Victoria Teachers Credit Union Ltd v KPMG - [2000] VSCA 23 - VSCA 2000 case summary — Zoe

VICVSCA

Victoria Teachers Credit Union Ltd v KPMG

[2000] VSCA 23

Court of Appeal (Vic)|2000-03-09|Before: TADGELL, ORMISTON and CALLAWAY, JJ.A.

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At a glance

Source facts

Court

Court of Appeal (Vic)

Decision date

2000-03-09

Before

TADGELL, ORMISTON and CALLAWAY, JJ.A.

Source

Original judgment source is linked above.

Judgment (76 paragraphs)

[1]

[2000] VSCA 23

[2]

PRACTICE AND PROCEDURE - Proceeding commenced by solicitor without plaintiff's authority - Ratification by plaintiff months later - Extension of time for service of writ thereafter obtained on ex parte application to Master - No disclosure to Master of initial want of authority - Whether order for extension liable to be set aside on application of defendant on ground of material non-disclosure to the Court of a material fact.

[3]

The appellant, a body incorporated under the provisions of the Financial Institutions (Victoria) Code), calls into question two decisions of a judge of the Trial Division pronounced on 12 June 1998. The effect of the first decision was to set aside an order of a Master made on 20 February 1997 extending the period of validity for service of a writ that had been filed on 23 February 1996. The judge's decision was made on the application of the present respondents, the defendants named in the writ, on the footing that the appellant - the plaintiff named in the writ and applicant before the Master - had failed to disclose to the Master a material fact, namely that the writ had been filed without the appellant's authority. The second decision under appeal refused a fresh application made to the judge by the appellant for an order extending the period of the writ for service. It is evident that the appellant's purpose would be served by the reversal of either of the impugned decisions.

[8]

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."

[29]

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.

[30]

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.