Lewis v Nortex Pty Ltd (In Liquidation)
[2011] NSWSC 220
•17 March 2011
Supreme Court
New South Wales
Medium Neutral Citation: Lewis v Nortex Pty Ltd (In Liquidation) [2011] NSWSC 220 Decision date: 17 March 2011 Before: White J Decision: 1. Order that the appeals from the orders made by Associate Justice Macready on 9 November 2010 dismissing the statutory appeals brought by Peter and Nicolette Lewis and Nortex Co Pty Ltd be allowed and that those orders be discharged.
2. Order that the appeal from the order of Associate Justice Macready of 9 November 2010 dismissing the statutory appeal brought by Kation Pty Ltd be dismissed.
3. Order that the costs orders made by Associate Justice Macready on 9 November 2010 in relation to the notice of motion of 24 August 2010 between Lamru Pty Ltd and the Statutory Appellants (Peter and Nicolette Lewis and Nortex Pty Ltd) be discharged.
Catchwords: PRACTICE AND PROCEDURE - appeal from orders dismissing statutory appeals from determination by liquidator of proof of debts for want of due despatch pursuant to r 12.7 Uniform Civil Procedure Rules - where basis of dismissal of appeals for want of prosecution was that appellants had shown no willingness to pursue appeals - failure to take into account material considerations - no evidence that parties did not wish to pursue statutory appeals - no evidence of prejudice to the parties from the delay - all parties content for proceedings to remain in abeyance - orders for dismissal discharged Cases Cited: In the matter of Nortex Pty Ltd, 9 November 2010, unreported, no medium neutral citation)
House v R [1936] HCA 40; (1936) 55 CLR 499
Stollznow v Calvert [1980] 2 NSWLR 749 Hoser v Hartcher [1999] NSWSC 527Category: Interlocutory applications Parties: Peter Lawrence Lewis (Plaintiff)
Nortex Pty Ltd (In Liquidation) (Defendant)File Number(s):
Judgment
HIS HONOUR : On 23 February 2000 notices of motion were filed in proceedings number 3081 of 1997 (now 25260 of 1997) being the proceedings for the winding-up of Nortex Pty Ltd (in liquidation) ("Nortex").
The notices of motion were filed by Peter Lawrence Lewis and Nicolette Lee Lewis, Nortex Co Pty Ltd and Kation Pty Ltd. Each notice of motion was an appeal from a determination by the liquidator of Nortex of proofs of debt lodged by the three moving parties in the winding-up of Nortex.
In the case of Peter Lawrence Lewis and Nicolette Lee Lewis, the notice of motion appealed against the liquidator's rejection of the proof of debt insofar as he rejected the proof to the extent of $119,477.10. In the case of Nortex Co Pty Ltd the appeal was in respect of the liquidator's rejection of that company's proof of debt to the extent of $16,251.07, and in the case of Kation Pty Ltd the appeal was in respect of rejection of the proof of debt to the extent of $314,640.49.
The notices of motion were amended on 6 March 2000. As amended, the respondents to the notices of motion were the liquidator and Lamru Pty Ltd.
From at least 2001, there has been extensive litigation in this court between Mr Lamb and Lamru Pty Ltd on the one hand, and Mr Lewis and Kation Pty Ltd on the other hand, involving the affairs of Nortex.
I am told that from October 2001, proceedings including the appeals filed in February 2000 from the liquidator's rejection of proofs of debt, were referred to Hamilton J for case management. No orders were made for the appeal proceedings to be stayed, pending the determination of the balance of the litigation. However, no step was taken in the proceedings so far as appears in the evidence on this application. The evidence on this application is that affidavits in support of the appeals were not filed by the three appellants.
The dispute between Kation and Mr Lewis on the one hand, and Lamru and Mr Lamb on the other hand, which also involved the liquidator, related, I am told, in part to loan account balances of Kation and Lamru.
The main proceedings were heard in a trial which took over 100 sitting days before Hamilton J. His Honour gave judgment on 23 May 2006. During that time the appeals from the rejection of the proofs of debt were in abeyance, except to the extent, which has not clearly appeared on the materials before me, that questions relevant to those proofs of debt were to be determined in the hearing before Hamilton J.
On 27 July 2006 various proceedings were listed before Palmer J. Matters with which his Honour dealt included that various cross-claims and claims in other proceedings, which had been stayed, should be pursued. In the course of the hearing on that day, a question was also raised in relation to the three statutory appeals from the liquidator's rejection of proofs of debt.
On that occasion his Honour was told by counsel appearing for the three moving parties that he was instructed by his solicitor that the matter had been resolved in principle between 2002 and 2004, and that was a matter that was being dealt with between his solicitor and the solicitors for the liquidator. The transcript records his Honour saying:
" The primary parties involved are certainly Mr Baird's clients [the three moving parties] and the liquidator, but consequentially, there is an effect to Mr Motbey's client [Lamru] . Would Mr Baird be able to write to the solicitors for the liquidator with a copy to Mr Motbey solicitors, say, within seven days making clear the position? I think I can see Mr Baird nodding. All right we will leave it on the basis that Mr Baird will communicate with the solicitors for the liquidator and Mr Motbey's clients within seven days and making clear the position with the statutory appeals and for the clients for whom he acts. "
A letter for that purpose was not sent until 20 October 2006. Mr Baird (then of Kemp Strang) wrote to the solicitor for the liquidator, Mr Ryckmans of Abbott Tout. He recorded in the case of the appeal by Peter and Nicolette Lewis:
"On 29 September 1997 Mr and Mrs Lewis lodged a Proof of Debt in the winding up of Nortex Pty Ltd in the sum of $120,650.60, principally for long service leave and annual holiday pay.
The Liquidator by Notice of Rejection of Formal Proof of Debt or Claim dated 11 January 2000 allowed the Proof of Debt in the sum of $1,173.50 and stood it over pending further details to the extent of $119,477.10.
On 23 February 2000 our clients appealed against this decision by way of Notice of Motion filed in the original winding up proceedings (No. ED3081 of 1997). The Notice of Motion was amended on 6 March 2000.
On 28 August 2000 the Liquidator wrote to our clients setting out the basis upon which he was prepared to finalise the Proof of Debt and the Appeal, the contents of which are self-explanatory. The Liquidator stated his intention to admit Mr Lewis' Proof of Debt for the additional amount of $38,346.15 and that of Mrs Lewis for the additional amount of $2,784.45.
The writer's recollection is that in about November 2000 and confirmed in about April 2002, in telephone conversations between the late Mr Somerset of your firm and the writer, the acceptance by our clients of this amended decision of the Liquidator was conveyed.
It would accordingly seem that the Appeal in regard to this Proof of Debt has been resolved."
In relation to the appeal by Nortex Co Pty Ltd, Mr Baird said that he had been instructed that there had been meetings and discussions between representatives of the liquidator and Mr Lewis directly at which he understood a resolution in principle was reached in relation to " substantiation issues ", that is to say, a requirement by the liquidator for Nortex Co Pty Ltd to substantiate the parts of the proof of debt which had been rejected.
Mr Baird said that he had not been a party to those discussions, but asked Mr Ryckmans if he would review the liquidator's records and confirm whether or not the matter had been resolved.
In relation to the appeal by Kation, Mr Baird stated that most of the issues in the appeal were resolved, the principal issue outstanding being a claim for legal costs of $70,881.33. Mr Baird said that that issue had been the subject of judgments given by Hamilton J on 29 November 2004 and 23 May 2006. This appeared to resolve the matters raised by the liquidator.
In relation to an amended or updated list of claims submitted by Kation, Mr Baird said that he understood those matters had been subsequently discussed and resolved between the liquidator and Mr Lewis directly but would appreciate confirmation of that and as to the terms of the resolution reached.
A copy of that letter was sent to the solicitors for Lamru. There was no response to the letter.
So far as the evidence on this application reveals, nothing further was done in the appeals from the liquidator's rejection of the proofs of debt.
There were appeals and cross-appeals from the judgments of Hamilton J to the Court of Appeal, and an application to the High Court for special leave to appeal from the Court of Appeal's orders. The application for special leave to appeal was refused by the High Court in July 2010. Orders to give effect to the Court of Appeal's determination were made on 23 July 2010. These orders included a declaration as to the balance of the loan account of Kation with Nortex as at the date of the commencement of the winding-up.
On 24 August 2010, Lamru (which it will be recalled is a party to the appeals from the liquidator's rejection of proofs of debt) filed a notice of motion seeking orders that the appeals be dismissed for want of prosecution pursuant to r 12.7 of the Uniform Civil Procedure Rules. Application was also made that the appeal brought by Kation be summarily dismissed pursuant to r 13.4. In the alternative, Lamru sought directions for the progress of each appeal.
Associate Justice Macready dealt with that application on 9 November 2010. According to the transcript of his Honour's reasons and the associate's record of proceedings, his Honour made orders in accordance with paragraphs 3, 5 and 7 of the notice of motion of 24 August 2010 namely:
"3. An order that pursuant to UCPR 12.7 that the Statutory Appeal brought by Peter and Nicolette Lewis be dismissed for want of prosecution;
...
5. An order pursuant to UCPR 13.4 that the Statutory Appeal brought by Kation Pty Limited be summarily dismissed; and
...
7. ... directions for the progress of the Statutory Appeal brought by Nortex Co Pty Limited."
At least the last order appears to be a typographical mistake. The case has been argued on the basis that his Honour also dismissed the statutory appeal brought by Nortex Co Pty Ltd pursuant to r 12.7 of the Uniform Civil Procedure Rules for want of prosecution.
His Honour's reasons also suggest that the appeal brought by Kation was dismissed pursuant to r 12.7, and not pursuant to r 13.4. Again the hearing before me has been argued on that basis.
Having said that, the notice of motion of 24 August 2010 only sought dismissal of the appeal brought by Kation pursuant to r 13.4.
The primary judge gave short ex tempore reasons for the order ( In the matter of Nortex Pty Ltd , 9 November 2010, unreported, no medium neutral citation). After referring to part of the history of the matter, his Honour said:
"What was required was that the appellants in those appeals were to advise their intentions in respect of unresolved statutory appeals by 3 August. That did not occur and, on 24 August, there was a reminder letter. A letter from Kemp [Strang] to Abbott Tout referred to the position regarding the appeals and seems to indicate that there might have been some acceptance or agreement about the disposition of the appeals. That request was made for the liquidator to have a look at his records and see if that might be in fact the situation.
In fact what has happened is that although the request has been repeated the liquidator's stand simply put to the Court today is that if there had been any such agreement, it would have been acted upon long before now.
Although there have been appeals to the Court of Appeal after the first instance judgment, even those appeals should have been resolved, apart from a few minor matters, by final orders in July of this year.
I have case managed these proceedings and they have been before me a number of times. The final hearing of this particular matter has proceeded before me today.
The Lewis interest[s] have suggested that the matters not be dismissed. Nothing is said about how the Lewis interests propose to proceed in this matter. Statements are made about it. There is no evidence of any agreement put forward. If there was an agreement then they would have had knowledge of it. If there was an agreement the matter could have been dealt with by agreement.
It seems to me there is no willingness to pursue the appeals and, accordingly I make orders 3, 5 and 7 in the notice of motion of 24 August 2010."
It appears that Lamru's notice of motion of 24 August 2010 was brought without its first having delivered a letter prior to the application suggesting a timetable for the prosecution of the appeals. So far as the evidence reveals, neither the appellants nor Lamru took any steps to progress the appeals, other than the appellants, by their solicitors Kemp Strang, enquiring of the liquidator as to whether the liquidator agreed that agreements had been made for the resolution of each of the appeals.
After service of the notice of motion, the appellants' solicitors corresponded further with the solicitors for the liquidator. On 30 September 2010, the appellants' solicitors wrote to Mr Ryckmans asking to be advised as to the liquidator's position in respect of each of the proofs of debt. Mr Chapman of Toomey Pegg, the solicitors presently acting for the appellants, wrote:
"With reference to the attached letter from Kemp Strang:
1. Please advise as to the outcome of the meetings and discussions between representatives of the Liquidator and Mr Lewis in relation to the Nortex Co proof of debt claim.
2. If settlement was reached, in whole or in part, of the Nortex Co proof of debt claim, please provide details of such settlement together with any documents evidencing the settlement.
3. What is the liquidator's position with respect to the balance of Kation's proof of debt claim (that is, excluding the issue of legal costs of $70,881.33)?
4. To the extent that Kation's proof of debt claim has settled, please provide details of the settlement together with any documents evidencing the settlement.
5. In relation to the additional or updated claims by Kation of $90,794.00, is it the liquidator's understanding that those claims were discussed and resolved between the liquidator and Mr Lewis directly? If so, when did those discussions take place and what were the details of the resolution? Please provide copies of any supporting documents.
We note that Lamru's notice of motion is listed for further hearing on 15 October 2010. Accordingly, we would appreciate it if you could provide us with the information requested above within 7 days."
There was no response to that email. The appellants' position is that the liquidator has not responded either to that email, or to Kemp Strang's letter of 20 October 2006, or to follow-up inquiries and demands made by the appellant' solicitors on the liquidator seeking a response to that correspondence.
It appears that the only response from the liquidator to that correspondence was the advice given by the liquidator through his counsel to Associate Justice Macready on 9 November 2010 on the hearing of the application that the liquidator's position was that if there had been any such agreement, it would have been acted upon long before now.
By notice of motion filed on 6 December 2010, the appellants appealed from the orders made by Associate Justice Macready on 9 November 2010 dismissing the statutory appeals. The grounds of appeal, as amended orally by leave during the course of submissions, include that his Honour erred in finding that there was no willingness on the part of the appellants to pursue their respective statutory appeals, and that his Honour did not deal with issues of prejudice, nor make a finding as to whether the appellants have not prosecuted the proceedings with "due despatch", nor deal with the appellants' responsibilities for the delays.
As this is an appeal pursuant to r 49.4 of the Uniform Civil Procedure Rules, and as his Honour exercised a discretionary power to dismiss proceedings summarily for want of prosecution, the principle for reviewing his Honour's decision are those in House v R [1936] HCA 40; (1936) 55 CLR 499 at 504-505.
Rule 12.7 provides:
" 12.7 Dismissal of proceedings etc for want of due despatch
(cf SCR Part 5, rule 12, Part 32A, rules 1 and 2; DCR Part 18, rules 3 and 9; LCR Part 17, rule 4)
(1) If a plaintiff does not prosecute the proceedings with due despatch, the court may order that the proceedings be dismissed or make such other order as the court thinks fit."
The discretion under that rule is not rigidly confined, but does require that a decision be reached having regard to all the relevant circumstances. An important consideration is whether any explanation or excuse has been offered for the delay, and, if so, whether that explanation is credible and satisfactory. Another important consideration is whether or not there is evidence of particular prejudice to the opposing party by reason of the delay ( Stollznow v Calvert [1980] 2 NSWLR 749 at 751-752; Hoser v Hartcher [1999] NSWSC 527 at [21]).
His Honour did not address either question. Nor did his Honour make any express finding that the delay in the prosecution of the appeals was due to the appellants' having failed to show " due despatch ".
It might seem obvious that if nothing has happened in the appeals for a space of more than 10 years, that there has been a want of due despatch. But what degree of despatch was " due " would depend upon the circumstances and the reasons that obtained at the time why none of the parties to the appeals, including Lamru, took any step for their progression. Nor, it seems, did it appear to Hamilton J, who was case managing the various proceedings up to 2006, that these appeals should be brought on before the resolution of the principal proceedings.
Macready AsJ observed that the appeals to the Court of Appeal should have been resolved " apart from a few minor matters " by final orders in July of 2010.
In the absence of a finding that the delays up to the resolution of the principal proceedings by final orders made in July 2010 were due to a want of despatch by the plaintiffs, then it would seem that the only want of due despatch which could be charged to the plaintiffs might be the delay from July 2010 up to 9 November 2010.
His Honour did not make a finding that there was a want of due despatch in that period. Such a finding would have required a consideration of whether or not the appellants were justified in not taking further steps to pursue the appeal whilst they sought clarification from the liquidator as to the liquidator's position as to whether a compromise had been reached in respect of the proofs of debt. Nor was there evidence of prejudice to the parties from the delay.
In many cases, indeed in most cases, prejudice can be inferred from the mere fact of delay. However, if Lamru considered that its position was being prejudiced by the delay from 2000 in the matter progressing, then it would have been open to it to have sought orders to bring the appeals on for hearing. As Moffitt P said in Stollznow v Calvert (at 753-754), where a defendant takes no action to bring a proceeding on for hearing, preferring to let sleeping dogs lie, a claim by the defendant of prejudice from delay will carry less weight.
The liquidator did not seek to have the proceedings dismissed and did not adduce any evidence of prejudice. Nothing on the materials before his Honour or before me suggests that the determination of the proofs of debt would depend, for example, on recollection by witnesses of past events where it might be inferred that the witness's recollection will have diminished with time.
In my view, the appellants have shown that in the exercise of his Honour's discretion, his Honour failed to take into account material considerations, such that his determination is liable to be reviewed.
It seems that the basis for his Honour's decision to dismiss each of the appeals for want of prosecution was on the ground that the appellants had shown no willingness to pursue the appeals. I do not think that the evidence supports that conclusion.
It is true, as counsel for Lamru submits, that the appellants did not, so it seems, proffer a timetable for taking particular steps to pursue the appeals. But the appellants' position was that they wanted the liquidator's confirmation that the appeals (as between them and the liquidator) had been resolved. No confirmation or rejection of that position was obtained from the liquidator.
There is nothing in the materials to support the contention that the appellants did not wish to pursue the appeals if the liquidator did not accept that the appeals had been resolved by agreement, or if it were found that there was no such agreement.
The transcript of the argument before his Honour was not available, but certainly the position taken by the appellants before me was that before his Honour, their position was that if the appeals had not been resolved by agreement with the liquidator, they wished to pursue them.
Dismissal of a proceeding for want of prosecution is a serious step. In exercising the discretion under r 12.7, the court is to have regard to the overriding purpose of the rules of facilitating the just, quick and cheap resolution of the real issues in the proceedings. There is no doubt that this proceeding has not been pursued with any speed. But without a finding as to who has been responsible for that, I do not think that the potentially drastic step of dismissing the appeals should be taken. On the face of it, it is not just that the appellants' claims should be dismissed without a determination on their merits, when it seems that all parties up to the middle of 2010 were content for the proceedings to remain in abeyance until the determination of the main proceedings.
However, a separate issue arises in relation to the statutory appeal brought by Kation Pty Ltd. His Honour also treated that as being an application for dismissal under r 12.7, although the notice of motion relied only on r 13.4. I would not dismiss that appeal under r 12.7. However, I cannot see how the appeal brought by Kation of the amount which it claims should be accepted as the debt owed by Nortex to it at the commencement of the winding-up can be pursued where there is a declaration as to the balance of the loan account of Kation with Nortex. I do not know to what extent issues which would have been raised on Kation's proof of debt were raised in the proceedings before Hamilton J and in the Court of Appeal, but as those proceedings resulted in a declaration as to the state of the loan account of Kation with Nortex, that declaration would stand as res judicata barring the appeal from the liquidator's rejection of the proof of debt.
In my view the claim for the relief sought in the notice of motion of 24 August 2010 that that appeal be dismissed pursuant to r 13.4 was well-founded. Counsel for Kation was not able to indicate in his submissions, any ground upon which the appeal from the liquidator's determination could be pursued for so long as the declaration stood.
For these reasons I make the following orders:
(1) Order that the appeals from the orders made by Associate Justice Macready on 9 November 2010 dismissing the statutory appeals brought by Peter and Nicolette Lewis and Nortex Co Pty Ltd be allowed and that those orders be discharged.
(2) Order that the appeal from the order of Associate Justice Macready of 9 November 2010 dismissing the statutory appeal brought by Kation Pty Ltd be dismissed.
(3) Order that the costs orders made by Associate Justice Macready on 9 November 2010 in relation to the notice of motion of 24 August 2010 between Lamru Pty Ltd and the Statutory Appellants (Peter and Nicolette Lewis and Nortex Pty Ltd) be discharged.
I will hear the parties on other costs orders to be made and on the orders which should be made for the progress of the appeals of Peter and Nicolette Lewis and Nortex Co Pty Ltd.
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Decision last updated: 29 March 2011
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