Re: I and L Securities Pty Ltd

[2000] QSC 25

SUPREME COURT OF QUEENSLAND

CITATION:	Re: I & L Securities Pty Ltd v Conroy & Others [2000] QSC 025
PARTIES:	I & L SECURITIES PTY LTD ACN 061 852 335 (plaintiff) and BEVAN CONROY (first defendant) and GRAEME HART (second defendant) and HIH CASUALTY & GENERAL INSURANCE LTD ACN 008 482 291 (first third party) and FAI GENERAL INSURANCE COMPANY LIMITED ACN 000 327 855) (second third party)
FILE NO:	2787 of 1997 Brisbane Registry
DIVISION:	Trial Division
DELIVERED ON:	2 March 2000
DELIVERED AT:	Brisbane
HEARING DATE:	21 February 2000
JUDGE:	Mackenzie J
ORDER:	1. The application to strike out the first defendant's proceedings against the first third party is dismissed. 2. The proceedings by the first defendant against the first third party stand dismissed if the first third party has complied with paragraph 2 of the order of Mr Justice Shepherdson made on 2 February, 2000 but the obligation imposed upon the first defendant by paragraph 6 thereof is not strictly complied with. 3. The respondent first defendant pay the applicant first third party's costs of and incidental to the application to be assessed.
CATCHWORDS:	PRACTICE – ACTION – STRIKING OUT – Repeated failures by first defendant to comply with rules and orders of the court – latest failure remedied before knowledge of application – insufficient to strike out proceedings.
COUNSEL:	S Doyle SC or third party A Stone for defendant
SOLICITORS:	Gadens for third party G Down & Assoc for defendant

[1]

MACKENZIE J: The first third party seeks to have proceedings by the first
defendant against it struck out on the following grounds:

(1)	That such an order is the only sanction applicable in the circumstances.
(2)	That first defendant is engaging in abuse of process on the basis that it should be inferred from his repeated defaults to comply with the rules and with orders of the court and his failure to explain them is that he commenced the claim without intending to bring it to a conclusion.
(3)	That the repeated defaults and absence of acceptable explanation indicate a want of prosecution; and
(4)	That any event the first defendant's case has no reasonable prospects of succeeding against the first third party.

1. By way of background to the matter generally and particularly with respect to the fourth basis of striking out, the first third party was an insurer upon whom a professional indemnity claim was made by the first defendant in respect of a policy covering the period 14 November 1995 to 14 November 1996. The policy was a "claims made" policy.

2. On 21 June 1996 the first defendant was advised by the plaintiff that it was alleged that valuations provided for the purpose of the plaintiff making a loan on security of real property were substantially in excess of what the property was worth. He was advised that the mortgagee would be taking legal action against him for financial loss suffered by it in consequence of its reliance on the valuations. The writ was issued by the plaintiff against the first defendant on 26 March 1997.

3. The second third party was a subsequent insurer, for the period 14 November 1996 to 14 November 1997. The first defendant made the first claim in respect of the action against the second third party on 8 April 1997. He was advised by solicitors for the second third party on 5 January 1998 in a very detailed letter, that the second third party elected to avoid the policy, on grounds which included failure to disclose, prior to entering into the policy that the valuation had been made in a dishonest fashion and non-disclosure of the letter of 21 June 1996 threatening legal action which, it was said would have caused the second third party to exclude cover for that claim from the policy.

4. On 16 March 1998, following a telephone call on 12 March 1998, the first defendant wrote to the insurance brokers who had arranged the policy with the first third party advising that he wished to claim under that policy. The only explanation of the circumstances of refusal of indemnity by the second third party was that they would not provide cover as the first defendant had not advised of the "June 1996" letter. Specifically, the first defendant did not advise that allegations of fraudulent valuations had been made against him by the second third party. I will return to this aspect of the matter later.

5. The first defendant has an abysmal record of complying with his obligations under the rules and under orders of the court since his defence ceased to be conducted by the first third party. It may also be inferred from some of the correspondence exhibited that there were difficulties about getting instructions from him even before that time.

6. The matter was before me previously on 10 November 1999 when an application to strike out for want of prosecution was made. In that instance, despite a consent order the required particulars were provided about a month late and only after the application had been made. On that occasion I said the following:

   "I have concluded that I should dismiss the application. The further and better particulars have been provided. The first defendant should, however, realise that he is on the brink of having his claim dismissed if he places himself in a position where it may be thought that he is deliberately delaying the proceedings. He places himself in danger of having that thought about him if he disregards orders or other time limits in the Rules and fails to give any explanation for that occurring."

7. On the present occasion a similar pattern followed except, perhaps, in one respect. On 29 November 1999 the first third party's solicitors requested copies of about 50 documents in the first defendant's list of documents. They were not supplied. Nor was the correspondence replied to.

8. On 21 January 1999 a rule 444 letter was written requesting the documents to be supplied by close of business on 25 January 2000. A few were provided under cover of a letter dated 24 January 2000. The letter concluded:

   "A list of the other documents was provided to me by my client. I have asked him for a copy of the documents. He is on holidays and will not be returning to his office until 31 January 2000. I ask for an extension to 7 February 2000 to provide the other documents."

9. On 2 February 2000 when an application by the plaintiff was before the chamber judge, a consent order to which the first defendant was a party required the first defendant to provide the balance of the documents referred to in the letter of 25 January 2000 on or before 4 pm on 7 February 2000 and set a timetable for further procedural steps including times by which the first defendant must complete certain subsequent steps. Being a consent order it is to be inferred that the first defendant's solicitor had instructions to consent to the order. It was not complied with. The affidavit from the first third party's solicitor explains what happened in the following terms. The affidavit refers to the "second defendant" but it is common ground that that is erroneous and should read the "first defendant". I have amended the passage accordingly."

   "I received the balance of those documents from the first defendant on about 8 February 2000. The first defendant had been on holidays and away from his office until 31 January 2000, I photocopied those documents (which comprised 953 pages) and sent them to Gadens, the first third party's solicitors on 14 February 2000. I also sent my letter by facsimile to Gadens on 14 February 2000 to avoid an unnecessary application to the court by the first third party. The short delay in providing the copies of the documents was caused by the first defendant's absence from his office and the volume of work involved in my photocopying the documents. I am a sole practitioner with two secretaries."

10. There is no affidavit from the first third party himself explaining why he did not provide the voluminous documents to his solicitor until a day after they were required to be in the hands of the first third party's solicitor. There is no explanation why the correspondence of 29 November 1999 was not responded to necessitating the rule 444 letter and the application. The only thing which may be said in favour of the first defendant is that on this occasion, while the documents were sent late, they may have been sent without knowledge of the present application actually having been brought. The sequence of events appears to be that the application was filed on the morning of 14 February 2000. At about 1 pm on 14 February 2000, the process of having the documents posted to the first defendant's solicitor was commenced by the solicitor for the first third party. At about 2.13 pm a facsimile listing, but not enclosing, documents which were being provided was sent by the first defendant's solicitor.

11. On 15 February 2000 the first third party's solicitor received the original of the facsimile letter together with the documents with a couple of exceptions which are irrelevant for present purposes.

12. On 16 February the solicitor for the first defendant wrote to the solicitor for the first third party stating that he had received the application that day. He said that he had sent the letter of 14 February by facsimile to avoid the application and suggested that the application be dismissed by consent.

13. It is of concern that after receiving a judicial warning in the clearest possible terms that further failures to comply with his obligations would place him at risk of sanctions, the first defendant failed to comply with a proper request to provide documents and then failed to comply with a consent order fixing a time for doing so (which was also the same as an undertaking given on his behalf). But for the crossing in the post of the application and the documents it may well have been a case where an inference of contumelious disregard of obligations may have been justified, particularly in the absence of any explanation by the first defendant personally of the reasons for his failure.

14. In the circumstances I feel constrained not to strike out the third party proceedings. However, it was not unreasonable for the first third party to bring the application in the circumstances as they stood at the time and the first third party should therefore have its costs of and incidental to the application to be assessed. I will also make an order which will result in the proceedings being dismissed if the next step required of the first defendant as between the first defendant and the first third party is not completed in strict accordance with the order of 2 February, 2000.

15. So far as the submission that the case against the first third party could not succeed is concerned, it is unnecessary to explore it further having regard to the conclusion reached above. It can be said, however, tht the primary proposition relied on by the first third party is that the valuations were fraudulently prepared. While a certain amount of material has been placed in evidence in the affidavits on this issue, it ultimately is an issue of fact whether the proposition is made out.

16. The orders are as follows:

1.	The application to strike out the first defendant's proceedings against the first third party is dismissed.
2.	The proceedings by the first defendant against the first third party stand dismissed if the first third party has complied with paragraph 2 of the order of Mr Justice Shepherdson made on 2 February, 2000 but the obligation imposed upon the first defendant by paragraph 6 thereof is not strictly complied with.
2.	The respondent first defendant pay the applicant first third party's costs of and incidental to the application to be assessed.

1. I will add by way of postscript that at the Applications to Court callover last Friday, counsel appeared on behalf of the plaintiff seeking to reopen argument on the matter. He wished to inform me that as between the plaintiff and the first defendant the matter had been settled and the first defendant's right of action against the first third party had been assigned to the plaintiff. I declined to hear counsel for the plaintiff further on the matter taking the view that any arrangements the plaintiff made and any decision made by it to settle the matter where a commercial decision taken by it were irrelevant to the present application.