Imagecolor (SA) (in Liq) & Sheahan v Curtis & Ors No. Scgrg-99-619

[2000] SASC 316

IMAGECOLOR (SA) PTY LTD (In Liquidation) & SHEAHAN v CURTIS & ORS

[2000] SASC 316

Appeal from a Master

1................ DOYLE CJ:....... There are two issues that arise in this appeal. The first is whether a Third Party Notice issued by the first and second defendants on 19 June 2000 is liable to be set aside on the ground that Rule 37.01(2) of the Supreme Court Rules requires the leave of the court to be granted before the Third Party Notice was issued. The Third Party Notice was issued without a grant of leave.

1. The second point is whether, if the answer to the first point is that leave was required, leave should now be granted for the issue of the Third Party Notice or whether the issue of the Third Party Notice should be set aside.

2. I turn to the first point. Rule 37.01 provides for the issue of a Third Party Notice without leave within the earlier of 14 days of filing the Defence in the proceedings, or 14 days of the last day according to the Rules for the filing of the Defence.

3. The first and second defendants filed their Defence on 7 July 1999. As I have already mentioned, the Third Party Notice was not issued until 19 June 2000. However, after the defendants filed their Defence, a number of pre‑trial procedures took place between the parties. In particular, on 27 April 2000, an amended Statement of Claim was filed, and on 5 June 2000 an amended Defence was filed by the first and second defendants. The Third Party Notice was issued within 14 days of the filing of that amended Defence.

4. The first and second defendants, the present appellants, submit that the reference in rule 37.01(1) to a Defence includes a reference to an amended Defence and accordingly that the Third Party Notice was filed within time and leave was not required. They submit that the term Defence is used elsewhere in the Rules in a manner that includes a reference to an amended Defence, and that the Rule should be interpreted on the basis that an expression in the rules will be given a consistent meaning unless there is a clear intention to do otherwise.

5. In my opinion, the principle of interpretation relied upon by the appellants must be applied with caution to an instrument such as the Supreme Court Rules. The rules perform a number of functions. One of those functions is to establish detailed prescriptions for the conduct of civil litigation. When performing this function, at times the rules descend to a level of considerable detail. One must be cautious about assuming that the hypothetical drafter of the rules is at all times conscious of the manner in which particular terms are used throughout the rules as distinct from focusing on the treatment of the particular topic under consideration.

6. If the appellants are correct, then whenever a Defence is amended and for whatever reason, a defendant is at liberty to issue and serve a Third Party Notice without leave. This is a consequence that makes one pause before accepting the submission for the appellants. The evident purpose of the rule is to give the court powers which will enable it to encourage the orderly conduct of litigation by controlling the introduction of new issues and new parties relatively late in the proceedings. If the submission for the appellants were accepted, that control would be substantially eroded. That is a matter to be considered when interpreting rule 37.

7. Of course it is one thing for a Third Party Notice to be issued and another thing to allow the conduct of the third party proceedings to intrude upon the orderly conduct of the proceedings between the plaintiff and the defendant. But the fact that rule 37.05 provides that third party proceedings will be tried with the trial of the plaintiffs’ action, unless the court otherwise directs, indicates that there is a presumption in favour of the concurrent disposition of the main proceedings and the third party proceedings, and this is relevant to the approach to be taken to the interpretation of rule 37.01.

8. I consider that the Master was right. I consider that taking into account the apparent purpose of rule 37.01 and the approach usually taken to the trial of third party proceedings, the rule is to be read as providing that the ability to issue a Third Party Notice without leave is not revived by the filing of an amended Defence. I consider that there is no risk of injustice to a defendant in so reading the rule.

9. If an amendment to the pleadings as between plaintiff and defendant raises for the first time an issue between those parties which appropriately gives rise to a third party claim by a defendant for the first time, then one would expect that leave would be granted to the defendant to institute the third party proceedings even if that arose relatively late in the proceedings.

10. In any other situation, it is simply a matter of balancing all of the factors relevant to the due administration of justice.

11. For those reasons, I conclude that the Master was correct in ruling that the issue of the third party notice required the leave of the court and for that reason the Third Party Notice should be set aside unless it is an appropriate case for the grant of leave.

12. I turn now to the issue of whether the Master erred in refusing to grant leave. The first matter to be considered is the explanation for the delay in the filing of the Third Party Notice. The appellants submit that a reason for the delay was the failure by the plaintiffs to make discovery of a transcript of an examination of an accountant, one of the potential third parties.

13. Discovery of this transcript was not made until April 2000. As to that, I am not satisfied that learning that the accountant, one of the proposed third parties thought that the company was solvent, was of any particular significance to the possibility of a third party claim against him and his firm.

14. I consider that the defendants would have known from a much earlier stage that they might have a claim against the accountant and that there was no substantial reason to delay the institution of that claim until after discovery of the transcript of his examination.

15. Accordingly, although in this respect the plaintiff was in default, in my opinion that default does not provide any particular assistance to the defendant.

16. Another matter to be considered is the impact of the third party proceedings on the orderly conduct of the proceedings between the plaintiff and the defendants.

17. As I mentioned earlier, the proceedings were instituted in June 1999, some 15 months ago. The proceedings are very close to being ready to be set down for trial. There is every reason to think that disputes between the defendant and the third party will take some time to resolve, and that if the trial between the plaintiff and the defendant is to proceed concurrently with the third party proceedings, that that trial will be substantially delayed. That is a factor that weighs against the grant of leave to file the Third Party Notice at this stage.

18. Relevant to that is the fact that the present appellants are at liberty to issue proceedings against the proposed third parties. If those proceedings can be brought to a state of readiness for trial, such that a joint trial can be directed, then it remains open to the defendants to have their claim against the potential third party tried at the same time as the claim by the plaintiffs against the defendants.

19. It is likely that, weighing everything up, a judge or Master would contemplate some moderate delay caused by the third party proceedings. In other words, the refusal of leave does not deny the defendants the opportunity to have the two sets of proceedings heard together. It merely frees the plaintiff from the burden of the impact of the third party proceedings on their proceedings at this stage.

20. It leaves it open to the defendants to endeavour to expedite the defendants’ claim against the third party with a view to persuading a judge or Master, a little later in the piece, that ultimately the two should be heard together.

21. Against this of course must be balanced the risk of inconsistent findings in the two sets of proceedings, if in the end they do proceed at separate times. That is a matter that needs to be weighed up, although in my opinion the appellants go too far in submitting that justice can be achieved only if the two sets of proceedings are heard at the same time. It may be desirable that that occur but that is not the only way in which justice can be achieved.

22. Another matter to be considered is the question of overall efficiency. There may well be some common witnesses - in fact, it is likely that there will be - and usually it is better that all of the proceedings be heard at the one time.

23. As the Master said, the matter is finely balanced. The Master took into account all relevant considerations and in the end concluded that he should refuse leave to institute the third party proceedings. The Master appears to have directed himself  correctly and to have considered the relevant matters.

24. In my opinion, there is no indication of error in the approach that he took.

25. The authorities suggest that in an appeal such as the appeal before me, the approach to be taken to the review of an exercise of a discretion by a Master is that the decision will be upset only if error is shown. The authorities suggest that on appeal the discretion is not simply exercised afresh. If that is the test, in my opinion the appeal must fail.

26. Even if the discretion is to be exercised afresh, I would exercise the discretion in the same manner as the Master did. There is every reason to think that the third party proceedings will delay the main action and there is a real possibility that the delay will be substantial.

27. There is still the opportunity to have the third party proceedings heard at the same time as the main proceeding, but if they are to be protracted, that is the third party proceedings, I consider that, weighing everything up, the interests of justice and the balance of convenience favour disposing of the main proceedings without further delay.

28. There is obviously an overlap between the two, but in my opinion the overlap is not so great as to make it imperative that the two be heard together.

29. For all those reasons, in my opinion the appeal must be dismissed and, accordingly, the order of the court is that the appeal be dismissed.

30. I order that the appellant pay the costs of the first and second respondents, and I order that there be no order as to the costs of the third respondent.