Commonwealth Bank of Australia v Day
[1998] VSC 197
•14 December 1998
SUPREME COURT OF VICTORIA
CAUSES JURISDICTION
Not Restricted
No. 9273 of 1992
COMMONWEALTH BANK OF AUSTRALIA Plaintiff v DAVID ELFORD DAY & ANOR Defendants and WILLAN & McKENZIE Third Party
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JUDGE: Mandie J WHERE HELD: Melbourne DATE OF HEARING: 14 December 1998 DATE OF JUDGMENT: 14 December 1998 CASE MAY BE CITED AS: Commonwealth Bank v. Day MEDIA NEUTRAL CITATION: [1998] VSC 197
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PRACTICE AND PROCEDURE - appeal from Master - whether third party proceeding should
be dismissed for want of prosecution.
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APPEARANCES: Counsel Solicitors For the Plaintiff For the Defendants Mr D. Baker Rosendorff Lawyers Third Party Mr G.J. McEwen Tress Cocks & Maddox
HIS HONOUR:
This is an appeal from an order of Master Evans made on 16 November 1998 whereby it was ordered that the third party proceeding be dismissed for want of prosecution. That order was made upon a summons dated 22 September 1998 which was filed on behalf of the third party seeking orders that the plaintiff's claim against the defendants be dismissed and the defendants' claim against the third party be dismissed. Only the latter application was proceeded with before the master.
The notice of appeal dated 23 November 1998, filed on behalf of the defendants, refers to an appeal by the plaintiff. This is either an error or was intended to refer to the defendants in their capacity as plaintiffs in the third party proceeding. The appeal is, of course, a rehearing.
The plaintiff, the bank, instituted this proceeding by writ dated 27 August 1992. The claim is for possession of certain land pursuant to a registered mortgage dated 26 September 1985 whereunder David Elford Day, the first defendant, and Edith Joyce Day, then the second defendant, since deceased, mortgaged the land to the bank to secure money lent or to be lent to two individuals, Mayfield and Radcliffe, the borrowers.
The statement of claim alleges an unsatisfied demand under the mortgage for the sum of $171,000, approximately, as it stood in 1991.
The defendants entered an appearance on 5 October 1992 and requested further and better particulars of the statement of claim at about that time. The bank provided particulars in January 1993 and those particulars showed that the alleged indebtedness related to amounts advanced to the borrowers and interest thereon.
The defendants filed a defence and counterclaim on 1 April 1993 alleging inter alia that it was promised or represented to them that the accommodation to be advanced to the borrowers and/or the amount to be secured by the mortgage was to be limited to $92,000. Both sides made discovery of documents in 1993. The bank delivered interrogatories for the examination of the first defendant in January 1994 and these were answered by affidavit filed 1 August 1994.
On 9 September 1994 the defendants filed a third party notice with the written consent of the bank's solicitors. The third party notice was directed to the defendants' former solicitor, a sole practitioner, Mr McKenzie, named in the proceeding as "Willan & McKenzie (a firm)". A statement of claim was endorsed on the notice. The statement of claim alleges that Mr McKenzie, in his capacity as the defendants' solicitor, acted in breach of his retainer, and negligently, and in breach of his duty of care. The alleged breach and negligence occurred in 1985 and was alleged to be constituted by, in the main, Mr McKenzie's failure to properly complete a chattel mortgage to be given by the borrowers to the defendants to secure the defendants' obligations to the bank given in support of the borrowers. In particular the negligence complained of was Mr McKenzie's alleged failure to include a list, or a proper list, of chattels and other details in the chattel mortgage and his failure to protect the interest of the defendants in relation to the chattel mortgage.
The statement of claim in the third party proceeding goes on to allege that the defendants executed the chattel mortgage in reliance upon Mr McKenzie's advice in July 1985 and in September 1985 they executed the said mortgage in favour of the bank. The defendants go on to allege that they have suffered loss and damage in that by 1989 the borrowers had become impecunious and the chattel mortgage was valueless. Their loss is said to be $92,000 plus interest, or whatever higher amount, if any, is held to be due by them to the bank. The defendants then alleged that they first became aware that the chattel mortgage was valueless in July 1989. Mr Baker, of counsel, who appeared for the defendants, expressly stated to the Court that the limit of the defendants' claim for damages was the value of the said chattels, about $150,000.
Mr McKenzie entered an appearance on 7 November 1994 and filed a defence dated 8 December 1994. The defence refers to oral instructions given by the defendants to Mr McKenzie in mid 1985 and 22 July 1985. The defence positively alleges that Mr McKenzie advised the defendants as follows:
"15.1.1.
That by guaranteeing the liability of Mayfield and Radcliffe to a bank the defendants were exposing themselves to the risk of assuming the ultimate liability to repay the loan.
15.1.2.
That a chattel mortgage was of little value in the circumstances as the chattels proposed to be included could be sold by Mayfield and Radcliffe at any time without the defendants' knowledge thereby dissipating the security.
15.1.3. That the execution of the chattel mortgage without the list of
chattels to be mortgaged was not effective security.15.1.4.
With the consent of Mayfield and Radcliffe (which consent was given on about 22 July 1985) the third party would include in the chattel mortgage the list of chattels which was to be supplied by Mayfield and Radcliffe in order to complete the chattel mortgage.
15.1.5.
On several occasions during the period on or about 22 July 1985 until in or about September 1985 that the list of machinery to be included in the chattel mortgage to be provided by Mayfield and Radcliffe had not been provided and that therefore the chattel mortgage was not effective as security."
So, all those matters were alleged by the defence to have been advised by the third party to the defendants. In addition paragraph 27 of the defence says:
"The defendants were aware that the chattel mortgage was not a valuable security immediately prior to and at the time of execution of the chattel mortgage and were further informed by the third party, through the period from the date of execution of the chattel mortgage to in or about July 1987, and by Geoff Waters, solicitor, on 15 July 1987, that the chattel mortgage was not a valuable security."
The defence finally pleads that the defendants' claims are statute barred under section 5 of the Limitation of Actions Act. The defendants' reply to that defence says in paragraph 11, responding to the Limitation of Actions Act defence, that in July 1989, when they first became aware that the chattel mortgage was not a "valuation security", which presumably means it was not a valuable security, they requested that Mr Bruce Embelton of Embelton & Associates, who had taken over the practice of Willan & McKenzie, pursue their claims against Mayfield and Radcliffe.
In January and February 1995 affidavits of documents were filed on behalf of the third party and the defendants respectively. The second defendant died on 9 February 1995. On 31 March 1995 the defendants filed a reply to the third party's defence and further and better particulars of their third party statement of claim. Inspection of documents and an interlocutory application thereafter occurred including an application for further and better discovery by the third party. Master Evans made an order on 3 August 1995 as follows:
"By 17 August 1995 the first defendant make, file and serve an affidavit stating whether he has or has had in his possession any and if so which of the documents [the class of documents comprising a file previously conducted by the third party on behalf of the defendants]."
And the order goes on to describe that file and the Master, on that occasion, made some other orders against the first defendant to provide copies of documents to the third party and further and better particulars to the third party, and ordered the first defendant to pay the third party's costs.
According to the solicitor for the third party, Mr Obst of Tress Cocks & Maddox, in his affidavit in support of the present application, all interlocutory steps were completed between the defendants and the third party by 1 September 1995 after inspection of further documents discovered by the defendants. Mr Obst wrote to the plaintiff's solicitor on 7 September 1995 and again on 16 October 1995 seeking to have a certificate of readiness for trial signed. No reply was received.
Mr Obst wrote again on 18 April 1996 to the plaintiff's solicitors and this time also to the defendants' solicitors threatening an application to have the proceedings set down for trial. The plaintiff's solicitor replied by letter dated 23 April 1996 saying that the matter was not yet ready to proceed because inspection of documents had yet to be completed and also stating that the plaintiff's solicitor had recently learned that the second defendant had died and that as the property which was at the heart of the proceeding was held in common between the first defendant and the estate of the second defendant the personal representative was a necessary party. The solicitor for the plaintiff went on to say in that letter that application would be made either by the estate of the second defendant or by the plaintiff within the next few weeks and also foreshadowed a further discovery of documents.
Mr Obst replied by letter dated 13 May 1996 saying:
"Thank you for your letter of 23 April. Essentially your client and our client are on the same side and we are simply trying to cooperate with you to achieve a result. We will not seek to have the matter set down for trial until you are ready. We have known for a year that Mrs Day had died since at that stage we were in contact with the defendants' solicitors on a regular basis pursuing the litigation. We hesitate to suggest that if this litigation does not get to trial quickly there is a prospect that Mr Day may no longer be with us as he is an elderly man and worse still, our client is a retired solicitor, not getting any younger. Perhaps Mr Templeton and the writer will be last men standing. We await your advice as to progress."
I note that Mr Templeton is the plaintiff's solicitor. Mr Baker sought to draw from this letter an inference that in some way Mr Obst was apprised of some danger or real risk relating to Mr McKenzie that he would die in the near future or that he might die in the near future. I do not read the letter that way. I think all Mr Obst was saying was that these were elderly people. The reference to "worse still" is, no doubt, made in the context of litigation; that it would be worse for them if the third party died than if the first defendant died, and nothing more than that.
On 3 June 1996 Mr Obst received a letter dated 30 May 1996 from the defendants' solicitors stating:
"We refer to the above and advise that we have this day obtained instructions to consent to an application to be made by the Commonwealth Bank's solicitors to join the personal representatives of Edith Joyce Day (deceased) as defendants in the matter. Accordingly we will advise you further when the joiner (sic) of parties had been completed."
Mr Obst received no further communication from the defendants' solicitors.
In the second half of 1996 there were a number of without prejudice and other communications between the plaintiff and the defendants but these could be described in my view, at best, as sporadic. On 7 January 1997 Mr Obst wrote to the plaintiff's solicitors as follows:
"1. On 7 September 1995 we sent you three copies of a certificate of
readiness for trial for execution;2.
Having not heard from you since that date on 18 April 1996 we wrote to you indicating our surprise that you were apparently not keen to pursue this matter. On 23 April 1996 you wrote to us advising"
and he there summarises the contents of that earlier letter:
"4. Nevertheless encouraged by your comments we wrote to you on 13
May 1996."
and he there summarises the substance of that letter:
"5. On 13 May 1996 we received a letter from solicitors of Mr Day indicating that they had received instructions to consent to the application to be made for you to join the representative of the estate of Edith Joyce Day as a defendant. We have heard nothing since then. We are completely astonished that your client allows this litigation to meander, as it apparently does, in a manner which would simply not be tolerated in an outside firm. Mr Day could easily be softened up to settle with the bank. Our letter is merely to remind you that this file exists."
Mr Obst received a reply from the bank's solicitors dated 16 January 1997. That letter attempted to explain that there had been efforts to bring the matter to a negotiated conclusion which had been worth pursuing and again reiterated the need to, before having the matter set down, have legal representatives of the second defendant appointed.
In February 1997 the plaintiff inspected the third party's documents. Nothing further happened until 11 June 1997 when the plaintiff gave notice of intention to proceed.
On 23 September 1997 Mr Justice Teague made orders and directions including an order providing, in substance, that if on or before 22 November 1997 the sons of the deceased, second defendant, had not obtained probate or administration of the estate and been added as parties in substitution for the second defendant the plaintiff, or a syndic on its behalf, should apply for a granted administration with the will annexed. The defendants consented to those orders and the third party raised no objection.
By summons dated 15 September 1997 the third party applied for an order that the proceeding be set down for trial. The summons was returnable on 30 September 1997. No person appeared on the return date. On 5 November 1997 the plaintiff filed a substantial further affidavit of documents. Mr McKenzie, the third party, died on or about 20 November 1997.
On 10 December 1997 the defendants' solicitors filed notice that they had ceased to act for the defendants. On 18 December 1997 new solicitors commenced to act for the defendants. Also in December 1997 the plaintiff applied by summons for a number of orders including an order that the proceeding proceed in the absence of a person to represent the estate of the second defendant and that her counterclaim be dismissed for want of prosecution. That application was supported by an affidavit disclosing that no step had been taken by her executors to obtain representation for the second defendant and that it had not been possible to find a person willing to act as administrator. That application was adjourned and came on for hearing on 12 February 1998 when Master Wheeler ordered, in substance, that unless representation be obtained by 16 April 1998 the proceeding proceed in the absence of the second defendant and her counterclaim be dismissed.
After some procedural mishaps by the defendants' solicitors, Master Evans ordered, in substance, on 7 April 1998 the executors be appointed for the purpose of representing the estate of the defendant and the proceedings be amended accordingly.
On 5 August 1998 the plaintiff gave notice of trial, it would seem thereby avoiding a self-executing order for dismissal relating to a time limit fixed on 23 September 1997 and extended on 12 February 1998.
On 22 September 1998 the third party made the present application and also sought an order substituting Marjorie Joy McKenzie as executrix of Mr McKenzie's estate as a third party. The third party had not actively participated in the various proceedings since the death of Mr McKenzie. The solicitor for the third party stood by, as was pointed out by Mr Baker, and did not advise the other parties of Mr McKenzie's death. However in my opinion this caused no prejudice or cost to the defendants because such steps as they took were necessitated by their continuing defence in the plaintiff's proceeding.
In addition to Mr Obst's affidavit there is an affidavit of David McKinnon Templeton, solicitor on behalf of the plaintiff, sworn 16 October 1998 which is relied upon by the third party, and to some extent by the defendants as well. Finally there is an affidavit of Joseph Dorfmann, sworn 2 November 1998, the solicitor from Rosendorff Lawyers, the solicitors for the defendants. Mr Dorfmann's affidavit, where it is not simply argumentative or irrelevant, puts the reason for any delays as being the death of the second defendant.
I do not think that there was any major dispute before me as to the nature of the principles governing an application to dismiss a proceeding for want of prosecution. It is convenient to refer to the case of Leyburd Nominees Pty Ltd v. Coates Brown & Co., an unreported decision of the Court of Appeal on 12 September 1995, where commencing at page 6 there is a useful summary of the well known authorities:
"The law relevant to the exercise of the court's inherent discretion to dismiss an action for want of prosecution is relatively well settled. In Department of Transport v. Chris Smaller (Transport) Ltd [1989] 1 AC, 1197, 1203, Lord Griffiths said:
`The principles upon which the jurisdiction to strike out for want of prosecution is exercised were settled by the Court of Appeal in Allen v. Sir Alfred McAlpine & Sons Ltd [1968] 2 QB 229 and approved by the decision of this house in Birkett v. James. The power should be exercised only where the court is satisfied either (1) that the default has been intentional and contumelious, for example disobedience to a preemptory order of the court or conduct amounting to an abuse of the process of the court; or (2)(a) that there has been inordinate and inexcusable delay on the part of the plaintiff or his lawyers and (b) that such delay will give rise to a substantial risk that it is not possible to have a fair trial of the issues in the action or is such as is likely to cause or to have caused serious prejudice to the defendants, either as between themselves and the plaintiffs or between each other or between them and a third party.'
This statement of principle was applied by the Appeal Division of the Supreme Court in Bishopsgate Insurance Australia Ltd (in liquidation) v. Deloitte Haskins & Sells unreported, 9 September 1994 at pages 7 to 18 of the court's reasons and by the appeal division in Masel & Others v. Transport Industries Insurance Co. Ltd & Others unreported, 28 April 1995 at pages 7 and 16 of the court's reasons. It has most recently been applied in this court in Sacco v. Renault (Wholesale) Pty Ltd unreported, 8 September 1995, per Ormiston JA at page 5 of his reasons and per Callaway JA, with whom Brooking JA agreed, at page 2 of his reasons. As Mr Justice Callaway said at pages 1 to 2 cases such as Bishopsgate and Masel -
`... establish guidelines for what nevertheless remains an unfettered discretion in the sense that a judge may depart from them when it is just and equitable to do so. At the end of the day the defendant must persuade the court that it is fair to dismiss the plaintiff's claim without its being heard.'
In Shepperdson v. Lewis [1966] VR 418 at page 419 Mr Justice O'Bryan said of an order dismissing an action for want of prosecution that:
`The guiding principle for the exercise of such a discretion may be stated broadly in terms that an order for dismissal will be made if the justice of the action demands it. On the other hand, if the default can be met by a less drastic order including maybe an appropriate order for costs, the action will not be dismissed. On such an application a number of considerations would appear to be relevant, for example the length of the delay, whether a credible and excusable explanation has been given for the delay, what prejudice to the defendant, if any, has arisen or may arise as a result thereof, and this would include a consideration of the nature of the action and the issues which are likely to arise at the trial.'
That this statement remains good law can be seen from its acceptance by the court in Bishopsgate at page 16 of the reasons and in Masel, pages 7 to 8 of the reasons."
I note later on on page 8 of the court's reasons in Leyburd, and this is in the judgment of Mr Justice Charles, His Honour says:
"I accept that the behaviour of the respondent is a relevant factor to be taken into account by the judge in assessing the justice of a decision whether to strike out for want of prosecution, see for example Zurich Australia Insurance (supra) per Chief Justice Young at pages 1 to 2 of his reasons. But, as all members of the courts said the question remains whether in all the circumstances a fair trial of the action is possible."
I might say in that regard that it was common ground between the parties that the position of a defendant in a third party proceeding was analogous to the position of a plaintiff and Mr McEwen, who appeared as counsel for the third party, referred me to a number of authorities in support of that proposition and the allied proposition that a third party, being in a position analogous to a defendant was under no duty to stir up an inactive "plaintiff" and was not acting improperly if he let the action lie (see Duncan v. Lowenthal (1969) VLR 180 at 186; John Holland (Constructions) Pty Ltd v. Jordin, McCheane v. Giles (1902) 1 C.287 at 301; and Barclays Bank v. Tom (1923) 1 KB 221; Slade & Kempton (Jewellery) Ltd v. Kayman Ltd [1969] 3 All ER 786.
I should say that Mr Baker, while accepting those principles were applicable, said that in the circumstances of this case there were variations to the principles which were applicable.
The first question, I think, that needs to be asked is: has there been inordinate and inexcusable delay by the defendants in the prosecution of the third party proceeding? The history of the proceeding shows the following:
1.
There is no explanation for the delay for most of the period between 9 February 1995 and 7 April 1998, a period of over three years, during which no step was taken by the executors for the second defendant to obtain probate, or any order for representation of the second defendants' estate. No attempt was made to put the third party proceeding in a position to be prosecuted further on behalf of the second defendant during most of this period.
2.
There is no explanation whatsoever for the delay during that same period and the failure to take any steps to prosecute the third party proceeding or to cooperate in the setting down of the proceeding itself by the first defendant or by the defendants' former solicitors.
3.
The solicitor for the third party pressed both the plaintiff, on a number of occasions, and the defendant in April 1996 for the setting down of the proceeding but got no satisfactory result. The obligation was on each of the defendants to proceed expeditiously with the third party proceeding, whether Mr Obst pressed them to do so or did nothing. It is a reasonable inference that the defendants, or their representatives, had no desire whatever to hasten a trial involving the bank's claim but that is no justification or excuse at all vis-a-vis the third party.
4.
Between April 1998 and August 1998 there was again lamentable and unexplained inactivity by the defendants and their new solicitors.
5.
Such delay or inactivity as has occurred on behalf of the third party has not been detrimental to the defendant. I take it into account but it does not, in my opinion, have much significance in the circumstances.
I have already referred to the passage in Leyburd dealing with this and there is also relevant discussion of the applicable law in Roebuck v. Mungovin [1994] 2 AC 224 at 236.
Mr Baker submitted that the position in the present proceeding was complicated by the fact that the defendants were affected by what course of action the plaintiff took and further, he contended that the third party acquiesced in the plaintiff's delay. For the reasons that I have already given I do not think that that is an answer. The defendants were obliged to expeditiously proceed with their third party proceeding and if that meant that pressure had to be put on the plaintiff to set the proceeding down contrary to what was no doubt the interest of the defendants then they had to accept that as a consequence of their conduct in bringing a third party proceeding.
I have taken into account that the third party participated in the order made by Mr Justice Teague and the solicitor for the third party did not advise of the third party's death for a considerable period and took no steps to push the defendants along, but taking into account all of those matters, it seems to me in the circumstances of this case that the factor which stands out as the principal cause of delay, if not the sole cause of delay, was the failure of the executors to obtain representation for the second defendant and the failure of the first defendant to take any step to bring on the third party proceeding.
I repeat that it is not an answer that it was up to the plaintiff to set the proceeding down for trial, it was equally a matter for the defendants to press on with the third party proceeding.
I do not accept Mr Baker's submission that the only period of delay was that between September 1997 and November 1997. There was clearly delay in bringing the proceeding but the delay to my mind which is of real significance is that which occurred between September 1995 and April 1998. In my opinion this is a clear case of inordinate and inexcusable delay by the defendants and their lawyers.
The next question can be referred to broadly under the heading of Prejudice. In paragraphs 41 to 46 of Mr Obst's affidavit is material relevant to this question. In summary, Mr McKenzie, deceased, carried on practice as a sole practitioner. He retired in December 1988. The allegations relate to a period between July 1985 and September 1985. The defence pleads a number of matters of oral advice by Mr McKenzie to the defendants. The only witness intended to be called in support of those matters was Mr McKenzie himself as a party to those conversations and there was no other person in that position.
The documentary material available is limited and does not go to the matters of significance which were pleaded in the third party's defence, or at least to any great extent. Mr Baker submitted that no prejudice had been caused by the delay. I find it difficult to understand, let alone accept, that submission.
An important question is whether, Mr McKenzie having died during this period of inordinate and inexcusable delay, the third party is now, as a result of that delay, in a position where there is a substantial risk of prejudice to the proper defence of the third party's case and a substantial risk that a fair trial is not possible.
In a case where significant and probably vital issues turn upon what was advised or said orally by the deceased solicitor to the defendants and what they said to him, I think it is undeniable that there is a very real likelihood that serious prejudice would be caused to the third party and a substantial risk that it is not possible to have a fair trial of the issues between the defendants and the third party.
It seems to me that in a situation where the first defendant would be able to give evidence as to what occurred in conferences and where the solicitor would not be available to give evidence in answer, that is a prime example of a situation where there is a real risk that a fair trial will not be had.
Another matter which arises, or which potentially arises, is the question of the limitation of actions defence. It is well established that the fact that it is possible for a party to bring a second action within the limitation time is one of the strongest reasons for refusing to dismiss a proceeding for want of prosecution. (See DeNier and Beicht [1982] VR 331 at 335 referring to Birkett v. James (1978) AC 297).
In this case it is conceded that the limitation period for the defendant's cause of action against the third party has expired so that no new proceeding could be brought. Presumably the contractual cause of action had expired by the end of 1991, if not earlier. Assuming that the defendants have a cause of action in the tort of negligence, it would seem to me that actual damage must have been suffered by about May 1989 when the first demand from the bank was received. (See generally Wardley Australia v. State of Western Australia (1992) 175 CLR 514). The borrowers were impecunious according to the defendants and the bank had thereby made its demand under the mortgage. Accordingly, the limitation period would have expired in 1995. Whatever the precise analysis in relation to this, it was not contended that a new proceeding could now be issued by the defendants.
In my opinion this consideration does not therefore provide a reason for refusing to dismiss the proceeding if there are strong reasons otherwise why the discretion to dismiss should be exercised. In the end there is a discretion to be exercised in all the circumstances and the court must be satisfied that the justice of the situation requires that the proceeding be dismissed. I consider that justice does require, for the reasons I have given and in all the circumstances to which I have referred, that the third party proceeding be dismissed for want of prosecution.
| 49 | Accordingly, the appeal is dismissed with costs. --- |
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