Rich v Long [2008] NSWSC 487 | Case summary

2921/07 - RICH v LONG JUDGMENT 1 HIS HONOUR: On 28 May 2007, the plaintiffs filed a statement of claim against the 85 defendants who are partners in a firm of accountants. 2 It would appear that the cause of action arose on 29 May 2001. 3 The statement of claim has not yet been served. 4 Under Part 6 r2(4)(a) of the Uniform Civil Procedure Rules 2005, a statement of claim is only valid for service for six months after filing. 5 However, Part 1 r12 of those rules empower the court to extend the time. 6 On 12 November 2007, Barrett J extended the time for service to 28 May 2008: see [2007] NSWSC 1290. 7 By notice of motion filed 12 May 2008, the plaintiffs sought an order that that time be further extended for another six months, that is until 28 November 2008. 8 In his judgment referred to earlier, Barrett J considered that the evidence before him was sufficient to justify the order being made. 9 The evidence before me is substantially the same. The principal reason for the further delay is that this case is closely connected with a civil penalty proceeding in which judgment was expected by now, but would not now appear to be delivered until well after 28 May. Until that judgment is delivered, the plaintiffs, and probably the defendants, do not wish to invest further funds in this litigation so long as there is protection against the running of time. 10 Thus the indications are that I should make the order, subject to being satisfied that it is proper to make the order without hearing from the defendants. 11 This Division has been criticised more than once recently for making ex parte orders affecting people's rights in corporations matters without notice being given to them. This makes me pause and look at the proper practice. 12 As the House of Lords said in Dagnell v JL Freedman & Co [1993] 1 WLR 388, the court should only extend the time on this sort of application for good reason. Further, as Lord Browne-Wilkinson said in that case at 396: "The fundamental consideration is that a defendant has a right to be served with proceedings (if at all) within the statutory period of limitation plus the period of validity of a writ." This was applied recently by the English Court of Appeal in Hoddinott v Persimmon Homes (Wessex) Ltd [2008] 1 WLR 806 at 820. 13 Both here and in England, the practice has been to hear these applications ex parte, but to give the defendants leave to set aside the order for extension; see eg Hoddinott's case. I will call this the "English Procedure". 14 However, in the normal case, the initiating process will be served a short time after the order for extension is made. There is no certainty that that will occur in the instant case. Should, therefore, the court direct that the defendants be notified of this order and of their right to have it set aside? 15 In view of the fundamental matters adverted to in the English decisions to which I have referred, I considered whilst I was hearing the application that the answer to the question might probably be, "Yes". 16 However, Mr D L Williams SC, who appeared a little surprised that I should raise the issue, argued against that course. I agreed to allow further time for written submissions on the matter which I duly received and thank counsel for them. 17 Mr Williams referred to three cases in his oral submissions, being the authorities referred to by Barrett J in the previous proceedings. 18 The first of these in point of time was the decision of Simpson J in FAI Insurances Ltd v Mainprize [2006] NSWSC 554. Her Honour there said that, there had been previous applications in the same matter where extension had been granted in the absence of the defendants. However, she then added: "In the ordinary case, that would be expected, since the defendant would not have notice of the substantive proceedings. However, in these unusual cases, the defendants have all received informal notice of the proceedings, and are aware of the nature of the claims to be made against them." 19 She then noted that the defendants had in fact been notified of the applications. 20 The second case is Buzzle Operations Pty Ltd v Breirl [2007] NSWSC 922, a decision of Malpass AsJ. In that case, the defendants knew of the application as there was another application before the court with the same parties. They objected to the extension application being heard ex parte. Malpass AsJ however dealt with it ex parte as the defendants refused to file an appearance and the learned judge did not consider it helpful to have their participation without their status being made clear. 21 The third case is Zhang v Zemin [2007] NSWSC 229, a decision of Harrison AsJ. Her Honour did not direct attention to the present point as the potential defendants were outside Australia. 22 None of the cases referred to the principle that was said to be fundamental by the House of Lords in Dagnell v JL Freedman & Co. However, reference was made to the earlier House of Lords decision in Kleinwort Benson Ltd v Barbrak Ltd [1987] AC 597. In that case the English Procedure was followed.

23 The English Procedure permits the defendants to be heard on the question at a time when they have appeared or conditionally appeared and their status before the court is unquestioned. 24 There are, of course, two great weaknesses in the English Procedure. First, the court does not have the benefit of competing arguments from the proposed defendants. Secondly, if the extension were refused before the original time limit ran out, the plaintiffs could just serve the initiating process. If the extension is granted and later the defendants successfully move to set the extension aside, the plaintiffs may be without remedy. 25 However, the English Procedure now seems too firmly entrenched to be altered. 26 In a case where the initiating process may not be served for some time, the English Procedure also means that considerable time may elapse before the defendants come to know of the process and, by that time, they may have suffered prejudice, for instance by discontinuing their tail off insurance cover. 27 Both the Kleinwort Benson case and the Hoddinott's case point out that it is wise to realise that there are three classes of case where an extension of time for service is sought. The first case is where the limitation period is yet to expire, the second is where the limitation period is expired, but the initiating process is still valid for service, the third is where the limitation period has expired, but the initiating process is no longer valid for service. 28 In the second class of case, as here, the English Court of Appeal in Hoddinott's case held that the right of the defendants not to be disturbed outside the limitation period plus six months is often the determinative factor. 29 Mr Williams' supplementary submissions referred me to two other decisions of judges of this court, viz: Weston v Publishing and Broadcasting Ltd [2007] NSWSC 1318 and Onefone Australia Pty Ltd v One.Tel Ltd [2007] NSWSC 1320 (both decisions of Barrett J) in which the order was made ex parte. In the first case mentioned, Barrett J determined that that was the proper manner in which to proceed on the true construction of the Uniform Civil Procedure Rules. In neither of the cases does it appear that the fundamental consideration required was brought to the attention of the presiding judge. 30 Mr Williams forwarded to me a copy of a letter received from the solicitors of some of the defendants who protested about some matters of this type being sought to be heard in closed court. There is also material on the file to show that one firm of solicitors sought to search the file. The court's judgments on the applications have been published on the internet. The probabilities of at least some of the defendants in fact being aware of what is happening is thus very great. 31 In my view the English Procedure which has been followed by Barrett J should be continued, but with an adjustment. Where the application is in the second or third classes of case, unless the extension of time is for no more than a month or there is some suggestion that the defendants may seek to avoid service, the order, if it is to be made, may be made on an ex parte application, but the defendants must be notified of the order within seven days and also notified that they have up until the expiration of 28 days after service of the process to set aside the order. 32 Thus, in the instant case, I will make the order as asked with the addition of the words italicised in the previous paragraph. 33 In the application heard at the same time in 2756/07, Rich v Packer, I make the same order. ****************

Rich v Long

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