Tela Pty Ltd v State Bank

[2001] NSWSC 327

CITATION:	Tela Pty Ltd v State Bank [2001] NSWSC 327
CURRENT JURISDICTION:	Equity Division
FILE NUMBER(S):	SC 2573 of 1997
HEARING DATE(S):	19 April 2001
JUDGMENT DATE:	19 April 2001
PARTIES :	Tela Pty Limited (Plaintiff/Appellant) State Bank of New South Wales (First Defendant/First Respondent) Nicholas George Cassim (Second Defendant/Second Respondent)
JUDGMENT OF:	Windeyer J at 1

LOWER COURT JURISDICTION :	Supreme Court (Master)
LOWER COURT FILE NUMBER(S) :
LOWER COURT JUDICIAL OFFICER :	Master Macready

COUNSEL :	Mr S Jacobs (Plaintiff/Appellant) Mr R Hollo (Defendants/Respondents)
SOLICITORS:	Messrs McKells (Plaintiff/Appellant) Minter Ellison (First Defendant/First Respondent) Henry Davis York (Second Defendant/Second Respondent)
CATCHWORDS:	APPEAL FROM MASTER - PROCEDURE - Supreme Court Rules Pt32A r2 - proceedings dismissed by Master as no special circumstances - whether discretion not to dismiss in absence of special circumstances
LEGISLATION CITED:	Limitation Act 1969 Supreme Court Rules Part 32A rule 2
DECISION:	See paragraph 22

1

IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION

WINDEYER J

THURSDAY 19 APRIL 2001

2573/97 TELA PTY LTD v STATE BANK OF NSW LTD & ANOR.

JUDGMENT

1    HIS HONOUR: These are proceedings by way of an application for leave to appeal out of time from a decision of Master Macready of 13 April 2000 and, if leave is given, then an appeal from that decision.

2    It is not contested that there is a sound reason for giving leave to extend the time for appeal. A notice of appeal in an inappropriate form as it was to the Court of Appeal was in fact lodged within time and the only argument put forward by counsel for the respondents is that there is no purpose in giving an extension of time because the appeal is bound to fail.

3 By order of 13 April 2000, the learned Master dismissed these proceedings pursuant to Part 32A rule 2 of the Supreme Court Rules. That order was made after the Court had given notice to the plaintiff, as it does under that rule, that the Court was considering dismissing the proceedings because the plaintiff had not for over a year taken any step in the proceedings.

4    It appears from the decision of the Master that what happened then was that the plaintiff took out a motion for directions and the question of whether or not the proceedings should be dismissed under the relevant rule was heard pursuant to that motion.

5    I should say that I have ascertained that what normally happens is that the party to whom the notice is sent responds to the Court, usually by way of letter, and the matter is usually dealt with by the Registrar one way or the other by referral to a Master or ensuring that they are satisfactorily brought to a conclusion. That, however, is not relevant to what is being dealt with here, there being no doubt that the Master was authorised to make the order which he did make.

6    The proceedings by the plaintiff company are against the State Bank of New South Wales and a former solicitor acting for the plaintiff company. It is not necessary to go into any detail of the actual claims made by the plaintiff company other than to say it has a claim against the bank for misleading and deceptive conduct in relation to a mortgage entered into between the plaintiff and that bank and makes a claim that the bank as mortgagee sold the mortgaged property at an undervalue. The claim against the solicitor is that he improperly consented to an order for possession being made in possession proceedings brought by the bank against the plaintiff company and presumably for damages consequential upon that order having been made.

7    The learned Master pointed out some of the difficulties with those claims. All that need be said is that some of them appeared to him to be clearly barred by the Limitation Act 1969 but the claim against the solicitor, if it has substance, and the claim for sale at undervalue would not be so barred.

8    The learned Master referred in some detail to the course of the proceedings and particularly to the attitude of the plaintiff company which clearly was that it would only bring the proceedings if it could find lawyers prepared to act for it on a contingency basis. It is clear that it is for that reason that there have been numerous solicitors on the record for the plaintiff company from time to time, they, from time to time, deciding that they are no longer prepared to act in the proceedings, usually stating that they had too much work. In fact, the present appeal is being conducted by counsel and solicitor acting on some contingency basis, there being no certainty at all that they would continue to act for the plaintiff company if this appeal succeeds.

9 The learned Master considered Part 32A rule 2 which provides that:

If a party has taken no steps in a proceedings for over one year, then the court may of its own motion dismiss the proceedings unless the party satisfies the Court that special circumstances exist that render it desirable that such order should not be made.

This is a rule which is intended to play some part in the current theory of court management of proceedings before it, rather than leaving such management in the hands of the parties. The rule and the appeal must be dealt with on that basis. Nevertheless, it is not a rule which is necessarily easy to interpret. What it does is to provide that the proceedings cannot be dismissed if the Court is satisfied that special circumstances exist that make it desirable that an order should not be made. If those special circumstances do not exist, then the Court may dismiss the proceedings. That word "may" as it appears there does not in my view mean "shall" but, as I have said, one must have some regard to the overall purpose of the rule, and while it becomes a discretionary matter for the Court to consider whether or not it should dismiss the proceedings, if special circumstances are not shown, it should not necessarily be thought that what was previously the learning as to dismissal for want of prosecution should be accepted as the proper method of proceeding under this particular rule.

10    The Master held that there were no special circumstances. The special circumstances put forward by the plaintiff company were its difficulty in obtaining representation. The Master said that those were not special circumstances, particularly because under the Court rules as they now stand, a company can, if necessary, act for itself. There is no basis for revisiting the decision of the Master on this aspect. The only question then is whether his exercise of discretion miscarried, and I think, whether or not he exercised that discretion at all.

11    The Master did consider what might be described as prejudice to the defendants in their conduct of the defence at the present time. One reason for that was that there was some evidence that one of the vital witnesses for the bank may not have been available. There was evidence which I allowed today from which it appears likely that the particular witness referred to can be located. Certainly the bank has been well aware of the address where this bank manager is said to live yet has done nothing other than write to him. I do not think on the basis of the new evidence which I allowed that it could be said that the bank has shown any prejudice.

12    There is also said to be prejudice to the solicitor in that his file is not available. The fact is, however, as I understand it, that it was not available when the proceedings were commenced and therefore one could not say that was any prejudice through delay in these proceedings.

13    These matters of principle seem to me to have been considered by the Master under the question of special circumstances. I do not consider that in proceedings under this rule a party setting up special circumstances is required to negative prejudice to the other party. To that extent I consider that that was not the correct approach, although those were matters which needed to be taken into account in the exercise of his discretion. Thus as I have come to the conclusion that it appears from his judgment that the Master proceeded on an incorrect basis, it is necessary for me to reconsider the matter myself.

14    In earlier times, when considering proceedings which were commenced by statement of claim in 1997, one would not have thought that there was any untoward conduct if those proceedings were not well advanced by the year 2000. That is not the position or proper thinking in the year 2001, but I think that the Court and the legal profession are just beginning to realise that. That is why, while one must apply the rule as it stands, one must, when exercising the discretion, determine what was reasonable at the time when the decision of the Master was made.

15    This is a matter which proceeded by way of statement of claim. It seems that there were probably orders made that the evidence be on affidavit, or at least it was intended that the evidence be on affidavit. There is one affidavit on behalf of the plaintiff. There are no affidavits on behalf of the defendants. There were some correspondence about security for costs but nobody did anything after that. The defendants could well have brought the matter to a head by an early application for security for costs. All that really needed to be done by the plaintiff to ensure that something was happening was to file a notice to set the matter down for trial and it would then have been placed in the general list and would have worked its way up towards a hearing.

16    The question which exercises my mind when considering the matter afresh is whether or not the Court should be satisfied that these proceedings, if allowed to continue, will ever continue in any reasonable way. There is also the question, which was referred to by the Master, of the proceedings being run at the insistence of the plaintiff at no risk to it yet at considerable risk to the defendants who, on the evidence of the plaintiff, will not be able to get any satisfaction of any order for costs made against the plaintiff.

17    I have come to the conclusion that the Court should not, as a matter of discretion, prevent the plaintiff from having one last chance to have what could be described as a proper trial of the claim. I am by no means certain that the plaintiff will avail itself of this last opportunity but I consider that it ought to have that opportunity because I do not consider that its conduct to date is such as to disbar it from that opportunity. Having said that, I make it clear again that I accept the decision of the Master, which I think was clearly correct, that there are no special circumstances which should assist the plaintiff in this matter in its application to keep the proceedings on foot. It follows from this that the appeal against the decision of the Master as to dismissing the proceedings should be allowed.

18    There then follows the question of security. This was a matter dealt with by the Master in his judgment. Part of the Notice of Appeal was directed to it and at the commencement of the hearing I stated I would deal with it if the order for dismissal was set aside. The Master said he would have ordered that security be provided for the first defendant in the sum of $35,000 and the second defendant in the sum of $25,000 within 28 days. There is no reason to suggest there is anything inappropriate in those figures.

19    The only basis on which the plaintiff has contested the order is that there is now evidence, not only that the plaintiff had no funds, but that the director, Mr Harris, who holds all shares bar one, and his wife have no funds. Against that, Mr Harris is apparently at the present moment on an overseas trip. He can somehow manage that yet he wishes his company to conduct these proceedings through a company at no risk to it or to him.

20    This is not a matter in my view where the impecuniosity of the plaintiff company can be necessarily laid at the feet of the defendants. It is not a case where the plaintiff company should be allowed the luxury of litigating at no cost or risk to itself. It follows that an order for security ought to be made. Not only that, but in my view, having regard to what has happened to date, Mr Harris must himself become personally liable for the costs of the defendants as a condition of allowing this matter to proceed.

21    I propose to order that interim security in the sum of $10,000 in respect of each defendant be provided in a manner satisfactory to the Registrar within 28 days, with further security at a later time and to order that additional security by way of guarantee or indemnity satisfactory to the Registrar be given by Mr Harris for any costs ordered to be paid by the plaintiff to the defendants.

22    Orders

1. Order that leave to appeal be granted

2. Order that the appeal be allowed.

3. Order that the order of the Master dismissing the proceedings be set aside. In lieu thereof order that:

(a) the plaintiff provide interim security within 28 days in the sum of $10,000 for the costs of the first defendant and in the sum of $10,000 for the costs of the second defendant in a form agreed by the parties or as determined by the Registrar;
(b) the plaintiff provide further security in the sum of $10,000 in respect of the costs of the first defendant and in the sum of $10,000 in respect of the costs of the second defendant in the manner aforesaid within 28 days of notice of call-over being issued by the Court;
(c) that further security be provided by the guarantee as settled by the Registrar of Mr Dimitrios Theocharidis Harris to pay to the defendants any amounts of costs ordered to be paid by the plaintiff to the defendants and not covered by the said amounts ordered under (a) and (b). Such guarantee to be provided within 28 days of this date.

4. Order the proceedings be stayed for 28 days. If such security is not given, I give leave to the defendants to apply on 48 hours' notice for the proceedings to be dismissed. Any such application is to be made to me.

23    So far as costs are concerned, it does not seem to me to be appropriate that the order of the Master that the plaintiff pay the defendants' costs should stand. On the other hand, some of those costs were incurred in respect of the application for security for costs on which it is fair to say that the defendant applicants were successful and have remained generally successful. In my view, therefore, the appropriate order is that the parties should bear their own costs. It is I think important to understand that in proceedings of this nature, it is the plaintiff's responsibility to establish that the proceedings should be allowed to remain on foot because the parties can no longer be allowed to conduct litigation on a timetable set by them. I therefore make the following orders:

1. I set aside the order of the Master as to costs and order that there be no order as to costs in the proceedings before the Master.

2. I order the defendants pay one half of the plaintiff's costs of the appeal. The defendants are to have a certificate under the Suitors' Fund Act if eligible.

24    I give the following directions:

1. Subject to the interim security being posted within 28 days, I direct the plaintiffs to set the matter down for hearing by 30 June 2001.

2. I direct that the evidence-in-chief be on affidavit.

3. I direct the plaintiff to file and serve any further affidavits by 27 July.

4. I direct the defendants to file and serve any affidavits by 31 August 2001.
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Last Modified: 06/06/2001