Haarslaw Pty Ltd v Systems Support Pty Ltd

[1991] FCA 298

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IN THE FEDERAL COURT OF AUSTRALIA	)
SOUTH AUSTRALIAN DISTRICT REGISTRY )	1
1
GENERAL DIVISION	) No. SAG9 of 1986
BETWEEN:
HAARSLAW PROPRIETARY LIMITED

Applicant

- and -

RECEIVED	SYSTEMS SUPPORT
0 5 J U N 1991	PROPRIETARY LIMITED
FEDERAL COURT OF	and ASHLEY BRIAN DIXON

AUSTRALLA

PRINCIPAL

REOlaTRY Respondents

EX TEMPORE REASONS FOR JUDGMENT

Corm: von Doussa J.
10 May 1991

By notice of motion the respondents seek an order that the applicant's claim be struck out for want of prosecution. That application was taken out on 9 April 1991, and was first heard on 24 April 1991. On that occasion it was adjourned until today. 1 made it clear that I thought the proceedings should be struck out unless before today the applicant remedied a number of matters which required its attention. The applicant is a trust company operated by a solicitor, Mr Haarsma, who was present in court at that time, and no doubt his counsel, Mr Adams, thoroughly instructed him as to the implications of the remarks from the bench.

Today the matters that were outstanding on 24 April 1991

have not been attended to, and in light of the history of the matter to which I will make brief reference, it is hardly surprising that counsel for the respondents urges that the time has at long last come for some positive action to be taken by the court to bring these sad proceedings to an end.

The proceedings were commenced on 21 February 1986. The applicant complained that it was induced in the months of February to April 1985 by the respondentsf representations, to purchase a computer operated accounting package from the respondents. Delivery of that package occurred in about mid- 1985. Apparently the package never performed satisfactorily. The package included computer hardware and computer software.

The respondents appeared, and there were several directions hearings leading up to one on 6 August 1986 when the directions hearing was adjourned sine die at the request of the parties to enable interlocutory matters then outstanding to be attended to. Inordinate delay has since

applicant, the applicant seeks to place a measure of blame on	occurred. In an affidavit filed on 9 May 1991 by the
various solicitors that have acted for it on the footing that the delay is due to the statement of claim being inadequate. The lack of particularity in the statement of claim has been the subject of ongoing complaint by the respondents. However,
I think it should be said that the statement of claim, apart
from lacking particulars, is probably not inadequate. Probably it was the best effort that could be made at the time it was filed to plead a broad ranging set of allegations that would cover the various things that may have given rise to inadequacy in the accounting package. Whilst the lack of particulars at an early stage in the proceedings can be understood, the respondents are, nevertheless, entitled to insist on sufficient particulars to know the case which it will be required to meet at trial. A notice of motion filed on 11 July 1989 sought further and better particulars which would disclose the nature of fault or faults alleged in the accounting package. On the hearing of this notice of motion it became clear that the applicant and M r Haarsma did not know the real cause of the trouble and could not supply the particulars which the respondents sought. This may also be the reason the applicant took no further steps in the proceedings after 6 August 1986 until the court of its own motion relisted the matter for directions.
It now appears that both parties had been content to allow the matter to become stale and to die a natural death.
relisted the matter on 9 December 1987. The court did so with In retrospect, it is perhaps unfortunate that the court
a view to having the proceedings either struck out or listed for trial. Unfortunately, the reverse has occurred. There have now been 32 further directions hearings. It may be said, viewing the matter objectively, that the applicant has not advanced its proceedings at all in the meantime.
In July 1989, after there had been further attempts to have the parties give discovery, the notice of motion for further and better particulars was argued. Three possibilities exist, either singularly or in combination, why the accounting package may not have operated as the applicant would have wished, namely an error in the hardware, an error in the software, or an error in the method of operation of the two. Until the nature of the complaint made by the applicant, which presumably would be either error in hardware or error in software was particularised, the respondents could not prepare their defence or take steps to protect their own position in relation to the proceedings by cross-claim. That remains the position today.
Also on the hearing in July 1989 a question was raised both by the court and by the respondents' counsel as to what amount of money was involved in this action. The court expressed the view that the amount involved might not be a large amount. The respondents' counsel was more forthcoming with an assertion that the claim may not exceed $10,000. The
occasions subsequently, to give proper particulars of the loss applicant at that stage was urged, and has been urged on
and an indication of how it is calculated. That has not happened.
The applicant has sought numerous adjournments to enable it either to comply with the request for particulars or to file an amended statement of claim containing particulars sufficient to identify the error in the accounting package.
It has become clear in the course of time that the applicant is unable to take either step until an opinion is obtained from a computer expert, an opinion which the applicant hopes will identify error either in the hardware or in the software, and eliminate operator error, as the cause of the trouble.
In relation to one of the hearings an affidavit was filed from a computer expert approached by the applicant, Mr Shipp, sworn in November 1990. This affidavit illustrates the difficulties which now arise so long after the event, in any attempt to evaluate the hardware and software comprising the accounting package. It is anything but clear that it will ever be possible to get such an opinion. It is even more unclear how much an evaluation and opinion is likely to cost, but it might be very expensive.
All that we know about the recent progress of the applicant's inquiries is in the information disclosed by Mr
Haarsma in his affidavit filed yesterday to the effect that the hardware is now operating. He omitted to tell us how far
the investigations have got and whether he is in a position to bear the cost of those investigations.
In an effort to bring the matter to a conclusion it was set down for trial in August 1989 notwithstanding the unsatisfactory state of the pleadings, but the trial date eventually had to be vacated as the parties were in no position to proceed without the particulars and without knowing what error was alleged in the accounting package.
The matter was set down for trial again in October 1990 in the hope that it might precipitate some conclusion to the proceedings but, as before, it was necessary to vacate the trial date because the applicant had not provided particulars and there was no way that the respondents could have been in a position to respond in an appropriate way to the claim.
In February 1990 an application was made by the respondents for security for costs. That was a belated application but it was one made at a time when it became apparent that the applicant was intending to recast the statement of claim with the result that a great deal of time would have been spent pointlessly up to that stage.
Evidence in support of the application showed that the applicant was a trust company not sufficiently supported by
assets to be in a position to bear the costs of the
proceedings in the event of failure. At the conclusion of
argument in February 1990 I declined to make orders on that or on other applications that were then before the court. I expressed the view that in due course if the whole matter could not be settled, as I thought it ought to be, quickly, an order for security would be made. And, furthermore, if security were not given the proceedings would be stayed or in due course dismissed. I declined to make orders on the

applications at that stage because I felt strongly that the parties ought make a determined effort to resolve their differences. At that stage, the picture appeared that a great deal of time had been spent on the proceedings, yet, the applicant could still not articulate its claim. The applicant was apparently having difficulties bearing its own costs of the proceedings and was in no position presently to fund the future conduct of the action, nor even to fund the investigation that was necessary by the computer expert. The position was becoming oppressive to the respondents and something would have to be done about that. The longer the applicant let the matter run the worse the picture was going to become. There was a real risk that one or both parties would finish up insolvent before the proceedings could be determined. Those considerations were expressed to the parties, and I urged them to seek the assistance of some independent person who might assist with mediation to reach a resolution of the proceedings. I was later informed that M r F.R. Fisher Q.C. had agreed to act as a mediator. The matter

was stood over for some months to enable mediation to occur.

Unfortunately, so I am told, all that led to nothing because the applicant remained unable to identify its complaint about the package. As mediation was not achieving the result intended, the matter was re-listed in October 1990, and at that stage the outstanding applications were again pursued by the respondents.

On 20 November 1990, an order for security for costs was made. It was clear once again that the applicant and Mr Haarsma were having some financial difficulties, and if an order for a substantial sum by way of security were made it would be most unlikely that the applicant could fund the investigation that was necessary by a computer expert. The order that was then made reflects a sympathy which has been extended to the applicant on numerous occasions during these proceedings, for reasons which I will note in a moment. The order for security, in effect, required the applicant by 7 December 1990 to give a bank guarantee in favour of the respondents in the sum of $10,000, exercisable only upon the order of the court, together with a personal guarantee in the sum of $10,000 from Mr Haarsma exercisable only upon the order of the court, by way of security.

The order has not been met. Indeed, all that we are told

by Mr Haarsma1s affidavit filed yesterday is that an application to the bank for security was made, and was

provide the security ordered. We are not told whether the	refused. Accordingly, the applicant is presently unable to
shareholders that stand behind the applicant - and in particular Mr Haarsma - offered a personal guarantee to the bank to support a bank guarantee. It will be noted that no personal guarantee has been given by Mr Haarsma to the respondents.

The present situation is therefore as follows. There

have been significantly more than 30 chamber applications, nearly all of which have been made necessary or adjourned because of non-compliance by the applicant with earlier orders, and still the respondents can look only to the applicant for the costs of those proceedings. When sooner or later the matter is resolved, there is no likelihood that the applicant will be in a position to pay those costs, and Mr Haarsma has not committed himself in any way which would make him personally liable.

The present application is made under 0.30, r.5. In my

view that rule applies as this matter has twice been set down for trial. In my opinion, from an objective point of view, there has been inordinate delay, and there is no light on the horizon provided by the applicant to suggest the delay will not continue if the matter is allowed to run on.

I have been referred today to the decision of the Full

Court of this Court in Leniiamar Ptv Ltd & Ors v. AGC

JAdvances) Limited (1990) 98 ALR 200, and also to the decision	of the Full Court of South Australia in Ulowski v. Miller
[l9681 SASR 277 which is an authority on procedural strike-out applications in South Australia. I do not think the principles in those two decisions to be in any way inconsistent. Leniiamar emphasises that at the end of the day the court must exercise a judicial discretion, having regard to all the circumstances of the case and weighing the many factors that are likely to arise. There is no hard and fast requirement that the respondent in proceedings must establish inordinate or inexcusable delay or must establish actual prejudice, or contumelious conduct on the part of the applicant. On the other hand, if one or more of those matters is established, it is an important factor to be taken into account in the exercise of the discretion.
In the present case, I do not think the delays and defaults by the applicant, and Mr Haarsma who stands behind it, were wilful. I return to a topic I mentioned before. A most sympathetic attitude has been adopted in favour of the applicant throughout these proceedings. As I have said in argument today, I could understand if the respondents were to say that, up to date, they have weathered too many chamber applications where positive action appears not to have been taken against the applicant by the court and that in the consequence, have failed to receive justice. The reason why sympathy has been extended rightly or wrongly, to the applicant is that I have gained the impression that Mr Haarsma
the issues of the case. For that, or some other reason that has developed some emotional inability to come to grips with is unexplained, he seems incapable of making a balanced, rational, commercial decision about the case. I therefore extended indulgences to him, perhaps almost beyond proper limits. I urged him, sometimes kindly and sometimes not too kindly, to adopt certain courses of action in the hope that even if the case could not progress he would avoid what I think has now become inevitable, namely, that the proceedings
be struck out with costs against the applicant.
As I do not think the delays and defaults of the applicant have been wilful, it follows that they are not contumelious. Wilcox and Gummow JJ. in Leniiamar at 208-209 note that there will be two situations that are obvious candidates for the exercise of the power to strike out:

"But two situations are obvious candidates for the exercise of the power: cases in which the history of non-compliance by an applicant is such as to indicate an inability or unwillingness to cooperate with the court and the other party or parties in having the matter ready for trial within an acceptable period and cases - whatever the applicant's state of mind or resources - in which the non-compliance is continuing and occasioning unnecessary delay, expense or other prejudice to the respondent."

In my view the present case falls within both those categories. There is the inability, for one reason or another, of the applicant to co-operate as required with the court and the parties to advance the proceedings. And it is clearly a case where there has been continuing non-	compliance - not just with the order to give security but with	directions to give particulars. Lying behind that is the
inability, whether for financial or other reasons, to obtain the expert evidence that is necessary to enable the applicant to identify what its cause of the complaint is.
In my view the position of the respondents has become untenable in these proceedings and it is a case where, although the respondents have not deposed to actual prejudice under specific heads, there is a real likelihood of prejudice covering the matters deposed to by Mr Kennett in his affidavit of 9 April 1991. I mention some of those which have been argued today. First, these proceedings were commenced before 0.62, r.36A was enacted. If the applicant were ever likely to succeed, even to a small degree, the respondents would suffer a very heavy burden of costs. On the other hand, if the respondents were to succeed - as they are bound to do to the extent of a substantial order for costs on applications already heard - there is little prospect of them being able to recover costs.
The amount of the loss alleged by the applicant has not been formulated. The loss may not be very much. It is a hardship for the respondents to continue to have to defend themselves in this court without knowing what is involved and without knowing what the claim against them is.

It may well be, as McNamara of counsel for the

respondents has suggested, that already the costs which the	respondents have incurred in this court exceed the amount in
issue.
It is now about six years since the subject transaction occurred. Some of the allegations in the statement of claim allege oral representations. It is likely that memories of witnesses have faded considerably on those issues and about communications which occurred over the alleged failure of the
package to operate in a way that the applicant intended. The affidavit of Mr Shipp shows that already it is very difficult to operate the hardware in an environment which enables the software programmes to be adequately examined and checked.
It is to be noted that some damage has occurred to the computer in the meantime - how and when, and to what extent, is not clear. But the position of the respondents is likely to have been made more difficult by reason of that. It is also to be noted that the original software programme that was supplied has been lost by the applicant. Again, that is a matter likely to give rise to some difficulty to the respondents if the case were to proceed.
All in all, it is, at the least, a long, sad story of neglect by the applicant of the steps necessary to proceed with the action. Kr Haarsma is a solicitor, and must be taken to have some understanding of the need to take the various steps suggested or ordered by the court.
The position of the respondents has become more and more difficult and, whilst one can still feel sympathy for the applicant, the sympathy to which the respondents are now entitled, at least equals that to which the applicant is entitled.
In my view, putting aside sympathy, the conduct of the applicant in this litigation is such that this court should now exercise its discretion to order that the application be dismissed and I so order.

And the proceedings will be dismissed with costs.

I certify that this and the

13 preceding pages are a

true copy of the Reasons for Judgment of Mr Justice von Doussa

~ssociate :,@$!,'CL 4~4- L"-L

Counsel for the applicant

Solicitor for the applicant	: Adams Kandelaars
Counsel for the respondents	: Mr P A McNamara
Solicitor for the respondents	: Kelly & Co.
Date of hearing	: 10 May 1991