Supreme Court of the ACT|2010-09-03|Before: Gray J

Lyons v Labathas, Sports Centres Australia Pty Ltd t/as Canberra International Sports & Aquatic Centre and The Club Group Pty Limited [2010] ACTSC 93 (3 September 2010)

[2010] ACTSC 93 (3 September 2010)

APPEAL - appeal from interlocutory decision of the Master - decision refusing the third defendant's application to set aside an order made by the acting Deputy Registrar - order of the acting Deputy Registrar allowing joinder of second and third defendants - whether substantial injustice caused to the third defendant - whether the third defendant is entitled ex debito justitiae to have order set aside - whether Master erred in the exercise of his discretion - appeal dismissed.

PRACTICE AND PROCEDURE - joinder of defendant - joined defendant not served personally - r 1450 of Court Procedure Rules 2006 (ACT) - whether joinder is a nullity or an irregularity - limitation period expiring subsequent to joinder - joinder declared valid.

Court Procedure Rules 2006 (ACT) rr 40, 111, 220, 223, 230, 504, 1450 , 5013, 6008

House v The King [1936] HCA 40; (1936) 55 CLR 499

Martin v NRMA Insurance Ltd [1998] ACTSC 237 (12 June 1998)

Stelmag Pty Ltd v Tifferley Manufacturing Pty Ltd and Robert John King and

Susan Rosalie King [2003] ACTSC 49 (18 June 2003)

Contender 1 Ltd v LEP International Pty Ltd [1988] HCA 60; (1988) 82 ALR 394.

Craig v Kanssen [1943] 1 KB 256

Hoskins v Van Den-Braak (1998) 43 NSWLR 290

Daniels Corporation International Pty Ltd v Australian Competition and Consumer

Re Pritchard [1963] 1 Ch 502

Harkness v Bell's Asbestos and Engineering Ltd [1967] 2 QB 729

Australian Coastal Shipping Commission v Curtis Cruising Pty Ltd and Others (1989) 17 NSWLR 734

ON APPEAL FROM THE MASTER OF THE SUPREME COURT OF THE AUSTRALIAN CAPITAL TERRITORY

AND: SPORTS CENTRES AUSTRALIA PTY LIMITED (ACN 096 066 901) t/as CANBERRA INTERNATIONAL SPORTS & AQUATIC CENTRE (CISAC)

AND: THE CLUB GROUP PTY LIMITED (ACN 106 378 947)

1. The appeal be dismissed except as to the order as to costs;

2. The appeal be upheld as to the cost order of the Master of 27 March 2009 and that matter be remitted to the Master for his determination;

3. The costs of the appeal be apportioned as to the appellant who is to pay 90% of those costs and the first respondent 10%.

1. This is an appeal pursuant to s 9(2)(a) of the Supreme Court Act 1933 (ACT) (Supreme Court Act) against a decision of Master Harper, who, on 27 March 2009, dismissed an application dated 5 December 2008 by the third defendant (the appellant in these proceedings) to set aside an order made by the acting Deputy Registrar on 4 August 2008 and declared that the order joining the third defendant was valid notwithstanding the failure of the plaintiff (the first respondent in these proceedings) to serve the application dated 23 July 2008 for joinder on the third defendant.

2. The right of appeal is given by s 9(2)(a) of the Supreme Court Act which provides for an appeal from an interlocutory order to the Supreme Court constituted by a single judge. Subsection (9)(3) provides that the Court must have regard to the evidence given in the proceeding out of which the appeal arose, may draw inferences of fact from the evidence and may receive further evidence in various ways provided by s 9(3)(c). Subsection (9)(4) provides that the Court may confirm, amend or set aside the order of the Master and may make any order that in all the circumstances it considers just.

3. The appeal involves the principles applicable to appeals against the exercise of a discretion. In House v The King [1936] HCA 40; (1936) 55 CLR 499 (House v The King) (at 504-505), in an oft quoted passage, the majority (Dixon, Evatt and McTiernan JJ) of the court said:

The manner in which an appeal against an exercise of discretion should be determined is governed by established principles. 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.

4. In Martin v NRMA Insurance Ltd [1998] ACTSC 237 (12 June 1998) (at [14]), Crispin J accepted that the principles referred to in House v The King apply to appeals from an interlocutory order of the Master.

5. This appeal involves a matter of practice and procedure and the Court will exercise particular caution in reviewing the Master's decision: see Stelmag Pty Ltd v Tifferley Manufacturing Pty Ltd and Robert John King and Susan Rosalie King [2003] ACTSC 49 (18 June 2003) (at [2]) citing Wilson, Dawson, Toohey and Gaudron JJ in Contender 1 Ltd v LEP International Pty Ltd [1988] HCA 60; (1988) 82 ALR 394 (at 397).

6. Although the rules for appeal (in particular the Court Procedure Rules 2006 (ACT) (CPR) r 5013) then did not require grounds of appeal, the appellant's solicitors provided the following grounds:

The Master erred in not following the decision of the New South Wales Court of Appeal in Hoskins v Van Den-Braak (1998) 43 NSWLR 290;
The Master erred in considering that Section 68 of the Court Procedures Act 2005 applied so as to disentitle the Applicant from having the order joining him as Third Defendant set aside ex debito justitiae.
The Master erred in not ordering the Plaintiff and/or his solicitors to pay the costs of the application in circumstances where the Plaintiff's solicitors conceded that it was entirely their fault in failing to serve the application to join the Defendant as required by the rules of Court.
In circumstances where the First and Second Defendants took part in the proceedings and opposed the orders sought by the Applicant, the Master erred in failing to order costs in favour of the Applicant against those Defendants and instead ordered that those costs be the First and Second Defendants' costs in the cause.

7. The plaintiff's case as pleaded in the statement of claim to the originating claim was that the first defendant was the company that owned or operated a gymnasium which provided personal trainers for its members. The incident of which proceedings were commenced occurred on 12 August 2005; a personal trainer employed by the first defendant, who is identified as Patrick Lyons and is later to be joined as third defendant, manipulated the plaintiff's back, causing injury to the plaintiff. The plaintiff commenced the proceedings in this Court on 14 March 2008 against the first defendant. The original statement of claim did not set out particulars of any negligence of the third defendant, or assert that the first defendant was vicariously liable for any negligence of the third defendant (the appellant). The originating claim was served on the first defendant on 20 March 2008. It was also later alleged that the second defendant leased the premises from the first defendant and operated and managed the business.

8. On 23 July 2008, the plaintiff made an application pursuant to rr 220 and 504 of the CPR to join the second and third defendants to the proceeding.

9. At the hearing of that application before the acting Deputy Registrar on 4 August 2008, the plaintiff relied upon an affidavit of service dated 28 July 2008 which stated that the third defendant had been served by express post. No point is taken with respect to service on the second defendant. An order adding the second and third defendants as parties was made.

10. The solicitor having the conduct of the action on behalf of the plaintiff was unaware of the requirements in rr 223 and 6008 of the CPR. Rule 223(2) requires that an application to include a person as a defendant must be served on the person. Rule 6008(3)(a) provides that an application to be served on a person, who is not an active party, must be served personally unless the Court otherwise orders. Not being informed that personal service was required in the case of the third defendant, the acting Deputy Registrar made the order joining both the second and third defendants to the proceeding.

11. On 6 August 2008, an amended originating claim with amended statement of claim showing the second and third defendants as parties was filed. The amended statement of claim set out a claim including particulars of negligence against the third defendant. The limitation period applicable to the plaintiff's claim is three years from the date of injury. In this case, it expired on 12 August 2008.

12. On 21 August 2008, the amended originating claim was personally served on the third defendant.

13. On 10 September 2008, the third defendant filed a conditional notice of intention to respond proposing to assert an irregularity. The application under r 40 of the CPR to set aside the order joining the third defendant was made on 5 December 2008 (cf r 111(3) of the CPR which requires the application to be made within 28 days after the day the notice is filed).

14. On 28 January 2009, the first and second defendants, represented by the same firm of solicitors, filed their defences and the second defendant also filed a notice claiming contribution or indemnity from the third defendant. The defences of the first and second defendants denied that the third defendant was either their employee, agent or servant.

15. The Master heard the application to set aside the acting Deputy Registrar's order joining the third defendant on 13 February 2009. Mr Stretton, who appeared as counsel for the appellant before the Master (and before me), contended that because there had been no personal service of the original application to join the appellant, there was a fundamental defect in the proceedings which cannot properly be described as an irregularity and that the person who is affected by such an order is entitled ex debito justitiae to have it set aside.

16. Craig v Kanssen [1943] 1 KB 256 was referred to in support of that proposition, per Lord Greene MR (at 262):

... a person who is affected by an order which can properly be described as a nullity is entitled ex debito justitiae to have it set aside.

17. Mr Stretton also relied on the judgment of the NSW Court of Appeal (Mason P, Priestley and Beazley JJA) in Hoskins v Van Den-Braak (1998) 43 NSWLR 290 (Hoskins). In that case, the Court of Appeal had set aside a local court judgment against a person who had not been served with the claim upon which the judgment was based. The Master distinguished the authorities cited by Mr Stretton and noted in his decision:

[25] I accept that the principle applied in Craig v Kanssen is applicable in Australia as part of the common law. The principle must, however, be viewed in the light of section 68 of the Court Procedures Act and rule 1450.

[26] The decision in Hoskins v Van Den Braak is not particularly apposite to the present circumstances. That arose out of a case which had proceeded to hearing and judgment: it was too late for the exercise of any statutory powers which might have got the litigation back onto a proper footing.

18. The hearing of this appeal came before me on 24 July 2009. Mr Stretton put his submissions on the grounds of appeal but also sought to submit that the Master had erred in exercising his discretion in refusing to set aside the order of the acting Deputy Registrar. The matter was then adjourned to allow the appellant to file written submissions in relation to that issue which had not been raised by the grounds of appeal. Further submissions were to be made in relation to the grounds of appeal relating to the order for costs. The first respondent was also to have the opportunity to respond to the appellant's submissions. The hearing resumed on 6 May 2010 and the appeal, save as to costs, was dismissed on that day with written reasons reserved. These are those reasons.

19. Section 68 of the Court Procedures Act 2004 (ACT) (Court Procedures Act) provides:

68 Formal defects to be amended

(1) No proceedings in the court shall be invalidated by any formal defect or by any irregularity, unless the court is of opinion that substantial injustice has been caused and that the injustice cannot be remedied by an order of the court.

(2) The court may make an order declaring that any proceeding is valid notwithstanding any such defect or irregularity.

1450 Effect of failure to comply with rules

(1) A failure to comply with these rules in relation to a proceeding is an irregularity and does not make the proceeding, or a document, step taken or order made in the proceeding, void.

(2) If there has been a failure to comply with these rules in relation to a proceeding, the court may -

(a) set aside all or part of the proceeding; or

(b) set aside a step taken or order made in the proceeding; or

(c) declare a document or step taken to be void; or

(d) declare a document or step taken to be valid; or

(e) make another order that could be made under these rules (including an order dealing with the proceeding generally); or

(f) make any order dealing with the proceeding generally that it considers appropriate.

(3) However, the court must not -

(a) set aside a proceeding only because the proceeding was started by the incorrect originating process; or

(b) set aside an originating process only because the incorrect originating process was used.

(4) The court may act under subrule (2) on application by a party or on its own initiative.

21. I have no difficulty with the proposition that a general statute does not take away established common law rights unless there is a clear intention to do so on its face or an expression that provides that it does (see Daniels Corporation International Pty Ltd v Australian Competition and Consumer Commission [2002] HCA 49; (2002) 213 CLR 543).

22. The decision in Hoskins, referred to earlier, may be accepted for the proposition that where, if a person or anyone retained on his behalf has not been served with a claim upon which a final judgment was based, the person is entitled to have the judgment set aside as the proceedings are a nullity. However, this does not assist to determine whether a failure of service of an application to join a party constitutes a nullity.

23. Hoskins was concerned with a determination of the case against a party. That is shown by the citation in Hoskins (at 294) of Cameron v Cole [1944] HCA 5; (1944) 68 CLR 571 at 589 where Rich J said:

... It is a fundamental principle of natural justice, applicable to all courts

whether superior or inferior, that a person against whom a claim or charge

is made must be given a reasonable opportunity of appearing and

presenting his case. If this principle be not observed, the person affected is

entitled, ex debito justitiae to have any determination which affects him set

aside; and a court which finds that it has been led to purport to determine a

matter in which there has been a failure to observe the principle has

inherent jurisdiction to set its determination aside (Craig v Kanssen [1943]

KB 256 at 262). In such a case there has been no valid trial at all. The

setting aside of the invalid determination lays the ghost of the simulacrum

of a trial, and leaves the field open for a real trial ....

24. In my view, the defect must be fundamental to the trial of the matter in issue before it can be said to be something more than an "irregularity". The interlocutory nature of the order the appellant is seeking to set aside in this matter as a nullity is not a feature as far as I have been able to ascertain of any of the cases cited to me and is the feature that distinguishes it from the matter under consideration in Hoskins and the cases that Hoskins applies. The orders that have been set aside in those cases have been orders that have been final in the sense of finally determining the rights of the parties with respect to a particular aspect, usually by the entry of judgment. The order that has been made in this case is an order which does not in any way finally determine the rights of the parties in respect of the issue with which it is concerned. Rule 230 of the CPR provides that:

230 Removing parties

(1) The court may order that a person be removed as a party to a proceeding if the person -

(a) has been inappropriately or unnecessarily included as a party; or

(b) has stopped being an appropriate or necessary party.

(2) The court may make an order under this rule -

(a) at any stage of the proceeding; and

(b) on application by a party to the proceeding or on its own initiative; and

(c) whether the person to be removed is a plaintiff or defendant.

25. Even under the more restrictive regime of the corresponding English order permitting relief from irregularities, Lord Upjohn, in Re Pritchard [1963] 1 Ch 502 (Re Pritchard), reviewed the cases concerning nullities and irregularities and said (at 523):

I do not think that the earlier cases or the later dicta upon them prevent me from saying that, in my judgment, the law when properly understood is that Ord. 70 [which bears some similarity to r 1450 of the CPR] applies to all defects in procedure unless it can be said that the defect is fundamental to the proceedings. A fundamental defect will make it a nullity. The court should not readily treat a defect as fundamental and so a nullity, and should be anxious to bring the matter within the umbrella of Ord. 70 when justice can be done as a matter of discretion, still bearing in mind that many cases must be decided in favour of the party entitled to the complain of the defect ex debito justitiae. Lord Denning in MacFoy pointed out that a useful test was whether the defect could be waived.

26. Shortly after the decision in Re v Pritchard, Ord. 70 referred to in that case was replaced by a new order similar in structure and its terms to r 1450 of the CPR declaring that failure to comply with the rules is an irregularity and does not nullify the proceedings or a step taken in those proceedings. In Harkness v Bell's Asbestos and Engineering Ltd [1967] 2 QB 729 (at 735 and 736), Lord Denning MR observed:

This new rule does away with the old distinction between nullities and irregularities. Every omission or mistake in practice or procedure is henceforward to be regarded as an irregularity which the court can and should rectify so long as it can do so without injustice. It can at last be asserted that "it is not possible for an honest litigant in Her Majesty's Supreme Court to be defeated by any mere technicality, any slip, any mistaken step in his litigation." That could not be said in 1963: see In re Pritchard, decd. But it can be in 1966. The new rule does it.

27. In Australian Coastal Shipping Commission v Curtis Cruising Pty Ltd and Others (1989) 17 NSWLR 734, Priestley JA, with whom Samuels JA agreed, adopted Lord Denning's formulation of the effect of the new rule as applicable to the equivalent NSW provision. It is equally applicable to r 1450 of the CPR.

28. The order that was made by the acting Deputy Registrar was clearly an interlocutory order. I am unable to see that by granting it without the application being properly served, is anything more than an irregularity. The challenge to the Master's decision on this aspect must fail.

29. It became apparent at the initial hearing of this matter on 24 July 2009 that Mr Stretton wished to also challenge the Master's exercise of discretion in refusing to set aside the order of the acting Deputy Registrar. Accordingly, I directed that there be further written submissions and a copy of the transcript of the proceedings before the Master be provided.

30. Written submissions on behalf of the appellant were filed on 1 October 2009 and the first respondent filed his response on 1 March 2010. On 6 May 2010, I heard further oral submissions from the parties. The principal submission that the appellant sought to advance was that once the Master had determined that it is an irregularity, his discretion should have been exercised in favour of the appellant to set aside the joinder. In order to do so, the appellant must accept the burden of showing that there has been a wrong exercise of discretion having regard to the principles in House v The King set out in [3] above.

31. Mr Stretton submits that the Master proceeded on extraneous or irrelevant matters and did not take into account material considerations. In support of these propositions, I was referred to the following matters of which Mr Stretton says are irrelevant or extraneous to the Master's reasoning.

32. First, it was submitted that it was irrelevant as to whether or not, after the expiration of the limitation period, the amended originating claim, statement of claim and a notice claiming contribution and indemnity had in fact been served on the appellant. To the contrary, it seems to me that such a consideration forms a part of the relevant circumstance that after the expiration of the limitation period, the amended originating claim was served on the appellant and the appellant was then notified of the proceedings. It was referred to by the Master as part of the background to the application that he was considering. It also took the matter out of that category of cases where a party had not been made aware of the proceedings at all (cf Re Pritchard (at 524)).

33. Secondly, it was submitted that it was irrelevant to speculate what the position may have been if the first respondent had taken a different course, namely, started proceedings on 6 August 2008 before the limitation period expired, in circumstances where this did not occur. This matter must have relevance as to whether in terms of s 68 of the Court Procedures Act a substantial injustice has been caused. Had the limitation period expired before the date of the order, the appellant would have been entitled to raise the substantial injustice by denial to him of the limitation defence.

34. Thirdly, it was submitted that it was irrelevant as to whether an application to join the appellant, if properly served and opposed, might have succeeded in circumstances where such a circumstance did not occur. That submission cannot succeed. Section 68 of the Court Procedures Act is predicated on whether the irregularity could cause a substantial injustice. The issue of what the appellant could have put in opposition to the joinder order was very much to the point. There were matters before the Master as to the circumstances surrounding the cause of action as well as an issue concerning compliance with s 51 of the Civil Law (Wrongs) Act 2002 (ACT). I am satisfied that the Master had regard to these considerations and that it was proper that he do so.

35. Fourthly, it was submitted that the expectation that if the third defendant was removed from the proceedings he would be joined by the second defendant was either irrelevant, a mistake as to facts or a failure to take account of a material consideration.

36. The issue of the first and second defendants issuing a third party notice to the third defendant in the event of the order joining the third defendant being set aside was specifically raised by the solicitor for those parties. Again, it is a matter that goes to the issue of substantial injustice and, in my view, cannot be said to be irrelevant. The point taken by the appellant that by the time the Master delivered judgment, the time for filing a third party had expired, does not seem to me to have any merit. Time had not expired at the date of the hearing before the Master and leave to give a third party notice out of time would no doubt have been readily granted.

37. As appears from the foregoing, I agree with the Master's exercise of his discretion against the appellant and say that I would have exercised the discretion in the same way as the Master did.

38. Based on the findings set out above, I am of the opinion that the appeal should be dismissed.

39. In his further submissions on behalf of the appellant, Mr Stretton pointed out that the order for costs made by the Master was determined without the parties being given an opportunity to be heard on the issue and the order for costs that was made was not foreshadowed or canvassed in any way whatsoever in the course of the argument. In light of that submission, I thought it appropriate that the parties be given the opportunity to put their case to the Master on costs. It seemed to me that the Master was in the best position to determine this issue. As a consequence, I ordered that the costs order made by the Master be remitted to the Master to hear submissions by the parties on that aspect. Subsection 9(4) of the Supreme Court Act permits me to make any order that, in all the circumstances, I consider just.

40. In respect of costs of this appeal, it seems to me that costs should generally follow the event but, after discussion with counsel, and with their agreement, I ordered that the appellant pay 90 per cent of the costs of the appeal and the first respondent pay 10 per cent.

I certify that the preceding forty (40) numbered paragraphs are a true copy of the Reasons for Judgment herein of his Honour, Justice Gray.

Counsel for the Appellant/Third Defendant: Mr G Stretton SC

Solicitor for the Appellant/Third Defendant: Elrington Boardman Allport

Counsel for the First Respondent/Plaintiff: Mr S Hausfeld

Solicitor for the First Respondent/Plaintiff: Stacks//Snedden Hall & Gallop

Court Procedure Rules 2006(ACT)

Procedure Rules 2006

Law (Wrongs) Act 2002

Procedure Rules 2006

Court Procedure Rules 2006(ACT)

Law (Wrongs) Act 2002

Lyons v Labathas, Sports Centres Australia Pty Ltd t/as Canberra International Sports & Aquatic Centre and The Club Group Pty Limited [2010] ACTSC 93

At a glance

Court

Decision date

Before

Source

Judgment (82 paragraphs)

Lyons v Labathas, Sports Centres Australia Pty Ltd t/as Canberra International Sports & Aquatic Centre and The Club Group Pty Limited [2010] ACTSC 93 (3 September 2010)

Parties

Legislation Cited (12)

Cases Cited (6)