FEDERAL COURT OF AUSTRALIA

Kedem v Johnson Lawyers Legal Practice Pty Ltd [2014] FCAFC 3

THE COURT ORDERS THAT:

1.    The interlocutory application filed by the appellant on 7 November 2013 be dismissed.

2.    The appeal be dismissed.

3.    The appellant pay the respondent’s costs of the appeal including its costs of defending the interlocutory application.

Note:    Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

REASONS FOR JUDGMENT

THE COURT

1    The appellant, Einav Kedem, is in debt to his former solicitors, Johnson Lawyers (“Johnson”), the respondent to this appeal. The debt relates to legal fees. Though Mr Kedem disputes the debt, it is the subject of a bankruptcy notice which he failed to have set aside. This proceeding is concerned with an action he brought against Johnson and which he unsuccessfully set up as an answer to the bankruptcy notice. Put simply, the basis of the claim was that Johnson had failed to act on his instructions in proceedings brought against him in the Supreme Court of South Australia.

2    This proceeding was initiated by an originating application and supporting affidavit. No pleadings were filed. In the originating application Mr Kedem sought (without alteration):

Damages for negligence, misleading and deceptive advice under ASIC & Trade Practices Act, acting not in the best interests of the applicant.

3    Mr Kedem calculated his loss at $2,294,000, together with a claim of “say $5 billion” to compensate him for a stroke he had suffered.

4    In the affidavit Mr Kedem applied for an extension of time in which to bring the action, not only against Johnson but also against his barrister, Alex Lazarevich, although Mr Lazarevich was never named as a respondent, no application was ever brought to add him as a party and there was no suggestion that he was ever served with documents in the proceedings.

5    The primary judge ordered that there be a separate trial of a number of questions, principal among which was whether any or all of Mr Kedem’s claims were statute-barred and, if so, whether he should be granted an extension of time. On 10 May 2013, after considering evidence and submissions from the parties, his Honour determined that all the claims were statute-barred and that no extension of time should be granted and proceeded to make orders dismissing the originating application with costs.

6    This is an appeal against those orders. The grounds of appeal are largely uninformative. Ground 1 pleads that the primary judge erred in fact and law and based his decision on “the false documents & information & arguments” submitted by Johnson and proffered to the court in later proceedings before another judge. Ground 2 complains of a decision of a judge of the District Court of South Australia to refuse to order discovery at a time when the action would not have been statute-barred. Ground 3 reads: “the rest of the grounds are in the attachment affidavit”. We will return to the contents of the affidavit shortly but first it is necessary to set out the background to the dispute so far as it is relevant to the appeal.

BACKGROUND

7    In March 2004 Pepper Finance Corporation (“Pepper”) lent Mr Kedem money on security of a mortgage over certain properties. The loan was for a period of 12 months. After a fire broke out in one of the properties Mr Kedem defaulted on interest payments due under the mortgage and in September Pepper applied to the Supreme Court for an order for possession.

8    The following month Mr Kedem received an insurance payout of just under $130,000 and on 18 October 2004 Pepper offered to adjourn its claim for three months and not to restore it if, by 22 October 2004, Mr Kedem paid the interest arrears of $18,972, costs of $2,597 and fees of $520, maintained regular payments of interest, and applied the proceeds of the insurance settlement to reinstating the damaged property. Mr Kedem, through his then solicitors (not Johnson), rejected the offer the next day (19 October 2004) and made a counter-offer which Pepper rejected. Mr Kedem then wrote personally to Pepper’s solicitors purporting to accept their original offer (the one his former solicitors had rejected) and three days later paid the arrears of interest, costs and fees that Pepper had sought in that offer. Mr Kedem later complained that despite the fact that he had paid this money, Pepper continued to charge him at the default rate and did not discontinue the Supreme Court proceedings in accordance with what he said was the agreement.

9    Mr Kedem then successively engaged two further firms of solicitors in relation to the Supreme Court action. By 28 June 2005 they had both ceased to act for him. The Supreme Court action was proceeding. In the meantime the date for repayment of the loan (19 March 2005) had passed and had not been extended.

10    Mr Kedem first consulted Johnson on 30 June 2005 in connection with the Supreme Court proceedings – two working days before the hearing was due to start. He paid various amounts into the firm’s trust accounts.

11    On 4 July 2005 a Master (Judge Withers) heard the application for possession. Judgment was reserved. After the hearing, counsel advised Johnson that it would be a good time to seek to negotiate a settlement of the action. Mr Kedem claims that he instructed Johnson to tell counsel to settle but that Johnson did not comply with his instructions.

12    By this time Mr Kedem was in dispute with Johnson about the payment of its fees. On 8 July 2005 Johnson wrote to him stating that certain payments had to be made before it would take any further steps in the Supreme Court action. On 12 July 2005 Mr Kedem instructed Louis Leventis of Johnson to settle on certain terms which Mr Leventis purportedly recorded in a contemporaneous file note.

13    On 15 July 2005 Mr Kedem and Mr Leventis spoke by phone. Mr Kedem asked Mr Leventis to put an offer to Pepper. It is unnecessary to set out the terms of the offer. In the conversation Mr Leventis repeated his requirement that Mr Kedem pay the firm’s outstanding fees.

14    On 18 July 2005 Johnson again wrote to Mr Kedem, informing him that $3,078.64 remained outstanding and that unless it was paid in full and an additional $1,000 deposited in its trust account, the firm would not carry out any further work in relation to the Supreme Court action and that included negotiating with Pepper. Mr Kedem refused to pay the money.

15    On 19 July 2005 Mr Kedem spoke with Mr Leventis by phone. He once again disputed the fees claimed and complained that Johnson had not written to Pepper with an offer of settlement. Mr Leventis told him that this would be done when the outstanding fees were paid and the additional money was paid in trust. Mr Kedem said he would not pay the fees.

16    On 29 July 2005 Mr Kedem emailed counsel directly stating that he had instructed Johnson to settle the action and that Johnson had failed to follow his instructions.

17    The same day Mr Leventis emailed Mr Kedem advising him that judgment would be delivered on 2 August 2005 and offering to discount its fees by $700.

18    On 30 July 2005 Mr Kedem sent several emails to Johnson concerning the dispute over fees and asserting that Johnson’s failure to follow instructions preceded that dispute.

19    On 1 August 2005 Johnson instructed counsel to attend court to take the judgment on 2 August 2005 and also to contact Pepper’s solicitors to see if the matter could be settled. Pepper’s solicitors responded that Pepper was not interested in negotiating until the judgment had been handed down.

20    On 2 August 2005, judgment was delivered and orders for possession were made against Mr Kedem.

21    It is useful at this stage to set out the history of the costs dispute which followed these events.

22    On 26 February 2006 Johnson obtained default judgment against Mr Kedem in the Adelaide Magistrates Court for $4,578 in respect of its outstanding fees. Mr Kedem did not satisfy the judgment.

23    More than four years later, on 14 April 2010, Johnson took steps to enforce the judgment. Only then did Mr Kedem apply to have the judgment set aside. On 7 July 2010 his application was dismissed. He then applied for review of that decision in the District Court. His review application was heard by Bampton DCJ (as her Honour then was). Her Honour set aside the default judgment on discretionary grounds and proceeded to hear Johnson’s action. She accepted that Mr Kedem was indebted to Johnson but she said that the Supreme Court had exclusive jurisdiction to determine the amount of fees owing. The District Court action was adjourned to allow Johnson’s costs to be taxed and on 10 December 2010 Johnson applied for a taxation of outstanding bills in the Supreme Court.

24    A hearing of the taxation took place on 17 May 2011 before a Master (Judge Lunn). Mr Kedem did not appear. His Honour went on to conduct a lump sum taxation of costs. He determined the amount at $2,800 and certified that fees were payable in that amount. Costs of the taxation were assessed in the sum of $1,000 and Mr Kedem was ordered to pay them.

25    The District Court proceeding before Bampton DCJ resumed on 26 May 2011. Again Mr Kedem did not appear. Judgment was then entered for the two sums Judge Lunn had determined. Mr Kedem later applied to Judge Lunn to have the summary determination of costs set aside but on 14 July 2011 his application was dismissed with costs. Mr Kedem then applied to the District Court to have that judgment set aside. That application (which was heard by McIntyre DCJ) was also dismissed with costs.

26    On 29 March 2012 the Official Receiver issued a bankruptcy notice against Mr Kedem founded on the four judgment debts. The notice was served upon him on 10 April 2012. The total sum due and payable under the notice was $7,055.10. On 24 April 2012 Mr Kedem applied to have the bankruptcy notice set aside. On 16 July 2012 a registrar of the Federal Magistrates Court dismissed the application. Mr Kedem applied for a review of the registrar’s decision but on 30 November 2012 a federal magistrate dismissed that application: Kedem v Johnson Lawyers Legal Practice Pty Ltd [2012] FMCA 1118. Mr Kedem appealed from the federal magistrate’s orders, but on 30 July 2013 Besanko J dismissed the appeal: Kedem v Johnson Lawyers Legal Practice Pty Ltd (No 3) [2013] FCA 739.

27    Mr Kedem launched the present proceeding on 13 July 2012.

reasons of the primary judge

Limitation of Actions

28    The primary judge held that all the causes of action which the appellant sought to raise were statute-barred.

29    His Honour held that the limitation period applicable to each of the causes of action was six years from when the cause of action arose.

30    As to the commencement of the limitation period, the primary judge said at [77]:

In my view, the applicant’s claim arises (subject to its merits) when he became subject to the Judgment, by which possession of the properties was to pass to Pepper. His complaint is that the respondent wrongfully failed to put an offer of settlement in relation to, and so to settle, the Pepper claims before the Judgment, and did not make a counterclaim so as to prevent the Judgment. Hence, that is when the cause of action accrued. In any event, the applicant says that he suffered economic loss as a result of the misleading and deceptive conduct of the respondent in that the properties owned by him were sold by Pepper pursuant to a power of sale in October 2005. Accordingly, loss was allegedly suffered by him in October 2005. That is at the latest the starting point for the losses allegedly suffered by the applicant. In addition, as the applicant claims six years’ worth of interest on his losses, it is, by implication, the applicant’s case that at least six years have elapsed from the time that he suffered those losses to the time that he commenced the application.

31    His Honour held that the causes of action arose at the latest when the properties were sold in October 2005 pursuant to the power of sale consequent on the judgment for possession. By the time Mr Kedem had filed his originating application, the six year limitation period had expired.

Extension of Time

32    Both of the statutory claims were statute-barred by the terms of the statutes (s 82(2) of the Trade Practices Act 1974 (Cth) (now the Competition and Consumer Act 2010 (Cth) and ss 87(1CA), 12GF(2) and 12GM(5) of the Australian Securities and Investments Commission Act 2001 (Cth)). His Honour held that there was no power to extend those times. Mr Kedem did not contend that this was an error.

33    The third claim was for negligence. Negligence is a tort. Section 35 of the Limitation of Actions Act 1936 (SA) (“Limitation Act”) imposes a six-year period of limitation for actions founded on tort which runs from the time the cause of action accrues, “save as otherwise provided in [that] Act”. Accordingly, his Honour found that that period also elapsed in October 2011. His Honour noted that the Court has power in the exercise of its discretion to extend the period in accordance with s 48 of the Limitation Act. That provision relevantly reads as follows:

(1)    Subject to this section, where an Act … prescribes or limits the time for-

(a)    instituting an action;

…

a court may extend the time so prescribed or limited to such an extent, and upon such terms (if any) as the justice of the case may require.

(2)    A court may exercise the powers conferred by this section in respect of any action that-

(a)    the court has jurisdiction to entertain; or

(b)    the court would, if the action were not out of time, have jurisdiction to entertain.

(3)    This section does not-

…

(b)    empower a court to extend a limitation of time prescribed by this Act unless it is satisfied-

(i)    that facts material to the plaintiff’s case were not ascertained by him until some point of time occurring within twelve months before the expiration of the period of limitation or occurring after the expiration of that period and that the action was instituted within twelve months after the ascertainment of those facts by the plaintiff; or

(ii)    that the plaintiff’s failure to institute the action within the period of limitation resulted from representations or conduct of the defendant, or a person whom the plaintiff reasonably believed to be acting on behalf of the defendant and was reasonable in view of those representations or that conduct and any relevant circumstances,

and that in all the circumstances of the case it is just to grant the extension of time.

(3a)    A fact is not to be regarded as material to the plaintiff’s case for the purposes of subsection (3)(b)(i) unless-

(a)    it forms an essential element of the plaintiff’s cause of action; or

(b)    it would have major significance on an assessment of the plaintiff’s loss.

34    The primary judge noted that in relation to the delay in commencing the proceeding Mr Kedem said that:

(a)    Pepper’s conduct had caused him to suffer a stroke in December 2004, leaving him ill and very disabled, relying on a discharge summary dated 21 February 2005;

(b)    he had not had access to Johnson’s files, has lost assets and many documents due to the repossession order, and could not afford legal representation;

(c)    he had made complaints to the “credit ombudsman”, ASIC, and a politician;

(d)    the solicitors took action against him in 2010 to recover their outstanding costs; and

(e)    he was told that he could not make a counterclaim in the Supreme Court action.

35    In particular, Mr Kedem submitted to the primary judge that his failure to commence the proceedings was the result of Johnson’s failure to give discovery. His Honour found that the basis on which the claims were made were known and asserted by Mr Kedem in mid July 2005. His Honour said at [92]:

Indeed, it has been the applicant’s claim even from mid-July 2005 that the respondent was negligent in its conduct of the Supreme Court action on his behalf. His claim then, and now, is based upon on an alleged failure to act properly on his instructions. That is a state of affairs, if it is accurate, which he has consistently asserted.

36    Consequently, his Honour held that the requirements of s 48(3)(b)(i) and (3a) were not made out.

37    The primary judge rejected Mr Kedem’s contention that he did not commence the proceeding because he did not have access to Johnson’s file. His Honour said at [93]–[94]:

93    … It may be understood that the applicant says he did not commence the application earlier by reason of the conduct of the respondent in not providing him with discovery of its file after a request for discovery in 2010, although I do not think he clearly says that. However, it is clear that the absence of such a response did not prevent the applicant commencing this action by reason of that alleged failure. The applicant says that he has to date not received a satisfactory response to the request for discovery in 2010, which he says was in the same terms as his more recent requests for discovery, and he commenced this application without having such a response.

94    The applicant does not explain why the delay occurred in that regard. If he was doubtful about his claim succeeding by reason of a lack of access to documents, he could have made an application for pre-action discovery or, alternatively, have issued these proceedings at an earlier time and sought discovery in the course of the proceedings. That is the course he has now apparently chosen. It was not reasonable in those circumstances to wait until 2010 to request discovery, or to take no other action to secure it, especially as he clearly has had a firm belief in his claim at all times. It is not the case that he hesitated because of difficulty in accessing the respondent’s file. I do not accept that his failure to institute the application earlier, or between October 2010 and October 2011 was for that reason.

38    Consequently, the primary judge held that the requirements of s 48(3)(b)(ii) were not satisfied.

39    The primary judge went on to say that, even if s 48(3)(b)(i) or (ii) had been satisfied, he did not consider it just in all the circumstances to grant Mr Kedem an extension of time to bring the application. His reasons were as follows:

96    The first, and most obvious, is that the applicant has not satisfactorily explained the delay. What is apparent from his affidavit is that he has elected to pursue alternative remedies through the “credit ombudsman”, ASIC and through political representatives. He is, of course, entitled to do that. But he does not say that he was unaware of his putative rights to bring his claims against the respondent. He was, on his own acknowledgment, aware of them and intended to purse them. Whilst the applicant, I accept, could not afford legal representation, that situation has existed apparently since 2005, so it does not explain a lengthy delay. Similarly, whilst his medical condition may explain some delay, it does not explain the lengthy delay particularly as the Supreme Court action was conducted in part in 2004 after his illness, and he was apparently able to give the detailed instructions in relation to it referred to above.

97    Secondly, the fact that the respondent took action against him in 2010 to recover unpaid fees does not justify the applicant in delaying his claim against the respondent. As noted, his claim is a very substantial (and I assume a genuinely expressed) one. It is of such an amount that it is not a justifying factor for his delay in bringing his claim that the respondent, perhaps also somewhat belatedly, brought a claim to recover outstanding fees.

98    Thirdly, the fact that the applicant was told (as he alleges, by the respondent) that he could not make a counterclaim in the Supreme Court action has no weight. In fact, he made a counterclaim in that action for relief against forfeiture. If that is the counterclaim he refers to, it was brought. If he means a counterclaim to sort out precisely how much he owed Pepper, that matter was stood over for further consideration in the Supreme Court action. It appears that the applicant did not seek to pursue it further, or at least he had not given evidence of having done so. If he means some other, more extensive claim, against Pepper, then it is not apparent to me how that claim is expressed or how the respondent was remiss in not pursuing it.

40    At [99] his Honour made some observations about the prospects of success of Mr Kedem’s allegation that Johnson had not followed his instructions. He said it was unlikely that the settlement he proposed would have been accepted. He concluded at [99] that:

[W]hether or not the respondent failed in its contractual or common law duty of care to the applicant, I do not consider the applicant has shown that any failure on its part to put the proposed settlement offer to Pepper either earlier than it did, or at all, would have made any difference to the position of the applicant.

41    Consequently, even if he had the power to do so, his Honour said that he would not exercise his discretion to extend time. He said that it was in the interests of justice to bring the claims against Johnson to an end. At [101] he explained that the three reasons referred to in [96]–[98] of his judgment (and extracted above) were sufficient to reach that conclusion.

42    Next his Honour considered Mr Kedem’s claim for failing to act in his best interests. He noted that the material Mr Kedem filed did not set out the basis for the claim. He interpreted it as a claim in negligence or contract. That is a reasonable assumption. Regardless, Mr Kedem did not contend in this appeal that the claim had any other basis.

43    His Honour observed that a cause of action for breach of contract arises at the time of the breach and noted that, as Mr Kedem alleged that Johnson’s retainer was terminated no later than August 2005, any cause of action for breach of contract accrued during or before that month. In any event, his Honour noted, the loss pleaded by Mr Kedem arose no later than October 2005. Section 35 of the Limitations Act imposes a six-year period of limitation for actions founded on a simple contract. Thus, whether the claim was based in contract or in negligence, the limitation period expired at the latest in October 2011. His Honour declined to extend the period and dismissed the claim because it was out of time for the reasons he had earlier given.

44    Finally, his Honour noted that in reaching his conclusions, he had taken into account Mr Kedem’s contentions that he was unaware of the relevant time limits. He accepted as much but said that a lack of awareness does not routinely lead to the grant of an extension of time. His Honour pointed out that it is in the public interest that claims be brought promptly and that was the reason for the statutory time limits.

45    His Honour also observed that on 28 July 2011 in his District Court proceedings, Mr Kedem had filed and served an extensive affidavit with exhibits demonstrating his detailed awareness of Johnson’s file, and a further affidavit of 4 July 2011 expressing with some clarity his claims against Johnson to dispute its entitlement to the costs claimed. His Honour noted that this material did not support Mr Kedem’s contention that his lack of knowledge about the contents of the file was a good reason for not bringing the present proceeding in a timely fashion. His Honour said that, if the timing of the application was prompted by the fact that Mr Kedem was vulnerable to a sequestration order in respect of the costs owed to Johnson, that was due to his failure to assert his claims at an earlier and proper time – either by application such as the present one or by way of defence to Johnson’s action to recover its costs.

46    For these reasons, his Honour concluded that the application could not succeed and had to be dismissed.

The affidavit FILED WITH the notice of appeal

47    It is regrettable that Mr Kedem was permitted to file the affidavit. There is no provision in the rules for an affidavit to be filed in support of a notice of appeal. Grounds of appeal must be pleaded exclusively in the notice of appeal.

48    The affidavit purports to contain the errors of law and fact referred to in ground 1 of the notice of appeal. It is not easy to make sense of the document but, insofar as it deals with the reasons of the primary judge, it is in the nature of submissions. In substance, Mr Kedem took issue with several factual findings relating to the application for an extension of time. He asserted that he was “entitled to” an extension of time. He submitted that the delay was due to his failure to obtain discovery of Johnson’s file and, by inference, his stroke, the effects of which, he insisted, endure. In substance, he complained that the primary judge had erred by assuming that he had recovered from the stroke by 2005 when there is “no recovery of 100%”. He also sought to ventilate his dispute with Johnson about their legal costs. He contended that Johnson deliberately tried to recover its fees in order to prevent him from discovering its negligence and to distract him from pursuing a claim against the firm. The remainder of the document complains about the judgment of Bampton DCJ.

The submissions in support of the appeal

49    The submissions filed in support of the appeal repeated and expanded upon the matters raised in the affidavit. Like the affidavit, they paid scant regard to the notice of appeal. Parts of them are plainly irrelevant. For example, Mr Kedem noted that one of the preliminary issues listed for separate trial was whether he was estopped from alleging that in 2005 he did not owe Johnson any fees. He then went on to argue why the plea of estoppel must fail. Yet, his Honour made no finding on this issue. It was, as he said at [108] of his reasons, unnecessary for him to do so. That was because of his findings that all causes of action were statute-barred.

50    Several alleged errors are inconsequential.

51    The first error in the judgment to which Mr Kedem pointed was in [106] of the reasons where his Honour stated that Mr Kedem sought an order that Johnson’s costs be taxed in the Supreme Court. We accept that was an error. Mr Kedem correctly pointed out that the initiative for that came from Bampton DCJ. But nothing turns on the error. Mr Kedem did not suggest otherwise.

52    Mr Kedem also submitted that no-one told him that the Trade Practices Act was now the Competition and Consumer Act. Once again, assuming that to be true, it does not suggest error on the part of the primary judge.

53    Mr Kedem drew attention to some of the authorities in which, despite lengthy delay, the plaintiffs had secured extensions of time. But Mr Kedem failed to engage with either the differences in the legislative regimes or the facts.

54    Some of the submissions raised matters not canvassed before the primary judge.

55    Mr Kedem submitted that he was told by the registrar of the District Court that he could not bring a counterclaim against Johnson because its claim was for costs only and by the registrar of the Supreme Court that he could not do so because it was an action for taxation of costs.

56    Mr Kedem also argued for the first time that the injuries he sustained in a motor vehicle accident on 2 February 2011 accounted, at least in part, for the delay in instituting proceedings against Johnson. He said he suffered injuries to his head, neck, shoulder, back and leg, for which he said he has received treatment, including steroid injections. He contended that the accident prevented him from bringing a claim before the expiry of the limitation period as he was busy receiving treatment for his injuries.

57    Another new argument raised in the appeal was that the primary judge erred in failing to extend the limitation period under s 45 of the Limitation Act. Section 45 provides that:

45 Persons under legal disability

(1)    Where the time for bringing an action or proceeding is limited by this Act, or any other Act or law, and the person who is entitled to bring the action or proceeding is under a legal disability, the time for bringing that action or proceeding shall, subject to subsection (3) of this section, be extended by the period or periods for which the disability exists or continues after the time at which the right to bring the action or proceeding arose.

(2)     For the purposes of this section a person is under a legal disability in relation to an action or proceeding while he remains a child or while he is subject to a mental deficiency, disease or disorder by reason of which he is incapable of reasoning or acting rationally in relation to the action or proceeding that he is entitled to bring.

58    Finally, Mr Kedem submitted that the order for a separate trial should never have been made, in substance because the issues were intertwined with the merits of his application.

59    Importantly, (with the possible exception of the s 45 argument), none of Mr Kedem’s submissions took issue with his Honour’s conclusions that all the claims were statute-barred. Their focus was on the decision to refuse to extend the time in which to sue in tort or contract. During oral argument Mr Kedem confirmed that he did not quarrel with his Honour’s decision that the limitation periods had expired. Indeed, he submitted that “the whole appeal is about extension of time”.

60    In the course of the hearing of the appeal, in order to provide some focus to Mr Kedem’s arguments, the Court took him to each of the steps in the primary judge’s reasoning and asked him to identify the error he alleged had been made.

61    The first step was the primary judge’s finding that Mr Kedem knew the facts material to his case against Johnson in about July 2005. Mr Kedem said that he was not aware of the facts material to his case against Johnson prior to the hearing before the primary judge. He said that he was aware that Johnson did not follow his instructions, but said that he thought this was not enough information on which to commence a claim, because his instructions had been mostly verbal.

62    Mr Kedem claimed that it was at the hearing before the primary judge that he was, for the first time, alerted to the fact that the counterclaim against Pepper had not been properly prosecuted by Johnson. He had claimed in his affidavit supporting the notice of appeal that the counterclaim against Pepper had not been filed. However, at the hearing, he acknowledged that the counterclaim had indeed been ‘entered’, but he claimed that Johnson had failed to amend or finalise and prosecute it.

63    The next step was the primary judge’s finding that Johnson’s failure to provide discovery of its file was not a reason for Mr Kedem’s failure to commence proceedings within the limitation period. Mr Kedem disagreed with the primary judge’s finding. Mr Kedem said that he had made many applications to Johnson and was not provided with the documents he had requested. He said that without adequate evidence of verbal instructions, he did not have enough information to commence the action. He said that the only evidence he had to support an action at the time were a couple of emails that we understand he had earlier submitted to the South Australian Legal Practitioners Conduct Board in support of a complaint lodged against Johnson. He also said that his stroke prevented him from taking the necessary steps to start proceedings.

64    The Court then invited Mr Kedem to address the primary judge’s reasons for finding that it would not be just in all the circumstances to extend the limitation period.

65    The first reason was that Mr Kedem did not satisfactorily explain the delay in bringing the action. Mr Kedem referred again to his stroke, which occurred in 2004. He said that he was able to proceed with the action against Pepper in 2005 because he had lawyers at that time and was not representing himself. However, Mr Kedem said that the stroke affected him very badly, that a stroke causes brain cells to die, and that it can cause memory loss. He said that when the stroke happened he could not stand on his right leg or hold a newspaper, and consequently could not have conducted the case himself. Mr Kedem complained that the primary judge did not ask for further evidence of the effect of his stroke, did not want to know about it, and was wrong in his conclusion about the contribution of the stroke to the delay.

66    The second reason given by the primary judge was that the fact that Johnson did not bring an action to recover its costs until 2010 did not explain Mr Kedem’s delay. At first Mr Kedem contended that his Honour was wrong in this conclusion. He then denied having proffered this explanation as a reason for the delay, and did not further pursue the argument.

67    Mr Kedem was then invited to address the primary judge’s third reason for refusing to extend the limitation period, namely, that he had been told by Johnson that he could not file a counterclaim in the action brought by Pepper. His submissions on this question are confused. At one point Mr Kedem said he did not know about the counterclaim but found it afterwards. Yet, later he submitted that his original instructions to Johnson were to let the barrister settle the case because “he prepared the counterclaim”. Elsewhere he acknowledged that a counterclaim had been filed by the previous solicitors but contended that “it needed amending … some finishing touches” and it included some mistakes. He submitted that Johnson’s job was to “finish it” and prosecute it but that Johnson did neither. He also submitted that Johnson should have amended the outline of argument. At another point he submitted that he wanted to file a counterclaim in the District Court and then in the Supreme Court proceedings Johnson had brought against him but was told by the registrar in each case that he could not do so.

68    Mr Kedem also argued that his Honour could not have known whether, and did not have a basis on which to conclude that, the offer he wanted Johnson to make would not have been accepted. He stated that the primary judge did not give him the opportunity to go to court to have that issue resolved, but had merely assumed that he would fail.

The application to ADDUCE evidence on the appeal

69    By an interlocutory application filed on 7 November 2013 (six business days before the appeal was listed for hearing) Mr Kedem applied to tender three volumes of evidence containing 64 documents. According to the affidavit filed in support of the application, the evidence consists of medical evidence about injuries he received in the motor vehicle accident in February 2011, evidence relating to complaints he made to the Legal Practitioners Board, transcripts of hearings in the District Court of South Australia and various invoices and other accounting records issued by or belonging to Johnson. Although the affidavit appears to have been prepared by a lawyer, no attempt was made to relate the documents to the issues on the appeal. Several of the documents were in fact before the primary judge. In respect of them, no application was necessary. If they were relevant, they should have been included in Part C of the appeal book. We will treat them as though they were.

70    Volume 1 consisted of an affidavit affirmed by Mr Kedem on 10 July 2013 in the South Australian Supreme Court apparently in support of an application in that court to set aside the judgment of Judge Lunn, annexing various documents and repeating the complaints made to the primary judge. Eleven of the 15 annexures were before the primary judge. Those which were not are an affidavit filed on behalf of Johnson in the Supreme Court (annexing various documents including bills of costs, the retainer agreement with Mr Kedem, correspondence between Johnson and Mr Kedem and a fee ledger) and correspondence between the Legal Practitioners Conduct Board and Mr Kedem (relating to his complaints about his former solicitor, Robert Chrzaszcz, and Johnson).

71    Fifteen, possibly 16, of the 22 sets of documents in the second volume were in evidence before the primary judge. Those which were not are: an affidavit affirmed by Mr Kedem and filed in the Supreme Court on 9 August 2013; a medical report from a Dr Chen (a registered practitioner of Chinese medicine) dated 8 August 2013 relating to the effects of the stroke; a letter from the registry of the South Australian Supreme Court acceding to Mr Kedem’s request for a fee waiver; an undated document containing a record of fees owed to Johnson; email correspondence between Mr Kedem and Mr Lazarevich; and an extract of a transcript of the hearing before Bampton DCJ.

72    Volume 3 contained 24 sets of documents, four of which were before the primary judge in their entirety, others only in part. The documents that were not before the primary judge consisted of a number of informal requests Mr Kedem made to Johnson for discovery; several affidavits filed in the Supreme Court; transcripts of hearings in the District Court; an application to adjourn a callover in the Magistrates Court; correspondence between the civil registry of the District Court and Mr Kedem; correspondence between Mr Chrzaszcz and Mr Kedem; correspondence between the Legal Practitioners Conduct Board and Mr Kedem; a tax invoice of Mr Lazarevich to Terry Charatsis; a sealed copy of Mr Kedem’s defence and counterclaim in the Pepper action; various medical reports relating to the motor vehicle accident; and a letter from an anaesthetist to Mr Kedem requesting consent to payment of his fees for an operation in September 2012.

73    The appeal is brought under s 25 of the Federal Court of Australia Act 1976 (Cth) (“FCA Act”). It is an appeal in the nature of a rehearing. A rehearing is not a new hearing (a “hearing de novo”) conducted without regard to the findings made in the court below. Error must be shown in the judgment of the primary judge. See Branir Pty Limited v Owston Nominees (No 2) Pty Ltd (2001) 117 FCR 424 at [14], [21], [25]. Allsop J (as his Honour then was) explained at [14]:

(T)he hearing of an appeal in this Court is neither a trial de novo nor a trial of the case afresh on the record (Duralla Pty Ltd v Plant (1984) 2 FCR 342) and the court is not obliged to proceed to make new findings of fact on all relevant issues and discharge the judgment appealed from if those findings differ from those of the trial judge and do not support the judgment. The Court must be satisfied that the judgment of the trial judge is erroneous and it may be so satisfied if it reaches the conclusion that the trial judge failed to draw inferences that should have been drawn from the facts established by the evidence. The court is unlikely to be so satisfied if all that is shown is that the trial judge made a choice between competing inferences, being a choice the court may not have been inclined to make but not a choice the trial judge should not have made.

74    The Court may in its discretion receive further evidence in an appeal: FCA Act, s 27. The power is not confined to “fresh evidence”, that is to say, evidence of which an applicant was unaware at the time of the original hearing and could not have obtained with reasonable diligence: cf. CDJ v VAJ (No 1) (1998) 197 CLR 172 (a case concerned with a similar provision in s 93A(2) of the Family Law Act 1975 (Cth)). But this circumstance is not irrelevant. Indeed, in many cases it would be “most material” to consider whether the evidence could have been called at trial: August v Commissioner of Taxation (2013) 2013 ATC ¶20-406; [2013] FCAFC 85 (“August v Commissioner of Taxation”) at [116]. The discretion is not at large, despite the absence of any express limitations.

75    As the Full Court observed in Sobey v Nicol and Davies as Joint and Several Receivers and Managers of the Property of Mercorella and the Scheme and as Joint and Several Liquidators of the Scheme (2007) 245 ALR 389; [2007] FCAFC 136 (“Sobey v Nicol”) at [71]-[72]:

The discretion to receive further evidence must be exercised judicially, consistently with proper judicial process and in the interests of justice. It is highly unlikely that the legislature intended that s 27 should be construed in such a way as to obliterate the distinction between original and appellate jurisdiction.

The proper role of an appellate court under s 25 of the Federal Court Act … is ordinarily to correct error. Nothing in CDJ was, in our view, intended to minimise the force of the observation of Gibbs CJ and Wilson, Brennan and Dawson JJ in Coulton v Holcombe (1986) 162 CLR 1 at 7 … that:

It is fundamental to the due administration of justice that the substantial issues between the parties are ordinarily settled at the trial. If it were not so the main arena for the settlement of disputes would move from the court of first instance to the appellate court, tending to reduce the proceedings in the former court to little more than a preliminary skirmish.

76    The power is remedial: August v Commissioner of Taxation at [119]. One important consideration in determining whether it should be exercised is whether the further evidence would have produced, or at least would be likely to have produced, a different result had it been available at the trial.

77    At the hearing, we declined to receive Mr Kedem’s further evidence. It follows that the interlocutory application must be dismissed. We indicated at the time that we would give our reasons later. These are those reasons.

78    First, the relevance of the evidence to the grounds of appeal is largely obscure.

79    Secondly, for the most part no explanation was offered as to why the evidence was not adduced before the primary judge.

80    At the hearing Mr Kedem told the Court that the primary judge did not ask him for the evidence and that, had his Honour done so, he would have produced it. But it was not the judge’s responsibility to seek out evidence. The onus was on Mr Kedem to satisfy the Court that he should be granted an extension of time. It was up to him to present the evidence.

81    Mr Kedem also said that he had not appreciated the possible relevance of the documents relating to the motor vehicle accident until he had read the terms of s 48 of the Limitation Act in the primary judge’s reasons. In substance, this is a claim that he did not know the law before he read the judgment. That is no proper basis for an appellate court to receive further evidence.

82    Thirdly, the application was made only 10 days before the hearing of the appeal. Rule 36.57 of the Federal Court Rules requires that any application to receive further evidence on appeal be filed at least 21 days before the hearing. It also requires that the application be accompanied by an affidavit stating:

(a)    the facts relating to the grounds of the application;

(b)    the grounds of appeal to which the application relates;

(c)    the evidence that the applicant wants the Court to receive;

(d)    why the evidence was not adduced in the court appealed from.

83    The affidavit Mr Kedem filed in support of the interlocutory application did not state the facts relating to the grounds of the application. Nor did it state the grounds of appeal to which the application related. And it offered no explanation as to why the evidence was not before the primary judge.

84    While the Court has power to dispense with the rules, there is no proper basis for doing so in this case. While we accept that some of the material would be familiar to Johnson, it was unfair to require it to deal with it at this point in the proceeding.

85    Fourthly, there is no reason to suppose that the evidence was not available at the time of the original hearing or that, with reasonable diligence, it could not have been obtained in sufficient time to enable it to be tendered at that hearing. Some of the documents post-date the hearing but they contain information or opinion that would have been available to Mr Kedem well before the hearing.

86    Finally, we are not persuaded that it is likely that any of the further evidence would have produced a different result if it had been presented at the trial. We would make two particular observations about the medical evidence.

87    Assuming Mr Kedem had leave to rely in the appeal on s 45 of the Limitation Act, the new evidence concerning the stroke (Dr Chen’s report of 8 August 2013) is silent on the critical question of whether that condition made him “incapable of reasoning or acting rationally in relation to the action or proceeding”.

88    It is impossible to see how the motor vehicle accident or its impact on Mr Kedem’s health falls within the terms of s 48(3)(b)(i). Subsection (3a) provides that a fact is not to be regarded as material to the plaintiff’s case for the purposes of subs (3)(b)(i) unless it forms an essential element of his cause of action or it would have major significance on an assessment of his loss. Neither the accident nor the injuries and disabilities that it may have caused were essential elements of any of Mr Kedem’s causes of action against Johnson nor would they have had any significance to the assessment of his loss.

89    This evidence does not therefore call into question the primary judge’s finding (at [89] of his judgment) that none of the facts Mr Kedem alleged in relation to his claim for an extension of time amounted to a fact or an alleged fact which was material to his case and which he discovered within the relevant 12 month period (October 2010 to October 2011). Furthermore, the grounds of appeal do not challenge this finding. In the light of the finding, the evidence relating to the motor vehicle accident could not have produced a different result had it been adduced at trial.

90    The evidence would have been relevant to the exercise of the Court’s discretion to grant an extension, but Mr Kedem failed to bring himself within the terms of the section so as to enliven the Court’s discretion. The same must be said of the evidence relating to the stroke and its effects.

91    In addition, the evidence relating to the motor vehicle accident does not explain the delay. Furthermore, it smacks of recent invention. Had Mr Kedem’s injuries or the treatment he was receiving for them affected his capacity to bring proceedings against Johnson, it is inconceivable that he would not have referred to them in the court below.

CONSIDERATION

92    As we have already mentioned, Mr Kedem did not argue that the primary judge was wrong to conclude that the causes of action were statute-barred. The appeal was concerned only with the decision to refuse an extension of time to sue at common law.

The order for a separate trial

93    The complaint about the order for a separate trial was not the subject of a ground of appeal. The submission was therefore irrelevant. That is sufficient of itself to dispose of the argument. In any event, the submission was never developed. There is nothing to indicate that Mr Kedem opposed the making of the order. He does not say so.

94    Having regard to the breadth of Mr Kedem’s application and the considerations of cost, efficiency and case management which s 37M of the FCA Act requires the Court to take into account in exercising its powers, his Honour’s decision to make the order is entirely understandable.

95    The decision to order a separate trial of the limitation issues was a discretionary decision concerning a matter of practice and procedure. Appellate courts are particularly cautious about reviewing decisions of this kind. The appellant must show that there has been an error of principle and that the error has resulted in a substantial injustice: Adam P Browne Male Fashions Pty Ltd v Phillip Morris Inc (1981) 148 CLR 170 at 177. Mr Kedem failed to show that the decision was affected by any error of principle. Moreover, we do not consider that, if there were any such error, it resulted in a substantial injustice.

96    For all these reasons the submission must be rejected.

Section 48(3)(b)(i) of the Limitation Act

97    Mr Kedem’s case was that he gave certain instructions to Johnson to settle the Pepper action and that Johnson failed to act on those instructions, that Johnson was negligent in the presentation of the argument to the Supreme Court, and that Johnson failed to bring a counterclaim.

98    Mr Kedem did not contest the finding that he knew in July 2005 that Johnson had failed to follow his instructions to make an offer of settlement to Pepper. Indeed, he was in no position to contest the finding. His emails to Johnson of 29 and 30 July 2005 made that very allegation.

99    As the primary judge pointed out at [106], Mr Kedem swore affidavits on 4 and 28 July 2011 in support of the application to set aside the taxation of costs which disclosed his claims against Johnson as a basis for his dispute over the payment of costs. These affidavits were filed before the end of the limitation period.

100    The primary judge did not advert specifically to Mr Kedem’s complaint relating to negligence in the presentation of the argument. Rather, his Honour referred in a general sense to the allegation of negligence “in [the] conduct of the Supreme Court action” (for example, in [92]). We were taken to no evidence to suggest that Mr Kedem was unaware of the material facts in relation to this aspect of his claim and Mr Kedem made no submissions on the subject. In any event, that part of his case would be doomed to fail, as Johnson would be immune from such a suit: Giannarelli v Wraith (1988) 165 CLR 543; D’Orta-Ekenaike v Victoria Legal Aid (2005) 223 CLR 1. See also Keefe v Marks (1989) 16 NSWLR 713 at 718 per Gleeson CJ.

101    As for the counterclaim, in his affidavit of 5 September 2012 Mr Kedem stated that he “always wanted to ‘counter claim’ against pepper for all their breechings of contract & illegal activities but johnsons … refused to do that …”.

102    It follows that before October 2011 Mr Kedem was aware of the alleged facts material to his claim and that his Honour was correct to find that under s 48(3)(b)(i) the Court was not empowered to extend the limitation period.

Section 48(3)(b)(ii) of the Limitation Act

103    Mr Kedem argued that he needed access to Johnson’s file to institute proceedings against the firm. He alleged that its refusal to give him access was at least a reason he failed to institute proceedings before the end of the limitation period. His Honour found otherwise. We are not persuaded that he was wrong to do so.

104    We also agree with the primary judge (at [93]–[94]) that Johnson could have applied for pre-action discovery (under r 7.23 or its predecessor - O 15A r 6 of the Federal Court Rules 1979 (Cth)) or filed an originating application and sought discovery in the course of the proceeding. This latter course is the one he ultimately followed.

105    In any event, Mr Kedem did not need documents to plead his case. He was not seeking discovery to see whether he had a case. Mr Kedem made it clear that he wanted the documents in order to corroborate his claim – to confirm what he was saying. The inability to produce documents is not synonymous with ignorance of a material fact.

106    There is no evidence to support Mr Kedem’s contention that Johnson deliberately tried to recover its fees in order to prevent him from discovering its negligence or to distract him from pursuing a claim against the firm.

107    For these reasons we are not satisfied that the primary judge was wrong to find that s 48(3)(b)(ii) was not engaged.

Additional arguments on the appeal

The counterclaim

108    In his submissions on the appeal Mr Kedem contended that he was told by the registrars of the District and Supreme Courts (he did not say when) that he could not bring a counterclaim against Johnson in the costs litigation. We took him to be putting this forward as part of the explanation for the delay in suing Johnson and as a submission that his Honour erred in his understanding of Mr Kedem’s complaint about the counterclaim. It does not appear that this submission was ever put to the primary judge, although in his affidavit of 5 September 2012 Mr Kedem did give as a reason for the delay that “at that time [without giving the time] [he] was told by the district court that it’s a hearing about costs only & that a counterclaim could not be heard at the same time”. There are several answers to the submission.

109    First, it does not impugn Johnson. Secondly, it does not explain why he did not bring these proceedings. Thirdly, his Honour was not mistaken. The allegation Mr Kedem squarely made in the court below was that Johnson failed to file “a defence and counterclaim against [Pepper]”. As we have already mentioned, in his affidavit of 5 September 2012 he asserted that Johnson had refused to follow his instructions to counterclaim in the Pepper proceedings. In another document Mr Kedem filed on 2 November 2012, he asserted under the heading “Failure to initiate counterclaim” that he recalled “asking Mr Lazarevich (scil.) & [Johnson] to initiate a defence & counterclaim against ‘Pepper’ on several occasions”. Indeed, he made the same allegation in the affidavit in support of the notice of appeal.

The motor vehicle accident

110    Leave should be refused to argue that the motor vehicle accident contributed to the delay in bringing the proceedings. The argument raises potentially controversial facts. A point cannot be raised for the first time on appeal when it could possibly have been met by calling evidence below: Water Board v Moustakas (1988) 180 CLR 491 at 497. When asked why he had not raised this matter below, Mr Kedem said that he was not aware that the accident was relevant to the question of the extension of time. As we have already observed, this explanation is difficult to accept. In any event, even if the argument had been put to the primary judge, it could not have overcome the problems Mr Kedem faced under s 48(3)(b), for neither the accident nor its consequences amounted to a fact material to his case (as defined in subs (3a)), nor is there any evidence to connect the accident or its effects to Johnson’s conduct.

Section 45 of the Limitation Act

111    Mr Kedem also required leave to raise this argument on appeal. Once again, leave should be refused. As the evidence is insufficient to establish that Mr Kedem was under a disability, it would be futile to allow the argument to be raised.

No power to extend the limitation period

112    These considerations are sufficient to dispose of the appeal. In the circumstances, the primary judge was correct to hold that Mr Kedem did not satisfy the requirements of s 48(3)(b). Consequently the Court had no power to extend the limitation period and the discretion was not enlivened. However, for completeness we will deal with the remaining arguments relating to the exercise of the discretion.

Discretionary reasons

113    An appeal from the exercise of a discretion can only be set aside in discrete circumstances. As the plurality explained in House v The King (1936) 55 CLR 499 (“House”) at 504–505:

It is not enough that the judges composing the appellate court consider that, if they had been in the position of the primary judge, they would have taken a different course. It must appear that some error has been made in exercising the discretion.

If the judge acts upon a wrong principle, if he allows extraneous or irrelevant matters to guide or affect him, if he mistakes the facts, if he does not take into account some material consideration, then his determination should be reviewed and the appellate court may exercise its own discretion in substitution for his if it has the materials for doing so. It may not appear how the primary judge has reached the result embodied in his order, but, if upon the facts it is unreasonable or plainly unjust, the appellate court may infer that in some way there has been a failure properly to exercise the discretion which the law reposes in the court of first instance.

114    Mr Kedem was not legally represented. He did not argue that there was a failure to conform to the principles in House. But we have examined the reasoning of the primary judge against the principles in House. That examination leads us to the conclusion that there was no error of the type there identified.

115    Mr Kedem argued that the primary judge was wrong to reject his application for an extension of time. The main focus of the argument was that the primary judge was wrong to find that his stroke did not explain the delay. But the finding was clearly open.

116    The evidence before the primary judge concerning the stroke was very limited. It consisted of a discharge sheet from the Royal Adelaide Hospital. That showed that Mr Kedem had suffered a stroke in December 2004 and that he discharged himself without authority soon afterwards. There was no medical evidence about the effects of the stroke on his ability to start proceedings against Johnson before the end of the limitation period. (As we have already mentioned, the new evidence Mr Kedem wanted the Court to receive did not touch on this question either.) The primary judge relied on the fact that in 2005 Mr Kedem was actively involved in the Supreme Court action brought by Pepper. This was a relevant consideration. Mr Kedem did not suggest otherwise. The primary judge also relied on Mr Kedem’s participation in the defence of the various proceedings relating to the costs dispute. That, too, was relevant. In the course of that process Mr Kedem swore two affidavits before the limitation period expired. Those affidavits disclose a clear understanding of the basis of the claim which Mr Kedem believed he had against Johnson.

117    It is unsurprising, then, that the primary judge was not persuaded that Johnson’s delay in pursuing its costs was a reason for Mr Kedem’s delay in suing Johnson and hence a basis for extending the limitation period. Mr Kedem did not press this argument with any force on the appeal. In any event, the primary judge explained why he was not convinced by the assertion. His Honour’s reasoning was cogent, taking into account the circumstances of the case before him. It does not disclose appealable error.

118    His Honour’s findings in relation to the counterclaim were also open and unaffected by appealable error. A defence and counterclaim, settled by Mr Lazarevich, had been filed by Mr Kedem’s previous solicitors in the Pepper action (Grestsas Chrzaszcz) and, although he later contended that it had not been amended or pursued, Mr Kedem never articulated the amendment(s) that should have been made. The counterclaim was clearly pursued. The Master referred to it at [18] as follows:

The defendant [Mr Kedem] changed solicitors and on 6 June 2005 a defence and counterclaim was filed in which the defendant claimed that the plaintiff [Pepper] was in breach of the loan contract in a number of ways. He alleged that in acting in the way that it had the plaintiff was guilty of unconscionable conduct against the defendant within the meaning of Section 12CB or Section 12CC of the Australian Securities and Investments Commission Act. The defendant pleaded that if he was in default of the terms and conditions of the loan then he was only in default because of the conduct of the plaintiff. The defence and counterclaim then pleaded that the plaintiff had waived its right to proceed on the Notices of Default by reason of the settlement that he alleged had occurred in October 2004. The defendant complained further that the plaintiff wrongfully attributed legal costs to his account which caused his loan statements to be misleading and deceptive and that had an impact on his ability to refinance. The defendant sought that the plaintiff’s claim be dismissed or in the alternative relief against rights of enforcement pursuant to Section 55A(3) of the Law of Property Act. He also sought an order pursuant to Section 12GD and/or Section 12GM of the Australian Securities and Investments Commission Act requiring the plaintiff to provide him with an accurate loan account statement which did not include the wrongful default interest and litigation costs.

119    Mr Kedem challenged some of the findings of fact made by the primary judge. He argued that his application had merit and the primary judge came to the wrong conclusion on the merits of his case. Some of the factual findings were inconsequential. Others were open to his Honour on the evidence. None is infected by appealable error.

120    Mr Kedem complained about the finding (at [100]) to the effect that, even if he had the power to extend the limitation period, “the interests of justice … favour bringing an end to the claims against [Johnson]”. He argued to the contrary. But none of his arguments engaged with his Honour’s reasons. Rather, they merely reiterated the factual contentions underlying his substantive claims. In any event, having regard to his Honour’s findings to the effect that he had not made out any ground upon which the discretion could be enlivened, any error in this part of the reasons would make no difference to the outcome.

121    As the primary judge’s decision on the question of discretion was based only on the first three reasons he set out at [96]-[98], it is unnecessary to say anything about his Honour’s observations about the consequences of any failure to put a settlement offer.

conclusion

122    For all these reasons the appeal must be dismissed with costs.

Associate:

Dated:    5 February 2014