Cases considered: Cakebread v. Henriks (unreported decision of Supreme Court of South Australia - 2 May 1986) Lovett v. Le Gall (1975) 10 SASR 479 Raison v. Alexoudis (unreported decision of Supreme Court of South Australia - 8 August 1986) Case not followed: Mills v. Sola Optical Australia Pty. Ltd. (unreported decision of Supreme Court of South Australia - 29 May 1986) Cases referred to: Booth v. Peko Mines (No Liability) 22 ALR 94 Braedon v. Hynes (unreported decision of Supreme Court of the Northern Territory - 24 July 1986) Davies v. Elsby Brothers Ltd. (1960) 3 All ER 672 Lynch v. Keddell (1985) 2 Qd R 103 McGee v. Yeomans (1977) 1 NSWLR 273 Stout v. R.A. Wenham Builders Pty. Ltd; Michilis Bros Pty. Ltd. (1980) 1 NSWLR 426 Weldon v. Neal (1887) 19 QBD 394 HRNG DARWIN #DATE 11:8:1987 Counsel for Plaintiffs: S.R. Southwood Solicitors for Plaintiffs: Ward Keller Counsel for Defendant and Andrew Liveris: D. Mildren QC Solicitors for Defendant and Andrew Liveris: Mildrens ORDER Claim refused. Plaintiff to pay Liveris' costs. JUDGE1 In March 1980 the plaintiffs appointed the defendant company as architect in relation to the proposed erection of a home at East Point Road, Darwin. By Writ issued 29 June, 1982, with Statement of Claim annexed, the plaintiffs sued to recover damages from the defendant for damages and loss resulting from the defendant's performance in design and supervision, that claim being based in contract and negligence. 2. Pleadings and pre-trial procedures followed. For reasons it is not necessary to recite, whilst the action has in the past been listed for trial, it remains as a pending matter. It is common ground that one Andrew Liveris, a director of the defendant company, was the architect who essentially carried out design and supervision of the building contract. It was his conduct of which the plaintiffs complain. The amount of the claim appears to have escalated over the years. The defendant company has denied liability throughout. 3. I now have before me an Interlocutory Summons issued by the plaintiffs in which, for present purposes, the plaintiffs claim the following relief: (1) That there be an extension of time to enable the plaintiffs to join Andrew Liveris as a second defendant to the action, pursuant to section 44 of the Limitation Act 1981. (2) That Andrew Liveris be joined as a defendant. 4. It is common ground that pursuant to the legislation in force in the Territory at the time of performance of the work, any claim against Liveris became statute barred after the expiration of six years, a period the parties agree which expired at the end of October 1986. The present Limitation Act came into force on 26th February 1982 and by virtue of section 12 actions in contract and tort are not maintainable after the expiration of a limitation period of 3 years from the date of the accrual of the course of action. However, section 44 contains provisions whereby time for instituting the action may be extended, provisions which may be invoked to extend time under the previous legislation. I will deal with this in more detail later. 5. Order 19 Rule 12 of the Rules of Court provides inter alia for the joinder of parties. The Court is empowered to join as a defendant a party "who ought to have been joined, or whose presence before the Court is necessary in order to enable the Court effectually and completely to adjudicate upon and settle all the questions involved in the cause or matter ---". Subsequent Rules 13 and 14 provide procedures for such joinder and application by interlocutory summons, rather than by motion, is probably inappropriate. (See Braedon v. Hynes - unreported decision of Supreme Court of the Northern Territory - 24th July 1986). However, the proposed defendant takes no issue with the procedure and I am asked to decide the issue on the merits. 6. This is not a case of misnomer or mistake as to the identity of the defendant. The plaintiffs' complaint is and always has been against the conduct of Liveris who at all material times was, and still is, an architect and a director of the defendant. He could properly and perhaps wisely have been joined in the first instance along with the present defendant. There is no dispute that he acted as architect in the course of his employment with the defendant as its agent. Our present rule follows the old English rule and it is well established save for a case of misnomer that leave to add a defendant should not be granted after the expiry of the period of limitation. (See Weldon v. Neal (1887) 19 QBD 394; Davies v. Elsby Brothers Ltd. (1960) 3 All ER 672 per Devlin L.J. at 676-677; Stout v. R.A. Wenham Builders Pty. Ltd.; Michilis Bros Pty. Ltd. (1980) 1 NSWLR 426 at 429 and the general discussion and review of authorities in Lynch v. Keddell (1985) 2 Qd R 103.) It is to be noted that Order 32 Rule 1 of the Queensland Rules empowers the Court to give leave after expiration of the relevant limitation period. I very much doubt, assuming time is not extended, whether such a joinder is permissible, even if it was entertained under the broader scope of the Queensland and New South Wales Rules where joinder may only be permitted after the limitation period has expired if the circumstances involved are "peculiar" or at least "special". (See McGee v. Yeomans (1977) 1 NSWLR 273.) Here the plaintiffs seek to add Liveris as a defendant, not because it will facilitate judgment, not because the present defendant is inappropriately sued, not because such joinder will enable effective or complete adjudication of the issues but because the plaintiffs fear that judgment against the defendant will prove barren. It is thus clear, in view of the concluding words of Order 19 Rule 12 that amendment cannot be made where the limitation period has expired. (Booth v. Peko Mines (No Liability) 22 ALR 94, per Toohey J. at 100). I thus turn to consider whether I should extend the period of limitation under section 44 of the Limitation Act. 7. In the course of the application four affidavits of the plaintiffs' solicitor, Mr Southwood, were read and one deposed to by the plaintiff Norman Forster. On behalf of Liveris three of his affidavits were introduced. The deponents Norman Forster and Andrew Liveris were cross-examined. I do not propose to set out the wealth of material. The plaintiffs, as I have said, are concerned that should judgment be entered against the defendant it will prove fruitless. The reasons for their concern are understandable. The defendant, a private company of which Liveris and Vin Keneally, both architects, were directors appears to have operated with a paid up capital of only $2. It appears that it no longer operates as a trading company. The returns for the year ended 30th June 1985 indicate it changed its name to Darlaide Interests Pty. Ltd., operated with the same paid up capital, received no income, and made no profit. It now operates as Trustee for certain Unit Trusts and its liabilities constituted by unsecured loans then approximated $37,000 offset only by assets of about $7,800 "representing its rights of indemnity out of the trust estate". Whilst paragraph 20 of the affidavit of Andrew Liveris sworn the 30th June 1987 deposes to the fact that the defendant "does have access to assets with which to comply with an order of this court if necessary", cross-examination revealed that such access may be problematical. Liveris stated in evidence that his work as an architect is now limited. 8. Another difficulty relates to the existence or otherwise of the amount of professional indemnity insurance available to satisfy a judgment. There is much material concerning this in the affidavits of Liveris sworn 13th May 1987 and 30th June 1987. It suffices to say that the defendant and Liveris were covered by appropriate and different policies from 4th August 1980 until 2nd November 1986 - but there were limited periods when there was no cover. It is not practicable for me to evaluate the extent of indemnity (if any) which will be available to cover a judgment against the defendant in this action. The claim has, as I commented, escalated over the years and the events giving rise to rights of indemnity and the dates of notice of such claims may involve different insurers. Generally speaking, the cover extended by the various policies relates to claims made during the period of the cover and in his affidavit of 30th June 1987 Liveris deposes to the fact that believing claims against him were statute barred after the period of 6 years he allowed the last policy to lapse on 2nd November 1986. As I have said, I cannot assess the availability of insurance, but the probability is that some indemnity (not necessarily total) will be available in the event of the plaintiffs' action being successful against the defendant. Some attempt has apparently been made (or contemplated) to join insurers as defendants, but that does not now concern me. 9. The plaintiff, Norman Forster, swears in his affidavit of 9th June 1987 that he was informed by his solicitor in December or January last (after the expiry of the limitation period) that the defendant may be insolvent. He was then advised that "the insurer" should be joined as defendant. He swore "At this time I was still unaware that Andrew Liveris could be sued personally". 10. In paragraph 21 of that affidavit he deposed as follows: "In or about May of 1987 I was telephoned by Mr Southwood who advised me that he was encountering difficulty in joining the insurer of the Defendant. Mr Southwood advised me that a list of insurers provided by the Defendant disclosed that the Defendant may not have been insured for the periods to which the cause of action in the matter herein relates. Mr Southwood advised me that in view of the difficulty encountered in joining the Defendant's insurer that an Application should also be made to join Mr Andrew Liveris as a Defendant. This was the first time that I became aware that Mr Andrew Liveris could be sued personally. In these circumstances I instructed Mr Stephen Southwood to apply to join Andrew Liveris as a Defendant". 11. Clearly, this consideration - i.e. advice as to a right to sue Liveris personally - prompted the application. It is also fair to comment that Forster had throughout left the conduct of this matter in the hands of his solicitors. 12. Against that background I turn to consider section 44 of the Limitation Act. 13. Section 44 (1) and (2) provides that where an Act prescribes or limits the time for (inter alia) instituting an action a court with relevant jurisdiction "may extend the time so prescribed or limited to such an extent, and upon such terms, if any, as it thinks fit." Sub-section 3 limits this apparently wide discretion: "(3) This section does not - (a) apply to criminal proceedings; or (b) empower a court to extend a limitation period prescribed by this Act unless it is satisfied that - (i) facts material to the plaintiff's case were not ascertained by him until some time within 12 months before the expiration of the limitation period or occurring after the expiration of that period, and that the action was instituted within 12 months after the ascertainment of those facts by the plaintiff; or (ii) the plaintiff's failure to institute the action within the limitation period resulted from representations or conduct of the defendant, or a person whom the plaintiff reasonably believed to be acting on behalf of the defendant, and was reasonable in view of those representations or that conduct and other relevant circumstances, and that in all the circumstances of the case, it is just to grant the extension of time". 14. I observe at the outset that sub-section (b)(ii) does not, in my view, assist the plaintiffs. I agree with Mr Mildren QC that the word "defendant" twice appearing therein refers, not to the defendant already joined, but to the defendant against whom it is proposed to issue proceedings subject to extension of the limitation period, in this case Liveris. There is no evidence that representations or conduct on his part resulted in the failure to institute proceedings against him. There could perhaps be an extreme case where directors of a company in bad faith denuded the company of assets for the purpose of defeating the consequences of a successful claim based on the negligence or breach of contract of a director himself but that is not the case here. Sub-section (ii) is directed against the defendant who by representation or conduct deceives or misleads a plaintiff, for example by leading him to understand that the claim will be met, that proceedings are unnecessary - facts which may in justice be found to have created a type of statutory estoppel i.e. to prevent a proposed defendant from reaping the harvest of his own deceit or procrastination. 15. So to use the words of Maurice J. in Braedon v. Hynes (above) at p 6 "To revive his cause of action the plaintiff must satisfy the Court as to two things: (1) facts material to his case were not ascertained by him until (in this case) after the expiration of the six year limitation period; and (2) in all the circumstances of the case, it is just to grant the extension of time. The first of these is clearly an absolute pre-condition that must be met before there is any question of the Court having a discretion in the matter". 16. The Full Court in South Australia constituted by five judges considered the South Australian equivalent of section 44 in Mills v. Sola Optical Australia Pty. Ltd. (unreported decision of Supreme Court of South Australia - 29th May 1986). Previously, it was considered that the law in that State as to interpretation of the section was settled in Lovett v. Le Gall (1975) 10 SASR 479. In his judgment the Chief Justice one of the majority in their final conclusion referred to four matters decided in Lovett v. Le Gall in this manner: "1. The words "not ascertained by him" refer to the plaintiff personally and not to his solicitors or agents. 2. The words "material to the plaintiff's case" do not refer to facts material for the purpose of alleging a complete cause of action, but to facts material to be proved in order that the plaintiff should establish his case at trial. 3. The facts referred to are facts material to the plaintiff's case at trial not to his decision to sue. 4. The section does not require that ignorance of the material fact later ascertained should have caused or contributed to the failure to sue in time or that the ascertainment of the fact should have caused or influenced the decision to sue." 17. However, in Cakebread v. Henriks (unreported decision of Supreme Court of South Australia - 2nd May 1986) the majority of the Full Court held that for the power to extend time to arise there must "be some interaction between the material fact and the plaintiff's decision by reason of her belated knowledge of the material fact, to take proceedings out of time". Similar reasoning was adopted by another Full Court in that State in Raison v. Alexoudis (unreported decision of Supreme Court of South Australia - 8th August 1986). It was by reason of an apparent conflict in these decisions that the Court was constituted by five judges. The Lovett v. Le Gall construction was, by majority, restored. 18. The decision, of course, merits the greatest respect although it is not binding on this Court. Special leave to appeal to the High Court has been granted. (See The Legal Reporter Vol 8 No. 10). Speaking only for myself I have some difficulty in accepting the notion that the "material fact" contemplated by the section may be only one of the many material facts to be proved in establishing the plaintiffs' case at trial. For example, the material fact relied upon in Mills v. Sola Optical Australia Pty. Ltd. (above) was the extent of the plaintiff's percentage loss of function of the hand, a fact the plaintiff discovered in her solicitor's office when the contents of a medical report were disclosed to her. The Chief Justice commented that when that report was read to her she ascertained a fact, the extent of her current disability which he classified as material. With respect, it seems to me that interpretation does some violence to sub-section 3(b)(i) as such a fact relates to only one common-place aspect in proof of damages and can hardly have a true or real association with a claim for relief from time limitation, accepting as I do that section 44 may be termed an ameliorative provision. I prefer an interpretation which requires some interaction or nexus between discovery of the material fact and the decision to institute proceedings out of time. That is to say I consider the word 'material' contemplates and describes a fact which explains (not justifies) the decision to sue out of time, albeit the fact may be of an evidentiary nature only. It must, in my view, when considered objectively be relevant to the outcome of litigation in a material and real sense, not in a peripheral manner as a mere component of an already established cause of action. If Mills v. Sola Optical Australia Pty. Ltd. (above) is good law its consequences appear to be illogical when considering the purposes of the section. I consider, and I say this with respect, such an interpretation lends itself to artificial contrivance. 19. As I have said earlier the plaintiffs' here base their case on the information gained from their solicitors that they were entitled to sue Liveris in addition to the company. This is not a case where a plaintiff has been seeking for information or material to justify the commencement of proceedings. There was never in the minds of the plaintiffs any doubt as to the part Liveris played in the design and construction of their home. He was the architect with whom they dealt and conferred before and after the issues in this case had arisen. Their cause of action against the defendant company, properly joined years ago is based in contract and tort. It is doubtful whether they have a cause of action against Liveris in contract as they contracted (I assume) with the company by whom Liveris was employed. Whether they had a cause of action against him in tort cannot now be determined; this is as Mr Mildren QC stressed, a question of law, although with the recent development of the law relating to tortious liability. I would not decide the matter on that narrow ground. 20. I am afraid I find myself quite unable to classify the advice given to the plaintiff Norman Forster in May 1987 as "facts material to the plaintiffs' case" within the meaning of section 44. It was certainly legal advice as to the future conduct of the action, tendered in view of difficulties apparently encountered in joining an insurer or insurers. In Lovett v. Le Gall (above) Bray C.J. referring to the equivalent of sub-section 3 of section 44 stated "--- a fact is material within the meaning of the sub-section if it is of such significance as to be able to influence the determination of the case". But on the facts here, if the plaintiffs' allegations are upheld at trial (and this will involve examination of Liveris' conduct) his case will be determined. The plaintiffs' case already stands on its own feet. Proof of default on the part of Liveris will result in judgment against the defendant. It is not the determination of the case itself which concerns or need concern the plaintiffs - they are looking beyond that determination i.e. to recovery if the claim succeeds. The pleadings do not suggest that Liveris acted without authority or beyond the scope of his authority - there is no division of interest in the forthcoming litigation between the defendant and Liveris. It is true that over the years the name and functions of the defendant may have changed but that does not affect the issue which the Court must ultimately determine. Furthermore, the question of whether or not recovery will follow judgment is in itself entirely unknown and hypothetical, as indeed it is in many actions. It is common ground that the defendant is entitled to insurance indemnity in respect of portion of the claim. Its directors, including Liveris, are professional men. I would be surprised if in this capacity they would not ensure that a judgment of this Court against their company for work done or not done in the course of professional duties was not honoured. 21. To sum up I am not satisfied that the legal advice the plaintiffs received in May 1987 constituted "facts material to the case". It is to the "case" the section refers, not to the question of recovery following adjudication of the issues. The factual circumstances here, which relate to the joinder of a second defendant out of time may raise new issues. Here the action with the contracting party is well on foot. The 'material facts' the plaintiff refers to are not vital to the establishment of his case against the defendant, they refer only to a case not previously contemplated against a new defendant. Against that background I have difficulty with the notion that advice from the plaintiffs' solicitors who have not joined Liveris perhaps by design, perhaps by inadvertence, constitutes a material fact within the meaning of the section. The consequences of so holding would be far reaching and could in fact be utilized by any solicitor who had allowed a cause of action to become statute barred by the simple expedient of solemnly advising the client, probably a person in complete ignorance of procedures, that a cause of action exists against the party who should have been sued in the first instance. From the plaintiff's point of view he could thus assent "this is a fact material to my case, I was unaware of it previously" and on such a basis seek an extension. I do not consider such a situation was in the contemplation of the legislature, it would tend to defeat the statute and there are in my opinion good policy reasons why section 44 should not be extended to such an extent. 22. Be that as it may, even if I am wrong in this view, I have also to consider whether "in all the circumstances of the case it is just to grant the extension". Here I have evidence that Liveris, relying on the statute, did not continue his insurance. Paragraphs 19 and 20 of the affidavit sworn by Liveris on 30th June last suggests that he may suffer prejudice if the application is allowed. Balancing the interests and mindful of the fact that should the plaintiff succeed against the defendant a substantial (if not a full) recovery may be made, I do not consider it would be just at this late stage to allow the extension. This is a discretionary matter which involves consideration of several factors. But I am mindful of the fact that the plaintiffs have for years been represented by solicitors in this matter. If the plaintiffs fail to recover against the defendant because the company does not meet the judgment or does not have assets available in execution, the plaintiffs may have other remedies. 23. To sum up, I am not satisfied that "facts material to the action" within the meaning of section 44(3)(b)(i) were not ascertained until after the cause against Liveris became statute barred. In any event I do not consider it is just to grant extension. 24. The orders must be refused. The plaintiffs must pay the costs of Andrew Liveris and I certify for counsel.