Latrobe Country Credit Co-operative Ltd v Smith
[1998] VSCA 74
•14 October 1998
SUPREME COURT OF VICTORIA
COURT OF APPEAL Not Restricted No.1951 of 1988
LATROBE COUNTRY CREDIT CO-OPERATIVE LIMITED
Appellant/Plaintiff
v
ROGER DAVID MIDGLEY SMITH & ORS.
Respondents/Defendants
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JUDGES: PHILLIPS, BATT and KENNY, JJ.A. WHERE HELD: MELBOURNE DATES OF HEARING: 27 and 28 July 1998 DATE OF JUDGMENT: 14 October 1998 CASE MAY BE CITED AS: Latrobe Country Credit v. Smith & Ors. MEDIA NEUTRAL CITATION: [1998] VSCA 74
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Practice and procedure - Dismissal for want of prosecution - Action in negligence against auditors - Writ issued nearly six years after auditors’ first report - Limitation period treated as ending five years later - Delay thereafter regarded as inexcusable and inordinate - Whether such delay caused additional prejudice to defendants - Action dismissed for want of prosecution - Appeal dismissed.
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APPEARANCES: Counsel Solicitors For the Appellant Mr. F.X. Costigan Q.C. Deacons Graham & James with Mr. D.M. Austin For the Respondents Mr. J.E. Middleton Q.C. Minter Ellison with Mr. S.M. Anderson
PHILLIPS, J.A.:
In this proceeding the plaintiff was seeking to recover damages from the defendants, its auditors, for alleged negligence, breach of contract and breach of statutory duty in and about the audit of the plaintiff's accounts for each of the financial years ended 31 March 1982 to 31 March 1986. The proceeding was commenced by generally endorsed writ issued on 7 June 1988. On 20 August 1996 the defendants issued a summons seeking to strike out the plaintiff's Amended Substituted Statement of Claim and seeking “alternatively” an order that the proceeding be dismissed for want of prosecution. The application was heard by Mr. Justice Harper who, after submissions about the sufficiency of the pleading, ordered on 7 February 1997 that the defendants' pleading be struck out and then, after receiving further submissions on the application for dismissal, ordered on 13 June 1997 that the whole proceeding be dismissed for want of prosecution. The plaintiff now appeals against the second of these orders, contending that his Honour erred in the exercise of his discretion to dismiss for want of prosecution, that the order for dismissal should be set aside and that the action should be allowed to proceed.
As for the evidence on which the respondents’ application was determined, there were two affidavits in support by the respondents’ solicitor (sworn on 24 September 1996 and 20 March 1997 respectively) and an affidavit in answer, sworn on 11 April 1997 by the appellant’s solicitor, in which a good deal of additional information was offered, especially about discussions that took place from time to time between the opposing lawyers. Indeed this affidavit included some of the detail of discussions that were had with a view to settlement, disclosing even that offers were made without prejudice (though without the figures). This, we were told, was in reliance upon what was said by the Court of Appeal in Family Housing Association (Manchester) Ltd. v. Michael Hyde and Partners [1993] 1 W.L.R. 354, especially at 363 per Hirst, L.J. I am not clear that the affidavit did not go beyond what was permissible, even on the basis of what was said in that case (given the limited purpose expressed by Hirst L.J. for admitting such evidence), but we need express no opinion on the course that was followed here; for the respondents raised no objection before us or, it would appear, below. Suffice it to say that the application for dismissal was determined on the totality of the affidavit material. There was no cross-examination, but there was a detailed chronology prepared by reference to which the matter was argued. It would be tedious to include that recitation of events in this judgment. In what follows, I shall content myself, as did Harper, J. with referring to particular events only to the extent necessary.
The appellant accepted (as it had to) that, since its appeal was from an exercise of discretion, its first task was to establish error below, according to the well- known statement in House v. R. (1936) 55 C.L.R. 499 at 405 per Dixon, Evatt and McTiernan, JJ. and Australian Coal & Shale Employees' Federation v. Commonwealth (1953) 94 C.L.R. 621 at 627 per Kitto, J. Yet it was not submitted that Harper, J. made any error so far as concerned the principles affecting an application to dismiss for want of prosecution. Those principles were canvassed in Masel v. Transport Industries Ins. Co. Ltd. [1995] 2 V.R. 328 and more recently in Spitfire Nominees Pty. Ltd. v. Ducco [1998] 1 V.R. 242 at 245-6. In line with the judgment of Hedigan, A.J.A. in Spitfire, a judgment in which the other members of the Court of Appeal agreed, Harper, J. adopted as a sufficient statement of the principle the following from the speech of Lord Griffiths in Department of Transport v. Chris Smaller (Transport) Ltd. [1989] 1 A.C. 1197 at 1203:-
"The power [to dismiss a proceeding for want of prosecution] should be exercised only where the court is satisfied either (1) that the default has been intentional and contumelious, e.g. disobedience to a peremptory 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."
As observed by Hedigan, A.J.A. in Spitfire, these principles are not much in doubt; it is the application of the principles to the facts that more often occasions dispute. And so it was here.
In this instance, it was not suggested that the appellant or its advisers had been guilty of any default which was "intentional and contumelious"; instead his Honour undertook the task of identifying "inordinate and inexcusable delay on the part of the plaintiff or [its] lawyers". It might be thought that this task was made the more difficult because of the absence of any extant pleading on the part of the plaintiff; for the latest statement of claim had been struck out (it will be recalled) on 7 February and although (as we were told from the Bar table in the course of the appeal) an oral application was thereupon made for leave to re-plead, that application was not dealt with before his Honour turned to the question of dismissal. (Presumably the oral application to re-plead lapsed when the order of dismissal for want of prosecution was made on 13 June.) Nevertheless, having dealt with the pleading in February, Harper, J. was well placed to describe, at least in general terms, the nature of the plaintiff's claim. He said:-
"The plaintiff's claim arises out of alleged deficiencies in the defendants' conduct of audits of the plaintiff for the financial years ended 31 March 1982, 31 March 1983, 31 March 1984, 31 March 1985 and 31 March 1986: paragraph 32 of the plaintiff's further amended statement of claim dated 29 May 1995. According to the plaintiff, the defendants were in breach of statutory and contractual duties, and were negligent, in conducting those audits. As a result, a relatively small number of loans, involving some eight borrowers, are allegedly now irrecoverable. If the annual audits conducted by the defendants had been carried out with reasonable skill and diligence:
(a) the provision for doubtful debts made by the plaintiff would have been adjusted to the extent necessary to ensure that the plaintiff's profit and loss account and balance sheet gave a true and fair view of the plaintiff's financial position; and
(b) deficiencies in the plaintiff's management of its loan portfolio (resulting in - in particular - breaches of the plaintiff's own rules, and of the relevant legislation) would have been revealed.
On the deficiencies being made known to the plaintiff's board of directors and to relevant officers of the plaintiff, appropriate remedial measures would (so the plaintiff claims) have been adopted. By this means, the losses in fact incurred on the loans in question would have been avoided."
This was not challenged on appeal. Nor, it seems, was it challenged below, and it was in this context that his Honour proceeded.
| 5 | It must be said that Harper, J. commenced with a view of events which was most favourable to the appellant, based upon supposed lack of knowledge. After describing the nature of the plaintiff's claims as just mentioned, the judge continued:- |
"The plaintiff accordingly relies upon breaches of duty which allegedly began some 15 years ago, and continued for four years thereafter. It follows, therefore, that none of the acts or omissions about which complaint is now made occurred within the last 10 years. But the first period of delay is readily explicable: the plaintiff was not aware of the problems which, it claims, a careful audit would have revealed."
Reference was made to a letter dated 3 October 1986 which, it was claimed, "first conveyed to the plaintiff's board of directors ... certain weaknesses in internal controls and accounting practices of the plaintiff" and to a further letter, dated 3 August 1987, from the auditors in which the respondents "advised the administrators of numerous concerns regarding various loans and the plaintiff's internal procedures". This letter of 3 August related, I think, to what the respondents discovered in the course of their auditing for the year ended 31 March 1987, so that it bears only indirectly upon what was, or might have been, the case in earlier years. In part at least, the appellant’s case may well be that the respondents ought to have sent a not dissimilar letter at the conclusion of their audits in earlier years. Be that as it may, according to the answering affidavit filed on behalf of the appellant, there were, throughout 1987, "various internal reviews and investigations" conducted by or on behalf of those who by then were administrators of the appellant. On 7 June 1988, the generally endorsed writ was issued - and to that point his Honour was not at all critical of the appellant’s conduct.
Indeed, Harper, J. dealt with the matter on the footing that, by issuing the writ in June 1988, the appellant had commenced the proceeding within 12 months of the accrual of the cause of action. The respondents had submitted that the appellant had delayed the issue of the writ until near the end of what they called "the first limitation period", no doubt by reference to the allegations in the general endorsement on the writ that the defendants had reported on the accounts of the appellant on 18 June 1982 and had failed at that point to exercise due diligence and care in carrying out their duties. His Honour referred, however, to "uncertainty about the date upon which, in the circumstances of this case, the relevant period or periods of limitation commenced to run", because of what the appellant claimed was its "ignorance of the true state of its financial affairs (an ignorance induced by the defendant's negligence)". It has been said that where the prospective defendant’s misconduct has been the cause of the plaintiff’s inability to commence proceedings, time should not begin to run until the plaintiff is at least in position to commence its proceeding: see Hawkins v. Clayton (1988) 164 C.L.R. 539 at 590 per Deane, J. This, Harper, J. said, "fits the facts, and appears to meet the justice, of this case" and on that basis, his Honour added:-
"This being so, 3 August 1987 picks itself as the date upon which the cause of action accrued. By that time, the administrators [of the plaintiff] had each been in office in excess of six months. They were also then in possession of information, provided by the defendants themselves, which indicated at least some areas of concern. This therefore was the end of the period during which any negligence of the defendants (always assuming such negligence could be proved) effectively precluded the bringing of proceedings."
For myself, I am not persuaded, if I may say so, that the remarks of Deane, J. in Hawkins v. Clayton, even if correct as a matter of law, did fit the facts. Despite more than one invitation from the Bench in the course of this appeal, neither side condescended to details, but, so far as I can tell from what I have seen, the appellant complains of a failure by the respondents, as auditors, to alert it to irregularities such, for instance, as the failure to obtain signatures on guarantees. I find it hard to regard such irregularities as outside the knowledge (whether actual or constructive) of the appellant itself, whose procedures were at issue and whose documents were under examination. Be that as it may, neither side sought to challenge his Honour's view of 3 August 1987 as the date upon which the appellant's cause of action accrued and so there is no need to consider on this appeal the correctness or otherwise of his Honour's reliance upon what was said by Deane, J. in Hawkins v. Clayton. Indeed, Harper, J. himself found it unnecessary to express a final view, because he added:-
"The question of the date on which the plaintiff's cause of action first accrued was not fully argued before me. Moreover, it is not a question to which I am presently required to give a considered answer. In these circumstances, I am prepared to assume, without finally deciding, that the plaintiff's cause of action first accrued on 3 August 1987. It is an assumption which greatly favours the plaintiff. It means that time did not start to run to the defendants' advantage until some five years after the delivery of the first of what the plaintiff alleges were a series of negligently-prepared reports. It follows that the limitation period in respect of the cause of action thus arising did not end until 3 August 1993: more than 11 years after the earliest of the impugned reports was prepared."
That the relevant limitation period ended on 3 August 1993 was significant. As his Honour observed:-
"The point is relevant because the plaintiff had until the expiration of the applicable period of limitation within which to commence proceedings: no delay in doing so within that time could of itself found a successful application to dismiss the proceeding for want of prosecution.”
Again this was not challenged by the respondents and appellant’s counsel referred us in support to Birkett v. James [1978] A.C. 297 and to Chris Smaller. His Honour continued:-
"On the other hand, it is established ‘that long delay before issue of the writ will have the effect of any post-writ delay being looked at critically by the Court and more readily being regarded as inordinate and inexcusable than would be the case if the action had been commenced soon after the accrual of the cause of action’: Department of Transport v. Chris Smaller (Transport) Ltd. [1989] 1 A.C. 1197 at 1208 per Lord Griffiths. Moreover (again in the words of Lord Griffiths at 1208) ‘if the defendant has suffered prejudice as a result of such delay before issue of the writ he would only have to show something more than minimal additional prejudice as a result of the post-writ delay to justify striking out the action’."
Basing himself on this, his Honour proceeded to identify unexplained delay on the part of the appellant or its advisers during the period ending on 3 August 1993 and, regarding such delay as significant - and indeed at least in part as inexcusable and inordinate - his Honour fixed upon 18 June 1993 (the date on which the appellant gave notice of intention to proceed under Rule 3.06) as the date beyond which any delay should be "looked at critically by the Court and more readily .... regarded as inordinate and inexcusable than would be the case" otherwise.
It was here, in respect of the Judge’s characterisation of delays during the period up until 3 August 1993, that the appellant did seek to identify error, and error on more than one count. His Honour identified significant delay, first, in the appellant’s apparently not serving the writ until May 1989 (some 11 months after its issue) and secondly, in its not serving a statement of claim until 28 August 1989 - some two years after the respondents’ letter of 3 August 1987. The Judge also identified delay in the appellant's responding to a request for further and better particulars, delay which caused his Honour to remark that “the years between January 1987 and June 1993 would seem largely to be wasted”. On these aspects the appellant made various criticisms of the judgment but there is no need to examine any of them; in my view none of them came to anything. Importantly it must be remembered that at this point in the chronology of events his Honour was not identifying ground for dismissal; he was doing no more than seeking to identify a date (18 June 1993 as it turned out) beyond which, by analogy with Chris Smaller, it became incumbent upon the appellant to proceed with expedition so that any avoidable delay thereafter would be regarded more readily as inordinate and inexcusable.
The analogy with Chris Smaller was error too, said the appellant, because quite plainly the case of Chris Smaller was distinguishable. In Chris Smaller, the Courts had been dealing with the issue of a writ on the eve of the expiry of the limitation period and it was "post writ delay" that was being looked at "critically by the Court and more readily ... regarded as inordinate and inexcusable" because of the delay that had occurred before the issue of the writ. In contrast, said the appellant, the Judge found expressly in this instance that there had been no significant delay between the accrual of the cause of action and the issue of the writ; indeed on the assumption made the writ had been issued only ten months after the accrual of the cause of action. Therefore, the argument ran, it was entirely inappropriate for the Judge to proceed by seeking to identify delay by the plaintiff during the following five years and just as inappropriate to regard any such delay, once identified, as relevant to the application for dismissal.
As I understood it, the appellant's argument came down to this: that Parliament gave a plaintiff six years to commence its proceeding and if the plaintiff instituted its proceeding early in the period, any delay thereafter, if within the limitation period, could not be held against it as evidence of a relevant want of prosecution. Of course, on the authorities as they stand, it may be accepted that delay within the limitation period cannot itself found a successful application to dismiss for want of prosecution, at least in the absence of extraordinary circumstances; but that is not because such delay is immaterial but because, to dismiss for want of prosecution within the limitation period, would be counter- productive. A plaintiff, finding his action dismissed within the limitation period, would simply re-issue the proceeding and start all over again and the trial of the action must simply be further delayed. On the other hand, delay within the limitation period may be treated as relevant at least to the extent laid down in Chris Smaller. In that case, delay within the limitation period occurred before the issue of the writ, which is not the case here, but I see that as no point of distinction. In Chris Smaller, it may be supposed that it was the plaintiff's choice (whether deliberate or simply by neglect) to delay the commencement of the proceeding until near the end of the limitation period. So in this case it was appropriate for his Honour to find like delay here (at the choice of the plaintiff) even if, on the facts of this case, it occurred after the issue of the writ.
I have recounted how the learned Judge arrived at the conclusion that the relevant period of limitations expired, or should be taken to have expired, on 3 August 1993, and fixed upon 18 June 1993 as the date after which it was “incumbent upon the plaintiff to waste no more time”. Adapting the words of Lord Griffiths in Chris Smaller, his Honour said that "any further delay [after 18 June 1993] would have to be looked at critically by the Court, and if the defendants showed that something more than minimal additional prejudice had resulted from the additional loss of time, then (subject to the overriding requirement that justice be done) an application to strike out would probably succeed"; and again: "the justice of the occasion, as at 18 June 1993, demanded that the defendants not be subjected thereafter to any delay which was attributable to the plaintiff and which the plaintiff could reasonably have avoided." In my view, no significant error has been shown in this. There may perhaps be a question whether the date 3 August 1993 (the end of the limitation period) ought to have been advanced to 18 June (the date of the notice of intention to proceed) but nothing turns on that. Having given notice under Rule 3.06, the plaintiff was on 18 July entitled to proceed; yet the next step was taken only on 24 September 1993 when notice for discovery was given.
Again his Honour was critical of the delay in giving this notice, saying that this further delay, albeit of fairly short duration after 18 July, was "totally inexcusable" and accordingly betokened if not an absence of commitment then a lack of proper perspective. Again, I need not pursue the Judge’s criticism; for in the end it is not determinative of this appeal. In passing, however, I would endorse his Honour’s remark that it was perhaps surprising that the appellant served notice for discovery as late in the day as 24 September 1993 if, as was asserted in the affidavit filed in answer, there was a need for the appellant to consider the content of the respondents' documents: after all, pleadings first closed before the end of 1989. As recorded in that affidavit, the appellant’s solicitors were informed by the respondents' solicitors on 19 June 1989 (that is, before the first statement of claim was served) that the respondents' files had been seized by the Federal Police. Nothing in the affidavit indicates that any attempt was made to overcome the effect of that seizure, if it was so disabling as suggested by the appellant's solicitor. From time to time, of course, the possibility of settlement had been raised between the parties and counsel for the appellant suggested that settlement negotiations may have delayed things somewhat, although I think that the facts show otherwise, as respondents’ counsel pointed out. For a long time settlement negotiations were no more than a future possibility and when finally there were negotiations it was late in the piece and they seemed not to impede progress in the action. By then the parties were wholly immersed in the pleading battles that occurred after 1994.
That brings me to the period since 8 December 1994, a period during which progress (or lack of it) was such, in my opinion, as to establish delay, being delay after 3 August 1993, that could truly be characterised as inexcusable and inordinate. On 8 December 1994 a Master gave leave to the appellant to file an amended statement of claim, its first attempt to re-plead the statement of claim served on 28 August 1989. According to the affidavit filed in answer, the respondents were given a copy of the proposed amended statement of claim on 19 September for consideration, in part by way of response to the long-outstanding request for particulars. The pleading ran to 64 paragraphs over 47 pages, plus 140 pages of schedules. Formal application for leave to amend was made by summons filed on 14 November 1994 and leave was given on 8 December. Regarding the period that followed, his Honour said:-
"It is almost enough, in finally disposing of the application presently before me, to say that more than three years after service of the notice for discovery, that process (i.e. discovery) is nowhere near completion; indeed, the defendants have not yet filed an affidavit of documents. What is worse, however, is that things have gone backwards. Until 8 December 1994, the plaintiff at least had an extant statement of claim, inadequate though that perhaps was. On that day, Master Wheeler gave leave to amend the statement of claim, the plaintiff having occupied the period of over 12 months since service of its notice for discovery in seeking an adequate response to that document, in inspecting the documents which were informally discovered in an unsworn affidavit, and in preparing the amendments which subsequently went before the Master.
I have no doubt that, since December 1994, the plaintiff has expended much time and energy, and doubtless much money, in pursuing this claim. It is also an inescapable fact that another two and a half years have passed without the proceeding being any closer to trial than it was then. I acknowledge the danger in these cases of simply adding one period of elapsed time to another, and then deciding the outcome of an application to dismiss for want of prosecution simply on the gross result: these dangers were addressed by the Court of Appeal in Spitfire Nominees Pty. Ltd. & Anor v. Ducco (unreported, 27 February 1997 - see, esp., the judgment of Hedigan, A.J.A. at p.12). At the same time, for the reasons which I have already given, further delay such as this must be fully justified; that is, it must be shown to be delay the consequences of which should not be borne (as between the plaintiff and the defendants) by the plaintiff.
In my opinion, it is quite impossible on the facts before me not to conclude (with the minor exception to which I will shortly come) that all the consequences of the delay since December 1994 must fall upon the plaintiff. The amended statement of claim, which was now a document of 64 paragraphs over 47 pages, did not live beyond 16 March 1995, when Master Wheeler gave leave to the plaintiff to file and serve a further amended statement of claim. Some 10 weeks later, on 29 May 1995, the gestation period for that document concluded with the birth of a 122 page giant, incorporating some 126 paragraphs of substantive pleading together with a further 100 or so pages of annexures. A summons to strike out this pleading was issued on 5 July 1995 and was heard by Master Kings on 16, 17 and 18 August that year. The Master delivered judgment on 1 December 1995, the result of which was that the plaintiff had leave to file and serve a further amended statement of claim.
The plaintiff appealed, by notice of appeal dated 6 December 1995. This was heard by me on 19 and 20 March 1996. I delivered judgment on 15 May that year. I ordered that the amended statement of claim be struck out, but that the plaintiff have leave to replead. Pursuant to that leave, a substituted statement of claim was filed on 28 June 1996.
The substituted statement of claim was a slightly smaller document than its predecessor. It consisted of 83 paragraphs over 44 pages. Again, however, the defendants were dissatisfied. An application to strike out that statement of claim (which by now was an amended substituted statement of claim) was initially heard by me on 24 September 1996, and then on 16 October 1996, 23 October 1996 and 24 October 1996. On 7 February this year I ordered that the amended substituted statement of claim be struck out."
Although below it was apparently submitted on behalf of the appellant that there must be excluded from this period of time any "diversion created by other parties to the litigation either directly or through their lawyers" (Masel at 345), it was not argued before us that there was any evidence of significant "diversion" created by the respondents. The judge found no "diversion" which could properly be attributed to the respondents or their lawyers during the period commencing in December 1994, and that conclusion was not challenged. It is plainly right; for during the period from December 1994, as the judge observed, the respondents did no more than attack the appellant's pleadings, generally with success. It may be said that during that time the respondents ought properly to have made better answer to the appellant's notice for discovery given in September 1993, but that notice was not altogether ignored and, of more significance, the appellant took no formal steps to enforce compliance. Below, the appellant argued that some 10 to 12 months of the period since December 1994 was attributable to the processes of the Court, which time should not be laid at the door of the appellant; and without deciding that it had to be excluded the judge left it out of account. His Honour concluded, however, that "the remaining delay for which the appellant is responsible is such as in my opinion to warrant the dismissal of this proceeding."
On this appeal, that was said to be error, but I think not. From December 1994, the appellant appears to have been almost wholly engaged in struggling to establish a sufficient pleading and maintain it. At first blush, it might be thought difficult to characterise as a “want of prosecution" such continuing efforts to establish a proper pleading, but that approach is now shown to be simplistic. In Bishopsgate Insurance Australia Ltd. (In Liq.) v. Deloite Haskins & Sells (unreported, Full Court, 9 September 1994) at p.27, the Full Court said in not dissimilar circumstances:-
"This is not the usual case where a defendant seeking to dismiss for want of prosecution points to long periods of total inactivity on the part of the plaintiff. There is in fact only one period of approximately 22 months which can be so characterized. Rather the case is based on the plaintiff's failure to produce a settled statement of claim during a period in excess of four and a half years from the late commencement in early 1989 of the action close to the expiry of the limitation period. The delay is therefore not primarily constituted by mere inactivity but by a failure to prosecute the action in a way which would enable the other interlocutory steps to be concluded within a reasonable time. The plaintiff sought to argue the case upon the basis that the only real delay was the 22 months between the institution of the appeal relating to the 'third' statement of claim and the time when the plaintiff consented to that appeal being dismissed on 12th August 1992. For the rest it sought to ascribe blame for any delays in the filing and service of the present further amended statement of claim as being attributable either to the actions of the defendant in seeking to have various versions of the statement of claim struck out or amended or to delays in the court process while the parties awaited either the hearing of those applications or appeals therefrom. It will be necessary to analyse later precisely what happened, having regard to the facts already set out. We see no reason, however, why the relevant delay should be confined to periods of complete inactivity, nor do we think that the defendant may not rely upon assertions (if made out) that the real cause for the other delay, or much of the other delay, was the inability of the plaintiff and its legal advisers to formulate with precision and in acceptable form the fundamental basis upon which it seeks relief namely its statement of claim. Perhaps the delays arising from its attempts to re-plead were a reason for the defendant's reliance on abuse of process generally but it is argued that the delays in this case are unusual in that, although the defendant sought to challenge the statement of claim in its various forms, on not one occasion was the current statement of claim upheld, whether that flowed from an order striking out the particular statement of claim or from the plaintiff's concession that a new or further statement of claim should be served and filed. We see no reason why delay flowing from events of that kind should not be the basis for an assertion that there has been inordinate and inexcusable delay."
In my view, that is apt here and the respondents were entitled, below, to ascribe to the plaintiff a want of proper prosecution during the period from December 1994, notwithstanding the plaintiff’s continuing efforts to establish a proper pleading.
It will be by now apparent that the learned judge found significant delay, over a lengthy period, which was "inordinate and inexcusable", notwithstanding that his Honour proceeded upon the assumption that the relevant cause of action accrued on 3 August 1987; that there was no significant delay before the issue of the writ in June 1988; and that the relevant period of limitation expired only on 3 August 1993. His Honour fell into no significant error, in my opinion, in concluding that by 18 June 1993 it had become incumbent upon the appellant not to subject the respondents to any further delay attributable to the appellant or its legal advisers if that delay could reasonably be avoided. Nor, quite apart from any question of delay in serving notice for discovery in September 1993, was there any error in his Honour’s concluding that there was thereafter inexcusable and inordinate delay on the part of the appellant or its lawyers, not simply in serving notice for discovery but for the most part of the three years that commenced on 18 December 1994. Given the conclusion of the Court in Bishopsgate, it was difficult for the appellant to contend that, during that period of three years from December 1994, the delay was not inordinate and inexcusable or, for some reason, should not be laid at the door of the appellant and its advisers and in reply, I did not understand the appellant so to contend. Instead, the appellant argued strongly that, given the delay, there was no evidence in this case of prejudice - or more strictly speaking, no evidence of prejudice which was occasioned by such delay on the part of the appellant or its advisers as was inexcusable and inordinate.
In this regard counsel emphasised the words of Lord Griffiths in Chris Smaller, arguing that once inordinate and inexcusable delay on the part of the appellant or his lawyers is identified, before an action can be dismissed for want of prosecution, it must be established 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 ...".
Whichever limb of this is applied, it is essential, the argument went, that the "inordinate and inexcusable delay" which has been identified is such as to cause the prejudice, whether it be a substantial risk that it is not possible to have a fair trial or is other serious prejudice. The need for that causal link could not be overlooked and, as in this case there was no evidence of any specific prejudice, it was important, it was argued, to compare such risk or prejudice as was now relied upon by the respondents with such risk or prejudice as would have existed, had there been no such "inordinate and inexcusable delay on the part of the plaintiff or his lawyers". As a matter of principle, none of this was seriously in dispute between the parties on this appeal. What was in dispute was, first, whether Harper, J. made due allowance for such risk or prejudice as must have occurred in any event and, secondly, whether in comparing what must now be the case with what would probably have been the case anyway it was proper for his Honour to have regard (as he did) to the period of elapsed time between the conducting of the audits (which commenced in 1982) and the issue of the writ which he found expressly had occurred without significant delay.
As for the second of these, I can find no error in the approach taken below. It is correct, as I have said, that, according to the authorities, delay in issuing a writ will not of itself found a successful application to dismiss a proceeding for want of prosecution, in a case where the writ, though issued within the applicable period of limitation, is issued very late in the day; and in my view, the judge cannot be said to have fallen into error - or at all events not error prejudicial to the appellant - in applying like reasoning, by analogy, to the period ending in 1993. The search for delay which is directly relevant to the dismissal application because it is "inordinate or inexcusable" was made, in substance, from and after the end of that initial period. But that search relates to the question whether there is relevant delay; it is altogether different from identifying prejudice as a result. The respondents submitted that, once relevant delay had been identified, it was open to the judge then to have regard to the whole of the time that had elapsed since the respondents' conduct of which complaint was made for the purpose of assessing the risk of a fair trial or other prejudice to the respondents. Again, I agree. In this case, it was material, when considering whether there was a risk that a fair trial might not be had, to have regard to the staleness of the claims.
Nevertheless, argued the appellant, there was no causal link established between any prejudice suffered by the respondents and culpable delay on the part of the appellant or its advisers. In the absence of any evidence of specific prejudice in this instance, the respondents were driven (said the appellant) to rely upon merely the anxiety attending their position in the proceeding and the risk that a fair trial could not be had through the dimming of memory. On both counts, it was contended, such prejudice or risk must have arisen in any event, even had there been no inordinate or inexcusable delay on the part of the appellant, and any exacerbation of the position was altogether minimal and of no real significance. If (as the judge assumed) the cause of action arose in August 1987 and if (as the judge found) the writ was issued without significant delay in June 1988, it must have taken some years before the trial could commence. The appellant suggested that even without the identified delay on its part, trial would not have been likely before mid-1994. I am not yet persuaded of that (mid-1992 seems to me a better choice), but in the end it does not matter and so I am content to adopt the appellant’s suggestion. On that basis, it could be said that the appellant’s delay added three or four years to the likely timetable before the commencement of the trial and in all the circumstances, given the time that had already elapsed since the audits were conducted, a further three or four years was of no real significance. Or so the appellant submitted.
In aid of this submission, counsel asserted that this would be a "documentary case", largely dependent upon the documents of both sides (which, it was accepted, would be available and no doubt put in evidence). On the other hand, the respondents submitted that it was by no means established that this will be a documentary case, at least to the extent necessary to support the appellant's submission. As was pointed out in Bishopsgate, which also was a claim by a client against its auditors, the appellant's case might well depend upon the documents; for in essence it is a complaint that steps were not taken and that what was written establishes that steps which ought to have been taken were not taken. But the respondents' answering case may be altogether different; their case may well depend upon the witnesses’ recollections of what was done in addition to what was recorded or, perhaps more importantly, what was intended or understood over and above what was written. In short, I found the appellant’s submission unpersuasive. In a situation like the present, while a plaintiff’s case may depend simply upon the documents, a defendant’s case may not.
Nor can I accept that the addition of even three years between the time at which a trial might properly had been had and the time now at which this trial must occur (if the action proceeds) makes no real difference to a case which stems from events first occurring in 1982. The period from, let us say, August 1982 until August 1994 is, of course, twelve years and during that time memories will dim, particularly where what is at issue is professional competence and those who are sued have continued with their ordinary professional activities, which presumably have included many like tasks in not dissimilar situations. There is, too, the added complication that audit rules change from time to time, so that what was done in 1982 or readily understood at the time as needing to be done may be different from what was done or understood as required in 1994. None the less, while such considerations may serve to underline the prejudice that any lapse of time must occasion, the passage of an additional three years can only make things worse. I agree with the Harper, J. that the further delay in this case occasioned by the appellant and its advisers was significant, and such as to cause additional prejudice to the respondents which could not be dismissed as insignificant.
There is too the added consideration that what is at stake in this litigation is the professional probity or competence of the respondents. Again, a passage in the judgment in Bishopsgate is relevant. Considering the effect on the defendants in that case of delay in bringing the proceeding to trial, their Honours said at 52:-
"Every case exposes defendants to risk and in complex cases that risk may extend over a number of years. But the nature of the claim and the potentiality for prejudice must be looked at in the light of the claims made. Where a claim is made against individuals relating to their probity or their competence, especially their professional competence, and the claim is for many millions of dollars, then it is not hard to infer that defendants against whom such allegations are made are under a heavy burden. When that burden is not merely deferred but then unjustifiably drawn out over many years, it is easier still to infer serious prejudice of the relevant kind to a defendant."
Applying that passage, his Honour reached the conclusion that the relevant delay, identified by him, had significantly added to the risk that a fair trial of the issues could not now be had and had otherwise prejudiced the respondents. Having acknowledged at the outset of his judgment that on such applications the aim must always be to arrive at a just result, his Honour determined that the application to dismiss should succeed.
For the reasons I have given I am clear that the appellant has not established error in the judgment under appeal. Indeed, there is that in the judgment which may have been unduly favourable to the appellant. Be that as it may, I can detect no error which is prejudicial to the appellant’s cause and in my opinion the appeal should be dismissed.
BATT, J. A.:
I agree with Phillips, J.A. that this appeal should be dismissed and I do so substantially for the reasons which his Honour gives.
KENNY, J. A.:
I concur in the judgment of Phillips, J.A.
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