V Vaccaro & Sons Pty Ltd v Von Marburg

1. [1]

   By notice of motion filed 28 February 2020, the plaintiff seeks that leave be granted to file and serve a further amended statement of claim (“FASC”).

2. [2]

   The plaintiff is V Vaccaro & Sons Pty Ltd (“the company”). The defendant is Dr Roland von Marburg.

Background

1. [3]

   On 22 December 2016, Mr Vaccaro filed a statement of claim (proceedings No. 2016/138568) seeking damages for personal injury alleged to have been caused by negligent treatment by the defendant (“the personal injury claim”). At the time of filing of the personal injury claim, Mr Vaccaro was a director of the company, having been appointed on 29 November 1987. Since 23 June 2000, Mr Vaccaro has been the sole director and secretary of the company.

2. [4]

   The allegations of negligence in the personal injury claim relate to advice given and/or treatment provided by the defendant to Mr Vaccaro from 15 June 2006 to 15 January 2014.

3. [5]

   In his personal injury claim, Mr Vaccaro pleads that he worked as a self-employed accountant and included a claim for economic loss.

4. [6]

   Mr Vaccaro says that he began to use the company to provide accounting services in 2003. The company ceased its trading activities in June 2009.

5. [7]

   Mr Vaccaro says that he was the controlling mind of the company and the only employee. The other shareholders were his siblings and late mother who, since 1996, have had no involvement in the company and received no benefit or dividends.

6. [8]

   The events that precede this application are as follows.

The law

1. [9]

   Sections 64 and 65 of the Civil Procedure Act 2005 (NSW) are relevant to the question of leave to file a FASC.

2. [10]

   Sections 64 and 65 of the Civil Procedure Act relevantly read:

3. [11]

   The plaintiff referred to Cropper v Smith (1884) Ch D 710, where Bowen LJ stated at [750]:

4. [12]

   The plaintiff submitted that the FASC is required to enable the real questions between the parties to be decided and to avoid multiplicity of proceedings.

5. [13]

   The defendant points out that there is a distinction between an amendment to determine the real questions in controversy between parties, and a situation where a party seeks to set up, by amendment, a new case at trial: see Hipgrave v Case (885) 28 Ch D 356 at 361 per Earl Selborne LC, as approved by the French CJ in Aon Risk Services Australia v Australian National University [2009] HCA 27; (2009) 239 CLR 175 at [14] (“Aon”).

6. [14]

   The defendant referred to Aon, where the plurality of the High Court held at [75]:

7. [15]

   So far as amendments are concerned, in Aon, the High Court held at [92]-[96] that a court must consider:

8. [16]

   The defendant submitted that if the proposed amendment is allowed, it should take effect from the date of the order.

9. [17]

   The proposed amendment is in addition to a claim for quod servitium amisit filed out of time on 11 September 2019. In summary, the amendments seek to bring a claim for pure economic loss allegedly suffered by the company arising from a breach of a duty said to be owed by the defendant doctor not to cause the company economic loss by the medical treatment and care provided by the defendant to Mr Vaccaro. The plaintiff submitted that the new cause of action, being the quod servitium amisit and pure economic loss claims in these proceedings, arise from the same facts as those in the personal injury claim proceedings. Accordingly, there is no prejudice to the defendant by granting leave to file the FASC in these proceedings.

10. [18]

    The defendant does not consent to the filing of the FASC for three reasons. There are:

11. [19]

    I will deal with each of these issues in turn.

(a) Explanation for delay

1. [20]

   The relevant period of delay is the period between the time the company claim was filed, and the time of the application seeking leave to file a FASC pleading pure economic loss. The plaintiff submitted that it cannot be suggested that the company could have commenced proceedings on its own behalf any earlier than the time when the personal injury proceedings were commenced.

2. [21]

   The company’s claim is dependent on there being a viable personal injury claim. On 22 December 2016, Mr Vaccaro commenced his personal injury claim proceedings, and relied on the expert reports of Professor Briggs dated 15 September 2016 and 13 December 2016.

3. [22]

   While the company could have commenced proceedings at, or shortly after, the time the personal injury claim proceedings were commenced in December 2016, it did not. In or about late August 2019, Kathryn Williams, the plaintiff’s current solicitor, received instructions from Mr Vaccaro. Carroll & O’Dea had previously acted for Mr Vaccaro.

4. [23]

   Ms Williams identified that a cause of action existed for the economic losses sustained as a result of the negligent medical advice and treatment provided by the defendant to Mr Vaccaro. On 11 September 2019, the statement of claim in these proceedings was filed on behalf of the plaintiff. An amended statement of claim (“ASC”) was filed on 23 September 2019.

5. [24]

   The explanation for delay by the plaintiff’s solicitor, Ms Williams, is that it was not until there had been a change of solicitor that she had identified the potential cause of action. Instructions were sought and obtained to commence these proceedings. As to the pure economic loss claim, this occurred after discussion with counsel.

6. [25]

   The defendant referred to Karl Suleman Enterprizes Pty Ltd (In Liq) v Pham & Ors [2013] NSWCA 93, where the Court of Appeal held (per Meagher and Barrett JJA) at [22]:

7. [26]

   The defendant submitted that any claim by the company could and should have been commenced at or prior to the time the personal injury claim was commenced. Mr Vaccaro, as the sole director, secretary and controlling mind of the company, was lawfully authorised and able to commence proceedings. As Mr Vaccaro was the controlling mind of the company, his knowledge is knowledge that can be imputed to the company.

8. [27]

   When Mr Vaccaro gave instructions to commence the personal injury claim, he was aware of the existence of the factual matters. The plaintiff now asserts that those factual matters give rise to the duty allegedly owed by the defendant to the company not to cause economic loss, and the acts or omissions by the defendant that are alleged to have been negligent.

9. [28]

   Mr Vaccaro knew of the injuries he allegedly suffered and any impairment his services provided to and through the company. He also knew of any drop in revenue or loss of income, and of the sale of the business of the company and any loss of profit/goodwill on sale.

10. [29]

    The defendant submitted that from at least 2016, Mr Vaccaro, as the director and secretary of the company, was aware of the viability of bringing litigation against the defendant. The personal injury claim has always asserted loss from his alleged inability to work as a sole trader, and through the company. This fact was known to his former solicitors, Carroll & O’Dea. It is also inconsistent with [41] of the proposed FASC.

11. [30]

    The defendant submitted that the company has provided no evidence or explanation to the Court:

12. [31]

    The defendant submitted that the plaintiff has provided no evidence that would allow the Court to conclude that it (as the moving party) and its former legal advisers acted diligently or expeditiously in the prosecution of any available claim, or that there is any good reason which would explain the delay in bringing this claim on behalf of the company. Therefore, the explanation for delay is non-existent or, at best, insufficient.

13. [32]

    On 22 December 2016, Mr Vaccaro filed his statement of claim alleging personal injuries and disabilities arising from advice and medical treatment provided by the defendant between 15 June 2006 and 15 January 2014.

14. [33]

    Although brief, his explanation for the delay is as follows. The plaintiff changed solicitors. His current solicitor, Ms Williams, received instructions in September 2019. It was Ms Williams who identified the company as having a cause of action for quod servitium amisit. This document was superseded by the ASC filed on 23 September 2019, correcting the oversight in the statement of claim, as the solicitor had not signed it. Ms Williams filed an amended statement of claim on 23 September 2019 alleging action for quod servitium amisit. She then identified a further cause of action as loss of pure economic loss, obtained instructions from Mr Vaccaro and sought advice from counsel. The plaintiff’s solicitor acted expeditiously when she took over carriage of these proceedings.

15. [34]

    On 28 November 2019, Ms William served the defendant with the expert report from Furzer Crestani and authorised by Mr Chris Kathesos, dated 27 November 2019, together with the briefing letters, which quantified the company’s losses in this claim.

16. [35]

    On 3 December 2019, Ms William sent an email to Eliza Faulk, the defendant’s solicitor, indicating that, in light of Professor Paul Fagan’s report, it would be necessary to amend the ASC in these proceedings and the statement of claim in the personal injury claim proceedings. On 5 December 2019, Ms Williams forwarded a further email to Ms Faulk stating that she could not forward the FASC, as it was taking longer than she expected to populate the FASC with loss and damage particulars. She also stated that the FASC would mirror the amendments made in the personal injury claim.

17. [36]

    On about 6 December 2019, Ms Williams attended the professional negligence list and advised the Court that she required an order to amended the ASC to reflect the evidence of Professor Fagan and to set out the company’s loss and damage. She advised the Court that the amendments would mirror what the amendments were in the personal injury claim. On 6 December 2019, the Court ordered that a proposed FASC be sent to the defendant by 12 December 2019. The defendant was to advise the plaintiff whether he consented to the proposed amendments by 20 December 2019.

18. [37]

    On about 10 December 2019, when Ms Williams sought to complete drafting the FASC, it became apparent to her that the FASC required further amendments outside what she had advised the defendant. On 11 December 2019, she sent the defendant’s solicitor the first of two proposed FASC for this matter. On 20 December 2019, the defendant’s solicitors wrote to Ms Williams seeking clarification of the nature and extent of the proposed changes. The FASC underwent a few iterations, the final version being dated 4 February 2020. On 11 February 2020, the defendant opposed the amendments. The plaintiff could not have been expected to know that his company had alleged causes of action without being legally advised of them.

19. [38]

    I have set out the plaintiff’s explanation for delay in detail above. In summary, Mr Vaccaro was still undergoing treatment up until 2014, and filed his statement of claim on 22 December 2016. It was about three years after the filing of Mr Vaccaro’s statement of claim that that he was advised by his solicitor as to the company’s causes of action. Mr Vaccaro could not have been expected to know of the company’s causes of action without being given the benefit of legal advice. As can be seen from the summary of events set out above, when the current solicitor received instructions from Mr Vaccaro, she acted expeditiously in commencing proceedings on behalf of the company. It is my view that the company has provided a satisfactory explanation for delay.

(b) Prejudice

1. [39]

   The defendant asserts prejudice on three grounds: that there is an absence of financial documents, that a new cause of action is pleaded and that the claim is substantial.

2. [40]

   In her affidavit dated 16 March 2020, the defendant’s solicitor, Ms Faulk, sets out the period of negotiation and production of financial documents in relation to Mr Vaccaro’s economic loss claim in the personal injury claim proceedings.

3. [41]

   Ms Faulk first requested the documents provided to the plaintiff’s forensic accountant, Furzer Crestani, on 19 December 2017. These were provided on 22 February 2018. On 27 March 2018, Ms Faulk advised Mr Vaccaro’s former solicitors, Carroll & O’Dea, that the defendant had engaged a forensic accountant and set out information and documents he wished to have in order to prepare a report.

4. [42]

   In 2018 there was an exchange of correspondence, including the issuing of a subpoena for documents by the defendant. This culminated in final documents being provided to the defendant’s solicitors by 27 September 2018. Mr Algie of Carroll & O’Dea expressly asked Ms Faulk to “please let me know if you believe our client has not fulfilled his obligations under the subpoena.” On 27 November 2019, the company served its forensic accountant’s report.

5. [43]

   The plaintiff stated that after this, the defendant made no further complaint about the adequacy of the production of documents by the company. The defendant served two reports from expert forensic accountant, Mr Richard Ivey, dated 5 November and 21 December 2018. In order to provide an opinion on economic loss in the personal injury proceedings, Mr Ivey was required to analyse the company records and express opinions about its earnings and performance.

6. [44]

   No further mention of source documents was made until 11 February 2020, when Ms Faulk asserted the defendant was prejudiced by the plaintiff’s inability to provide primary and source financial documents.

7. [45]

   The plaintiff submitted that there is no practical difference between the documents required by the defendant for the personal injury economic loss claim and those now relevant for the company’s claim. The claim of prejudice about the absence of primary and source documents is unfounded.

8. [46]

   The plaintiff argued that the fact that it has raised a claim for pure economic loss should not prejudice the defendant in terms of legal research. The case law regarding quod servitium amisit frequently refers to pure economic loss: see Barclay v Penberthy [2012] HCA 40 (“Barclay”). This is not a novel cause of action, but is one that is available depending upon the factual circumstances of the case.

9. [47]

   The plaintiff submitted that the defendant’s complaint of prejudice boils down to the anxiety of having to deal with a larger claim. That is not the type of prejudice that should influence the decision of whether to permit the proposed amendments.

10. [48]

    The defendant submitted that it will be prejudiced if the company is granted leave for the following reasons:

11. [49]

    According to the defendant, Mr Vaccaro was to provide further documents prior to the hearing of this notice of motion. The plaintiff has not done so, nor has he provided an explanation. The proposed conclaves of the forensic accountants cannot proceed until the investigations have been completed and any further documents have been provided.

12. [50]

    The defendant submitted that given the delay in advancing the claim, the defendant should not be prejudiced by being forced to investigate a new and substantial claim and the additional instructions/assumptions/calculations and documents.

13. [51]

    It is not necessary for the defendant to establish irreparable prejudice, nor can the company rely on the absence of prejudice as a factor alone, or with a costs order, that justifies the grant of leave: see Spencer v NSW Minister for Climate Change and the Environment [2010] NSWCA 75 at [33].

14. [52]

    There is a presumptive prejudice occasioned by delay. In Brisbane South Regional Health Authority v Taylor (1996) 186 CLR at 551, the court held that “prejudice may exist without the parties or anybody else realising that it exists…what has been forgotten can rarely be shown.”

15. [53]

    The defendant submitted that the fact that the expert was able to provide a report does not overcome the issues raised by the lack of production of various company records. The defendant is prejudiced in his ability to examine and test the various assumptions and the assertions made by other individual and company documents. Documents necessary to do this were requested by the defendant’s lawyer at the request of the expert.

16. [54]

    I accept that the defendant will suffer some presumptive prejudice due to the delay.

17. [55]

    Both parties have served forensic accountants’ reports. The defendant served two reports of Mr Richard Ivey dated 5 November and 21 December 2019. The plaintiff served a report of Furzer Crestani dated 27 November 2019. I accept that there may be documents still to be produced, but as I understand it, they will be produced shortly.

18. [56]

    The amendments do raise a new cause of action, but to some extent the damage overlaps with the damages claimed in the personal injury claim. The plaintiff’s damages for the claim of pure economic loss and for quad servitium amisit will be the same or similar.

19. [57]

    The defendant suggested that Mr Vaccaro knew of the existence of these two new causes of action in relation to the company, but the evidence is to the contrary. There is a dispute as to whether or not the defendant has been supplied with all the documentation it requires. Certainly he has been supplied with most of the necessary documents. On 9 July 2018, the plaintiff’s former solicitors wrote to the defendant’s solicitors supplying more financial information and explaining what had happened with the other documents and their plans to obtain some further documents. Despite this, the defendant still complains that he has not received certain documents, and the plaintiff has submitted that they will be served in the near future. As stated, both parties have served forensic accountants’ reports. There is still ample time for the accountants to hold a conclave.

20. [58]

    In these circumstances, I am satisfied that if the company is granted leave to file the FASC, both parties will received a fair trial.

(c) The limitation period

1. [59]

   The defendant concedes that ordinarily, any limitation issue is properly ventilated at trial, and that the limitation issue should not be determined as part of this application. However, the plaintiff needs to show that the amendment is not futile.

2. [60]

   In relation to any consideration of the limitation period, these proceedings represent a cause of action for damages that relate to the personal injury to a person.

3. [61]

   Section 50C of the Limitation Act reads:

4. [62]

   The relevant limitation period for a cause of action that relates to personal injury expires 3 years after the cause of action is discoverable, or 12 years from the time of the act or omission alleged to have resulted in the injury concerned. An extension to the 12 year stop limitation period can be obtained where the Court considers that it is just and reasonable. Various matters are to be considered by the Court when deciding whether to exercise its discretion to grant an extension to the 12 year limitation period.

5. [63]

   The question to be considered in respect of this application in relation to the limitation period is confined to whether it is just and reasonable to extend the 12 year limitation period pursuant Div 6 of Pt 2 of the Limitation Act. The final determination of any limitation defence is a matter for consideration by the trial judge. At this stage, the defendant has not filed a defence to the ASC and the plaintiff does not know what section of the Limitation Act is relied upon by the defendant in asserting that these proceedings are statute barred.

6. [64]

   A decision by the Court not to grant the plaintiff leave to file the FASC will deprive the company of obtaining a judicial determination of its whole claim. The plaintiff submitted that this would be tantamount to dismissing the proceedings summarily. The case law establishes that great caution must be exercised in such cases, and that summary dismissal should be limited to cases where there is no reasonable cause of action, and which are manifestly groundless or clearly untenable. The plaintiff argued that this is not such a case, and that for the reasons set out below, it is arguably just and reasonable to extend the 12 year limitation period.

7. [65]

   The plaintiff accepts that a claim for pure economic loss is not a claim for personal injury damages. The circumstances in which it arises, however, unambiguously concern personal injury. But for Mr Vaccaro’s personal injury, there can be no cause of action for pure economic loss. In this sense, the claim for pure economic loss “relates to personal injury of a person” under s 50A(1) of the Limitation Act.

8. [66]

   As it is alleged that as damage was first suffered in 2006, by reason of s 50C(1)(b) of the Limitation Act, the plaintiff is entitled to an extension of the period so long as it satisfies the conditions in s 62B of the Limitation Act. Extension applications are routinely dealt with by a trial judge. It is at least reasonably arguable that a pure economic loss claim that arises because of a sole director’s personal injury is an action for damages relating to person injury under s 50A of the Limitation Act. This should be determined by the trial judge unless the Court is satisfied under the General Steel Industries Inc v Commissioner for Railways (NSW) (1964) 112 CLR 125 test that there is no reasonable cause of action, the claim is manifestly groundless or clearly untenable. The plaintiff submitted that none of these expressions are relevant.

9. [67]

   Finally, even if the defendant’s submissions that s 14 of the Limitation Act is the relevant limitation provision are correct, the company is entitled to claim economic loss for losses accruing within 6 years of the pure economic loss claim being filed. Thus, pure economic loss from 2013 may be recoverable. Again, this is a matter that the trial judge should determine in light of all the surrounding factual circumstances.

10. [68]

    The defendant maintains that the applicable limitation period is that set out in s 14 of the Limitation Act.

11. [69]

    It is correct to say that there is at least an argument that s 50C of the Limitation Act has a role to play. The plaintiff concedes that the matter is statute barred without an extension of the 12 year period.

12. [70]

    The plaintiff asserts that a claim from 2013 would not be statute barred. The company ceased trading in 2009, and any claim arising out of events in 2013 is irrelevant. Even if it were relevant, no application to extend the period pursuant to s 62A of the Limitation Act has been made, and there is no evidence at even a prima facie level of the matters referred to in s 62B (a) or (e) of the Limitation Act.

13. [71]

    The plaintiff has not demonstrated on this application that there is a prima facie case to be determined. Whether or not ss 14 or 50C of the Limitation Act applies, the matter is statute barred.

14. [72]

    The defendant further referred to Barclay, where High Court held that a claim by a company for damages for loss of income or profit arising from injury or death of an employee is a claim for pure economic loss, and is distinct in its legal basis to claim per quod servitium amisit.

15. [73]

    Putting to one side whether or not the company will succeed in persuading the Court of a novel duty owed by the defendant to the company, the defendant says the company’s claim for economic loss:

16. [74]

    The company submitted that the amendment is governed by s 65 of the Civil Procedure Act. That section applies only if the original claim was filed in time.

17. [75]

    The defendant correctly concedes that ordinarily, any limitation issue is properly ventilated at trial, and the limitation issue should not be determined as part of this application. However, the plaintiff needs to show the amendment is not futile.

18. [76]

    It appears that the company’s amendments do not fall within the provisions of s 65(2) of the Limitation Act, as the company is a different entity from Mr Vaccaro. If the company ceased trading in June 2009, it is not clear that its losses crystallised at that date.

19. [77]

    As was stated by the High Court in Wardley Australia Ltd v State of Western Australia (1992) 175 CLR 514; (1992) 109 ALR 247, it is regarded as undesirable that limitation questions of the kind under consideration should be decided in interlocutory proceedings in advance of the hearing of the action, except in the clearest of cases.

20. [78]

    In these circumstances, I am satisfied that the company’s claims are not futile. Hence, whether the company’s claims are statute barred should be determined at trial.

The result

1. [79]

   I am satisfied that the the company has provided a satisfactory explanation for the delay, that the parties will receive a fair trial and that the company’s claims are not statute barred. The issues raised in the FASC will enable the real questions between the parties to be decided. I grant leave to the company to file the FASC.

Costs

1. [80]

   While the defendant has sought his costs, it is my view that the appropriate order for costs at this stage is that they be reserved.