Smith v Pacific Trading Enterprises

THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION ADMIRALTY LIST

51/1991 - SMITH & ORS v PACIFIC TRADING ENTERPRISES LIMITED & ORS

1 On 2 May 1991 the first defendant entered into a written agreement, which was executed under seal, in Western Samoa to purchase a 54 metre fishing vessel, which was based there, from the second and third plaintiffs. The first defendant's obligations under that agreement were guaranteed by the second and third defendants, who were its directors. The first plaintiff was a party to the agreement and referred to in it as "the Beneficiary". 2 Clause 2 provided that the first defendant would pay for the vessel firstly, by paying the amount currently owing on her, including interest accrued to a specified date, to the Development Bank of Fiji, and secondly, by paying to the first plaintiff, or as he should direct in writing, $(A)30,000 by bank cheque. These payments were made. Thirdly, there was to be payment to the first plaintiff of:- ".. 20% of the net proceeds of fishing operations carried out by the vessel for three consecutive fishing seasons ('the Instalment'), commencing with the 1991/2 season. The minimum Instalment paid by the Company to the Beneficiary shall be United States $80,000 and the maximum shall be United States $180,000 if 20% of the net proceeds of fishing operations in value exceeds United States $80,000 payable by 30th June in each year." 3 Fourthly, the first defendant was to negotiate with the first plaintiff's creditors in Fiji, who had furnished supplies and services to the vessel:- "And where it is deemed appropriate, assume responsibility for payment of debts owing to such creditors as at the date of this contract, payment to be made within the period in which the Company pays the Instalment to the beneficiary." 4 Clause 5 provided that the guarantors guaranteed the performance of all the obligations of the first defendant, including payment by it to the first plaintiff "under this Agreement". 5 On 5 December 1991 the plaintiffs issued a Statement of Claim in which they pleaded the agreement and various provisions of it. In paragraph 7 it was pleaded that in breach of the agreement the first defendant "failed to make any payment in respect of the 1991 season". I do not understand this allegation as the first season for which the agreement made provision was the 1991/1992 season, the payment being due on 30 June 1992. Perhaps nothing turns on this. 6 In the alternative it was pleaded that it was an implied term of the agreement that the first defendant would not do anything to deprive the plaintiffs of the benefit of the agreement and, in breach thereof, the first defendant "has commenced" negotiating for the sale of the vessel to a person or persons resident outside Fiji, whereby the first plaintiff would be deprived of the benefit of the payment of the net proceeds of fishing operations contemplated by clause 2. 7 Further, and in the alternative, it was pleaded that in breach of the agreement the first defendant failed to utilise the vessel for fishing operations, thereby depriving the plaintiffs, and in particular the first plaintiff, of the benefit of the agreement. 8 In paragraph 11 it was pleaded that by reason of the breach or breaches alleged the plaintiffs have suffered loss and damage. 9 Declarations were sought that the first defendant was not entitled to sell the vessel prior to compliance with clause 2, and that the title of the first defendant was subject to the title or interest of "the plaintiff" to secure performance of the agreement. A general claim was made for damages, although it was not particularised, and an order was sought restraining the first defendant from selling the vessel. Ancillary relief was claimed. 10 It was common ground that the vessel was sold by the first defendant to Asia Pacific Business Associates Limited on 18 December 1991, as Carruthers J found in a judgment he gave on 16 March 1992. The Course Of The Proceedings 11 The matter came before Carruthers J on 4 December 1991, on an ex parte basis. His Honour granted the plaintiffs leave to serve a Notice of Motion for Summary Judgment and a Statement of Claim outside the State of New South Wales, the Statement of Claim being filed on 5 December 1991. He ordered that service of those documents be effected personally on or before 11 December 1991, abridged the time for an Appearance to 18 December 1991, and made the Notice of Motion returnable at 9.30am on 19 December 1991. 12 The matter came before his Honour on 20 December 1991 when there was an appearance on behalf of the plaintiffs and the first and second defendants. He noted the plaintiffs' undertaking as to damages and restrained the first and second defendants from selling or otherwise disposing of the vessel until further order without first giving two days' notice in writing to the solicitors for the plaintiffs. In fact the vessel had been disposed of on 18 December 1991. He directed those defendants to file a Defence on or before 17 January 1992, stood the matter over to 4 February 1992 and granted liberty to apply. 13 On 16 March 1992 his Honour granted leave to the solicitor for the first and second defendants to file a Notice of Ceasing to Act and, conformably with the finding he made on that day that the vessel had been transferred on 18 December 1991, he held that the plaintiffs were entitled to a declaration that those defendants had repudiated the agreement and were entitled to damages to be assessed. He stood the matter over to a date to be fixed for an assessment of damages and ordered the first and second defendants to pay the plaintiffs' costs. 14 On 19 February 1993, almost twelve months after his Honour had ordered that damages were to be assessed, that matter came before him. There was an appearance on behalf of the plaintiffs, but not on behalf of the first and second defendants. His Honour, according to the Associate's Record of Proceedings, ordered judgment for the plaintiffs against the first and second defendants in the sum of US$232,295, and that those defendants pay the plaintiffs' costs of the proceedings. 15 Although the judgment was entered on 25 March 1993, there are no reasons in the file or to which the parties could refer me showing how his Honour assessed that amount. I do not know what the components were. No evidence, which must have been before his Honour, was sought to be tendered before me. The Resurrection Of The Proceedings 16 On 7 August 1998 the proceedings were listed before Hunter J, obviously at the instance of the plaintiffs. There was no suggestion that any of the defendants were given notice. In a short judgment his Honour said:- "In this matter Mr Taylor, for the plaintiff, seeks the directions of the Court, unsupported by motion or affidavit, aimed at re-listing of the matter for the purpose of bringing before the Court the third defendant in proceedings in which judgment has been previously entered against the first and second defendants at a time when the third defendant has not been served, that defendant later being served, it seems, imperfectly by service in Western Samoa. In any event, the third defendant did not participate in whatever preceded the judgment of this Court against the first and second defendants. Whether that judgment followed a hearing on the merits or was a summary judgment or a judgment by default, one simply is not informed. In the circumstances I am prepared to direct the plaintiff to serve the subject Statement of Claim upon the third defendant, that service to be personal service to be effected in the Australian Capital Territory. I list the matter for further directions on 18 September 1998. If in the meantime the plaintiff has occasion to reconsider its position as against the third defendant and desires to move formally in a manner different from that the subject of these directions, then it may do so on liberty to apply within forty eight hours." 17 It is not clear to me what his Honour was told about the proceedings, and Mr G.I. Foster of Counsel, who appeared before me for the plaintiffs but was not then appearing, was unable to say. The service on the third defendant, to which his Honour was referring, must have been the alleged service on 30 March 1992 to which the first plaintiff deposed in an affidavit he swore on 12 March 1996. The original of that affidavit was not before me, although a copy is an annexure to an affidavit of Mr Peter John Brown, sworn on 17 February 1999. Whether the third defendant was served on 30 March 1992 was a matter in issue before me. I am satisfied by his evidence and also by the probabilities that he was not. He was cross-examined about the matter and he said that he could not recall receiving the Statement of Claim from Mr Smith. He denied discussing the Statement of Claim with him, and receiving such a document from him. The probability, which strongly favours the view that he was not served, is that when the proceedings came before Carruthers J on 19 February 1993, i.e. some eleven months after the alleged service, no attempt was made to obtain judgment against him, and there was no suggestion that he had been served. There is no conceivable reason why, if he had been served, an attempt would not have been made to obtain judgment against him and, as the chronology demonstrates, the plaintiffs had plenty of time to take whatever step may have been necessary to proceed against him. 18 I do not understand the second paragraph of Hunter J's reasons to be in any way stating that service of the Statement of Claim, pursuant to the direction he gave, would have any legal effect or significance. There was no originating process before his Honour, and I cannot imagine he would have made any order affecting substantive rights without giving the party against whom the order was sought the right to be heard. It was rather a machinery step to be taken with a view to ascertaining the legal position after the document had been furnished to the third defendant. 19 It was not in issue that the Statement of Claim was handed to the third defendant on 1 September 1998 and, on 9 September 1998, his Honour vacated the directions hearing date of 18 September 1998, stood the matter over to 25 September 1998 for further directions, and directed the plaintiffs to notify the third defendant accordingly. 20 On 25 September 1998 I made orders by consent directing that the plaintiffs file any motion in relation to the service of the Statement of Claim upon the third defendant, together with any affidavits upon which they intended to rely, on or before 23 October 1998, and that the third defendant file any further affidavits upon which he intended to rely on or before 20 November 1998. I gave certain other directions, by consent, including re-listing the matter "for any further directions" on 11 December 1998. The plaintiffs would not have been pursuing this course if they had thought that Hunter J's directions had any greater effect than I have attributed to them. 21 On 22 September 1998 the third defendant, for whom Mr T.S. Murphy of Counsel appeared, filed a Notice of Motion seeking an order setting aside the Statement of Claim as against him; an order discharging any order extending the validity for service of the Statement of Claim; an order setting aside the service of the Statement of Claim upon him; and, in the alternative, a declaration that the Statement of Claim had not been duly served upon him. Certain additional relief was sought. 22 On 23 October 1998 the plaintiffs filed a Notice of Motion seeking orders that the period of leave in which to serve the Statement of Claim out of the jurisdiction, granted by the Court on 4 December 1991, be extended from 11 December 1991 to 30 April 1992; that service of the Statement of Claim on the third defendant on 30 March 1992 be confirmed; that the requirement to comply with Part 7 rule 7(1) be dispensed with in respect of the service of the Statement of Claim on the third defendant on 1 September 1998; that in the alternative the period of validity of the Statement of Claim for the purpose of service under Part 7 rule 7 be extended to 2 September 1998; that service of the Statement of Claim on 1 September 1998 be confirmed; and for consequential orders. 23 On 11 December 1998 I gave certain further directions and, on 19 February 1999, I fixed the motion for hearing on 8 April 1999. The Hearing Of The Notices Of Motion 24 On the hearing the affidavits of Mr Peter John Brown sworn on 23 October 1998 and 17 February 1999, and the affidavit of the third defendant sworn on 1 January 1999 were read. In each of his affidavits Mr Brown said, and objection was taken to this successfully, that he was the attorney by Power of Attorney for the plaintiffs and "empowered to conduct these proceedings on their behalf". The success of these objections led to four Powers of Attorney being tendered: Exhibits 1, 2 and 3. Exhibit 1 was a Power of Attorney granted to Mr Brown by the second plaintiff on 21 July 1998, being limited to:- ".. matters pertaining to certain Admiralty action being No 51/1991 in the Supreme Court of New South Wales, Sydney Registry, relating to it, arising from it, or the subject matter therein, or any new proceedings against any of the parties named in No 51/1991 arising therefrom." 25 It was stated to be a condition of the Power of Attorney that the second plaintiff and any member of her family be indemnified for any costs as a direct or indirect result of having granted the Power of Attorney and of the proceedings. 26 On 4 June 1998 the third plaintiff gave a Power of Attorney to Mr Brown confined:- ".. to matters pertaining to certain Admiralty Action No 51/1991 in the Supreme Court of New South Wales, Sydney Registry or relating to it or arising from it or in relation to the subject matter therein or to commence new proceedings between the same parties or against any other persons touching or relating to the said subject matter." 27 The Powers of Attorney given by the first plaintiff on 5 October 1995 and 18 November 1997, became Exhibit 3. The first Power of Attorney was limited to the proceedings, but the second was in general terms in relation to commencing proceedings against the third defendant "now of 66 Goldner Crescent, Melba in the Australian Capital Territory" to enforce any of the first plaintiff's rights arising from the agreement and to take other appropriate action in relation thereto. Once that was established it was not submitted that Mr Brown did not have status to bring the present Notice of Motion. 28 It appeared from Mr Brown's evidence that he has taken an assignment of the benefit of one half of any moneys that might be recovered from the third defendant, although the terms of the assignment were not explored. 29 There was no evidence from any of the plaintiffs as to why they had not pursued the proceedings against the third defendant, nor why they had elected to proceed to judgment against only the first and second defendants. Nor was there any evidence from Mr Brown in relation to this latter matter. Mr Brown gave evidence that he had tried to have the first plaintiff come to the hearing, but, apparently he declined: p.24. 30 In his affidavit of 23 October 1998 Mr Brown set forth the history of the matter and he said that he was informed by the first plaintiff that between March 1993 and the time of the granting of the Power of Attorney the plaintiffs wished to proceed against the third defendant, but did not know of his whereabouts. He continued that during the early months of 1996 he instructed solicitors in both Fiji and Western Samoa to register the New South Wales judgment in both countries and, at that time, he had no knowledge of the whereabouts of the third defendant, although, towards the end of 1996 he became aware that he was residing in Canberra and telephoned him. He recounted certain conversations with the third defendant, which were not seriously in issue, the purpose thereof, he said, being to try to reach a commercial settlement with him. This was not achieved. However, of more significance, to my mind, is the fact that Mr Brown knew where the third defendant was from late 1996, but did not seek to effect service on him. In paragraph 23 of the affidavit, which was admitted subject to relevance and only as to Mr Brown's belief, he said that from early 1996 he was preoccupied with enforcing judgment against the second defendant in Fiji and Western Samoa, and he did not consider it practical to continue proceedings at that time against the third defendant, whom he believed had been "validly served on 30 March 1992". He continued that he believed that the continuation of the proceedings against the third defendant could and should wait until enforcement of the judgment was well under way against the second defendant. 31 In his affidavit of 1 January 1999 the third defendant set out the history of the matter. He said that he returned from Western Samoa on 30 September 1993 and, thereafter, lived in Canberra and, from 22 December 1993 at his present address. He also carried on business in Canberra, and he denied that he organised his affairs to avoid service of the Statement of Claim. I accept his evidence in this regard. 32 In paragraph 25 he said he no longer held any records of any substance in relation to his involvement in the purchase of the vessel, which were lost in transit when he returned to Australia, and that since he was served with the Statement of Claim he has made a number of enquiries to attempt to locate relevant documents to assist in any defence of the proceedings, which he may be required to mount. He said the only documents that he had been able to obtain were contained in a file from the Cook Islands in relation to the transfer of the ownership of the vessel during 1991 to Asia Pacific Business Associates Limited, that he understood that the first defendant was no longer trading, and that if the leave sought by the plaintiffs was granted then he would be "severely prejudiced in defending these proceedings by reason of the effluxion of time". He added he had no records to assist him in relation to circumstances surrounding the purchase. 33 In paragraph 29 he said it was his belief that the agreement was breached by the plaintiffs in that it was initially represented that the vessel was sold as a going concern, ready for the 1991/1992 fishing season. However, upon taking delivery it was discovered she had substantial inherent defects requiring a complete overhaul, and as such she was not ready for the 1991/1992 fishing season. He said:- "Due to the substantial period of time which has elapsed from the date delivery was taken of the vessel in 1991, to the date that I was served with the Statement of Claim on 1 September 1998, together with the fact that I no longer hold any documentation of any substance in relation to the vessel, I will have substantial difficulty in setting up any defence to the plaintiff's (sic) claim." 34 In paragraph 30 he said that during the period 1 December 1991 to 1 September 1997 he organised his affairs without any reference to the proceedings, and that he believed that he will suffer substantial prejudice if the plaintiffs are granted the leave they seek. 35 None of this material was objected to nor seriously challenged. 36 In his affidavit of 17 February 1999 Mr Brown set out some of the history of the matter and some of the attempts he had made to ascertain the whereabouts of the third defendant. 37 I am quite satisfied that the third defendant did not attempt to conceal his whereabouts, that he was not served with the Statement of Claim on 30 March 1992, and that he was unaware that there were any proceedings brought against him until approximately 1997: Tp.8, although he was aware, prior to that, that proceedings had been brought against the first and second defendants. He said the first time he saw the Statement of Claim was on 1 September 1998: Tp.7. 38 The primary relief sought by the plaintiffs is that in paragraphs 3, 4 and 5 of the Notice of Motion. Although the relief sought in paragraphs 1 and 2 was not abandoned, it was not pressed with any enthusiasm, and having regard to all the circumstances I can understand why this was so. As I have said I am quite satisfied that no service was effected on the third defendant on 30 March 1992 and, accordingly, that no basis has been established for making either of those orders. The Relief Sought 39 Part 7 rule 7, as it existed when the Statement of Claim was issued, provided:- "(1) For the purposes of service an originating process shall be valid for two years from the date on which it is filed.

(2) The Court shall not extend the period of two years mentioned in sub-rule (1).

(3) Nothing in this rule prevents the plaintiff from commencing fresh proceedings by filing another originating process." 40 The rule was amended in respect to proceedings commenced on or after 1 September 1998 to reduce the period referred to in sub-rule (1) to one year "unless the Court otherwise orders", and to delete sub-rule (2). 41 The Statement of Claim clearly was not served within the time provided by sub-rule (1), as then applicable. In these circumstances Mr Foster submitted that there was an irregularity, which I could cure pursuant to s.81 of the Supreme Court Act 1970. The decision of Master Allen, which was confirmed by Yeldham J, in Rust v Barnes (1980) 2 NSWLR 726 is clear authority for the correctness of both those propositions. It is also authority for the proposition that service may be permitted beyond the two year period notwithstanding that there is an argument that the defendant would thereby be deprived of the limitation period. This is because, so it was reasoned, the Limitation Act 1969 requires proceedings to be commenced within the limitation period, and proceedings are commenced by the filing of the originating process. Service of that process is not a step in the commencement of the proceedings, but in the prosecution of them. The question is whether I should, in the exercise of my discretion, cure the irregularity. 42 The facts in Rust v Barnes were set out at length by Master Allen and showed that although the Statement of Claim had not been served the solicitors for the defendant were well aware of the nature of the claim and had engaged in considerable discussions with the solicitors for the plaintiff concerning the matter. At p.737 the Master said:- "In the light of the above facts, however, I have come to the conclusion that the discretion conferred by s.81 of the Act should be exercised in favour of the plaintiff. The service, albeit irregular, should not be set aside. The irregularity should be cured. I do not consider that injustice to the defendant would be occasioned thereby. So far as the defendant on the record is concerned, that is the driver of the other vehicle, he is protected by his third party insurance. If, on the other hand, one regards the substantive defendant as being the GIO, the position is that the plaintiff's claim is one which is extensively examined and considered before the Statement of Claim was served. The present case is far from being one in which the defendant has become aware so belatedly of the existence of the claim against it that it would suffer substantial prejudice in preparing for trial. There is not a scintilla of evidence that any person who was a material witness has ceased to be available to give evidence. There is direct evidence that the defendant driver himself is still available." (My emphasis.) That factual position is quite different from the one which confronts me. 43 Mr Murphy submitted that the evidence established that the third defendant was prejudiced in a number of ways. Firstly, he does not now have certain documents, which he considers relevant to his defence. In cross-examination he referred to certain company records, which, assuming they are still retained in Western Samoa, related to relatively formal matters including the incorporation of the first defendant and other such material. He also referred to the absence of the minutes of the first defendant's meetings. He was cross-examined about documents necessary to deal with various parts of the claim, and he said that he had bank records, although it appeared that he did not have the primary records pursuant to which his obligations to make certain payments arose. He elaborated on the absence of documents at Tp.10, and, in relation to a claim under Clause 2(iii), he said he had "nothing that would be of assistance there": Tp.17. As this must have been a substantial component of the damages awarded by Carruthers J and would be a major part of the claim against the third defendant, the prejudice is obvious and severe. He said he had bank records, but no original statements or documents: Tpp.17-18. 44 Secondly, Mr Murphy relied on the sheer period of time which had elapsed without the third defendant's being given notice of the claim against him. Thirdly, he relied upon the desire to raise a defence or cross-claim that the plaintiffs were in breach of the agreement, and the difficulties in establishing that so long after the vessel was acquired and, as the evidence now established, after she had been sunk. The sinking only occurred "some time last year": Tp.28, so that if the plaintiffs had pursued the proceedings against him in a timely fashion, she would then have been available for inspection. Fourthly, he relied upon the absence of any records in relation to the fishing seasons and, fifthly, upon the matters set forth in paragraph 30 of the third defendant's affidavit. Sixthly, he relied on the fact that it would now be very difficult, as execution had been levied against the second defendant, for the third defendant to pursue his rights against his co-guarantor. Seventhly, he submitted that the plaintiffs had elected to proceed only against the first and second defendants and that they had failed to give any evidence why they had adopted this course. The submission ran that, for all the evidence disclosed, there may well have been good reason for this. He noted that Mr Smith had declined to appear. On the other hand there was some evidence from Mr Brown, to which I have referred, that from March 1993 the plaintiffs wished to proceed against the third defendant, although the significance of this evidence is difficult to understand. I say that because the relevant reference to March was 30 March 1992, when it was asserted the third defendant was served with the Statement of Claim. There is no particular reason why March 1993 was a date of any significance, unless it was because it was shortly after Carruthers J gave judgment against the first and second defendants. The third defendant has never seen the documentation relied on before his Honour: Tp.18, and it was not identified to me. However, because of the absence of any evidence from the plaintiffs one is left to speculate as to their reason for not proceeding against the third defendant. In my opinion the Court should not be placed in the position of speculating on these matters. There was no suggestion that the persons, who were in a position to give evidence as to why they did not proceed against the third defendant, could not provide such evidence. There has been ample opportunity, consistently with the directions given by the Court, for such evidence to be obtained. They either refused, in the case of the first plaintiff, or did not do so in the case of the others and without explanation. 45 I accept that all the matters, to which Mr Murphy referred in his submissions, have occasioned substantial prejudice to the third defendant, in circumstances where he is in no way to blame for any of them and was kept unaware that proceedings had been commenced. 46 Mr Murphy submitted that the substantial effluxion of time, without notice that the proceedings were on foot against him, meant that the third defendant suffered the imperceptible prejudice which any litigant suffers by virtue of that fact. If he is now required to consider the case it may well be that witnesses are no longer available, that memories have faded and that evidence has been lost. Certainly it is known that the vessel can no longer be inspected. It must also be borne in mind that the transactions took place overseas, which only adds to the difficulty of accumulating the necessary evidence. 47 In regard to the question of prejudice I respectfully refer to the statement of Kirby P in Williams v Minister, Aboriginal Land Rights Act 1983 & Anor (1994) 35 NSWLR 497, at p.513. His Honour said:- "There is no justice in a lopsided trial in which one person asserts claims and the other is denied the opportunity to test, verify and counter such claims. It is not just to force a party to trial at which that party is bereft of evidence which has either disappeared or been destroyed through the passing of time or the dispersal or death of witnesses." 48 It cannot be said in the present case that the third defendant has been totally bereft of evidence, but I am satisfied that he has been deprived of evidence to a substantial degree. 49 In my opinion, this is solely because of the failure of the plaintiffs to pursue their rights against him in a timely manner. As I have said there is no blame which can be attached to him. 50 Mr Foster submitted that the plaintiffs were entitled to bring the proceedings at least six years, and perhaps twelve years if the agreement be construed as a Deed, after the cause of action arose in 1991 and, thereafter, would have a further two years in which to serve the Statement of Claim. The submission ran that in respect of these proceedings the plaintiffs had at least eight years to commence and serve them, and perhaps fourteen years, and that if the plaintiffs had adopted even the former approach all the elements of prejudice about which Mr Murphy complained would equally apply. The submission only points up the gross prejudice a party can suffer when there is a delay in bringing forward the proceedings and, no doubt, explains why the time within which service can be effected validly has been reduced by the recent amendments. However, strictly speaking, Mr Foster's submissions are correct, but, in the present case in my opinion, they are not applicable and suffer from the deficiency that the plaintiffs did not delay in bringing the proceedings. They instituted the proceedings expeditiously and, thereby, set the two year period running. It expired in December 1993. It does not, in those circumstances, avail the plaintiffs to say that they could have refrained from bringing the proceedings until a much later date. They did not, and they are therefore fixed with the consequences of the rules applying to the proceedings they did commence and in circumstances where the third defendant knew that proceedings were on foot against the first and second defendants, but not against him. Mr Foster elicited from the third defendant that he was aware of the proceedings against the first and second defendants. But I am satisfied he was not aware of those against him. In this respect he could well have been lulled into a false sense of security. In fact almost five years went by from the time when service, at the latest, should have been effected, to when the Statement of Claim was handed to the third defendant. Admittedly there had been some discussions between him and Mr Brown from late 1996. However, it is obvious from Mr Brown's recitation of those discussions that they never appeared likely to lead a resolution of the matter. The reason Mr Brown advanced for not pursuing the proceedings is singularly unconvincing. One would have thought that if he had been trying to bring about a settlement he would have done so against the background of forcing the third defendant to face up to the proceedings. More importantly for present purposes some elements of prejudice may have been removed or alleviated. 51 Mr Murphy also submitted that there was no challenge to the evidence of the third defendant that he had arranged his affairs on the basis that there were no proceedings against him. This was correct and disclosed another element of prejudice. 52 Mr Foster further submitted that a number of matters on which Mr Murphy relied were incapable of any precise evaluation, so far as prejudice was concerned. He said one simply could not measure the prejudice in relation to the non-availability of the vessel. He made a similar submission in relation to certain other matters. These submissions merely point up the problem confronted by the third defendant, that is that it is, at this stage, not possible to quantify in any intelligible way the extent of the prejudice, which has been suffered. As Mr Foster conceded it may be minimal or it may be great. It is hardly open to the plaintiffs, who have failed to act conformably with the Rules and have been guilty of the most gross delay, to assert that the third defendant now cannot be precise about the extent of the prejudice suffered. The fact is that there is a concession that there has been prejudice, which may be great. Even if the prejudice is minimal the various events of prejudice, when aggregated, may be great. Suffice it is that there is relevant and, I am satisfied, not insubstantial prejudice. This has been caused by the plaintiffs and it could well result in a totally unfair trial if the proceedings are allowed to go forward. 53 Mr Foster had, in my opinion, no real answer to the submission that the third defendant would have great difficulty in mounting a cross-claim against the plaintiffs based on the condition of the vessel when she was received, which the third defendant alleged not to be consistent with the agreement. Nor, as I have sought to say, was he able to explain why the plaintiffs had not proceeded earlier against the third defendant, save to the extent to which I have referred. 54 Mr Murphy also submitted that his client would be greatly prejudiced because the amount of the debt has now been substantially increased by the addition of interest under s.94 of the Supreme Court Act. In an attempt to deflect this element of prejudice Mr Foster stated that he was instructed by Mr Brown, who was in Court at all times and certainly when the concession was made, that Mr Brown would not pursue a claim for interest from the date on which the Statement of Claim was filed. Conclusion 55 I have come to the conclusion that the third defendant has established that he would be severely and irreparably prejudiced if he was now required to defend the proceedings in which, of course, I include bringing any cross-claim in relation to the state of the vessel or against his co-guarantor. In all these circumstances I am not disposed to remedy the irregularity in service in the exercise of my discretion. There is another matter which is of importance. The evidence is that the execution against the second defendant has realised some $45,000, and that the first defendant has no assets. In those circumstances, prima facie, the plaintiffs will suffer some loss. However, that is entirely their own fault and had they acted with promptitude, such that the prejudice to which I have referred did not accrue to the third defendant, they may not be in that position. 56 There is a further matter which requires consideration. The third defendant guaranteed the obligations of the first defendant under the agreement. A very real question arises as to whether the payment of damages for a repudiation of the agreement was an obligation undertaken by the third defendant as guarantor. There was no evidence before me as to how Carruthers J assessed the damages, but what must be clear is that his Honour was awarding a sum for amounts which would accrue due, at least in part, in the future. In that sense the award comprised an element, the extent of which was not disclosed, for pure damages, as opposed to amounts bound to be paid under the contract. Mr Foster conceded that this led to some doubt as to the extent to which the plaintiffs could recover against the third defendant, although he submitted that that should be resolved on the hearing. In my view it is a material matter, although perhaps not of the highest significance, to be taken into account when one is determining how the discretion should be exercised. It is the more so when the method by which his Honour assessed damages is not revealed. Orders 57 I am satisfied that the plaintiffs' Notice of Motion should be dismissed with costs. I consider that if I make that order there is no need to make any order on the third defendant's Notice of Motion. However, I am satisfied that notwithstanding that the third defendant is entitled to his costs of his Notice of Motion, although, for the assistance of the costs' assessor I record that both motions were heard together. 58 I order that the plaintiffs' Notice of Motion filed on 23 October 1998 be dismissed with costs including the third defendant's costs of his Notice of Motion and that the Exhibits be returned.

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