Erincole Building Services Pty Ltd (ACN 075 796 842) v John Holland Pty Ltd (ACN 004 282 268)
[2010] ACTSC 77
•28 July 2010
ERINCOLE BUILDING SERVICES PTY LTD (ACN 075 796 842) v JOHN HOLLAND PTY LTD (ACN 004 282 268) [2010] ACTSC 77 (28 July 2010)
PRACTICE AND PROCEDURE – discovery of documents – persistent failure to comply with directions – defence and counterclaim struck out by referee – application for stay of hearing by referee dismissed
PRACTICE AND PROCEDURE – Whether referee prejudged issues – whether referee should be disqualified for bias – held no bias in relevant sense
Commercial Arbitration Act 1986 (ACT)
Court Procedures Rules 2006 (ACT)
Aon Risk Services Australia Ltd v Australian National University (2009) 83 ALJR 951; (2009) 258 ALR 14; [2009] HCA 27
Astor Properties Pty Ltd v L’Union des Assurance de Paris (1989) 17 NSWLR 483
British American Tobacco Australia Services Ltd v Cowell (2002) 7 VR 524
Compagnie Financiere du Pacifique v Peruvian Guano Co (1882) 11 QBD 55
Ferguson v Mackaness Produce Pty Ltd [1972] NSWR 66
Hans Pet Constructions Pty Limited v Cassar [2009] NSWCA 230
Logicose Limited v Southland United Football Company Limited (Millett J, Chancery Division, 5 February 1988, unreported)
Mulley v Manifold (1959) 103 CLR 341
The Queen v Watson Ex parte Armstrong (1976) 136 CLR 248
Vance v McCormack (2007) 1 ACTLR 74
Wallfire Pty Ltd v Andwendrod Services Pty Ltd [2003] VSC 348
No. SC 136 of 2009
Judge: Master Harper
Supreme Court of the ACT
Date: 28 July 2010
IN THE SUPREME COURT OF THE )
) No. SC 136 of 2009
AUSTRALIAN CAPITAL TERRITORY )
BETWEEN:ERINCOLE BUILDING SERVICES PTY LIMITED (ACN 075 796 842)
Plaintiff
AND:JOHN HOLLAND PTY LIMITED (ACN 004 282 268)
Defendants
ORDER
Judge: Master Harper
Date: 28 July 2010
Place: Canberra
THE COURT ORDERS THAT:
With effect from 25 November 2009:
(a)the referee may decide that a party be allowed to amend its pleadings, whether to enlarge or limit the proceedings as presently pleaded;
(b)the referee may decide that a party should not be permitted to proceed further with all or part of its pleadings for any reasons, including for want of prosecution or for non-compliance with directions made by the Court or the referee, whether made before or after these orders;
(c) the referee may decide the reference summarily;
(d)the referee may decide any interlocutory matters that may arise in the proceedings;
(e)the referee may decide whether costs should be borne by any party, in any proportion, in relation to interlocutory applications;
(f)each of the decisions of the referee as allowed in orders 1-5 above are subject to the operation of r 1537 of the Court Procedures Rules 2006 (ACT);
(g) the costs of, and incidental to:
(a)the defendant’s application in proceedings filed 20 November 2009;
(b) the plaintiff’s application in proceedings filed 17 November 2009; and
(c)the defendant’s amended application in procepedings filed 18 November 2009;
be costs in the reference.
The defendant’s application dated 22 July 2010 be dismissed.
The defendant pay the plaintiff’s costs of the application.
This is an application by the defendant for a stay of proceedings before a referee appointed by the Court in a construction dispute.
The action was commenced in January 2009. The plaintiff claimed damages for breach of contract, and in the alternative remuneration for work done on a quantum meruit, with an additional count for relief under the Trade Practices Act 1974 (Cth). The defendant had been the head contractor on the construction of the National Portrait Gallery. The plaintiff was a sub-contractor engaged to provide and install reflective cladding.
In July 2009 the defendant filed a defence denying any liability to the plaintiff, and a counterclaim for breach of contract claiming site costs and scaffolding costs incurred by the defendant by reason of delays by the plaintiff.
In June 2009 I ordered pursuant to r 1531 of the Court Procedures Rules 2006 that the proceeding be referred to a referee to hear and decide it. I ordered that the referee be a person appointed by the President of the Institute of Arbitrators and Mediators (ACT Chapter). The referee so appointed was Mr John Murray. Mr Murray practised as a solicitor in Brisbane in the early 1980s, following which he joined the Master Builders Association, serving as National Executive Director for some 15 years until 2002. He has considerable experience as an arbitrator in construction disputes.
Some confusion has arisen as to the precise extent of the powers of the referee. In November 2009 I heard an application by the plaintiff for directions about the conduct of the reference. Towards the conclusion of that hearing I was informed by counsel for the parties that it was proposed that consent orders would be filed as to those matters. It now appears that orders were drafted on behalf of the plaintiff, and that correspondence between the solicitors followed as to the form and substance of the proposed consent orders, but that no orders were ever formally made. Nevertheless, the reference proceeded. The referee was clearly under the impression that orders had been made. He said at para 16 of his report dated 21 December 2009:
On 25 November the Supreme Court made the following orders:
(a)the referee may decide that a party be allowed to amend its pleadings, whether to enlarge or limit the proceedings as presently pleaded;
(b)the referee may decide that a party should not be permitted to proceed further with all or part of its pleadings for any reasons, including for want of prosecution or for non-compliance with directions made by the Court or the referee, whether made before or after these orders;
(c) the referee may decide the reference summarily;
(d)the referee may decide any interlocutory matters that may arise in the proceedings;
(e)the referee may decide whether costs should be borne by any party, in any proportion, in relation to interlocutory applications;
(f)each of the decisions of the referee as allowed in orders 1-5 above are subject to the operation of r 1537 of the Court Procedures Rules 2006 (ACT);
(g) the costs of, and incidental to:
(a)the defendant’s application in proceedings filed 20 November 2009;
(b) the plaintiff’s application in proceedings filed 17 November 2009; and
(c)the defendant’s amended application in proceedings filed 18 November 2009;
be costs in the reference.
On 9 April 2010 I ordered pursuant to r 1537 that the whole of that report be accepted. I now accept that no-one involved in the matter adverted to the fact that orders to that effect had not formally been made or taken out but that the parties and the referee proceeded on the basis that they had.
Following his appointment, the referee held a number of directions hearings and made numerous orders and directions as to the conduct of the reference. These included orders and directions about discovery of documents.
An affidavit of documents was lodged with the referee by the defendant on 14 October 2009. The plaintiff complained that the list of documents was incomplete. The referee accepted this at a directions hearing on 12 November 2009, and ordered the defendant to file a supplementary affidavit of documents. A second affidavit of documents was lodged on behalf of the defendant on 18 November 2009.
In his report of 21 December 2009, the referee said at para 19.2:
Defendant to file further supplementary affidavit of documents
Notwithstanding directions I had issued at previous hearings the defendant continues to be in default of its obligation in relation to discovery. In addition to the defendant’s general obligation relating to discovery, I consider that the plaintiff’s request for the defendant to disclose the various categories of documents outlined in its correspondence of 2 December 2009 to be appropriate and relevant. I note that although the defendant contends that it has complied with its legal obligation in respect to discovery and that many of the specific documentation requested by the plaintiff are not relevant, it is nevertheless willing to make every effort to locate such documents ... . Given that the task of locating many of the documents may be time consuming and given that the hearing has been adjourned to March 2010, I consider that the order requiring the defendant to provide its supplementary affidavit (and enable the plaintiff to inspect such documents) by 23 December 2009 is reasonable.
On 18 December 2009 the defendant’s solicitors lodged with the referee a third affidavit of documents.
At a directions hearing on 5 March 2010, counsel for the plaintiff complained again about the adequacy of the defendant’s discovery. After hearing submissions by counsel for both parties, the referee ordered the defendant to file a supplementary affidavit of discovery, with inspection to take place by 1 April 2010.
On 18 March 2010, a fourth affidavit of documents was lodged by the defendant’s solicitors with the referee.
The matter came before the referee again for directions on 12 May 2010. Counsel for the plaintiff complained once more about the adequacy of the defendant’s discovery. The referee adjourned the directions hearing for two days. Counsel for the plaintiff asked the referee to dismiss the defence and counterclaim because of the defendant’s failure to discover all relevant documents. The referee said he would hear that application at the beginning of the hearing, then scheduled for 24 May with five days set aside.
On 26 May the plaintiff’s solicitors formally lodged an application seeking orders that the defendant not be permitted to proceed further with its defence or counterclaim, other than in contesting the issue of damages.
The hearing did not proceed in May. The matter came back before the referee for further directions on 18 June. The application in relation to the defence and counterclaim was heard by the referee on 5, 9 and 12 July. On 17 July the referee gave his decision, accompanied by brief (seven pages) reasons. His decision was to strike out the defence and counterclaim. He stated in his reasons that he would provide reasons in greater detail by the end of July.
His formal decision was that the defendant not be permitted to proceed further with its defence of the claim, save that it could contest the assessment of the plaintiff’s damages, and that the defendant not be permitted to proceed further in the prosecution of its counterclaim.
He identified the issues as whether the defendant’s failure to comply with his directions as to discovery had prejudiced the plaintiff in the preparation of its case, and whether the non-compliance was of such an egregious nature as to justify the imposition of the sanction. He noted that the defendant’s failure to comply with the original timetable as to discovery had caused the vacation of the hearing date originally fixed, 26 October 2009. A fresh date had been fixed for 7 December 2009. The second affidavit of documents was also inadequate, resulting in the vacation of the December hearing date. A fresh date was fixed for 22 March 2010. At that point the referee provided a report to the Court, which I adopted, which led to costs orders against the defendant in relation to the vacation of the hearing dates.
The plaintiff made a further application for supplementary discovery. The March hearing date had to be vacated. The plaintiff issued a number of notices for non-party production. It was apparent from the documents produced in response to those notices that there were further documents in existence which could reasonably be inferred to be or to have been in the defendant’s possession or control which had not been discovered. It was in that context that the plaintiff applied to have the defence and counterclaim struck out. The hearing of that application occupied three days. On the first day the defendant produced a bundle of further documents, being site diaries, running to some hundreds of pages. On the third day of the hearing of the application, the defendant produced a lever arch folder of about 300 pages, being attachments to monthly reports in relation to the construction project. The reports had previously been discovered but not the attachments. The defendant asserted at the time of production of the attachments that they “were not relevant to an issue in the proceedings except for a select few of the construction programs”.
The referee noted that on each occasion following his directions for further discovery, and following the strike-out application, the defendant had produced further documents. Counsel for the defendant said they had been produced under protest and submitted that they were not relevant. The referee’s view was that the defendant’s submission failed to recognise the critical importance that the issue of the causation of delay in completion of the building project had to the proceedings.
In its counterclaim, the defendant asserted that by reason of the plaintiff’s failure to complete its work within the agreed time, the defendant had incurred loss and damage by way of additional costs. The referee’s view was that the defendant was required to disclose all documents that related to the issue of delay on the project, for the period from just prior to the plaintiff commencing work on site up to 2 December 2008. The documents required to be discovered were not only those relating to the plaintiff’s work, but those relating to all the other trades whose work had a connection with the plaintiff’s work. This would have included not only material that would advance the defendant’s case but also material that might not support its case (such as for example, site reports referring to delays but making no reference to the plaintiff being the cause of the delay).
The referee considered that the defendant should have been aware that in making discovery it was necessary to provide all documentation relating to the cause of the delay. That point had been underscored by the plaintiff at each of the directions hearings. It appeared that the defendant either did not accept it or did not understand it. The deponent to the defendant’s various affidavits of documents, Mr Donald, had consistently asserted that the plaintiff’s requests for further documentation were not supportable. It was clear from the pleadings that the plaintiff contested the defendant’s assertion that the plaintiff was the cause of the delay, and would contend that there were other causes. A careful perusal of the defence and counterclaim would have made it clear that the defendant was obliged to disclose all documents relating to the cause of the delay on the overall project during the relevant period. The plaintiff should not have been required to incur the extra effort and expense of issuing various notices for non-party production to obtain material relevant to the causation of the delay. Such material should have been discovered in the first instance.
There had clearly been prejudice to the plaintiff by the non-compliance. The plaintiff would have been significantly disadvantaged if required to proceed to hearing based on the original discovery. The prejudice remained. The referee’s view was influenced by the fact that on the very hearing of the strike-out application, the defendant produced further material which in the referee’s view was unquestionably relevant to the proceedings. If the plaintiff had not issued notices for non-party production, and made the strike-out application, those documents would not have been brought to light. The referee accepted the plaintiff’s submission that there could be little confidence that the defendant had even then discovered all of the necessary material to enable the plaintiff to properly prepare its case.
The referee went on to consider whether the circumstances were sufficiently egregious to warrant the striking out of the defence and counterclaim. He noted that such relief was granted sparingly. He referred to and quoted from authority to the effect that such relief was an extreme measure to be taken as a last resort (per Young J in Hans Pet Constructions Pty Limited v Cassar [2009] NSWCA 230 at para 52) and noted that the object of the rules about discovery was “not to punish the offender for his conduct but to secure the fair trial of the action in accordance with the due process of the Court” (per Millett J in Logicose Limited v Southland United Football Company Limited (Chancery Division, 5 February 1988, unreported).
The referee concluded that the defendant’s continuing failure to make proper discovery would prevent the plaintiff from appropriately preparing its case. He accepted the plaintiff’s submission that the problems stemmed from a misconception on the part of the defendant of its obligations relating to discovery. He referred to the defendant’s fourth affidavit of documents, in which the deponent, Mr Donald, had expressed his view that the defendant was obliged to disclose only such documents as he considered to be relevant. The referee said that such an approach was entirely misconceived. The defendant was obliged to discover all documents relevant to the issues in dispute. It was not for the deponent of the affidavit to determine which issues were relevant. The misconception had resulted, for example, in the defendant discovering only those site minutes which Mr Donald thought were relevant, when in fact, given the issues emerging from the pleadings, the defendant was required to disclose all site minutes because all site minutes were relevant.
The misconception had resulted in relevant documents not being identified, and the affidavits in toto could not be considered as conclusive. Here the referee referred to Mulley v Manifold (1959) 103 CLR 341 per Menzies J at p 343.
The referee took note of the fact that the matter had been referred to him by the Court in the expectation that the hearing by a referee would result in expedition. The vacation of two previous hearing dates and the making of numerous directions about discovery, as well as the conduct of twelve directions hearings, had led to the re-scheduling of the hearing from its original date of 26 October 2009 to 2 August 2010. In a number of the directions hearings counsel for the plaintiff had clearly articulated the precise areas where the defendant’s discovery was deficient, only to be confronted with the refrain that the materials requested were considered not to be relevant, or did not exist, or were no longer in the possession of the defendant, or even, in relation to some documents, “if only you had told us you wanted such a document”. After each direction requiring the defendant to complete discovery, some further documentation would be produced. It was not satisfactory that the dispute should continue to proceed on the basis of the defendant responding to its discovery obligations in such a manner. The referee thought that any further direction about discovery would be likely at best to result in only some additional documents being produced. Discovery should not be progressed on such an instalment basis. He had come to the view that it was most unlikely that the defendant would ever make full disclosure given its misconstrued understanding of the issues in dispute. For those reasons the referee considered the circumstances to be of such an egregious nature that they justified the striking-out of the defence and counterclaim.
The referee has directed that the hearing commence next Monday, 2 August 2010, the date fixed for the hearing prior to the orders about the defence and counterclaim. If the hearing proceeds, it will be for the assessment of the plaintiff’s damages only. Because of the urgency of the matter, the defendant has brought this application seeking a stay of the hearing. The defendant also seeks an order that the referee be disqualified for bias.
The referral of a proceeding to a referee is governed by Div 2.15.4 of the Court Procedures Rules. Rule 1531 provides that the Court may refer a proceeding to a referee to hear and decide the proceeding. The Court may give directions about the conduct of the reference from time to time, on application by a party or on the Court’s own initiative.
Rule 1534 provides that a proceeding referred to a referee must be conducted as if it were an arbitration agreement under the Commercial Arbitration Act 1986 and the referee were an arbitrator under that Act.
Rule 1536 provides that the referee must file a written report on the proceeding, giving the referee’s decision, with reasons. Where such a report is filed, rule 1537 provides that on application by a party, the Court may, on a matter of fact or law or both, accept, amend or reject all or part of the report. The Court may require the referee to give an explanation by further report. The Court may remit all or part of the proceeding to the referee for further consideration and report. The Court may make an order in the proceeding on the evidence taken before the referee, with or without additional evidence.
It does not seem to me that the reference in the Rules to the Commercial Arbitration Act goes beyond incorporating Pt 3 of that Act (Conduct of Arbitration Proceedings). Other provisions in the Act such as s 28 in Pt 4 (Award to be Final) and s 38 in Pt 5 (Judicial Review of Awards) are not appropriate to a reference to a referee. The report of the referee to the Court has no status until it is accepted by the Court. On acceptance, the referee’s decision acquires equivalent status to a judgment of the Court. The Court is not obliged to accept the report and will hear submissions from the parties before doing so: Astor Properties Pty Ltd v L’Union des Assurance de Paris (1989) 17 NSWLR 483 per Cole J; Wallfire Pty Ltd v Andwendrod Services Pty Ltd [2003] VSC 348 per Hansen J.
It is clear that the parties intended the referee to have the powers he referred to in his report of 21 December 2009, which I set out at [5]. Because the reference has been conducted on the understanding that orders in those terms were made, without demur by either party, I am of the view that I should make orders in those terms nunc pro tunc with effect from 25 November 2009, and I do so.
The effect of order (f) of those orders is not entirely clear. There is no question that the intention of the parties and my intention in making the orders was that the referee would have effective power to make interlocutory orders, including orders having the same effect as an order striking out a defence or counterclaim. On one view of order (f), such an “order” by the referee would have no effect until accepted by the court, and it might be amended or rejected by the court. On another, the referee would be obliged to file only his final report with the court, and only that final report would arise for acceptance, amendment or rejection under rule 1537.
With the exception of the present application, the parties have thus far proceeded on the basis that individual orders and directions of an interlocutory nature made by the referee since the commencement of the reference were effective without the necessity for an application to the court and acceptance of a report by the referee about each such “order”.
On reflection, it seems to me that the proper construction of order (f) is that all interlocutory orders and directions made by the referee pursuant to orders (a) to (e) inclusive are ultimately subject to the possibility of amendment or rejection by the court when considering the final report of the referee. During the course of the reference leading up to the production of the final report, as between the referee and the parties, such corrections and “orders” are to be complied with, and further involvement of the court at that stage is unnecessary and not contemplated by the parties. Accordingly, I am satisfied that the referee had the power to make the order of 15 July 2010.
Whilst this is an application for an order staying the hearing next week, and is not an appeal from the decision of the referee, it raises similar issues to those which would arise for consideration on an interlocutory appeal. It seems to me appropriate that I look at the referee’s decision from that perspective.
Counsel for the plaintiff quoted the classic passage from Compagnie Financiere du Pacifique v Peruvian Guano Co (1882) 11 QBD 55 per Brett LJ at p 63:
It seems to me that every document relates to the matters in question in the action which not only would be evidence upon any issue, but also which, it is reasonable to suppose, contains information which may – not which must – either directly or indirectly enable the party requiring the affidavit either to advance his own case or to damage the case of his adversary. I have put in the words “either directly or indirectly” because, as it seems to me, a document can properly be said to contain information which may enable the party requiring the affidavit either to advance his own case or to damage the case of his adversary if it is a document which may fairly lead him to a train of inquiry which may have either of those two consequences.
Counsel for the plaintiff also cited a passage from Ferguson v Mackaness Produce Pty Ltd [1972] NSWR 66 per McFarlan J to the effect that solicitors bore a:
... particularly heavy burden requiring not merely advice to their clients when their clients seek advice but an active participation in ensuring that the clients undertake what they are obliged to do by the order. In fact, so seriously is this obligation of the solicitors regarded that English judges on a number of occasions have said that failure to discharge it can well be considered to be professional misconduct. It is therefore, I hope, clear from what I have said that it is not sufficient for a solicitor simply to enquire of his client ... if he has any documents and request that he send any documents that he has to him; the obligation extends much further, namely to the extent that the solicitor is obliged to make an appraisal of the case and form his own opinions as to what documents probably are in existence and actively to seek out from the client ... whether or not those documents exist. It is only, indeed, in that way that the obligation of the solicitor can be properly discharged.
McFarlan J went on to say:
In this case there are issues of contract, breach and damages and the plaintiffs must prove all of those matters before they are entitled to any damages. Any document which the defendant has in its possession relating to any of those issues must be discovered even though the only issues raised by the defendant are much more limited and do not relate to damages in any way as is possibly the case here where the statement of defence simply puts the plaintiffs to proof of their damages. The obligation of both parties, plaintiff and defendant, is to discover and produce all documents, not being privileged, which relate to all matters which will be litigated in the case.
Counsel for the plaintiff pointed out that r 608(3) requires the deponent to an affidavit of documents to state that he or she believes that there are no discoverable documents other than those mentioned in the list that are, or have been, in the parties’ possession. Mr Donald, who has sworn the affidavits of documents on behalf of the defendant, has deposed in those terms now on four occasions, each time disclosing more documents not on the previous list. In the second and third affidavits, he simply followed the usual formula, giving no explanation as to how the further documents had been omitted previously. In his fourth affidavit, he swore that he had reviewed and was aware of the contents of the pleadings, and expressed the opinion that “the claimed documents that the plaintiff has filed are somewhat vague and imprecise as to what they are claiming”. I take it that this was intended as some kind of explanation for his earlier failures to disclose all relevant documents.
I accept the submission of counsel for the defendant that the sanction of striking out pleadings for failure to comply with the obligations of discovery is rarely granted, and that courts will generally strive to fashion some less draconian remedy. The bar for such relief is set high. British American Tobacco Australia Services Ltd v Cowell (2002) 7 VR 524 is an example of a case where an appellate court set aside such an order, notwithstanding a suggestion that the party in default had intentionally destroyed relevant documents to prevent their use in evidence. An example of a case in this Court where portion of a defence was struck out for extended and continuing failure to give complete discovery is Vance v McCormack (2007) 1 ACTLR 74. Crispin J said at para 38:
... generally speaking, a party should not be denied the opportunity for a full and fair hearing on the merits of the case when the delay caused by its default has not led to irredeemable prejudice. However, in this case there has been a persistent failure to adequately comply with a court order and a defendant cannot expect a court to be mollified by a contention that, no matter how many years the case is delayed by its persistent default, it will always be possible for the plaintiff to eventually obtain a fair trial of the action. Indeed, in some cases a very serious view has been taken of even a short delay in compliance with court orders. ... In an extreme case it cannot be doubted that substantial delay in compliance with court orders may itself be sufficient to warrant even the drastic remedy of striking out a defence in whole or in part.
In Vance, by the time the application was made six affidavits of discovery had been filed on behalf of the defendant, each disclosing additional documents not previously disclosed, over a period of five years.
Counsel for the defendant submits that r 21 of the Civil Procedures Rules is applicable notwithstanding that the default in discovery has taken place in the course of a reference to a referee rather than as part of the preparation for a hearing before the Court. I accept the submission as to the applicability of the rule, which provides:
21(1)The purpose of this Chapter, and the other provisions of these rules in their application to civil proceedings, is to facilitate the just resolution of the real issues in civil proceedings with minimum delay and expense.
(2)These rules are to be applied by the courts in civil proceedings with the objective of achieving –
(a|)the just resolution of the real issues in the proceedings; and
(b)the timely disposal of the proceedings, and all other proceedings in the court, at a cost affordable by the respective parties.
(3)The parties to a civil proceeding must help the court to achieve the objectives.
(4)The court may impose appropriate sanctions if a party does not comply with these rules or an order of the court.
Example for r(4)
The court may dismiss a proceeding or make a costs order if a plaintiff fails to proceed as required by the rules in ch 2 or an order of the court.
The effect of r 21 was considered by the High Court of Australia in Aon Risk Services Australia Ltd v Australian National University (2009) 83 ALJR 951; (2009) 258 ALR 14; [2009] HCA 27.
This appeal related to an application to amend a statement of claim. Relevantly for present purposes, the application came at a late stage, and if granted would have led to the adjournment of the hearing and the waste of the judicial time set aside for the hearing. French CJ referred at para 30 to the need for courts to take into account waste of the public resources and undue delay, with the concomitant strain and uncertainty imposed on litigants and the potential for loss of public confidence in the legal system which arises where a court is seen to accede to an application for vacation of a fixed trial date.
Gummow, Hayne, Crennan, Kiefel and Bell JJ in their joint judgment in paras 89 and following, referred to r 21 of the Court Procedures Rules. They said at para 92 that the purposes stated in the rule reflected principles of case management by the courts. Such management was an accepted aspect of the system of civil justice administered by courts in Australia. It had been recognised that a different approach was required to tackle the problems of delay and cost in the litigation process. The achievement of a just but timely and cost-effective resolution of a dispute has an effect upon the court and upon other litigants. Their Honours said at para 94 that it might be necessary for the court to make a decision which might produce a sense of injustice in a party, for the sake of doing justice to the opponent and other litigants. At para 101, their Honours recognised that corporations were subject to the pressures of litigation. They referred to a corporation in the position of the defendant in that matter being required to carry a contingent liability in its books of account, with consequent effects upon its ability to plan financially. They noted that the company’s resources might have to be diverted to deal with the litigation.
Their Honours said at para 114 that r 21 recognises that delay and costs are undesirable and that delay has deleterious effects, not only upon the party to the proceedings in question, but to other litigants.
These observations have application to the present circumstances notwithstanding that the proceedings are before a referee rather than a judge of the court. The reference has been fixed for hearing on two previous occasions and those hearing dates have had to be vacated. The fact that the relief sought by the defendant in this application would result in the vacation of a further period of days set aside for the hearing is undoubtedly a factor to be weighed in the balance.
I am not satisfied that the referee’s decision to, in effect, strike out the defence and counterclaim was such as would warrant appellate interference. The referee was exercising a power available to him. The exercise of the power did not in my opinion miscarry and I would not, if I were asked to review it on appeal, overturn it or alter it.
Counsel for the defendant submits, as an additional or alternative ground for a stay, that the referee has exhibited bias such as would be regarded as disqualifying him from proceeding with the hearing. Counsel points to the following passage in the summary reasons of the referee for his decision:
Any further direction requiring further discovery will (at best) only result in some additional documents being produced. Discovery should not be progressed on such instalment basis, and in any event it is most unlikely that the defendant will ever make full disclosure given its misconstrued understanding of the issues in dispute.
Counsel for the defendant submits that the referee has prejudged the credibility of the deponent to the affidavits of documents, Mr Donald. Mr Donald was the defendant’s project manager for the National Portrait Gallery project, and I accept that he would be a critical witness for the defendant on liability, in relation to both the claim and the counterclaim. He may also be an important witness in relation to the assessment of the plaintiff’s damages.
Counsel for the defendant refers to the decision of the High Court in The Queen v Watson Ex parte Armstrong (1976) 136 CLR 248. A judge of the Family Court of Australia had stated in the course of interlocutory applications that he would not accept the evidence of either the husband or the wife in contested proceedings under the Family Law Act 1975 (Cth). The High Court by majority (Barwick CJ, Gibbs, Stephen and Mason JJ, Jacobs J dissenting) held that the judge should be prohibited from continuing to hear the proceeding. The formation of a preconceived opinion that neither party was worthy of belief amounted to bias in the relevant sense: the public might reasonably suspect that the judge was not unprejudiced or impartial.
It does not seem to me that the referee has formed a view as to Mr Donald’s credit, still less a more general view about the credibility of witnesses likely to be called for the defendant. On the contrary, it is clear from the referee’s reasons that his view is that the defendant’s failure to discover all relevant documents has arisen from a misconception on the part of the defendant and of Mr Donald as to the defendant’s obligations relating to discovery. Such a misconception, I suspect, would not be an uncommon thing in the commercial world. Players in commerce and industry are expected to act in the interests of the company they work for, and are rewarded for doing so. The requirements of the obligations of discovery in civil litigation are completely contrary to that culture. It is hardly surprising that people in business initially cannot believe, and sometimes can never accept, that they are obliged to do things which are positively adverse to the interests of their company. This is no doubt a large part of the reason for the imposition of a heavy burden on solicitors in commercial litigation to ensure that their clients comply with their obligations.
But having said that, the referee has not suggested that the defendant company or Mr Donald have deliberately put forward false or misleading material, still less that Mr Donald or any other witness would be likely to give other than truthful evidence on hearing.
The assertion of bias on the part of the referee is unfounded.
Accordingly the defendant’s application fails, and will be dismissed with costs. The hearing of the reference will proceed before the referee on Monday next, 2 August.
I certify that the preceding fifty-six (56) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Master.
Associate:
Date: 28 July 2010
Counsel for the plaintiff: Mr PA Walker
Solicitor for the plaintiff: Goodman Law
Counsel for the defendant: Mr R P Clynes
Solicitor for the defendant: Dibbs Barker
Date of hearing: 26 July 2010
Date of decision: 28 July 2010
7
1