In April 1985 or thereabouts the respondent terminated the retainer of the appellants as his solicitors and immediately, it seems, retained another firm of solicitors. The learned primary judge in his reasons for judgment referred to the appellants as "the first solicitors" and to the solicitors retained in 1985 as "the second solicitors". I shall do the same.

It is common ground that the respondent's retainer of the second solicitors was terminated by him in 1988, I think in September. His present solicitors, who filed the writ in the present proceeding, the judge for convenience called, and I shall sometimes call, "the third solicitors".

The appellants filed and served a defence on 30 November 1990 which did little more than put in issue the allegations made in the statement of claim. It did not plead the Limitation of Actions Act. Before serving it, the solicitors for the appellants had sought an extension of time within which to do so but the third solicitors, on instructions, refused it. On 9 March 1994, just over three years and three months after serving their defence, the appellants sought leave by summons to file and serve an amended defence which, among other things, was to include a plea relying on the Limitation of Actions Act. On 23 March 1994 a master granted such leave. On 5 May 1994 Fullagar J allowed an appeal from the master's order so far as it permitted the appellants to plead the statute in respect of any cause of action which accrued to the respondent before 10 March 1982. Hence this appeal, which is brought by leave of the Full Court.

There was evidence before the judge to the following effect. The third solicitors were retained by the respondent in mid-1987 in relation to certain criminal proceedings brought against him, and they were retained by him in about September 1988 in relation to civil proceedings arising out of the said partnerships pending in this court against the respondent in which the second solicitors had previously been retained by him. The third solicitors also took over from the second solicitors, again, it seems, in 1988, a file which contained a draft statement of claim, apparently drawn by counsel in 1985 on behalf of the respondent against the appellants. The file indicated that notice of intention to make a claim on the grounds contained in the draft statement of claim had been given by the second solicitors to the appellants, but that the second solicitors had not issued any proceeding based on the draft statement of claim. Before issuing the present proceeding in September 1990, the third solicitors obtained counsel's -

opinion about two matters. The first was about a concern that the contemplated proceeding might be statute-barred as against the appellants. The second related to the position of the second solicitors as a potential defendant, presumably in the light of their failure to issue proceedings against the appellants based on the 1985 draft statement of claim. The third solicitors obtained advice from counsel in conference between August and October 1990 and received opinions on 25 June, 31 August and 28 September 1990. It will be noted that those opinions, which I assume were written, were received on either side of the issue of the present proceeding.

The member of the third solicitors' firm who was responsible for handling the respondent's affairs swore in an affidavit filed in opposition to the grant of leave to amend the defence that, by October 1990, he had formed the view that time under the Limitation of Actions Act may well have commenced to run (relevantly, as I should infer, to the present proceeding) in 1981 and 1982. On 31 October 1990, five days after serving the statement of claim, the third solicitors wrote to the second solicitors to say this: As indicated in our conference, it is with reluctance that our client advises of the possibility of bringing action against your firm for matters relating to the conduct of his affairs from 1985 until 1989. It is possible that, in that period of time, the right to bring action against Messrs Home Wilkinson and Lowry, Solicitors, for a cause of action arising in 1982 became statute barred.

Neither this firm nor Counsel engaged on behalf of our client has formed a definitive view as to whether any such right of action is statute barred but would wish to place your firm on notice that in the event that a defence of limitation of actions is taken in proceedings issued recently by our client against the abovementioned firm, it may be necessary to join your firm to ensure that all proper parties to the action are before the Court in the one action. We enclose for your information a copy of the Statement of Claim recently delivered by us in Action 9969 of 1990. Subject to receipt of a Defence in this matter we will communicate with you to advise our client's instructions. We believe that the content of the Statement of Claim is sufficient to place you on notice of the matters to which a specific complaint may need to be made in the future. The deponent also swore that, as the defence served on 30 November 1990 did not raise any issue under the Limitation of Actions Act, he did not advise the respondent to issue proceedings against the second solicitors and he has not done so.

Following the service of their defence the appellants, on 20 February 1991, sought further particulars of the statement of claim and on 15 August 1991, following an order made by consent, the respondent provided some particulars extending to 42 paragraphs. In reliance perhaps, in part at least, on those particulars, the appellants on 11 October 1991 filed a third party notice by which they sought indemnity or contribution from yet another firm of solicitors in respect of any liability they, the appellants, might incur to the respondent. In broad terms it may be said that the appellants alleged in effect that the third-party solicitors, practising in Canberra, had accepted retainers from the respondent as his solicitors, and had in breach of them caused the respondent's loss of which he complained against the first solicitors. The respondent's proceeding was not thereafter much forwarded during the remainder of 1991 or during 1992, evidently because, or largely because, of the respondent's very long re-trial upon -

criminal charges in defence of which the third solicitors were acting for him. An account of the criminal proceedings is contained in the decision in R v Wilson and Grimwade [1995] 1 VR 163.

On 28 October 1992 the appellants gave notice pursuant to r3.06 of intention to proceed, but apparently took no step pursuant to it before the respondent filed a summons for directions returnable on 19 February 1993 by which he applied to have his proceeding set down for trial and to have it tried at the same time as the two partnership actions in which he was defendant. The appellants opposed the application contending, among other things, that the respondent's particulars of his statement of claim were deficient, that discovery was incomplete, that interrogatories were required, that interlocutory steps in the third party proceedings were incomplete and that the appellants would not in any event be ready to have the proceeding set down for approximately six months. The listing master, before whom the summons came, ordered that the respondent provide yet further particulars of the statement of claim and a further affidavit of documents, gave directions for the service of interrogatories and answers and gave certain directions in the third party proceedings. An appeal by the present respondent to Cummins J against the listing master's order was dismissed on 15 March 1993. According to an affidavit filed on behalf of the appellants, the respondent provided the further particulars that the listing master had ordered and did so on 24 March 1993. That evidence may not be right because the particulars themselves are dated 20 May 1993.

The partner of the solicitors acting for the appellants, who had himself been responsible for the matter since May 1992, made an affidavit in support of the application to amend the defence. He swore that, following receipt of the further particulars of the statement of claim, he arranged for counsel to be briefed to consider whether an amended defence should be filed, and he swore also that senior and junior counsel advised that it should. There is no indication when that advice was sought or given. It appears, however, that although the further particulars were provided in March 1993, or it may be in May 1993, the summons seeking leave to amend was not filed until 9 March 1994. In his affidavit the appellants' solicitor indicated in effect that, as a result of the refusal of an extension of time within which to file and serve a defence, the defence that was filed and served on 30 November 1990 was, "in essence, a holding defence to prevent the plaintiff from entering judgment and default".

By way of response the respondent's solicitor, a member of the third solicitors, has sworn that the appellants' solicitor had never previously suggested to him that the defence was a holding defence, and that the first time that he became aware of the appellants' desire to amend their defence was in a casual conversation with their solicitor when the two of them passed in the street shortly before Christmas 1993. The respondent's solicitor has sworn that that was not confirmed until receipt of the summons dated 9 March 1994. Moreover, the appellants' solicitor's affidavit, sworn in opposition to the appeal from the listing master's order that had been made in February 1993, contained no reference, and there was no other reference upon the hearing of the summons for directions, to the possibility of a wish to amend the defence.

The nub of the opposition to the appellants' application to amend the defence was and is a concern that, if the appellants were now allowed to plead the statute of limitations, the respondent could be prejudiced in that he has lost the chance to sue the second solicitors within the period of limitation applicable to any claim against them. The argument is that, if the respondent had known at or within a -

reasonable time of the service of the defence that the appellants intended to rely on the statute, he would have sued the second solicitors, but that any claim against them on account of their failure to issue proceedings against the first solicitors has in the meantime become, or has probably become, statute-barred. Fullagar J accepted the substance of that contention. He concluded that an amendment of the defence to allow the appellants to plead the statute as they wished would probably irremediably prejudice the respondent, and ought therefore to be refused. As I have indicated his Honour did, by the terms of his order, allow the statute to be pleaded in a limited way. The order made was evidently intended to equate the respondent's position overall to that which he would have been in had the appellants pleaded the statute on the day on which they sought leave to do so (9 March 1994) and had the respondent then sued the second solicitors upon causes of action in negligence to which they could not successfully have pleaded the statute as a defence.

It was common ground that the judge correctly identified the following relevant principles. First, that in general a defendant should be permitted to amend a defence so that the court may decide all issues between the parties, provided that the amendment may be effected without injustice to the plaintiff: Tildesley v Harper (1878) 10 Ch D 393 at 396-397; Clarapede v Commercial Union Association (1883) 32 WR 262 at 263; Cropper v Smith (1884) 26 Ch D 700 at 710-711; Shannon v Lee Chun [1912] HCA 52; (1912) 15 CLR 257 at 260-261; The Commonwealth v Verwayen (1990) 170 CLR 394 at 456-457, 464-465 and 482. Secondl y that, in order to resist an amendment in accordance with the first principle, a plaintiff must point to prejudice caused by conduct of the defendant in first filing a defence without relying on the statute of limitations and later seeking to file a defence which relied upon the statute. Thirdly that, in order that a defendant should be disentitled from amending, it is not sufficient if the prejudice relied on by the plaintiff results from an unreasonable act or omission on the plaintiff's own part: Steward v North Metropolitan Tramways Co (1886) 16 QBD 556 at 559-560.

Accepting those statements of principle, counsel for the appellants submitted, before the judge and before us, that any prejudice that the respondent would suffer upon a plea of the statute of limitations would result from the respondent's own conduct and not from conduct of the appellants. It was the respondent himself, so the argument ran, who unreasonably and imprudently chose by his solicitors not to sue the second solicitors when he knew that his action against the appellants might be statute-barred. It was said to follow that the failure of the appellants to plead the statute in November 1990 could not in any real or practical sense be regarded as a cause of any prejudice to the respondent if an amendment were allowed to plead the statute. The judge rejected that argument. He recognised that he was exercising a discretion, as undoubtedly he was, and a very wide discretion at that. Having examined the facts in some detail, his Honour expressed his view that: I do not think it can be said that the conduct of the plaintiff (through his lawyers) was unreasonable or imprudent in electing to sue at the outset only the present defendant (the first solicitors) or in subsequently, upon receipt of a defence which omitted to plead the statute, electing not to sue the second solicitors. I should not regard the learned judge in that passage, when twice using the word "electing", to have used it in any technical sense. His Honour meant, I think, no more than that the respondent's solicitor decided or chose to sue only the -

appellants for reasons which seemed valid to him and that the course taken could not be criticised as unreasonable or imprudent. The argument advanced on appeal for the appellants essentially involved the contention, as it seems to me, that it was not open to the judge for the purpose of his discretionary judgment to have regarded the course taken by the respondent's solicitor as neither unreasonable nor imprudent.

Counsel for the appellants was at pains to invite us to consider and characterise the attitude taken by the respondent's solicitor as at the time of commencement of proceedings in September 1990, and in October 1990, and upon receipt of the defence in November 1990. Counsel submitted, and with justification, that nothing the appellants did or did not do before service of the defence could have influenced the attitude of the respondent's solicitor to joining the second solicitors as defendants or suing them separately. Counsel also submitted that the terms of the defence served in November 1990 could not reasonably be said to be a cause of the failure to join, or to issue separate proceedings against, the second solicitors. So much may also be conceded. But the judge was not invited to exercise his discretion merely upon those facts. There was a much wider canvas to survey. His Honour was required to consider whether it was a fair thing that the appellants should be permitted to change their front by pleading the statute three and a quarter years later upon an application made on 9 March 1994. There was no evidence at all to indicate a reason, or to allow a reason to be properly inferred, why the appellants waited until 9 March 1994 to apply for leave to amend their defence. It was not evident, nor does it appear to have been suggested below, that the provision of particulars was necessary to enable the appellants to decide to plead the statute. In any event, as I have mentioned, the application was left until 12 or perhaps 10 months after the second set of particulars was given.

As Lord Griffiths pointed out in Ketteman v Hansel Properties Ltd [1987] AC 189 at 219: A defendant does not invariably wish to rely on a defence of limitation and may prefer to contest the issue on the merits. If, therefore, no plea of limitation is raised in the defence the plaintiff is entitled to assume that the defendant does not wish to rely upon a time bar but prefers the court to adjudicate on the issues raised in the dispute between the parties.

Counsel for the appellants disputed that that statement of principle was one of universal application. It is true that it was a statement made in the context of a case in which a very late application was made to amend a defence in order to plead a statute of limitations. Notwithstanding that, it does not seem to me to be a statement which is confined to the kind of case in respect of which his Lordship was making it.

There was no evidence suggesting why the appellants did not originally plead the statute. Various suggestions were made on behalf of the respondent in the course of argument as to why it might have been convenient to the appellants not originally to have done so. I think, however, that one cannot speculate profitably upon that. As against the failure of the appellants to explain either their initial failure to plead the statute, or the lateness of the application to amend, there was some explanation of the course that the respondent's solicitors took to which the judge was entitled to have regard. It appears that, by October 1990, the respondent's solicitors and counsel whom they had engaged had not reached a definite conclusion whether the claims made against the appellants were -

time-barred. The respondent's legal advisers seemed to have been unwilling to recommend the engagement in litigation of the second solicitors unless constrained to do so, and they seem not to have felt so constrained in the absence of a plea of the statute by the appellants. The judge was in my opinion well entitled to regard that attitude as stemming from a professional judgment which, in all the circumstances, was not unreasonably formed. The longer the appellants waited to seek leave to amend their defence, the greater was the risk that the respondents would be prejudiced by an amendment. The judge was not obliged, as counsel for the appellants in effect submitted this morning before us he was, to conclude that the reasonableness of the respondent's course decreased with the increase in the risk, so that ultimately the whole of the prejudice could be laid only at the respondent's door. Dawson J in The Commonwealth v Verwayen at 456 observed that a pleading amendment may be refused because it is made (that is, sought) at such a late stage that neither costs nor an adjournment can compensate the other side for the failure to raise the issue at an earlier stage. That, with respect, is an unremarkable precept, and it is evidently one to which the judge had regard in this case. I refer also to what Toohey J said at 464 in Verwayen's case, that: ... it is appropriate to refuse leave to amend, if to grant leave may bring about an injustice to the other party which cannot be compensated by an adjournment or an order for costs.

Had the application to amend been made a year, or even two years, after service of the defence, one can very well understand that the judge might have taken a different view of the likely consequences to the respondent of amendment, and he might have exercised his discretion differently from the way in which he did. As it was, his Honour took the view that to grant an amendment so late would, as a matter of probability, unwarrantably prejudice the respondent. His Honour concluded in effect that, upon balance, it was fairer that the appellants should suffer the disadvantage of a discretionary refusal for allowing amendment than that the respondent should suffer the disadvantage of having it allowed as a matter of discretion.

In my opinion his Honour has not been shown to have erred in that conclusion. I would accordingly dismiss the appeal.

I agree. I would add only this. As I understand it, the question on such an application as was being considered here, first by the master and then by the judge on appeal from the master, was this: assuming that the amendment which the defendants (now the appellants) were seeking by summons was shown to be necessary, could the amendment be allowed without prejudice to the plaintiff (now the respondent) or without such prejudice as could not be overcome by an adjournment or an order for costs? That question, when it fell to be answered in this case, fell to be answered not in December 1990, only days after the defence was delivered; nor did it fall to be answered in 1991 or 1992, or even in 1993 when Master Gawne gave directions in part upon a request by the defendants that made no reference to the defendants' amending their defence. It fell to be determined as at 9 March 1994 when the defendants took out their summons for leave to amend. By that date, the plaintiff had not in fact sued the second solicitors and by that date, according to the statute, it was too late to do so, at least in relation to those causes of action first accruing to the plaintiff against the defendants in this proceeding more than 12 years previously. -

Nor could it be said in March 1994 that that was the result only of the plaintiff's own act, neglect or default or that of his solicitors. Until the defendants made application for leave to amend their defence, there was no real need for the plaintiff to sue the second solicitors. Indeed, as at present advised, it seems to me that the expiry of the limitation period in respect of any claims the plaintiff might mount against the second solicitors was of little immediate practical significance to the plaintiff so long as the defendants in this proceeding refrained from pleading the statute in respect of the claims the plaintiff was making against them. Moreover, the defendants had had ample time to raise the plea of the statute before that limitation period began to operate early in 1993.

I agree, therefore, for the reasons given by the learned presiding judge that the appellants have not shown the decision under appeal to be attended by error or, perhaps more strictly speaking, by such error as would entitle this court to set aside the decision of the judge which was made in the exercise of a discretion. The appeal should be dismissed.

I do not wish to add unnecessarily to what, in Tildesley v Harper (1878) 10 Ch D 393 at396, Bramwell LJ called "this humble branch of learning", but the case did initially cause me some hesitation and for that reason I desire to state my conclusion briefly in my own words. In doing so I shall seek to deal also with two aspects of the case on which counsel addressed submissions in response to questions that I asked.

The critical issue is whether the appellants' failure to plead the statute of limitations and their delay in seeking leave to amend make them, rather than the respondent, responsible for the irremediable prejudice that he would suffer if leave were granted. The appellants' conduct is clearly a causa sine qua non of that prejudice, but one must consider whether the prejudice would really be caused by the respondent's solicitors' own assessment of the situation, the maintenance of their decision not to institute proceedings against the second solicitors in the light of that assessment and their omission to ask the second solicitors for an agreement not to plead the statute in consideration of a promise not to sue them unless the appellants took that defence.

On reflection, I accept Mr. Lally's submission that we should not infer that the omission to ask for such an agreement would have prevented the prejudice that is apprehended. If the second solicitors had refused to agree, it is by no means clear that the decision not to sue them would or should have been reversed.

So far as the other matters are concerned, the appellants' conduct in 1990 and thereafter was "a direct or indirect contributing cause" both of the respondent's solicitors' assessment of the situation and of the maintenance of their decision not to institute proceedings against the second solicitors, cf. Medlin v State Government Insurance Commission [1995] HCA 5; (1995) 182 CLR 1 at 6-7.

The ultimate question is whether, notwithstanding the respondent's solicitors' own assessment and maintenance of their decision, the appellants' conduct is, as between the parties and as a matter of common sense and experience, properly to be seen as making the appellants responsible for the prejudice that the amendment would cause. The respondent's present solicitors took a calculated risk in 1990. Nothing happened thereafter to deflect them from the course that they had chosen in the interests of their client. True it is that from February 1993 the statute of limitations would begin to bar his rights against the second -

solicitors, but it would have to be shown that that fact, and virtually that fact alone, made it unreasonable to continue with a strategy that was proving successful.

The learned primary judge clearly considered that the appellants were responsible, as between the parties and in the sense I have endeavoured to explain, for the prejudice that would be occasioned by the amendment sought. Nothing I have said is inconsistent with his Honour's reasons or decision, nor am I persuaded on other grounds that we should interfere with the exercise of his discretion.

Accordingly, I agree that the appeal should be dismissed.

Solicitors for the appellants: Ebsworth and Ebsworth