BETWEEN : SANGORA HOLDINGS PTY LTD (ACN 009 348 752)

RONALD EDWARD BARRETT formerly t/as BARRETT & PARTNERS

Application to dismiss action for lack of prosecution and abuse of process - Limitation arguments

Limitation Act 1935 (WA), s 38(1)(a)(v)

Birkett v James [1978] AC 297

Biss v Lambeth Health Authority [1978] 1 WLR 382

Brisbane South Regional Health Authority v Taylor [1996] HCA 25; (1996) 186 CLR 541

Bristow Helicopters Limited v Global Marine Drilling Company, unreported; SCt of WA; Library No 3042; 6 October 1980

Commonwealth of Australia v Brinkworth, unreported; FCt SCt of WA; Library No 990045; 10 February 1999

Dzienciol v Logie Brae Pty Ltd, unreported; FCt SCt of WA; Library No 980078; 8 October 1997

Hughes v Gales (1995) 14 WAR 434

Jakovljevic v L & B Doslov [2000] WASCA 131

James v ANZ Banking Group Ltd [1986] FCA 41; (1986) 64 ALR 347

Lewandowski v Lovell (1994) 11 WAR 124

Masel v Transport Industries Insurance Co Ltd [1995] VicRp 59; [1995] 2 VR 328

Ulowski v Miller [1968] SASR 277

Wan v Sweetman, unreported; FCt SCt of WA; Library No 960456; 14 August 1996

1 MASTER BREDMEYER: This is an application by the first-named first defendant and the second defendant, who is the same person (Mr Ronald Louis), dated 9 August 2000 to strike out the plaintiffs' action for lack of prosecution and/or as an abuse of process. I also have before me a similar application by the second defendant, dated 18 January 2001, brought on the same two bases.

2 It is necessary to summarise the plaintiffs' action and I do so from its minute of proposed statement of claim of 15 August 2000, plus some supplementary material from two related actions: CIV 1097 of 1996, which is by the same plaintiffs against James Hodder and Godfrey Pembroke Ltd (the "Pembroke action") and CIV 1767 of 1996 by the same plaintiffs against Takako Shoji and Qunye Velaphi (the "Shoji action"). Mr Shozo Kawasaki is a Japanese gentleman who came to Australia in the late 1980's with a lot of money to invest. He purchased the shares in the two plaintiff companies. Mr Kawasaki was responsible for investment decisions taken by those companies in Australia. He could only speak and read minimal English. At all times he used Ms Takako Shoji as his Japanese/English interpreter. He engaged an accounting firm Barrett & Partners to do the accounting work for his companies and to advise him in certain matters. His main contact with that firm was through its partner, Mr Ronald Louis. Mr Kawasaki, through the plaintiff companies, purchased property at 76 Kings Park Road and three shopping centres in Perth, including one at Morley and one at Dog Swamp. In early 1990 he came into contact with a Mr James Hodder who was an investment adviser with Godfrey Pembroke Ltd and asked him for advice on investment opportunities in Australia. Mr Hodder recommended that he invest in three unlisted property unit trusts. He asked Mr Hodder about those investments and received certain representations and advice. He also discussed the proposed investments with his own accountant, Mr Louis, and received certain advice. After that the plaintiffs invested in the three property trusts recommended. Each investment was made through Godfrey Pembroke Ltd. In March 1990 Ackhurst invested $2 million in the Aust Wide Flexi Trust. On or about 31 March 1990 Sangora invested $5.265 million in the Aust Wide Grosvenor Trust. On or about 29 May 1990 Sangora invested $3 million in the Mirvac Trust. It is said in this action that these investments were made in reliance on the advice of Mr Louis. It is said in the Godfrey Pembroke action that the investments were also made on the advice of Mr James Hodder.

3 It is said that Mr Louis was negligent in his advice and the representations he made in relation to these proposed investments. The plaintiffs sold the investments in 1996, after waiting a reasonable time for the value of the units to increase. They were sold at a great loss to the plaintiffs. This action is one of negligence against Mr Louis. The other partners in his accountancy practice are sued as partners, being vicariously liable for the negligence of Mr Louis. This action commenced on 25 July 1996 which is close to the expiration of the limitation period. I have heard some argument that the limitation period has expired, which I will consider later. On the same date the Shoji action was commenced. On an earlier date, on 5 February 1996, the Godfrey Pembroke action was commenced. In that action the plaintiffs sue James Hodder and Godfrey Pembroke Ltd for negligent financial advice in relation to the investments.

4 What steps have the plaintiffs taken to progress the present action? The Court file cover tells the story in brief outline. As stated, the writ was filed on 25 July 1996. It was generally endorsed. Appearances were filed in September 1996. Notices of change of solicitor were filed by various defendants in September and December 1996 and in January 1997. No statement of claim was filed. Mr Louis' summons to strike out the action for want of prosecution was filed on 9 August 2000. On 15 August 2000 the plaintiffs filed a summons for leave to file a statement of claim in the form of the minute of proposed statement of claim already mentioned. It has been agreed between the parties that that application should stand over until I have ruled on the two applications to dismiss. On 18 January 2001 the other defendants filed their application to dismiss for want of prosecution.

5 I now propose to consider what was going on between the solicitors for the parties in the four year period between the filing of the writ on 25 July 1996 and the filing of Mr Louis' application to dismiss on 9 August 2000. There were a number of discussions and correspondence flowing between the solicitors for the plaintiffs and for Mr Louis. Most of those discussions and the correspondence were with the plaintiffs' solicitors and Mr Louis' solicitors. Little was happening in relation to the other defendants. I think all the defendants regarded Mr Louis as the principal defendant, in the sense of the one who was most involved in the events which lead up to the action, and the other defendants took a back seat in the progress of the action. They are separately represented here and have a separate application to dismiss which I will consider that later. The discussions and correspondence between the plaintiffs' solicitors and Mr Louis' solicitors are contained in the affidavit of Mr Blyth, who was the plaintiffs' solicitor, sworn 5 April 2001 and in two affidavits of Mrs Templeman, who was Mr Louis' solicitor in the firm of Minter Ellison, of 3 and 21 November 2000. Unless otherwise stated, I will be referring to exhibits and paragraphs in these affidavits.

6 In a letter dated 15 May 1997 to Minter Ellison, Mr Louis' solicitors, Mr Blyth proposed a settlement of this action. In that letter he referred to the Godfrey Pembroke action as the "head action" and referred to this action as the "supplementary action". In that letter, Mr Blyth proposed discontinuing the supplementary action if Mr Louis and his firm would co-operate and assist the plaintiffs in their prosecution of the head action. That would require Mr Louis to give a full and truthful statement of his evidence and knowledge of the matters the subject of the head action and to produce all documents which he may have in connection with that. The settlement proposal would be evidenced by a deed of agreement. The settlement would, of course, include the other defendants and each party would bear their own costs in respect of the supplementary action.

7 On 21 May 1997 Minter Ellison replied to the offer. They had received instructions from their client and they proposed that the action be dismissed rather than discontinued. They wanted an indemnity to be provided by the plaintiffs against any future contribution proceedings which might be brought by other parties. I think this refers to Godfrey Pembroke, although that is not stated. They also sought a contribution of $8,000 towards costs. They said that their client had actually outlaid $15,000 in legal costs. Mr Louis was prepared to co-operate, providing a written statement of his evidence and knowledge of those matters, and the letter looked forward to a response and being able to settle the action on that basis. This letter was followed up by a telephone conversation between Mr Blyth and Mrs Templeman and then a further letter from Mrs Templeman of 25 July 1997 altering the proposed terms of settlement in minor ways. The proposal was that the plaintiff pay $7,000 towards payment of the defendants' legal costs. Also, Mr Louis was prepared to provide a full and frank statement of his evidence but would like to charge for his time at his normal rate of $150 an hour. Minter Ellison would prepare the deed of indemnity and release and they required a contribution of $700 from the plaintiffs towards the costs of preparing that deed.

8 On 1 August 1997 a draft deed of release was prepared and sent to Mr Blyth. Mr Blyth replied by fax of 8 September 1997. He had taken instructions from his client and consulted with Ken Martin QC and they proposed a couple of changes to the deed of release. Firstly, they wanted Mr Louis to also assist with a statement in connection with the Shoji action which, as I have stated, was commenced on the same date as the present action. That was an action seeking to recover damages from Shoji and Velaphi for breach of fiduciary duty and for recovery of a secret commission of $32,800 which was paid to them by Godfrey Pembroke on placing of the investments. Mr Shoji was at that time a director of Sangora, hence the plea of secret commission. Mr Martin had also recommended a change to the wording of the deed of release so that it read like this:

"If a party against which Sangora or Ackhurst is claiming in relation to the matters referred to in the recitals to this deed, claims against the Indemnified Parties, Sangora and Ackhurst shall indemnify the Indemnified Parties against the costs of defending such a claim and Sangora and Ackhurst shall be entitled to retain lawyers of their choice to defend any such claim or claims against the Indemnified Parties."

9 On 30 September 1997 Mrs Templeman replied. She had redrafted the deed of release to agree with some of the requests made, but not with others. She sent it to the plaintiffs' solicitor for his consideration. Mr Blyth replied in a letter of 7 November 1997. Two aspects of the deed remained in issue and needed resolution. The plaintiffs were not prepared to provide separate legal representation to Mr Louis and Barrett & Partners on a fully funded basis in circumstances where the indemnifier (that is, Sangora) has no control at all of how the litigation was to be conducted. The plaintiffs also wanted some clarification of cl 7(a) dealing with Mr Louis' assistance to the plaintiffs, in particular to the reference to his duties of confidentiality. Part of that clause read that Mr Louis will:

"provide to Sangora and Ackhurst a frank and truthful account of his knowledge which is not subject to duties of confidentiality to other parties."

Mr Blyth sought clarification of the ambit of that caveat. Mrs Templeman replied, by a fax of 14 November 1997, and set out why her clients could not agree with the plaintiffs' views on the two remaining matters in issue - cl 6 and cl 7.

10 On 3 December 1997 Mr Blyth wrote a letter and issued an ultimatum:

"We note your client's refusal to enter into a deed of agreement containing clauses 6 and 7 as per out draft. Those clauses are not negotiable. Our instructions are to discontinue the proceedings against all defendants unless your client confirms its preparedness to enter into a deed on the terms we have proposed by 2.00 pm Tuesday 9 December 1997."

Despite this ultimatum, negotiations continued. Mr Blyth and Mrs Templeman spoke by telephone on 4 December and Mrs Templeman set out in a letter her understanding of the conversation. It was proposed that the parties would investigate options for minor changes to cls 6 and 7 which would result in a settlement. Mr Blyth told her that he would ignore the deadline of 9 December proposed in the earlier letter. Mrs Templeman wrote a further letter on 9 December 1997. It concluded:

"We look forward to hearing from you in regard to clause 7, and the proposal that the plaintiffs would nominate the areas in which they wish Mr Louis to give assistance and we would respond to let them know whether such assistance could be given without breaching the duty of confidentiality to other parties.

We look forward to hearing from you."

11 By a further letter dated 24 December 1997 Mr Blyth said that he was going on leave, but looked forward to further discussions with Mrs Templeman about the provisions of the deed after his return on 5 January 1998. He advised Mrs Templeman that the Shoji trial was listed for hearing on 5 and 6 February 1998 and that he had a subpoena prepared to be served on Mr Louis. He said his client remained interested in pursuing an arrangement with Mr Louis, the subject of the previous correspondence and of the draft deed of indemnity. Mr Blyth wrote again on 27 January 1998. He was meeting with Ken Martin QC to review the situation regarding Mr Louis. He asked if the negotiations could be concluded as a matter of urgency so that the deed of release and indemnity could be finalised prior to calling Mr Louis as a witness. A further telephone call and fax of 30 January 1998 from Mrs Templeman occurred. It was agreed that Mr Louis need not give evidence on the secret commission trial but would be called, if necessary, to prove certain documents. Mr Blyth said he was too busy preparing for that trial to complete the negotiations about the deed of indemnity. The Shoji action settled on the day of the trial - 5 February 1998 - on the defendants agreeing to pay to the plaintiffs $70,000 "on account of costs".

12 In April 1998 the discussions and negotiations concerning the basis upon which Mr Louis might assist the plaintiffs were raised again. It was agreed in a phone call of 2 April 1998 that Mr Ken Martin QC, for the plaintiff, and Mr Sean Mullins of Minter Ellison would speak to each other direct concerning the basis on which Mr Louis might assist the plaintiffs. That discussion occurred in April 1998. Mr Blyth raised the matter again in a phone call to Mrs Templeman on 9 July 1998. The parties to that phone call have different versions as to what was said there, but for the purpose of this application I consider I should take Mr Blyth's version as correct, or at least arguable - his clients being the "defendants' to this application to dismiss. He said he said that there was no deal between the parties, nor any offer on foot because the plaintiffs were not prepared to compromise on the two areas still in dispute in the draft deed of indemnity. On 10 July 1998 Mrs Templeman wrote again to Mr Blyth concerning the basis upon which Mr Louis might assist the plaintiffs. It is a letter which is not before me. On 30 July 1998 Mr Blyth contacted Mrs Templeman, at the suggestion of Mr Ken Martin QC, seeking a conference with Minter Ellison and Mr Louis concerning the basis upon which Mr Louis might assist the plaintiffs. Again, there is a difference in the two versions of the phone call and, for the purposes of this application, I consider that I should take the version of Mr Blyth as arguable. He said that the plaintiffs preferred not to target Mr Louis but preferred to procure his assistance in the Pembroke action, rather than to proceed with this action. He also said the plaintiffs had to know whether Mr Louis had anything to offer the plaintiffs which would give them sufficient cause to discontinue the action against him. He said the purpose of the meeting was to determine whether Mr Louis could give the plaintiffs good reason to discontinue their action. The conference went ahead. Mr Blyth and Russell Morgan, an accountant assisting the plaintiffs in the litigation, met with Mrs Templeman and Mr Louis at the offices of Minter Ellison and discussed the basis on which Mr Louis might assist the plaintiffs. On 6 August Mr Blyth wrote to Mrs Templeman setting out his understanding of what agreement had been reached at the conference. Mr Blyth's view of that conference is as follows:

"1. The only area of 'confidentiality' that concerned Ron Louis was information that he may have obtained from Shoji Australia Pty Ltd or its directors concerning the secret commissions relating to the aforesaid investments.

2. Ron Louis will say that Mr Kawasaki, in determining whether or not to make the aforementioned investments, only relied upon James Hodder, never upon the advice of Ron Louis.

3. At the time the said investments were made, Ron Louis discussed such investments with both Mr Kawasaki and James Hodder.

4. Ron Louis was unsure as to whether he had been a party to any correspondence between Sangora and James Hodder concerning the said investments.

5. Ron Louis had more than a brief conversation on the subject of the aforementioned investments with James Hodder.

6. Ron Louis will say that Mr Kawasaki informed Ron Louis that Ron Louis was not to involve himself in discussions or the decision as to whether Sangora invested in the aforementioned 3 investments - the information on which Mr Kawasaki would rely in determining to place the said 3 investments was that provided to him by James Hodder.

7. Ron Louis believes he can assist Sangora prove that it relied upon the advice of James Hodder in placing the aforesaid 3 investments and can further help by advising who did what, what the Sangora procedures were internally including advising on Sangora's investment philosophy, and indicating how the decision was made to invest as aforesaid by Mr Kawasaki.

8. Minter Ellison, having proofed Ron Louis, consider Ron Louis would be a very useful witness to Sangora.

9. Minter Ellison believe that Ron Louis' exposure to a cross claim, third party notice or the like by James Hodder, Godfrey Pembroke or the like is very slight because James Hodder would know that Mr Kawasaki did not rely upon Ron Louis in determining to place the investments but only relied, in that respect, upon the advice of James Hodder."

Mrs Templeman replied on 11 August and pointed out several inaccuracies in points 4, 6, 7, 8 and 9 of Mr Blyth's letter. On point 8 she said:

"Point 8 - our contention that Mr Louis would be a useful witness to Sangora was based upon your comments that you needed information about how things were done at Sangora and about the events surrounding the placement of the investments and about the matters referred to in points 6 and 7 as corrected above. However, only you can know what will be useful to Sangora in the case Sangora has against Godfrey Pembroke, and we do not purport to make any such judgment. Our comments were in the nature of submissions for your consideration based upon the more specific information we provided to you as outlined in your letter (as corrected above)."

13 She concluded: "We look forward to hearing from you in relation to your client's attitude to finalising the deed of release and indemnity".

14 In August 1998 the plaintiffs instructed their solicitor to seek the advice of Mr Malcolm McCusker QC on the Pembroke action and to advise on how Mr Louis might assist the plaintiffs in that action. Mr Blyth and the accountant, Russell Morgan, met with Mr McCusker QC on 29 September 1998 and awaited Mr McCusker's opinion. Mr Blyth said the plaintiffs were unable to further determine their attitude to the basis upon which Mr Louis might assist the plaintiffs - and I add, incidentally, how the action might be settled - pending receipt of Mr McCusker's advice. On 2 and 17 November 1998 Mrs Templeman wrote to Mr Blyth asking for the plaintiffs' intentions regarding the resolution of the proceedings and the signing of the deed of release. On 24 December 1998 Mr McCusker QC provided advice to the plaintiffs. On 22 January 1999 his advice was discussed with Russell Morgan and Messrs Morgan, Blyth and Kawasaki met with Mr McCusker QC on 3 February 1999 for a conference.

15 On 25 February 1999 Mr Blyth spoke by telephone with Mrs Templeman and their recollections of that conversation differ. As previously stated, I consider, for the purposes of this application, I should follow Mr Blyth's version. He says he told her that the plaintiffs had determined that there was no need to negotiate a settlement of this action with Mr Louis. Mr Blyth said he would take instructions as to whether the plaintiffs would discontinue the action with each party bearing their own costs.

16 On 19 March 1999 the plaintiffs' solicitor was instructed by Mr Morgan to procure further advice from Mr McCusker QC concerning this action. On 30 March 1999 Mr Blyth spoke by phone with Mrs Templeman. Again, their versions of this conversation differ. She says Mr Blyth reminded her of an earlier statement to the effect that, rest assured, the plaintiffs would not be proceeding against Mr Louis. Mr Blyth's recollection is that he said the plaintiffs may not proceed against Mr Louis but were waiting on further advice from Mr McCusker.

17 On 6 and 7 April 1999 Mr Blyth attended upon Mr McCusker seeking his further advice concerning the action. On 16 July 1999 he spoke by phone to Mrs Templeman and confirmed that, as a result of further investigations and information received, the plaintiffs were in the process of preparing a substituted statement of claim in the Pembroke action. On 30 July 1999 the plaintiffs filed a chamber summons seeking leave to file a substituted statement of claim in the Pembroke action. The application was opposed and was listed for a special appointment. A lengthy minute of proposed statement of claim prepared by Mr Peter Hannan of counsel was prepared for that application.

18 On 17 August 1999 Mr Blyth spoke by telephone to Mrs Templeman. They discussed a possible settlement of this action. According to Mr Blyth, he said that, when the defendants in the Pembroke action filed their defence, the plaintiffs could then further consider the basis upon which Mr Louis might assist the plaintiffs - and, I add, possibly settle this action.

19 On 14 September 1999 Mrs Templeman made an offer to Mr Blyth to settle the action on the following basis:

1. The action be dismissed with an order for the Plaintiffs to pay $7,000 costs to the Defendant, but otherwise no orders to costs.

2. A Deed of Release be signed by all parties regarding the terms of settlement.

3. The Plaintiffs to pay $700 towards the costs of preparing the Deed and towards Stamp Duty. Otherwise each party to pay its own costs in relation to the Deed.

4. The parties file a consent order providing for the dismissal of the action.

20 I note that the offer does not refer to Mr Louis assisting the plaintiffs in the Pembroke action. The offer was open for 14 days and was not responded to so it lapsed as at the end of September 1999. But that was not the end of the negotiations in the eyes of Minter Ellison. On 26 November 1999 Mrs Templeman telephoned Mr Blyth requesting a response to the offer. He indicated that he would be in a position to respond soon. On 14 December 1999 she sent a reminder letter about this, awaiting his response. He responded with a long letter of 11 February 2000. Before summarising that letter, it is important to note a new development.

21 On 24 December 1999 the defendants in the Pembroke action filed their consolidated amended defence. Paragraph 24 of that pleading contains new material which was not found in the earlier version:

"24. On 21 March 1990 and at the offices of Barrett & Partners in Perth, the Second Defendant met with Mr Ron Louis, who at all material times acted as accountant of the Plaintiffs and as agent for the Plaintiffs. During this meeting the First Defendant, in performance of the Adjusted Retainer, informed Louis that no assurance could be given that the value of the units in the trusts referred to in the letter of 20 March 1990 would not fall in value but that they had not fallen in value over a considerable period of time. At all material times Louis advised the Plaintiffs in relation to the acquisition and selling of the investments in issue in the within proceedings."

22 Paragraph 20 of that defence is also relevant. It provides, in summary, that Godfrey Pembroke, through Hodder, provided to Kawasaki a copy of the memorandum of information published by Aust Wide Grosvenor Place Trust at the meeting of 14 March 1990.

23 In Mr Blyth's letter of 11 February 2000, already mentioned, he spells out the significance of par 24 of the amended defence in the Pembroke action to the present action. He said, in summary, if Hodder made out the defence set up in par 24 that he had warned Mr Louis that the investment could fall in value, but Mr Louis had failed to pass on that warning to Mr Kawasaki, then Hodder and Pembroke could escape liability in the first action. The plaintiffs could not, therefore, take the risk of releasing Mr Louis from liability under the present action. The letter went on:

"Given the aforementioned matters, we invite Ron Louis to co-operate and by your office to inform us of his response in detail to the allegation in paragraph 24 of the Amended Defence.

We have procured, and enclose herewith, a copy of the 'Memorandum of Information' referred to in paragraphs 20 and 21 of the amended defence and believe the alleged warning of risk referred to in paragraph 21 of the Amended Defence is set forth in the disclaimer on page 24 of the Memorandum of Information.

While the Plaintiffs would clearly like to come to some arrangement with Ron Louis, they can no longer take the risk of releasing him because of the prospect that the Court will find the allegation in paragraph 24 of the Amended Defence to be true irrespective of the fact that Ron Louis may dispute the same.

As it stands, our clients cannot release Ron Louis until such time as a determination is made by the Court that the allegations in paragraph 24 of the Amended Defence are untrue.

If Ron Louis remains silent and does not respond to paragraph 24 of the Amended Defence, then our client may have no alternative but to seek leave to file a statement of claim in the action against Barrett & Partners alleging a breach on the part of Ron Louis based upon the matters in paragraph 24 of the Amended Defence, claiming any warning as to risk as communicated by Hodder to Ron Louis was not communicated to the Plaintiffs."

Minter Ellison replied by letter on 22 February, as follows:

"We must say how disappointed we are that after your specific assurance that the action against our client will not be proceeding, your clients are now contemplating proceeding with the action.

Our client reserves all rights in regard to that statement, and your clients delay in prosecuting their action.

We are, however, instructed to provide you with information in response to your request to assist you to provide an adequate reply to the consolidated amended defence dated 24 December 1999."

24 On 22 February Minter Ellison replied to the plaintiffs' request and outlined Mr Louis' recollections of the matters pleaded in par 24 of the defence. No response to that letter was received until 4 May when the plaintiffs' solicitors gave notice in accordance with O 3 r 7 that they intended to proceed in the action in one month's time.

25 On 5 May Mrs Templeman telephoned Mr Blyth to enquire about the plaintiffs' intentions in regard to the action. She was unable to get him and left a message on his answering machine. He says he did not get the message. On 19 June she followed up with a letter to the same effect. On 20 June he replied by fax that his instructions were to proceed with the action and that the statement of claim was currently being settled and would be provided to her firm in advance of any application to the court for leave to file the pleading.

26 On 2 August 2000 Mrs Templeman wrote a letter to Mr Blyth, as follows:

"We enquire pursuant to Order 59 rule 9 of the Rules of the Supreme Court 1971, as to whether your client is agreeable to dismissing the action against our client for want of prosecution.

Kindly inform us of your response within 7 days."

27 Their reply of 7 August was that the plaintiffs' solicitors were instructed to file a statement of claim. A draft statement of claim had been prepared and sent to Mr McCusker QC approximately four weeks ago for him to settle. Given the contents of her letter - that her client was considering dismissing the action for want of prosecution - Mr Blyth said he had written to Mr McCusker QC urging him to settle the pleading by 10 August and asked her to delay bringing her application until 14 August. Mr Louis' application to strike out was filed on 9 August and served by letter on the plaintiffs' solicitors on 10 August. The affidavits in support, however, were not filed until November 2000.

28 I summarise this long narrative by saying that the action was commenced on 25 July 1996. The defendants appeared in September 1996. Nothing happened between then and May 1997. Between May 1997 and February 2000 the parties were actively engaged on trying to settle the action on the basis that Mr Louis would give evidence for the plaintiff in the Pembroke action for a discontinuance of this action, a release from any possible claims against him by others, such as by Godfrey Pembroke, and a payment towards his costs. The prospects of such a settlement were dashed by the new allegation pleaded in par 24 of the amended defence in the Pembroke action filed in December 1999. The significance of that to the plaintiffs was spelled out in Mr Blyth's letter to Mrs Templeman of 11 February 2000. The attempts to settle the action were genuine and proceeded over a long period of time. The parties came very close to a settlement. I consider the settlement negotiations between May 1997 and February 2000 are a reasonable explanation for the delay in filing a statement of claim and getting on with this action.

29 Before turning to specific matters of prejudice raised by Mr Louis due to the long delays in the prosecution of this case, I want to summarise the key allegations made against Mr Louis from the minute of proposed statement of claim. Those allegations are within very short compass. It is pleaded in par 19 that in or about March 1990, Kawasaki met with Hodder and received advice from him concerning possibly investments by companies connected with Kawasaki. It is pleaded in par 20 that at that meeting Hodder represented that an investment in an unlisted property unit trust, which Hodder described as the "Aust-Wide Property Trust" had no risk of loss. It is then said in par 21 that shortly after that meeting, Shoji (the interpreter) on behalf of Kawasaki instructed Louis to:

(a) Investigate the property trust referred to in par 20;

(b) verify the information given by Hodder to Kawasaki about the Aust-Wide Property Trust;

(c) verify that there was no risk in making an investment in that trust;

(d) consider notes made by Mrs Shoji at that meeting between Hodder and Kawasaki which discussed the Aust-Wide Property Trust;

(e) advise whether an investment in that trust was a suitable investment to make; and

(f) advise whether an investment in that trust would have the effect of creating a tax advantage.

30 It is then pleaded in par 22 that a few days later - I add this is still March 1990 - Kawasaki met with Louis and discussed the Hodder representations through the translation of Mrs Shoji. This is referred to as the first Louis meeting. At par 23 it is said that at that meeting Louis had in front of him a pamphlet regarding the Aust-Wide Property Trust, which Hodder had given Kawasaki and also the notes taken by Shoji at that meeting. Kawasaki asked Louis about the investment in Aust-Wide Property Trust recommended by Hodder and whether it was one which Louis would recommend. Louis said words to the effect that there were no problems with the proposed investment and he could see no risk (the first Louis representation). At par 24 it is stated that a few days after that first Louis meeting Kawasaki and a Mr Koge, the president of the parent company, Torioto Shoji Ltd, met with Louis again and discussed the Hodder Aust-Wide representation. This was their second meeting and at that meeting Louis told Kawasaki and Koge that the investment in the Aust-Wide Property Trust "was a safe investment" (the second Louis representation).

31 Later paragraphs plead that in late March 1990 Ackhurst invested $2 million through Godfrey Pembroke in the Aust-Wide Property Trust and on 31 March 1990, Sangoro invested $5.265 million through Godfrey Pembroke in the Aust-Wide Grosvenor Trust. It is pleaded that they made those investments in reliance on the first and second Louis representations.

32 The pleading in relation to the third investment is in very similar form. In par 30 it is said that in about May 1990 Kawasaki met with Hodder and received advice from him about a possible investment by Sangora in the Mirvac Trust (the Hodder Mirvac meeting). During the course of that meeting, Hodder said to Kawasaki that an investment in the Mirvac Trust was a good investment and had no risk of capital loss, and recommended that Kawasaki invest $5 million in the Mirvac Trust (the Hodder Mirvac representation). It is then pleaded in par 32 that shortly after that meeting Shoji, on behalf of Kawasaki, instructed Louis to:

(a) Investigate the Mirvac Trust;

(b) verify the information given by Hodder to Kawasaki about that trust;

(c) verify there was no risk in making an investment in the Mirvac Trust;

(d) consider notes of the Hodder Mirvac meeting made by Mrs Shoji and a pamphlet handed by Hodder to Kawasaki during the course of that meeting;

(e) advise whether an investment in the Mirvac Trust was a suitable investment to make; and

(f) advise whether an investment in the Mirvac Trust would have the effect of creating a tax advantage.

33 In par 33 it is pleaded that a few days after the Hodder Mirvac meeting, Kawasaki met with Louis to discuss the Hodder Mirvac representations. During the course of that meeting - the third Louis meeting - Kawasaki told Louis that his company was considering making an investment of $3 million in the Mirvac Trust. Kawasaki told Louis that Hodder had said that there was no risk of loss of an investment in the Mirvac Trust. Kawasaki asked Louis if he thought that was the case and Louis replied that there "was no risk" - the third Louis representation. Later paragraphs plead that on 29 May 1990, Sangora invested $3 million through Godfrey Pembroke in the Mirvac Trust and did so in reliance on the third Louis representation.

34 In summary, three investments were made in unlisted property trusts. It is said that prior to the first of those two investments being made in March 1990, Louis advised Kawasaki that "he could see no problem with the proposed investment" and "could see no risk" and that the investment in the property trust "was a safe investment". Prior to the third investment made in May 1990, Louis is said to have said that there was no risk in the investment. At the time of the first two representations, the people present were Mr Louis, Mr Kawasaki, Mr Koge and I assume Mrs Shoji as interpreter. At the third meeting in May, the people present were Mr Louis, Mr Kawasaki and again I assume Mrs Shoji. It would be, I think, a relatively simple task to proof Mr Louis on those allegations.

35 The plaintiffs have some idea as to what Mr Louis might say in response to these allegations because a Mr Robin Judd, on behalf of the plaintiffs on 30 October 1995, discussed certain matters with Mr Louis and has made notes of his discussion. This was before the writ was issued. Mr Judd had been instructed by Kawasaki and the plaintiff companies to establish whether there was a prima facie case against Godfrey Pembroke and/or others for losses incurred in investing in the property trusts in 1990. Mr Judd asked Mr Louis about his recollection of the circumstances surrounding the investments and Louis stated the following:

"1. Ms Shoji's husband, Velaphi, introduced Mr Kawasaki to James Hodder of Godfrey Weston [I add that company is now called Godfrey Pembroke].

2. Shoji and Kawasaki told Louis that they had bought an investment in two trusts and asked him if he would look at it and if okay, pay over the cheques.

3. Louis did not read the material and assumed James Hodder knew what he was doing - met with James Hodder and handed over the forms and cheques (two instances).

4. Ron Louis believed Mr Kawasaki had made up his mind and would have invested regardless of what Ronald Louis thought."

36 The negligence alleged against Louis is spelled out in more detail in par 38:

"That in breach of his duty of care Louis failed to advise the plaintiffs that:

(a) an investment in unlisted property unit trusts carried with it a risk of capital loss;

(b) there could be no guarantee against capital loss of investment in unlisted property unit trusts;

(c) the value of units in an unlisted property unit trust depended to a significant extent upon the value of the real properties owned by the trusts and that real property values in Australia had from time to time fallen;

(d) investments in unlisted property unit trusts could not, in terms of security of capital, be compared with, for example, Commonwealth government bonds; and

(e) there was no readily available market in which to sell unlisted property trust units."

37 Mrs Templeman has sworn a detailed affidavit dated 21 December 2000 dealing with the history of the unit trusts, missing records, missing witnesses and lack of information about the trusts. In that affidavit, she annexes a copy of the Aust-Wide Grosvenor Place Trust prospectus which was given by Hodder to Kawasaki and passed on to Louis in March 1990. Her inquiries have revealed that the Aust-Wide Grosvenor Place Trust is now part of the BT Office Trust and is managed by BT Funds Management Ltd. The Aust-Wide Flexi Property Trust has had a series of changes of management and trustee, but the trustee and manager is now Guardian Funds Management Ltd. The Mirvac Split Trust changed its name to the Mirvac Property Trust and then became part of a "stapled security" called the Mirvac Group, which consists of two property trusts and one company trading as one entity. It is managed now by Mirvac Funds Ltd.

38 In relation to each of these three trusts, she describes inquiries made by her of solicitors and various others to locate the whereabouts of the records of those three trusts. To take one example at par 22, she states that she was informed by Pamela Frances Nathan of Mirvac on 1 November 2000 - I think this refers to a telephone call - that:

(a) She had destroyed certain documents recently in relation to the Mirvac Split Trust;

(b) whilst she did not believe that she had discarded anything particularly relevant to the action, she could not be certain;

(c) she had retained information regarding unit prices, client updates and a list of prices and income distributions and the unit register;

(d) however, she no longer held any copies of original investment documents, banking details of cheques, application forms or original prospectuses.

39 In par 23 onwards of her affidavit, Mrs Templeman details inquiries made for relevant third party information such as analysis of the trusts made in 1990. She spoke to the chairman of Ipac Securities Pty Ltd, a person from Deutsche Bank AG financial services group who worked at Ipac about the time Ipac was arranging investments in trusts managed by Aust-Wide Management Ltd. She spoke with Stephen van Eyk of van Eyk Research. I should add that these conversations are all telephone conversations. She also spoke with someone from J B Were & Sons, stockbrokers, who told her that she could find no record of any research reports ever having been held on the trusts. She spoke with someone from Property Investment Research, who are investment analysts. He told her that if there were research reports on the trust dating back to 1990, then in accordance with their usual practice they would have been discarded after seven years. She also spoke with a gentleman from Monitor Money, investment advisers, who told her that he had searched through the archive file and could find no record of research documentation. She also contacted the chairman of a group called the Aust-Wide Unit Holders Action Group, which had been involved in litigation concerning the Aust-Wide trusts. She also spoke with someone from Norwich Union Australia, a financial services group, who told her that the research team is conducting a search for her to see whether they have any record of investment analysis dating back to 1990. The results of those latter two inquiries are not given in the affidavit.

40 At par 33 onwards, Mrs Templeman detailed inquiries she had made to track down the directors of Aust-Wide Management Ltd, the manager of the three trusts, including Ronald Thomas Kerr and Henry George Townsing. It is clear from the Aust-Wide Grosvenor Place prospectus already mentioned that Mr Kerr was the executive chairman of the company and Mr Townsing one of the directors. She was told by somebody in the Aust-Wide Unit Holders Action Group that Kerr and Townsing were the directors principally involved in the management of Aust-Wide Management Ltd. Her inquiries revealed that Kerr was supposed to be working in real estate in Hornsby, New South Wales. She telephone numerous real estate agents in that area, but was unable to track him down. She made inquiries about Townsing and believed that he is now living in Malaysia.

41 At par 41 and onwards of her affidavit, she states that, as a result of the plaintiffs' representations that the action against Louis would be discontinued or dismissed, and due to the lack of a statement of claim, she halted investigations into the action and only obtained a draft proof of evidence from one witness, namely, Mr Louis. Notes on her file indicate that a Miss Perry, a solicitor formerly employed by Minter Ellison, recently telephoned Mr Velaphi, the husband of Mrs Shoji, who, according to Mr Louis played a referring role between the plaintiffs and Godfrey Pembroke. She also spoke to Mr Peter Briggs and Mr Toshiro Akizuki, employees and former employees of the plaintiffs, who might be able to give evidence relevant to the plaintiffs' alleged reliance on the representations and the issue of damages in the sense of alternative investments that the plaintiffs may have made. She said that none of these witnesses indicated that their memory was unaffected by the passage of time and none indicated that they had notes or other documents which would assist in refreshing their memories of relevant events.

42 I consider it is not particularly prejudicial that Mr Ron Kerr, the executive chairman, and Mr Henry Townsing, one of the key directors of Aust-Wide Grosvenor Place Trust, cannot now be located. The question of damages will turn on two matters. In relation to the Aust-Wide Grosvenor Place Trust, which only owned a share in the Grosvenor Place building, it will turn on the value of that property. The trust's 30 per cent interest in that building was valued each month. Secondly, it will turn on the market price of units sold in the trust from time to time. I consider it matters not what the directors thought their trust was worth. This is not a commission of inquiry into the ultimate worth of this trust. To get damages, the plaintiffs need to show that the price of their units in the trust fell. Normally, if it was a listed trust, those prices could be ascertained from the Australian Stock Exchange. Being an unlisted trust does pose some problems, but it is not necessary to track down the directors and ascertain their views which might, incidentally, be very subjective. It is of interest that Minter Ellison first made inquiries regarding the location of documents and witnesses in December 2000 in the context of finding prejudice for this application to dismiss brought in August 2000.

43 Louis, and the defendants in the Godfrey Pembroke action had a common professional insurer. Presumably, inquiries into the circumstances surrounding investments made by the plaintiffs and about possible witnesses could have been made by the solicitors for the defendants in the Godfrey Pembroke action - who were Barker Gosling. There is no reason why information could not have been shared. I realise that documents discovered in one action are not to be used for another purpose, but reference to newspaper reports, valuations and documents in the public arena could, I think, be shared. Also an order could have been obtained for third party discovery from Mr Hodder and Godfrey Pembroke, or the common plaintiffs could have been asked to disclose the documents which they had or had had discovered to them. The discovery in the Godfrey Pembroke action is annexed to Mr Blyth's affidavit of 5 April 2001. The initial list covers 420 documents. The supplementary list covers 411 documents. In addition, there is the plaintiffs' discovery in the Godfrey Pembroke action and it, too, is annexed to Mr Blyth's affidavit. It contains a list of 376 documents. In addition, it contains an index to Fairfax articles in the Australian Financial Review and the Business Review Weekly, the Sun Herald and other newspapers. There are 70 articles listed there. Those articles cover the period January to July 1990. The headings of many of these newspaper articles indicate a downturn - eg, "Australia's Property Boom Appears All Washed Up", "Kearn to sell 400m dollars of property assets" (Kearn was a co-owner of part of the Grosvenor Place lease), "Sydney CBD for sale but no-one is buying", "Property vacancy rate to soar", "Kearn sells its share of Grosvenor Place", "Aust-Wide is buying stake in Grosvenor", "Kearn sells Grosvenor stake to reduce debt", "Role of valuations questions", "Sydney to see record amount of new office space this year", "Sydney CBD vacancies to hit southern sector hardest", "Aust-Wide buys 77% of Prime", "Downturn leaves its mark in Sydney CBD", "Outlook grim for rest of year", "Grosvenor Place rent deal", "Property crisis worse than crash of '74", "BT cuts price of office tower by 15%", "Determinations for Grosvenor Place rent may go below budget", "No Kearn extension for Aust-Wide", "Kearn Corp runs out of patience", "Grosvenor Place 20% for sale as Aust-Wide dips out", "Property trusts to suspend payments", "Threat of buy-back freeze to unlisted property", "Trust funds frozen as run hits Sydney", "Aust-Wide freezes buy-backs", "Aggressive Aust-Wide takes lead in pay-outs suspension", "Property trusts: What went wrong", "Grosvenor Place owners divided over valuation", "Mirvac bid to hold damage", "Funds frozen as confidence crisis hits Sydney trust", "Trust industry fractures over buy-back solutions", "The value of due diligence", and "Unlisted trusts may get six months".

44 The discovered documents in the Godfrey Pembroke action include prospectuses, portfolio valuations of the plaintiffs' investments, material on Aust-Wide and Mirvac, including documents from the Aust-Wide Action Group, contemporaneous research material (including material from Aust-Wide, Godfrey Pembroke and independent research organisations, newspaper and magazine articles and documents relating to the NCSC suspension of redemption of units in unlisted property trusts, and the redemption of units in Aust-Wide Flexi Property Fund. The plaintiffs have been able to instruct experts to advise on the Godfrey Pembroke action on the basis of the material that has been discovered. I consider the failure by Louis' solicitors to seek access to the most obvious source of documents undermines the credibility of his claims of prejudice in the conduct of the action.

45 Also, it is stated in par 8 of Mr Louis' affidavit of 3 November 2000 that on 30 October 1995, before this action commenced, he met with Robin Judd, a chartered accountant who was giving advice to the plaintiffs, to discuss the investments. I have already referred to Mr Judd's notes of their conversation. At par 8, Mr Louis said that he left some files of his documents relating to the investments with Mr Judd. Those files are with the plaintiffs' solicitors and may well be a useful source of information for Mr Louis' solicitors. They are not mentioned in Mrs Templeman's affidavit.

46 A matter of prejudice raised by Mr Louis is that he was insured under a professional indemnity policy with FAI. From the commencement of Minter Ellison's involvement in this action in 1996 until 15 March 2001, they acted on the instructions of FAI. On that date, joint provisional liquidators were appointed to 17 companies within the HIH group, including FAI. Shortly after that, Minter Ellison was advised that the liquidators were not in a position to guarantee payment of costs or provide instructions in relation to individual proceedings. A statement to that effect addressed to all insured and their legal representatives is dated 6 April 2001.

"Following the appointment of provisional liquidators to the company on 15 March 2001, the company is not in a position to pay any claims pursuant to policies which it has issued, nor is it able to commit to fund insured's defence costs. Accordingly, insureds should take whatever action they deem appropriate in order to mitigate their loss and the prospects of having judgments made against them. Any such costs incurred by the insured and any judgments which would normally be claimable under the policies and for which policies are liable to respond, will rank as unsecured claims in future distributions by the liquidator appointed to the company."

47 Mr Louis practised as a partner of that firm from 1 June 1986 to 28 February 1994. Messrs Macri and Barrett are in the same position. When Louis, Macri and Barrett practised as Barrett & Partners, which was the position in 1990 and onwards, the firm was insured with a profession indemnity policy number 130006300 with FAI. That firm was insured with FAI until 23 August 1996. Immediately after Messrs Macri and Barrett were served with the writ, they contacted their broker and told him to notify the insurer which covered the firm in respect of claims made from 23 August 1996 (the firm's current insurer). They were advised that the firm's current insurer had taken the view that its policy may not respond to the claim. Accordingly, they notified Barrett & Partners' previous insurer (ie, FAI) of this claim. Barrett & Partners' two insurers dispute who should meet the claim. Prior to the appointment of a liquidator, FAI said that the claim was not notified during the currency of the policy and hence should be refused. The firm's current insurer took the view that its policy might not respond to the claim because Louis, as a former partner of Barrett & Partners, was aware on 26 July 1996 of the claim and thus the claim was made before the commencement of the new policy. As previously stated, the current insurer took on liability from 23 August 1996.

48 I do not know the basis for the statement that Mr Louis was aware of the claim as at 26 July 1996. The writ was issued on 25 July 1996. Mr Macri was served with the writ on 26 August 1996, Mr Barrett was served on 27 August. They filed an appearance on 9 September. I do not know when Mr Louis was served but he filed an appearance on 5 September 1996. The writ allows 10 days for an appearance so he may have been served also around 26 or 27 August 1996.

49 Barrett & Partners current insurers (not FAI) may have some doubt about their obligation to cover the claims of Messrs Macri and Barrett, as stated above, but to date, as I understand it, they are representing these defendants. That is why Mr Louis and Messrs Macri and Barrett have separate representation, although a common interest in the case. They have been represented by different insurers.

50 Mr Louis has deposed to his lack of assets. At par 9 of his affidavit of 19 April 2001, he states:

"I own no assets besides personal effects such as clothes and jewellery and 183 shares in Commonwealth Bank Ltd which I may need to sell to fund the legal representation for this application to strike out the action. I have a motor vehicle registered in my name, but that vehicle is owed and driven by my son."

That statement is very bald. Does he live in a house? If so, does he rent it, or is it owned by his wife, or by a family trust? Is he a beneficiary under a trust? Does he have access to trust funds? What kind of income does he make as an accountant?

51 I consider that there is nothing, even when taken together, in the defendants' submissions that missing records, missing witnesses and failed memories in this case constitute substantial prejudice to Mr Louis. The fact that his insurer has gone bad is, indeed, a matter of real prejudice. Had the plaintiffs got on with their actions earlier on and proceeded to a trial and judgment, the insurer would have met the damages and the legal costs. Now the insurer is, possibly, worthless. However, the delay in the progress of the action was not caused exclusively by the plaintiffs. It was a mutual thing. The plaintiffs were trying to negotiate with Mr Louis to settle this action. Those negotiations, as I have related above, took several years. They were mutual negotiations. At no time did Mr Louis or his advisers say "This is taking far too long. We will terminate the negotiations and demand a statement of claim, failing which we will apply for a springing order or for dismissal of the action." In the circumstances of this case of the long mutual negotiations to settle I am not persuaded that the substantial prejudice of the lack of an insurer caused by the delay amounts to a justification to dismiss this action against Mr Louis for lack of prosecution.

52 I consider the same conclusion applies to the other defendants. They took no active part in the negotiations with the plaintiffs, but they knew of them and I consider they supported the negotiations. After all, Mr Louis was the partner involved in giving the allegedly negligent advice. Their liability was vicarious only. It made good sense for them to go along with any reasonable proposal for settling this action which would absolve them for liability in return for Mr Louis' co-operation as a witness for the plaintiffs in the Godfrey Pembroke action. I consider these other defendants condoned and/or were happy with those negotiations and with the fact that the action was not proceeding steadily towards trial and that they were not incurring expenses of pleadings, discovery, and other interlocutory processes.

53 Counsel for Mr Louis has argued that the plaintiffs' claim in contract was time-barred when the writ was issued on 25 July 1996 and for that reason, at least that part of the plaintiffs' claim, should be dismissed. The limitation period for a claim in contract is six years under s 38(1)(a)(v) of the Limitation Act 1935. The minute of statement of claim pleads a negligence claim in both contract and in tort. It pleads that the defendants were engaged in January 1989 to act as the accountant for Mr Kawasaki and his companies (the retainer). It further pleads that the first and second Louis representations (that the proposed investments had no risk of loss etc) were made in March 1990 and that the third Louis representation (which was similar in content) was made in May 1990. It is pleaded that the plaintiffs acted on the first two representations on different dates in March 1990 and made investments pursuant to them and acted on the third representation by making an investment pursuant to that representation on 29 May 1990. Mr Louis' counsel says that the cause of action in contract arose on each occasion when the contract was breached, that is in March and May 1990 and that the cause of action arose in tort when the loss occurred. It is pleaded in pars 51, 52 and 53 of the minute that the investments later fell and that, after waiting a reasonable time for the value of the units to increase, the plaintiffs sold the units in 1996 at a loss.

54 The indorsement on the writ of summons is as follows:

"1. The First Defendant alternatively the Second Defendant was retained by the First Plaintiff alternatively the First and Second Plaintiffs to provide inter alia financial advice to the First and Second Plaintiffs. The Plaintiffs claim damages, further or alternatively equitable compensation, against the First Defendants alternatively the Second Defendant upon the basis of negligent investment advice, alternatively a failure to provide prudent business advice in breach of the duty of care owed by the First Defendants alternatively the Second Defendant to the Plaintiffs in about July 1990 and on an ongoing basis thereafter, in respect of investments made by the Plaintiffs in the Austwide Grosvenor Place Trust, the Austwide Flexi Property Fund and the Mirvac Split Trust Growth Units, in respect of which investments the Plaintiffs sought to rely upon the advice of the First Defendants alternatively the Second Defendant, and by reason of which the Plaintiffs have suffered loss and damage.

2. In addition, the Plaintiffs claim against the First Defendants alternatively the Second Defendant on the basis of breach of fiduciary duty in respect of the failure on the part of the First Defendants alternatively the Second Defendant to disclose secret commission received by the Plaintiff's agent Shoji Australia Pty Ltd and/or its Director Qunye Velaphi in respect of the investments."

55 The phrase "was retained by ... to provide ... financial advice to the ... Plaintiffs" (emphasis mine) suggests a claim in contract.

56 The statutory period for breach of contract begins to run the moment that the cause of action accrues, that is to say, when the breach of contract occurs. The fact that damage is not actually suffered until some date later than the breach does not extend the time within which suit may be brought: see Cheshire and Fifoot's, Law of Contract, 5th Australian ed par 2452. I consider that the claim for breach of contract is statute-barred. I do not consider that justifies a dismissal of the plaintiffs' total action. It is better regarded as a reason for not permitting the statement of claim to stand in the form of the current minute.

57 The claim in tort for negligence is not statute-barred. That cause of action is complete when the loss occurs. The representations were made, as seen in March and May of 1990 and the writ was issued on 25 July 1996. Mr Louis' counsel referred me to par 59, and following, of the plaintiffs' statement of claim in the Pembroke action which pleaded that in March or February 1991 Hodder met with Kawasaki and Kawasaki expressed the view that the unit prices in the trust had declined to such a point that he considered that they should be immediately redeemed or sold. If that was when the loss occurred, in January or February 1991, then the writ, in this action was still issued within time.

58 Mr Louis' counsel argued that the action should be dismissed inter alia because, as expressed in the minute of proposed statement of claim, it departed seriously from the indorsement of claim. The negligence in the indorsement of claim on the writ said to have occurred "in about July 1990", where it is clear from the minute that it occurred in March and May 1990. I regard that as a minor discrepancy and one which could readily be cured by amendment. It was also said that the indorsement claimed the negligence occurred in or about July 1990 "and on an ongoing basis thereafter". No such claim for ongoing negligent advice appears in the minute. So be it. I consider that is not a basis for dismissal of this action. Although the date "in or about July 1990" for the negligent advice is wrong. I do not consider that Mr Louis would have been deceived by that. The indorsement speaks of negligent advice in respect of investments made by the plaintiffs in Austwide Grosvenor Place Trust, the Austwide Flexi Property Fund and the Mirvac Split Trust Growth Units. Mr Louis was the one who signed the cheques and completed the application forms for these investments and would know when those investments were made.

59 It is also said, on behalf of Mr Louis, that the indorsement of claim pleads breach of fiduciary duties and that these two have been abandoned in the statement of claim. I consider the plaintiffs have a good reason for that, in that the secret commission action was settled. The plaintiffs recovered substantial damages from the recipients of that commission and are not now concerned with pursuing the defendants for their role in the payment of that commission.

60 I turn now to the separate application by Messrs Macri and Barrett for dismissal of the action for want of prosecution and as an abuse of process. I would like to deal, firstly, with a limitation argument. These defendants rely on the law as stated in Scarcella v Lettice [2000] NSWCA 289; (2001) Aust Torts Rep 81-589, a decision of the New South Wales Court of Appeal. That case concerned negligence committed by a solicitor. He was engaged by clients to act for them in 1982 on the purchase of a property. He did that, but he failed to conduct searches which would have discovered that they did not have any right-of-way at the rear of their property. They only discovered this in 1994 when they applied to the local council to subdivide the property into two lots. They discovered that there was no access road to their property and so subdivisional approval could not be given. They then sued their solicitor. He pleaded that the action was time-barred, having been brought more than six years after he failed to conduct the searches.

61 The Court of Appeal found for the solicitor. They held that time started to run under the Limitation Act 1969 (NSW) when the plaintiffs suffered loss at the time of the purchase of the property, even though they were unaware of it: Hawkins v Clayton (1988) 164 CLR 539. Contingent or future losses do not constitute immediate damage for limitation purposes. The position is otherwise, however, with latent defects in buildings where time starts to run when the defects become manifest or otherwise discoverable, for example: Bryan v Maloney (1995) 182 CLR 609. This principle has been extended to include latent defects in title when defects were not ordinarily discoverable during a conveyance: Christopoulos v Angelos (1996) 41 NSWLR 700. In Scarella, normal searches conducted when the client purchased the property would have revealed the absence of the right-of-way. There was no latent defect in the title. The cause of action was the negligence and not the discovery of it.

62 Applying the principle of that case to the facts of this case, Mrs Davis, for these defendants, has argued that the tort of negligence was complete when the plaintiff suffered loss and that was when they invested in the three property trusts which, contrary to the defendants' representations, had risks of loss. That is, the plaintiffs' investments in these trusts carried with it a risk of capital loss, even though the plaintiffs were unaware of it at the time.

63 A cause of action in negligence is not complete until the plaintiff first suffers actual loss of damage. Damage which is prospective or contingent does not qualify as actual damage for this purpose: Wardley Australia Ltd v Western Australia [1992] HCA 55; (1992) 175 CLR 514 at 530 and 531. I consider that the plaintiffs, in investing in these unlimited property trusts, may have suffered prospective damage only from the date of the investments. They suffered actual loss when the investments fell. When was that? It is not clear on the pleading. I have already quoted pars 51, 52 and 53 which recite that the plaintiffs suffered loss and damage when the value of the investments in the trusts "later fell". The pleading is not specific as to when that was. The pleading goes on to say that "after waiting a reasonable time for the value of the units to increase, Sangora sold all those units at a loss", and those sales and losses occurred in 1996. The writ was issued on 25 July 1996. It is not possible on the pleading, or on the affidavits before me, to say that actual loss or damage occurred by a fall in the capital value of the investments between March and 25 July or between 29 May and 25 July. The first hint we have that the value of the investments fell is in par 59, and following, of the statement of claim in the Pembroke action that the unit prices had seriously declined in January or February 1991, that Mr Kawasaki told Mr Hodder that he would like to sell the investments. (It is later pleaded that Mr Hodder talked Mr Kawasaki out of that. He urged him to retain the investments and that is also said to be a negligent misrepresentation.) On the only information before me, the investments in these property trusts fell or had fallen by January 1991. That being so, the writ which issued in July 1996 is not time-barred.

64 I propose to dismiss the defendants' application.