Cavell Leitch Pringle & Boyle v The Official Assignee in the Estate of
[2001] NZCA 182
•6 June 2001
| IN THE COURT OF APPEAL OF NEW ZEALAND | CA5/01 |
| BETWEEN | CAVELL LEITCH PRINGLE & BOYLE |
| Appellants |
| AND | THE OFFICIAL ASSIGNEE IN THE ESTATE OF JOHN MICHAEL COLLIER |
| Respondent |
| Hearing: | 24 May 2001 |
| Coram: | Thomas J Blanchard J Tipping J |
| Appearances: | N A Till for Appellants A C Hughes-Johnson QC for Respondent |
| Judgment: | 6 June 2001 |
| JUDGMENT OF THE COURT |
The appellant is a firm of solicitors known as Cavell Leitch Pringle and Boyle. The firm was sued in the High Court at Christchurch by John Michael Collier on the basis that it had been negligent when dealing with a contract which Mr Collier had entered into for the purchase of land and equipment from a company called Andersons Engineering Ltd. The proceedings were commenced as long ago as March 1988. Mr Collier was adjudicated bankrupt in July 1991 and in July 1992 the Official Assignee (to whom we shall refer as the plaintiff) was authorised to continue the proceedings.
In circumstances to which we will come in more detail below, the firm applied in July 1999 for an order striking out the proceeding for want of prosecution. Young J heard the application and dismissed it. He did, however, make it a condition of such dismissal that the Official Assignee, representing Mr Collier’s bankrupt estate, should not pursue a particular point which the Judge saw as being unduly prejudicial to the firm. The firm appeals from Young J’s refusal to strike out the proceeding. The plaintiff cross-appeals against the Judge’s decision that he should not be allowed to pursue the particular point known as the Track Industries point.
The events at issue go back to June 1986 when Mr Collier entered into the contract with Andersons at a total price of $1,932,200. It became necessary for Mr Collier to register a caveat to protect his interests under the contract following the service by Andersons of a settlement notice based on Mr Collier’s inability to settle on time. When the caveat was tested by a dummy mortgage, it lapsed because of procedural errors for which the firm was responsible. There can be little doubt that negligence was involved. Mr Collier sued for his losses as a result of being unable to hold the caveat, and as a result of what he claimed was additional negligence on the part of the firm in not challenging the validity of Andersons’ settlement notice and Andersons’ consequent cancellation of the contract following his failure to settle. The claim was and always has been based on the loss of the profits which Mr Collier claimed he was going to make from the development of the property and the sale of the equipment. No claim has ever been made for loss of bargain, ie. on the basis that Mr Collier was buying at a price less than the true value of the assets being acquired.
For various reasons which it is unnecessary to traverse in detail, little progress was made with the litigation for many years. Very close to the expiry of the six year limitation period, an amended statement of claim was filed in September 1992. It expanded the allegations of negligence in very wide terms. The firm sought discovery and particulars but these issues remained outstanding for a long time. The major reason for the delay was that there were ongoing difficulties between Mr Collier and the Official Assignee. It is unnecessary to discuss them in any detail, save to say that most of the blame appears to lie with Mr Collier. As a result of continuing inactivity the Official Assignee had to seek leave under rule 426A to continue the proceedings. The Master granted leave on 28 October 1997, but on the basis that the firm’s right to apply to strike out for want of prosecution was reserved. When granting leave the Master ordered the plaintiff to file a further statement of claim giving appropriate details. This was not filed until March 1998. On 12 June 1998 a judicial conference took place before the Master. He had earlier directed that any further interlocutory applications on either side be filed by 28 May 1998. At the conference the firm’s counsel explained that his client was considering whether to apply to strike out but, due to the absence overseas of a relevant person, no decision had been possible by the 28 May deadline. The Master extended that deadline to 26 June.
On 1 July 1998 the solicitors filed a memorandum, to which we will refer to as “the memorandum”. It became a crucial dimension of the ultimate strike out application. The memorandum included this passage:
The [firm] have now completed their investigation into the files held by another firm of solicitors in Christchurch and have concluded that although some files and documents have been destroyed they cannot establish sufficient prejudice at this stage to be successful in an application to strike the proceedings out on the basis of failure to prosecute.
Thus the proceedings continued and on 3 August 1998 the Master made an order for further discovery and better particulars, both to be supplied by 30 September 1998. That order was not complied with, as a result of which the firm applied to strike out the proceedings not generally, but on the basis of that non-compliance. Ultimately an “unless” order was made requiring compliance by 23 October 1998 with default leading to striking out. The order was complied with, but in relation to documents only partially, in that further lists were supplied by the plaintiff late in 1988 and early in 1999.
On 28 November 1998 the Master ordered the plaintiff to file and serve briefs of evidence by 19 February 1999. The plaintiff had sought a longer time but the Master expressly refused that request. In the event this order too was not complied with, and a further “unless” order was made resulting in the briefs being filed and served in April 1999.
It is unnecessary for us to traverse the details of the Judge’s careful assessment of both the facts and the contentions of the parties on the application before him. As noted earlier, he declined to strike out the proceedings but observed that the application to do so had failed “by the narrowest of margins”. Mr Till’s argument was that the Judge had placed too much weight on the memorandum and had not sufficiently recognised the defaults occurring after the date of the memorandum and the prejudice to the firm caused by a material change in the compass of the case which also occurred after 1 July 1998.
Mr Hughes-Johnson QC emphasised that the greater part of the delay had arisen because of the difficulties between Mr Collier and the Official Assignee. In that respect we agree with the Judge when he viewed that as no excuse. Mr Hughes-Johnson also suggested that the prejudice now claimed by the solicitors was significantly of their own making through their not having pursued appropriate enquiries at an earlier stage. His ultimate submission was that justice could still be done notwithstanding the extreme lapse of time. There is no doubt that the application ultimately failed before Young J because of the memorandum. The Judge rightly held that there had been inordinate delay which had been inexcusable. The solicitors had thereby suffered “serious prejudice”. Indeed the Judge held that justice could no longer be done between the parties. In that respect he said:
For myself, I do not think that justice can still be done in an appropriate way and, if the matter fell to be determined solely by reference to the considerations to which I have so far referred, I would have no difficulty at all in striking the proceedings out. There are, however, real difficulties in this case arising out of [the memorandum].
And also:
On the other hand, if all the facts relevant to the way in which this case will be run were known in June 1998, it is inevitable that the defendant would then have applied to strike the proceedings out and it is likewise inevitable, in my view, that such an application would have been successful.
When referring to the memorandum the Judge described it as containing “an unequivocal assertion by [the firm] that a strike out application would not be made”. He noted that the plaintiff had incurred substantial expenditure on preparations for trial. These matters he regarded as having relevance beyond the conventional matters which arise on strike out applications. We agree they were relevant but we consider that the Judge’s description of the memorandum overstates its true effect. To view it as “an unequivocal assertion” is correct in a limited sense but does not reflect the guarded way in which the firm’s decision not at that point to apply to strike out was conveyed. It is important to note that the firm was saying that it could not “establish sufficient prejudice at this stage”. We agree with Mr Till that a candid statement of that kind should not be regarded as wiping the delay and prejudice slates clean entirely and for all purposes. The Master’s procedural direction that any interlocutory applications should be filed by a certain date could not deprive the firm of its right to rely on all relevant delay and other factors should they subsequently consider a strike out application should be made.
Any expenditure incurred by the plaintiff after such an intimation from the firm, was incurred at the plaintiff’s risk that as a result of his further conduct of the case or prejudice to the firm subsequently occurring or coming to light, a strike out application might be made and might be justified. The plaintiff could not reasonably take the view that he was henceforth insulated from the effects of the previous prejudice and delay. The position is analogous to prejudice resulting to a defendant from delay by a plaintiff within the limitation period. It is inherent in the concept of limitation that a defendant has to live with any such prejudice but, depending always on the circumstances, it may not take much further prejudicial delay after the expiry of the limitation period to create grounds to strike out on the basis of the cumulative prejudice resulting. That is the position in the present case.
There may not have been enough prejudice as at 1 July 1998 for the firm successfully to apply to strike out. That was obviously its perception of the matter and understandably so because a premature application to strike out can often be counterproductive. In the circumstances little further prejudicial delay was needed to tip the balance in favour of the firm. It was of course clearly inherent in the firm’s statement that it could not establish “sufficient” prejudice, that there was some prejudice but in its view not enough.
Mr Hughes-Johnson accepted that his client’s claim was for the loss of a chance; either the chance that Andersons may have paid a sum to get rid of the caveat had it been sustained or to buy off any challenge to its cancellation of the contract; or more substantially, the chance which Mr Collier asserted he had lost of making a profit from the venture had settlement of the transaction been able to be achieved despite the cancellation. Counsel submitted that the firm had clearly been negligent, at least in relation to the caveat, and that the matter should therefore be looked at on the basis that liability was not likely to be a significant issue. Mr Till accepted that but pointed out that in order to prove the value of the chance lost the plaintiff would have to establish, amongst other things, what prospect Mr Collier had of being able to settle had the opportunity to do so been achieved.
In this respect we are of the view that as at 1 July 1998 the firm was entitled to take the stance that the loan offer which Mr Collier had received from a lender of last resort was, in view of its terms, unlikely to have resulted in finance actually becoming available. Thus the firm was entitled at that stage to approach the litigation on the basis that it had a strong defence, which it had expressly pleaded, on this crucial point. It was a defence which was open largely, if not entirely, on the face of the documents which had been discovered, and the way in which the plaintiff’s case was being presented at that time.
A significant new dimension came into this aspect of the case during the process of exchanging briefs. It became apparent that Mr Collier intended to call evidence, not earlier foreshadowed, to the effect that in spite of the terms of the loan offer, he had received a verbal assurance from the financier that the money he was seeking would be advanced. A Mr Turner who worked at the time for the financier, but of whose involvement the firm had hitherto understandably been unaware, stated in his brief that he was confident that the monies would have been advanced. He went into quite considerable detail in support of that assertion. The firm was very sceptical of and naturally troubled by this development, and a corresponding statement by Mr Collier in an affidavit that he, Mr Collier, had had discussions with the financier to the same effect. This too was the first mention of such an assertion.
The firm managed, after difficulties, to contact a Mr Samuel who had been a director of the financier at the relevant time and who had actually signed the loan offer. The other director died in 1990. It was thought that Mr Samuel might be able to shed light on the veracity of what the plaintiff was now asserting. However, he could not remember the transactions at all. We cannot accept the proposition advanced by Mr Hughes-Johnson that the firm should have contacted and briefed him earlier. Until the developments to which we have referred, the firm had no objective need to do so. It was only this significant development in the way the plaintiff’s case was to be put on the financing front which made it necessary for the firm to contact Mr Samuel. It is fair to the Judge to say that this aspect of the matter appears to have assumed much greater prominence in this Court than in the High Court. We consider this development of the plaintiff’s case must be regarded as occasioning significant additional prejudice to the firm. It introduced an important oral dimension into a case which is already 15 years old. The firm is materially disadvantaged in that a potentially important witness cannot now recall the relevant events.
The foregoing point would be sufficient on its own to justify striking out the plaintiff’s claim. There is, however, the further point that the plaintiff has continued to move in what, in the context, can only be described as a dilatory fashion. Against the whole background of delay, the need for the firm to obtain the “unless” order in relation to compliance with the Master’s order of 3 August 1998 is extraordinary. The plaintiff's failure to supply its briefs on time is also in context inexcusable. While we can understand the explanations for these defaults they must be regarded as wholly inadequate in the circumstances. If ever there was a case for pulling out all the stops from mid 1998, it was this one.
We are mindful that the Judge’s decision was a discretionary one. We are, however, in the end, brought to the conclusion that he came to a conclusion which cannot be justified on an appraisal of all the relevant factors. We agree with the Judge’s conclusion that justice can no longer be done and, for the reasons given, we are unable to take the view that the memorandum requires that a trial nevertheless take place. The Judge’s assessment that justice could no longer be done is reinforced by the developments in the plaintiff’s case on the financing front.
In the light of these conclusions it is unnecessary to address the cross-appeal and various other matters which were argued. The appeal is allowed. The orders made in the High Court are set aside. In their place we order that the proceeding be struck out for want of prosecution. The firm is entitled to costs both here and below. For costs in this Court we order the respondent Official Assignee to pay the appellants the sum of $5000 plus disbursements including the reasonable travel and accommodation expenses of counsel, to be fixed if necessary by the Registrar. Costs in the High Court are to be fixed by that Court in the light of the orders now made.
Solicitors
Young Hunter, Christchurch, for Appellants
Office Solicitor, Economic Development, Auckland, for Respondent
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