Stoland Pty Limited v Peter James Thurn
[1997] FCA 557
•12 June 1997
CATCHWORDS
Practice and Procedure ‑ motion for leave to re‑open ‑ whether applicant permitted to re‑open case in the circumstance of its simple failure at the hearing to make out its case ‑ principles applicable ‑ justice ‑ justice between the parties ‑ whether on balance it is in the interests of justice to grant leave to re‑open where the applicant was to blame for the failure to make out its case, the respondent will suffer prejudice from delay, this prejudice exacerbated by the fact that the matters giving rise to the claim could result in criminal as well as civil liability but where the applicant, on the evidence, would appear to have a reasonable prospect of being able to make at a case.
Urban Transport Authority of New South Wales v Nweiser (1991) 28 NSWLR 471
State of Queensland v J L Holdings Pty Ltd (1997) 141 ALR 353
House v R (1936) 55 CLR 499
STOLAND PTY LIMITED v PETER JAMES THURN & ANOR
No. NG 3164 of 1994
CORAM: Lehane J
PLACE: Sydney
DATE: 12 June 1997
IN THE FEDERAL COURT OF AUSTRALIA )
NEW SOUTH WALES DISTRICT REGISTRY ) No. NG 3164 of 1994
GENERAL DIVISION )
BETWEEN: STOLAND PTY LIMITED
Applicant
AND: PETER JAMES THURN
First Respondent
WILLIAM GARY QUICK
Second Respondent
CORAM: Lehane J
PLACE: Sydney
DATE: 12 June 1997
MINUTE OF ORDERS
THE COURT ORDERS THAT:
The applicant is granted leave to re‑open the applicant’s case.
The applicant is to pay costs, on the indemnity basis, of the proceedings from and including the 22 August 1996 to the conclusion of today’s proceedings.
NOTE:Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.
IN THE FEDERAL COURT OF AUSTRALIA )
NEW SOUTH WALES DISTRICT REGISTRY ) No. NG 3164 of 1994
GENERAL DIVISION )
BETWEEN: STOLAND PTY LIMITED
Applicant
AND: PETER JAMES THURN
First Respondent
WILLIAM GARY QUICK
Second Respondent
CORAM: Lehane J
PLACE: Sydney
DATE: 12 June 1997
EXTEMPORE REASONS FOR JUDGMENT
LEHANE J:
This is a motion of the applicant by which it seeks leave to open its case. The circumstances are both extremely unfortunate and, I believe, fortunately, unusual.
The proceedings were commenced by an application filed on 3 May, 1994 by which the applicant sought relief under s 592 of the Corporations Law against two respondents under s 592. The principal relief sought was that each of the respondents pay to the applicant the sum of $241,250. The claim was of course made on the footing that the amount claimed represented indebtedness incurred by Cazihaven Homes Pty Ltd a company in liquidation of which the respondents were directors, at a time when it was said, there were reasonable grounds to expect that the Company would not be able to pay its debts; that is to describe the claim briefly, perhaps not with complete precision but I think sufficiently for present purposes.
The first respondent has for some time played no significant part in these proceedings. He is bankrupt, and leave to proceed against him has not been sought.
In accordance with its practice, the court made directions for conduct of the proceeding including directions as to the filing of pleadings and affidavit evidence. The matter has been set down for hearing on no less than three occasions already. On the first occasion the dates set down were vacated on the application of the second respondent, in circumstances where the court was satisfied that the second respondent was at fault and the order vacating the dates was made subject to a condition that the second respondent pay on the indemnity basis the costs of the applicant thrown away and that the applicant should be at liberty forthwith to tax and then to recover the amount of those costs.
On the second occasion, on 22 August 1996, the matter was set down for hearing before me. Before the trial had proceeded any great distance it became evident that material which the applicant required, and needed to tender in order to establish the factual foundation of certain expert evidence on which it sought to rely, was unavailable. The documents concerned simply had, for some reason, been temporarily mislaid. The applicant sought an adjournment which the second respondent opposed. I considered, in a brief extempore judgment, what seemed to me the relevant issues relating to the balance of prejudice and the interests of justice and I granted the adjournment sought. I listed the matter for hearing on 28 October 1996, and I ordered that costs be reserved.
On 28 October 1996 the matter was again before the court for trial. On that occasion there were in court a large number of boxes of documents. Those documents apparently related to the affairs of the Company. It was suggested that among the documents was the material required in order to make good the factual basis of the expert evidence which the applicant sought to lead.
Unfortunately, when the expert came to give evidence it quickly became apparent that there was difficulty in identifying, even in the most general way, the particular documents required to make good the factual basis of his evidence. Although the applicant was granted an adjournment so that the expert could identify the documents, the documents were not found and, as a result the applicant was simply not in a position to make out an essential element in its claim, namely, the insolvency of the Company.
In those circumstances the applicant made two successive applications, the first for an adjournment, the second for leave to discontinue, both of which were opposed by the respondent and refused. Copies of the judgments which I then delivered are not in court and those judgments have probably not been transcribed. The view I took was, however, that the applicant and those representing it had been clearly aware since 22 August of what was required in order to make out its claim. Equally, they had been well aware at least since that date that the second respondent was likely to take, a reasonably strict attitude to the way in which the applicant should prove its case. I say that without the slightest hint of criticism. The second respondent was perfectly entitled to require the applicant to prove its case, and particularly to require that the applicant establish a proper factual foundation for any expert evidence which it sought to tender.
Knowing those things the applicant, it can only be said, simply failed on 28 October to prove that which it was required to prove. In deciding as I did, having heard what took place on that day, I took into account, first, that it seemed highly unlikely that the applicant would be able within any reasonable time to get its house in order and, secondly, that the second respondent, despite its initial default giving rise to the vacation of the first of the three hearing dates, had been brought to court on two occasions for a hearing of the matter on each of which the applicant had failed, through lack of appropriate evidence, to make out its case.
Immediately after I delivered the second of my two judgments on 28 October, that relating to the application for leave to discontinue, the applicant’s counsel announced that he had closed his case and the second respondent offered no evidence. A timetable was then fixed for the filing of written submissions. No written submissions were forthcoming from the applicant; submissions were, however, filed by the second respondent. The recitation of the circumstances can be completed by recounting that, following those events, the applicant retained other solicitors and counsel, those by whom it is now represented. The applicant now moves, as I have said, to reopen its case.
I have been referred this morning to two of the leading authorities on the principles which apply to an application of this sort and to applications of an analogous character. The authorities are Urban Transport Authority of New South Wales v Nweiser (1991) 28 NSWLR 471 and the decision of the High Court in State of Queensland v J L Holdings Pty Ltd (1997) 141 ALR 353. It is perfectly plain that I am required to have regard generally to the interests of justice; and justice in the context is, at least principally, justice as between the parties; but I should have regard also, though perhaps as subsidiary issues, to matters such as the state of court lists and the effect that an order may have on the legitimate claims of parties to other proceedings to have their matters expeditiously dealt with by the court.
There are some particular considerations of justice which it must be said weigh quite strongly against the present motion. The first, and most obvious, is that the applicant has simply failed, on two occasions, to make out its case. The second is that there is clear prejudice to the second respondent arising from further postponement of the matter, particularly in circumstances where no fault can be attributed to him. This prejudice is exacerbated by the fact that matters giving rise to a claim under s 592 can result in criminal as well as civil liability. In State of Queensland case, Kirby J (at 369) identifies as considerations tending against the grant of an indulgence, matters such as those to which I have just referred. His Honour also includes among such considerations, the failure of a party seeking it to offer anything by way of explanation for delay, blamelessness of the resisting party and the extent to which the applicant is at fault in its breach of clear directions. The fault in this case, of course, is not a breach of clear directions but the principle is exactly the same. It is also true, I think, that there must be a significant difference between an application to re-open made at this stage, and one, with which courts are rather more familiar, made at a late stage during the hearing itself.
As against those rather powerful considerations, what is the case which the applicant makes? The evidence before me on the motion is an affidavit sworn on 14 March (and I understand served on that day in accordance with directions which I previously gave) of Martin Madden, a partner in the firm of Arthur Andersen and a registered and official liquidator. Counsel for the second respondent conceded that Mr Madden is qualified, as clearly he is, to give expert evidence of the kind which would be required in these proceedings.
To Mr Madden's affidavit, there is annexed what may be described as a preliminary report. The preliminary report is certainly not itself evidence of the kind which would at a hearing be required to prove the insolvency of the company at the relevant dates. However, it states the result of what Mr Madden describes as his initial review of the Company's records; and the conclusion which he reaches as a result of that initial review, is that the Company was insolvent on 29 February 1992 and possibly earlier.
Mr Madden identifies additional work required: first the preparation and detailed analysis of financial statements at 30 September 1991 and 31 December 1991; secondly, a detailed review of the company's financial statements at 30 June 1992; and thirdly, the preparation and detailed analysis of financial statements at 30 September 1992, 31 December 1992 and 31 March 1993. In other words, as Mr Newlinds appearing for the applicant put it, there would necessarily be involved a significant amount of writing up, or re‑writing of the Company's records.
I think I should conclude from Mr Madden's preliminary evidence that there is a real possibility that work of the kind which he describes could be done and would establish, in whole or in part, the correctness of Mr Madden's preliminary conclusion. I emphasise that I am speaking of reasonable possibility, not any particular degree of likelihood. That, of course, will be, if the matter proceeds, something which can only be considered at a later stage and with more complete evidence.
In that circumstance, the consideration weighing in the balance in favour of the applicant is a very simple one. It is that, despite all that has happened, there is apparently a reasonable prospect that the applicant may be able to make out a case. If the second respondent is liable, to put the matter another way, prejudice amounting to injustice will be suffered by the applicant if it is not given the opportunity to make out its case. The court will not lightly make an order the effect of which is to preclude an applicant from making a case which is open to it.
As subsidiary matters, it may be said that if the matter has an unfortunate history, that history is not to be attributed solely to the applicant. The original vacation was clearly, it appears, the fault of the second respondent, and blame for the second vacation cannot be attributed to either party.
Precisely who, on the applicant's side, was ultimately to blame for what happened on 28 October is a matter on which I have heard no evidence and should refrain from expressing any firm view, beyond saying that I am unable to resist the impression that the respects in which the applicant failed were matters within the expertise of lawyers rather than lay people and that if, as turned out to be the case, the applicant and its advisers realised that the case could not be made, that was a matter that could and should have been addressed before the commencement of the hearing.
At all events, the matter attributable to the applicant’s default is principally that on the second occasion on which the matter came before me the applicant, having selected the way in which it chose to make its case, turned out not to be in a position to do so. On the other hand, on the material before me today, it appears that the case may be one which it is in fact able to make. That brings me to the balancing exercise that is required.
My view is that the applicant should, on conditions, be permitted one more chance to run this case. I think not too much weight should be given to the circumstance that the case commenced in 1994. It is, after all, only since the latter part of 1996 that things can be said to have gone wrong owing to the fault of the applicant. It is a serious matter to preclude an applicant from making a claim which, on the evidence before the Court, it appears that the applicant may be able to make.
It is possible to make an order which at least will compensate the second respondent substantially in monetary terms for the cost which he has incurred and which has been wasted. It is not possible to make an order which will have the effect of alleviating what Kirby J described, in State of Queensland at 369, as the "anxiety, distraction and disruption which litigation causes" and, particularly in the case of a claim such as that made here, is not to be regarded as a trivial matter. That matter should be recognised, at least to the extent of imposing a reasonably strict timetable in relation to the future conduct of the proceedings and by stating that the Court will expect the timetable to be adhered to and is unlikely to look with favour upon further applications by the applicant for indulgence in circumstances where the applicant is once again at fault. The considerations referred to by Kirby J are powerful and dictate that the matter must come to an end in the not too distant future.
In the result, I think it is appropriate to make order 1 as set out in the notice of motion. The applicant informed me, at the commencement of the hearing of the motion, that it would accept a condition that all costs of the second respondent wasted as a result of what has occurred, being particularly the costs of the proceedings on the two occasions before me and this morning, would be paid by the applicant. There was some discussion as to whether payment of costs should be ordered on the indemnity basis; counsel informed me that he had no instructions to offer that but would not oppose it.
It was common ground between the parties that it would probably make very little difference whether or not costs were ordered to be paid on that basis. I think, however, that it is appropriate that the orders should require the payment of costs by the applicant on the indemnity basis and I shall hear counsel as to the precise form of that order. The other matter on which I shall of course hear counsel is the matter of directions for the future conduct of these proceedings.
[Argument ensued as to costs].
HIS HONOUR: There are two remaining issues on the question of costs. The first is whether the order for costs in favour of the second respondent ought to include the costs which were reserved on 22 August 1996, that is, the costs of the hearing on that day. Mr Newlinds, for the applicant, says that those costs should remain reserved on the footing that it may turn out that a substantial part of the costs of that day at least are not thrown away and, if he were successful, might be dealt with otherwise than by an order that the applicant pay the costs of the second respondent.
I think it is relatively clear that the costs of that day were largely concerned, simply having regard to the time spent on the various aspects of the proceeding, with matters which led to the adjournment and, thus, to what happened on 28 October. The bulk of those costs I think must therefore be regarded as costs falling within the same category as those incurred on 28 October.
This is a matter in which in unusual circumstances the applicant has sought and obtained what must be regarded as an unusual and considerable indulgence. That being so, I think it is inappropriate for me to either continue to reserve the costs of 22 August or to attempt to apportion them. I think the appropriate order is that which Mr Johnson seeks, that the costs which the applicant must pay to the second respondent include those of 22 August.
The second issue is as to whether there should be an order for the taxation and payment forthwith of the costs which I have ordered the applicant to pay. The argument against that is based entirely on inconvenience and delay, and therefore prejudice to both parties, resulting from a taxation of those costs in what one might hope would be the short period intervening between now and a final determination of this matter.
But again, it seems to me that the inconvenience and prejudice is to a very large extent on the side of the second respondent. It is the second respondent who seeks the order and, given the history which I need not recount again, it seems to me appropriate that there be an order that those costs be taxed and paid forthwith.
[The second respondent sought leave to appeal].
HIS HONOUR: The second respondent seeks leave appeal from the interlocutory decision by which I granted leave to the applicant to re-open its case. There is no controversy about the tests to be applied in dealing with that application.
It is to be borne in mind first that the decision I have made is a discretionary one and is one of a kind to which the principle in House v R (1936) 55 CLR 499 is peculiarly applicable. It follows that except in a clear case an appellate court is reluctant to intervene and will refuse to do so unless it is satisfied that the decision was vitiated by a failure to take account of relevant matter or by taking account of irrelevant matter, or was simply so far outside the bounds of a permissible exercise of the discretion that it should not be allowed to stand.
I must accept of course that it is possible that a Full Court would come to such a conclusion. That must, I think, necessarily be accepted in circumstances such as this. It is, however, perhaps fair to observe that, although the parties have not yet had the opportunity to consider my judgment in written form, no particular error of principle has been brought to my attention. At all events, the fundamental point is that the judgment is a discretionary one and an application for leave to appeal must be considered having regard to difficulties attending an appeal from such a judgment.
Other matters really relate to the balance of convenience. It is undoubtedly true that if there were an appeal from my judgment, and if the appeal were successful, the proceeding would then be disposed of quickly and, it appears, without serious controversy. On the other hand, if the appeal were not to succeed then the consequence would be a loss of time cumulative upon the substantial losses of time that have already occurred, the incurring of additional cost that would not otherwise be incurred, and thus in the end further prejudice to both parties.
Additionally, two factors must be borne in mind. One is that the orders I have already proposed by way of further directions should have the matter ready for hearing probably at some time during August. It might be possible, and certainly I think every effort should be made to bring it about, that the matter would be heard shortly after it became ready for hearing. And I say that bearing in mind that the next sitting of the Full Court commences on 8 September.
The second factor is that, if leave is refused, the second respondent does not lose the opportunity to raise in the Full Court matters which could form the basis of its argument on the appeal from my interlocutory decision. In other words, were the applicant to succeed at trial and were the second respondent to appeal, then it would be open to the second respondent to put its case, at least as to one limb of it, on the basis that the applicant should not have been allowed to reopen and that if the applicant had not reopened the applicant must necessarily have failed.
Taking all those matters into account, and bearing in mind that appellate courts have on not a few occasions discouraged interlocutory appeals and have indeed on occasion seen fit to rescind orders granted by judges for leave to appeal against their own decisions, the correct course, I believe, is to refuse leave to appeal and I so order.
I certify that this and the preceding 12 pages are a true copy of the Reasons for Judgment of the Honourable Justice Lehane.
Associate:
Dated:12 June 1997
Heard: 12 June 1997
Place: Sydney
Decision:12 June 1997
Appearances: Mr C R C Newlinds of counsel instructed by Kemp Strang & Chippindall appeared for the applicant
Mr J T Johnson of counsel instructed by Ward Maxwell & Co appeared for the second respondent.
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