The New South Wales Solicitors Mutual Indemnity Fund v The Hancock Family Memorial Foundation Ltd - [2008] WASCA 197

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA

TITLE OF COURT : THE COURT OF APPEAL (WA)

CITATION: THE NEW SOUTH WALES SOLICITORS MUTUAL INDEMNITY FUND -v- THE HANCOCK FAMILY MEMORIAL FOUNDATION LTD [2008] WASCA 197

CORAM: MILLER JA

HEARD: 19 SEPTEMBER 2008

DELIVERED : 19 SEPTEMBER 2008

FILE NO/S: CACV 80 of 2008

BETWEEN: THE NEW SOUTH WALES SOLICITORS MUTUAL INDEMNITY FUND
First Appellant
SYNDICATE 657 DR LOWE
SYNDICATE 683 R J WALLACE
SYNDICATE 839 A M SHARPE
SYNDICATE 376 J H BENTON
SYNDICATE 510 R J KILN
Second Appellants
AND
THE HANCOCK FAMILY MEMORIAL FOUNDATION LTD
Respondent

ON APPEAL FROM:
Jurisdiction              :  SUPREME COURT OF WESTERN AUSTRALIA
Coram  :LE MIERE J
Citation  :THE HANCOCK FAMILY MEMORIAL FOUNDATION LTD -v- FIELDHOUSE [No 2] [2008] WASC 147
File No  :CIV 1802 of 1995

Catchwords:

Application for stay of orders - Preaction discovery - Pending appeal - Turns on own facts

Legislation:

Insurance Contracts Act 1984 (Cth), s 51
Rules of the Supreme Court 1971 (WA), O 26A r 3, O 26A r 4

Result:

Application granted

Category: B

Representation:

Counsel:

First Appellant : Mr G R Donaldson SC &
Ms F C Davis

Second Appellants : Mr G R Donaldson SC &
Ms F C Davis

Respondent: Mr R E Birmingham QC &
Mr A P Hershowitz

Solicitors:

First Appellant               :     DLA Phillips Fox
Second Appellants         :     DLA Phillips Fox
Respondent:     Salter Power Pty Ltd

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

Eastland Technology Australia Pty Ltd v Whisson (2003) 28 WAR 308
The Hancock Family Memorial Foundation Ltd v Fieldhouse [No 2] [2008] WASC 147

MILLER JA:

Application for stay

This is an application for a stay of orders for pre‑action discovery made by Le Miere J on 25 July 2008.
The orders made by Le Miere J were as follows:
1.Within 28 days of the date of the order the first potential party (NSW Solicitors Mutual Indemnity Fund) and the second potential parties (Dr Lowe, R J Wallace, A M Sharpe, J H Benton and R J Kiln) file and serve a list of documents in accordance with a schedule indicating which of them are or have been in their possession, power or custody.
2.Orders for costs incurred in making the documents available.
Le Miere J delivered written reasons for judgment (The Hancock Family Memorial Foundation Ltd v Fieldhouse [No 2] [2008] WASC 147) on 25 July 2008.
Those reasons reveal that the plaintiff in the proceedings (The Hancock Foundation) commenced proceedings against Carnegie Richmond Hallett Fieldhouse (Fieldhouse) on 21 August 1995.
Fieldhouse had been a solicitor employed and working for the late Lang Hancock and his group of companies. He had commenced work and had been working with those entities from around 1972.
In the action, The Hancock Foundation alleges that Fieldhouse was in a position of conflict whilst acting as solicitor for both Mr Hancock and The Hancock Foundation when he negotiated and procured the sale of a Life Governor's share held by Mr Hancock to The Hancock Foundation. The action alleges a breach of fiduciary and common law duties and negligence in advice. Damages are claimed for alleged loss suffered.
Le Miere J observed at [7] that the action has proceeded slowly. This is an understatement. It has been on foot for 13 years.
On 6 April 2004, a master of this court ordered that the action be dismissed for want of prosecution.
On 26 May 2005, the Court of Appeal allowed an appeal from that order and ordered that the application to strike out the action for want of prosecution be dismissed.
As Le Miere J observed at [7], the action has again 'proceeded slowly' since that time.
On 16 November 2007, more than two years after the order of the Court of Appeal, Fieldhouse died.
On 18 March 2008, The Hancock Foundation's solicitor wrote to Fieldhouse's solicitor enquiring about Fieldhouse's insurers stating that now that Fieldhouse was deceased the extent of any cover he had under his insurance policy or policies was directly relevant to The Hancock Foundation's position. In short, there was an indication that The Hancock Foundation would take action under s 51 of the Insurance Contracts Act 1984 (Cth).
Prior to electing whether to join insurers, The Hancock Foundation indicated it wished to seek discovery of the contract or contracts of insurance that Fieldhouse held with his insurers 'so that it can be satisfied that cover is provided in respect of the liability that is owed to our client'.
The amount of damages claimed was in excess of $20 million.
By letter dated 30 April 2008, the defendant's solicitor provided details about the identity of the defendant's insurers. It was pointed out that:
1.at all material times, Fieldhouse held a certificate of insurance issued by the Solicitors Mutual Indemnity Fund pursuant to the compulsory requirements of the Legal Profession Act 1987 (NSW); and
2.Fieldhouse held excess insurance policies through underwriters at Lloyds. The market participation in those relevant policies was detailed as to name and percentage.
Addresses of the different insurers were given in the letter.
The Hancock Foundation's solicitors contended that there had been a failure to identify the legal entities who were the parties relevant to the insurance held by Fieldhouse and application was made for pre‑action discovery to identify potential parties and to obtain discovery from those potential parties: Rules of the Supreme Court 1971 (WA), O 26A r 3 and O 26A r 4.
Le Miere J gave extensive reasons for his judgment in the matter. He concluded that the potential parties must give discovery to the plaintiff of all documents that are or have been in their possession relating to the description of the potential parties and that may assist the plaintiff in deciding whether or not to take proceedings against the potential parties. A minute of proposed amended application for pre‑action discovery identifies the documents.
The essential reasoning of Le Miere J was as follows:
(a)The Hancock Foundation commenced the action in 1995 without knowing the extent of the defendant's insurance coverage.
(b)In 1998 The Hancock Foundation executed a deed of release which had the effect of limiting the recovery that it might make under any judgment it obtained to the amount of Fieldhouse's insurance.
(c)The Hancock Foundation then continued with the action for a further 12 years without knowing the extent of that insurance cover.
(d)Things changed significantly when Fieldhouse passed away on 16 November 2007.
(e)The Hancock Foundation now contemplates taking proceedings directly against the insurers or putative insurers.
(f)If The Hancock Foundation takes those proceedings, it will risk the legal costs of the proceedings - costs which were not at risk whilst The Hancock Foundation's action was against Fieldhouse alone.
(g)These costs are likely to be substantial.
(h)The evidence does not establish that The Hancock Foundation has decided to take the proceedings against the potential parties in any event.
Le Miere J recognised that making an order for preliminary discovery was a discretionary matter. His Honour considered that there would be no oppression to the potential defendants by giving discovery - there was no evidence that the handing over of the documents sought would cause any commercial or other prejudice to the potential parties.
Le Miere J also held that LawCover was already involved and engaged in the proceedings and, in the circumstances, it was appropriate to order that the potential parties give discovery of documents that may assist The Hancock Foundation in deciding whether or not to take the proceedings against the potential parties.
The decision of Le Miere J has been appealed to the Court of Appeal. There are five grounds of appeal. Summarised, they are as follows:
1.The primary judge erred in concluding that The Hancock Foundation could not ascertain a description of the first appellant sufficient for the purposes of taking proceedings.
2.The primary judge erred in concluding that the identification which had been given of the excess insurers was insufficient to enable action to be taken.
3.The primary judge erred in concluding that The Hancock Foundation did not have sufficient information to make a decision whether or not to commence proceedings against the potential defendants.
4.The primary judge erred in the exercise of his discretion in ordering discovery when there was no basis at law for the exercise of that discretion because (a) at the time of the application The Hancock Foundation had already reached a decision about taking proceedings against the potential defendants and had decided to do so; and (b) there was evidence that The Hancock Foundation was seeking discovery of documents only in relation to quantum to ascertain whether or not the insurance which Fieldhouse held covered any liability there might be in damages.
The present application for a stay of the orders of Le Miere J pending the hearing of the appeal is made under the Supreme Court (Court of Appeal) Rules 2005 (WA), r 44(1). That rule provides that at any time after an appeal is commenced and before it is concluded, a party may apply for an interim order. An interim order is defined in the Rules to include an order staying the proceedings in the primary court.
The principles upon which a stay might be granted were set out in Eastland Technology Australia Pty Ltd v Whisson (2003) 28 WAR 308 (Murray & Parker JJ):
In the light of the authorities, we may attempt to distil what we take to be the generally applicable relevant principles -
•The successful litigant at first instance will ordinarily be entitled to enforce the judgment pending the determination of any appeal.
•It is for the applicant for a stay to move the court to a favourable exercise of its discretion.
•It will not do so unless special circumstances are shown justifying the departure from the ordinary rule.
•The central issue will be whether the grant of a stay is perceived to be necessary to preserve the subject matter or the integrity of the litigation, or where refusal of a stay could create practical difficulties in respect of the relief which may be granted on appeal. It is often put shortly that it will first and foremost be necessary to establish that without the grant of a stay, the right of appeal, whether upon the grant of leave or special leave or not, will be rendered nugatory.
•If that can be demonstrated, the stay will generally still be refused unless it can be established that the appeal process, whether upon the grant of leave or special leave or not, has ultimately reasonable prospects of success so as to result in the grant of relief to the appellant.
•If that hurdle can be overcome, the stay may still be refused where it appears that the balance of convenience does not lie in favour of the applicant; where, for example, the grant of a stay will occasion hardship to the respondent which may not be alleviated by the terms upon which the stay may be granted. [9]
The first thing to be said about the present application is that consideration must be given to the long history of the proceedings. This is an action which began 13 years ago. It has proceeded extremely slowly. An order for pre‑action discovery was made by Le Miere J on 25 July 2008, some 12 or 13 years after the action had been commenced. That order is now under appeal and an appeal is likely to be heard some time later this year.
Any further delay in the matter has to be seen in the light of the long history of the proceedings and the gross delay in the prosecution of the action by The Hancock Foundation.
Applying the six principles set out in Eastland Technology, my conclusions are:
1.Although The Hancock Foundation has been successful at first instance and would ordinarily be entitled to enforce its judgment pending the determination of the appeal, that principle must be conditioned by the fact that in this case the action was commenced in 1995 and it has proceeded particularly slowly. Further delay does not seem to me to be of any significant prejudice to The Hancock Foundation.
2.In the present case, the applicant for the stay has the obligation of persuading the court that it should exercise its discretion in its favour.
3.For that discretion to be so exercised, special circumstances must be shown to justify departure from the ordinary rule.
4.The question is whether the stay is necessary to preserve the subject‑matter or integrity of the litigation. If refusal of the stay could create practical difficulties in respect of the relief which may be granted on appeal, this is a relevant factor. In other words, an important question is whether the appeal might be rendered nugatory if the stay is not granted.
In my opinion, the appeal in this matter would be rendered nugatory if the stay is not granted. If the potential defendants are required to give the discovery ordered by Le Miere J, there would be no purpose in the appeal proceeding further.
5.The stay may still be refused unless it can be shown that there are reasonable prospects of success on the appeal.
In my opinion, there are reasonable prospects of success in relation to the appeal. Given the history of the proceedings, and given the amount of information that has already been imparted by or on behalf of potential defendants to The Hancock Foundation, there is, in my opinion, a reasonable prospect that the appeal will succeed.
6.A stay could of course be refused if the balance of convenience did not lie in favour of the applicant - for example, where there would be hardship occasioned to The Hancock Foundation which would not be alleviated by the terms upon which the stay is granted.
In my opinion, no hardship would be occasioned. That is because the proceedings themselves have been on foot for such a long time and have been prosecuted extremely slowly. There is no question that any potential parties who might be liable to The Hancock Foundation might have their economic position changed between now and the outcome of the appeal. In short, I can see no prospect of hardship to The Hancock Foundation whatever.
In the circumstances, I would exercise my discretion to order a stay of the orders made by Le Miere J on 25 July 2008 pending the determination of the appeal in these proceedings.