The Hancock Family Memorial Foundation Ltd v Fieldhouse - [2004] WASC 59

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CHAMBERS

CITATION: THE HANCOCK FAMILY MEMORIAL FOUNDATION LTD -v- FIELDHOUSE & ORS [2004] WASC 59

CORAM: MASTER SANDERSON

HEARD: 3 DECEMBER 2003

DELIVERED : 6 APRIL 2004

FILE NO/S: CIV 1802 of 1995

BETWEEN: THE HANCOCK FAMILY MEMORIAL FOUNDATION LTD
Plaintiff
AND
CARNEGIE RICHMOND HALLETT FIELDHOUSE
First Defendant
MARTIN LAWRENCE BENNETT
GARY RICHARD SCHWAB
GEORGINA HOPE RINEHART (as Executors of the Estate of LANGLEY GEORGE HANCOCK)
Second Defendants

Catchwords:

Practice and procedure - Application to strike out for want of prosecution - Turns on own facts

Legislation:

Nil

Result:

Action struck out - Judgment for first defendant

Category: B

Representation:

Counsel:

Plaintiff:     Mr J Gilmour QC & Ms P A Saraceni
First Defendant             :     Mr J A Chaney SC & Ms F C E Davis
Second Defendants       :     No appearance

Solicitors:

Plaintiff:     Cocks Macnish
First Defendant             :     Phillips Fox
Second Defendants       :     No appearance

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

Birkett v James (1978) AC 297
Hughes v Gales (1995) 14 WAR 434
Lewandowski v Lovell (1994) 11 WAR 124
Tipperary Developments Pty Ltd v The State of Western Australia [2004] WASCA 15
Ulowski v Miller (1968) SASR 277

Case(s) also cited:

Allen v Sir Alfred McAlpine & Sons Ltd [1968] 2 QB 229
Arcadia Holdings Pty Ltd v Brown [2002] WASC 44
Birkett v James [1978] AC 297
Biss v Lambeth Health Authority [1978] 1 WLR 382
Brisbane South Regional Health Authority v Taylor (1996) 186 CLR 541
Bristow Helicopters Ltd v Global Marine Drilling Co, unreported; SCt of WA; Library No 3042; 6 October 1980
Brixton Nominees Pty Ltd v Hardiman [2002] WASC 3
Director of Public Prosecutions for Western Australia v Mansfield [2003] WASC 186
Duke v Royalstar Pty Ltd [2001] WASCA 273
Dzienciol v Logie Brae Pty Ltd, unreported; FCt SCt of WA; Library No 980078; 25 February 1998
FAI General Insurance Co Ltd v Southern Cross Exploration NL (1988) 77 ALR 411
Geneva Finance Ltd (Receiver and Manager Appointed) v Howat [2003] WASC 119
Hancock Family Memorial Foundation Ltd v Porteous (1999) 151 FLR 191
Hancock Family Memorial Foundation Ltd v Porteous [2000] WASCA 29; (2000) 22 WAR 198
Hardware Services Pty Ltd v Primac Association Ltd [1988] 1 Qd R 393
Hughes v Gales (1995) 14 WAR 434
Integrated Computer Services Pty Ltd v Digital Equipment Corporation (Aust) Pty Ltd (1988) 5 BPR 11,110
Jakovljevic v Doslov [2000] WASC 131
Levi v Stirling Brass Founders Pty Ltd, unreported; SCt of WA; Library No 970209; 9 May 1997
Lewandowski v Lovell (1994) 11 WAR 124
Link Blocks (1981) Pty Ltd v Fullin [1986] WAR 187
Meerkin v Apel v Rossett [1998] 4 VR 54
Meridian Oil NL v Smyth [1999] WASC 173
Pegrum v Fatharly (1996) 14 WAR 92
Queensland v J L Holdings Pty Ltd (1997) 141 ALR 353
Sangora Holdings Pty Ltd v Hodder [2003] WASCA 108
Spargos Mining NL v Fuller, unreported; SCt of WA; Library No 980382; 14 July 1998
Ulowski v Miller [1968] SASR 277
Walton v Gardiner (1993) 177 CLR 378

MASTER SANDERSON: This is the return of two applications. The first in time is the first defendant's application to dismiss the action for want of prosecution. The second application is by the plaintiff, seeking leave to amend its statement of claim in terms of a revised amended minute of statement of claim dated 16 September 2003. It is convenient to deal with the applications in chronological order - if the first application is successful, the second need not be considered.
The principles which govern an application to strike out for want of prosecution were not in dispute. They were recently restated by the Full Court in Tipperary Developments Pty Ltd v The State of Western Australia [2004] WASCA 15. Their Honours (Malcolm CJ and McKechnie J) referred to a line of cases beginning with Birkett v James (1978) AC 297 and following through Lewandowski v Lovell (1994) 11 WAR 124, to Hughes v Gales (1995) 14 WAR 434. Based upon these decisions and with reference to the decision of Bray CJ in Ulowski v Miller (1968) SASR 277, the five paramount matters to be considered are:
(1)the length of the delay;
(2)the explanation for the delay;
(3)the hardship to the plaintiff if the action is dismissed and the cause of action left statute‑barred;
(4)the prejudice to the defendant if the action is allowed to proceed, notwithstanding the delay;
(5)the conduct of the defendant in the litigation.
As the Tipperary Developments case makes plain, some consideration needs to be given to whether the delay is contumelious or inexcusable. Consideration of those issues can be dealt with when considering the explanation for the delay.
At the conclusion of argument in this matter, I indicated to the parties that my determination of the application would be held over until the Full Court published their reasons in the Tipperary case. (The appeal in the Tipperary case was heard on 5 November 2003 and at the conclusion of the hearing, the Court indicated the appeal would be allowed. The reasons for decision were not published until 4 February 2004. Thus at the date of the hearing of this application, the outcome of the appeal in Tipperary was known, but not the reasons why the appeal had been allowed.) The question then is whether there is anything in the Tipperary decision which is of general application when striking out for want of prosecution is considered.
At first instance in the Tipperary decision I concluded that to strike out the plaintiff's claim would occasion hardship to the plaintiff. The claim was statute‑barred and legal expenses running into many millions of dollars had been incurred and would be wasted. There was also a very expensive expert's report which would have been of no use to the plaintiff. The Court found that having concluded that striking out the action would prejudice the plaintiff and there was no real prejudice to the defendant in allowing the action to proceed, sufficient weight had not been given to this factor. The Court also was satisfied that the plaintiff's explanation for the delay in advancing the litigation - essentially based on its inability from time to time to fund the action - had been accorded insufficient weight. Although these two matters in large measure explained why the appeal was successful, they added nothing to the established principles on which applications to strike out for want of prosecution are to be determined.
However, there was one matter to which the Court referred in the final paragraph of their reasons which may suggest that there is an additional matter to be considered in dealing with applications of this sort. The Court said (at par 28):
"It is hard to overlook the fact that the case was close to being entered for trial and/or at the least, with robust management, could be entered for trial within a reasonable period. The accountant's report which was the cause of much of the delay has been completed. In these circumstances the discretion miscarried. The matters which the Master regarded as decisive, namely, the length of delay and inadequate explanation for the delay, could not properly be decisive in this case. What was necessarily decisive in the circumstances of the case was the overwhelming prejudice to the plaintiff absent any serious degree of prejudice to the defendant."
As I understand the decision in Tipperary, it does not set out to lay down a new and different approach, or vary any of the established principles. Perhaps what can be said is that each case must be considered on its merits and the facts of each case weighed in the balance against the particular circumstances of the case. However, in considering all relevant factors, some regard ought be had to how far the action has progressed and how soon it might be ready for trial. If the action can proceed to trial in the near future, that is a factor in favour of refusing the application. Whether or not the fact that an action will not be ready for trial for quite some time is a matter which might weigh in favour of striking out the proceedings for want of prosecution, is not a matter which is addressed in the Tipperary decision.
Because of the way the respective arguments were put in this case, it is necessary to say something about the facts said to give rise to the cause of action. The plaintiff is said to be a company limited by guarantee which was required by its memorandum and articles of association to conduct business for charitable purposes and not for the profit of its individual members. The company was part of what is defined as "the Hancock Group", being companies controlled by the late Mr Lang Hancock. The Hancock Group was said to include Hancock Prospecting Pty Ltd. Throughout the voluminous documentation which accompanied this application and in the draft revised amended minute of statement of claim, the plaintiff is referred to as "HFMF" and Hancock Prospecting Pty Ltd is referred to "HPPL". For consistency, I will adopt that nomenclature.
Mr Hancock was not a director of HFMF but he did have control of the company. HFMF's articles of association allowed for the issue of different classes of shares which gave the holders of certain classes control of the company. Relevantly, a member holding an A‑class share effectively controlled the company at general meeting level. HFMF says that until March 1986 and thereafter, Mr Hancock was a person with whose instructions or on whose directions HFMF directors were accustomed to act and therefore, pursuant to the relevant provisions of the Companies Act 1981 and the Corporations Law, Mr Hancock was the de facto director of the company. The first defendant (who is now the only remaining defendant in these proceedings) was at all material times a solicitor of the Supreme Court of New South Wales and until 22 December 1989, a director of HFMF.
HPPL had an unusual (but by no means unique) share structure. The memorandum of association allowed for the issue of a life governor's share. The holder of this share was entitled to remain in office for so long as they wished, exercise all the powers of the Board from time to time, convene a general meeting at any time and cast 76 votes out of every 100 votes cast at a general meeting. According to the pleading, if Mr Hancock transferred his life‑governor's share to a third‑party, the share would thereafter be classified as an A‑class share and no longer attract the rights and entitlements of the life governor's share. Further, the articles of association of HPPL provided that if Mr Hancock did transfer his life governor's share to a third party, another share, known as life governor's share number 2, would then attract the same rights and entitlements as the now defunct life‑governor's share.
The statement of claim pleads that as at March 1991, Mr Hancock owed the HPPL pension fund $12 million or thereabouts. It is said Mr Hancock sought advice from the defendant as to the most tax‑effective manner to discharge this liability. The first defendant advised Mr Hancock that the necessary funds could be obtained by selling his life governor's share to HFMF for the sum of $20 million. It is pleaded that Mr Hancock accepted that advice and eventually the transaction was concluded. In giving that advice the plaintiff says that the defendant was at fault in a number of different ways which need not, for the purposes of this application, be catalogued. Suffice it to say that the plaintiff says that the life governor's share, when purchased for $20 million, was of little or no value. The plaintiff says that the defendant was responsible for its paying out the $20 million and that he is therefore liable to the plaintiff for that amount.
Mr Hancock died in March 1992. It is notorious that subsequent to Mr Hancock's death a dispute arose between his daughter, Ms Rinehart, and his widow, Ms Porteous. The nature of these disputes has been catalogued elsewhere and are not presently relevant. However, the existence of these disputes was used by the plaintiff in part to explain why it was that this action had not been pursued. The position was put clearly and distinctly by counsel for the plaintiff. Counsel submitted (at page 34 ‑ 35 of the transcript):
"The action was instituted in August, I think it was, in 1995 and unashamedly, we say, to preserve the limitation period. In relation to a substantial claim for damages of 16 and a half million dollars which now with interest is a claim exceeding $26,000,000, and we have just usefully, I think - hopefully usefully - for your assistance set out how that is calculated as an annexure to the recent affidavit of Mr David Neil, the facts are that there were, putting it broadly, three potential avenues of address for the plaintiff.
The first was to proceed against the estate of Mr Hancock - I do not put them in any particular order - for damages in that sum, being the amount that was paid less some credits that were ultimately available to the plaintiff and which were deducted from the claim but to sue the estate alleging as against Mr Hancock that as a director of the plaintiff he was in breach of relevant fiduciary duties. The damages sought are the same damages sought against Mr Fieldhouse.
The second source of potential remedy was as against the Porteous interests because it is no secret that these manifold millions ended up in one form or another; that is to say, in the form of one asset or another, within her control. In relation to that there were six separate actions ultimately heard together before Anderson J in this court which we generally describe as the constructive trust actions and which embraced in part, at least, again the same amount of money, the 16 and a half million dollars; and thirdly, a claim as against Mr Fieldhouse.
Now, in those circumstances, if I can descend slightly into the vernacular, we are in a place where we are damned if we did and damned if we didn't. What I mean by that is on one view, and it's a view which we propound and submit to you, Master, it was a quite reasonable, indeed responsible, allocation of resources not only in the private interest of the plaintiff but there is a public interest issue here involving, not the least, this court in pursuing those remedies as against the Porteous interests, alternatively against Mr Hancock, if you like, the primary sources.
Our submission is that Mr Fieldhouse is equally liable because but for his negligence we would not be here but it is recognised that he did not get the money, put it that way, and so the plaintiff, as we say, responsibly and reasonably went after particularly the Porteous interests who got the benefit of the money and the Hancock estate for those breach of fiduciary duties.
Now, depending on the success, bearing in mind that we now look back to those events but looking, as it were, from the time when those decisions were made to pursue those remedies into the future, success in whole or part in relation to either of those actions or sets of actions would have meant that Mr Fieldhouse would have been off the hook because we would have extinguished the claim for damages whatever liability may have existed."
Based upon counsel's submissions, it is possible to say something about the length of the delay and the explanation for the delay. It is now over eight years since proceedings were issued and the plaintiff has not finalised a statement of claim. Even allowing for the glacial progress of so many cases in this Court, the delay is lengthy and is a factor which weighs against the plaintiff.
It is clear from the submission made by counsel that the delay has been occasioned by a calculated tactical decision taken by the plaintiff and its legal advisers. The consequence of a tactical decision to delay an action was considered by the Full Court in Hughes v Gales (supra). The Chief Justice in his reasons refers to the decision at first instance of Master Bredmeyer, dealing with a tactical decision to delay proceedings. The learned Master had said (at 444):
"In all of the circumstances it seems to me that the plaintiff's spasmodic attempts to get the defendant to sign a proof of evidence cannot be regarded as a reasonable excuse for delaying this action. The delay was deliberate and apparently due to a strategic decision to delay the action for reasons related to the other action. Any plaintiff who brings actions against potential witnesses is likely to face the same difficulty of their lack of cooperation prior to trial. A decision must then be made as to what ought to be done, but in my view any difficult thereby produced is the plaintiff's own doing and cannot be used as a justifiable excuse for the undue prolongation of unrelated proceedings."
The Chief Justice approved what was said by the learned Master. Adapting the Master's reasoning, what can be said in this case, and what was submitted by counsel for the defendant, is that in light of the fact that a tactical decision was taken not to proceed with this action, the delay is caused by the plaintiff and cannot be a justifiable excuse for prolonging the proceedings. With respect, that seems to me to be correct. In my opinion there is no satisfactory explanation for the delay and that is a factor which weighs against the plaintiff and in favour of the defendant.
There is no doubt that if this action is struck out for want of prosecution, it will occasion hardship to the plaintiff. It was common ground between the parties that the action would be statute‑barred and the plaintiff would be left without a remedy against the defendant. As counsel pointed out, this claim is substantial. However, it is not quite as substantial as would seem from counsel's submissions. On 22 September 1998 the plaintiff and the defendant entered into an agreement entitled "Deed of Release and Indemnity". A copy of the agreement is to be found as annexure "DN10" to the affidavit of David Neill, sworn 10 October 2002. It would seem that the parties entered into this deed as a means of the plaintiff and HPPL obtaining the cooperation of the defendant in other proceedings. Clause 2.7 of the agreement is in the following terms:
"HFMF further agrees that, in the event of obtaining judgment in CIV 1802 of 1995, or CIV 1803 of 1995, it shall not seek to enforce either judgment and any costs order that may be made against Fieldhouse to recover moneys beyond that paid or payable by Fieldhouse's professional indemnity insurers (including law cover) in respect of either judgment. Fieldhouse agrees that he shall not knowingly do or take any step that might have the effect of amounting to a breach by him of any obligation to Fieldhouse's professional indemnity insurers (including law cover) in respect of any policy of insurance Fieldhouse has in relation to his practice as a solicitor."
The defendant then is in a rather unusual position. Personally, he has no interest one way or the other in the outcome of these proceedings. It is only his insurers who are at risk. There was no evidence as to what insurance cover is held by the defendant. However, what may be said is that it is not certain if the plaintiff were to succeed in its action, what amount it would recover. So while there is no doubt that the plaintiff would be prejudiced if this action was struck out, it is not entirely certain the extent to which, in money terms, it would be prejudiced.
The defendant has been unable to point to any particular prejudice he would suffer if the action is allowed to proceed. (In one sense, given the "hold harmless" agreement, he will not suffer any prejudice. Clearly the proper way to view the matter is to look at the prejudice his insurers might suffer if the action proceeds.) It was submitted on behalf of the defendant that he is now in his mid‑70s and while still practising and in good health, his recollection of events must necessarily be limited. In other words, the flux of time will undoubtedly have prejudiced the defendant's ability to mount a proper defence.

Against that, the plaintiff points out that the defendant has, on at least one occasion, given detailed evidence about the events the subject of this action. Appearing as annexure "DN8" to the affidavit of David Neil, sworn 16 September 2003, is a transcript of evidence given by the defendant on 25 June 2001 in an action in the Federal Court heard before Stone J. Counsel submitted that the detailed cross‑examination of the defendant about the transaction in question in these proceedings would either stand as the relevant evidence or would greatly assist the defendant in recalling the events that transpired: see in particular pages 64 to 67. That may well be the case. However, it is difficult in an interlocutory application such as this, to be sure that the evidence given in the Federal Court proceedings precisely coincides with the evidence the defendant might be required to adduce in these proceedings. Nonetheless, there is undoubtedly a significant overlap. In the result, while there will undoubtedly be some prejudice to the defendant if this action is allowed to proceed, notwithstanding the delay, I am not satisfied that it is a consideration that is determinative one way or the other. In my view the position is evenly balanced.
There is nothing in the conduct of the defendant in this litigation which explains the delay. This consideration can be put to one side.
This is not a case where the action is anywhere near ready for trial. As yet there is no settled statement of claim. Counsel for the plaintiff suggested that the action was relatively straightforward, that interlocutory proceedings should not occupy much time and that the action might be ready for hearing towards the end of this calendar year. With respect to counsel, experience shows that cases of this nature, where the stakes are high, take some time to ready for trial. Quite how long this action might take before it is ready to be listed, it is not possible to say. But mindful of the consideration given to this question by the Full Court in the Tipperary decision, I think it is fair to say that the action is, at present, nowhere near ready for trial and will not be for some time.
In my view, the two factors which are determinative in this case are the length of the delay and the explanation for the delay. It is not just that eight years have passed, although that in itself is significant. It is the fact that eight years have passed with nothing happening on this file. In my view that makes the length of the delay a significant factor weighing against the plaintiff. Furthermore, the plaintiff has delayed for tactical reasons. That is a decision that it made and it is a decision for which it must bear responsibility. Based upon the decision of the Full Court in Hughes v Gales, the tactical decision can provide no satisfactory explanation for the delay. I am satisfied that this is a reason for striking the action out for want of prosecution.
In referring to these two factors as the reason for reaching the conclusion I have, I have not been unmindful of the hardship occasioned to the plaintiff if the action is dismissed. I have weighed that hardship in the balance. However, in the end I have concluded that the proper course is to strike this action out for want of prosecution.
I will hear the parties as to the precise form of orders and as to costs.