Capricorn Society Ltd v Lucisano - [2016] WADC 107

JURISDICTION : DISTRICT COURT OF WESTERN AUSTRALIA
IN CHAMBERS

LOCATION: PERTH

CITATION: CAPRICORN SOCIETY LTD -v- LUCISANO [2016] WADC 107

CORAM: PRINCIPAL REGISTRAR MELVILLE

HEARD: 15 DECEMBER 2015 & 21 JUNE 2016

DELIVERED : 20 JULY 2016

FILE NO/S: CIV 3714 of 2010

BETWEEN: CAPRICORN SOCIETY LTD
Plaintiff
AND
NANCY LUCISANO
Defendant

Catchwords:

Application for leave to discontinue with no order as to costs - Whether continuation of the action would be futile

Legislation:

Rules of the Supreme Court 1971 O 23 r 2(3), O 37 r 6

Result:

Application for leave to discontinue dismissed

Representation:

Counsel:

Plaintiff: Mr C Ko
Defendant: Mr A Aristei & Mr B Clemens

Solicitors:

Plaintiff: Trinix Lawyers
Defendant: Clemens Haskin Legal

Case(s) referred to in judgment(s):

ACN 116 149 092 Pty Ltd v Coopers Brewery Ltd [2006] FCA 1119
Blythe v The State of Western Australia [2008] WASCA 10
Covell Matthews & Partners v French Wools Ltd [1977] 1 WLR 876
Heartlink Ltd v Jones as liquidator of H Bell Diagnostics Pty Ltd (in liq) (2007) 35 WAR 190
JL Young Manufacturing Co Ltd [1900] 2 CH 753
Lewkowski v Bergalin Pty Ltd (Unreported, WASCA, Library No 7675, 26 May 1989)
Re Minister for Immigration & Ethnic Affairs; Ex parte Lai Qin (1997) 186 CLR 622
Stratford and Son Ltd v Lindley [No 2] (1969) 1 WLR 1547
Walter v Buckeridge [No 4] [2011] WASC 313

PRINCIPAL REGISTRAR MELVILLE: By writ dated 2 December 2010 Capricorn Society Ltd (the plaintiff) issued a writ against Nancy Lucisano (the defendant) for monies alleged to be owing pursuant to a written guarantee between the plaintiff and the defendant. To broadly paraphrase her defence dated 24 February 2011, the defendant denied that there was a valid and binding contract of guarantee. The defendant also alleged that the purported guarantee was voidable due to unconscionable conduct by the plaintiff's agent, alleged that the plaintiff engaged in prohibited exclusive dealing known as third line forcing, contrary to s 47(10) of the Trade Practices Act 1974 and, finally, in the alternative, alleged that any amount the plaintiff was claiming should be reduced by the losses it suffered as a result of its own acts and omissions and its failure to mitigate.
The action was entered for trial in about June 2011 and following a pre‑trial conference was set down for a listing conference on 22 August 2011 for the purpose of listing the action for trial.
It was at this point the action appears to have lost momentum. In October 2011 the defendant applied for leave to amend her defence. This application was adjourned to a special appointment which appears never to have taken place.
In July 2013 the action was placed on the inactive cases list due to the fact that no document had been filed in the action in the preceding 12 months. On 19 December 2013 the case was removed from the inactive cases list. The reasons for decision given by the learned deputy registrar for removing the action from the inactive cases list reveal that further legal proceedings between the parties had taken place in Victoria by which the defendant sought the removal of a caveat registered over 27 Kirkford Drive, Mooroolbark, Victoria (the property). There were also bankruptcy proceedings on foot in respect of the defendant's failure to pay the costs ordered against her in the proceedings to remove the caveat.
Subsequently attempts were made to enforce the costs order by way of a warrant of seizure and sale resulting in attempts to sell the defendant's property.
Notwithstanding the deputy registrar ordering that the action be removed from the inactive cases list on 19 December 2013, still no activity took place in respect of this action and it again found itself on the inactive cases list on 6 May 2015.
By summons dated 21 October 2015 the plaintiff applied again for the case to be taken off the inactive cases list and also sought an order that 'the plaintiff be given leave to discontinue the action with no order as to costs'.
On the return date of the summons on 2 November 2015 the action was removed from the inactive cases list. However, the defendant, whilst amenable to an order being made giving the plaintiff leave to discontinue the action, was not agreeable to an order that there be no order as to costs associated with the discontinuance.
The plaintiff, for its part, made it clear that the only order it sought was as stated above and that it was not seeking and would not be content with leave to discontinue only. This issue was adjourned to a special appointment for hearing on 15 December 2015.

The issue

The issue distilled to its most basic form of expression, is that the plaintiff says it should be given leave to discontinue with no order as to costs because the continued progress of this action is futile. The futility is said to arise as a result of the defendant's impecuniosity which means even if the action is successfully progressed, the plaintiff will not recover any award of damages and/or costs. The defendant on the other hand says that the action is not futile and says even if she was impecunious, then:
(a)any impecuniosity has been brought about by the actions of the plaintiff; and
(b)any impecuniosity is, in any event, irrelevant to the question of whether the ongoing action is futile and is irrelevant to the question of whether the plaintiff should be permitted to discontinue with no order as to costs.

The evidence

The plaintiff's application was supported by the evidence of Calvin Chung Ke Ko sworn 21 October 2015, 21 April 2016 and 20 June 2016.
On behalf of the defendant were filed affidavits of Mr Frank Lucisano sworn 30 October 2016 and 14 December 2015. Whilst other affidavits were filed, they were in respect of a further application filed on 17 June 2016 by the defendant for the action to be dismissed for want of prosecution, which application has been adjourned pending the outcome of this application.
Objections were taken by both parties to the contents of various paragraphs of the affidavits filed by the other on the basis they did not comply with the requirements of O 37 r 6.
In this regard it is to be noted that an application for leave to discontinue is an interlocutory application. As such, it is possible for affidavits to be filed containing evidence that would not be admissible in a trial of the proceedings. More particularly, affidavits may contain statements that would be inadmissible on the grounds of hearsay, if the claimant swears to a belief as to the truth of those statements and states the source of his information and the grounds upon which he believes that information to be true: JL Young Manufacturing Co Ltd [1900] 2 CH 753,754.
The Court of Appeal has stated in Lewkowski v Bergalin Pty Ltd (Unreported, WASCA, Library No 7675, 26 May 1989) that preferably the statements should be in the form 'I have been informed by X and verily believe'.
In Blythe v The State of Western Australia [2008] WASCA 10 it was held that hearsay evidence recited by a deponent in an affidavit which does not disclose who the third party was who provided that information and that the deponent believes what the third party said was true is not admissible.
Further, evidence contained within an affidavit may be inadmissible for other reasons, such as it being unqualified opinion. This becomes particularly significant when parties testify as to their own opinions as to the state of mind or motives of third persons or give their opinions as to what should be or the legal consequences of a certain state of facts. This type of evidence might be otherwise described as unqualified opinion, speculative, conclusionary, and argumentative.
As a result of the objections, a number of the paragraphs were ruled inadmissible. Of those paragraphs contained within the affidavit of Mr Ko dated 21 October 2015 I ruled pars 8 and 10 inadmissible save for the first two sentences of par 8. Of his affidavit of 29 April 2016 I found pars 5, 7 and 8 inadmissible for being argumentative and opinion. As to par 6 of the affidavit I would not rule it inadmissible insofar as it annexes a number of financial statements relating to the sale of the property which in my view are admissible as business records pursuant to s 79(c) of the Evidence Act 1906.
As to the affidavit of Mr Lucisano dated 30 October 2007, I ruled the following paragraphs as being inadmissible due to non-compliance with O 37, namely pars 4(b), 4(c), 5, 9 – 12, 28 (also on the basis that it was secondary evidence of the contents of a document and referred to 'without prejudice' communications), 30, 33, the last sentence of 34, 35, 38 and 39.
The remaining evidence contained within the affidavits can, in broad terms, be summarised as evidence relating to the plaintiff's attempt to sell the property, communications between the parties regarding potential settlement of their disputes, steps the defendant was taking to resist enforcement of the costs order, the estimated market value of the property, what was in 2011 regarded by the mortgagee as the value of the property ($508,000) and the overall financial position of the plaintiff. In my view, the most cogent evidence on this issue is the copy of an affidavit filed by the defendant in the Supreme Court of Victoria dated 21 May 2014, which was annexed to the affidavit for Mr Ko sworn 21 October 2015.
The affidavit of the defendant contains a statement of her financial position. It estimates a net value in the property of $30,000 (I interpolate to observe that the property has since been sold for less than was owing to the bank) and very little more in the way of assets or income.
On this evidence I am satisfied that the defendant would not have the capacity to pay the damages claimed by the plaintiff or its costs in the event she was unsuccessful in defending the action.
This evidence is relevant to the question of the impecuniosity of the plaintiff and the futility of pursuing the proceedings, being the very basis on which this application was brought.

The law

By the Rules of the Supreme Court 1971 O 23 r 2(3), the court may:
… before, or at, or after the hearing or trial, upon such terms as to costs, and as to any other action, and otherwise, as may be just, order the action to be discontinued …
Subject to addressing questions of injustice, the court is inclined to grant leave to discontinue because it is said not to be desirable that a plaintiff should be required to litigate against its will. However, the court also needs to be mindful that a defendant is not deprived of some advantage which he or she has already gained in the litigation: Covell Matthews & Partners v French Wools Ltd [1977] 1 WLR 876; Heartlink Ltd v Jones as liquidator of H Bell Diagnostics Pty Ltd (in liq) (2007) 35 WAR 190.
It has been held that if both parties act reasonably in commencing and defending the proceedings and continue to be reasonable until the litigation was settled, or its further prosecution became futile, the proper exercise of the costs discretion will usually mean the court will make no order as to the costs: Re Minister for Immigration & Ethnic Affairs; Ex parte Lai Qin (1997) 186 CLR 622, 624, 625. Of course, a defendant may have incurred some cost, even considerable cost in defending proceedings, proceedings which might in the end be shown to have no merit. Hypothetically speaking, a plaintiff may wish to discontinue because information has become available that causes it to come to the view that the action it has commenced cannot succeed. In those circumstances it would be unjust to a defendant to allow the plaintiff to discontinue without indemnifying the defendant for the cost to which the defendant has been put through no fault of its own.
In circumstances where an action comes to an end without a trial of the merits, it may be impossible for a court to assess which of the parties would have been successful and it would be inappropriate for the court to effectively try the issues, that the parties do not wish to pursue, for the sole purpose of determining costs. Hence the court, in attempting to sort out what would just, can only attempt to look to the reasonableness of the conduct of each party which includes the need to turn its mind to the question of whether the ongoing prosecution of the action is futile.
In considering the reasonableness of the conduct of the parties it is relevant to consider the reality that a plaintiff often, if not always, makes a conscious decision to prosecute in light of the risks that a defendant does not, or will not, by the end of the proceedings have the capacity to pay in the event the plaintiff is successful, and that any capacity the defendant may have had to pay at the outset will be eroded by the payment of legal fees incurred along the way in defending the case.
The question of whether a plaintiff should be allowed to discontinue with no order as to costs has been addressed by Le Miere J in Walter v Buckeridge [No 4] [2011] WASC 313. In that case Mr Walter commenced proceedings for defamation against Mr Buckeridge. The action was said to have been hard fought with numerous interlocutory disputes and several appeals. In 2011, some seven to eight years after the action was commenced, Mr Walter sought leave to discontinue and that there be no costs as to the costs of the action. The application was supported by an affidavit in which Mr Walter's gave evidence to the effect that the action was consuming an inordinate amount of time and effort and no longer carried any value or any beneficial purpose for him given the length of time that had passed since the alleged defamatory publications were made. He said any benefits he might achieve from being successful at trial would be outweighed by the detriment, cost, time and stress, including stress to his family, involved in further pressing the matter. He saw the ongoing action as being a waste of the court's time and resources as well as the time of witnesses.
His Honour canvassed a number of authorities including ACN 116 149 092 Pty Ltd v Coopers Brewery Ltd [2006] FCA 1119. In ACN Pty Ltd v Coopers Brewery Ltd the court had granted leave to ACN to discontinue but required it to pay the defendant's costs. It had been held that ACN when it commenced the action had assumed the risk of the proceedings becoming futile and it could not escape the consequences of that by the assertion that it had nonetheless conducted itself reasonably.
In dealing with the facts of Walter v Buckeridge Le Miere J stated, 'I do not find that the plaintiff acted unreasonably in commencing the actions'. His Honour appears to have accepted the statement was defamatory and a serious matter. Nevertheless, the plaintiff was aware before he commenced the action the claims would be resisted and would be defended on the grounds of justification. His Honour observed that the plaintiff should have expected that prosecuting the actions would involve significant amounts of his time and be stressful and would be distressing for his family. However, arriving at the decision that a successful verdict might not outweigh a continued burdened on he and his family did not constitute futility in the sense referred to by McHugh J in Re Minister for Immigration and Ethnic Affairs; Ex parte Lai Qin.
Le Miere J also stated the question needed to be looked at also through the eyes of the defendant. He observed that the facts before him in Buckeridge's case were different to those before the court in the case of Stratford and Son Ltd v Lindley [No 2] (1969) 1 WLR 1547, where a few desultory steps were taken in the action, negotiations took place and once pleadings closed in which neither side wanted to go on, but nor did they want to pay the cost of the other. In Buckeridge's case the action had not gone to sleep even thought there were times when the plaintiff could have prosecuted the action more expeditiously.
Like Buckeridge's case, there are times at which this plaintiff might have prosecuted the claim more expeditiously. However, in my view, it is not open to the plaintiff to say that this is a case that has gone to sleep with neither of the two parties wanting the matter to progress. Whilst it must be observed the defendant has not made any efforts to re-list her application to amend her defence for hearing by way of special appointment and neither has the plaintiff taken steps to force this action to a conclusion, it must also be observed that the explanation advanced by the plaintiff in support of its several applications to have the case removed from the inactive cases list, is that proceedings were being actively pursued and fought in the courts in Victoria.
It is clear that the reason the plaintiff now no longer wants to go on with the action is similar to the reason advanced by Mr Walter in Buckeridge's case, that is, it will involve considerable expenditure of time and expense in circumstances where the outcome is uncertain and where the benefits that might be attained by successful litigation will not outweigh that expenditure of that time and money. Having chosen to launch this litigation the plaintiff has put the defendant to considerable expenditure of time and money in circumstances where the defendant, for all the court knows, may have a perfectly good defence.
Having regard to the decision of Le Miere J in Walterv Buckeridge, and the matters referred to above, it is my view that it would not be just to order that the plaintiff have leave to discontinue with no order as to the costs of the proceedings.
As the plaintiff does not seek any order other than the one I am not prepared to make, it follows the plaintiff's application for leave to discontinue must be dismissed.