RUBIK FINANCIAL LTD -v- HERSKOPE [No 2] - [2014] WASC 115

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CHAMBERS

CITATION: RUBIK FINANCIAL LTD -v- HERSKOPE [No 2] [2014] WASC 115

CORAM: MARTIN CJ

HEARD: 17 SEPTEMBER 2013

DELIVERED : 4 APRIL 2014

FILE NO/S: CIV 2273 of 2006

BETWEEN: RUBIK FINANCIAL LTD
Plaintiff
AND
ALAN HERSKOPE
Defendant
(BY ORIGINAL ACTION)
ALAN HERSKOPE
Plaintiff
AND
RUBIK FINANCIAL LTD
Defendant
(BY COUNTERCLAIM)

Catchwords:

Practice and procedure - Stay of counterclaim - Abuse of process - Vexatious conduct - Burdensome or oppressive conduct of proceedings - Failure to pay costs

Legislation:

Bankruptcy Act 1966 (Cth)
Corporations Law (Cth)
Rules of the Supreme Court 1971 (WA), O 4A
Supreme Court Act 1935 (WA), s 16(1)(d)(i)
Trade Practices Act 1974 (Cth)

Result:

Defendant's counterclaim stayed permanently and any defence by way of set off arising from the matters asserted in the counterclaim dismissed, unless defendant satisfies all outstanding costs orders within 21 days

Category: B

Representation:

Original Action

Counsel:

Plaintiff: Mr M N Solomon & Mr T J Palmer
Defendant: Mr T Galic

Solicitors:

Plaintiff: Roe Legal Services
Defendant: Galic & Co

Counterclaim

Counsel:

Plaintiff: Mr T Galic
Defendant: Mr M N Solomon & Mr T J Palmer

Solicitors:

Plaintiff: Galic & Co
Defendant: Roe Legal Services

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

Attorney-General (NSW) v Wentworth (1988) 14 NSWLR 481
Batistatos v Roads and Traffic Authority of NSW [2006] HCA 27; (2006) 226 CLR 256
Christmas Island Resort Pty Ltd v Geraldton Building Co Pty Ltd (No 5) (1997) 18 WAR 334
Gao v Zhang [2005] VSCA 200; (2005) 14 VR 380
Graham v Sutton, Carden & Co (1897) 2 Ch 367
Ireland v Norilya Minerals Pty Ltd [2010] WASCA 203
Jeffery & Katauskas Pty Ltd v SST Consulting Pty Ltd [2009] HCA 43; (2009) 239 CLR 75
Kermani v Westpac Banking Corporation [2012] VSCA 42; (2012) 36 VR 130
Oceanic Sun Line Special Shipping Co Inc v Fay [1988] HCA 32; (1988) 165 CLR 197
Phillip Morris Ltd v Attorney-General (Victoria) [2006] VSCA 21; (2006) 14 VR 538
Re Wickham; Marony v Taylor (1887) 35 Ch D 272
Rubik Financial Ltd v Herskope [2010] WASC 343
Welsh v Digilin Pty Ltd [2008] FCAFC 149; (2008) 250 ALR 13
MARTIN CJ:

Summary

The plaintiff, Rubik Financial Ltd (Rubik) seeks an order staying the counterclaim by the defendant, Mr Alan Herskope, in which he claims damages and other remedies arising from alleged misleading and deceptive conduct and negligent misrepresentation by Rubik, or parties for which Rubik is responsible. If a permanent stay is granted, it would follow that those aspects of Mr Herskope's defence to Rubik's claim which depend upon the award of damages or some other remedy as a result of the causes of action asserted in his counterclaim would be summarily dismissed.
Rubik's application for a stay of Mr Herskope's counterclaim relies upon a combination of three matters:
(a)Mr Herskope's failure to satisfy a number of orders for costs made against him in the course of interlocutory proceedings;
(b)the manner in which Mr Herskope has conducted his defence of Rubik's claim and his counterclaim which has been productive of unnecessary delay and expense; and
(c)the weakness of Mr Herskope's counterclaim.
There is no doubt that Mr Herskope has failed to satisfy a series of costs orders made against him. No explanation has been proffered for his default. For the reasons which follow, I am satisfied that Mr Herskope has conducted his defence of Rubik's claim, and prosecuted his counterclaim in a way which has produced unnecessary delay and additional expense over such a period and to such an extent as to justify the grant of the stay sought by Rubik unless Mr Herskope satisfies the outstanding costs orders within 21 days of publication of these reasons. In those circumstances, it is neither necessary nor appropriate for me to express any concluded view with respect to the apparent strength or weakness of Mr Herskope's counterclaim.

The jurisdiction to grant a stay

In Jeffery & Katauskas Pty Ltd v SST Consulting Pty Ltd [2009] HCA 43; (2009) 239 CLR 75, French CJ, Gummow, Hayne and Crennan JJ observed:
In Walton v Gardiner (1993) 177 CLR 378 the majority adopted the observation in Hunter v Chief Constable of the West Midlands Police [1982] AC 529 that courts have an inherent power to prevent misuse of their procedures in a way which, although not inconsistent with the literal application of procedural rules of court, would nevertheless be 'manifestly unfair to a party to litigation ... or would otherwise bring the administration of justice into disrepute among right-thinking people'. This does not mean that abuse of process is a term at large or without meaning. Nor does it mean that any conduct of a party or non-party in relation to judicial proceedings is an abuse of process if it can be characterised as in some sense unfair to a party. It is clear, however, that abuse of process extends to proceedings that are 'seriously and unfairly burdensome, prejudicial or damaging' or 'productive of serious and unjustified trouble and harassment' [28].
See also Batistatos v Roads and Traffic Authority of NSW [2006] HCA 27; (2006) 226 CLR 256 per Gleeson CJ, Gummow, Hayne and Crennan JJ, [6]; Kermani v Westpac Banking Corporation [2012] VSCA 42; (2012) 36 VR 130 per Robson JA, [97].
The exercise of this general jurisdiction to stay the claim of a party who has failed to satisfy orders for costs made by the court in the course of the proceedings has long been recognised. For example, in Graham v Sutton, Carden & Co (1897) 2 Ch 367, Chitty LJ observed:
When I sat in the Chancery Division I used to decline to stay proceedings till the costs of a single application were paid; but if several orders had been made for payment of costs by a plaintiff, and the costs remained unpaid, I used to stay proceedings till they were paid, on the ground that a succession of orders for payment of costs by him shewed that he was conducting the litigation vexatiously (371).
See also Re Wickham; Marony v Taylor (1887) 35 Ch D 272, per Lindley LJ (at 282).
Consistently with the observations of Chitty LJ, venerable authority establishes that:
Mere non‑payment of costs of interlocutory proceedings by a plaintiff is not a ground for staying proceedings, being no longer a contempt of court since the Debtors Act 1869; but the court has jurisdiction to order such stay where payment for costs is vexatiously withheld, and an application is made before trial, or if the action is vexatious or has been vexatiously conducted.
(Daniell's Chancery Practice (8^th ed) 1914 volume 2, page 1641 – cited with approval in Ireland v Norilya Minerals Pty Ltd [2010] WASCA 203 [38] per McLure P, Newnes and Murphy JJA.)
So, mere non‑payment of costs of interlocutory proceedings will not, of itself, ordinarily justify an order staying the defaulting party's claims. However, if a party in default of payment of orders for costs made by the court is conducting the proceedings in a manner which could be described as 'vexatious' or, in more contemporary language, in a manner which is burdensome or oppressive to the other party, the combination of those matters will justify the invocation of the court's jurisdiction to grant a stay.
In Phillip Morris Ltd v Attorney-General (Victoria) [2006] VSCA 21; (2006) 14 VR 538, Ormiston JA referred to a line of cases dealing with the circumstance in which a stay was sought as a consequence of a party's failure to satisfy costs orders made in previous related proceedings. He observed:
This kind of application may be contrasted with those made where a party, not necessarily the plaintiff, has failed to pay the costs of an interlocutory application but another party wishes to be paid its costs before the offending party takes any further step in the proceedings. More often than not it will be a defendant who seeks such a remedy and the order customarily made is that the proceeding be stayed until the costs have been paid, but the court's powers are more extensive and may result in the proceeding being permanently stayed. A considerable number of the latter applications have been brought in this Court in recent years and, as a result of a seemingly narrow interpretation of the Court's powers in respect of interlocutory orders for costs in Exell v Exell [1984] VR 1, the Supreme Court (General Civil Procedure) Rules were amended so as to express the court's power more clearly, as may be seen from the terms of Order 63.03. Recently I had occasion to consider a number of unreported decisions concerning the application of that rule: see Gao v Zhang [2005] VSCA 200; (2005) 14 VR 380 [123].
In Gao, Ormiston JA (Vincent JA agreeing) observed that the specific Victorian rule should not be regarded as a means of debt collection, but rather as a means of ensuring that justice is done as between the parties. He observed that while a stay order would not be reserved for exceptional circumstances, it should not be assumed that stay orders would be granted as an everyday occurrence. In his Honour's view, before a stay order was made:
… there must be seen to have been some conduct on the part of the party in default which falls for condemnation to the extent of making so draconian an order. For this purpose frequent litigation of minor interlocutory points may, at least in due course, point to misuse of the Court's process, in the limited sense of a deliberate harassing of the other side, such that it can no longer be permitted to continue. Ordinarily, therefore, one would assume before making an order of this kind that there would be a series of orders for costs and that they usually would be of a kind which did not involve the genuine resolution of disputes relating to interlocutory matters which have to be resolved before the matter can go to trial. For this purpose, then, the way in which each interlocutory dispute has been contested may well be relevant. … [A] party seeking an order such as the present may be able to bring to the Court's attention factors which would indicate a pattern suggesting at least a harassing of, or unfair dealing with, the opposite party, which in one way or another is exacerbated by a deliberate or regular refusal to pay the consequential costs of those applications [17].
In Welsh v Digilin Pty Ltd [2008] FCAFC 149; (2008) 250 ALR 13, the Full Court of the Federal Court referred to the older English cases in this area:
Historically the Courts considered that mere non‑payment of costs awarded on an interlocutory basis was not sufficient to justify an order to stay proceedings (Graham v Sutton, Carden & Co (1897) 2 Ch 367) however they also recognised that each case must be considered on its merits. So, for example where a plaintiff acted vexatiously towards a defendant in the course of the proceedings, the action could be stayed pending payment of costs ordered against the plaintiff (Re Wickham, Marony v Taylor (1887) 35 Ch D 272, Graham v Sutton, Carden & Co; cf Denning LJ in Hadkinson v Hadkinson (1952) P 285, 297 [29].
In Welsh, the Full Court did not consider that the principles enunciated by Ormiston JA in Gao should be considered as prescribing a standard of conduct which limited the circumstances in which the power conferred by O 35A r 3(1) of the rules of the Federal Court could be exercised, and in particular expressed the view that it was not necessary to establish that a party had engaged in conduct in the nature of harassment or unfair dealing before the powers conferred by that rule could be exercised.
There is no specific rule within the Rules of the Supreme Court that deals precisely with the circumstance now before the court – unlike O 63.03 of Rules of the Supreme Court of Victoria, or the rule considered by the Federal Court in Welsh. Nevertheless, there is no doubt that this court enjoys the inherent jurisdiction referred to in the authorities, augmented by the general case management powers conferred by O 4A and the jurisdiction conferred upon the court by s 16(1)(d)(i) of the Supreme Court Act 1935 (WA) – see Christmas Island Resort Pty Ltd v Geraldton Building Co Pty Ltd(No 5) (1997) 18 WAR 334, per Malcolm CJ at 340 – 343.
As I have noted, the authorities establish that the jurisdiction to grant a stay should only be exercised if, in addition to Mr Herskope's non‑payment of the interlocutory costs orders made against him, his conduct of the proceedings can be characterised as 'vexatious' within the meaning attributed to that word in this context. In Oceanic Sun Line Special Shipping Co Inc v Fay [1988] HCA 32; (1988) 165 CLR 197, Deane J used more contemporary language to describe the concept conveyed by the word 'vexatious', which he described as applying to conduct 'productive of serious and unjustified trouble and harassment' (at 247).
There is another sense in which the word 'vexatious' is sometimes used. That is to describe proceedings which are hopeless or untenable, irrespective of the motive of their proponent – see example, Attorney-General (NSW) v Wentworth (1988) 14 NSWLR 481, per Roden J (at 491). As I have indicated, Rubik relies upon its characterisation of Mr Herskope's counterclaim as 'vexatious' in this sense. However, as I have concluded that Mr Herskope's conduct of the proceedings is properly characterised as 'vexatious' within the meaning conveyed by Deane J in Oceanic Sun Line, for the reasons which follow, it is not necessary for me to express a view on this aspect of Rubik's submissions, nor is it appropriate, given that Mr Herskope might well satisfy the outstanding costs orders, with the result that any stay will be lifted and presumably the proceedings will proceed to be determined on their merits.

The history of the proceedings

It will be clear from the principles which I have just analysed that in order to resolve Rubik's application for a stay, it is necessary to carefully analyse the history of these proceedings, and to make an assessment of the circumstances in which the unsatisfied orders for costs were made against Mr Herskope, and of his general conduct of the proceedings in the context of that analysis. Those are the tasks which I will now undertake.
Rubik commenced these proceedings by a writ issued on 29 November 2006. Notwithstanding that Mr Herskope is a barrister carrying on practice from chambers in Melbourne, there were difficulties in effecting service and after a number of unsuccessful attempts at service, an order for substituted service was made on 29 March 2007.
A conditional appearance was entered on behalf of Mr Herskope on 27 April 2007. On 16 May 2007 a notice was filed advising that Mr Herskope had changed solicitors. On 22 May 2007, Mr Herskope applied for an order transferring the proceedings to the Supreme Court of Victoria, although no affidavit in support of that application was filed at the time the application was lodged. On 7 June 2007, Master Newnes (as his Honour then was) ordered that Mr Herskope file an affidavit disclosing the nature of his defence within 14 days.
Mr Herskope did not comply with that order within the time provided. By an affidavit sworn on 29 June 2007 and filed on 3 July 2007, approximately two weeks after the time for compliance with the Master's order had expired, Mr Herskope annexed a document described as a draft defence which commences by asserting that the statement of claim was frivolous, vexatious and embarrassing, and failed to disclose a cause of action against the defendant. Although the affidavit sworn by Mr Herskope foreshadows defences to the claim arising from misleading and deceptive conduct, no reference is made to those matters in the document entitled 'draft defence'.
On 19 July 2007, Rubik filed and served a substantial affidavit in opposition to Mr Herskope's application to transfer the proceedings to Victoria. The application for transfer was heard on 8 August 2007 and dismissed by Acting Master Chapman. He ordered that Mr Herskope pay Rubik's costs of the application including any reserved costs to be taxed. Those costs were taxed during January 2008, and allowed in the amount of $5,022.50. A certificate to that effect was issued by the court on 14 February 2008. This is the first costs order which Mr Herskope has not satisfied. It will be noted that it has been outstanding for more than six years. Mr Herskope has proffered no explanation for his failure to pay those costs.
On 7 September 2007, Rubik filed an amended statement of claim. On 24 September 2007 a case management conference was held before a registrar. Directions were made providing for Rubik to serve a minute of proposed further amended statement of claim, for Mr Herskope to respond to the proposed amendment, and in the event the amendments were agreed, for a further amended statement of claim to be filed and served by 19 October 2007, and for a defence and counterclaim to be filed and served by Mr Herskope by 29 October 2007.
Rubik filed a further amended statement of claim on 22 October 2007, three days later than required by the registrar's directions. Mr Herskope did not file his defence and counterclaim in accordance with the timetable ordered by the registrar either. No pleading had been filed by Mr Herskope when the matter came before another registrar for directions on 5 November 2007. Directions were made extending the time for service of Mr Herskope's defence and counterclaim until 19 November 2007.
Rubik was ordered to pay any costs thrown away by reason of the amendment of the statement of claim. Mr Herskope's costs were subsequently taxed and allowed in the amount of $1,401.68. Rubik has not paid those costs, although clearly they should be set off against the amounts due under the many costs orders in its favour.
By the amended statement of claim filed in October 2007, Rubik alleged that Mr Herskope borrowed $359,804 from Australian Agribusiness Finance Pty Ltd pursuant to a written agreement dated 26 March 2001. Rubik further alleged that Statewest Credit Society Ltd acquired the debt from Australian Agribusiness Finance Pty Ltd, and that notice of the assignment was given to Mr Herskope. Rubik further alleged that it provided a guarantee in favour of Statewest Credit Society Ltd in respect of Mr Herskope's repayment of the loan. Rubik alleged that as a result of Mr Herskope's default in repayment of that loan, it was required to satisfy the debt due to Statewest Credit Society Ltd pursuant to the guarantee it had given, and was thereby entitled to the benefit of the loan agreement, and to the lender's rights under that agreement.
On 16 November 2007, orders were made by consent pursuant to O 43 r 16 extending the time by which Mr Herskope was to file his defence and counterclaim until 27 November 2007. However, the pleading was not filed until 30 November 2007.
In the defence and counterclaim filed on 30 November 2007, Mr Herskope admitted entering into the loan agreement and asserted that it was part of a series of transactions by which he acquired an interest as a grower in certain olive groves. He asserted that certain representations were made in connection with the acquisition of that interest which were misleading and deceptive, and upon which he relied at the time of entering into the transaction and borrowing the moneys pursuant to the loan agreement. Statutory remedies were claimed pursuant to the Trade Practices Act1974 (Cth) and the Corporations Law (Cth), and in negligence. Mr Herskope asserted an entitlement to set off against the debt due under the loan, any damages to which he is entitled by reason of the remedies he claimed.
On 14 December 2007, Rubik filed its reply to Mr Herskope's defence, and its defence to his counterclaim, and on 16 January 2009, Rubik filed an amended version of that pleading. In essence, Rubik denied any misleading and deceptive conduct or misrepresentation.

At a status conference held on 11 February 2008, a registrar made further case management directions. Pursuant to those directions Mr Herskope was required to file and serve a rejoinder to the reply and defence to counterclaim by 25 February 2008, and the parties were required to give discovery on affidavit by 14 March 2008.
Mr Herskope had not filed his rejoinder to Rubik's reply, or his reply to Rubik's defence to his counterclaim when the matter was relisted for further directions on 14 April 2008. Rubik had, however, filed an affidavit of discovery on 11 April 2008. Directions were made extending the time by which Mr Herskope was to file his rejoinder until 18 April 2008, and extending the time by which he was to give discovery until 28 April 2008. Mr Herskope filed his rejoinder to Rubik's reply, and his reply to Rubik's defence to his counterclaim within the time directed, on 18 April, but three days later, on 21 April 2008, filed an amended rejoinder and reply to defence to counterclaim. On the same day he filed an affidavit of discovery.
At a case evaluation conference held on 26 May 2008, it was ordered that Mr Herskope file and serve any application for further and better discovery by 13 June 2008. However, on that date, by consent, orders were made extending that time until 23 June 2008. On that date, another order was made by consent extending the time for Mr Herskope's compliance with the order made on 26 May 2008 until 10 July 2008. However, no application for further and better discovery was made by Mr Herskope and on 14 July 2008, the case evaluation conference was adjourned indefinitely.
On 24 October 2008, Rubik issued a chamber summons seeking leave to issue a subpoena duces tecum. Leave to issue the subpoena was granted on 6 November 2008. However, it seems that service of the subpoena could not be effected.
On 24 December 2008, Rubik filed an affidavit of further and better discovery.
On 16 March 2009 a case evaluation conference was held. However, it was adjourned until 20 April 2009. Shortly before that conference was due to be held, Mr Herskope gave notice of change of solicitor and it seems the conference did not proceed.
On 25 May 2009, case management directions were made requiring Rubik to file and serve an amended writ of summons and statement of claim reflecting its change of name, and further requiring Mr Herskope to file and serve any application for leave to amend his defence not later than 4 July 2009.
On 4 June 2009, Rubik filed an amended writ of summons and reamended statement of claim, reflecting not only its change of name but also introducing a number of pleas with respect to the means by which it acquired the debt owed by Mr Herskope to Statewest Credit Society Ltd. Mr Herskope did not file an amended defence and counterclaim within the time directed, although it seems from a case evaluation checklist prepared by the parties following conferral on 29 July 2009, that during July 2009 Rubik indicated that it proposed to further amend its statement of claim. However, perhaps curiously, at a case evaluation conference held on 3 August 2009, a registrar directed that the plaintiff enter the matter for trial by 5 October 2009.
On 2 October 2009 Rubik applied for leave to issue subpoenas returnable prior to trial, and such leave was granted. On 14 October 2009 Rubik applied for leave to file a further reamended statement of claim. On 27 October 2009 that leave was granted and Mr Herskope was directed to file and serve an amended defence by 10 November 2009. It was further directed that the time within which the matter was to be entered for trial was to be extended until 20 November 2009.
Mr Herskope did not comply with the direction requiring him to file and serve an amended defence by 10 November 2009. However, on 3 December 2009 the parties filed a memorandum of consent to an order granting Mr Herskope leave to file an amended defence and counterclaim. The thrust of the assertions made by Mr Herskope in his amended pleading were unaltered.
On 9 December 2009 Rubik entered the matter for trial.
On 22 March 2010 Rubik filed a supplementary affidavit of discovery. On 21 May 2010, Rubik filed an affidavit advising of the unavailable dates of counsel, in anticipation of a listing conference which was to be held on 26 May 2010.
On 24 May 2010, the solicitor representing Mr Herskope filed an affidavit in which he deposed to the fact that as a result of Mr Herskope's commitments as a barrister, and his overseas travel arrangements, he would not be available for a trial within the timeframe indicated by the court. The affidavit also asserts:
My client also informs me that he now has issues about the other side's discovery and he thinks we may need to seek third party discovery and possibly may need to retain an expert as well. In the circumstances I don't believe the matter is ready to proceed.
I digress to observe that these assertions are cast in the most general terms. They were made almost six months after the matter had been entered for trial by Rubik, and on the eve of a listing conference. No application was made by Mr Herskope to countermand the entry for trial either within the time limited by O 33 r 9 or at all.
Prior to the listing conference, Rubik's solicitor filed an affidavit deposing to difficulties experienced in attempting to communicate with Mr Herskope's solicitor. Those difficulties included four unsuccessful attempts to speak by telephone in order to confer with respect to trial directions. At the listing conference various directions were made in order to prepare the matter for trial. Those directions included the specification of times by which the parties were to request any further and better or particular discovery and the time by which Mr Herskope was to serve a statement of expert evidence upon which he proposed to rely. A timetable was also provided for amendments to the pleadings, the preparation of a trial bundle and the exchange of statements of the evidence to be adduced from non‑expert witnesses.
Mr Herskope did not make any request or application for further and better or particular discovery within the time limited in directions made by the court. However, five days after that time had expired, Rubik made an application for further and better discovery from Mr Herskope. In an affidavit in support of that application, and justifying the delay in bringing the application, Rubik's solicitor deposed to the making of a request for further and better discovery by letter to Mr Herskope's solicitor dated 9 June 2010. Despite further correspondence and a number of telephone calls, no response was received from Mr Herskope's solicitor within the time limited by the court for the making of an application for further and better discovery. However, the day after that time expired, Mr Herskope's solicitor advised, in the course of a telephone conversation with Rubik's solicitor that he had not received instructions from Mr Herskope.
On 3 August 2010, the Acting Master made the order for further and better discovery sought by Rubik, and ordered Mr Herskope to pay Rubik's costs of the application fixed at $700. That is the second costs order which Mr Herskope has failed to satisfy without explanation.
Mr Herskope failed to comply with the order for further and better discovery. He also failed to comply with the orders made by the court with respect to the service of expert evidence upon which he proposed to rely at trial. By chamber summons dated 14 October 2010, Rubik applied for orders compelling the provision of the further and better discovery previously ordered, and for an order that if Mr Herskope failed to provide the expert evidence upon which he proposed to rely at trial within 14 days, his defence and counterclaim be struck out. In an affidavit filed in support of that application, Rubik's solicitor deposed to a sequence of correspondence and oral communication with Mr Herskope's solicitor. After several unsuccessful attempts to obtain a substantive response from Mr Herskope's solicitor, on 22 September 2010, Mr Herskope's solicitor sent a letter to Rubik's solicitor advising that:
We are taking instructions from our client at the moment and will be making every attempt to comply with the court's directions. There is no need to bring application for a springing order. We will write to you again later this week advising exactly when the order will be complied with. We suggest you take no action until then. We will refer to this letter on the question of costs in the event that the application is brought prematurely.
I digress to observe that this letter was written more than one month after the time fixed by the court for the provision of further and better discovery had expired, and three weeks after the time fixed by the court for Mr Herskope to serve a statement of the expert evidence upon which he proposed to rely at trial had expired.
Mr Herskope's solicitor did not write again within the week, as foreshadowed. By letter dated 8 October 2010, Rubik's solicitors wrote again to Mr Herskope's solicitor, recording a number of unsuccessful attempts to communicate by telephone and advising that unless a substantive response was received by 11 October, application would be made for a springing order.
On 11 October 2010, Mr Herskope's solicitor wrote to Rubik's solicitor advising that:
Our client instructs us that there are no documents answering the description of those ordered to be discovered in his possession, custody or power. We will file an affidavit confirming this.
In another letter sent on the same day, Mr Herskope's solicitor wrote to:
… inquire whether your client's expert evidence is any closer to finalisation. Our clients [sic] are anxious to resolve this matter. Please advise by the close of business this week whether that looks like a likely possibility following which we will make some recommendations to our clients in terms of issuing proceedings.
Rubik's solicitors responded to that letter in these terms:
Your letter regarding expert evidence is nothing short of astonishing. The expert evidence was proposed by you in relation to your client's counterclaim.
Those observations were justified. There is a clear inference available, which I draw, to the effect that the inquiry made in relation to the provision of Rubik's expert evidence was an attempt to obscure Mr Herskope's continuing failure to comply with the directions of the court.
On 25 October 2010, Mr Herskope filed an affidavit in which he deposed that he did not have any documents in his possession, custody or control answering the description in the orders of the court with respect to further and better discovery. On the same day his solicitor filed an affidavit annexing a document which was described as 'substance of expert evidence to be adduced at the trial by the defendant'. However, the document was nothing of the kind. It did not identify any expert whose evidence was to be adduced at trial and merely repeated the allegations of fact made in the defence and counterclaim. There is a clear inference available, which I draw, to the effect that this was another attempt to obscure Mr Herskope's continuing failure to comply with the order of the court with respect to the provision of the expert evidence upon which he proposed to rely.
On 26 October 2010, the Master ordered that unless Mr Herskope provided the statement of expert evidence upon which he proposed to rely at trial, his defence and counterclaim would be struck out and judgment entered for the plaintiff in the amount claimed. The Master also ordered Mr Herskope to pay Rubik's costs on 'a full indemnity basis such costs to be taxed and paid forthwith'.
On 5 November 2010, Mr Herskope lodged a notice of appeal from the orders of the Master. On 8 November 2010, he applied for a stay of those orders. On 9 November 2010, the Master granted a stay until 24 November 2010. On 23 November 2010, the Master extended the stay until 4 pm on 1 December 2010. On 25 November 2010, the Master published reasons for his decision – see Rubik Financial Ltd v Herskope [2010] WASC 343. Those reasons recount the sorry history of Mr Herskope's failure to comply with the orders of the court with respect to the provision of the expert evidence upon which he proposed to rely and his conspicuous failure to proffer any explanation for that failure.
The Master explained his reasons for making the springing order in these terms:
In my view, there was ample justification for the making of a springing order. Essentially, I reached that conclusion for two reasons. First, orders of the court cannot be simply ignored. Whether that is expressed to be [a] manifestation of case management or whether it is a requirement more broadly of the system of justice is not to the point. All the indications were, in this case, [that] the court's orders had been ignored. The defendant, by his inaction, had compromised his right to take advantage of the court system.
Secondly, and compounding the defendant's failure to comply with orders, was the cavalier disregard the defendant or his solicitors had shown for those orders. The defendant had undertaken to provide to the plaintiff's solicitors by mid-June some details about the nature of the expert evidence. There was no order to that effect, but an undertaking such as that should be honoured. If it is not honoured, there should be some explanation as to why it is not honoured. Again, leaving to one side professional courtesy, honouring such undertakings allows the system to work effectively. A failure to honour such undertakings undermines the co-operation between solicitors which is essential if cases are to be handled expeditiously. Moreover, at no stage had there been any attempt to explain why the expert evidence had not been provided. No attempt was made in the correspondence to offer an explanation; nothing was put on affidavit in response to the plaintiff's chamber summons. Rather, what was filed was a late affidavit which was of no assistance whatever. Finally, there was the document purporting to comply with the expert evidence order. It is not worth dignifying that document with even a superficial analysis of its failings. It should never have been sent to the plaintiff's solicitors and it should certainly not have been put before the court [20] – [21].
In relation to the application for a stay of the springing order, the Master referred to a further affidavit of Mr Herskope's solicitor in which he stated:
I confirm that I have made inquiries and continue to make inquiries of potential expert witnesses including accounting and financial experts who have experience in operating tax effective schemes and who will be able to give evidence in relation to the allegations contained in paragraphs 15 and 21 of the Defendant's Amended Defence and Counterclaim, in particular the reasonableness of the representations made in the prospectus in terms of projected rates of return on investment [23].
The Master's reasons for granting a limited stay appear from the following:
It is apparent, then, that as at 26 May 2010, when Le Miere J made the order for the provision of expert evidence, the defendant had not engaged an expert. Indeed, an expert still has not been engaged. The affidavit does not identify any individuals to whom Mr Galic has spoken and gives no evidence of what time frame might be necessary to obtain the evidence. In other words, on the issue of expert evidence, the matter is no further forward than it was on 28 May last.
Furthermore, and of concern is the fact Mr Galic still persists with the notion that the purported substance of expert evidence is a document served in compliance with his Honour's orders. As I have indicated, there is nothing in the various affidavits sworn by Mr Galic to identify who any expert might be and when a report might be produced. But based upon the notice that was served on the plaintiff's solicitors, I had assumed some form of evidence had been obtained, but was not yet in a form which could be sent to the plaintiff's solicitors. In fact, the notice that was given to the plaintiff's solicitors was entirely misleading.
At no stage in this matter has either of the two counsel who have represented the defendant at the various hearings submitted the case should proceed on the basis the defendant will not seek to rely on any expert evidence. The submissions that have been put seem to accept the defendant's defence requires expert evidence to succeed. I say 'seem to suggest' because the issue has not been squarely addressed. Counsel for the plaintiff submitted, when arguing for the springing order, the defendant's case was dependent on expert evidence. That proposition has never been challenged by counsel for the defendant. It is worthy of note the application for the extension of the stay of the operation of the springing orders (if that is the correct way to characterise the application that was made) was so the defendant could obtain expert evidence.
In my view, the circumstances of this case did not justify an extension of any stay through until the end of January. By consent, I did grant a stay until 1 December 2010 to allow the defendant to take the matter before the Court of Appeal. I ordered that the defendant should be responsible for the plaintiff's costs of the hearing on 9 and 23 November 2010, fixed in an amount of $1,500 [24] – [27].
The order that Mr Herskope pay Rubik's costs in an amount of $1,500 is the third order for costs which Mr Herskope has failed to satisfy, without explanation.
Under the rules, Mr Herskope's case in support of his appeal was due to be filed by 12 November 2010. As the Master's reasons were not published until 25 November 2010, it seems likely that an application for an extension of time would have been granted if sought. However, it was not sought.
By letter dated 20 December 2010, Rubik's solicitors advised Mr Herskope's solicitor that Rubik was prepared to allow Mr Herskope until 14 February 2011 to produce a statement of the expert evidence upon which he proposed to rely at trial, and that Rubik would not enforce the springing order in any event. Two days later Rubik's solicitors wrote again to Mr Herskope's solicitor advising that in its view, the appeal was 'an inefficient and futile distraction', again advising that the springing order would not be enforced, and inviting Mr Herskope to discontinue the appeal.
In response to a query from the registrar of the Court of Appeal, on 8 February 2011 Mr Herskope's solicitor wrote to the court advising:
Our client has instructed us to pursue the appeal. Counsel will be settling the appellant's case documents with a view to filing them as quickly as possible.
Later that day Mr Herskope's solicitor wrote again to the registrar of the Court of Appeal. In this letter it was asserted that:
Since sending the letter we have received advice through counsel this morning that the respondent does not intend to enforce the springing order the subject of these appeal proceedings.
This letter conveyed the false impression that Rubik had changed its position with respect to the enforcement of the springing order during the course of the day. The solicitor advancing that assertion had received letters from Rubik's solicitors dated 20 December 2010 and 22 December 2010 in which it was stated, clearly and unequivocally, that Rubik would not enforce the springing order.
On 1 March 2011, orders were made by consent granting Mr Herskope leave to discontinue the appeal on the basis that each party bear their own costs of the appeal.
Still no statement of expert evidence was supplied by Mr Herskope. On 3 June 2011, Rubik's solicitors wrote to Mr Herskope's solicitor requesting that such a statement be provided immediately. Mr Herskope's solicitor did not reply to that letter.

As the matter remained entered for trial, a listing conference was scheduled before me on 9 December 2011. In anticipation of that conference, Rubik's solicitors wrote again, on 6 December 2011, requesting a response to the letter of 3 June 2011.
Mr Herskope's solicitor filed an affidavit on 7 December 2011 in which he deposed that Mr Herskope had instructed him that:
He wishes to reserve his rights in respect to adducing expert evidence and has instructed me to seek an order allowing him to adduce any expert evidence by the end of March 2012; …
and
He is available from mid June 2012 onwards and has a trial himself commencing on 2 July 2012.
When the matter came before me it was clearly unready for trial. I directed that the matter be entered into the CMC list to be managed by me, and further directed that Mr Herskope file and serve the substance of any expert evidence which he wished to adduce at trial not later 30 March 2012. I ordered that the matter be relisted for further directions before me on 2 April 2012.
On 28 March 2012 Rubik filed a notice requiring Mr Herskope to admit certain facts essentially relating to the authenticity of documents.
When the matter came before me on 2 April 2012 I was advised by Mr Herskope's legal representative that he had been unable to obtain instructions. Mr Herskope had still not served any statement of the expert evidence upon which he proposed to rely, and which had been such a significant source of delay, and no explanation was proffered for that failure. I ordered Mr Herskope to respond to the notice to admit facts not later than 27 April 2012 and further ordered that the matter be relisted on 3 May 2012. I fixed Rubik's costs of the hearing at $500, and ordered Mr Herskope to pay those costs forthwith. This is the fourth costs order which Mr Herskope has failed to satisfy, without explanation.
Mr Herskope did not respond to the notice to admit facts within the time which I directed, although he did respond on 2 May 2012. On the same day, Rubik filed and served requests for further and better particulars of Mr Herskope's amended defence and counterclaim, and of his amended rejoinder and reply to defence and counterclaim. On 3 May 2012 I directed that Mr Herskope respond to those requests by 5 June 2012, and that he file and serve statements of the evidence‑in‑chief of each witness he proposed to call at trial by 2 July 2012. The matter was relisted for further directions on 4 July 2012.
Mr Herskope did not comply with the directions which I made. On 3 July 2012 Rubik filed a chamber summons for orders striking out the amended defence and counterclaim. Later that day Mr Herskope filed a statement of the evidence which he proposed to give at trial, answers to the request for further and better particulars of amended defence and counterclaim, and a request for particulars of Rubik's amended reply and defence to counterclaim. No answers were provided to Rubik's request for particulars of his amended rejoinder and reply to defence to counterclaim.
During the directions hearing on 4 July 2012 I expressed exasperation at Mr Herskope's continued failure to comply with the orders of the court. Having regard to his occupation as a barrister, I described 'his continuing programme of contempt for the orders of this court' as 'extraordinary'. Although those observations were made in a moment of exasperation, having again carefully reviewed Mr Herskope's conduct in relation to these proceedings, I consider those observations to have been justified.
Counsel for Rubik advised me that as a result of only receiving the documents provided by Mr Herskope the day before the directions hearing, it had not been possible to provide considered advice, or to take instructions, on the question of whether Rubik's application for judgment should be maintained. Accordingly, I made directions on the basis that the application would be maintained and adjourned the matter for further directions on 8 August 2012. I ordered Mr Herskope to pay Rubik's costs of the hearing on 3 May 2012 and of the application to enter judgment up to the date of that hearing, and fixed both costs in an amount of $800. That is the fifth costs order which Mr Herskope has failed to satisfy without explanation.
Mr Herskope provided an answer to Rubik's request for further and better particulars of his amended rejoinder to reply and the reply to the defence to counterclaim on 9 July 2012. In the result, Rubik chose not to proceed with its application for judgment, and on 8 August 2012 I made a number of case management directions, largely in accordance with a minute provided by Rubik, which were intended to move the matter forward to trial. Those directions included orders requiring Rubik to file and serve statements of the witnesses it proposed to call at trial. The matter was listed for further directions on 31 October 2012.
Rubik provided a response to Mr Herskope's request for particulars, but did not serve witness statements in accordance with the directions which I made. Prior to the next directions hearing, the parties filed a memorandum of consent orders generally extending the date for compliance with the case management directions which I had previously made, including an order extending the time by which Rubik was to file and serve its witness statements until 27 February 2013. The matter was listed for further directions before me in April 2013.
In the meantime, Rubik lodged its bill of costs for taxation pursuant to the order for indemnity costs made by Master Sanderson in October 2010. An appointment to tax those costs before a registrar of the court was fixed for 8 August 2012. Rubik was represented at that appointment by counsel with special expertise in the area of costs. There was no appearance on behalf of Mr Herskope. An order was made requiring Mr Herskope to file and serve within 21 days a schedule setting out the items in Rubik's bill of costs to which objection was taken, the grounds of objection, and any amount offered in respect of that item. The registrar further directed that Mr Herskope pay Rubik's costs of the appointment fixed in the amount of $415. That is the sixth costs order which Mr Herskope has failed to satisfy without explanation.
Another appointment for taxation of those costs was fixed for 6 December 2012. Mr Herskope had not complied with the order requiring him to file a document identifying the items to which he objected, and the grounds of his objection. Nevertheless, his legal representative appeared and endeavoured to present objections of which no notice had been given. Mr Herskope was ordered to file and serve a document particularising his objections by 17 December 2012. No objections were filed or served on behalf of Mr Herskope by that date, and on 18 December 2012 the taxing officer signed the allocatur fixing the costs payable by Mr Herskope to Rubik in respect of the orders of Master Sanderson in the amount of $12,689.50. This is the seventh costs order which Mr Herskope has failed to satisfy without explanation.
On 19 December 2012, two days after the time fixed by direction of the court and one day after the allocatur had been signed, objections to Rubik's bill of costs were filed on behalf of Mr Herskope. The taxing officer wrote to Mr Herskope's solicitor advising that the taxation process had been completed by the execution of the allocatur and that the late objections would not be considered.
On 14 January 2013 Rubik's solicitors wrote to Mr Herskope's solicitor demanding satisfaction of the outstanding costs orders by 21 January 2013. On 23 January 2013 Mr Herskope's solicitor sent an email to Rubik's solicitors advising that 'we are still taking instructions from our client and we will contact you within the next 10 days to advise the position'. However, no substantive response was ever provided to Rubik's solicitors' request.
On 5 March 2013, Rubik issued a bankruptcy notice against Mr Herskope in respect of the debts due pursuant to the unsatisfied costs orders made by the court. However, on 26 March 2013 that notice was withdrawn. That action was taken having regard to the provisions of the Bankruptcy Act1966 (Cth) with respect to Mr Herskope's claim to set off any liability to Rubik against the entitlement to damages which he claims by his counterclaim.
The matter came before me for further directions on 18 April 2013. Rubik had still not prepared statements of the evidence upon which it proposed to rely at trial. I generally revised the case management directions which I had previously made, again with a view to the matter moving forward to trial.
Amongst those directions was a direction that Rubik file and serve statements of the evidence upon which it proposed to rely at trial by 1 July 2013. However, before that date arrived, Rubik issued a chamber summons claiming a stay of proceedings until the outstanding costs orders in its favour are satisfied and seeking security for its costs of defending Mr Herskope's counterclaim. The application for security for costs has not been pursued, but Rubik presses its claim for a stay of Mr Herskope's counterclaim on the basis of his failure to satisfy the various costs orders made in its favour. In support of that application Rubik relies upon an affidavit of its solicitor in which he deposes to his unsuccessful attempts to communicate with Mr Herskope's solicitor in relation to Rubik's application for a stay on a number of occasions prior to the issue of that application.
In light of Rubik's application, on 26 June 2013 I suspended the operation of the various case management directions which I had made with a view to programming the matter to trial, and made directions programming Rubik's application for a stay of the counterclaim for hearing. Following that hearing, I made further directions for the exchange of documents relating to issues raised during the course of the hearing, and reserved my decision.

Summary and conclusion

It is clear from this most regrettable litany that these proceedings have been conducted in a manner which is as far removed as one would ever wish to see from the contemporary approach to the conduct of litigation which the court encourages parties to adopt. Neither party is entirely blameless in this respect, and the court must itself accept some responsibility for not managing these proceedings with greater resolve. However, it is clear that Mr Herskope's conduct of these proceedings has been characterised by prevarication and default which has extended over many years. Mr Herskope's repeated failure to comply with orders made by the court or to communicate his position to Rubik's solicitors in a way which would facilitate the orderly and efficient conduct of these proceedings has resulted in many years' delay and many interlocutory steps which would not otherwise have been necessary. It is in that context that his failure to satisfy the various costs orders to which I have referred must be viewed.
On behalf of Mr Herskope it is submitted that no special standard of behaviour in relation to the conduct of these proceedings should be expected of him merely because he is an officer of the court (he having been admitted to practice in Western Australia some years ago). However, irrespective of whether or not some higher standard might reasonably be expected from Mr Herskope as an officer of the court, it is clear that his continued prevarication and default cannot be explained by ignorance of the court's requirements or procedures, or of the standards of conduct which the court requires from litigants.
It is neither necessary nor profitable to speculate with respect to Mr Herskope's motives or purpose in conducting the proceedings in the manner in which they have been conducted. It is sufficient to conclude that, whatever his motive or purpose, the effect of his continued prevarication and default has been to unnecessarily protract these proceedings and to expose Rubik to significantly increased cost. In my view it is entirely appropriate to characterise the effect of the manner in which he has conducted these proceedings over many years as being 'productive of serious and unjustified trouble and harassment' (in the words of Deane J in Oceanic Sun Line v Fay). In more quaint terminology, the manner in which he has conducted these proceedings can readily be described as 'vexatious'.
In these circumstances the court's jurisdiction to grant a stay of Mr Herskope's counterclaim as a result of his failure to satisfy the various costs orders which have been made against him is enlivened, consistently with the principles and authorities to which I referred at the outset of these reasons. A question then arises as to the form of order which will best achieve justice between the parties in the particular circumstances of this case.
It would be possible to order that Mr Herskope's counterclaim be stayed unless and until he satisfies the outstanding costs orders. However, the difficulty with that form of order is that it would leave the future conduct of these proceedings uncertain. In particular, there is a very real risk that an order in those terms would result in the proceedings being prepared for trial on one basis and then having to be again prepared for trial on a different basis if, at the last minute, Mr Herskope were to satisfy the outstanding costs orders.
Given Mr Herskope's manifest propensity for prevarication and default, and the need to bring these proceedings to resolution without further protracted delay, it seems to me that the order which will best achieve justice as between the parties is an order to the effect that Mr Herskope's counterclaim will be stayed permanently, and any defence by way of set off arising from the matters asserted in the counterclaim will be dismissed, unless Mr Herskope satisfies the outstanding costs orders in favour of Rubik within 21 days of publication of these reasons. For the avoidance of doubt, I should make it clear, as I have earlier noted, that Mr Herskope can satisfy part of the costs orders which have been made against him by setting off the amount due under the one cost order which has been made in his favour.
I will invite submissions from the parties as to the precise form of orders which will best give effect to these reasons.