Australia: Court Stops Claim Following Procedural Breach

Last Updated: 12 November 2009
Article by Gregory Couston and Mark Dobbie

ACN 081 123 140 Pty Limited (under external administration) and Finnbell Pty Limited v Landerer & Co and Anor


On 23 October 2009 Harrison AJ in the Supreme Court of New South Wales handed down a decision setting aside the originating process filed by the plaintiffs because it was not served within the time prescribed by the Court rules. The claim is now potentially time barred.

Middletons was instructed to act for the defendants in a substantial Supreme Court claim.

On 20 August 2008 the plaintiffs filed a statement of claim seeking damages arising from a commercial dispute concerning a joint venture to develop property at Pyrmont, Sydney. The plaintiffs sought damages potentially amounting to over A$5 million. The claim was arguably filed on the last day prior to the expiration of the limitation period.

Under the Court rules the statement of claim was to be served within six months from the date of filing. The plaintiffs failed to serve the statement of claim within six months.

The plaintiffs provided affidavit evidence setting out an explanation for the delay. It was asserted that there was confusion between plaintiffs and their former solicitors as to who would serve the statement of claim.

This explanation was contradicted by documents extracted from the former solicitors' file which demonstrated that the plaintiffs were advised to serve the statement of claim but made a deliberate decision not to serve it – in order to further review and potentially amend the claim prior to service.

The plaintiffs brought an application seeking an extension of time to serve the statement of claim. The defendants brought an application seeking to have the statement of claim set aside.

The defendants issued a subpoena to the former solicitors' for their file. Documents were produced and privilege was claimed by the plaintiffs. The defendants successfully argued that any privilege had been waived when the plaintiffs put in issue the reasons for the proceedings not being served in time.

Reasons for Judgment

The Court has the power to extend the six month period for service pursuant to UCPR r 1.12. The decisions of Pell v Hodges [2007] NSWCA 234 and Arthur Andersen Corporate Finance Pty Limited v Buzzle Operations Pty Limited (in Liq) [2009] NSWCA 104 were cited and set out the relevant principles including the following:

  • the discretion conferred by UCPR r 1.12 is not unfettered. Proof is required of a satisfactory explanation for the delay
  • delay in service of proceedings is particularly serious if it occurs after the expiration of a limitation period. Potential defendants should be made aware of the claims against them in reasonable time
  • a plaintiff who issues proceedings just before the limitation period expires, and only then has the merits of the case investigated, should not have any expectation of obtaining an extension of time to enable investigations to continue
  • if an extension of time was granted in circumstances where the plaintiff deliberately refrains from service while awaiting a decision from a third party about going ahead with the proceedings (in the case of Arthur Andersen v Buzzle – whilst awaiting litigation funding), the Court would be allowing plaintiffs to grant to third parties the right to decide the period by which the time for service should be extended. That would be in conflict with the Court's duty to exercise, alone, the discretion conferred upon it
  • a deliberate decision to allow a writ to become stale after a limitation period had expired would be a powerful factor against the grant of an extension of time as any prejudice suffered in such circumstances would be self inflicted.

Harrison AJ found that the plaintiffs in this case made a deliberate decision to allow the statement of claim to become stale after the limitation period had expired. This was a powerful factor against extending the time for service. Her Honour found that the plaintiffs were intent upon creating delay in commencing prosecuting these proceedings and refused their application for an extension of time accordingly.

Issues arising from the Judgment

Courts are demonstrating an increasing willingness to enforce the objectives of the Court rules requiring parties to pursue proceedings in a diligent and timely way.

In this case, the defendants' decision to press an interlocutory application arising out of a procedural breach resulted in the dismissal of potentially lengthy and complex proceedings at an early stage.

The defendants, by bringing the application, required the plaintiffs to provide an explanation for their failure to serve the proceedings within time. The defendants then tested the plaintiffs' explanation and were able to demonstrate that the plaintiffs were not diligently pursuing the proceedings in accordance with the objectives of the Court Rules.

The Court was unwilling to exercise its discretion to extend a time period in circumstances in which the plaintiffs were making deliberate strategic decisions concerning the course of the proceedings.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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