Abode P/L v Beverage Bottlers (SA) Ltd (in Liquidation) & Robert Milton Lapointe
[2008] SADC 163
•26 November 2008
DISTRICT COURT OF SOUTH AUSTRALIA
(Civil: Appeal Against a Master's Decision)
ABODE P/L v BEVERAGE BOTTLERS (SA) LTD (IN LIQUIDATION) & ROBERT MILTON LAPOINTE
[2008] SADC 163
Judgment of His Honour Judge Burley
26 November 2008
PROCEDURE - COURTS AND JUDGES GENERALLY - COURTS - DISMISSAL OF PROCEEDINGS FOR WANT OF PROSECUTION
Appeal from master against decision to dismiss proceedings for want of prosecution – substance of action related to whether plaintiff was entitled, pursuant to a lease indenture and deed of guarantee and indemnity, to be indemnified against losses incurred – additional alternative claim – five year delay in obtaining expert report – whether appellant guilty of inexcusable and inordinate delay – whether any prejudice arising from potential witness’s memory impairment and the death of a potential witness caused by appellant – expert report related to issues unrelated to evidence of potential witness – respondents' failure to obtain statement from material witness - second respondent's failure to commence third party proceedings - appellant held not responsible for prejudice arising from witness’s memory impairment – whether subsequent death of director of lessee company prejudiced second defendant from bringing third party claim for indemnity – alleged prejudice held to be caused just as much by second respondent’s decision not to take third party proceedings as appellant’s delay – prejudice from witness’s memory impairment and director’s death held not to arise solely or predominantly from appellant’s delay – appeal allowed.
District Court Rules 1992 r 2.09, 97.01; District Court Act 1991 s 43; District Court Civil Rules 2006 r 17, 292; Trade Practices Act 1974 (Cth) s 52, 82, referred to.
BQ & HM Doe Pty Ltd v National Australia Bank [1999] SASC 124; Ulowski v Miller [1968] SASR 277, applied.
Bennett v WMC (Olympic Dam Corporation) Pty Ltd [2008] SADC 42; Birkett v James [1978] AC 297; Brisbane South Regional Health Authority v Taylor (1996) 186 CLR 541; House v The King (1936) 55 CLR 499; Niemann v Electronic Industries Ltd [1978] VR 431; Wardley Australia Ltd v State of Western Australia (Rothwell's Loan Case) (1992) 175 CLR 514; Williams v F S Evans & Sons (1988) 52 SASR 237, discussed.
WORDS AND PHRASES CONSIDERED/DEFINED
"Inordinate and inexcusable delay."
ABODE P/L v BEVERAGE BOTTLERS (SA) LTD (IN LIQUIDATION) & ROBERT MILTON LAPOINTE
[2008] SADC 163Judge Burley
Civil
This is an appeal by the plaintiff from the decision of a master, handed down on 15 February 2008, when he granted the defendants’ application, dated 18 May 2007 (FDN 32), and ordered that the proceedings be dismissed for want of prosecution. At the hearing before the Master it was common ground that, to the extent (if any) that they were applicable, the District Court Rules 1992 applied to the respondents’ application. It was also common ground that there was no specific rule within the Rules conferring upon the Court power to dismiss proceedings for want of prosecution. Both parties accepted that the Court had an inherent jurisdiction to do so: BQ & HM Doe Pty Ltd v National Australia Bank [1999] SASC 124 at [71]. In that case Lander J cited the decision of the House of Lords in Birkett v James [1978] AC 297 as authority for the proposition that the Court had inherent jurisdiction to dismiss proceedings for want of prosecution. Although the appellant argued that that decision has not been followed in South Australia, I do not understand the appellant to have asserted that the Court lacks the inherent jurisdiction referred to in the decision.
The inherent jurisdiction is not to be confused with the provisions of Rule 2.09 of the Rules. That Rule is limited to an application based on a failure of a party to proceed with the hearing of an action or application at the time fixed for such hearing: BQ & HM Doe Pty Ltd v National Australia Bank (supra) at [75].
The main issue arising on this appeal is whether the appellant, by reason of significant delays in the prosecution of these proceedings, is materially responsible for prejudice to the respondents consisting of an inability to call potential witnesses who may, or may not, have given evidence favourable to the respective respondents in relation to: (a) these proceedings; and (b) a potential third party claim which the second respondent asserts is available to him. If not, the appellant contends that the appeal should be allowed.
Appeals from Masters
Section 43 of the District Court Act 1991 provides:
(1)A party to an action may, in accordance with the Rules of the appellate court, appeal against any judgment given in the action.
(2)The appeal lies–
(a) In the case of a judgment given by a master or the court constituted of a master – to the court constituted of a judge.
The applicable rules of court are the District Court Civil Rules 2006. DCR 17 provides that an appeal lies as of right from a judgment of a master to the court constituted of a judge. DCR 292 provides:
(1)An appeal is to be by way of rehearing (unless the law under which the appeal is brought provides to the contrary).
(2)Subject to any limitation on its powers arising apart from these Rules, a court may determine an appeal as the justice of the case requires despite the failure of the parties to the appeal to raise relevant grounds of appeal, or to state grounds of appeal appropriately, in the Notice of Appeal.
(3)Subject to any limitation on its powers arising apart from these Rules, the court may –
(a) draw inferences of fact from evidence taken at the original hearing and, in its discretion, hear further evidence on a question of fact;
(b) amend or set aside the judgment subject to the appeal and give any judgment that the justice of the case requires;
(c) remit the case or part of the case for rehearing or reconsideration;
(d) make orders for the costs of the appeal.
As Simpson DCJ pointed out in Bennett v WMC (Olympic Dam Corporation) Pty Ltd [2008] SADC 42, the current provisions are to be contrasted with Rule 97.01 of the former District Court Rules which provided that the judge hearing the appeal “may exercise his own discretion without regard to the manner in which it was exercised in the decision order or direction appealed against”. She said that the appellate court must be:
… satisfied that the decision [appealed against] is a product of the decision maker acting on a wrong principle, or giving weight to extraneous irrelevant matters, or failing to give weight or sufficient weight to relevant considerations, or making a mistake as to the facts.
Her Honour referred to a number of authorities including House v The King (1936) 55 CLR 499 at 504-505. Both the appellant and the respondents accepted, as do I, that that is the correct approach to be taken on this appeal.
The Case Law
The Master dealt with the applicable legal principles at [206] et seq of his reasons. He referred to a number of decisions, including Ulowski v Miller [1968] SASR 277 and BQ & HM Doe Pty Ltd v National Australia Bank (supra). He correctly identified the principles set out in the decision of Lander J in BQ & HM Doe Pty Ltd. In particular, he accepted that the decision of the Full Court in Ulowski v Miller represented the law in South Australia relating to applications to dismiss proceedings for want of prosecution.
The Master identified, correctly in my view, that in the circumstances of this application, two factors were of decisive importance: first, whether the plaintiff had been guilty of inordinate and inexcusable delay; and, second, whether such delay involved “the substantial risk that a fair trial of the issues would not be possible due to the delay in the prosecution of the proceedings”: per Lander J in BQ & HM Doe Pty Ltd at [71]. The cases also refer to contumelious behaviour, but it was not suggested, either before the Master or on appeal, that the appellant’s conduct was contumelious.
The Master came to the view that the respondents had made out a case for an order for dismissal for want of prosecution and he dismissed the proceedings accordingly. He gave detailed reasons for his decision. The appellants have, pursuant to leave granted on 13 August 2008, filed amended grounds of appeal.
The grounds of appeal
The first ground of appeal raises a number of considerations. The appellant complains that, in reviewing the various factors affecting the exercise of the discretion, the Master took into account a limitation period of six years whereas, the appellant contended, the relevant limitation period is 15 years. If the latter contention is correct, the exercise of the discretion would have been affected because the Master would have made a decision at a time when it was open to the appellant to commence fresh proceedings even if the current proceedings were dismissed for want of prosecution. In the case of a six-year time limit, by the time the Master was called upon to decide the application, the six-year period had expired. The difference in the exercise of the discretion, as I understand the appellant’s argument, is that, if the limitation period were 15 years, it could be argued that there is no point in dismissing the proceedings for want of prosecution because the appellant can start again, whereas if it were six years, there is a point in dismissing the proceedings if the ingredients of the application are made out, because the respondents will then never be put in a position of having to participate in a trial at a time when it would be unfair to them to be required to do so.
As part of the first ground of appeal (as against both respondents), the appellant added that, in any event, the action should not have been dismissed because it had not been guilty of inordinate and inexcusable delay.
Paragraph 2 of the Amended Notice of Appeal raises further grounds said to be in the alternative to the grounds set out in paragraph 1. I am not sure that they are true alternatives. The first of such grounds is really the corollary of the third part of paragraph 1 of the Amended Notice of Appeal, namely that the appellant contended that it had not been guilty of inordinate and inexcusable delay. All that paragraph 2.1 does is state that the Master erred in finding (impliedly) that the appellant had been guilty of inordinate and inexcusable delay.
Paragraph 2.2 asserts that the Master erred in not expressing reasons in support of the implied finding that the appellant had been guilty of inordinate and inexcusable delay. The particulars of that assertion are to be found in paragraph 2.2.2 where it is asserted that the Master failed to make any express finding as to the causes of the delay and as to whether any period of delay was excused or excusable.
Paragraph 3 of the Amended Notice of Appeal contends that the Master erred in finding that the risk of an unfair trial had been created by the delays, the unfairness arising from the impairment of the memory of a potential witness, the solicitor Mr La Vincente. Paragraph 3A asserts that the Master should have found on the evidence that any prejudice to the respondents arising from the impairment of Mr La Vincente’s memory arose, not from delay on the part of the appellant, but from deliberate acts or, in the alternative, omissions, of the second respondent and his legal advisors.
Paragraphs 4 and 5 of the Amended Notice of Appeal deal with grounds as against the second respondent and paragraph 6 of the amended Notice deals with a ground as against the first respondent.
Paragraph 4 involves a consideration of whether the second respondent was prejudiced because the prosecution of a claim for indemnity (by third party proceedings) that may have been available to him was affected by the death of a Mr Sutton. This ground, like Ground 3A, raises questions of causation, namely whether, on the assumption that the plaintiff had been guilty of inordinate and inexcusable delay, such delay caused the particular prejudice to the respective respondents in the conduct of their defence to the proceedings or in the prosecution of third party proceedings.
Paragraph 6 asserts that the Master erred in concluding that both respondents “had been put at risk of not obtaining a fair trial or an indemnity, in that the indemnity issue applies only to the second” respondent. As I understand it, the respondents accept that it was only the second respondent who asserted that a claim for indemnity was available.
Chronology of events
The Master set out in his reasons a detailed chronology of events ([8] – [138]). His findings in that regard are not challenged. I set out below some of the relevant paragraphs from his reasons which, together with additional comments of mine, provide a convenient means of reference to the chronology of events which preceded the respondents’ application. I have retained the paragraph numbers used in the Master’s reasons so that they may be readily recognised as a quotation from his reasons. Where I have referred to additional facts, these have been gleaned from the affidavits filed by the parties.
8 The following background has been obtained from the affidavit material on file.
9On 9 February 1988 the plaintiff and the defendants entered into a deed of guarantee and indemnity.
The recitals contained in the guarantee and indemnity are as follows:
WHEREAS:
A. The lessor is the registered proprietor or entitled to be registered as the proprietor of an estate in fee simple in the whole of the land comprised in Certificates of Title Register Book Volume 2298 Folios 187, 188 and 189 (herein after called “the said Land”).
B. At the request of Diverse and LaPointe the lessor has entered into a certain indenture for lease bearing or intended to bear even date herewith (herein called “the Indenture”) with Sizzler Restaurants Australia Ltd and Spignel Pty Ltd (herein called the “Lessee”) pursuant to which indenture the lessor is to construct and erect on the land certain buildings and other improvements and thereafter the Lessor shall lease and the Lessee shall take on lease the whole of the said land subject to and upon the terms and conditions of a certain memorandum of lease annexed to the indenture (herein after called “the Lease”).
C. The Lessor has agreed to enter into the Indenture and to grant the lease to the Lessee at the request of Diverse and LaPointe.
D. Diverse and LaPointe have agreed to indemnify the Lessor in the proportions hereafter set out against all costs expenses losses and damages which the Lessor may suffer or sustain as a result of the breach or default by the Lessees pursuant to the Indenture and/or the Lease.
E. Diverse has agreed to indemnify the Lessor from and against 50 per centum (50%) only of all costs expenses losses and damages which the Lessor may suffer or sustain as a result of the breach or default by the Lessee pursuant to the Indenture and/or the Lease.
F. LaPointe has agreed to indemnify the Lessor from and against 50 per centum (50%) only (being the remainder) of all costs expenses losses and damages the Lessor may suffer or sustain as a result of the breach or default by the Lessee pursuant to the Indenture and/or the Lease.
At the same time (9 February 1988), the document described as “the Lease Indenture” in paragraph 3 of the Further More Explicit Statement of Claim (the Statement of Claim) was entered into between the appellant on the one part and the two companies referred to at paragraph 10 of the Master’s reasons, namely Spignel and Sizzler. The recitals in that indenture set out its purpose as follows:
WHEREAS:
A. The lessor is or is entitled to be registered as the proprietor for estate in fee simple in the whole of the land referred to in the first schedule hereto (herein after called “the Land”).
B. The lessor has agreed with the lessee that the lessor shall construct or cause to be constructed on the land a building in accordance with the plans and specifications; and
C. The lessor has agreed to grant the lessee and the lessee has agreed to accept from the lessor a lease of the demised premises herein specified upon the terms and conditions set out herein.
10On 17 June 1988 the plaintiff entered into a lease with Spignel Pty Ltd (Spignel) and Sizzler Restaurants Australia Ltd (Sizzler) over a Sizzler restaurant situated on Main North Road, Enfield.
11On 24 December 1990 the first defendant (“Beverage”) sold its interest in Spignel and thereby, it has contended, it had no involvement in the property thereafter.
Beverage, the first respondent, may have had no involvement, but that is not the same as being released from its obligations under the Guarantee and Indemnity.
12On 10 April 1991 a deed was entered into by the plaintiff, Sizzler, Spignel, and Jardine Australian Restaurants (Vic) Pty Ltd (“Jardine”), whereby all of Spignel’s interest in the lease was transferred to Sizzler.
By the deed, Sizzler assigned to Jardine its estate and interest in Memorandum of Lease No 6558204 registered on the land previously referred to. Both the lessor (the appellant) and Spignel (the other lessee) consented to the assignment by their execution of the deed. That deed was given effect to by the registration of the transfer of a “leasehold [interest] as to one undivided moiety” registered on the relevant titles. The transfer was dated 10 April 1991 but was not registered until 14 May 1992. In addition, by a memorandum of transfer of lease which appears to have been dated 11 March 1992 but which contains the item (Item 8) – transfer date – the 11th day of August 1991 – Spignel transferred its interest in the relevant lease to Sizzler.
13In April 1997, the property was abandoned by the assignees of the original lessees and no further payments under the lease have [been] made since that date.
14On 23 September 1998, these proceedings were issued. The plaintiff claimed that the defendants were liable to it on the Deed of Guarantee of 9 February 1988 to make good certain breaches of the lease of 17 June 1988 (which would expire on 21 April 2008) by the assignees of the original lessees under the lease.
15On 2 October 1998, Piper Alderman, then solicitors for Beverage, filed an appearance and on 28 October 1998, Thomson Playford, then acting for the second defendant, (Mr LaPointe), filed an appearance on his behalf.
16On 21 December 1998 Piper Alderman filed a notice of acting on behalf of Mr LaPointe.
17Between October 1998 and May 1999 defences were filed by the defendants and during that time the plaintiff filed a more explicit statement of claim and subsequent amendments were made to the defences.
18All made [sic] parties made discovery during that period.
19In particular, Mr LaPointe filed his amended defence on 8 February 1999 and Beverage filed its amended defence on 16 February 1999.
…
24On 16 June 1999 a case evaluation conference was held at the District Court. The defendants’ solicitors advised the Court of an intention to apply for an order that issues related to the construction of certain documents relevant to the question of whether or not the defendants remained liable under the guarantee be determined as a preliminary point.
The “construction issues” relate to paragraphs 1-9 of the Statement of Claim which are set out later in these reasons. They constitute the appellant’s primary claim. The question of having the construction issues heard and determined before any other issues first arose prior to the introduction in mid-2000 of paragraphs 9A - 9H of the Statement of Claim by way of amendment. They constitute the appellant’s alternative claim.
In mid-1999 it was the respondents’ position that the primary claim could be determined as a matter of construction of the documents referred to in paragraphs 1-9. They contended, in particular, that, to the extent that the appellant consented to assignments of leasehold interests (as referred to in paragraph 26 of the Master’s reasons, set out below), the respondents would have no further liability under the guarantee and indemnity.
25Discussions on this matter took place thereafter but on 9 August 1999, the issue not being resolved, the defendants filed an application seeking an order for a separate trial of the construction issues.
26In the meantime, the defendants’ solicitor had inspected files maintained by Thompson Playford in relation to the Sizzler/Jardine lease transfer of April 1991 and the Spignel/Sizzler lease transfer of August 1991. During such inspection Ms Haslam inspected documents which she took the view had some relevance to the pleadings at that time and requested copies of those documents.
27Copies of these documents were received from Thomson Playford (“Thomsons”) on 23 June 1999.
28Thomsons kept the originals.
…
30On 6 August 1999 Ms Haslam prepared, on behalf of Mr LaPointe, a second list of documents. This discovered copies of documents obtained from her inspection of the Thomson’s files relevant to the proceedings.
31On 1 November 1999 the defendant’s application for a separate trial of the construction issues was argued before me. The application was opposed on the basis of additional delays and costs which would be incurred.
…
33 On 21 December 1999 I made orders requiring a separate trial on the construction issues.
…
38On 4 April 2000 an order was made listing the construction issues for trial commencing on 12 July 2000.
39On 3 May 2000 the plaintiff filed an application seeking to delay the trial of the action and seeking leave to amend its statement of claim.
…
This application ultimately led to the incorporation into the Statement of Claim of paragraphs 9A - 9H.
41On 10 May 2000 the plaintiff’s application seeking an amendment was heard by the court. The application was opposed, but the court vacated the trial date set for 12 July 2000 and adjourned the plaintiff’s application seeking an amendment, for argument on 25 July 2000.
…
49On 25 July 2000 orders were made, by consent, giving the plaintiff leave to amend its statement of claim. The plaintiff’s application for further and better discovery was adjourned, and the construction issues were listed for a three day trial commencing on 12 October 2000.
50At this time, the defendants’ solicitor advised the plaintiff’s solicitors that they were prepared to allow the amendments to be made provided the construction issues were listed for trial.
…
The Pleadings
It is appropriate, at this point, to examine the pleadings. By its Amended Statement Of Claim, the appellant pursues a claim said to be based on a Deed of Guarantee (paragraphs 1 – 9) and, in the alternative (paragraphs 9A - 9H), a claim based upon alleged agreements, implied representations and estoppel which were either entered into or took place, as the case may be, during March/April 1991 and August 1991 when, respectively, the original lessees transferred their interests each to another entity.
It is clear from paragraphs 9A - 9H of the Amended Statement of Claim that a solicitor, Mr La Vincente, is said to have played an important role, as solicitor for the respondents, in relation to the dealings between the relevant parties which led to the transfers of the respective lessee’s interest to other entities. It was part of the respondents’ case on the application before the Master that, by reason of the delays attributable to both the appellant and its solicitors, irremediable prejudice would be suffered by the respondents if the appellant’s alternative claim were to proceed, because Mr La Vincente now had no memory of the events referred to in paragraphs 9A – 9H of the Amended Statement of Claim.
This and other contentions put by the respondents require separate examination of the claim contained in paragraphs 1 – 9 of the Statement of Claim and the alternative claim contained at paragraphs 9A – 9H.
Mr Livesey QC, counsel for the respondents, contended that the argument now advanced by the appellant regarding the relationship between the primary and alternative claims was different from the contentions put to the Master. Mr McNamara QC, counsel for the appellant, contended that, on the application to dismiss the claim, the respondents put to the Master a different characterisation of the primary claim from that which they had previously advanced on an earlier application by the respondents for an order that the issues arising from paragraphs 1 – 9 of the Statement of Claim be heard and determined before any other issues (in particular damages) raised in the pleadings.
I set out below paragraphs 1 – 9 of the Further More Explicit Statement of Claim:
1. The plaintiff is and was at all times material to this action:
1.1.a company duly incorporated pursuant to the Companies (South Australia) Code and the Corporation law; and
1.2.the registered proprietor of the whole of the land described in Certificates of Title Register book Volume 4325 Folio 798 and Volume 2298 Folios 188 and 189 and more commonly known as 25 Main North Road, Enfield in the State of South Australia (“the Leased Premises”).
2.The first defendant is and was at all material times a duly incorporated company and was formerly named Diverse Products Ltd (“Diverse”). Leave to proceed against it has been granted on 25th July 2000 by this Honourable Court.
3.Pursuant to a certain Indenture (“the Lease Indenture”) between the plaintiff as lessor of the one part and Sizzler Restaurants Australia Ltd of 147 Victoria Avenue, Chatswood 2067 New South Wales (“Sizzler”) and Spignel Pty Ltd of 29 Port Road, Thebarton 5031 in the State of South Australia (“Spignel”) as lessees of the other part the plaintiff agreed with Sizzler and Spignel to construct certain improvements to the Leased Premises in consideration of Sizzler and Spignel agreeing to enter into a certain lease a copy of which lease is annexed to the lease Indenture.
4.On or about the 17th day of June 1988 the plaintiff (as lessor) entered into a memorandum of lease registered number 6558204 (“the Lease”) with Sizzler and Spignel (as lessees) in the terms of the lease annexed to the Lease Indenture.
5. The Lease contained, inter alia, the following terms and conditions.
5.1.The original term of the lease was twenty years commencing on the 22nd day of April 1988 and expiring at midnight on the 21st day of April 2008 (“the Lease Term”).
5.2.The commencing annual rent payable by the lessees Sizzler and Spignel was $158,500.00 payable by consecutive calendar monthly instalments equivalent to 1/12th of the annual rent always in advance the first of such instalment to be paid on the date of commencement of the Lease and thereafter on the first day of each and every month (“commencing annual rental”).
5.3.The commencing annual rental was to be reviewed every two years following the commencement of the Lease and was to be reviewed to the higher of the Adelaide Consumer Price Index movement or the then current market rent provided only that no one rent review would produce an increase of greater than 16% (“Lease Rent Reviews”).
5.4.The word “Lessee” where appearing in the Lease means and includes Spignel and Sizzler jointly and severally and where the context admits the assigns of such companies jointly and severally and where the context admits the successors and permitted assigns of such companies.
5.5.“Permitted Use” means the business of a licensed “Sizzler” Steak Seafood and Salad Restaurant and the lessee is not to use the Leased Premises otherwise than for the Permitted Use without the consent of the Lessor which consent the Lessor shall not unreasonably withhold.
5.6.The lessee is to pay all rates and taxes, assessments charges and impositions including the State Land Tax on a single holding basis, water and sewerage rates and council rates and pay all charges for gas, electricity, oil, telephone and all other like services.
5.7.The lessee is not without the consent of the Lessor to assign or transfer possession of the Leased Premises without the consent of the lessor which shall not be unreasonably withheld.
5.8.The essential terms of the Lease include the lessee’s covenant to pay rent, to pay rates and taxes, not to assign without consent, not to use the Leased Premises for other than the Permitted Use without consent.
5.9.The lessee covenants to compensate the Lessor in respect of any breach of any essential term which entitlement of the Lessor shall not be prejudiced by the lessor exercising its right of re-entry.
5.10.The Lessor shall be entitled to recover damages against the lessee for damage suffered by the Lessor during the entire term of the lease (refer sub-clause 4.1.3.4. of the Lease) and the Lessor’s entitlement to so recover shall not be affected or limited in any way by the lessee’s abandonment of the Leased Premises, the Lessor’s re-entry of the Leased Premises or the parties conduct constituting a surrender of the lease by operation of law.
5.11.The Lessor shall be entitled to institute legal proceedings claiming damages against the lessee in respect of the entire term of the Lease including the periods before and after the lessee has vacated the Leased Premises and before and after the abandonment, termination, repudiation, acceptance or surrender by operation of law referred to in sub-paragraph 5.10 above.
5.12.The Lessor shall be obliged to take reasonable steps to mitigate its damages and to endeavour to lease the Lease Premises at a reasonable rent and on reasonable terms.
5.13.The lessee is to pay to the Lessor entered at the rate of twenty percent (20%) per annum on any monies due but unpaid fourteen days after the same fell due such interest to be computed from the due date for the payment until payment is made.
5.14.That costs of and incidental to the recovery of rent due and unpaid interest thereof and the Lessor’s costs and expenses incurred by remedying or attempting to remedy any breach of the lessee’s covenant shall be deemed and treated as additional rent falling due and payable on the date on which such rent interests costs and expenses become due.
6.Pursuant to a certain Deed made the 10th day of April 1991 between the plaintiff as lessor, Sizzler as the assignor, Spignel as Spignel and Jardine as the assignee (“the Sizzler/Jardine Lease Transfer”) Sizzler transferred its interest in the Lease as to one undivided moiety to Jardine Australian Restaurants (Vic) Pty Ltd (“Jardine”). Registration of the Sizzler/Jardine Lease Transfer was effected by Memorandum of Transfer of Lease registered number 8212050.
7.By Memorandum of Transfer of Lease registered number 7273543 Spignel transferred to Sizzler its interest in the Lease as to one undivided moiety the effective date of such transfer being the 11th day of August 1991 and which transfer was consented to under certain terms and conditions by the plaintiff (“the Spignel/Sizzler Lease Transfer”).
8.By a certain Deed (“Deed of Guarantee and Indemnity”) between the plaintiff and the defendants dated the 9th day of February 1988 the first and second named defendants each agreed to indemnify the plaintiff against all losses and damages which the plaintiff may suffer as a result of the breach or a default by the lessee pursuant to the Lease Indenture and or the Lease.
9.The Deed of Guarantee and Indemnity contained, inter alia, the following terms and conditions:
9.1.The first named defendant agreed to indemnify the plaintiff from and against fifty per cent (50%) of all damages which the plaintiff may suffer as a result of the breach or default by the Lessee pursuant to the Lease Indenture and or the Lease.
9.2.The second named defendant agreed to indemnify the plaintiff from and against fifty per cent (50%) of all damages which the plaintiff may suffer as a result of the breach or default by the Lessee pursuant to the Lease Indenture and or the Lease.
9.3.Subject only to the above 50% limitation the first and second named defendants each severally covenanted with the plaintiff that:-
9.3.1.they indemnify in respect of any such damages and shall remain liable to the plaintiff notwithstanding the plaintiff exercising its rights of re-entry under the Lease and notwithstanding that the lessee under the Lease (being a company) may be wound up or dissolved;
9.3.2.on the default or failure by the lessee to perform the Lease covenants to pay all costs, expenses losses and damages sustained without the necessity of any prior demand having been made on the lessee;
9.3.3.the obligations under the Deed of Guarantee and Indemnity shall continue to remain in force until all rent and other monies payable under the Lease shall have been paid.
These paragraphs formed the basis of the appellant’s claim as referred to at [14] of the Master’s reasons.
As I have said, the amendments to the Statement of Claim consisted of paragraphs 9A to 9H. The Master summarised those paragraphs as follows ([53] – [58]):
53Firstly, it was contended that Thomsons and Mr La Vincente were the solicitors and agents of both Beverage and then Mr LaPointe in connection with the preparation and execution of documents referred to in the claim including the lease, the deed of guarantee and indemnity, the Sizzler to Jardine lease transfer and the Spignel to Sizzler lease transfer.
54Secondly, it was contended that Thomsons and Mr La Vincente were the solicitors and agents of Sizzler in connection with the sale of its half-share in the restaurant business to Jardine.
55Thirdly, it was contended that in March or April of 1991 the parties had agreed that in consideration of the plaintiff entering into the Sizzler/Jardine lease transfer, the defendants would continue to indemnify the plaintiff in respect of losses suffered as a result of a breach by Spignel and Jardine.
56It was contended that this agreement was comprised in a telephone conversation between Mr La Vincente and Mr Giglio in March 1991; a letter dated 3 April 1991 from Thomsons to Mr Giglio containing a letter dated 3 April 1991 from Mr Schlee of Jardines to Mr Giglio; to be implied from the fact that Mr La Vincente instigated the transaction, requested the plaintiff to execute the Sizzler/Jardine lease transfer, prepared the documents and proffered the documents for execution by the plaintiffs; and was to be further implied from the fact that by publishing the letter from Mr Schlee to Mr Giglio, Mr La Vincente had allegedly made the express representations.
57Fourthly, it was contended that by publishing the letter from Mr Schlee to Mr Giglio, Mr La Vincente had impliedly represented the matters set out in the amendments.
58Fifthly, it was contended that on 13 August 1991 the parties had agreed that in consideration of the plaintiff entering into the Spignel/Sizzler lease transfer, the defendants would continue to indemnify the plaintiff in respect of losses suffered as a result of a breach by Sizzler and Jardine. It was contended that this agreement was contained in a letter from Thomsons to the plaintiff dated 14 August 1991; and by a telephone conversation between Mr Giglio and a Mr Anells on behalf of Spignel and Jardine; and was to be implied from the fact that Mr La Vincente instigated the transaction, prepared the documents, and proffered the documents for execution by the plaintiff in order to give effect to the transfer of Spignel’s interests in the lease to Jardine.
He then continued with the chronology:
63On 12 October 2000 the trial of the construction issues came on for hearing before Judge Smith. Submissions were made on behalf of the plaintiff to the effect that, given the recent amendments to the statement of claim, it had become appropriate to determine the construction issues by way of preliminary hearing. A discharge of the order for a preliminary trial was sought.
64Judge Smith ordered, inter alia, that the 21 December 1999 orders be set aside, that the plaintiff pay the defendant’s costs thrown away in any event, on an indemnity basis, and that the costs orders of 19 January 2000 be varied.
…
70In about August 2001 the plaintiff undertook negotiations for the sale of the property. The plaintiff’s solicitor thereupon took the view that the marshalling of expert evidence of loss should best await this sale, which would “crystallize” rental losses and allow an assessment to be made of any capital losses occurring by virtue of the alleged breach of the lease.
71On 21 August 2001 the plaintiff’s solicitors wrote to the defendants’ solicitors. In this letter they indicated:
“We do not press you to file amended defences now, unless you wish to. We are prepared to enable an adequate period of time for settlement to be explored at this stage, and will give fair notice if and when our instructions are to press the next procedural steps.”
…
76On 26 November 2001 the defendants’ solicitor wrote to the plaintiff’s solicitor requesting further information regarding the plaintiff’s quantification of its loss. It was suggested that the plaintiff obtain an appropriate expert’s report in relation to these issues. Attention to the issues arising in the amended pleas was brought to the plaintiff.
77On 7 December 2001 the plaintiff’s solicitor wrote to the defendants’ solicitor stating that the plaintiff proposed to deal with the issues raised by the defendants’ solicitor “now” including obtaining an expert’s report. The defendant’s solicitor was given notice that in the new year (2002), the plaintiff would bring the matter back to the court for directions as to the filing of defences and for referral to mediation.
78 On 7 December 2001 the plaintiff’s solicitor wrote to the defendants’ solicitor.
79There was no further communication between the solicitors until 11 November 2006 – five years later.
80By 9 August 2002 the plaintiff’s property was sold for $1.3 million.
81On 23 August 2002 Mr Jakobsen conferred with Mr Giglio and was given instructions to proceed with the obtaining of expert’s evidence on the quantum issue.
…
Thus, some nine months after the matter having been raised in November 2001, the appellant’s solicitor set about obtaining the appropriate reports. The second of two reports was obtained by him in October 2006 and disclosed to the respondents’ solicitors in November 2006. As at November 2006 there had been no communication between the parties’ respective solicitors for five years. The delays and “vicissitudes” surrounding the obtaining of the reports between August 2002 and October 2006 are set out in [82] to [121] of the Master’s reasons. At [98] he noted that Mr Bob Sutton, the principal Australian representative and a director of Jardine, died in June 2004. But for his demise, he was, according to the second respondent, a potential witness in relation to possible third party proceedings.
The remaining parts of the Master’s chronology are as follows:
122On 11 November 2006 Mr Jakobsen forwarded to the defendant’s solicitor the Crase report with an accompanying letter dated 11 November 2006. Mr Jakobsen did not receive any response to this letter.
123On 14 November 2006 the defendant’s solicitors received the report of the plaintiff’s expert, Mr Crase. Prior to that date, the plaintiff had not informed the defendant’s solicitors of the sale of the property.
124On 16 March 2006 Mr Jakobsen issued an application seeking an amendment to the pleadings and future directions as to the course of the matter.
125Over the period between 26 November 2001 and 12 April 2007, Mr Jakobsen contends, he received no communications whatsoever from the defendants’ solicitors.
126On 18 May 2007 the defendants issued this application.
127On 9 July 2007 Ms Haslam contacted Thomson Playford and requested further access to their original files relevant to the issues in dispute.
128On 13 August 2007 Ms Haslam received a telephone call from Mr David Gaszner, a partner of Thomsons. Mr Gaszner told her that the files requested by her had been destroyed.
…
131In August 2007 Ms Haslam attempted to obtain from Mr La Vincente a statement in relation to the allegations raised in relation to him by the 2000 amendments.
132Ms Haslam testifies in her affidavit of 12 October 2007, however, that as a result of the passage of time, and the inability of Mr La Vincente to refresh his memory from the Thomsons files, this attempt was unsuccessful.
133On 8 August 2007 Ms Haslam contacted Mr La Vincente to proof him. She provided him with the further more explicit statement of claim dated 22 August 2000, the deed dated 10 April 1991, the letter from Thomsons to Mr Giglio dated 3 April 1991, and the letter from Mr Schlee to Mr Giglio dated 3 April 1991.
134On 10 August 2007 Ms Haslam provided to Mr La Vincente a bundle of documents comprising all of the documents which she had obtained from her inspections of the Thomsons files in June 1999. These documents included documents which had been discovered by Mr LaPointe as well as documents which had not been discovered by him.
135On 16 August 2007 Mr La Pointe swore his affidavit (FDN 33). (see below)
136On 23 August 2007 Mr La Vincente swore his affidavit (FDN 36). (see below)
137On 5 October 2007 Ms Haslam wrote to Mr La Vincente enclosing two further documents which had been discovered by the plaintiff and which she formed the view might be relevant to the allegations which had been made in the claim involving Mr La Vincente.
138On 19 October 2007, Ms Haslam received an email from Mr La Vincente advising that the documents provided to him by Ms Haslam on 5 October 2007 did not change anything set out in his affidavit.
Paragraphs 1.3, 2 and 3A of the Grounds of Appeal
I put to one side for the moment paragraphs 1.1 and 1.2 of the Grounds of Appeal. Paragraphs 1.3, 2 and 3A are linked. They relate to delay and to the alleged prejudice to both respondents said to arise from Mr La Vincente’s lack of memory. In that regard, as stated by Toohey and Gummow JJ in Brisbane South Regional Health Authority v Taylor (1996) 186 CLR 541 (at 550) “[t]he real question is whether the delay has made the chances of a fair trial unlikely”. In other words, did the delay cause the prejudice.
These grounds raise two matters: first, whether there was inordinate and inexcusable delay; and second, if there was such delay, did it lead to the likelihood of the respondents not receiving a fair trial.
The appellant asserts that the Master did not adequately deal with the question of inordinate and inexcusable delay. I agree that, in a sense, he did not because he concentrated his attention upon the factors listed by Bray CJ in Ulowski (at [303] et seq of his reasons).
The expression “inordinate and inexcusable delay” was adopted by Lander J in BQ & HM Doe Pty Ltd. It is somewhat of a solecism, but it nevertheless requires a consideration of the length of the delay and whether there is any justification for it. The Master made implied findings of inordinate and inexcusable delay when he dealt with the length of the delay and the explanation for the delay. I think there are ample grounds to support a finding that the delay was both inordinate and inexcusable.
By any standard, a five-year delay in obtaining expert reports is inordinate. Much longer delays have been countenanced by the courts: Niemann v Electronic Industries Ltd [1978] VR 431. However, a judgment has to be made as to what is inordinate by reference to the particular facts of each case. In my opinion, to take five years to obtain expert reports in the circumstances of this matter is plainly too long a period. The delay is inordinate.
Was there any excuse for the delay? In my opinion, it was clearly open to the Master to conclude, whether implicitly or explicitly, that the delay could not be excused. Whilst the evidence does not indicate any intransigence on the part of the appellant, the appellant’s solicitor or indeed of two of the experts retained by the appellant, the events (as recorded in the Master’s reasons) over the five-year period do not either individually or cumulatively excuse the delay. It may be an oversimplification to say that the appellant was unfortunate in choosing as an expert an accountant who had to be replaced because of his inaction. That expert must bear some of the responsibility for the inordinate delay. So must the appellant’s solicitor when he was tardy in retaining the first accountant. However, none of the periods of delay, either cumulatively or individually, provide the appellant with an acceptable excuse for the delay. In my opinion, the appellant must bear the adverse consequences of the five-year delay. It would be quite unfair to the respondents to afford an excuse for the delay based on the conduct referred to by the Master.
The question then becomes, as Mr McNamara put it, was the delay of five years in prosecuting the action a material cause of any irremediable prejudice to the respondents in their defence of the proceedings? The cases require that the prejudice must be attributable to the delay. This is evident from the acceptance by Bray CJ in Ulowski and by Lander J in BQ & HM Doe Pty Ltd of the principles enunciated in Allen v Sir Alfred McAlpine & Sons Ltd [1968] 2QB 229, a case which was approved by the House of Lords in Birkett v James: cf. the comments of Lander J in BQ & HM Doe Pty Ltd at [86].
Putting to one side for the moment the death of Mr Sutton, if there is any prejudice, it arises as a result of the lack of memory on the part of Mr La Vincente. Prejudice may be said to arise if it is assumed that the evidence that might have been given by Mr La Vincente at a time when he had a sufficient memory of the relevant events, would have been favourable to the respondents. There is no means of knowing what his evidence would have been. It seems to me that this type of alleged “prejudice” may be characterised in the same way as the alleged prejudice dealt with by the Full Court in Niemann (supra) where Murphy J said (at 443/47):
The defendants at best, have put forward material which could explain the way in which the plaintiffs’ delay could have caused prejudice, (if in fact any prejudice has been suffered), but this material stops short of demonstrating any such prejudice. It is mere surmise whether or not any prejudice has in fact been suffered.
Mere surmise is not a sufficient basis for a finding of potential prejudice. The Master erred in finding that potential prejudice had been established.
If I am wrong in this conclusion, other considerations arise.
Two factors have contributed to Mr La Vincente’s lack of memory. First, the effluxion of time; and second, the destruction of the Thompson Playford file. Even though copies of parts of the file are still available, it is clear that they did not revive Mr La Vincente’s memory.
The failure on the part of the respondents’ solicitors to obtain a statement from Mr La Vincente after the amendment to the Statement of Claim by the addition of paragraphs 9A - 9H also needs to be taken into account. The amendment was completed in mid-2000. It was thereafter open to the respondents, and perhaps incumbent upon them, to investigate the assertions made in paragraphs 9A - 9H of the Amended Statement of Claim. Any cursory examination of the pleading would have revealed Mr La Vincente’s importance, one way or the other, in relation to the issues raised in paragraphs 9A - 9H.
It is not unreasonable to infer that, had the respondents investigated the allegations made in paragraphs 9A - 9H, even within a year or two of the allegations being raised the first time, it was likely that they would have ascertained from Mr La Vincente what he recalled of the relevant events. In that sense, the fact that there was a subsequent delay of five years in obtaining expert reports relating to matters of quantum as opposed to liability, had nothing to do with the respondents now being in a position that, if this matter proceeds to trial, they may be prejudiced in not being able to call Mr La Vincente. More accurately, given that Mr La Vincente’s evidence would not necessarily have been favourable to the respondents, their prejudice is that they have been deprived of the opportunity of obtaining a witness’ proof from Mr La Vincente because, they assert, of the delay in obtaining an expert report unrelated to that question. To put this appeal issue in such a way demonstrates, in my view, that, even if there is material prejudice not based on surmise, the appellant is neither solely nor predominantly responsible for that prejudice. It was clearly open to the respondents to investigate the allegations introduced by amendment into the Statement of Claim in July 2000 at any time thereafter. The fact that there was a delay between November 2001 and November 2006 in obtaining reports as to quantum does not alter the existence of that opportunity.
In these circumstances, the most favourable (to the respondents) finding that was open to the Master was that they were as much responsible for their present position as the appellant. The latter part of such a finding attributes partial responsibility for the alleged prejudice to the appellant, an attribution which, in my view, has an uncertain foundation because of my conclusion that potential prejudice was based on surmise. Be that as it may, a finding that the respondents are as much responsible for their present position (of prejudice) as the appellant does not, on my understanding of the authorities, justify the dismissal of the proceedings for want of prosecution. It is clear from Ulowski and BQ & HM Doe Pty Ltd that the delay must be the cause of the prejudice. There may be more than one cause but, if so, delay must be the predominant cause of the alleged prejudice. In this case, delay was by no means either the sole or predominant cause of the alleged prejudice. To hold otherwise would be to ignore a significant failure by the respondents to prosecute their defence while at the same time seeking to penalise the appellant by dismissing its action. Even if it is assumed that the appellant could start again because the relevant time limit had not expired, the detriment to the appellant by way of costs (both as between solicitor and client and respondents’ costs ordered to be paid by the appellant) and by way of further delays, is such that a dismissal of the proceedings is not warranted.
These conclusions lead to the determination that the appellant has established the contention at paragraph 3A of the Notice of Appeal to the extent that it is there asserted that the Master should have found that any prejudice caused by Mr La Vincente’s lack of memory did not arise from the appellant’s delay. To the extent that (impliedly or otherwise) the Master found to the contrary, I consider that he was in error. He should have found, first, that the respondents were at least equally responsible for the prejudice following Mr La Vincente’s memory impairment and that that was insufficient to justify dismissal of the proceedings.
Connected to this aspect of the appeal is the contention in paragraph 3 of the Amended Notice of Appeal that the impairment of Mr La Vincente’s memory did not, in any event, warrant the dismissal of the appellant’s primary claim. In this respect, it was argued by Mr McNamara, and I agree, that because the primary claim involves only what has been described as “the construction issues”, there is little likelihood that Mr La Vincente could have given admissible evidence in relation to the issues raised in paragraphs 1 – 9 of the Amended Statement of Claim, even if it is assumed that what he might have said was favourable to the defendant. This is where the respondents departed from their earlier contentions in relation to paragraphs 1 – 9 when they applied for an initial trial confined to the issues raised in those paragraphs. In argument before me, Mr Livesey submitted that Mr La Vincente may have been able to give admissible evidence because the issues raised by paragraphs 1 – 9 of the Amended Statement of Claim went beyond the interpretation of written documents without reference to parole evidence. I do not accept this submission. In my opinion, the likelihood is that Mr La Vincente could not have assisted either party on the construction issues. It follows that, irrespective of whether or not the appellant’s delay caused the alleged prejudice, the Master erred if and to the extent that he dismissed the primary claim on the basis that the impairment of Mr La Vincente’s memory prevented a fair trial of the issues raised in paragraphs 1 – 9 of the Amended Statement of Claim.
Paragraph 3.2 of the Grounds of Appeal
This leads to an examination of paragraph 3.2 of the Notice of Appeal where it is asserted that the impairment of Mr La Vincente’s memory could, at best, only warrant the dismissal of the alternative claim in paragraphs 9A to 9H of the Amended Statement of Claim.
At paragraph 92 of the appellant’s written submission (AB958) it is stated:
92. Having regard to the unchallenged fact that the plaintiff’s primary case was one of construction and interpretation only, the master’s findings as to the impairment of La Vincente’s memory did not warrant an order for the dismissal of the action. The master’s finding as to the impairment of La Vincente’s memory warranted, at most, an order dismissing the plaintiff’s alternative claim (that embodied in paragraphs 9A – 9H of the Amended Statement of Claim).
Mr McNamara took this point up during the course of his submissions (T165 et seq, T373). He said (T165), in relation to the alternative claim:
The findings about the dimming of memory on La Vincente’s part, are probative of prejudice in relation to that, the second, the alternative claim … it was open to the master to have struck out 9A(a) – 9(h) [sic], I make that concession …but the dimming of La Vincente’s memory is entirely extraneous to the primary ground of claim.
I then questioned Mr McNamara about the meaning of the “concession”. I said (at T166/22 et seq):
His Honour: … So really the concession should be limited to this:
‘The appellant concedes that it was open to the master to dismiss the alternative claim contained in paras 9(a) to 9(h) [sic] of the statement of claim.
Mr McNamara: Yes.
Mr McNamara then said:
… and that’s more or less what I tried to say in para.92 of the outline.
I put further questions as follows: (T168/11 et seq):
His Honour: … You’ve put it in terms of the dimming of Mr La Vincente’s memory, dimming to the point of extinction.
Mr McNamara: Yes.
His Honour: But do you agree that memory having been dimmed to that extent that there was the potential to cause substantial prejudice?
Mr McNamara: Yes, quite so.
His Honour: Thank you.
Mr McNamara: I do concede that; hence the concession I made in the outline.
I take Mr McNamara to have been referring to paragraph 92 of the outline as set out above. Mr McNamara also referred to the “concession” during the course of his submissions in reply (T373/10 et seq). He said in relation to the concession (T373/24 et seq):
… your Honour would accept that I was not conceding that the master’s finding was correct, I was not conceding that in fact the appellant was responsible for any prejudice arising from the dimming of the memory of La Vincente or the death of Sutton. Our case before the master was that the defendants were responsible for the destruction of the Thompson’s [sic] file and they are responsible therefore for prejudice arising from the dimming of the memory of La Vincente.
My last point is that the concession related solely to prejudice arising from the prosecution or continued prosecution of paras 9(a) – 9(h) and said nothing about the responsibility of the defendants to attend to matters which they now say are implicit in their amended defences.
What was stated at paragraph 92 was no more than that the Master’s finding as to the impairment of Mr La Vincente’s memory, which was not challenged, warranted, at most, an order dismissing the appellant’s alternative claim. In other words it did not justify the dismissal of the primary claim because no prejudice could be said to have arisen from Mr La Vincente’s lack of recollection since, according to the plaintiff, the primary claim was based solely on documentation.
It seems to me that Mr McNamara clarified his client’s position later in his submissions-in-chief where he said (at T194/38 et seq):
Finally my fourth major point, the dimming of La Vincente’s memory. I am not [resiling] of course from the concession I have put to your Honour before, the concession we make in [para] 92, but remind your Honour of this. That the dimming of La Vincente’s memory doesn’t stand alone but assumes importance only because the Thomson file has been destroyed. What the master has overlooked is that the Thomson file was in the power of Lapointe for the purposes of the discovery rules.
Mr McNamara put a further submission of a similar nature and then stated what the appropriate conclusions were. The following passage from the transcript is instructive (T196/11):
Mr McNamara: … So if your Honour is with me on those matters and your Honour is with me on the point that the court must try to identify the source of the prejudice, your Honour would have misgivings about the master’s findings of the dimming of La Vincente’s memory is sufficiently attributable to us, to have warranted even the striking out of 9(a) – 9(h).
His Honour: I have problems with that, and the problem is this. If you apply the principle in House v The King, there has to be error identified on the part of the person appealed from.
Mr McNamara: Yes.
His Honour: If you have made the concession that it was open to the master to draw the conclusion or to make a finding that there was prejudice to … both defendants as a result of Mr La Vincente’s fading memory, in relation to the prosecution of the claim in 9(a) to 9(h) by the plaintiff against each of those two defendants. I can’t see how you can say “Look nevertheless his acting upon such a finding should be set aside, should effectively be set aside”. If there is an identifiable error, yes, but if there’s not, then I shouldn’t interfere.
Mr McNamara: If it please the court, thank you. We say therefore, that if your Honour is with us on our primary points, your Honour will allow the appeal unconditionally and completely … If however your Honour is with us merely on the arguments about prejudice, your Honour would allow the appeal only in relation to the primary ground of claim.
Having reflected on those matters, it seems to me that the appellant’s “concession”, as explained by Mr McNamara, was no more than that, if it is assumed that the appellant’s delay caused the prejudice to the defendants arising from Mr La Vincente’s lack of memory, it was open to the Master to dismiss the claim in paragraphs 9A - 9H of the Amended Statement of Claim. This was implicit in paragraph 92 of the appellant’s written submissions. In addition, Mr McNamara said (at T373/24):
I was not conceding … that in fact the appellant was responsible for any prejudice arising from the dimming of the memory of Mr La Vincente or the death of Sutton.
[My emphasis.]
I have already stated that the Master erred if and to the extent that he found that the appellant was sufficiently responsible for any prejudice arising from the impairment of Mr La Vincente’s memory to justify dismissal of the proceedings or any part thereof. The absence of sole or predominant responsibility on the part of the appellant for such prejudice precludes the dismissal not only of the primary claim but also of the alternative claim.
Subject to the matters raised in paragraphs 4 and 5 of the grounds of appeal, these conclusions lead to an order upholding the appeal because the Master either implicitly found that the appellant, by its delay, was materially responsible for the prejudice arising from Mr La Vincente’s memory impairment, or, because he did not adequately deal with that issue, he has erred in concluding that the proceedings should be dismissed against both respondents.
Paragraphs 4 and 5 of the Grounds of Appeal
The second respondent relied upon additional prejudice which needs to be considered before a determination may be made as to whether or not the Master erred in dismissing the primary and alternative claims against the second respondent. The alleged additional prejudice is said to arise from the death of Mr Sutton.
Paragraphs 4 and 5 of the Further Amended Notice of Appeal deal with the second respondent’s contention that the death of Mr Sutton affected his ability to take the third party proceedings claiming an indemnity in respect of any judgment that may be obtained against him by the appellant. The paragraphs are as follows:
4. As against the second defendant, the Master erred in finding:
4.1That the second defendant was further prejudiced in that his right to prosecute an indemnity was compromised by the death of Sutton.
4.2(expressly) that the death of Sutton inflicted any prejudice on the second defendant which was caused, or contributed to, by delay on the part of the plaintiff.
4.3(impliedly) that the second defendant had demonstrated a good right to be indemnified against his liability to the plaintiff.
4.4(Expressly) that the reasoning of the High Court in Wardley precluded the second defendant from instituting proceedings, before August 2000, to vindicate his asserted right of indemnification.
4.5That it was not open to the second defendant to have instituted third party or other proceedings to vindicate his asserted right of indemnity.
4.6That no right to proceed against the alleged indemnifying party had arisen, because the second defendant’s loss had not “crystallised”, and would not “crystallise” until a final order had been made as between the plaintiff and the second defendant.
5.The Master should have found that:
5.1On service on the second defendant of the plaintiff’s proceedings in 1998, it was open to the second defendant to have instituted third party proceedings immediately against the alleged indemnifying party.
5.2Any prejudice arising from the death of Sutton is attributable, not to delay on the part of the plaintiff, but to a considered decision on the part of the second defendant and his legal advisers.
5.3The second defendant did not identify in his evidence the party against whom the second defendant claimed to have a right of indemnification.
5.4That there was no basis on the evidence entitling the Master to conclude that the alleged indemnity would be refused or challenged in any event.
The grounds specified in paragraph 4 relate to alleged prejudice in not being able to pursue third party proceedings claiming indemnity because of the absence of the availability of evidence from Mr Sutton. It is to be remembered that the inherent jurisdiction to dismiss the want of prosecution arises from the Court’s ability to prevent abuses of its process. The abuse of process is characterised as delay giving rise to the inability of a party to obtain a fair trial. The trial in this case is the trial between the appellant and the respondents. No third party proceedings have been commenced. The reason given for that is that the second respondent is of the view that he could not commence third party or other proceedings seeking an indemnity until his loss is crystallised by a determination in these proceedings: first, that the appellant is able to recover damages against the second respondent; and, second, fixing the amount of such damages. Reliance was placed on Wardley Australia Ltd v State of Western Australia (Rothwell’s Loan Case) (1992) 175 CLR 514.
The prejudice which is said to exist is in relation to other proceedings which have not been commenced. It may be a matter of argument as to whether such prejudice may be taken into account, but that point was not debated before me. The appellant’s position was that the second respondent was not precluded from taking third party proceedings; he could have done so at an earlier stage, well before the death of Mr Sutton, and his failure to do so was the cause of the prejudice (if any) that may now apply in relation to the prosecution of such proceedings without Mr Sutton being available as a witness. If the appellant is correct in this contention, I agree that it is a complete answer to the second respondent’s assertion that he has been materially prejudiced by the appellant’s delay.
It follows from the above analysis that I must determine whether the Master erred if he accepted the proposition that the principles enunciated in Wardley precluded the second respondent from bringing third party proceedings once he was in a position to file a defence. In Wardley, the majority (Mason CJ, Dawson, Gaudron and McHugh JJ) stated at the commencement of their joint judgment:
The principal question in this appeal concerns the time at which a cause of action under section 82 of the Trade Practices Act1974 (Cth) (“the Act”) accrues if, as a result of misleading or deceptive conduct, a party enters into an indemnity which is subsequently called upon.
In that case the respondent, the State of Western Australia, had brought proceedings in the Federal Court to recover damages for alleged false and misleading conduct contrary to section 52 of the Act by the appellants. It was asserted in the Statement of Claim that as a result of the alleged false and misleading conduct, the plaintiff entered into an agreement to indemnify the National Australia Bank in respect of a facility granted by the bank to Rothwells Ltd.
The question at issue was whether the cause of action under s 82 of the Act accrued at the date of the entry into the indemnity agreement or at the date that the plaintiff was called upon to make payments to the National Australia Bank pursuant to the indemnity agreement. The High Court held that the cause of action accrued at the time the plaintiff was called upon to make payments pursuant to the indemnity. The majority said (at 532):
If, contrary to the view which we have just expressed, the English decisions properly understood support the proposition that where, as a result of the defendant’s negligent misrepresentation, the plaintiff enters into a contract which exposes him or her to a contingent loss or liability, the plaintiff first suffers loss or damage on the entering into the contract, we do not agree with them. In our opinion, in such a case, the plaintiff sustains no actual damage until the contingency is fulfilled and the loss becomes actual; until that happens the loss is prospective and may never be incurred. …
In the result, we agree with the decision of Von Doussa J in SWF Hoists and Industrial Equipment Pty Ltd v State Government Insurance Commission. There the insured sued the insurer for loss suffered as a result of a misrepresentation as to the extent of the indemnity or liability coverage provided by a proposed contract of insurance. His Honour held that actual loss (as opposed to a mere potential for loss) occurred only when the insured was called on by a third party to make payments against which it would have been entitled to be indemnified by the insurer under the contract as represented. When the events entitling the third party to make demand for payment occurred and when the insurer indicated, prior to the making of that demand, that it would not indemnify the insured against any such demand, there was no more than the potential for loss.
[References omitted.]
In my opinion, Wardley does not govern the time at which third party proceedings may be commenced. It deals with the accrual of a cause of action and the commencement of a limitation period. It says nothing about the nature of third party proceedings and when they might be commenced.
Third party proceedings are almost always conditional, in the sense that a defendant who has been sued by a plaintiff contends that, by reason of contingent rights which the defendant has against the third party, if the defendant is found to be liable to the plaintiff, then the third party is liable to indemnify in respect of, or to contribute to the payment of, the judgment entered against the defendant. They are a time-honoured means of dealing efficiently with claims between plaintiff and defendant which are allied to a potential claim which a defendant may have against a third party. They have the advantage of enabling a third party to participate, if the third party so chooses, in the trial between the plaintiff and the defendant relating to the question of liability between the plaintiff and the defendant and, if a liability exists, the quantum of the sum of money that might be payable by the defendant to the plaintiff pursuant to that liability. This is another means of saying that frequently there is a considerable overlap of the respective cases between the plaintiff and the defendant and the defendant and the third party such that it is appropriate to deal with all claims at the one hearing.
The fact that the amount recoverable by the defendant from the third party may not be crystallised until there is a determination as to liability and quantum between the plaintiff and the defendant does not preclude such third party proceedings from being prosecuted. It is no answer to a third party claim to say that the cause of action relied upon is not complete. Third party proceedings are by definition incomplete until there is a determination in the main proceedings against the defendant.
Because third party proceedings are for the most part contingent upon a finding of liability between a plaintiff and the defendant, the procedure does not invoke a cause of action as at the date of the institution of the third party proceedings. The thrust of the third party claim contemplated by the second respondent is that, if the appellant has a cause of action maintainable against the second respondent and recovers a money judgment pursuant to that cause of action, a cause of action then arises as against the third party for indemnity or contribution in respect of the amount payable by the second respondent to the appellant. In my opinion, the question of when the cause of action arises is not material to the maintenance of such a third party claim, so long as the claim for indemnity is commenced prior to the expiration of any relevant period of limitation.
Wardley does not support the proposition that the cause of action in proposed third party proceedings must be complete. Nor do the tort cases which establish that the cause of action is not complete until loss is sustained: See Hawkins v Clayton (1988) 164 CLR 535 per Gaudron J at 599; Pirelli General Cable Works Ltd v Oscar Faber and Partners (1983) 2 AC 1; Footner v Broken Hill Associated Smelters Pty Ltd (1983) 33 SASR 58.
To hold that the liability must crystallise, as explained above, before the third party proceedings may be commenced, would be to undermine the efficacy of third party proceedings. To my mind, the process of conditional third party proceedings is so well established that the limitation contended for by the second respondent in this case is untenable.
It follows that the Master erred in proceeding on the assumption that the defendants were precluded from commencing third party proceedings because the amount sought by way of indemnity had not crystallised. He proceeded on the assumption that the delay of the plaintiffs in prosecuting the proceedings put the defendants in the position of prejudice relating to the third party proceedings, whereas the reality of the situation was that the second respondent’s decision not to commence third party proceedings based on an error of law was as much responsible for the second respondent’s position as any delay on the part of the appellant.
Mr Livesey raised in addition the point that the second respondent was not obliged to commence expensive third party proceedings which in any event might prove to be unnecessary. It is a matter of pure speculation as to whether or not such proceedings might have proved unnecessary. Nevertheless, it is correct to say that the second respondent could have awaited the outcome of the proceedings against him before seeking indemnity, assuming he had a right of indemnity. However, that does not change the fact that the decision not to take third party proceedings is as much responsible for the alleged prejudice as delay on the part of the appellant. Even if the reason for the decision not to take third party proceedings was confined to a desire to avoid expensive litigation, and even if it had been reasonable to make such a decision, the fact remains that the second respondent had the opportunity to attempt to obtain Mr Sutton’s statement and, with or without favourable evidence from him, to commence third party proceedings, for a period of approximately four years prior to his death. In those circumstances, the failure to obtain Mr Sutton’s statement (or to attempt to do so) and the decision not to commence third party proceedings are again as much the cause of the second respondent’s current position as any delay on the part of the appellant.
As with the impairment of Mr La Vincente’s memory, the only potential prejudice was the inability, after Mr Sutton’s death, of the second respondent to obtain Mr Sutton’s statement which may have been favourable or unfavourable to the second respondent or of no assistance. In my opinion, the reasoning in Niemann (supra) that the alleged prejudice was a matter of surmise applies to this type of prejudice. Be that as it may, since, at the latest, mid-2000, it was open to the second respondent to see if Mr Sutton would have given a statement, it was, as I have said, as much the responsibility of the second respondent as the appellant for the situation in which the second respondent finds himself. In my opinion, therefore, the additional submission by Mr Livesey does not support the dismissal of the appeal.
Much was said during the course of submissions as to whether or not there could be identified from the evidence and from the submissions put on behalf of the second respondent a plausible third party claim. That included submissions relating to the identification of the potential third parties. It is not necessary to resolve these matters because of my conclusions with regard to the nature and causes of the potential prejudice. In my opinion, the potential prejudice arose not from the death of a potential witness, but from the death of a person who may, or may not, have given evidence favourable to the second respondent. There is no means of knowing, one way or the other, whether Mr Sutton would have given evidence favourable to the second respondent. Indeed, it was possible that Mr Sutton himself may have been joined as third party.
The respondents’ written submissions identified, at paragraph 4, five issues arising on the appeal. The first two dealt with what the relevant period of limitation might be in relation to the causes of action pursued by the plaintiff. In light of the conclusion to which I have come, it is not necessary to decide these points. In broad terms, I have concluded that the Master erred in finding that the appellant, by reason of delay, was responsible for the two types of prejudice which the respondents said arose as a result of that delay. I have found that in each instance the conduct of the respondent was as much to blame for the existence of any prejudice that may have arisen. This means that one of the essential requirements for the exercise of the jurisdiction to dismiss for want of prosecution has not been made out. It follows that the Master erred in exercising the jurisdiction at all.
The third of the five issues relates to whether the principles relating to applications for dismissal for want of prosecution are to be found in Ulowski or in the later Full Court case of Williams v F S Evans and Sons (1988) 52 SASR 237. This question was dealt with by Lander J in BQ & HM Doe Pty Ltd. His Honour came to the conclusion that Ulowski was a binding decision directly relating to applications for dismissal for want of prosecution. I respectfully agree with Lander J’s conclusion. This means that an applicant for an order for dismissal for want of prosecution needed to adduce only “very slight evidence … indicating various possibilities of prejudice”: Ulowski per Bray CJ at 280. For the reasons I have previously stated, prejudice must arise solely or predominantly from the delay. The conclusions to which I have come, namely that the respondents are as much responsible as the appellant for any prejudice that arose either from the impairment of Mr La Vincente’s memory or the death of Mr Sutton, preclude such a finding. Therefore, even if it is assumed that there is a possibility of actual prejudice arising from Mr La Vincente’s impaired memory or the death of Mr Sutton, the discretion to dismiss is not enlivened because the appellant’s delays were not the sole or predominant cause of such prejudice.
The fourth issue arising on the appeal referred to at paragraph 4 of the respondents’ written outline (delay and causation) is covered by the foregoing.
The fifth issue concerns the question of whether the Master erred in the exercise of his discretion. I have concluded that the appeal should be allowed, not so much because there was an error in the exercise of the discretion, but because the discretion should not have been exercised at all.
For the above reasons, I propose to make the following orders:
1. Appeal allowed.
2. That the order of the Master dismissing the within action be set aside.
In the Amended Notice of Appeal certain further orders are sought in relation to an application dated 16 March 2007. In my opinion, those orders should be dealt with by reference to that application and not by reference to this appeal.
I will hear the parties as to the costs of the appeal and the costs of the application before the Master.
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