Victoria Teachers Credit Union Ltd v KPMG

5. The relevant facts were uncomplicated, although a little unusual. At material times the respondent firm, or one or other of what it is convenient if not strictly accurate to call its predecessors, was retained as auditor of the appellant's financial statements and acted in that capacity. In August 1993 the appellant had occasion to investigate into its printing and associated costs that had steeply risen during the five financial years ending on 31 March 1989 to 1993. The investigation revealed or strongly suggested that, over the period, two of the appellant's senior employees had combined with a third party in a fraudulent scheme, causing it loss by the extraction of payments for the pretended or over-priced supply of printing and associated goods and services. The police were informed; the two employees were suspended and, in 1994, dismissed. The auditor did not detect the fraud or alert the appellant to any inadequacy in its control systems that might have allowed fraudulent conduct to go undetected.

8. In view of its loss the appellant in November 1993 notified VACC Insurance Co. Ltd. (VACC) of a potential claim under the Fidelity Guarantee (Bond) section of that company's Credit Union Protection Pack policy that had been issued to the appellant. The loss was then unquantified but the claim was expected to amount to some millions of dollars.

11. In 1995 the auditor, following its own investigation into the provision of printing services to the appellant during the period of the fraudulent scheme, prepared without the consent of VACC a report to the Corporate Crime Group of the Victoria Police. In December 1995 an officer of the Major Fraud Squad informed the solicitors for VACC, Messrs. Arthur Robinson and Hedderwicks (AR&H) that he expected the police to "take action" in the following March in relation to the supposed criminal conduct.

14. On 5 February 1996 VACC instructed its solicitors, in accordance with their advice, to issue a writ in the name of the appellant as plaintiff against the respondent firm and an audit partner as defendants, claiming damages in respect of their alleged professional shortcomings. AR&H, as instructed, filed a writ in the Supreme Court on 23 February 1996 bearing an endorsement of claim. In so instructing its solicitors VACC was not purporting by right to sue in the name of the appellant: no right of subrogation had arisen because, no formal claim having been made under the policy, no obligation of the insurer to indemnify had been met or even acknowledged; and no other right under the policy to sue in the name of the assured had then arisen. For reasons unexplained in this litigation neither VACC nor anyone on its behalf had told the appellant, before the writ was filed, of the decision to begin the proceeding in the appellant's name, let alone sought the appellant's authority so to begin it. Indeed, it appears that some eight months were to pass before anyone on behalf of the appellant learned of the writ's existence. Miss M E A Cahill, the employee solicitor who was responsible for filing the writ, has deposed that the proceeding was issued "...in order to protect both [the appellant] and VACC's position and to ensure that the action would not be barred by the Statute of Limitations."

17. The writ was not served during the first twelve months of its life. Miss Cahill has further deposed that the reason for not serving it was the appellant's "...concern that these proceedings might compromise the continuing investigations of the Major Fraud Squad and any subsequent prosecutions. In particular, the plaintiff was conscious of the fact that KPMG had prepared a report for the Major Fraud Squad." That explanation for the failure to serve the writ seems unlikely to have been quite accurate. In truth the appellant itself can have had no early "concern" of the kind suggested, nor any consciousness of the auditor's report provided to the police as a reason for not serving the writ: the appellant remained unaware until October 1996 that the proceeding had been brought. It had been brought entirely at the instance of VACC upon the advice of its solicitors and without reference to the appellant, the assured. The appellant at all relevant times retained its own solicitors - now known as Messrs Mahoneys. That firm or its predecessors were very closely concerned in the investigation of the fraudulent scheme perpetrated on the appellant, and in the communication to VACC of all details of the potential claim under the policy and, ultimately, a formal claim. The partner of the firm most intimately concerned was Mr F X Moore who, on behalf of the appellant, handled all correspondence on the matter with the insurer's solicitors, AR&H. It is perhaps surprising in retrospect that neither VACC nor its solicitors asked or told Mr Moore, or anyone else connected with the appellant, about the writ before or shortly after it was filed. The general manager of VACC, Mr W R Lockett, has sworn that it was he who instructed AR&H to begin the proceeding. His letter of instructions, dated 5 February 1996, referred to the solicitors' initial advice that "...the writ would not be served pending the outcome of further investigations, if at all. The purpose of this is to protect our position in relation to the Statute of Limitations..." Mr Lockett has sworn further that he "...did not at that stage [scil. in February 1996] notify [the appellant] of the writ as a formal claim had not yet been lodged."

20. Be all that as it may, Mr Moore, together with Mr B J Smith, the general manager and secretary of the appellant, attended a meeting at the offices of AR&H on 17 October 1996 at which Miss Louise Jenkins, the partner of AR&H concerned, and Miss Cahill and Mr Lockett were present. Miss Jenkins then and there told Messrs Moore and Smith that the proceeding had been commenced, describing it and specifying the parties to it. She also informed them (as Mr Smith has sworn) "...that it was not intended to take any further steps in relation to the writ unless they were agreed to by [the appellant]". This, according to Mr Smith, was the first he knew of the existence of the proceeding. A copy of the writ was on the same day forwarded to Mr Moore.

23. On 3 December 1996 Mr Moore attended a meeting of the Board of the appellant at which Mr Smith was also present. Mr Moore there informed the directors that the proceeding had been issued on the initiative of VACC and recommended that the appellant lodge a formal claim under the policy. He also indicated that "the writ would need to be extended following its expiry".

26. On 12 February 1997 Miss Cahill telephoned Mr Moore seeking the appellant's authority for an application to extend the period of the validity of the writ for service. Mr Moore thereupon telephoned Mr Smith seeking the necessary authority. Mr Smith gave it on the appellant's behalf and Mr Moore conveyed it to Miss Cahill by telephone, confirming it by letter dated 13 February in the following terms -

"We refer to the writer's telephone conversation with Megan Cahill of 12 February and confirm our client's authorisation to make application for the extension of the Generally Endorsed Writ issued against KPMG Peat Marwick."

30. On 20 February 1997 Miss Cahill made an affidavit in support of an ex parte application for extension of the period of the validity of the writ for service on the defendants; and on that day Master Evans granted the application, extending the period for eight months from the date of the order.

33. On 15 October 1997 the appellant submitted a formal claim to VACC under the policy. Thereupon immediate steps appear to have been taken to serve the writ. Service on the defendants was duly effected on 17 October 1997 after the following events occurred. On that day Messrs Moore and Smith had a meeting with Miss Jenkins at the offices of AR&H at which (consistently with what she had stated on the previous 17 October) she sought the appellant's consent to the service of the writ. Later on the same day Messrs Moore and Smith together conferred by telephone with Mr Colin Laity, the Chairman of Directors of the appellant, to report to him on the meeting with Miss Jenkins. In the course of the telephone conference Mr Moore received instructions to give the appellant's authority for service of the writ. On the same day Mr Moore telephoned Miss Jenkins to convey his instructions and confirmed the communication by facsimile as follows: "We confirm our client's consent to your client, in the exercise of its rights under the policy, proceeding with service of the writ issued by you against KPMG." We were not provided with a copy of the policy and, despite our request of counsel, we were not informed of the nature of the insurer's "rights under the policy" that were being there referred to.

36. The respondents, as defendants named in the writ, entered unconditional appearances on 27 October 1997. On 20 November 1997 AR&H provided Mr Moore with a draft statement of claim in the proceeding and sought the appellant's express authority for an allegation in it of misappropriation by the appellant's employees. Having sought and received instructions from Messrs Smith and Laity to make the allegation, Mr Moore conveyed them by letter to AR&H dated 25 November. In his letter Mr Moore said, among other things -

"While VACC has not yet admitted liability in relation to this claim VACC has, with VTCU's consent, proceeded to have the Writ previously issued by you on its behalf served on KPMG to preserve VACC's position under its rights of subrogation. Effectively therefore your firm is acting for VTCU in relation to the proceedings issued in its name against KPMG. ... While VTCU reiterates its position in relation to these proceedings of its intention to continue complying with its obligation to co-operate with VACC pursuant to the policy nothing in this letter is to be taken as in any way prejudicing the rights of VTCU to proceed with its claim under the policy and to seek VACC's acceptance of that claim."

40. A statement of claim was duly served on 25 November 1997. It alleges, in effect, breaches of duty by the respondents as auditors as a result of which the appellant suffered damage. The respondent firm remained the appellant's auditor. In March 1998 the respondents, with a view to discovering whether the appellant had instructed AR&H to issue proceedings against them, undertook a search of information that had become available to them in their professional capacity. Presumably, as it was suggested to us by their counsel, this was done on legal advice, but there is no indication that the propriety of that course was considered. The search turned up a minute of a meeting of the appellant's Board on 22 July 1997 which recorded that "A writ has been served on KPMG by the solicitors acting for VACC and the Supreme Court has contacted KPMG with hearing dates for next year...". So much was sworn in, and a copy of the minute was exhibited to, an affidavit made on 5 March 1998 by Miss A J Nicholls, a solicitor in the employ of Messrs Phillips Fox, the solicitors for the respondents. What was recorded in the minute was obviously factually inaccurate insofar as it purported to refer to service of the writ in the present proceeding having been effected as at 22 July 1997. Apparently what had happened, as Mr Smith has sworn, was that the respondent firm had been provided with a copy of the writ before it was formally served on 17 October. The minute went on to say (correctly, as Mr Smith has further sworn) that "Mr Smith has spoken with Mr Bartley [the second respondent], and also with Mr Moore who will advise further".

43. The affidavit sworn by Miss Nicholls on 5 March 1998 was used in support of an application on behalf of the respondents by summons filed on the same day to set aside the order made ex parte by Master Evans on 20 February 1997 extending the time for service of the writ. Miss Nicholls swore further, in paragraph 16 of her affidavit, that "In the circumstances, the application was made before Master Evans on instructions from a stranger to the proceedings. The proceedings taken in the name of the plaintiff continue to remain in the care and conduct of those instructed by a stranger to the proceedings...". It should be noted that the application by summons filed on behalf of the respondents on 5 March 1998 does not appear to have been the subject, before it was made, of any communication from the solicitors for the respondents to the appellant or its solicitors or to AR&H. So far as appears the respondents had neither sought nor obtained any account from those sources of any of the dealings between them that had preceded or followed the application made to Master Evans. An appropriate enquiry might have served to temper the above-quoted asseverations made by Miss Nicholls in her paragraph 16.

46. The respondents' application to have the order of Master Evans set aside was heard on 20 May 1998 by Master Wheeler, who dismissed it. On 12 June 1998 Mandie, J. allowed an appeal by the respondents, set aside the order of Master Evans and dismissed the present appellant's fresh application (made by summons filed on 5 June 1998 in case the appeal before the judge should succeed) for an extension of time for service of the writ. Hence the present appeal.

49. In her affidavit of 20 February 1997- the only evidence (with its exhibits) in support of the ex parte application that was before Master Evans - Miss Cahill made no mention of the want of the appellant's authority for the commencement of the proceeding on 23 February 1996. With hindsight she would have been prudent to mention it, for it was that omission that led the judge to conclude that there had been a failure to disclose a material fact upon the ex parte application. The question now arising, however, is not whether it would have been prudent, but whether it was essential, that she or someone on behalf of the appellant should have made the disclosure. In an affidavit made in opposition to the respondents' application to set aside the ex parte order Miss Cahill referred to her communications with the appellant's solicitors in February 1997; and she explained that, when she made her earlier affidavit, and at the time of the application before Master Evans "... I did not consider the lack of contemporaneous authority from the Plaintiff for the issue of the writ to be a fact material to the Court's consideration of the application. I considered that the earlier lack of authority had been cured by the Plaintiff's authorisation to apply for the extension of the period of validity of the generally endorsed writ and its consequent adoption of the proceeding generally."

52. It was apparently common ground before the judge (as it was in this Court) that, had non-disclosure to Master Evans of the appellant's want of authority to file the writ constituted non-disclosure of a material fact, the ex parte order was liable to be set aside. There was no dispute that Isaacs, J. had accurately stated the general rule in Thomas A. Edison Ltd. v Bullock[1] thus -

"Dalglish v. Jarvie [1850] EngR 688; 2 Mac. & G., 231, a case of high authority, establishes that it is the duty of a party asking for an injunction ex parte to bring under the notice of the Court all facts material to the determination of his right to that injunction, and it is no excuse for him to say he was not aware of their importance. Uberrima fides is required, and the party inducing the Court to act in the absence of the other party, fails in his obligation unless he supplies the place of the absent party to the extent of bringing forward all the material facts which that party would presumably have brought forward in his defence to that application. Unless that is done, the implied condition upon which the Court acts in forming its judgment is unfulfilled and the order so obtained must almost invariably fall. I add the word 'almost' in deference to such an exceptional case as Holden v. Waterlow 15 W.R., 139."

Authorities to the same effect abound - of which I shall mention only The King v Kensington Income Tax Commisioners, ex p. Princess Edmond de Polignac[2] - which by no means confine the rule to cases of an ex parte application for an injunction: it extends to practically all ex parte applications. Counsel for the appellant was not, however, disposed to concede here - as counsel for the respondents contended - that, had there been material non-disclosure, the order was irretrievably bad and without hope of salvation by the exercise of a benign discretion. Counsel for the appellant referred us to some comparatively recent decisions in which appellate courts have perceived a locus poenitentiae, allowing for a merciful dispensation from the strict application of the rule in circumstances that are supposed to warrant it: Brink's-Mat Ltd. v Elcombe[3]; Dormeuil Frères S.A. v Nicolian International (Textiles) Ltd.[4]; Southern

Equities Corporation Ltd.[5]; Bell Group N.V. v Aspinall[6]. These cases, or some of them, might illustrate or accommodate the observation by Isaacs, J., above, that an order obtained in contravention of the general rule must "almost" invariably fall.

58. If driven to the point, I should hesitate to say that a rule of practice such as that now in question is utterly wanting in adaptability; cf. Spry, Equitable Remedies, 5th ed. , 497-8. This case, however, does not in my view call for either endorsement or rejection of the notion that an order obtained in contravention of the general rule might be salvaged in particular circumstances, for I cannot agree with the learned judge that the rule was contravened.

61. The appellant's essential argument, consistently with Miss Cahill's affidavit in opposition, was that by the time the application was made for an extension of the period of the writ for service the appellant's want of authority to file the writ had altogether ceased to be material for any purpose: the appellant had by then adopted the proceeding. The respondents had submitted to the learned judge (as his Honour's reasons indicate) that the letter dated 13 February 1997 from Mahoneys to AR&H giving the appellant's authority to apply for an extension did not constitute either a ratification or an unequivocal adoption of the proceeding. The judge accepted that submission, apparently treating the letter dated 17 October 1997 from Mahoneys to AR&H, conveying the appellant's authority to serve the writ, as inconsistent with an intention to adopt the proceeding some eight months beforehand. His Honour accordingly concluded that "...if the Master had been given the additional information and proper disclosure had been made, the order would still [sic] not have been made."

64. If the letters of 13 February and 17 October 1997 be considered alone and in unexplained apposition to each other, as it were, the latter might justify a restrictive interpretation of the former. It seems to me however, with respect, to be artificial to gauge the appellant's attitude to the proceeding, and its intention in relation to it when the extension application was made, by reference only to the letter of 13 February interpreted in the light of the letter of 17 October. Surely the circumstances that surrounded the two letters, as well as their text, (none of which the respondents took the trouble to discover before filing their summons on 5th March) are to be considered in gathering the appellant's relevant attitude and intention.

67. The appellant may be taken to have known of the existence of the proceeding from 17 October 1996. This the judge apparently accepted. The manner in which the existence of the proceeding was conveyed to the appellant was not without its significance; and the clear common assumption at the meeting on 17 October was that the appellant would be invited to agree to "any further steps in relation to the writ". It is importantly to be remembered that the Board was advised by the appellant's solicitor at a Board Meeting in December 1996 that the proceeding "...had been issued on the initiative of VACC and ...that the writ would need to be extended following its expiry". Having thus learned of the proceeding begun in the appellant's name without its express authority, and doing nothing to repudiate it, the Board should be taken to have acknowledged it. This was at least evidence that the appellant approved of the proceeding, even if it stopped short of indicating an actual adoption of it. Thereafter, on 12 February 1997, the appellant's chief executive officer advised its solicitors that it authorised an application to be made , as had been foreshadowed, for extension of the period of validity of the writ for service; and an authorisation (or a supposed authorisation) was duly conveyed orally and in writing to the solicitors on the court record. As at 20 February 1997, when the application for extension was made, there can in my opinion have been no room for doubt of the appellant's intention to approve of the continuance of the proceeding, and thus to adopt the filing of the writ that had commenced it. With what other intention can it be supposed that authority to make the application was conveyed?

70. The respondents contended in this Court that in reality the appellant had given no such authority. Their counsel referred to the appellant's Rules prescribing the requirements for valid resolutions of the Board such as would bind the appellant, with which compliance had not been shown as at February 1997. It was further pointed out that Mr Smith had no general delegated power to authorise the making of the application. These submissions miss the point. What it is relevant now to consider is the evidence that was available, at the time of the application for extension, of the appellant's attitude to the proceeding, its intention to adopt it and the implementation of the intention. Let it be assumed that the applicant for an extension had sought to disclose to the Master an initial want of authorisation on its part for the filing of the writ, but a subsequent adoption of the proceeding. It is true that evidence of due adoption by the appellant as a body corporate would have been necessary; but I do not understand that on that account a meticulous compliance by the Board with the Rules, chapter and verse, would have been called for. In fact, after the respondents' summons of 5 March 1998 had been served, the appellant's Board took steps on 19 March to pass a formal resolution ratifying the commencement of the proceeding by AR&H in the appellant's name. This was no doubt an understandable reaction to the respondents' hitherto unannounced application. While, however, formal ratification in March 1998 might have assisted the appellant's fresh application for an extension of time that was later made, it can in truth have had little or no bearing on the matter of adoption of the proceeding as at 20 February 1997. Even so, had there been evidence before the Master on 20 February 1997 relating the circumstances in which the writ had been filed and the relevant history from the time of the meeting on the previous 17 October until 13 February, I cannot seriously doubt that (assuming the evidence to be accepted) it would have been appropriate to proceed to hear the application and to make the order on the footing that the appellant had adopted the proceeding. Specifically, I do not agree that it must be said that, if that evidence had been placed before the Master, the order of 20 February would not have been made. Nor can I accept the view that the conduct of the appellant or of its solicitors after 20 February should be taken to derogate from the value of such evidence as at that date. A consideration of the whole of the relevant circumstances, as they were revealed to the judge, shows to my mind no reason to treat Mahoneys' letter of 17 October 1997, or any of the subsequent efforts of the appellant or its solicitors to provide evidence of an actual formal adoption or ratification of the proceeding, as being inconsistent with a previously existing intention of the appellant, as a corporation, to adopt it.

73. We were referred in the course of his reply by counsel for the appellant to numerous authorities for the proposition that, to enable a solicitor to issue a writ, a special authority is required which ordinarily (or prudently from the solicitor's point of view) should be in writing; for if the authority is disputed the burden of proving it lies on the solicitor: Daniell's Chancery Practice[7]. Due authority may, however, be implied in appropriate circumstances, such as those from which acquiescence in or adoption of the proceeding may be inferred. Wiggins v Peppin[8]; Hood v Phillips[9]; Pinner v Knights[10] - all decisions of Lord Langdale, M.R. - and Reynolds v Howell[11] contain dicta to that effect. Those cases, so far as they raised the question whether a person was bound by or responsible for a solicitor's conduct, appear to have depended on an application to particular circumstances of the general law of principal and agent, as did the dicta to which I have referred. That basis for the conclusion that a client may by subsequent ratification validate the commencement of an action without authority was put beyond doubt by the House of Lords in Alexander Ward & Co. Ltd. v Samyang Navigation Co. Ltd.[12], approving Danish Mercantile Co. Ltd. & Ors. v Beaumont & Anor.[13] ; and see Presentaciones Musicales S.A. v Secunda & Anor.[14]. Such a ratification will therefore, in accordance with general principle, relate back so as to be deemed equivalent to an antecedent authority.[15] In these three last-mentioned cases there was no difficulty in concluding that there had been an effective ratification by the party concerned - a company in liquidation in each case acting by the liquidator. Although in the present case there was as at 20 February 1997 no formal ratification of the commencement of the proceeding, there was at that time evident approval of it by the appellant's Board in that capacity; and that was in my opinion clear and sufficient evidence of adoption of the proceeding by the appellant. When on 12 February Mr Smith gave authority on the appellant's behalf for the making of the extension application he should not be seen to have done so of his own motion but to have conveyed to the appellant's solicitor, for passing on to AR&H what the Board had by implication authorised. In Reynolds v Howell, supra, Blackburn, J observed that "...if a plaintiff after action brought in his name by an attorney without authority hears of it, and does not repudiate it, he will be supposed to have ratified the attorney's act." That, as counsel for the respondents was at pains to point out, was an obiter dictum; but it was, with due respect to its author, unexceptionably correct as a matter of law and common sense. It covers this case and I have no hesitation in applying it here. The Bullfinch Surprise Gold Mining Company N.L. v Butler[16], to which we were referred on behalf of the respondents, is distinguishable: what was unsuccessfully relied on there as a sole act of ratification was a supposed resolution of the board of directors at an improperly convened meeting.

76. For these reasons I would allow the appeal with costs, order that the order of Mr Justice Mandie made on 12 June 1998 be set aside and that in lieu the appeal against the order of Master Wheeler made on 20 May 1998 be dismissed with costs. The respondents should also pay the appellant's costs of its summons filed on 5 June 1998.

81. In this matter I have had the benefit of reading the judgment of Tadgell, J.A. in draft form and, substantially for the reasons he has stated, I agree that the appeal should be allowed.

84. I would add only these matters. It would be easy to assume that, by reason of a number of the statements in the more recent authorities, the need for the plaintiff's solicitor properly to be authorised to institute a proceeding is fundamental in the sense that, as has once been stated,[17] a writ issued without authority "is a nullity and can be stayed at any time". The practice requiring a solicitor to have proper authority before commencing an action has never been the subject of the Rules of Court in England or in this State, so far as I am aware, except where an additional plaintiff is joined.[18] The appropriate practice has been left to the general law which, surprisingly, has not taken a consistent view over the centuries. Originally a solicitor might commence proceedings without authority and there was no means of preventing the action from proceeding to judgment, with the plaintiff whose name had been misused left to his common law remedy against the solicitor. That practice in broad terms was changed for the Court of King's Bench and other common law courts in the mid-eighteenth century but it remained the practice of the Court of Chancery down to the passing of the Judicature Acts. It required two decisions in 1879 for the Court of Appeal specifically to prefer the common law practice, which was thereby made applicable in both Queen's Bench and Chancery Divisions: see Nurse v. Durnford[19] and Newbiggin-by-the-Sea Gas Co. v. Armstrong[20]. For the common law practice see in particular the judgment of Blackburn, J. in Reynolds v. Howell[21], and generally see the judgments of the High Court in Australian Workers' Union v. Bowen[22]. The current practice is still best expressed in Daniell's Chancery Practice[23] in these terms:

"A special authority is required to enable a solicitor to issue a writ which should be in writing. Such an authority may be implied where the client adopts the proceedings, but a written retainer is always advisable, for if his authority be disputed the onus of the proof of authority will be cast on him, and in the absence of a written retainer he may be held to have been acting without authority."

The word "should", in the first sentence, from the context clearly means "ought to", for the learned author thereafter points out the dangers of acting without that kind of authority, which this expensive piece of litigation has demonstrated to be only too true.

89. Nevertheless, as Dixon, J. said in AWU v. Bowen[24], the courts would not countenance parties to be joined "without their actual authority, express or implied". It is not, however, a matter for the Rules of Court nor is failure one to be characterised as a breach of a specific rule, which would otherwise require an order dispensing with non-compliance pursuant to Rule 2.04. I confess that originally I viewed the failure to have the requisite authority at the time the proceeding was commenced as one which would have to be dealt with pursuant to that rule or at least drawn to the attention of the Master so that he could deal with the matter either under that rule or pursuant to Rule 2.01. In other words, if, as here was not the case, there had been a failure to comply with the Rules of Court and a party was seeking relief of the kind sought here, then it clearly would have been essential to disclose that non-compliance before asking the Master to make any order.

92. The present case, however, must be seen in the light of the present practice which in my opinion essentially depends upon ordinary contractual rules relating to the giving of authority to take an act. The issue of the writ was not a nullity and the matter in the words of Jenkins, L.J.[25] was to be dealt with "in accordance with the ordinary law of principal and agent and in accordance with the ordinary doctrine of ratification ...". Clearly, if the writ had been issued without authority and the solicitor was aware that the matter remained one where there was no authority in her firm either to issue the writ or to continue the proceedings, then that should have been disclosed. That was not here the case, however, for the reasons stated by Tadgell, J.A.

95. As I see it, it was clear enough by November 1996 that steps were then being taken which clearly involved ratification of what the insurer and the solicitors had done, though subject to certain conditions, naturally enough imposed, as to what steps might thereafter be taken to prosecute the action. One of those steps, which was shortly afterwards seen as being necessary, was the extension of time within which to serve the proceedings on the defendants.[26] The authority to make the application given to the solicitor both orally and by letter impliedly if not explicitly either confirmed an existing ratification or made clear what previously might have been seen to have been doubtful. There could be no basis upon which the solicitors could seek to extend the time to serve the writ unless they were authorised on the plaintiff's behalf to prosecute the proceeding. That in turn involved, in my opinion, ratification of what had originally been done without authority.

98. Each case of this kind is no doubt a matter of impression for the issue was whether the solicitor should have disclosed these dealings to the learned Master. In my opinion, if the solicitor were properly satisfied of the ratification, she had no reason to draw it to the Master's attention. No act was required by the Master to correct any failure to comply with the rules, nor would he have been obliged in the circumstances to have refused to entertain the application, for it was implicit in the letter that ratification had occurred. From these reasons no impression should be gained that solicitors (and barristers) are not under the highest duties of disclosure to the Court when seeking orders ex parte in the absence of other parties against whom relief is sought or who may be affected by such orders. The other members of the Court have made clear how high that duty is, but in the present case, notwithstanding the careful reasons of Callaway, J.A., I am not persuaded that the solicitor's duties to the Court were broken.

101. I would therefore allow the appeal in the manner suggested by Tadgell, J.A.

106. I have the misfortune to differ from the other members of the Court. In my opinion it was right to set aside the order made by Master Evans but the renewed application for extension of the period of validity for service of the writ should have been granted.

109. The leading principles concerning disclosure of material facts on ex parte applications[27] are well settled. The practice has always been strict, and rightly so.[28] If there is material non-disclosure, the order is almost invariably set aside so that the party in whose favour it was made is deprived of a benefit wrongfully, even if innocently, obtained. That party may apply afresh, but without the benefit of the previous decision in his or her favour. Even if the original order is continued as a matter of convenience, where the fresh order would be in identical terms, the onus on the party concerned is neither lighter nor different.

112. It may be thought anomalous that, although the setting aside of the original order involves a discretion, it is almost invariably exercised one way, but there is in truth no anomaly. The importance of requiring disclosure on ex parte applications is so great, and the responsibility of the party applying so onerous, that those considerations are rarely outweighed by others. The public interest requires the encouragement of candour and diligence. Moreover, the original decision is ex hypothesi blemished[29] by its having been given without knowledge of all the material facts. It is hardly surprising that the party in whose favour the original order was made will be required to start again and obtain an unblemished decision if he or she can.

115. The fact that the proceeding was commenced without authority was plainly a material fact on an application to extend the period of validity for service of the writ unless it had been completely expunged. The other members of the Court consider that it had been, but in my opinion the original want of authority and the facts that were thought to have cured the deficiency should have been laid before the master. The evidence of adoption was not so unequivocal that the respondents, if represented, would not have relied on the circumstances in which the writ was filed. This was a case, which not infrequently arises, where the right course was to tell the court the difficulty and how the applicant believed it had been solved.

118. On the second application, by contrast, I think there was good reason to extend the period of validity for service.[30] Prominent among my reasons for that conclusion are the following:

(a) The application to Master Evans had been made before the writ expired. The appellant proffered an explanation for not having served it before then, which the master accepted, and thereafter acted in good faith in the belief that an extension had been properly granted.

(b) The reasons for judgment of Tadgell, J.A. show that the appellant probably had adopted the proceeding. If the original want of authority had been brought to the master's attention, he would either have accepted that the proceeding had been adopted or adjourned the application to give the board of the appellant an opportunity to do so.[31]

(c) There was no significant detriment to the respondents other than the loss of a possible defence under the statute of limitations and the effluxion of time. The latter may be presumed to work some inconvenience but there was no evidence that, for example, a critical witness was no longer available or records had been lost.

(d) Assuming that it is proper to take the statute into account,[32] its effect on both sides should have been considered. In the circumstances of this case its possible operation would be a disproportionate sanction for the appellant's innocent non-disclosure, which was allowed to have its consequence in the setting aside of the original order and putting the appellant to its proof again.

124. I am conscious that, on both branches of the case, the learned primary judge was exercising a discretion. I respectfully agree with him that Master Evans's order should be set aside. There is no need for me to consider that part of the case any further. His Honour's discretion on the second branch is reopened because he considered that the circumstances surrounding the filing of the writ and the obtaining of the ex parte order provided little or no good reason to accede to the second application and because he considered the statute of limitations only as it bore on the position of the respondents.

[1] [1912] HCA 72; (1912) 15 C.L.R. 679, at 681-2.

[2] [1917] 1 K.B. 486.

[3] [1988] 1 W.L.R. 1350, at 1357ff.

[4] [1988] 1 W.L.R. 1362, at 1368.

[5] (1997) 25 A.C.S.R. 394, at 424.

[6] (1998) WAR 561, at 570.

[7] 1914 ed., 253-6, and the cases there cited.

[8] [1839] EngR 942; (1837) 2 Beav. 403, at 406; [1839] EngR 942; 48 E.R. 1237, at 1238.

[9] [1842] EngR 902; (1842) 6 Beav. 176; 49 E.R. 793.

[10] [1843] EngR 355; (1843) 6 Beav. 174; 49 E.R. 792.

[11] (1873) L.R. 8 Q.B. 398, at 400, per Blackburn, J.

[12] [1975] 1 W.L.R. 673.

[13] [1951] Ch. 680.

[14] [1994] Ch. 271, at 277, per Dillon, L.J.

[15] Alexander Ward, at 678 and 683; Danish Mercantile, at 686 and 687, per Jenkins, L.J.

[16] (1913) 35 A.L.T. 99.

[17] See Danish Mercantile Co. Ltd. v. Beaumont [1951] Ch.680 at 687 per Jenkins, L.J., but that would be to misunderstand the general thrust of his Lordship's judgment.

[18] See Rule 9.07 of the present Rules of General Civil Procedure, reflecting rules which go back to the time of the Judicature Act. Presumably that requirement is specifically made because there must be only one solicitor on the record for the plaintiffs so that it is unlikely that a joined plaintiff would be acting through his or her customary solicitor, and thus written consent has been insisted upon.

[19] [1879] 13 Ch.D. 764.

[20] (1879] 13 Ch.D. 310. Though reported first, it was decided later.

[21] (1873) L.R. 8 Q.B. 398.

[22] [1946] HCA 24; (1946) 72 C.L.R. 575 especially at 592-3 per Williams, J.

[26] The appellant's alternative application need not be considered, but it should not be assumed that I consider that the circumstances justified the making of an order. It is not necessary to express an opinion on that subject.

[27] It may be doubted whether there is any significant difference between applications for common law, and applications for equitable, remedies: cf. R. v. Kensington Income Tax Commissioners, ex parte Princess Edmond de Polignac [1917] 1 K.B. 486 at 505-506, 514 and Garrard v. Email Furniture Pty. Ltd. (1990) 32 N.S.W.L.R. 662 at 677.

[28] See, for example, Dalglish v. Jarvie [1850] EngR 688; (1850) 2 Mac.& G. 231 at 238, 241, 243-244[1850] EngR 688; , 42 E.R. 89 at 92, 93, 94; Thomas A. Edison Ltd. v. Bullock [1912] HCA 72; (1912) 15 C.L.R. 679 at 681-682; R. v. Kensington Income Tax Commissioners, ex parte Princess Edmond de Polignac at 504-505, 506, 509, 514-515, 517, 519; Town & Country Sport Resorts (Holdings) Pty. Ltd. v. Partnership Pacific Ltd. (1988) 20 F.C.R. 540 at 543 and Garrard v. Email Furniture Pty. Ltd. at 676-678, 682.

[29] I hesitate to say that it is vitiated, because the category of material facts is far wider than the facts that the judge or master was obliged to take into account.

[30] Good reason is not limited to difficulties in effecting service: old RSC O.8 r.1; Ramsay v. Madgwicks [1989] VicRp 1; [1989] V.R. 1 at 6; Bell Group NV v. Aspinall (1998) 19 W.A.R. 561 at 575 and Brealey v. Board of Management Royal Perth Hospital [1999] WASCA 158; (1999) 21 W.A.R. 79 at 83..

[31] The board did approve, ratify and confirm the commencement of the proceeding and all subsequent steps by resolution passed on 19th March 1998.

[32] The practice of doing so is well established but, once the English view is rejected, as it has been since Irving v. Carbines [1982] VicRp 86; [1982] V.R. 861, it is at least arguable that the statute is irrelevant: cf. Finlay v. Littler [1992] VicRp 59; [1992] 2 V.R. 181 at 186 line 47 - 187 line 8. The plaintiff's loss is the defendant's gain and vice versa. Other factors will determine whether there is good reason to extend the period of validity for service.