Plaintiff v Defendant

2 By generally endorsed writ filed on 10 October 2011 ("Writ") the plaintiff ("Howard"), a solicitor, claimed against the defendant ("Power"), a barrister, damages for negligent advice. The claim arose from a contract of retainer pursuant to which Howard sought the advice of Power in relation to taxation matters. The retainer was entered into in September 2005 and written advice was given by Power, it is alleged, on 12 October 2005. It is alleged that the advice was relied upon by Howard in organising his affairs and that in breach of his duty to exercise all due care, skill and attention in providing the advice, Power was negligent. The claim is one made both for breach of the contract of retainer and for damages for negligence in tort.

3 The validity of the writ for service expired on 8 October 2012. By ex parte summons filed on 3 October 2012 Howard applied to extend the validity of the writ for service. That application came before Mukhtar AsJ on 8 October 2012. His Honour ordered that the summons be heard on notice to Power and required that it be served on Power, personally, by 15 November 2012. He noted that the writ had intentionally not been served and that it appeared that the only reason Howard had abstained from serving the writ was that he wished to await the decision of the Full Court of the Federal Court in an appeal by him.

4 The application was supported by a number of affidavits of Howard[1] and affidavits sworn on behalf of Power by his solicitor.[2] The material facts may be summarised as follows:

(a) Howard together with Kevin Donovan, David Mackie and Michael Quinert were directors of a non-resident corporation called Koda Holdings Ltd ("Koda"). The sole ordinary shareholder of Koda was a company called Esparto Limited ("Esparto") another non-resident corporation. The shares in Esparto were owned by or on behalf of the trustee of the Esparto trust, a nonresident discretionary trust associated with the family of Kevin Donovan.

(b) In September 2005 the board of Koda met in Hong Kong. At that time Donovan advised Howard that because of contributions made by Howard, Mackie and Quinert to the building up of the assets of Koda, that consequently there was an increase in the value of the Esparto trust. Howard would be added as a beneficiary of the trust for the purposes of the trust making a gift to Howard out of the corpus of the trust.

(c) Howard, upon his return to Melbourne, sought from Power taxation advice regarding the applicability of capital gains tax to a distribution by the Esparto trust if it occurred. The advice was given by Power by memorandum dated 12 October 2005. It was to the effect that none of the capital gains tax provisions applied to a capital distribution from a non-resident trust to an Australian beneficiary and that, similarly, such a distribution was not taxable as income.

(d) Then followed events leading to amended assessments of the tax payable by Howard for the 2006 and 2007 financial years arising from the distributions from the non-resident trust, appeals against those assessments and appeals from the determinations of the Federal Court to the Full Federal Court. In the middle of this process, this proceeding was commenced, shortly before the expiry of the limitation period applicable to the contractual breach claim; but the proceeding was not served because of the desire to await the outcome of the appeals which, if successful, would obviate the need for any claim against Power at all.

5 A chronology of the significant events is as follows:

Meeting of board of Koda Holdings Ltd (Koda). Donovan advises that he will approach the trustees of the Esparto trust to exercise their discretion to add Howard as a beneficiary.[3]

Howard retains Power to provide advice. Power is provided with a copy of the Esparto trust deed.[4]

Power provides a memorandum of advice to Howard.[5]

Howard is advised that the trustees of the Esparto Trust have added him as a beneficiary.[6]

Howard receives instrument of release which identifies that he will receive an amount of £2.685m from the Esparto trust.[7]

Resolution of Koda board to approve share buy back. This is the method by which cash is generated to satisfy the distribution of the Esparto trust to Howard.[8]

Howard lodges tax return for the 2006 financial year in reliance on the advice of Power.[9]

Howard receives notice of assessment from Commissioner.[10]

ATO issues amended notice of assessment. The distribution from the Esparto trust is assessed as part of Howard's taxable income.[11]

Howard lodges notice of objection to amended notice of assessment.[12]

Commissioner wholly disallows Howard's objection.[13]

Howard lodges appeal in Federal Court against decision of Commissioner to disallow his objection: proceeding No. VID 80/2010.[14]

Howard contends he told Power that in the event Power's advice was proven to be wrong he would most likely sue Power for negligence.[15] Power denies this happened.[16]

Howard receives further amended assessment for additional tax penalties and interest for the 2006 year.[17]

Howard lodges a notice of objection against the further amended assessment.[18]

In the course of the preparation for a mediation of the Federal Court Proceeding, Howard says he told Power that in the event the matter before the Federal Court is determined against him as to primary tax liability or penalty, he would look to him for an indemnity for those liabilities.[19] Power denies this happened.[20]

ATO disallows the notice of objection.[21]

Howard lodges appeal in Federal Court against decision of Commissioner to disallow his objection: Proceeding No. VID 28/2011.[22]

Trial of both Federal Court proceeding commences before Jessup J, and involves the conduct of examinations in London in June 2011.[23]

Power appears at trial on behalf of Howard (with FGA Beaumont QC). Trial hearings conclude on 1 December 2011.[24]

Howard commences proceedings against Power in Supreme Court of Victoria. The proceedings are not served.[25]

25, 26, 28 & 31 October, and 2,3,8,10,11 and 14 November 2011

Power acts for Howard (pursuant to an earlier retainer) in Federal Court proceeding and on these dates was briefed to examine documents and prepare submissions.[26]

Power appears before Jessup J without Senior Counsel to make submissions on behalf of Howard.[27]

Power appears before Jessup J without Senior Counsel and trial of Federal Court proceedings concludes.[28]

Federal Court decides that the distributions from the Esparto trust form part of Howard's assessable income.[29] Howard v Commissioner of Taxation (No. 2) [2011] FCA 1421

Power briefed to draw notice of appeal to Full Court against decision of Jessup J.[30]

Power attends conference in Sydney with Howard and Anthony Slater QC in relation to the appeal.[31]

Power prepares draft advice concerning the appeal for settling by Slater QC.[32] This appears to be the last time that Power acts for Howard in relation to the matter.

Howard commences appeals to the Full Court of the Federal Court of Australia.[33]

Hearing of appeal commences.[34] Power does not appear in the appeal.

Power receives a telephone call from Howard who advises that this proceeding had been commenced against him and that Howard had applied to extend the time for service, but Mukhtar AsJ had not at that stage allowed an extension.[36]

Full Court Federal Court hands down Judgment on appeal: Howard v Commissioner of Taxation [2012] FCAFC 149.

6 I was told by Mr Broadbent, solicitor, who appeared for Howard, that the decision of the Full court was the subject of a special leave application to the High Court.

7 After Power was given notice of the application to extend the validity of the Writ, as required by the order of Mukhtar AsJ, there were exchanges of correspondence between the solicitors for the parties and requests for documents referred to in the Writ and Indorsement of Claim. One of the matters advanced on behalf of Howard was that in light of the judgment of the Full Court of the Federal Court in Howard v Commissioner of Taxation [2012] FCAFC 149, handed down on 26 October 2012 (that is, since the application to extend the validity of the Writ was adjourned by Mukhtar AsJ), Howard now intended to formally serve the Writ and "activate" the proceeding. The solicitors for Howard advance the proposition that there was no doubt that the court would make an order extending the validity of the Writ, if required, but that the most cost effective option was for Power to enter an appearance, which cures the irregularity arising out of the service of an expired Writ. The only response from Power's solicitors was to serve a Notice to Produce. From this, Howard's solicitor concluded that Power was opposing the cost effective option, rightly as it turned out.

8 Power's solicitor, Mr Carfoot, swears on information and belief that if Howard had informed Power in October 2011 of the commencement of this proceeding, he, Power, would not have continued to act for Howard and would immediately have notified his professional indemnity insurers, the Legal Practitioners' Liability Committee.

9 Rule 5.12 (1) of the Supreme Court (General Civil Procedure) Rules 2005 ("Rules") provides that a writ or originating motion shall be valid for service for one year after the day it is filed. The application is made under r 5.12(2). That rule provides:

Where a writ or originating motion has not been served on a defendant, the court may from time to time by order extend the period of validity for such period from the day of the order as the Court directs, being not more that one year from that day.

Rule 5.12(3) provides that an order may be made under paragraph (2) before or after expiry.

10 The principles applicable are well settled. They derive in part from earlier Rules (Order 8 Rule 1), which provided that the court might order that a writ be renewed if satisfied that reasonable efforts had been made to serve the defendant, or for "other good reason". Despite the change in language, however, the authorities make it clear that the court should determine the question of extending the validity of the Writ on the same basis as previously.[37] Amongst the differences between the old and new Rules is a change of terminology, from renewal of the writ to 'extension of its validity. The principles applicable are, in summary, as follows:

(a) Although the power conferred by Rule 5.12 is wholly discretionary, a judge has to approach the exercise of the discretion in accordance with established principles: Dagnell v Freedman & Co [1993] 2 All ER 161 at 165 ("Dagnell");

(b) The jurisdiction given by the rule ought to be exercised with caution: Battersby v Anglo-American Oil Co Ltd ("Battersby");[38] Ramsay v Madgwicks[39] ("Madgwicks");

(c) It is the duty of a plaintiff to serve a writ promptly: Battersby at 32;

(d) An application to extend time for service is not granted as a matter of course: Battersby at 32; Madgwicks; Savcor Pty Ltd v Cathodic Protection International APS[40] ("Savcor");

(e) The first question to consider is whether the plaintiff has taken reasonable steps to serve the writ. If not, it then becomes necessary to consider whether there was "some other good reason" for making the order to extend time for service of the writ: Soper v Matsukawa[41] ("Soper"); Battersby;

(f) The plaintiff carries the onus of showing that there is a good reason for extending the time to serve the writ (Soper at 952; Madgwicks at 6; Savcor at [41]); the applicant's burden is no greater if the limitation period has expired between the date of issue of the writ and the date on which the application is made: Findlay at 187.

(g) Whether there is good reason depends on all the circumstances of the case: Dagnell at 165; Kleinwort Benson Ltd v Barbrak Ltd & Ors [1987] AC 597 at 622-3 ("Kleinwort"); and it is not possible to define or circumscribe the scope of the expression "good reason": Kleinwort;

(h) Where the application is made after the period for service has expired, the reason must be one of substance (Savcor at [41]);

(i) The selection of relevant factors to establish that there is a good reason for making the order, and the significance to be given to each of the factors, are matters of discretion (Soper at 954);

(j) The fact that the plaintiff decides not to serve the writ whilst some other case is tried, or to await some future development, is generally not a good reason to justify extending time for service. Madgwicks at 4 and 5; Savcor at [42]); Dagnell at 165-168. It is for the Court and not for one of the litigants to decide whether there should be a stay, and it is not right that people should be left in ignorance that proceedings have been commenced against them if they are there to be served: Battersby at 32;[42]

(k) It is a relevant factor against the exercise of the discretion that the renewal of the writ might deprive the defendant of a limitation defence where the plaintiff has been aware that the passage of time might be dangerous: Battersby at 31-2; Madgwicks at 7; Soper at 953; see also Finlay v Littler [1992] VicRp 59; [1992] 2 VR 181 at 187 ("Finlay").

(l) It is a relevant factor against the exercise of the discretion that the defendant was unaware of and had no reason to expect that a writ had been issued against them: Madgwicks at 7; Kleinwort at 623-4).[43]

(m) The lapse of time is itself generally to be regarded as prejudicial to the defendant (Madgwicks at 7; Finlay at 188). In this contest, the relevant delay is to be measured from the time at which the plaintiff's cause of action arose (Tyson v Morgan [200] 1 Qd R 100 at 104.50);

(n) Any delay in making the application to extend the time for service of the writ is a relevant factor against the exercise of the discretion (Finlay at 187); delay preceding (as well as following) the issue of the writ is material (Soper at 953);

(o) The expiration of the limitation period will not in itself constitute a good reason for extending the validity of the writ (Finlay at 187), although it is relevant (Soper at 952); and

(p) It may be appropriate to have regard to the balance of hardship: Kleinwort at 622; Van Leer Australia Pty Ltd v Palace Shipping KK [1981] HCA 11; (1981) 180 CLR 337 at 343 and 346 ("Van Leer") (adopting the approach of Bray CJ in Victa Ltd v Johnson (1975) 10 SASR 496 at 502 ("Victa")).

11 The Australian cases differ from the English cases as to the effect of a limitation defence arising after the issue of a writ but before the application to extend the validity of the writ. The difference is traced by Stephen J in Van Leer at 341-6. His Honour preferred the approach of the Australian and Canadian courts. He quoted with approval what Bray CJ said in Victa.[44] Bray CJ stated that there was no rule that a defendant acquired an absolute right to immunity when a writ issued within the limitation period is not served and in the meantime the period expires. The English cases had stated a test that if the limitation period had expired it was only in exceptional circumstances that the writ would be renewed. This is not the Australian position.[45]

12 Mr Broadbent, on behalf of Howard, accepted the summary of the applicable principles advanced by Mr Hanak on behalf of Power (which are substantially reproduced above) and also accepted that there had been no attempt to serve the Writ. Mr Broadbent made the following submissions:

(a) The application to extend the validity of the Writ was made before it expired;

(b) That the primary reasons for the application to extend the validity of the Writ was the continuance of the Federal Court proceedings, that is, at the time of the application the outcome of the Appeal to the Full Federal Court was not known. If it was ultimately determined that Power's advice was correct, then there would be no basis for the negligence claim and no need to activate the proceeding by service. In other words, the reason the Writ has not been served is to await the outcome of the Federal Court proceedings against the Commissioner of Taxation;

(c) The potential claim in the proceeding is in the millions of dollars. This distinguishes the case from such cases as Madgwicks, where the amount in dispute was modest. The ramifications for Howard in this case of a refusal to extend the validity of the Writ were much more serious;

(d) That on the evidence of Howard, Power was warned that if the appeals against the amended assessments were unsuccessful, Howard would look to Power for compensation, a matter that Power clearly disputes. The significance of this is, Howard contends, that Power was on notice of a potential claim and was thereby enabled to notify his insurer and ensure that all relevant documents were retained;

(e) In contradistinction to the case based on the alleged fact that Power had been warned of the potential claim, it was submitted that it would have been hugely prejudicial to Howard had Power withdrawn from acting in the Federal Court proceedings. This is because Howard had spent over $300,000 in retaining Power, which would have been thrown away had the Writ been served whilst Power was representing him. It was accepted by Mr Broadbent that the inevitable consequence of service of the Writ would have been that Power must have returned the brief. It was not explained how that submission sat alongside the submission that Power was warned of the potential claim. However, it was not put as a hypothetical position. It thus detracts from, if not flatly contradicts, the evidence of the warning having clearly been made. That is because such a warning would for a reasonable practitioner be likely to act as a red flag and result in that practitioner being compelled to retire from continuing to act in the matter, where the matter had arisen out of the very advice the subject of the warning; and

(f) In relation to the time when the causes of action accrued, the cause of action for breach of contract is likely to have accrued at the time of the giving of the advice. In relation to the cause of action in tort, however, it was submitted that the damage suffered by Howard commenced to be suffered shortly after the advice was given, by Howard expending moneys to put in place the distribution of corpus from the Trust to Howard and Quinert.

(a) The affidavits filed on behalf of Howard do not disclose a good reason for the exercise of the Court's discretion and that is principally because the authorities are clear that it is not a good reason for extending the validity of a writ that the plaintiff is waiting for the outcome of another proceeding;

(b) It is for the Court to control its processes and not for the party in its discretion to determine when a writ is to be served;

(c) There is not one set of rules for cases involving small claims and another set for cases involving large claims;

(d) It is a relevant consideration against the exercise of the discretion that the extension of the validity of the Writ might deprive Power of a limitation defence where Howard has been aware that the passage of time might be dangerous. That is what has happened here. Howard is an experienced solicitor of in excess of 20 years and must be taken to be aware of the relevance of the limitation period and that it is an issue in this proceeding. Indeed the Writ was issued some two days before the contractual limitation period expired and the application for the extension of the validity of the Writ was made shortly before the Writ expired. In this connection, Mr Hanak referred me to the observations of Lush J in Soper at 953 and his observations regarding the significance to a plaintiff of the expiry of a limitation period and submitted that it did not constitute a good reason to extend the validity of the writ where the plaintiff was aware of the danger of its expiry;

(e) It is relevant that Power was unaware of the fact that the Writ had been issued against him, but whether or not Power had no reason to expect that a writ had been issued against him is the subject of dispute between Howard and Power on the affidavits. Submissions were made on behalf of Power that I should give little weight to the evidence of Howard that he had warned Power of the potential for a claim for negligent advice, because the evidence was unconvincing and arguably inconsistent with the chronology of events;

(f) That the lapse of time since the giving of advice in 2005 is generally to be regarded as prejudicial to Power. This raised the question of when the causes of action arose. It seems fairly clear that the cause of action for breach of contract, if there was one, arose at or about the time of the giving of the advice in 2005. It is more problematic as to when the cause of action for breach of the tortious duty of care arose, as I mention below. However, the prejudice identified by Mr Hanak was that the recollection of the parties of the circumstances leading up to the giving of the advice is material and depends upon matters that are not recorded in writing. It particularly relates to the instructions given to Power for the purposes of preparing the advice. In this regard, I was referred to the judgment of Jessup J in Howard v Commissioner of Taxation (No 2)[46] at paragraph 186 where his Honour referred to Howard seeking the advice of Power in the following terms:

[186] Anticipating the receipt of a distribution from the Esparto Trust, the applicant promptly sought the advice of counsel as to the taxation consequences of any such distribution. Counsel was briefed with a copy of the trust instrument, but no record of any other written instructions provided to counsel is in evidence. Notwithstanding that deficiency, the drift of those instructions may be gathered from the opening paragraphs of counsel's memorandum of advice dated 12 October 2005 ...

I would make the following observations about the apparent tenor of counsel's instructions. First, it is not clear why counsel's advice was required "as a matter of urgency". Secondly, it seems that counsel had been misinformed as to the identity of the trustee of the Esparto Trust. Thirdly, it also seems that counsel was not informed as to the existence of Juris and Lively. Fourthly, counsel appeared to have been informed that, as at October 2005, the trust itself was "capital enriched", whereas the enrichment of capital which ultimately funded the distributions of March 2006 then lay in the future...

[188] As a member of the Board of Koda in March 2006, the applicant was involved in the resolution to buy shares back from Esparto. I would readily infer that the applicant well knew that the ultimate purpose of that buyback was to put the Esparto Trust in funds sufficient to make the distributions foreshadowed by Donovan in September 2005. There is no evidence that the applicant sought supplementary advice from counsel as to the taxation consequences, if any, of these developments.

I am not presently in a position to assess the true impact of these matters. But it does appear, according to the submissions made on behalf of Power, that the question of what instructions were given may be an issue in this proceeding. The solicitors for Power had served a Notice to Produce the Brief to Power to give the 2005 advice on Howard's solicitor. The result seems to be that, apart from an email, which cannot be produced, the instructions were oral;

(g) The identified delay was, Mr Hanak submitted, from the time of the amended assessment in 2009 or at the latest from the time that the Commissioner of Taxation disallowed Howard's objection in December 2010. There was deliberate and unacceptable delay by a man who must have understood the significance of the limitation periods and the consequence of their expiry;

(h) That Howard had not served the Writ on Power with full knowledge that the contractual cause of action would be statute barred if the validity of the Writ was not extended. It is clear, submitted Mr Hanak, that at least a part of the reason for Howard not serving the Writ in the period prior to March 2012 was that he did not wish to upset the relationship with Power and that he wanted Power to continue to work on the Federal Court proceeding; and

(i) Mr Hanak also referred me to the professional indemnity policy issued by the Legal Practitioners' Liability Committee. That policy excludes, by clause 19.10, indemnity calculated by reference to any "fee, commission or disbursement charged or incurred by any Insured". The relevance of this is that it is likely that an element of the damages claimed by Howard would include the expense to which he has been put in the proceedings in the Federal Court in reliance upon the advice of Power. Howard deposed that the fees were in excess of $300,000. It was said on behalf of Power that had he been told of the issue of the Writ he would have ceased to act, and thus the limitation on his indemnity under the insurance policy would be less detrimental to him if indeed his advice was negligently given.

14 In my view, the principles I have outlined above lead to the conclusion that I should refuse to extend the validity of this Writ. Prime amongst those reasons is the undisputed fact that the Writ was not served, and no attempt was made to serve it, because of the desire to await the outcome of the Federal Court proceedings, including the decision which has now been handed down by the Full Court of the Federal Court.

15 In relation to the submission on behalf of Howard that the damage suffered by Howard commenced to be suffered shortly after the advice was given, by Howard expending moneys to put in place the distribution of corpus from the Trust to Howard and Quinert, and thus the cause of action in tort accrued then, I note there was no evidence of this and that it is just as likely that the damage was suffered when the amended assessments were raised in August 2009, or the when the ATO disallowed Howard's objection to that assessment in December 2010.

16 The endorsement on the Writ does not identify in any way the nature of the damages or when damage commenced to be suffered. The affidavit evidence of Howard, particularly his affidavit of 3 October 2012, identifies some minor activities undertaken by Howard in order to enable the distribution from the Trust,[47] but there is no indication of any expenditure in reliance on the advice until, at the earliest, about May 2007, as Howard says that on 24 May 2007 he lodged his tax return for the 2006 year. I infer that at that time there must have been expenditure in reliance on the advice in the preparation of the tax return. It may well be the case, however, that such expenditure is not causally a result of any breach as it would have been incurred in any event. If that is the case, the loss consequent upon the negligent advice is not likely to have been "actually"[48] suffered until the amended assessment was issued in August 2009.

17 Thus, even though the cause of action in contract is statute barred, 6 years having elapsed since the allegedly negligent advice was given, it is likely that the cause of action in tort survives and it is not statute barred. On the one hand, Power has "acquired" a defence to one cause of action (contract) which he will lose if the validity of the Writ is extended. On the other, there is likely to be a subsisting cause of action in tort, and Howard will be able to re-issue in respect of that cause of action.

18 The argument advanced on behalf of Howard that the expiry of the limitation period, whether it be in contract or tort, was itself a good reason in this case to extend the validity of the Writ is met, as Mr Hanak submitted, by the forceful opinion of Lush J in Soper (at 953) where his Honour said:

Modern Australian cases... show that what the applicant has to show is one or other of two alternatives. If the relevant alternative is within the expression in the rule of "other good reason"[49], then the applicant must show nothing more or other than good reason for the making of the order. The cases depart from a view expressed in some English cases that at any rate where a statute of limitations has run out between the time of issue of the writ and the time of the application for the renewal, the applicant must show exceptional circumstances. These decisions show, among other things, that the running out of the statute of limitations does not increase the burden of proof resting on the applicant for renewal.

In the present case, however, there is an element of inversion of this view, so that the plaintiff puts forward his position in relation to the statute of limitations as the strongest, if not the only, element of his "good reason", so that the running out is to facilitate and not obstruct the granting of a renewal.

I find myself unable to accept this proposition, certainly unable to accept it in the present situation where the argument for the plaintiff appellant postulated an awareness of the statute of limitations in judging the time for issuing the writ and so implied a background of conduct of the action of awareness of the fact that the passage of time might be dangerous.

19 It is quite evident from the timing of the issue of the Writ in this case that Howard, who is a partner in Oakley Thompson & Co, which firm act as the solicitors for him in this proceeding (and also did in the Federal Court proceedings), was (or his advisors were) aware of the "statute of limitations in judging the time for issuing the writ and so implied a background of conduct of the action of awareness of the fact that the passage of time might be dangerous".[50]

20 I agree with the submission by Mr Hanak that, in the circumstances of this case, it is not an excuse, nor is it good reason, that Howard wished to avoid the incurring of additional costs, or wished to avoid throwing away his "investment" in the services of Power. This follows an examination of the argument and decision in Madgwicks. In that case it was submitted by counsel for the appellant that (at 4) "the good reason established by the plaintiffs for the extension of the writ was that they had wished to await the outcome of the appeal to this Court in the proceedings instituted by the Commissioner for Corporate Affairs before proceeding with the action with which they had instituted, and it was said that they wanted to save the costs of that action if it were possible" (emphasis added). Young CJ said (at 5):

It is the duty of a plaintiff who issues a writ to serve it promptly, and renewal is certainly not to be granted as a course on an application which is necessarily made ex parte. In every case care should be taken to see that the renewal will not prejudice any right of defence then existing, and in any case it should only be granted where the court is satisfied that good reasons appear to excuse the delay in service, as, indeed is laid down in the order. The best reason, of course, would be that the defendant has been avoiding service, or that his address is unknown, and there may well be others, but ordinarily it is not a good reason that the plaintiff desires to hold up the proceedings while some other case is tried or to await some future development. It is for the court and not for one of the litigants to decide whether there should be stay, and it is not right that people should be left in ignorance that proceedings have been taken against them if they are here to be served.

Clearly, there is a direct analogy between the desire in that case to save costs and the desire of Howard in this case to avoid throwing away the monies he has "invested" by having retained Power both for the purposes of obtaining advice and for the purposes of conducting the Federal Court proceedings.

21 In the circumstances of this case, there was ample opportunity for Howard to serve Power after he had ceased to act in the appeal to the Full Court of the Federal Court in about February 2012. The only inhibition was the desire to avoid wasting money on proceeding against Power when it might turn out that the Full Court upheld the appeal. That could have been easily accommodated by appropriate interlocutory orders.

22 By about February 2012 - when Power apparently ceased to act in the Federal Court Proceeding - there was no possibility of wasted expenditure by reason of the fees paid to Power being "thrown away". Thus, the ground advanced by Mr Broadbent on behalf of Howard that he wished to avoid wasting his "investment" in Power fell away by about February 2012.

23 There are instances where to await the outcome of related proceedings has constituted a good reason for the purposes of r 5.12. An example is Kleinwort. There, a test case was commenced by the plaintiff and an omnibus writ was issued but not served in relation to all other claims of the same character. The plan was designed to save, and did save, legal costs which, if they had been incurred, would have fallen on the defendants. The defendants had given undertakings to pay their share of the costs of discharging their cargo from the ship (which was the substance of the claim in the writ); the defendants had negotiated with the plaintiff in relation to the claims and knew of the possibility of the claims being made against them, and none of the defendants suffered any prejudice by the delay in service, indeed they gained a costs benefit from the trial of the test case. On the other side of the ledger, the plaintiff's claims would be statute barred if the writ was not renewed. The balance of hardship thus favoured the plaintiff.

24 This case is of a quite different character. The Writ was issued when Power continued to represent Howard in the proceedings that flowed from the alleged reliance on the advice. Although I cannot finally decide the dispute as to whether Power was warned of the possibility of proceedings (in the absence of cross-examination - for which neither party applied), the probabilities are against a clear warning having been given. That is because, as I have said, the likelihood is that, if such a warning was clearly given, Power must have withdrawn from acting in the matter. It is also clear that Howard did not want Power to withdraw from the matter, as he had expended a large amount of money in paying his fees, and at least a part of those fees would have been thrown away by the need to bring another counsel up to speed, even though that is what occurred, albeit late in the conduct of the appeals.

25 The observations of Young CJ in Ramsay (at 4-5) are binding on me and in the circumstances of this case appear to be directly applicable. In that proceeding the saving of costs was also the motivating factor leading to the writ not being served whilst awaiting the outcome of related proceedings. Similarly, Lord Oakbrook in Kleinwort quoted with approval the observations of Lord Goddard in Battersby to like effect; that is "ordinarily it is not a good reason that the plaintiff desires to hold up the proceeding while some other case is tried or to await some future development".[51]

26 In relation to prejudice to Power arising from the delay in the service of the proceeding, in my view there is a real tendency for prejudice because of the oral component of the instructions given to Power. But this tendency to prejudice needs to be tempered by:

(a) the fact that Power had been acting for Howard until about February 2012 and may be expected to have been refreshed from time to time in his recollection of the events; and

(b) the fact that it is likely that the limitation period applicable to the cause of action in tort has not expired, so that Howard may yet commence another proceeding for the negligent advice.

27 There is, in any event, an inference of general prejudice arising from the long delay between the giving of the advice and the trial of the claim. It will be at least 8 years since the advice was given before any trial commences. Given that much may turn on the oral instructions given to Power by Howard, the inference of prejudice is clear and compelling.[52]

28 Thus, it seems to me I ought to exercise my discretion against extending the validity of the Writ. The substantive reason advanced to extend it was the desire of Howard to await the outcome of the Full Federal Court Appeal. That is ordinarily not a good reason to extend the validity. There are no circumstances taking this case out of the ordinary, as existed in the Kleinwort case. The only factors in addition to the desire to await the outcome of the Full Court decision were:

(a) The desire not to expend costs on the proceeding if the Full Federal Court vindicated the advice and allowed the appeal;

(b) The limitation periods, or at least the period applicable to the contract claim, had expired;

(c) The application was made before the expiry of the Writ for service (it is

self-evidently not a good reason to extend the validity of a writ that the application is made within time, so I will have not dealt with this so-called ground); and

(d) Power had been warned of the potential for a claim for negligent advice.

29 Power was not acting in the appeal to the Full Federal Court after February 2012. By that time, it seems on the evidence, that there was no inhibition on Howard serving the Writ arising from the prospect of losing Power's services - apart from the desire not to waste the costs if the Full Federal Court upheld the appeal.

30 In my view, the fact that Power was acting for Howard at the time the Writ was issued, and faced a loss of fees expended in retaining him if the Writ were served, is not a good reason in any event. There is a real tension between engaging, and continuing to engage, a barrister to act in a matter and at the same time issuing a Writ against the barrister claiming damages for negligent advice in relation to the very same matter, and doing so without informing him of the issue of that Writ. It was not suggested to me that this contravened any provision of the Civil Procedure Act 2010. But it has the potential to contravene the obligation not to engage in conduct likely to mislead or deceive, in contravention of s 21 of that Act. It is not a course of conduct that this Court should condone.

31 In relation to the expiry of the limitation periods, the positions of the parties is fairly evenly balanced. It is almost certainly the case that the contractual period has expired. It is highly likely that the period applicable to the tort claim has not. It is likely to be the case that Howard can issue afresh his claim in tort. I see no valid reason to deny Power such benefit he gets from the expiry of the contractual limitation period, in the circumstances I have set out. This is particularly the case where the only reason not to serve the Writ between the time Power ceased to act in the appeal to the Full Federal Court and the time the Writ expired was the desire to save costs of the proceeding where the result of the Appeal may have obviated the need to expend those costs. That could have been substantially accommodated, as I have said, by the parties and the Court fashioning the interlocutory steps to await the outcome of the Appeal.

32 For these reasons I will dismiss the Howard's application to extend the validity of the Writ, with costs.

[1] Affidavits of Stephen James Howard sworn 3 October 2012, and two affidavits of 13 February 2013. Further an affidavit of the plaintiff's solicitor Jeremy Scott Broadbent sworn 12 February 2013.

[2] Affidavits of Gregory John Carfoot sworn 12 February and 13 February 2013.