Petek v Goldman & 3 Ors

Goodacre Development Pty Limited (Fourth Defendant) JUDGMENT OF : Master Harrison

Mr Catts (First Defendant) COUNSEL : Mr W Hodgekiss (Second & Third Defendant)

Ms E A Collins (Fourth Defendant) Conway Maccallum (Plaintiff)

The Law Partnership (First Defendant) SOLICITORS : D C Balog & Associates (Second & Third Defendants)

Clayton Utz (Fourth Defendant) CATCHWORDS : Extension of time to serve statement of claim Supreme Court Act - s 81 LEGISLATION CITED : Supreme Court Rules Trade Practices Act - s 52 Fair Trading Act - s 42 Franklin House Ltd v ANI Corporation Ltd & Ors (NSWSC, unreported 7 November 1994) CASES CITED : Baker v Wingo (1972) 407 US 514 at 532 Brisbane South Regional Health Authority v Taylor (1996) 186 CLR 541; 129 ALR 1 DECISION : See para 19

THE SUPREME COURT OF NEW SOUTH WALES COMMON LAW DIVISION

20110/96 - KENNETH PAUL PETEK v BARRY GOLDMAN & 3 ORS

JUDGMENT (Extension of time to serve statement of claim)

1 MASTER: The first, second, third and fourth defendants by notices of motion filed 18 October 1999, 1 October 1999 and 17 September 1999 respectively, seek an order setting aside proceedings as against them or in the alternative that proceedings against them be dismissed or struck out pursuant to Part 13 r 5 and Part 15 r 26 of the Supreme Court Rules (SCR). The first defendant seeks a further order that proceedings be struck out as against him as it is statute barred. The plaintiff by notice of motion filed 11 November 1999 seeks leave to further amend the amended statement of claim. The first and second defendants relied on the affidavit of Warren Wilson sworn 7 February 2000, the third defendant relied on the affidavit of David Catts sworn 18 October 1999 and the fourth defendant relied on the affidavit of David Cowling sworn 16 September 1999. 2 On 8 February 2000 during the hearing of submissions, it became apparent that the plaintiff required leave to extend time for the service of the statement of claim. The plaintiff was granted an adjournment and ordered to file a notice of motion seeking an extension of time to serve the statement of claim and serve an affidavit in support. When the matter next came before the court, the plaintiff had filed the foreshadowed motion together with an affidavit of the plaintiff sworn on 15 February 2000. The first defendant relied on two further affidavits of Barry Goldberg and his solicitor David Catts both sworn 9 March 2000. 3 At this later hearing the plaintiff sought to file a fresh further amended statement of claim which had been served on the defendants late on Friday afternoon prior to the Monday hearing. As the fourth defendant had not had adequate time to consider how these amendments would affect its summary judgment application, the motions seeking the filing of the further amended statement of claim and the extension to the limitation period and the summary judgment applications were stood over pending the result of whether an extension of time to serve the statement of claim was successful. This judgment deals with the plaintiff's application seeking an extension of time to serve the statement of claim. 4 For the purposes of this application the brief facts giving rise to the statement of claim are as follows. These facts are not in dispute.

(1) On 1 August 1990 Bunutu Pty Limited (Bunutu) as lessor and KPP Enterprises (KPP) as lessee entered into a lease over the premises at "Central Park" Thornleigh (Z/SP35561) expressed to commence for a period five years. The plaintiff was, at that time, a director and shareholder in KPP (the company). The first defendant Barry Goldman was an agent of Bunutu. The second defendant Naga Pty Limited was the agent of Bunutu authorised to act in relation to the management of the premises. The third defendant Warren Wilson was a director of the second defendant. As at 7 March 2000 Bunutu does not appear on the ASPC Names Index Search.

(2) On 16 November 1990 KPP commenced the operation of a restaurant "La Province" at the "Central Park" premises at Thornleigh.

(3) On 25 May 1992 the plaintiff agreed to cause an additional bank guarantee to be provided to Goodacre Development Pty Limited (Goodacre) the fourth defendant in the sum of $20,000. The first defendant was a mortgagee of the premises.

(4) On 9 February 1993 the fourth defendant re-entered the premises and took possession.

(5) On 12 February 1993 KPP commenced proceedings against Goodacre in this Court seeking specific performance of the lease (Equity No 20110/96). Goodacre is the fourth defendant in the current proceedings.

(6) On 4 March 1993 the summons by consent was dismissed. KPP undertook not to bring any further claims for relief against forfeiture or for possession. 5 I turn now to the pleadings. Paragraph 6 of the proposed further amended statement of claim, alleges that the company entered into the lease agreement and that the first and third defendants warranted and represented to the plaintiff that firstly, 90% of the complex known as "Central Park" had been leased; secondly, the remainder of the complex would be leased by the time the company would have completed its fit-out of the premises, and thirdly, there would only be three restaurants (including that of the company permitted in the complex) (these are known as representations). It is pleaded that the plaintiff relied upon those representations and it was reasonable for him to rely upon them. It is alleged that it was those representations which the plaintiff relied upon when he loaned money to KPP in order for KPP to enter into the lease agreement. The alleged loss the plaintiff suffered is the moneys he loaned the company. It is alleged that this representation was false as only 30% or less of the premises in the complex were leased and at least 60% were still vacant three years later. It is also alleged an additional three restaurants were permitted to be opened in the complex despite the representation that only three restaurants were permitted. 6 The plaintiff has pleaded that the conduct of the defendants falls within s 52 of the Trade Practices Act and s 42 of the Fair Trading Act and such conduct was misleading or deceptive or was likely to mislead. The further amended statement of claim also pleads that there was a general breach of duty of care owed to the plaintiff by the third defendant. It is not pleaded that the defendants owed the plaintiff a duty of care. Although it should have been pleaded it appears to be an oversight which can be rectified. 7 It is alleged against the fourth defendant that it represented to the plaintiff that if the plaintiff or the company paid rent in the sum of $2,000 per week to the fourth defendant, the fourth defendant would release the additional bank guarantee after the expiration of three months, and would put a proposal to the plaintiff for a new lease of the premises. It is alleged that this conduct was false and misleading within s 52 of the Trade Practices Act and in breach of duty of care owed by the fourth defendant to plaintiff. It is also alleged that on 9 February 1993 the fourth defendant wrongly entered the premises and wrongly took possession of those premises and has trespassed on those premises. 8 It is important to appreciate that it was the company KPP that entered into the lease with the first defendant not the plaintiff. These proceedings are not taken by the company but by Mr Petek who was the managing director and shareholder of KPP at the relevant time. According to the plaintiff, he was the controlling mind of the company. However, by at least 23 October 1998 the plaintiff was no longer a director of the company. The plaintiff claims that on the basis of the representations he lent money to the company which he subsequently lost, and he can sue for those loses. This is a novel proposition which would reflect a shift of major significance in the current law. This proposition will be dealt with more fully should the summary judgment application proceed. 9 The plaintiff submits that service of the statement of claim should be extended pursuant to s 81 of the Supreme Court Act 1970 (SCA) and Part 2 r 3 and Part 7 r 7 of the SCR. 7 The relevant portions of s 81 of the SCA provide: "(1) Where, in beginning or purporting to begin any proceedings at any stage in the court of or in connection with any proceedings, there is, by reason of anything done or left undone, a failure to comply with the requirements of this Act or of the rules whether in respect of time, place, manner, form or content or in any other respect - (a) the failure shall be treated as an irregularity and shall not nullify the proceedings, or any step taken in the proceedings, or any document, judgment or order in the proceedings; and

(b) subject to subsections (2) and (3), the court may, on terms, set aside wholly or in part the proceedings or any step taken in the proceedings or any document, judgment or order in the proceedings or exercise its powers under this Act and the rules to allow amendments and to make orders dealing with the proceedings generally. (2) …

(3) The court shall not set aside any proceedings or any step taken in any proceedings or any document, judgment or order in any proceedings on the ground of a failure to which subsection (1) applies on the application of any party unless the application is made within a reasonable time and before the applicant has taken any fresh step after becoming aware of the irregularity." 10 Part 2 r 3 of the SCR provides: "(1) The Court may, on terms, by order, extend or abridge any time fixed by the rules or by any judgment or order.

(2) The Court may extend time under subrule (1) as well after as before the time expires whether or not an application for the extension is made before the time expires.

(3) The period within which a person is required by rules or by any order to serve, file or amend any pleading or other document may be extended by consent without an order for extension." 11 Part 7 r 7 says: "(1) For the purposes of service an originating process shall be valid for two years from the date on which it is filed.

(2) Nothing in this rule prevents the plaintiff from commencing fresh proceedings by filing another originating process." 12 It is common ground that the above section and rules give the court power to extend the time for serving a statement of claim. The question of extension of time for the service of a statement of claim was discussed by Windeyer J in Franklin House Ltd v ANI Corporation Ltd & Ors (NSWSC, unreported 7 November 1994). The learned judge wrote: "A plaintiff seeking an extension of time must put forward grounds for seeking relief. It is not sufficient ground just to say that the statement of claim has not been served as that would have the effect of providing for almost automatic extensions such as were at one stage granted under old rules as to renewal of writs. While it must be remembered that most of the cases dealing with the problem rest upon specific rules providing for extension of the validity of a writ or originating process and not upon a general rule such as Pt 2 r 3 or RSC Ord 3 r 5 of the English Rules the considerations which apply are I consider generally the same. A party seeking an extension of time must give a proper or sufficient reason for delay in service. Exceptions circumstances need not be shown as they need no longer be shown in the United Kingdom but good cause for delay should I think be shown. See Rust v Barnes [1980] 2 NSWLR 725 at 738; Ramsay v Madgwicks [1989] VR 1; Finlay v Littler [1992] 2 VR 181 at 186. If proper reason for delay is shown then it is a matter for the Court in exercising its discretion to see where the interest of justice lie. The most important case in England on this subject is Kleinwort Benson Ltd v Barbrak [1987] 1 AC 597. In that case Lord Brandon of Oakbrook explained the three categories of case to which extension would apply being: 1. where application is made when the writ is valid and before the limitation period has expired;

2. where application is made when the writ is still valid but the limitation period has expired; and

3. where application is made when the writ has ceased to be valid and the limitation period has expired. He explained that in at least cases 1 and 2 when application is made the defendant has not an accrued right of limitation although of course in category 2 the defendant might reasonably think he has if service is effected after the normal period of validity of the writ. Category 1 cases cause no problem; category 3 cases according to the House of Lords decision require satisfactory explanation of delay as it would seem do category 2. See Kleinwort Benson apparently approving Stevens v Services Window & General Cleaning Co Ltd [1967] 1 QB 359." 13 A brief history of these procedural steps taken in these proceedings are as follows:

(1) On 7 February 1996 the statement of claimed was filed but it was not served on the defendants.

(2) On 6 February 1997, the plaintiff's solicitors ceased acting for him. On that day the plaintiff's solicitor wrote to the plaintiff and pointed out that neither he nor Mr Hutchinson from Walker Wayland told them (the solicitors) that the company had been deregistered and that an application would have to be made to the court to have the company restored for the purposes of these proceedings. The letter (Ex 4D 3) continued: "… We also remind you that the Statement of Claim was drafted primarily to make sure that it was filed in view of possible complications with statutes of limitations and that in our view it was likely to require amendment in several respects. We have advised you on several occasions of the wisdom of having it reviewed by a barrister before it is served but you have obviously now decided not to accept that advice. … you also face the risk that the Statement of Claim will not have been properly served under the Court rules if it is served more than two years after the date on which it was filed. Although the Court has a discretion as to whether or not to treat a Statement of Claim which is served outside that period as being a nullity, it may refuse to give you any extension of time in which to serve the Statement of Claim. if you are not permitted to serve the Statement of Claim outside the period of two years, you would be forced to commence new proceedings. Those proceedings are likely to be statute barred. We therefore advise you to seek advice from a new firm of solicitors without delay."

(3) On 15 July 1997 the plaintiff sworn an affidavit verifying allegations of fact in the amended statement of claim.

(4) On 26 July 1997 the amended statement of claim was filed.

(5) The plaintiff explained that after receipt of the solicitor's letter he continued to explore the reinstatement of the company but by mid July he realised that these attempts were futile. He also deposed that when he filed the amended statement of claim he was under the impression that he had two years in which to serve it.

(6) On about 30 April 1998 the plaintiff received a notice from the court requesting that he file DCM documents. He considered that he should serve the defendants with both the amended statement of claim and the DCM documents.

(7) On 12 June 1998 the amended statement of claim and DCM documents were served on the third and fourth defendants.

(8) On 19 June 1998 the amended statement of claim and DCM documents were served on the first and second defendants.

(9) On 22 September 1998 the status conference was adjourned.

(10) On 4 November 1998 the matter was placed in the "not ready list".

(11) Between 17 September 1999 and 18 October 1999 the defendants filed a notice of motion seeking that the proceedings be dismissed.

(12) On 8 November 1999 the motions were adjourned.

(13) On 11 November 1999 the plaintiff filed a notice of motion seeking leave to further amend the statement of claim. 14 The critical events, namely the alleged representations that form the basis of the claims against the defendants occurred in 1990 some 10 years ago. In 1993 KPP (of which Mr Petek was the alter ego) was evicted from the restaurant premises. In June 1998 an amended statement of claim was served on the defendants. It should have been served by 7 February 1998. The statement of claim was served about four months out of time. This delay of itself is not one of great magnitude. The plaintiff submitted that the defendants have not suffered any irredeemable or actual prejudice and an extension should be granted. Further, the plaintiff submitted that the representations relied upon may never have appeared in documentation and the absence of documentation is immaterial. 15 The fourth defendant submitted that it is prejudiced because the statement of claim is a recast of the previous proceedings except that Mr Petek has been substituted as the plaintiff in lieu of KPP Enterprises. 16 Mr Goldman was at the relevant time a director of the real estate company Goldman and May Pty Limited. The company has been liquidated. Mr Goldman has moved house several times in the last 10 years and does not hold any records relating to any of the matters raised in the statement of claim or amended statement of claim. He has made enquiries of his co-director Mr May pertaining to the whereabouts of any records. Mr May has no records relating to the Thornleigh property nor any matter raised in the statement of claim or amended statement of claim. Mr Goldman is aware that there was a lease between KPP because he was told this by his solicitor. Mr Catt the first defendant's solicitor inspected the second and third defendants records to ascertain whether they hold any records relating to transactions between KPP and any other party who may have been involved in the fit-out and leasing of "La Province". The solicitor could not find any documentation which would shed light on the issues raised by the plaintiff in these proceedings. It would be a very difficult task to expect the defendants to remember oral conversations that they had with the plaintiff about 10 years ago. So far as the first defendant is concerned, there is no documentation to assist him with his recollection of events. 17 It is a harsh step to deprive a plaintiff of a trial on its merits. The plaintiff has not been entirely frank in giving his explanation for the delay. In February 1997 the plaintiff was informed by his solicitors in writing that the statement of claim has to be served within two years after the date on which it was filed and if he did not do so he risked that the statement of claim would be considered a nullity. He was also warned that if he was not permitted to serve the statement of claim he could commence fresh proceedings but they were likely to be statute barred. He was instructed to seek advice from a new firm of solicitors without delay. In other words, the plaintiff should have realised that it was critical that the statement of claim be served without delay. Notwithstanding this advice, the plaintiff formed the view that he could file an amended statement of claim and then have a further two years in which to serve it. I do not accept this explanation as satisfactory. The plaintiff's case is not a strong one. The costs in litigating such a novel common law claim will be high. After the effluxion of 7 to 10 years from the time when the representations were made, it cannot be expected that the defendants will have detailed memories of the events. The first defendant does not have any documents that would be able to assist him. As was stated in Barker v Wingo (1972) 407 US 514 at 532, "What has been forgotten can rarely be shown." This sentence was quoted by McHugh J with approval in Brisbane South Regional Health Authority v Taylor (1996) 186 CLR 541; 129 ALR 1. 18 In the exercise of my discretion and after careful consideration I have formed the view that justice is best served if the application for an extension of time to serve the amended statement of claim is refused. Costs should follow the event. The plaintiff should pay the defendants' costs. 19 The orders I make are:

(1) The plaintiff's notice of motion filed 15 February 2000 is dismissed.

(3) The plaintiff is to pay the defendants' costs of the motion and of the proceedings including all costs thrown away by the adjournment of 8 February 2000. **********

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