Smith v Pacific Trading Enterprises

(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.

At a glance

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Judgment (9 paragraphs)

Parties

Cases Cited (2)

Cited By (1)