McLachlan v Geotherm Energy Limited
[2006] NZCA 12
•28 February 2006
IN THE COURT OF APPEAL OF NEW ZEALAND
CA157/05
BETWEENALISTAIR STUART MCLACHLAN AND AVA MARIE MCLACHLAN
First AppellantsANDGEOTHERM ENERGY LIMITED
Second AppellantANDGEOTHERM GROUP LIMITED
Third AppellantANDGEOTHERMAL PRODUCE NEW ZEALAND LIMITED
Fourth AppellantANDGEOTHERM TRANSMISSION LIMITED
Fifth AppellantANDMCLACHLAN INVESTMENTS LIMITED
Sixth Appellant
ANDVECTOR LIMITED
Respondent
Hearing:2 February 2006
Court:William Young P, Hammond and O'Regan JJ
Counsel:S P Bryers and D A Towle for Appellants
P W David and J A Browne for Respondent
Judgment:28 February 2006
JUDGMENT OF THE COURT
AThe appeal is allowed and the judgment of Potter J delivered on 7 July 2005 is set aside.
B The application to strike out the Vector proceedings is dismissed.
CThere is no order as to costs in this Court but the McLachlans are entitled to costs in the High Court on the strike out application, with the costs be fixed in that Court.
REASONS
(Given by William Young P)
Introduction
[1] This is an appeal against a judgment delivered by Potter J on 7 July 2005 in which she struck out proceedings by the appellants (Mr and Mrs Alistair McLachlan and others) against Vector Ltd. The basis of the strike out was the Judge’s conclusion that these proceedings were an abuse of process.
Factual background
[2] This litigation arises out of joint venture arrangements entered into in 1994 between Mr and Mrs McLachlan (on the one hand) and entities associated with Vector Ltd on the other. We note that one of the issues between the parties is whether Vector itself was a party to the joint venture arrangements. The contractual agreements associated with this joint venture were between companies associated with the McLachlans and MEL Network Ltd (“Network”). Network is a wholly owned subsidiary of Vector. For ease of reference, we will henceforth refer to the McLachlans and their associated entities collectively as “the McLachlans”.
[3] The purpose of the joint venture was to develop a geothermal power station near Taupo. To this end, joint venture companies, most particularly for present purposes, Mercury Geotherm Ltd (“MGL”) were set up. The funds for the development were primarily provided to MGL by Network which took security over the assets of MGL.
[4] The joint venture was not a success. The upshot was that Network placed MGL in receivership in December 1998 and its assets were disposed of between December 1999 and January 2000 for a consideration considerably below their cost to the joint venture.
The McLachlans’ claim against Network
[5] The McLachlans sought to prevent Network from appointing receivers and so, in September 1998, they issued proceedings in the course of which they applied for an interim injunction. Despite some initial, albeit qualified, success, the McLachlans were not able to prevent the appointment of receivers. They did, however, persist with their substantive claim against Network. As well, they issued other proceedings against Network under s 174 of the Companies Act 1993. Both claims have been consolidated and we will refer to them collectively as “the Network proceedings”. The broad complaint of the McLachlans throughout has been that Network acted in breach of its obligations under the joint venture arrangements.
[6] The Network proceedings have been prosecuted in a haphazard and unsatisfactory way. The McLachlans have amended their pleadings on a number of occasions. For a significant period of time the McLachlans have been self‑represented. In February 2002, Potter J (who had been managing the litigation since April 2000) made an order that no further interlocutory applications were to be made after May 2002. Despite all the difficulties which have arisen, however, the substantive proceedings remain on foot and are presently scheduled to be tried in October and November this year. In fairness to the McLachlans’ legal advisers (including their present counsel and solicitors who are late starters in this litigation) we should make it clear that we are not seeking to blame the lawyers for the way the case has been prosecuted.
The attempt to join Vector as a defendant in the Network proceedings
[7] The primary reason that the McLachlans wish to claim against Vector is that Network (which is the most logical defendant) may be insolvent and thus not able to meet a monetary judgment.
[8] For a number of years the McLachlans have contemplated suing Vector. They have not, however, pursued a consistent course in this regard.
[9] In a third amended statement of claim which was filed in the Network proceedings on 7 February 2001, the McLachlans purported to seek relief against Vector and two other parties. This was irregular as no order joining Vector and the other two new “defendants” had been obtained. The McLachlans at this time were not represented. They then obtained representation and, on 7 June 2001, they filed (through their new solicitors) a fourth amended statement of claim in which Vector was not named as a defendant.
[10] In August 2003 the McLachlans (who had, by now, instructed other lawyers) applied for the joinder of additional defendants. The proposed additional defendants included Vector and, in the end, the application was prosecuted only in relation to it. On 6 May 2004, there was an adjournment of the hearing of the joinder application on terms which included undertakings from both Network and Vector not to rely on the delay between 6 May 2004 and the determination of the joinder application in relation to limitation defences.
[11] The McLachlans had considered whether it was appropriate simply to issue separate proceedings against Vector rather than seek to have Vector joined as an additional defendant in the Network proceedings. They chose to seek joinder because they saw the factual basis of their claims against Vector and Network as being the same. They made this clear in a memorandum which was filed in the High Court.
[12] The joinder application was opposed by Network and was eventually dismissed by Potter J in a judgment which she delivered on 9 December 2004 (“the joinder judgment”).
[13] In the course of the joinder judgment, Potter J discussed extensively the extent to which the McLachlans’ claims against Vector were subject to limitation defences. Amongst the issues she addressed was whether the application to join Vector could be treated as the bringing of an action for the purposes of s 4(1) of the Limitation Act 1950. She concluded that the joinder application did not stop the limitation period from running and that, allowing for the undertaking referred to in [10] above, the claims against Vector which arose prior to May 1998 were prima facie subject to limitation defences. On the other hand, it was common ground that some of the claims which the McLachlans wished to pursue arose after May 1998 ‑ assuming, of course, that these claims are sustainable. Further, the McLachlans maintained that there were credible bases (including fraud) for arguing that the relevant limitation periods may not have started to run. The Judge was not in a position to reject these arguments as untenable and she accordingly accepted that the claims made by the McLachlans against Vector would not necessarily fail on the basis of limitation defences.
[14] Potter J also discussed, albeit briefly, the merits of the claims against Vector. Although she plainly did not see the claims as particularly cogent, she did not categorise them as incapable of serious argument (or indeed success).
[15] Her primary reasons for dismissing the application related to the delays on the part of the McLachlans. As to this she said:
[39] There would undoubtedly be cost and inconvenience for Network/Vector if Vector were to be joined as a party at this advanced stage of the proceedings. This is not a factor which on its own, in my view, would weigh against the plaintiffs’ application to the extent that it could not be dealt with by appropriate awards of costs, as matters developed. Nevertheless I accept that there is prejudice inherent in a situation where any party, which has to go about its business, plan for the future, cope with a rapidly changing and ever challenging marketplace and be responsive to its shareholder, has hanging over it the threat or possibility of substantial legal proceedings, with inconsistent indicators being delivered from time to time as to whether it may/will/will not, be joined in those proceedings. Parties against whom legal proceedings are issued, are entitled to have them pursued and determined without undue delay.
…
[69] It is inevitable therefore that if the Court were to exercise its discretion in favour of the joinder of Vector, an already complex proceeding against Network as first defendant would become infinitely more complicated and infinitely more drawn out, calling no doubt for even more extensive discovery than has been sought to date, and for even more detailed evidence from witnesses than will be required in relation to the existing causes of action against Network, which do not give rise to the need for factual findings relevant to the availability of limitation defences.
[70] I have summarised … the long history of this case, and the considerable indulgences that have been granted to the plaintiffs in order to ensure that they had full opportunity to pursue their claims and to fully plead their case against such defendants as they thought fit. Their failure to proceed with anything approaching reasonable expedition has now placed them in a situation in respect of their application to join Vector more than six years after the proceeding was commenced, at being at risk of limitation defences, assuming their causes of action were otherwise sustainable. That is not a predicament that should be visited upon Network in this proceeding. The causes of action against Network have been pleaded and repleaded and are currently pleaded in the fourth amended statement of claim. Discovery has been given; the plaintiffs have yet to undertake inspection. The matter should proceed to hearing without any further avoidable delay.
[71] … In the light of the history of the case and given the undoubted complexities and consequent delays, that the joinder of Vector would introduce, I conclude that the Court’s discretion should be exercised against the joinder application.
[16] She concluded her judgment by saying:
[77] If the plaintiffs consider that they have viable causes of action against Vector, then they will need to pursue them in separate proceedings wherein the difficult and no doubt contentious issues surrounding the limitation defences which may be available to Vector, can be developed and determined.
Steps taken by the McLachlans after the joinder judgment
[17] The McLachlans filed an appeal with this Court against the joinder judgment. They also commenced separate proceedings against Vector which they applied to consolidate with the Network proceedings. We will refer to the claim against Vector as “the Vector proceedings”.
[18] Vector responded with a strike out application alleging abuse of process. Both Vector and Network, however, accept that if the Vector proceedings cannot be struck out they ought to be consolidated with the Network proceedings. So if the McLachlans are able to resist, successfully, Vector’s strike out application they could thereby achieve, in large measure, the result which they had sought unsuccessfully in the joinder application. We say “in large measure” because the limitation questions which will arise in relation to the Vector proceedings will not necessarily be exactly the same as those which would have arisen had the joinder application been successful.
[19] Potter J was not prepared to advance Vector’s application to strike out the proceedings against it until the appeal against the joinder judgment had been determined. This meant that the Vector proceedings were in effect in abeyance while the appeal against the joinder judgment was unresolved. This prompted the McLachlans to abandon their appeal against the joinder judgment. Their decision to do so seems to have been driven by the following considerations:
(a)Concerns on their part as to various permutations as to how limitation issues would fall to be determined depending on how and when the appeal was determined.
(b)A desire to retain a fixture for the hearing of the Network proceedings (then scheduled for November 2005).
(c)Their view that [77] of the joinder judgment was an invitation to issue separate proceedings.
[20] With the appeal against the joinder judgment disposed of, Potter J was prepared to and did hear the strike out application in the Vector proceedings and this in due course led to the judgment which is now under appeal.
The judgment under appeal
[21] The decision by the Judge to strike out the Vector proceedings was primarily on the basis that delays by the McLachlans in respect of the Network proceedings and, particularly, in relation to the proposed joinder of Vector meant that the Vector proceedings are an abuse of process. On this point the Judge’s reasoning is summarised in the following portion of her judgment:
[82] There is no doubt that the plaintiffs have paid insufficient regard to the due processes of the Court. There have been lamentable delays, and the consequence for parties affected by the litigation has been at least inconvenience, frustration and expense. The ultimate issue is whether the plaintiffs’ delays are not only a matter of cost and inconvenience but constitute an abuse of process.
[83] I found in the joinder judgment that the explanations for delay proffered by the plaintiffs were unconvincing given the significant delay. I have noted that this is major commercial litigation – the transactions to which the causes of action relate were major commercial undertakings in which the parties were entitled to look to each other and the Court for the efficient, expeditious and just resolution of disputes. I have referred to the pre-contractual negotiations which are put in issue by the claims against Vector and that memories dim over such a passage of time for those such as the Network/Vector witnesses who have moved on from Vector and these events. I have rejected Mr McLachlan’s assertions that he was unaware of the steps required to join a defendant and have found as a fact that by 2001, and probably earlier he had decided he wished to join Vector, had taken legal advice and knew generally the steps required. But he did not take those steps in anything like a timely fashion.
[84] Now, were this action to proceed, Vector would be obliged to defend multiple causes of action of questionable merit, plead and argue limitation defences which would be factually and legally complex, and confront the plaintiffs’ foreshadowed responses to the potential limitation defences which raise serious unparticularised allegations including fraud. If Vector was to be joined as a defendant, it was entitled to know much sooner and to have the opportunity to prepare for a case which did not have all the additional complexities which delay has now attached to this proceeding.
[85] Further, in light of the clear notice that Vector itself ensured was conveyed to the plaintiffs per memoranda filed in Court as to the processes involved in joinder, and that an application for joinder would be opposed, Vector was entitled to infer from the plaintiffs’ inaction until August 2003, that the plaintiffs did not intend to proceed against Vector.
[86] Weighing all these considerations and addressing the overriding consideration whether justice can be done despite the considerable delays that have occurred, I am drawn to the conclusion that it cannot. The delays in this case go well beyond failure to meet case management timetables. They give rise to unfairness. Therefore the factor of delay supports a conclusion of abuse of process.
[22] She also concluded that the commencement of the claim against Vector was a collateral attack on the joinder judgment. This conclusion, at least at first sight, might be thought to be inconsistent with what the Judge had said in [77] of the joinder judgment. On this issue Potter J observed:
[95] I observe that this statement [ie the one in [77]] followed a conclusion … that there were considerable hurdles for the plaintiffs to overcome in the causes of action they sought to plead against Vector which was not a factor that told in favour of joinder in all the circumstances of the case. Para [77] merely stated an alternative, which at that stage seemed to me unlikely to commend itself to the plaintiffs as I did not read the 6 May 2004 undertaking by Network and Vector for a standstill in the limitation period, as applying outside the Network proceedings. The alternative had apparently been considered and rejected by the plaintiffs in favour of the joinder application … .
[96] There is no basis for treating [77] of the joinder judgment as “an invitation” as the plaintiffs chose to describe it. Nor can it be treated as predictive of the Court’s view of or in respect of this proceeding nor of the strike-out application. The strike-out application and the plaintiff’s opposition to it, must be treated on their merits.
[23] On the collateral challenge point, she concluded:
[99] It was always open to the plaintiffs to issue separate proceedings against Vector and to seek consolidation. This was a course obviously contemplated by the plaintiffs, and rejected in favour of the joinder application. But the step now taken to proceed against Vector and to seek consolidation has to be viewed in the context of the unsuccessful joinder application because it seeks, after all, to effect exactly the same outcome as was sought in the unsuccessful joinder application. For that reason, these proceedings constitute an abuse of process.
[24] Potter J also discussed the merits of the McLachlans’ claims against Vector, including their ability to overcome limitation defences. On the limitation issue, she observed:
[109] In the context of this strike-out application the main relevance of the plaintiffs’ proposed responses to the limitation defences is that they would cause Vector to be exposed to serious allegations of bad faith, fraud and commercial conspiracy by members of its Board and its executives over the period of the joint venture. This proceeding against Vector issued outside the generally applicable limited period, i.e. more than six years after the events to which it relates and more than ten years after many of the relevant events, raises not only very difficult and complex limitation issues both legally and factually, but would expose Vector to unparticularised allegations of the most serious kind in defence of which it would [be] obliged to endeavour to call upon more than a decade of memory of its former Board members and executives who were allegedly participants in the misconduct asserted by the plaintiffs. I accept that these are matters prejudicial to the defendants and their ability and right to receive justice in the case.
[110] Thus, the existence of potential limitation defences, and the prejudice that would be caused by the plaintiffs’ response to those limitation defences, are both factors supporting a conclusion that this proceeding constitutes an abuse of process.
[25] On the merits she had these comments to make:
[115] Beyond those general observations it is unnecessary to examine the merits of the competing submissions on the strength of the plaintiffs’ case. This is not a case where the causes of action are clearly so untenable that they cannot possibly succeed such as to provide grounds for striking out: R Lucas & Son (Nelson Mail) Ltd v O’Brien [1978] 2 NZLR 289; Takaro Properties Ltd (in rec) v Rowling [1978] 2 NZLR 314. On the other hand, it is far from a situation where the plaintiffs’ case against Vector [is] so patently strong that the interests of justice require that the action proceed notwithstanding other factors which may weigh in favour of strike-out.
[26] She then concluded her judgment in this way:
[116] There are three dominant factors which support a conclusion of abuse of process: delay, collateral attack on the joinder judgment, and the availability of limitation defences coupled with the prejudice that would flow from the plaintiffs’ responses to them. I have dealt in turn with each of these factors.
[117] There are other factors including that the plaintiffs’ case as pleaded is not strong; that the plaintiffs’ pleadings have lacked particularity and the causes of action have been frequently repleaded; that there is inherent prejudice for a defendant to major commercial litigation of this kind in the impact on its day to day commercial activity.
[118] Abuse of process can in an extreme situation persuade the Court that it should exercise its power to strike out proceedings to avoid the administration of justice being brought into disrepute. The categories in which abuse of process might arise are not limited but delay is a category which has not infrequently been before the Court. In this case in addition to inexcusable delay there are the other factors I have summarised. Although the jurisdiction to strike out must be exercised sparingly and only in a clear case, I am satisfied that this is such a case.
The appeal
[27] New Zealand law recognises a doctrine of res judicata, which applies only between the parties to the particular proceedings. The doctrine cannot be invoked by, or against, a person who was not a party to the proceedings in which the judgment relied upon was given. There are perfectly good reasons for limiting the res judicata rules to the parties, but the results of such a limitation are not always satisfactory. There can be situations where allowing a party to raise arguments against a stranger, which had been decided against that party in earlier proceedings, could result in unjustified inconsistencies between the findings of different courts or undermine public confidence in the general administration of justice. This has led to the evolution of a principle against collateral attack on the correctness of a subsisting judgment of the trial court on a contested issue by what in substance would be a re‑trial of the same issue.
[28] That public policy finds expression in the exercise of the discretionary jurisdiction to prevent an abuse of process. The Court may exercise its discretion to restrain a party from advancing against a stranger an argument that is inconsistent with an earlier judgment, but if, and only if, the Court concludes that in the circumstances of the particular case it would be unjust to allow the party to do so. The jurisdiction is exercised in order to prevent parties from functionally challenging court decisions that went against them in earlier proceedings. First, however, it must be established that a collateral attack is involved; the second question is then whether justice requires that the party in question should be prevented from advancing an inconsistent case.
[29] The discretion to prevent collateral attacks on a court decision also provides a trial court with a useful case management tool, particularly in the context of the control of multi-party litigation. The concern here is to get determination of a common issue, and the object of such court management is to decide the common issue in one set of proceedings for the benefit of all actions.
[30] The speech of Lord Diplock in Hunter v Chief Constable of the West Midlands Police [1982] AC 529 shows that the courts primarily resort to principles of abuse of process in circumstances where the impugned proceedings are not in obvious breach of relevant procedural rules and that, necessarily, the circumstances in which abuse of process will be found are not confined to “fixed categories”. It follows that the underlying principles are open-textured. They nonetheless fall to be determined and applied in a context which includes existing rules as to limitation and procedure, customary litigation practice (and associated legitimate expectations) and a respect for the right of access to the courts.
[31] Potter J was not persuaded that the claim against Vector would necessarily fail (either on the merits or by reason of insurmountable limitation defences). Before us, Mr David did not seek to argue that the claim could be categorised as hopeless at this stage of the proceedings. So, whatever difficulties the claim by the McLachlans against Vector faces - and they are real enough - the proceedings have not been shown to be devoid of merit. The case is thus not within r 186(a) of the High Court Rules because it has not been shown that the statement of claim discloses no reasonable cause of action. Further, Vector has not sought summary judgment. Accordingly the weaknesses in the claim which have been identified do not in themselves warrant a strike out.
[32] The Courts do not strike out for pre-commencement delay (and associated prejudice) proceedings which have been commenced within the time limits specified by the legislature, see for instance Lovie v Medical Assurance Society New Zealand Ltd [1992] 2 NZLR 244 (HC) at 250 per Eichelbaum CJ. It was for this reason that the House of Lords, in Birkett v James [1978] AC 297 held that, with very limited exceptions, proceedings should not be struck out for delay if a fresh action could be commenced within the limitation period. In the wake of the Woolf reforms, Birkett v James no longer represents completely contemporary English and Welsh practice, see for instance Arbuthnot Latham Bank Ltd v Trafalgar Holdings Ltd [1998] 1 WLR 1426 (CA). It nonetheless remains part of New Zealand law, see Bank of New Zealand v Savril Contractors Ltd [2005] 2 NZLR 475 (CA).
[33] If the Vector proceedings which were commenced in December 2004 had come entirely out of the blue (ie without the background of the Network proceedings), neither the perceived weaknesses of the case nor the pre‑commencement delay and associated prejudice to Vector would have warranted a strike out.
[34] A feature of this case, much stressed by Mr David, is the reality that if the McLachlans can persist with the claim against Vector they will have achieved a result which is at least similar to what they were seeking on their joinder application. He maintained (and Potter J accepted), that this meant that the Vector proceedings involve a collateral attack on the joinder judgment.
[35] Proceedings which involve a collateral attack on a final judgment are properly regarded as an abuse of process. Hunter was such a case. But this applies only where the first judgment can be fairly categorised as “final”, see Spencer Bower, Turner and Handley, Res Judicata (3 ed 1996) at [447]. Interlocutory judgments are usually insufficiently final to give rise to estoppels. An interlocutory order may be varied or rescinded if shown to be wrong (see what is now r 259 of the High Court Rules). Orders associated with the “management of proceedings” may be varied if circumstances change (see r 260). A party who has failed on an interlocutory application may apply again for the same or a similar order providing the leave of the Court has been first obtained (see r 262). We accept that, in some cases, decisions which are ostensibly interlocutory may nonetheless be treated as “final”, see for instance Joseph Lynch Land Co Ltd v Lynch [1995] 1 NZLR 37 at 40 - 41 per Tipping J and McGaveston v New Zealand Permanent Trustees Ltd CA23/02 11 December 2002. But the conclusion that an interlocutory decision is “final” requires careful analysis of what was actually decided and why that decision, despite review opportunities, should be seen as final.
[36] In matters of procedure there is often more than one way forward.
[37] A party to litigation who wishes to pursue a related claim against a non-party may seek to join that non-party in the existing proceedings or may instead issue separate proceedings. Where separate proceedings are issued, they may or may not be consolidated with (or in some less formal way be heard at the same time as) the initial proceedings. In the past it was not uncommon for a defendant who had been refused leave to issue a third party notice (perhaps because this would disrupt a scheduled trial) to issue separate proceedings. We are not aware of this course ever being regarded as an abuse of process.
[38] This approach has not been confined to situations which are directly analogous to the present circumstances. A plaintiff who had been refused an adjournment of a trial was, until recently, perfectly entitled to elect a non-suit and in this way secure, at least in substance (although with adverse costs consequences) the adjournment which had been declined. It was never suggested, to our knowledge, that a plaintiff who had elected a non-suit and had paid the costs was acting in abuse of process in going to trial a second time. Further, a party declined particulars on the basis that what is sought involves interrogatories may seek to obtain the same information by way of interrogatories (and vice versa). In this context it does not matter that the result achieved the second time around is substantially the same as was sought on the first unsuccessful application.
[39] We cannot discern an issue which was finally resolved by Potter J’s joinder judgment and is under collateral attack in the Vector proceedings. All that the Judge determined in the joinder judgment was that Vector should not be joined a defendant in the Network proceedings. That decision was susceptible to review under the High Court Rules. It did not absolutely preclude a further application for joinder. Further, that decision did not proceed on the basis that the claim against Vector was hopeless. In that context there is no inconsistency between the commencement of the Vector proceedings and the joinder judgment and thus the commencement of those proceedings does not involve a collateral attack on the joinder judgment in the relevant res judicata and/or abuse of process sense.
[40] If the Vector proceedings are consolidated with (or perhaps heard at the same time as) the Network proceedings, the result in terms of the way in which both sets of proceedings are tried will presumably be very similar to what would have happened if the joinder judgment had gone the other way. But given the general litigation practice in relation to procedural rulings, we do not see that as involving an abuse of process.
[41] We are aware of the explanation given by the Judge in the judgment under appeal for what she said in [77] of the joinder judgment (see [22] above), but, with respect, there is nothing in [77] of the joinder judgment to suggest that she then envisaged that separate proceedings against Vector would be an abuse of process. This paragraph plainly proceeds on the basis that the Judge then identified no procedural objection to separate proceedings being commenced.
[42] In that context, it seems to us to be unfair for the McLachlans to be apparently invited, in [77] of the joinder judgment, to issue separate proceedings, to be then denied the right to proceed with those separate proceedings while their appeal against the joinder judgment was pending (see [19] above) and, when that appeal was then abandoned, to have their Vector proceedings (by now the only practical mechanism by which a claim against Vector could be prosecuted) struck out as an abuse of process on grounds that include the conclusion that they were illegitimately collaterally challenging the joinder judgment.
[43] We accept that proceedings which are not obviously devoid of legal or factual merit, are within (or cannot be shown to be outside) the relevant limitation period and are not barred by the strict principles of res judicata may nonetheless be struck out as an abuse of process by reason of the plaintiff’s conduct in associated litigation. That this is so is apparent from Reid v New Zealand Trotting Conference [1984] 1 NZLR 8 (CA) and New Zealand Social Credit Political League Inc v O’Brien [1984] 1 NZLR 84 (CA). Those cases involved attempts by plaintiffs to have what was in effect a second (or third) shot in relation to complaints or allegations which had already been the subject of substantive hearings and final judgments. In each case the further proceedings were not excluded on strict res judicata principles but were nonetheless rightly seen in this Court as being in abuse of process. These cases, however, are not directly relevant in the present context as here there has been no final adjudication.
[44] We accept that Judges can insist on a reasonable measure of control as to how parties litigate. We think it may well be open to a Judge to require a plaintiff in major commercial litigation to identify in a timely way all proposed defendants and to ensure that proceedings against those defendants are commenced in a manner that enables them all to be dealt with expeditiously and fairly. Where there has been such a requirement, the issue by the plaintiff of separate proceedings against a different defendant but arising out of the same dispute might be an abuse of process particularly if the effect (and especially if the purpose) is to derail case management programmes associated with the primary litigation.
[45] In saying this we think it right to recognise that it would be a strong step for a Judge to impose upon a plaintiff time limits for the commencement of proceedings which differ from those which the legislature has provided in the Limitation Act 1950.
[46] If such a step is to be taken we think it should be on a prospective basis, ie with the cut off date being specified well in advance and the plaintiff being given a fair opportunity to commence proceedings before that date rather than, as here, retrospectively, after the further proceedings have been commenced. As well, flexibility is required. For instance, if the primary and obvious defendant asserts possible insolvency, this is likely to prompt the plaintiff to cast around for other defendants. We do not know if and when it was first suggest that Network might not be good for the monetary judgment or if and when Vector indicated that it would not stand behind its subsidiary but we note that problems of this sort might warrant reconsideration of a timetable order. Such orders are, of course, always open to review under r 260 of the High Court Rules.
[47] At no time were the McLachlans put on direct notice that there was a time limit for the commencement of proceedings against Vector other than that provided by the general law. Their decision to abandon the appeal against the joinder judgment must, logically, have been affected at least to some extent by what the Judge had said in [77] of her joinder judgment which plainly envisaged at least the possibility of a separate claim. The Vector proceedings are not an attempt to derail existing proceedings or interfere with their orderly disposition.
[48] We have so far dealt with, on an individual basis, the reasons why the Judge found that the Vector proceedings were an abuse of process. It is, however, right to look at the totality of the considerations to which she referred. This Court in Reid very much acted on the basis of a totality approach.
[49] Before expressing a view on this aspect of the case, there are some other factors to which we think it right to refer:
(a)The proceedings against Network were commenced promptly and given the substantial identity between Network and Vector, Vector has been on notice from the outset of the substance of the allegations made (although of course not the various bases upon which the McLachlans maintain Vector is responsible for what ostensibly are liabilities of Network).
(b)Although there have been appreciable and unacceptable delays on the part of the McLachlans, there are some mitigating considerations, a substantial award of security for costs made in February 2002 which was later significantly reduced on appeal by the McLachlans to this Court and impecuniosity of the McLachlans (which the McLachlans attribute to the defaults of Network/Vector) leading to their self representation.
(c)The proceedings have never gone to sleep.
(d)There has been nothing in the nature of contumelious misconduct by the McLachlans in relation to the Network proceedings.
[50] For the reasons just given as well as the reasons given individually in relation to each of the areas of complaint identified by the Judge, we are satisfied that the Vector proceedings ought not to have been struck out as an abuse of process.
Disposition
[51] The appeal is allowed. The judgment of Potter J delivered on 7 July 2005 is set aside. The application to strike out the Vector proceedings is dismissed.
[52] In this Court there will be no order for costs given that the McLachlans have, in a related appeal been unsuccessful. The McLachlans, however, are entitled to costs in the High Court on the strike out application, with the costs to be fixed in that Court.
Solicitors:
Martelli McKegg Wells & Cormack, Auckland for AppellantsWilson Harle, Auckland for Respondent
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