Poltaz v Robinson

[1999] NSWCA 29

CITATION:	Poltaz v Robinson & Anor [1999] NSWCA 29
FILE NUMBER(S):	CA 40744/98
HEARING DATE(S):	8 February; 1999
JUDGMENT DATE:	8 February 1999
PARTIES :	Poltaz Pty Ltd v Andrew George Robinson & Anor
JUDGMENT OF:	Mason P at 17; Handley JA at 1

LOWER COURT JURISDICTION:	District Court
LOWER COURT FILE NUMBER(S) :	6468/97
LOWER COURT JUDICIAL OFFICER:	Sidis DCJ

COUNSEL:	A Bennett SC (Appellant) D Davies SC (1st Respondent) A Crowe (2nd Respondent)
SOLICITORS:	Jennifer E Darin (Appellant) Colin Biggers and Paisley (1st Respondent) Clayton Utz (2nd Respondent)
CATCHWORDS:	PROCEDURE - application to strike out proceedings entertained and granted without notice
DECISION:	Appeal allowed with costs

8

THE SUPREME COURT

OF NEW SOUTH WALES

COURT OF APPEAL

CA 40744/98
6468/97

MASON P
HANDLEY JA

Monday 8 February 1999

POLTAZ PTY LTD v ANDREW GEORGE ROBINSON & ANOR

PROCEDURE - application to strike out proceedings entertained and granted without notice
The appellant brought proceedings for professional negligence in the District Court against its former solicitor. It was ordered to provide security for costs and in default the action was to be stayed. Security was not provided as ordered and the action was stayed only a few days before it had been specially fixed for hearing. At the same time the appellant commenced proceedings in the Supreme Court against the solicitor for breach of fiduciary duty arising out of the same relationship. The appellant foreshadowed an application for the District Court proceedings to be removed to the Supreme Court to be heard with the Supreme Court proceedings. The defendants and cross-defendants sought an order in the District Court for the costs thrown away as a result of the automatic stay. At the hearing of these applications they applied for the proceedings to be struck out. The trial Judge held that the District Court proceedings were an abuse of process and that the plaintiff was in contempt of court and struck out the proceedings.
HELD: allowing the appeal: (1) The trial Judge misunderstood the facts and took into account irrelevant considerations and her exercise of discretion in granting the application to strike out the proceedings miscarried. (2) The order should be set aside but the plaintiff should pay the costs thrown away as a result of the stay of proceedings.

ORDER

Appeal allowed with costs.
THE SUPREME COURT

OF NEW SOUTH WALES

COURT OF APPEAL

CA 40744/98
6468/97

MASON P
HANDLEY JA

Monday 8 February 1999

POLTAZ PTY LTD v ANDREW GEORGE ROBINSON & ANOR

JUDGMENT

1 HANDLEY JA: This application for leave to appeal from a decision of Sidis DCJ given on 1 September 1998 has, with the consent of the parties, been treated as the hearing of the appeal subject to leave being granted. An action by a client against its solicitor for professional negligence had been fixed for trial in the District Court over four days to commence on 1 September 1998. The fixture was ordered on 28 April that year. On 10 July George ADCJ made an order for the plaintiff to provide security in the sum of $20,000 for the defendant's costs of the proceedings, such security to be provided by 4pm on 25 August. The order provided for a stay of proceedings in the event that the security was not provided by that date. The day before that order was made, the plaintiff's solicitors had written to the defendant's solicitors foreshadowing further proceedings against the defendant in the Supreme Court and indicating a concern by plaintiff's counsel that, without steps being taken, the Supreme Court proceedings could attract a res judicata defence based on Anshun principles following a decision in the District Court in the pending action. The defendant's solicitors were asked to advise whether they were prepared to give an undertaking that no Anshun defence would be relied on in the Supreme Court. No reply was received to this letter. The Court has not been told whether any reference was made to that letter in the hearing before George ADCJ the following day. On 25 August the plaintiff and other parties commenced fresh proceedings in the Supreme Court as foreshadowed. These arose out of the same retainer of the defendant but alleged breaches of fiduciary duty. Later that day the plaintiff failed to comply with the order directing security, activating the automatic stay provided for in the order.
2 That day, there was a conversation between Mr Butler, the solicitor handling the matter on behalf of the plaintiff, and Miss Chapman, the solicitor handling the matter for the defendant, in which they agreed that the action had been stayed as a result of the non-compliance with the order for security and that the trial could not proceed on 1 September.
3 On 27 August the solicitors for the defendant and the solicitors for the cross-defendant notified the plaintiff's solicitors that they wished to be heard on the question of costs following the loss of the hearing date, the defendant's solicitors indicating that they would seek an order on an indemnity basis. On the same day the District Court was notified that the hearing of the action could not proceed on 1 September.
4 It appears that at 4.30 pm on 31 August the solicitors for the cross-defendant, who were in Brisbane, sent a facsimile transmission dated 27 August to the plaintiff's solicitors. This reiterated the claim for an order for the costs thrown away by the vacation of the trial date and discussed the situation created by the fresh proceedings in the Supreme Court. The letter concluded
"Accordingly, we see (sic) that in addition to an order for costs in our client's favour next Tuesday the following should occur:

(1) provision of the security (the Supreme Court could hardly be expected to order the transfer of a stayed action);
(2) an application should be brought that day or as soon as possible seeking transfer of the District Court action and consolidation (we put you on notice that our client will oppose this application).
Failing the taking of the steps outlined above, our client will argue that the maintenance of the District Court action is an abuse of process and that it should be struck out with your client paying our client's costs on an indemnity basis”.
5 The following day the action was number 17 in a list of cases before Sidis DCJ. The transcript records that Mr Davies, senior counsel for the defendant, submitted that what had happened was an abuse of process by the plaintiff and that the defendant should have an order for the costs thrown away on an indemnity basis.
6 Mr Crowe, for the cross-defendants, submitted that the plaintiff's conduct showed that the action was not going to be prosecuted and should be struck out. This application had not been foreshadowed by the letter sent the afternoon before but this point was not taken by the plaintiff's solicitor.
7 The judge then called on Mr Butler, the solicitor for the plaintiff. The transcript reveals a number of misunderstandings and mistakes in the discussion which followed. Mr Butler first told the judge that the Supreme Court proceedings subsumed the issue in the District Court proceedings, which was not correct. The following exchange then occurred.
Her Honour "I take it that you aren't going to tell me today that you don't want to proceed with these proceedings?"
Butler "With the proceedings today, yes your Honour".
Her Honour "Yes. Why shouldn't I strike them out?"
Butler "The plaintiff would submit your Honour that they are proceedings that ought to be dealt with in the Supreme Court with the further Supreme Court proceedings".
Her Honour "You've got proceedings in the Supreme Court, why do you need to take these with you, why don't I just strike them out?"
8 Mr Butler apparently misunderstood the Judge's question and said that the plaintiff did not wish to proceed "today". The Judge then misunderstood Mr Butler's answer. The terms of the new statement of claim in the Supreme Court clearly indicated that the plaintiff wished to proceed with its District Court action, but in conjunction with its claim in the Supreme Court and that removal to the Supreme Court would be sought. The Judge then said that the plaintiff was in contempt of court, which was neither correct nor appropriate. The order for security was not peremptory in form, the contempt was not in the face of the court, and the plaintiff had had no proper notice of the allegation. Later in the transcript she said "it's just an outrageous abuse of process" and referred again to the fact that the claims in both courts were basically the same and asked why the plaintiff had not sought to have the District Court proceedings transferred back to the Supreme Court. Mr Butler said that an application for transfer had been proposed and that the causes of action in the two proceedings were different although they involved the same parties and the same relationship. The argument then concluded and her Honour gave reasons, struck out the proceedings, and ordered the plaintiff to pay the defendant's costs on an indemnity basis and the defendant to pay the cross-defendant's costs on an indemnity basis. The precise effect of these orders on the defendant is not clear.
9 Her Honour's reasons appear to indicate a misunderstanding of the listing position. She said
"… the proceedings were listed for hearing today. The plaintiff does not propose to proceed with the hearing matter (sic) today. The matter was listed for hearing on the basis that it would require four days of hearing time and that there would be overseas and country witnesses".
10 Her Honour had during argument asked why this Court had not been told of the fact that the action was not going to proceed. Her Honour did not appreciate that the matter should not have been listed for hearing that day because of the stay and that the Court had been notified of this on 27 August. It was not a question of the plaintiff not proposing to proceed with the hearing that day, the plaintiff was prevented from doing so by the automatic stay which came into effect on 25 August.
11 The Judge then referred to the Supreme Court proceedings and said that she had been told that they related to matters which are substantially the same as those raised in the District Court proceedings, apparently having failed to take in Mr Butler's statement to the contrary recorded on p 4 of the transcript, to which I have already referred. This corrected his earlier erroneous statement that the District Court proceedings were subsumed by the new proceedings in the Supreme Court. She then referred again to the fact that the plaintiff was in contempt of the orders made by the Court in respect of security for costs.
12 In these circumstances, it is clear her Honour seriously misunderstood the facts in relation to the matter before her and took into account irrelevant considerations and her exercise of discretion miscarried.
13 This Court is now called upon to re-exercise the discretion in the light of the correct information. In my judgment an application of the nature granted by the Judge should not have been entertained without proper notice to the plaintiff. Until 4.30 on the afternoon before, the plaintiff was only on notice that the defendant and cross-defendant would be seeking orders for the costs thrown away as a result of the stay of proceedings. The letter of 27 August from the cross-defendant's solicitors, sent on 31 August, foreshadowed a different application but not one which was to be made the following day. Despite the absence of due notice to the plaintiff, the Judge entertained and granted an application for summary dismissal of the plaintiff's proceedings on the ground that it was in contempt of court and had abused the process of the court by failing to provide security for costs by the due date and commencing additional proceedings in the Supreme Court.
14 As Lord Atkin pointed out a long time ago in Evans v Bartlam, [1937] AC 473 a judgment adverse to a party, which is not the result of a trial on the merits, is a serious matter. In that case his Lordship was dealing with a default judgment in favour of the plaintiff. Here the Court is concerned with an order striking out proceedings for procedural defaults.
15 The errors which the Judge made, and the misunderstandings which occurred flowed from the informal and irregular nature of the proceedings before her, including the Court's acceptance of an application to strike out the whole proceedings of which the plaintiff had had no prior notice whatever. It is true of course that Mr Butler did not seek an adjournment, but in circumstances where he was suddenly confronted with an application of which he had no advance notice, I do not think that this error of judgment in the course of a hearing should permanently affect his client's interests. On a re-exercise of discretion, I would set aside the Judge's decision and make the order for costs which in my opinion the Judge should have made.
16 I would therefore propose that the appeal should be allowed and the orders of Sidis DCJ should be set aside. In lieu thereof I would order that the plaintiff pay the costs of the defendant and the cross-defendant on an indemnity basis thrown away as a result of the stay of proceedings coming into force on 25 August 1998 and the hearing not proceeding on 1 September 1998. The plaintiff is entitled to the costs in this Court. The respondents will be entitled to certificates under the Suitors Fund Act.
17 MASON P: I agree. The orders of the Court will be as proposed by Handley J.