Plaintiff v Defendant

1 M & I Samaras Pty Ltd and John Holland Pty Ltd are parties to building subcontracts dated 8 October 2002 and 9 June 2004 in respect of the State Bowls and Training Velodrome and the Melbourne Sports and Aquatic Centre respectively. The companies are in dispute in relation to both projects, as to which the contractually compulsory dispute resolution procedures are being followed.

2 On 19 May 2010, Samaras filed two writs with general endorsements, one in respect of the velodrome contract and another in respect of the sports and aquatic centre contract. The writs claimed against John Holland amounts in excess of $1 million and nearly $10 million which were said to be due and payable by that company to Samaras under the contracts respectively. These writs were issued within the period specified in s 5 of the Limitations of Actions Act 1958 (Vic).

3 Under r 5.12(1) of the Supreme Court (General Civil Procedure) Rules 2005 (Vic), a writ is valid for service for a period of one year after the day it is filed. Samaras made a conscious and deliberate decision not to serve the writs within that period and (as is usually the case in such situations) John Holland did not know the writs had been filed.

4 Under r 5.12(2) and without notice to John Holland, Samaras made application for the period of validity for the service of the writs to be extended by a further period of 12 months. When the application was made, the first period of validity for service of the writs had not lapsed. On 19 May 2011 and just before the expiry of that first 12 month period, Daly AsJ granted the application for the extension for the further period. After the orders came to the attention of John Holland, it made application under r 46.08(b) for the extension orders to be set aside.

5 An application to set aside under r 46.08(b) is a rehearing. John Holland was entitled to, and did, raise and rely on the same grounds which it would have been entitled to rely on and raise if the original application had been made on notice and not ex parte.[1]

6 The discretion in r 5.12(2) to extend the period of validity for service of a writ is unfettered. However, it is expected writs will be served within the 12 month period of validity for service.[2] To extend that period, it must be shown there were good reasons in all the circumstances to extend the period of validity for service.[3]

7 In the rehearing of Samaras's applications for extension, Daly AsJ decided it had good reason for not serving the writs on John Holland within the first period of validity for service. On 19 September 2011, she refused to set aside the orders which she had made extending that period.

8 John Holland now appeals under r 76.06(1) from the orders of the associate judge. Under r 76.06(7), the appeals are by way of re-hearing de novo. I am required independently to determine whether to exercise the discretion in r 5.12(2) to extend the period of validity for service of the writs.

9 The good reason which the associate judge found to exist related to the dispute resolution procedures which are specified in the contracts. Under those procedures, the parties are required to submit any dispute to a certain kind of determination. In both cases, the penultimate step is determination by an expert. That determination is final and binding unless a party appeals by written notice to the other party. The dispute must then go either to arbitration or to litigation, in John Holland's 'absolute discretion' (cl 15.13 of the velodrome contract and cl 47.3 of the sports and aquatic centre contract).

10 Having participated unsuccessfully in certain other agreed dispute resolution processes, the parties are still involved in the compulsory dispute resolution processes which are specified in the contracts. Those processes have dragged on and the time has not yet come for John Holland to determine whether, if there is an appeal from an expert's determination, the dispute will go to arbitration or the court. In the meantime, Samaras does not know how John Holland will exercise that absolute discretion when the occasion to do so arises. In reliance on those circumstances, the reason given by Samaras to Daly AsJ for not serving the writs within the first 12 month period and for seeking the extension for a further period of 12 months was that 'the further steps required to be taken under the subcontract will take many months to complete'.

11 In carefully considered reasons, the associate judge determined the good reason which Samaras had for not serving the writs was its compulsory participation in the dispute resolution procedures specified in the contract. Her Honour had regard to the overarching purposes in ss 7, 8 and 9 of the Civil Procedure Act 2010 (Vic) and decided John Holland would not be prejudiced by granting the extensions. Applying the modern approach to the question (see below), her Honour did not impose any special burden on Samaras because John Holland would lose the limitation defence if the extensions were granted. She took into account that 'it appears that what the defendant is trying to achieve is to shut the plaintiff out of pursuing its legal rights in the event that the parties fail to resolve their differences through the contractually agreed processes'.

12 John Holland submitted the outcome of this appeal would turn on one essential question: if a plaintiff has a cause of action and has issued a writ, is it a good reason to refrain from serving the writ that the plaintiff wishes to undertake further steps in a dispute resolution process? In characterising the central question in that way, John Holland relied on the well-established principle that the 'mere wish' of the party cannot be a sufficiently good reason for extending the period for service of a writ.[4]

13 In John Holland's submission, it was for the court to decide whether legal proceedings should be stayed. Samaras could not effectively obtain a stay by seeking to have the period of validity for service of the writs extended. That proposition is elementary and supported by decisions of high authority.[5] A deliberate decision by a plaintiff not to serve a writ until collateral litigation had been disposed of or until some development in that litigation has occurred would not ordinarily be a good reason for extending the time for service.[6] It was not a good reason for failing to serve a writ within time that a party was engaged in settlement discussions or processes.

14 I accept there have been cases in which the courts have refused to extend the time for service where the plaintiff has simply preferred to engage in settlement discussions rather than serving the writ. In Easy v Universal Anchorage Company Ltd,[7] Lord Denning examined the authorities and said: 'Negotiations for a settlement do not afford an excuse for failing to serve a writ in time or to renew it'.[8] In Savcor Pty Ltd v Cathodic Protection Industrial APS,[9] Gillard AJA said 'it is not a good reason that negotiations are continuing between the parties'.[10] In Protec Pacific Pty Ltd v Stueler Industriewerke GmbH,[11] Hansen J did not accept that concern about damaging the close commercial relationship between the plaintiff and the defendant companies was a valid reason for not serving a writ within time.

15 On the other hand, there have been cases in which the courts have extended time where the writs were not issued pending the hearing and determination of test cases of a similar or identical nature. The writs extended by Smith J in Rowland v Commonwealth of Australia[12] (which concerned the HMAS Voyager litigation) are the clearest examples of that. Another example is C & M Brick (Melbourne) Pty Ltd v Boral Besser Masonry Ltd.[13] There Beach J held: 'If collateral litigation is closely connected to the action the subject of the writ and if the defendant is in substance in the same position it would have been if service had been effected within time, an extension will be granted'.

16 In the circumstances of the present case, it would not be right to characterise the decision made by Samaras not to serve the writs as a 'mere wish' to await the outcome of settlement procedures or to engage in settlement discussions. Samaras has not been engaged in the pre-action dispute resolution process because it wishes to. Under the contractual arrangements, it is compelled to follow the prescribed procedures before the dispute can be judicially determined. Under those procedures, John Holland has an absolute discretion to refer an unresolved dispute to arbitration or to litigation. Until that point is reached and John Holland makes its election, Samaras will not know whether the dispute will be resolved and, if not, whether it will then be determined by arbitration or a court. In the meantime, it is required to participate in the contractual dispute resolution procedures. It was in these circumstances that Samaras determined to preserve its legal position by issuing but not serving the writs. That was being done for reasons of forensic prudence, not a mere wish to engage in settlement discussions.

17 John Holland submits Samaras could have preserved its position just as well by both filing and serving the writs. I think it was likely that, if Samaras had adopted that course, there would have been parallel disputation in the court and under the dispute resolution procedures. Samaras would have been legally obliged to participate in both. By filing but not serving the writs, the company has preserved its position but avoided that possibility. In the circumstances of the present case, I think it was legitimate for it do so.

18 As the associate judge pointed out, by s 7(2)(b)(c) it is an overarching purpose of the Civil Procedure Act to facilitate the just, efficient, timely and cost-effective resolution of disputes by agreement between the parties and under an agreed dispute resolution process. Section 8(1) requires the court to give effect to this overarching purpose in the exercise of its powers, which include the power under r 5(2) to extend the period of validity for service of a writ. In making orders in the exercise of this power, s 9(1)(b) requires the court to further the overarching purpose by having regard to (among other things) the public interest in the early settlement of disputes by agreement between the parties.

19 The overarching purpose of the Civil Procedure Act is thus a relevant consideration in this case. It would not facilitate the early settlement of disputes by agreement if the court were to exercise its power to extend the time for service of a writ without regard to a party's compulsory participation in contractual dispute resolution processes.

20 John Holland submits that, if Samaras wanted to avoid parallel proceedings but still preserve its rights in this court, it could and should have issued and served a writ and then sought a stay. Indeed it could. But this is neither a reason for refusing to grant an extension or for concluding Samaras did not have a good reason for not serving the writ.

21 The predicament in which Samaras found itself was caused by the requirement to undergo dispute resolution according to the exclusive contractual processes. By not serving the writ and then seeking an extension of the period for service, Samaras was not giving itself a stay, as John Holland submitted, but was preserving its position in the light of the provisions of the contracts. As Samaras submitted, the subject-matter of the proceedings instituted in the court were inextricably intertwined with the subject-matter of the dispute resolution processes. Those processes had been underway for over three years. Having regard to the time delay, the amounts involved, the apparent complexity of the issues and the relationship between the parties in respect of the dispute, there appears to have been good reason for Samaras to think that it would not have been conducive to settlement for the filing of the writs to be disclosed to John Holland. In my view, these matters should be taken into account when determining whether the company had a good reason for not serving the writs.

22 Of course it is necessary to take countervailing considerations into account. But here there has been no inordinate or inexcusable delay. All of the delay has been explained entirely by the compulsory participation of the parties in the contractual dispute resolution processes. There has been no material prejudice on the part of John Holland, beyond the prejudice which any delay might cause. For example, John Holland has not alleged that it will lose access to important witnesses by reason of the delay. On the materials before me, if the period for service of the writ is extended, John Holland will be able to participate in the proceedings in the court just as well as it would have been if the writs had been served.

23 Because of the operation of the dispute resolution procedure in the contracts, there is a question whether the causes of action in the writs which have been issued by Samaras have accrued. If the causes of action have not accrued, the writs are liable to be struck out, but Samaras will presumably be able to issue other writs when the causes of action accrue. If the causes of action have not accrued, there are two possible consequences. If the applications for extension of the time for service are refused and new writs are reissued, Samaras will likely be met with a valid and legitimate limitation defence. If the applications are granted and the present writs remain alive, John Holland will be deprived of such a defence.

24 Quite properly, John Holland makes no concession about this question. It would not be appropriate for me to determine the question finally here. It is enough for me to recognise that, if the applications for extension of the period for service are refused and Samaras has to reissue the proceedings, there is a serious possibility that it will be met with a limitations defence which John Holland may have, and vice versa.

25 On the modern approach, this is a neutral consideration. As Crockett J held after reviewing the authorities in Finlay v Littler,[14] the operation of a limitations period is not itself a good reason for extending the period of validity for service of a writ. Moreover, if there is good reason for not serving the writs, exceptional circumstances need not be shown because a limitation period may have intervened. In the words of Lush J in Soper v Matsukawa,[15] 'the running out of a statute of limitations does not increase the burden of proof resting on the applicant for renewal'.

26 In the present case, there are good reasons for granting a period of extension for service of the writs and the possible expiry of the limitation period is not a reason for refusing to grant the extension.

[1] McNamara v Cameron [1890] VicLawRp 22; (1890) 16 VLR 108, 110 (Higinbotham CJ_); Savcor Pty Ltd v Cathodic Protection Interntional APS_ [2005] VSCA 213; (2005) 12 VR 639, 646 [20] (Gillard AJA, Ormiston and Buchanan JJA agreeing) ('Savcor').

[2] Ramsay v Madwicks [1989] VicRp 1; [1989] VR 1, 4-5 (Young CJ, Kaye and Southwell JJ agreeing) ('Ramsay'), following Battersby v Anglo-American Oil Co Ltd [1945] KB 23, 32-33 (Lord Goddard) ('Battersby').

[3] Ramsay [1989] VicRp 1; [1989] VR 1, 6 (Young CJ, Kaye and Southwell JJ agreeing); Finlay v Littler [1992] VicRp 59; [1992] 2 VR 181, 186 (Southwell J, Crockett J agreeing); Savcor [2005] VSCA 213; (2005) 12 VR 639, 652 [42] (Gillard AJA, Ormiston and Buchanan JJA agreeing)

[4] Ramsay [1989] VicRp 1; [1989] VR 1, 4 (Young CJ, Kaye and Southwell JJ agreeing).

[5] Ibid 5, approving Battersby [1945] KB 23, 33 (Lord Goddard).

[6] Protec Pacific Pty Ltd v Stueler Industriewerke GmbH [2007] VSC 93 (4 April 2007) [37] (Hansen J) ('Protec Pacific').

[7] [1974] 1 WLR 899.

[8] Ibid 902 (Orr and Roskill LJJ concurring).

[9] [2005] VSCA 213; (2005) 12 VR 639.

[10] Ibid 651 [41] (Ormiston and Buchanan JJA concurring).

[11] [2007] VSC 93 (4April 2007) [56].

[12] Unreported, Supreme Court of Victoria, Smith J, 2 July 1993, 15.

[13] [1998] VSC 186 (17 December 1998) [15].

[14] [1992] VicRp 59; [1992] 2 VR 181, 187 (Southwell J concurring).

[15] [1982] VicRp 96; [1982] VR 948, 953 (Gray J concurring).