of the Bakery. He had been instructed that Ms Lawrence held a file in relation to the acquisition of the Bakery, which contained, in particular, documents recording representations made by the vendor or its agent. He requested a copy of the file.

[19] Ms Lawrence states that, with Mr Walker's permission, she copied some of the documents from the file and sent them to the former solicitor.

[20] On the finalisation of the dispute with the ATO in early 2008, the former solicitor turned his attention to the claim against the defendants. As I have stated, the claim was filed on 7 April 2008. On 8 October 2008, the former solicitor wrote to Ms Lawrence advising of the filing of the claim. The letter stated that the claim was being reviewed, and recommended that Ms Lawrence obtain legal advice and give notice to her insurer.

[21] On 7 April 2009, an unidentified person contacted Mrs Sale telling her that he wished to arrange to serve legal process. In a later telephone conversation he identified Hightop and Mr Walker as the plaintiffs in the proceeding. However, service was not effected at that time. It is apparent that if not served on that day the claim would then have become stale.

[22] After the renewal order which I have previously mentioned, the statement of claim was amended on 22 June 2009. On 25 June 2009, a copy of the proceedings was served at the registered office of Caffe. A copy was provided to Mr Sale the same day. Mrs Sale was personally served with the proceedings on 9 July 2009, and personal service was effected on Mr Sale on 23 July 2009. The proceedings were served on Ms Lawrence on 7 July 2009.

[23] Rule 24 of the Uniform Civil Procedure Rules 1999 (Qld) (UCPR) conferred on the Registrar power to renew the claim after it became stale. It includes the following:-

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

(2) If the claim has not been served on a defendant and the registrar is satisfied that reasonable efforts have been made to serve the defendant or that there is another good reason to renew the claim, the registrar may renew the claim for further periods, of not more than 1 year at a time, starting on the day after the claim would otherwise end."

[24] It was common ground that the Court had the power to reconsider the order made ex parte by the Registrar.[1]

[25] It was common ground that the onus lay with the plaintiffs to establish in these proceedings that the discretion to renew the claim should be exercised in their favour.

[26] In Muirhead v Uniting Church in Australia Property Trust[2] Williams J stated that where a limitation period has expired, the relevant principles when considering whether or not to renew a claim are no different from those which are relevant to an application to extend a limitation period, or for leave to proceed when no step has been taken in an action for 12 months.[3] His Honour concluded that in that case, the claim should not be renewed. Pincus JA identified the relevant principles as those stated by Stephen J in Van Leer Australia Pty Ltd v Palace Shipping KK,[4] which his Honour then applied. His Honour concluded by saying that, subject to the matters set out in his judgment, he agreed with the reasons of, and the order proposed by, Williams J. The third member of the court, Davies JA, agreed with the reasons of Williams J, subject to the remarks of Pincus JA.

[27] As I read these judgements, the result is that two members of the Court of Appeal considered that the relevant principles were those stated in Van Leer.[5] They are as follows:-

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'.

[28] The context in which the discretion conferred by r 24(2) is to be exercised includes r 5,[6] which states the following:-

5 Philosophy - overriding obligations of parties and court

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

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

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

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

[29] An "apparently worthwhile action" is a factor favouring renewal of the claim. However, an application for renewal is not an occasion for determining the merits of the claim and it will often be difficult to come to a reliable view that a plaintiff's claim is so strong that a serious injustice would result if it were not allowed to proceed.[7]

[30] In the present case, the contentions of the parties make it necessary to give some consideration to the apparent prospects of success of the claims, though the limitations associated with the performance of that exercise at a very early stage in the proceedings must be borne in mind. The various contentions may be considered by reference to the following topics:-

[31] The following matters are relied upon on behalf of the plaintiffs to explain this delay:-

(a) The enormous pressures of attempting to keep the business afloat until April 2005;

(b) The illnesses suffered by Mr and Mrs Walker between April 2003 and April 2005;

(c) The need to deal with the Australian Taxation Office between August 2005 and early 2008;

(d) Concentration by Mr and Mrs Walker on recovering their health, and consolidating the remaining business of Mr Walker.

[32] The effect of the evidence given on behalf of the plaintiffs is that it was not expected that significant personal involvement would be required from Mr and Mrs Walker. At about the time of the purchase of the Bakery, another business, Le Snacks, was also purchased. Mr Walker ran this business during the day. However he gives evidence that in 2004, he was working through the night at the Bakery to ensure orders were met the following day; that he worked seven days a week, and was getting on average four hours sleep a night; and that Mrs Walker, who was a full time teacher, would also often work through the night packing bread for the next day's delivery; as would his daughter who was then in Year 12 at school. In addition, moneys had to be borrowed including refinancing from the bank, and additional sums from relatives.

[33] Mr Walker also gives evidence that in April 2003 he became ill with a brain tumour. An operation was required to remove the tumour, and he had to undergo a short period of recuperation. In about April 2005, Mrs Walker was diagnosed with breast cancer (for the second time). In addition, she had developed Graves' disease, a condition resulting from an overactive thyroid, caused by high levels of stress. These circumstances, including dealing with issues with the Australian Taxation Office in relation to the tax debt of approximately $340,000, made it very difficult for Mr Walker to give consideration to an action against the vendor group or Ms Lawrence.

[34] Counsel for Ms Lawrence points out that Mr Walker gives evidence that in early 2003 he had "confidential dealings" with a Mr Bridge of Bridge Brideaux, Solicitors, "as to the misrepresentation concerning the under-payment of the wages" by Caffe. That is one of the matters relied upon in the claim. The submission is that the effect of this evidence is that a possible claim was then being explored with another solicitor. No attempt was made to cross-examine Mr Walker to clarify the statement. It is somewhat ambiguously expressed. In the context of his evidence, it seems to me a little unlikely that Mr Walker is there stating that he approached a solicitor for advice about a potential claim. While the effect of the evidence is far from certain, it rather suggests to me that a solicitor acting for a former employee of the Bakery made some inquires of Mr Walker on a confidential basis relating to the under-payment of wages.

[35] All of the defendants refer to the August 2005 letter. It is clear from that letter that one of the matters in respect of which the former solicitor was then retained was the purchase of the Bakery. Moreover, that seems to be the likely explanation for the request for Ms Lawrence's file. Although the former solicitor has provided an affidavit, he makes no reference to this aspect of his retainer, nor to the receipt of documents from Ms Lawrence. His affidavit suggests that it was not until early 2008 that Mr Walker raised the purchase of the Bakery with him. That suggestion cannot be correct.

[36] In my view, the personal circumstances of Mr Walker provide some explanation for delay in the pursuit of a potential claim against the defendants. There is, however, no real explanation in the material for the fact that between August 2005 and early 2008 the solicitor did not take any action in respect to the claim.

[37] The former solicitor deposes that, having taken some instructions from Mr and Mrs Walker, and having conferred with Senior Counsel, he formed the view that the limitation period might expire on 8 April 2008. He arranged for proceedings to be settled, resulting in the filing of the claim and statement of claim on 7 April 2008. He says that in his view the proceedings were not then in a proper state to be served. One reason for that view was the insufficiency of particulars in relation to loss and damage, but he says he would have served the proceedings if that were the only difficulty. The other difficulties were that the report of an expert had not been obtained in relation to the claim against Ms Lawrence; and that he had not been able to review the documents held by the plaintiffs, to enable him to have sufficient confidence in the claim as pleaded.

[38] It has been held that, despite the requirements of r 5 of the UCPR, the plaintiff may delay serving originating process on its issue, it being a legitimate reason to defer service to enable investigation of the claim, though that consideration has been said to be subject to the question of prejudice caused to the defendant.[8]

[39] On behalf of the vendors it is pointed out that the amended statement of claim is not materially different to the original version, and it is submitted generally that the explanation for delay is unsatisfactory.

[40] In my view, it is a satisfactory explanation for the fact that proceedings are not served when issued, that a solicitor, experienced in litigation, has formed the view that the proceedings should not be served, on grounds that appear to have some substance. That is what happened in the present case. The fact that, as it turns out, major amendments were not required does not of itself affect this conclusion. I note that no attempt was made to cross-examine the former solicitor, in order to challenge his opinion.

[41] The former solicitor deposes to the work undertaken after the proceedings were initially filed on 7 April 2008. He recovered 21 archive boxes of documents, which were not in good order. He instructed two of his employed lawyers to go through the documents and to work with Mr and Mrs Walker to prepare witness statements. These tasks alone occupied almost 100 hours. A report from expert accountants was obtained. The former solicitor conferred with Senior Counsel, and subsequently drew an amended statement of claim. That was sent to Junior and Senior Counsel to be settled, before service was effected.

[42] Mr Walker deposes that since April 2008, he has received a number of requests for information and documents from the former solicitor, which he has done his best to answer. He believed that he had answered all those requests and had completed the task of providing all documents and information to prepare the plaintiffs' case by the end of 2008. He also deposes to having paid the former solicitor $100,000 to prosecute the case to this point, including disbursements. He did not give instructions that the proceedings not be served, though he was informed in April 2008 that the proceedings were not served at that time. He was unaware that the proceedings had to be served within 12 months of their issue. He says that he is ready, willing and able to proceed with the case with diligence and expedition.

[43] On behalf of the vendor group, it is submitted, that notwithstanding Mr Walker's evidence, the plaintiffs cannot escape personal blame. They refer to Vlies v Commonwealth of Australia[9] and Porzuczek v Toowoomba District Health Services[10] as demonstrating that personal blame may attach to a party in circumstances where the delay was primarily that of the solicitor. Obviously, every case turns on its own facts. For example, in Vlies, the delay occurred over a period of 18 years from the commencement of proceedings. In Porzuczek the plaintiff had been injured in 1992. Proceedings had commenced in 1996. The case concerned an application to dismiss the action for want of prosecution, filed in April 2007. Moynihan J, having first noted that a client should be able to rely upon his solicitor,[11] concluded that the delay in the proceedings was primarily the fault of a former solicitor, but that the plaintiff had failed to pursue his action more vigorously, although he did not regard that of itself as a decisive consideration.[12]

[44] In my view, blame is not to be attributed to the plaintiffs personally for the delay in serving proceedings after they were initially issued. The former solicitor has provided an explanation for this delay which I consider to be of some substance, although his conduct is open to the criticism that, given the time that had passed, the matter should have been pursued with greater diligence, and he should have ensured, in his client's interest, that the claim did not become stale.

[45] It is submitted in this context that fault on the part of the former solicitor works in favour of the defendants, because the plaintiffs would have an action against the former solicitor if the claim is not renewed. The submission is based on a passage in Muirhead.[13] The availability of a negligence action against a solicitor, as an alternative remedy, was there recognised as a relevant circumstance when considering whether or not there was good reason for renewing a claim. It seems to me that, while such a matter is relevant, its significance may vary from case to case, for reasons which include the following:-

(a) Not all the facts relevant to the question whether the solicitor was negligent may be before the Court on the application for the extension of the claim;

(b) If a fresh action is to be started against the solicitor, there will inevitably be further delay before a remedy is provided to the plaintiff;

(c) The plaintiff's claim against the solicitor is likely to require consideration of the subject matter of the claim which has gone stale;

(d) Important facts and documents may be in the control of parties who may be hostile to the plaintiff and the plaintiff's solicitor, or who are likely to have little reason to cooperate with either of them;

(e) Evidence may have been lost with the passage of time. There may be greater difficulty in securing a just trial between the plaintiff and the solicitor, than in the claim which has gone stale;

(f) The plaintiff's ability to pursue a claim against the solicitor may be affected by limitations on the plaintiff's resources, financial or personal.

[46] In the present case, there is insufficient evidence available to enable me to be confident that the former solicitor was negligent. I would not be prepared to take this matter into account in determining the application.[14]

[47] In summary, I am of the view that the plaintiffs have given a reasonable explanation, so far as their own conduct is concerned, for the delay which occurred after the proceedings issued; and while some criticism may be made of the conduct of the former solicitor in this period, that should not count significantly against the plaintiffs.

[48] The plaintiffs' claim against the vendor group is for damages for misleading conduct under the Trade Practices Act 1974 (Cth) (the TP Act). It is founded on the following alleged representations:

(a) A representation as to wages paid to staff, contained in the information pack (the wages representation);

(b) A representation relating to franchising (the franchise representation);

(c) A representation as to net profit made by the Bakery in the period dealt with in the information pack (the net profit representation);

(d) A representation as to bad debts for the six month period ending 31 December 2001, found in the information pack (the bad debts representation);

(e) A representation as to the level of the wastage in the business (the wastage representation).

[49] Mr and Mrs Sale are alleged to be liable in respect of these representations pursuant to s 75B of the TP Act, being knowingly concerned in their making.

[50] The information pack plainly contained statements as to the amount of wages, which are relied upon for the wages representation. The representation is said to constitute misleading conduct because Caffe did not in fact pay penalty rates, with the result that the amounts represented were substantially less than the staff's minimum legal entitlement to wages.

[51] In respect of this claim Mr Walker gives evidence that two staff members successfully sued Caffe for the underpayment of wages. This evidence is not contradicted, nor has it been otherwise challenged.

[52] The failure to disclose an unexpected circumstance which would qualify the effect of what is otherwise represented can constitute misleading conduct.[15] It seems to me that a representation of the amount of wages paid by a business which is in fact less than the legal entitlement of the staff, without disclosure of that circumstance, is likely to fall within this category. Although I am conscious that this is simply an application to renew the claim, the limited material available suggests the plaintiffs have substantial prospects of success on this part of their claim.

[53] As pleaded, the franchise representation relates to the franchise income for the six month period ending 31 December 2001, which the information pack recorded as $25,689.29. In part, the representation is supported by a representation that the franchise income in that period was 2 percent of the gross turnover of the retail café. In the six month period ending 31 December 2001, gross turnover for the retail café is alleged by the plaintiffs to have been $100,000, it being alleged in the particular of this allegation that, for the corresponding period in 2002, franchise income was approximately $2,000; and accordingly it is asserted that the franchise representation was misleading or deceptive.

[54] As pleaded, the franchise representation includes a representation relating to the relationship between franchise income and gross turnover for the retail café. That representation was said to have been made orally by either Hallmark (the selling agent) or another agent of Caffe. Mr Landon, from Hallmark, has no recollection of making the representation. Nor do Mr and Mrs Sale.

[55] As previously mentioned, in the document dated 30 January 2002, Ms Lawrence provided Mr Walker with a series of points for consideration. One related to the calculation of franchise income. There was a handwritten note, which reads "2 per cent of gross turnover". The handwriting is that of Ms Lawrence. She suggests that it may reflect a conversation with Mr Walker.

[56] It is difficult to come to any view about whether the plaintiffs are likely successfully to establish that the representation that franchise income was 2 percent of gross turnover was made, though the handwritten note provides some support for that view. Perhaps more importantly, the amended statement of claim alleges that the franchise income from the retail café for the six months ending 31 December 2002 was approximately $2,000; and Mr Walker swears to the truth of the allegations in the statement of claim. It would seem that the franchising income was unlikely to be the amount stated in the information pack, on that basis.

[57] While there are some uncertainties about that part of the claim relating to the franchise representation, it may well have reasonable prospects of success.

[58] The net profit representation is said to be misleading because the net profit figures in the information pack were the result of adding back into the calculation of net profit (or, more accurately, excluding from the expenses) salaries paid to Mr and Mrs Sale. The difficulty with this aspect the claim is that the April 2002 letter, from Mr Le Sueur, a copy of which was sent to Ms Lawrence, recorded that the net profit was calculated on that basis. It seems that Ms Lawrence sent a copy of that letter to Mr Walker, although Mr Walker says he did not see it. At this stage, it may be doubted whether this matters. The fact that the true position was made known to Ms Lawrence rather suggests that the plaintiffs will have difficulty in succeeding on this aspect of their claim.

[59] The information pack contained a statement that for the six month period ending 31 December 2001, there were no bad debts. The statement of claim alleges that there were substantial bad debts both before and after that period, by inference making it unlikely that there were no bad debts in that period. Although the information is relatively sparse, it would suggest that the plaintiffs have some real prospect of success on this aspect of their claim.

[60] The self-managed business representation is based in part on the information pack. It is also based in part upon an oral representation, said to have been made by Mrs Sale to Mr Walker at a meeting in early March 2002, in the presence of Mr Sale. The effect of the oral representation is that Mrs Sale worked in the business for an hour or two a day. Both Mr Sale and Mrs Sale say they have no recollection of the making of this representation.

[61] Mrs Sale's evidence is to the effect that the representation in the information pack about the extent of her work is true. I have previously mentioned the extent of the work Mr Walker says that he, his wife, and his daughter performed in the business. Ultimately, questions of credit will be involved, which makes it difficult to assess the plaintiffs' prospects of success on this aspect of the claim. At this stage, it could not be said that the plaintiffs had no substantial prospects of succeeding on it.

[62] The wastage representation is based solely on an oral representation said to have been made at the meeting in early March 2002. Both Mr Sale and Mrs Sale say they have no recollection of the making of this representation. The representation is alleged to be misleading and deceptive, because wastage was of the order of 10 percent. However, there is no allegation that the information in the information pack relating to the costs of ingredients is erroneous. It is therefore difficult to see that the wastage representation, if made, is of any significance. It does not appear likely, on the material available to me, to be a matter which would provide any substantial basis for a successful claim for misleading conduct.

[63] In my view, therefore, in respect of a number of aspects of their claim, the plaintiffs appear to have substantial prospects of succeeding against the vendor group of defendants.

[64] I have previously mentioned the absence of recollection of Mr and Mrs Sale in relation to the meeting alleged by the plaintiffs to have occurred in March 2002, and the representations said to have been made at that meeting.

[65] On 5 August 2009, Mr Sale swore an affidavit stating that source documents relating to the contract and the operation of the business by Caffe were contained in 11 archive boxes kept in a shed at his residence. In May this year, as a result of a flood, 4 of these archive boxes, and other personal records, were destroyed. Mr Sale swore that the loss of those boxes would impact upon the ability of the vendor group to address the wages representation and the net profit representation.

[66] On 14 September 2009, Mr Sale swore a further affidavit. It deposes to the fact that all the MYOB files for the operation of the Bakery when owned by Caffe had been kept on a backup disk. The MYOB files were said to be an electronic recording of every transaction that occurred in the operation of the business. Mr Sale deposed that at the time of the preparation of his affidavit sworn on 5 August 2009, he believed that the MYOB files could be located. His belief about that was not disclosed in the affidavit of 5 August 2009, and as I have indicated, the affidavit was to a different effect. The affidavit of 14 September 2009 deposes to the fact that the backup disk cannot now be located, and a personal computer where the information was also stored has been disposed of.

[67] Mr Le Sueur was the accountant for Caffe at the time of the sale of the Bakery. He was the author of the April 2002 letter. Although he has sworn an affidavit on behalf of the vendor group, he is silent about the extent of records, if any, held by him in relation to the Bakery when conducted by Caffe.

[68] On behalf of the plaintiffs, it is submitted that the lost documents are unlikely to have been of any particular importance in the case. They were said to be relevant to the net profit representation and the wages representation. However, it is pointed out that the plaintiffs rely on the April 2002 letter, to establish that the representation as to net profit was misleading, and that accordingly it is highly unlikely that the factual basis for the allegation could be in dispute.

[69] With respect to the wages representation, the plaintiffs submit that this matter is unlikely to be in contest, Caffe having been successfully sued by former employees because of its failure to pay wages in accordance with relevant awards. It is to be noted that none of the affidavits provided on behalf of the vendor group has addressed this allegation.

[70] It seems to me that it is unlikely that any lost documents or computer files would contain information that would be important in contesting the claim. Further, in view of the way the evidence has emerged, I am not satisfied that the vendor group have established that they do not have available to them adequate sources of information relating to the operation of the Bakery when it was owned by Caffe.

[71] Mr and Mrs Sale have deposed to having no recollection of the meeting on 21 March 2002, or of making representations about the number of hours worked by Mrs Sale, or that wastage in the business was 2 percent. In my view, loss of recollection relating to these representations is not of great significance in this case. The representation about the hours worked by Mrs Sale is related to statements in the information pack, there being no dispute that this document was provided to Mr Walker. The wastage representation does not seem likely to assume great importance in the case.

[72] It is alleged against Ms Lawrence that she is negligent because she did not advise the plaintiffs to obtain financial records in order to verify the matters represented in the information pack; and because she did not properly advise about the effect of the April 2002 letter. It is also alleged that she gave negligent advice which resulted in Mr Walker's liability with the Australian Tax Office, and the incurring of associated legal fees. The liability to the Australian Tax Office related to GST, superannuation guarantee payments, PAYG withholding tax for employees, income tax, and penalties.

[73] It is difficult to come to a preliminary view about the prospects of success in the action against Ms Lawrence, so far as it related to advice about whether to buy the Bakery. It seems inherently unlikely that she advised Mr Walker not to buy the Bakery, and her affidavit does not suggest this. Nor does she suggest that she advised Mr Walker that further investigations of its profitability should be carried out. Nor does she suggest that she did not give advice to Mr Walker relating to tax matters, which resulted in the business being purchased and carried on in the way described by Mr Walker. However, much will depend on the communications between her and Mr Walker. Also, it would be difficult to come to a view, on the basis of the allegations made, about whether she was negligent, in the absence of expert evidence.

[74] Ms Lawrence has deposed that she made detailed notes of all of her conversations with Mr Walker in this period, including notes on the information he provided and the advice she gave. By 19 August 2008, her notes were stored in an archive box. The box was destroyed on 20 August 2008, in accordance with Ms Lawrence's usual practice. Ms Lawrence believes that not all her file notes were copied and sent to the plaintiff's former solicitor in August 2005. On 8 October 2008, the former solicitor wrote to Ms Lawrence advising of the filing of the claim. However, the proceedings were not served on her until 7 July 2009. She says that she remembers conversing with Mr Walker, but with the passage of time, she no longer has a complete recollection of what was said by each of them. She does not indicate what recollection she has.

[75] The plaintiffs have not identified the documents the former solicitor received from Ms Lawrence in August 2005, nor have they adduced evidence to show that all or most of the notes were given to the former solicitor at that time.

[76] In my view, the instructions given to Ms Lawrence and the precise terms in which she gave advice, could well be of considerable importance in the determination of the claim against her. The loss of her file may well prejudice the conduct of her defence, though it is conceivable the documents might also have provided further support for the plaintiffs' claim. Even if it be assumed that Ms Lawrence has a substantial recollection of her conversations with Mr Walker, the absence of the notes is likely to significantly affect the prospect that her evidence will be accepted; and there is a substantial risk that she can not now recall important communications recorded in the notes.

[77] In my view, there is some understandable explanation for the delay by the plaintiffs for the commencement of the proceedings. There is an unexplained failure by the former solicitor to act earlier, but it does not seem to me appropriate to attribute much blame to the plaintiffs for the delay by the former solicitor.[16] There is, in my view, an adequate explanation for the fact that the proceedings were not served shortly after they were commenced. I also consider there is adequate explanation for the delay in amending the proceedings, and serving the amended pleadings. I do not consider that significant weight should be attributed to the prejudice asserted by the vendor group, though I am conscious some prejudice is likely to have accrued simply by reason of the passage of time. At least in respect of some of the claims against the vendor group, the plaintiffs appear to have reasonable prospects of success. Weighing up these matters, I consider that good reason has been shown to renew the claim against these defendants, notwithstanding the general philosophy of r 5 of the UCPR.

[78] My views about the explanation for delay up to the time of the services of the proceedings on Ms Lawrence are generally the same as I have stated in respect of the claim against the vendor group.

[79] So far as prejudice is concerned, it is submitted against Ms Lawrence that she had been asked to provide a copy of her file to the former solicitor; that she had provided some but not all of the documents on that file, without advising the former solicitor of that; and that she caused the file to be destroyed, without confirming that the documents on it were not required for the purposes of any litigation. On that basis, it is submitted that she is the cause of, or has significantly contributed, to any prejudice that might have accrued by reason of destruction of the file.

[80] While there is some merit in these submissions, three years passed after the August 2005 letter, without any further communication to Ms Lawrence. On balance, it seems to me that I should give considerable weight to the prejudice which has accrued to her by reason of the delay in service of the proceedings. I am also mindful that I do not have before me material which enables me to form a preliminary view that the plaintiffs' claim against Ms Lawrence has substantial prospects of success. Taking these matters into account, I consider that the plaintiffs have not shown good reason to renew the claim against Ms Lawrence.

[81] I propose to order that the claim against the first, second and third defendants be renewed, but not that against Ms Lawrence. I shall hear further submissions about the orders to be made, and costs.

[1] The plaintiffs referred to r 16(d) of the UCPR. The first, second and third defendants referred to Sailorchard Pty Ltd (Administrators Appointed) v Thrifty (Australia) Pty Ltd & Ors [2003] QSC 41 at [33], which in turn referred to Major v Australian Sports Commission [2001] QSC 320 at [58], suggesting an inherent power to reconsider an order made ex parte. Rule 667 would in any event appear to be a relevant source of power: The IMB Group Pty Ltd (in Liq.) v Australian Competition and Consumer Commission [2006] QCA 407; [2007] 1 Qd R 148 at [28].

[2] [1999] QCA 513.

[4] [1981] HCA 11; (1981) 180 CLR 337.

[5] See also The IMB Group at [32], [37].

[8] Major v Australian Sports Commission [2001] QSC 320 at [71]; The IMB Group at [55].

[9] [2004] QSC 404 at [20].

[10] [2007] QSC 177 at [31]- [32].

[14] I note that a similar submission could have been made about delay by the former solicitor between August 2005 and April 2008. For similar reasons, I would not be prepared to give weight to the prospect of a successful claim against the former solicitor, in determining the present application.

[15] Compare Demagogue Pty Ltd v Ramensky [1992] FCA 557; (1992) 39 FCR 31.

[16] See the earlier discussion of Porzuczek.