Monaveen Pty Ltd v ABB Service Pty Ltd - [2004] WASC 5

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CHAMBERS

CITATION: MONAVEEN PTY LTD (Receivers and Managers Appointed) (Administrator Appointed) -v- ABB SERVICE PTY LTD (formerly known as ABB Engineering Construction Pty Ltd) [2004] WASC 5

CORAM: TEMPLEMAN J

HEARD: 17 OCTOBER 2003 & 19 DECEMBER 2003

DELIVERED : 22 JANUARY 2004

FILE NO/S: CIV 2302 of 1998

BETWEEN: MONAVEEN PTY LTD (Receivers and Managers Appointed) (Administrator Appointed) (ACN 009 309 175)
Plaintiff
AND
ABB SERVICE PTY LTD (formerly known as ABB Engineering Construction Pty Ltd) (ACN 000 095 250)
Defendant

Catchwords:

Practice and procedure - Defendant's application to strike out action for want of prosecution - Delay due to shortage of funds - Whether delay contumelious - Conduct of solicitors - Hardship to plaintiff - Whether prejudice to defendant if action proceeds

Legislation:

Trade Practices Act 1974 (Cth), s 82, s 87

Result:

Application dismissed

Category: B

Representation:

Counsel:

Plaintiff: Mr R K F Davis
Defendant: Mr P B O'Neal & Ms R J Lee

Solicitors:

Plaintiff: Talbot & Olivier
Defendant: Minter Ellison

Case(s) referred to in judgment(s):

Nil

Case(s) also cited:

Nil

TEMPLEMAN J: This is an application by the defendant, ABB Service Pty Ltd (formerly ABB Engineering Construction Pty Ltd) to have dismissed for want of prosecution the action brought against it by Monaveen Pty Ltd, the plaintiff.
In summary, the grounds for the application are that some five years after the action was commenced, the pleadings have yet to be settled and there have been lengthy periods of inactivity on the part of the plaintiff which, being in administration, has been chronically short of funds with which to prosecute the action and to provide security for costs. Further, it is said, there has been a recent period of delay which can only be described as intentional and contumelious. The defendant contends that in all the circumstances, including the prejudice it will suffer if the action is to proceed, the action should now be dismissed.

Background

In 1996, the plaintiff entered into a subcontract with the defendant to supply labour, equipment and materials to carry out substantial civil engineering works in the construction of a hot briquetted iron plant for BHP Direct Reduced Iron Pty Ltd ("BHP") near Port Hedland. The defendant was BHP's head contractor.
Essentially, the work comprised the construction of materials handling facilities and overland conveyors.
The plaintiff commenced work in late July or early August 1996 and submitted progress claims to the defendant during the period July to November 1996. An issue then arose about the quality or grade of concrete which the plaintiff had used in constructing the foundations for an overland conveyor system.
On 12 November 1996, the plaintiff was informed that some $592,740 would be available to it for collection as part payment of a progress claim. However, a few days later, after the concrete quality issue emerged, the plaintiff was informed that no moneys would be paid and that an amount of up to $1.2 million would be withheld pending resolution of this issue.
The plaintiff contends that the defendant had no contractual right to withhold the funds as it did. The plaintiff contends further, that as a direct consequence of that allegedly improper withholding, it was obliged to accept an amendment to the subcontract which had a substantially deleterious effect on its position. The plaintiff claims that thereafter, it was controlled directly by the defendant and was subjected to onerous obligations in relation to remedial work. The overall effect, the plaintiff contends, was that it was unable to continue properly in its business.
The plaintiff alleges it was then obliged to accept a second amendment to the subcontract which had an even more drastic effect. The plaintiff puts its case in the following way in par 76 of its re-amended statement of claim:
"The defendant by its own actions in wrongfully withholding payments from the plaintiff to which the plaintiff was properly entitled and by forcing the plaintiff to accept the terms of the first amendment, which actions together had the effect of destroying the plaintiff's credit relationship with its suppliers and sub-contractors and its own capacity to manage its cash flow and creditors, exerted an illegitimate pressure on the plaintiff to submit to the terms of the second amendment and to execute the document."
The plaintiff says it was induced to accept the second amendment by representations made by the defendant's project manager that certain payments would be made, but that at the material time the defendant had no intention of making such payments.
The plaintiff contends that the defendant's conduct was unconscionable, being contrary to s 51AA of the Trade Practices Act 1974, and constituted repudiatory breaches of the subcontract. The plaintiff alleges that as a consequence of the defendant's conduct, it went into receivership, and later into administration.
The plaintiff seeks orders that both amendments to the subcontract be set aside pursuant to s 87 of the Trade Practices Act: and that the defendant pay special damages in excess of $3 million, representing moneys due under the subcontract and unspecified damages for breach of the contract and pursuant to s 82 or s 87 of the Trade Practices Act.
There is a substantial counterclaim. The defendant alleges that there were numerous breaches of the subcontract by the plaintiff resulting in a claim to some $2.23 million by way of damages.

The course of the action

The plaintiff issued its writ on 19 August 1998. A concurrent amended writ was issued on 17 November 1999 and was served on 14 December. The defendant entered a conditional appearance on 24 December. The statement of claim was filed on 1 March 2000.
Thereafter, various interlocutory applications were made in relation to the provision of security for costs (the plaintiff being in administration) and in relation to the pleadings.
So far as the pleadings are concerned, the fact that the plaintiff has filed a minute of a further re-amended statement of claim, illustrates the difficulty the plaintiff has had in formulating its claim with sufficient precision. Amendments have been made not only of the plaintiff's own volition, but as a result of the defendant's application to strike out parts of the statement of claim and to obtain clarification of it.
There are still some pleading issues to be resolved. They may be significant. They include the following:
(1)In par 22 of the minute of further re-amended statement of claim, the plaintiff claims to have paid its workers sums totalling $406,235 as part of its monthly progress claims. It is said that the defendant has failed to make those payments to the plaintiff in breach of its obligation to do so. The amount in question is said to be a site allowance. However, in answers to a request for further and better particulars, the plaintiff contends that only $146,584 was claimed for site allowances in its progress claims.
On 19 June 2000 I ordered the parties to confer in an attempt to resolve this issue. Despite requests from the defendant's solicitors, no such conferral has taken place.
(2)The defendant contends that the amount of progress claims made by the plaintiff includes unpaid amounts from previous progress claims. In other words, there has been some duplication. The defendant contends that if the duplicated claims are taken out of account, then as at mid-December 1996, the defendant had paid more to the plaintiff than was required. If that is correct, it would have a substantial impact on the claim that the plaintiff entered into the second amendment to the subcontract as a result of improper pressure by the defendant. This is another matter which has been raised by the defendant's solicitors. The plaintiff's solicitors have not responded.
(3)There appears to be a discrepancy between the re‑amended statement of claim and particulars given in relation to it, concerning the amount of money paid by the defendant to the plaintiff. It seems the discrepancy relates to moneys paid by the defendant to the Australian Taxation Office on behalf of the plaintiffs. This is a further matter which the defendant's solicitors have sought to raise with the plaintiff's former solicitors.
I should mention also, in relation to the pleadings, that on 13 November 2002 I dismissed an application by the plaintiff for the trial of a preliminary issue. The issue was whether the defendant was correct in its contention that the plaintiff had used the incorrect grade of concrete. The plaintiff has foreshadowed an application for separate trials on issues of liability and quantum. I do not favour that course.
Security for costs was first ordered on 7 August 2000. The plaintiff was to provide security of $250,000 by 15 August but did not do so.
On 5 April 2001 I made a springing order on the defendant's application. This required the plaintiff to provide security by 4 June. On 1 June, on the plaintiff's application, I extended the time for the provision of security until 4 July. On that date, on a further application by the plaintiff, White AJ extended the time for a provision of security to 6 July. Security in the form of a bank guarantee was provided on 4 July.
On 13 August 2002, the defendant applied for an increase in the amount of security. After an adjournment, I ordered an increase in security of $100,000 on 13 November 2002. The plaintiff was to provide security by 11 December, but did not do so.
On 5 February 2003 I made a further springing order on the defendant's application. This required the plaintiff to provide the additional security by 26 February, which it did.

Delays in the progress of the action

As a result either of the plaintiff's inability to provide security for costs, resulting in the action being stayed, or for lack of funds, there have been lengthy periods of delay in the prosecution of the action. These are as follows:
•11 months between 7 August 2000 and 4 July 2001, the interval between the first order for security for costs and the provision of such security.
•13 months between 4 July 2001 to 6 August 2002, when the plaintiff seems to have been without funds.
•3 months between 13 November 2002 and 26 February 2003, the period between the second order for security for costs and the provision of that security
•8 months between 26 February and 17 October 2003, which was the first return date of the present application.
The total period of delay in the prosecution of the action has therefore been of the order of three years.

The Phillips Fox Certificate

On 16 May 2002, the defendant applied to strike out parts of the plaintiff's reply and defence to counterclaim. The plaintiff sought to have the application adjourned, on the basis of an affidavit of Giovanni Maurizio Carello, the plaintiff's administrator, who said:
"I do not currently have sufficient funds available to me to fund the litigation on behalf of the plaintiff."
Mr Carello deposed to the fact that in conjunction with negotiations he had had with creditors of the plaintiff, he had obtained an agreement in principle from the ANZ Bank in Sydney to provide funding for the action. Mr Carello said he expected it would take some six to eight weeks to satisfy the concerns of the Bank's solicitors, to prepare an agreement to fund the litigation and for the funds then to be made available to the plaintiff.
In this climate of uncertainty, the defendant's solicitors were concerned to protect their client's position. In all the circumstances, I considered it appropriate to make a springing order which would take effect to dismiss the action if the plaintiff was unable to obtain funds to prosecute it. I therefore gave a direction in the following terms:
"Solicitors to confer for the purpose of agreeing a springing order relating to the provision of funds to the plaintiff for the continuance of this action."
I then approved an order in the following terms:
"Unless by 6 August 2002, the plaintiff's solicitors certify to the defendant's solicitors that funding is available to the plaintiff to proceed with the action up to and including discovery, the action will be dismissed."
On 6 August 2002 Phillips Fox, who were then the plaintiff's solicitors, filed a certificate "that sufficient funding is available to the plaintiff to proceed with the action up to and including discovery".
In fact, as I have noted above, the plaintiff did not progress the action. Further, Phillips Fox did not respond to requests from the defendant's solicitors, saying they were without instructions. It was in these circumstances that the defendant instituted the present application to have the action dismissed for want of prosecution. They were circumstances which clearly called for an explanation from Phillips Fox, in the light of their certificate.

Phillips Fox's general explanation for the delays

On 16 October 2003, Natasha Marie Breach, a solicitor in the employ of Phillips Fox swore an affidavit in response to the defendant's application to dismiss the action for want of prosecution. Mrs Breach had the conduct of this matter subject to the supervision of Robert David Shaw, a partner in the firm.
Mrs Breach said the delay between 7 August 2000 and 4 July 2001 was caused by the plaintiff's difficulty in obtaining security. This was provided ultimately by way of a bank guarantee in the sum of $250,000. The action was stayed pending the provision of security.
The delay between 4 July 2001 and 6 August 2002 was explained by the plaintiff's inability to raise funds with which to prosecute the action.
Between 30 November and 26 February 2003, the plaintiff had difficulty in obtaining an increase of $100,000 in the bank guarantee in order to provide the additional security for costs which had been ordered. Again, the action was stayed pending the provision of such security.
Turning to the delay between 26 February 2003 and the first return date for this application, Mrs Breach said that on or before 6 August 2002, Mr Hetherington, Mr Sharpe and Mr Crothers provided a personal guarantee for legal fees which was to take the matter the end of discovery. The Mr Hetherington to whom Mrs Breach referred is Kenneth Sydney Hetherington, a director of the plaintiff. Although Mr Carello has responsibility for the action, as administrator of the plaintiff, it is clear from affidavits filed by Mr Hetherington during the course of the proceedings, that he is the moving spirit behind the action.
Mrs Breach did not introduce Mr Sharpe or Mr Crothers in her affidavit. It was not clear who they are and how they came to be involved in funding the action.
Mrs Breach went on to say that on 24 February 2003, after consulting Mr Carello and the plaintiff's counsel, she provided Mr Hetherington with a revised estimate of the costs of the action through to the completion of the trial. Mrs Breach said:
"At that stage I had advised Mr Hetherington that there was no point in proceeding with the action until funding had been obtained to take the action through to completion."
Mrs Breach then deposed to various negotiations and discussions between Mr Shaw on behalf of Phillips Fox, Mr Carello and Mr Hetherington on behalf of the plaintiffs and the solicitors for the ANZ Bank relating to funding. Mrs Breach said:
"Mr Carello had already instructed Phillips Fox not to continue acting without having in place a signed costs agreement from Mr Hetherington, Mr Sharpe and Mr Crothers. The last of the signatures, which was by Mr Crothers was received by Phillips Fox on 9 October 2003 by facsimile.
The funding arrangement now in place is that Mr Hetherington, Mr Sharpe and Mr Crothers are responsible personally for the payment of legal fees and disbursements until the conclusion of the action.
I am advised by Mr Carello that he had reached an agreement with Mr Hetherington, Mr Sharpe and Mr Crothers for them to replace Mr Carello as having the conduct of this action on behalf of the plaintiff, subject to the execution of documentation to this effect."
A number of questions arise from Mrs Breach's affidavit. They are:
1.Why she considered it appropriate to advise Mr Hetherington that there was no point in proceeding with the action until funding had been obtained to enable it to be completed, when Phillips Fox had certified that they had funds available to take the matter to discovery?
2.When did Mr Carello instruct Phillips Fox not to continue acting?
3.How Mr Carello, as administrator of the plaintiff, could properly permit Messrs Hetherington, Sharpe and Crothers to assume responsibility for conducting the action?
4.Why did Phillips Fox not inform the Court of the change in circumstances which, in effect, rendered their certificate meaningless?

The hearing on 17 October 2003

At the hearing on 17 October 2003, I asked the plaintiff's counsel why the plaintiff, being funded up to discovery, had not proceeded with the action. Counsel said the explanation was the unanticipated expenditure which his client had been obliged to incur. In essence, this arose from interlocutory applications, including the application for additional security for costs and the plaintiff's application for a trial of the preliminary issue to which I have already referred. In short, the funds available to Phillips Fox which were the subject of their certificate was not used as envisaged. But that amount and more (as the plaintiff's counsel put it) were consumed in other ways. Thus, counsel submitted, the certificate provided by Phillips Fox "was totally overtaken by events" (TS 169). The certificate was therefore meaningless.
In the light of the information provided to me by the plaintiff's counsel from the Bar table, and in the absence of any proper explanation from Phillips Fox, I considered I should not determine the defendant's strike out application without giving Phillips Fox a further opportunity to clarify the position and also, to show cause why they should not pay the costs of the day personally, pursuant to O 66 r 5 of the Rules of the Supreme Court. I shall return to that matter in due course.
I therefore adjourned the application, giving directions requiring the solicitor having the conduct of the matter at Phillips Fox to file and serve an affidavit setting out in detail and in chronological order, the events relating to the conduct of the action which had occurred since the filing of the certificate of 6 August 2002, with particular reference to instructions received from the plaintiff's representatives and the funding of the action.

Mr Shaw's affidavit

In compliance with my direction, Mr Shaw filed an affidavit sworn 31 October 2003 in which he set out the relevant matters. Mr Shaw dealt first with events leading up to the filing of the certificate on 6 August 2002. Mr Shaw said that having promptly sought instructions in relation to the draft order for certification made on 11 June 2002, he wrote to Mr Carello on 26 June 2002 informing him it was imperative, if the action was to be maintained, to have a final funding agreement in place before 6 August 2002. At that time, Mr Shaw estimated that $50,000 would be sufficient to proceed with the action up to and including discovery.
Mr Shaw was informed by the solicitors for the plaintiff's bank that the bank would not provide interim funding. On or about 2 August 2002, Mr Shaw had a discussion with Mr Hetherington in which Mr Hetherington said he, Mr Sharpe and Mr Crothers would, on certain conditions, be prepared to provide the funding to take the matter up to and including discovery. Mr Sharpe is said to be an accountant who was involved previously in the running of the plaintiff and Mr Crothers is said to be a friend of Mr Hetherington.

As a result, Mr Shaw prepared a costs agreement in the sum of $50,000 pursuant to which Messrs Hetherington, Sharpe and Crothers would jointly and severally guarantee payment of Phillips Fox's anticipated fees in that amount.
The costs agreement was signed, and Mr Shaw provided the certificate of funding dated 6 August 2002.
Mr Shaw's affidavit then deals with events after 6 August 2002. On 9 August, Mr Shaw was alerted to the fact that the defendant intended to seek additional security for costs. He was also instructed by the plaintiff to prepare an application for the trial of a preliminary issue, that being the issue relating to the concrete. This was, however, a matter which Mr Shaw had contemplated previously and which, as I understand it, was factored into his $50,000 costs estimate.
Following further correspondence and conferral between the parties' legal representatives, various interlocutory applications were made. I heard these applications on 13 November 2002 when I dismissed the plaintiff's application for the trial of the preliminary issue and ordered the plaintiff to provide an additional $100,000 security for costs. The plaintiff had also an application for separate trials of liability and quantum. I declined to deal with that application and adjourned it sine die.
Mr Shaw wrote to Mr Carello on 15 November 2002 confirming the outcome of the applications heard on 13 November.
On 2 December 2002, Mr Shaw was informed by the solicitors for the plaintiff's bank that the bank was unwilling to provide a further guarantee of $100,000 but that those concerned on behalf of the bank would be prepared to meet Mr Hetherington in Sydney at his own expense to hear his submissions.
On the same day, Mr Shaw was telephoned by Mr Carello who instructed him that Phillips Fox was to stop work on the matter. And yet, also on that day, Mrs Breach wrote to the defendant's solicitors, asking them to provide outstanding particulars of the defence within seven days.
By 20 February 2003, it had emerged that the only likely source of additional future funding of solicitor and client costs (including counsel fees) sufficient to take the action to trial, was Messrs Hetherington, Sharpe and Crothers. At that stage, the plaintiff's bank had indicated it would provide the bank guarantee in the sum of $100,000 subject to certain conditions being met by Messrs Hetherington, Sharpe and Crothers. Also by that stage, Phillips Fox had rendered accounts pursuant to the $50,000 costs agreement and was pressing for payment of their outstanding fees together with payment of counsel's fees.
On that date, Ms Breach wrote to Mr Carello in relation to funding. She said she had discussed the matter with Mr Shaw who had discussed it with another partner in Phillips Fox:
"Our thoughts are that unless there is a real commitment for funding in the amount of approximately $300,000.00 there is little point in proceeding with the action."
On 26 February 2003, the ANZ Bank provided a further bank guarantee in the sum of $100,000, this being the additional security for costs. On the same day, Mrs Breach wrote to the Court, with a copy to the defendant's solicitors saying that the plaintiff had now provided the further security for costs. Mrs Breach said she was instructed to seek that the stay be lifted. The defendant's solicitors replied on 28 February saying they had no objection to the stay being lifted and would give consideration to any minute of consent orders that might be drafted, subject to their comments on the terms of the guarantee.
In fact, Phillips Fox did not apply to have the stay lifted because, as Mr Shaw said in his affidavit, they had yet to hear from Mr Hetherington in response to a funding proposal. Further, Mr Carello had not withdrawn his stop work instruction and there appeared to be little point in proceeding with the action while the issue of additional funding remained unresolved. That being so, it is surprising that Mrs Beach said she had instructions to lift the stay.
On 18 March 2003, Mr Hetherington informed Mr Shaw that he, Mr Sharpe and Mr Crothers were willing to fund the action to the completion of the trial but needed to have some priority as against the ANZ Bank and other creditors for repayment of funds paid personally, assuming the plaintiff was successful.
The question of funding and the priority to be accorded to Messrs Hetherington, Sharpe and Crothers were the subject of further negotiations until 19 September 2003. During the period May to September 2003, Mr Shaw says he discussed the state of the action with Mr Carello from time to time and that "his consistent instruction was that Phillips Fox was not to continue with the action without a signed costs agreement from Hetherington, Sharpe and Crothers".
Mr Shaw referred, in particular, to his meeting on 26 May 2003, with Mr Carello, Mr Hetherington and a former partner of Phillips Fox who had been involved in the matter previously. Mr Shaw says he informed those present that approximately $40,000 was outstanding under the $50,000 costs agreement. Mr Hetherington said that $150,000 was available, apparently in addition to the funds necessary to discharge the indebtedness under the costs agreement. However, no further money would be paid until Messrs Hetherington, Sharp and Crothers had obtained some priority over the ANZ Bank, and had assumed control of the action in place of Mr Carello.
It should therefore have been apparent to Mr Shaw that despite his certificate of 6 August 2002 that sufficient funding was available to the plaintiff to proceed with the action to discovery, those funds were not being made available. And on 26 May 2003 at the latest, Mr Shaw knew that the funds would not be made available (apparently in breach of the $50,000 costs agreement) until Mr Hetherington's priority and control requirements had been met.
Mr Shaw was clearly embarrassed by his client's conduct, and the failure to pay his firm's outstanding accounts. At one stage, in late August 2003, Mr Shaw threatened to apply to withdraw from the record. However, neither the Court nor the defendant's solicitors were told about the circumstances which rendered the certificate meaningless.
Eventually, on 8 October 2003, Phillips Fox had the costs agreement signed by each of Mr Hetherington, Sharpe and Crothers.
Mr Shaw deposed to the fact that on about 15 October 2003, Mr Carello informed him by telephone that he had reached agreement with Messrs Hetherington, Sharpe and Crothers for them to have effective conduct of the action on behalf of the plaintiff "subject to the execution of documentation to this effect". I note that thus far, no such documentation has been forthcoming.

Should the action be dismissed for want of prosecution?

The principles applicable to the dismissal of an action for want of prosecution are well settled. They are stated conveniently in Seaman on Civil Procedure in Western Australia at par [3.0.4] in the following terms:
"The Full Court has applied the general principles applicable to dismissal of an action for want of prosecution enunciated by Lord Diplock in Birkett v James [1978] AC 297 at 318 …. It being for the defendant to show that they apply: see Lewandowski v Lovell (1994) 11 WAR 124 at 128, 133, 134, 135, 158. Those principles are that the court must be satisfied either: (1) that the default has been intentional and contumelious, eg, disobedience to a peremptory order of the court or conduct amounting to an abuse of the process of the court; or (2)(a) there has been inordinate and inexcusable delay on the part of the plaintiff or his or her lawyers, and (b) that such delay will give rise to a substantial risk that it is not possible to 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 …"
Then in par [3.0.4A] it is said that in exercising the discretion to dismiss an action for want of prosecution five paramount matters must be considered. They are:
•the length of the delay
•the explanation for the delay
•the hardship to the plaintiff if the action is dismissed and the cause of the action left statute barred
•the prejudice to the defendant if the action is allowed to proceed notwithstanding the delay
•the conduct of the defendant in the litigation
In the present case, it is clear from Mr Shaw's affidavit that the cause of the most recent delay is, as it has always been, the plaintiff's inability to fund the action. In the past, there have been failures to comply with orders for the provision of security for costs. The action has been stayed pending compliance with the relevant orders: hence the delay during those periods. Those delays have been excused in the sense that the action has been permitted to continue.
The most recent delay, since the provision of Phillips Fox funding certificate, has not resulted from any disobedience to a peremptory order of the Court. The delay has resulted from the plaintiff's chronic shortage of funds, and in particular, from its instruction to Phillips Fox to stop work. The defendant was lulled into a false sense of security by Phillips Fox's certificate, being entitled to assume that matters were progressing. Mrs Breach's letter of 26 February 2003 would have reinforced that assumption. Indeed, on 28 February 2003, the defendant's solicitors wrote to Phillips Fox, saying:
"We note that as at 6 August 2002, your client only certified that it had sufficient funding to proceed with the action up to and including discovery. Please advise if this has changed."
Of course, the certificate had not been given by the plaintiff, but by Phillips Fox. However, in my view, the proper response to the letter would have been to inform the defendant's solicitors that the situation had changed in that funding was not available and Phillips Fox had been instructed to stop work. In fact, Phillips Fox did not reply.
As I understand it, the defendant's solicitors received no response to any of their letters from then until 19 August 2003, when Mrs Breach wrote to say she was in the process of obtaining instructions and that she expected to be in a position to respond by 5 September 2003. In my view, this was a somewhat disingenuous letter, given the fact that Phillips Fox had been without instructions since December 2002.
As I have noted above, Phillips Fox failed to inform the Court or the defendant of the change of circumstances which rendered their certificate meaningless. As to that, Mr Shaw said in his affidavit:
"At the time I made the estimate of $50,000 I did not take into account the possibility that the plaintiff would make application for the trial of a preliminary issue or that there would be an application for further security for costs. The legal costs incurred in preparing, instructing counsel and running those applications have consumed a significant component of the $50,000 in a fashion which I did not contemplate when I approved that figure in August 2002.
With respect to the Court, I did not interpret the giving of the 6 August 2002 Certificate as speaking at any time other than the date it was signed and at that time I honestly believed that the Phillips Fox certification amount of $50,000 was accurate. I also believe(d) that funds in that amount, albeit not held in trust would be provided promptly to Phillips Fox from at least Crothers upon the rendering of Phillips Fox accounts. I never applied my mind to the need to withdraw, correct or modify the 6 August 2002 Certificate given my understanding that it spoke only to the past …
I offer an unreserved apology to the Court if my understanding of the effect of the orders requiring the giving of the 6 August 2002 Certificate was not accurate."
With all respect to Mr Shaw, I find it difficult to accept he believed that the certificate spoke only to the past, when it is directed to progressing the action to discovery, obviously at some time in the future. However, I have no reason to doubt Mr Shaw's evidence that he did not turn his mind to the need to withdraw or modify the Certificate: and I accept his apology.
There has undoubtedly been inordinate delay in the prosecution of the action. The question whether the delay is inexcusable depends to some extent on the outcome of the action. That is because, as I have noted, the plaintiff claims its impecuniosity is a direct consequence of improper conduct on the part of the defendant. In those circumstances, I do not think the delay can be said to be "intentional" in the sense normally envisaged in this context. I accept that the plaintiff's intention is to prosecute the action and recover substantial damages as soon as it is able to do so. For the same reason, I do not think the delay can be described as "contumelious". These are factors to be taken into account in considering the hardship to the plaintiff if the action is dismissed, the cause of action now being statute barred.
I accept there is prejudice to the defendant in allowing the action to proceed. That is because what are said to be two of the defendant's key witnesses have left its employment. However, the evidence is that they left on 31 March and 21 July 2000 respectively. That being so, the recent delay in the prosecution of the action has caused no additional prejudice.
The defendant's principal witness will be its former project manager. He remains in the employ of the defendant or a subsidiary company. The defendant's evidence is that his involvement in his current employment "continues to limit his availability in terms of this action". However, that is by no means unusual in actions of this kind.
There is, of course, the general prejudice resulting from the passage of time and the consequential fading of memory on the part of potential witnesses. However, it is not uncommon for complex engineering cases such as this to take many years to come to trial even when progressed in a satisfactory manner.
The defendant points out that it is not confined to proof of inordinate and inexcusable delay by reference to long periods of total inactivity on the part of the plaintiff. As is noted in Seaman (supra) at par [3.0.4]:
"There may be a want of prosecution during a period in which the plaintiff is involved in continuing unsuccessful efforts to establish a proper pleading: La Trobe Country Credit Coop Ltd v Smith [1999] 1 VR 440 at 448, 452."
That is, to a certain extent, the position here. Nor do I overlook the fact that contrary to my direction of 19 June 2000 that the parties confer for the purpose of attempting to resolve the apparent inconsistency in the statement of claim in relation to progress payments, no such conferral has taken place.
At the hearing on 17 October 2003, counsel for the plaintiff described this as "a very minor matter", and "not a priority" (TS 166).
I appreciate that I did not specify when the conferral was to take place and the action has been stayed for considerable periods since then. However, with all respect to counsel, that is not an acceptable attitude: case management directions should be followed.
The defendant's solicitors wrote to Phillips Fox about the matter on 22 July 2003, when the action was again on foot (as the defendant's solicitors believed). The response from Phillips Fox, on 8 September 2003, was that it would be "a little premature" to confer: and that conferral should take place after pleadings had been finalised, or following discovery.
This response was also somewhat disingenuous, in that it did not disclose the fact that Phillips Fox had instructions not to carry out any further work.
The failure to comply with my directions was therefore deliberate. But it resulted from what I regard as improper conduct on the part of Phillips Fox, in failing to disclose their lack of instructions. I appreciate that a lay client will usually suffer the consequences of his solicitor's actions. However, in this instance, I think it would be unfair to the plaintiff to penalise it for the conduct of its solicitors.
When the matter was mentioned before me on 14 December 2003, Mr Taylor of Talbot and Olivier, (who have now been instructed by the plaintiff in place of Phillips Fox) sought leave to file further affidavit material relating to funding arrangements. Mr Taylor submitted that I should be less inclined to dismiss the action for want of prosecution, if satisfied that the reason for the previous delays no longer existed.
I gave leave as requested, over objection from the defendant's solicitors.
Affidavits were then filed by each of Messrs Hetherington, Sharpe and Crothers in which they respectively deposed to the fact that they had agreed to fund the action "through to and including the final trial". Each deponent exhibited to his affidavit a statement of assets and liabilities of himself and his wife. Mr Hetherington says he and his wife own their assets jointly, other than a house which he owns, and in which he has an equity of $120,000.
Mr Sharpe and Mr Crothers do not disclose whether they and their respective wives own their assets jointly: I assume they do.
Mr Hetherington's assets are brought in on the basis that the plaintiff will succeed in the action. For example, he places a value of $350,000 on his shares in the plaintiff.
In a subsequent outline of submissions, the defendant contends, in substance, that this evidence is unsatisfactory and that there are still substantial questions about the plaintiff's ability to fund the action. For example, a draft Deed of Priority between the ANZ Bank, Messrs Hetherington, Sharpe and Crothers, the plaintiff and various of its creditors has yet to be executed.
I do not think it can be said with certainty, therefore, that the action will be funded to trial. However, that is the position in many cases. For example, it is always open to a plaintiff to discontinue an action if his perception of the prospects change as the trial approaches; or if the costs become prohibitive.
As I have said, I am satisfied that the action has been brought bona fide, for the purpose of pursuing what is perceived by the plaintiff to be a substantial claim.
If the action does not proceed or is unsuccessful, the defendant is protected to a certain extent by the order for security for costs, and now has at least a prospect of costs orders being made against Messrs Hetherington, Sharpe and Crothers, pursuant to s 37 of the Supreme Court Act: see generally, Seaman at par [66.1.3].
Taking all these considerations into account, and after some hesitation, I have come to the conclusion that I should not dismiss the action for want of prosecution. In reaching that conclusion, I have given considerable weight to the fact that the claim is now statute barred and to the plaintiff's contention that its impecuniosity has been caused by improper conduct on the part of the defendant. I appreciate that is not a consideration which can be permitted to be a blanket excuse for delay. I appreciate also, that the allegation is denied by the defendant. I make it plain that I do not intend in any way to suggest that I am prejudging the issue. But the fact that such a claim is made suggests that it would be a hardship to the plaintiff not to permit the action to proceed.
I understand from a further affidavit of Mr Shaw exhibiting a print-out from a substantial database containing a list of the plaintiff's discoverable documents, that discovery could be given quite soon. I am therefore of the view that the application should be dismissed and directions should now be given for discovery, and for outstanding pleadings issues to be resolved.

The costs of the application

As I have noted above, the hearing on 17 October 2003 was inconclusive because of the inadequacy of Mrs Breach's affidavit. That being so, I raised the question whether Phillips Fox should be required to pay the costs of the application personally, having regard to O 66 r 5 of the Rules of the Supreme Court. That rule provides:
"(1)Where in any proceedings costs are incurred by a party –
(a)as a result of any improper, unreasonable, or negligent act or omission; or
(b)which, in the light of any such act or omission occurring after they were incurred, the Court considers it is unreasonable to expect that party to pay, the Court may order any practitioner whom it considers to be responsible (whether personally or through a servant or agent) –
(c)to pay those costs personally or to indemnify any party who has been ordered to pay those costs;
(d)not to claim any relevant costs or fees; or
(e)to refund any relevant costs or fees which may have been paid already."

The shortcomings in Mrs Breach's affidavit have now been remedied by Mr Shaw. Had Mr Shaw's affidavit been available at the hearing on 17 October 2002, I would have come more quickly to the conclusion I have now reached.
I assume that the defendant's solicitors, being unaware of the plaintiff's position, and the change in circumstances which rendered the Phillips Fox certificate meaningless, continued to work on the case when they might not otherwise have done so. Had I dismissed the action for want of prosecution, that work would have been wasted and the question might then have arisen, having regard to O 66 r 5, whether Phillips Fox should pay for it. However, as the action will continue, the work has not been wasted and the question does not arise.
The position is, therefore, that the defendant's application to dismiss the action for want of prosecution has failed because I have been prepared to allow the plaintiff a considerable amount of latitude in relation to delay, for the reasons set above. Despite my criticism of Phillips Fox's conduct, I do not think it can be said that they caused the defendant to incur any costs in relation to the hearing of this application which it would not have incurred otherwise. It will not, therefore, be necessary to proceed further with the issue.
I will invite submissions from the parties in relation to costs.