Practice and procedure - Springing order - Delays by the plaintiff - Failure to comply with Court orders

(This judgment was delivered orally on 28 May 2014 and has been edited for grammar and syntax.)

1 The defendant, Cliffs Asia, applies for a springing order. The springing order is sought on the basis of delays by the plaintiff, Westonia. It is also sought on the basis of Westonia's failure to comply with court orders. [1]

2 This Court has both inherent power and general case management powers in O 4A r 5(1)(e) of the Rules of the Supreme Court 1971 (WA) to make springing orders for reasons the Court 'considers just'. Reasons of justice include violation of orders of the Court as well as a failure to pursue the action with due diligence. Springing orders on both bases were referred to in Dallas Development Corporation Pty Ltd v Western Australian Land Authority,[2] where there had been a six month failure to post security for costs without explanation. As Master Sanderson has recently observed that decision was decided prior to the contemporary, robust approach to case management.[3]

3 The springing order sought in this case is as follows. If Westonia fails to pay $50,000 into the Court as security for Cliffs Asia's costs of the proceeding, which is to be deposited with the Public Trustee for investment:

(i) the substituted statement of claim dated 9 December 2013 be struck out;

(ii) Westonia's claim against Cliffs Asia be dismissed; and

(iii) Westonia pay Cliffs Asia's costs of the action, including reserved costs, to be taxed if not agreed.

4 It is necessary to set out the delays and failure to comply with court orders in this proceeding to explain why this springing order is appropriate.

5 On 5 September 2012, Westonia commenced this action by writ and statement of claim.

6 On 25 September 2012, Cliffs Asia requested further and better particulars of Westonia's claim from Westonia.

7 On 8 October 2012, I admitted this matter to the Commercial and Managed Cases List.

8 On 31 October 2012, I made orders by consent requiring Westonia to file and serve any amended statement of claim, which was to include a response to Cliffs Asia's request for further and better particulars. This was to be done by 14 November 2012.

10 On 20 December 2012, I made orders again by consent requiring Westonia to file a substituted amended statement of claim, including a response to Cliffs Asia's request for further and better particulars. This was to be done by 7 January 2013.

12 On 8 January 2013, Westonia filed a substituted statement of claim. This substituted statement of claim did not completely answer Cliffs Asia's request for further and better particulars.

13 On 31 January 2013, Westonia was placed into voluntary administration and an administrator was appointed.[4]

14 On 26 March 2013, Westonia entered into a Deed of Company Arrangement and a deed administrator was appointed.

15 The parties went to mediation on 9 April 2013. The mediation was adjourned to allow an expert witness report (from an expert, Mr Jones) to be prepared on behalf of Westonia and considered by the parties.[5] By the consent of the parties, the mediation scheduled for 23 July 2013 was adjourned.

16 On 12 July 2013, Mr Peter Quigley was appointed as the new deed administrator of the Deed of Company Arrangement executed by Westonia.[6]

17 At a directions hearing on 28 August 2013 I made orders including the following.

(i) By 18 October 2013, Westonia file any amended statement of claim, which was to include a response to Cliffs Asia's request for further and better particulars dated 25 September 2012.

(ii) By 11 September 2013, Westonia file and serve an expert witness statement of Mr Jones.

19 At a strategic conference on 29 October 2013, I made orders including the following.

(i) By 26 November 2013, Westonia file and serve a further substituted statement of claim, which was to include a response to Cliffs Asia's request for further and better particulars dated 25 September 2012.

(ii) By 19 November 2013, Westonia file and serve the expert witness statement of Mr Gordon Jones.

21 On 5 December 2013, I made orders by consent including the following.

(i) By 6 December 2013, Westonia file and serve a further substituted statement of claim, which was to include a response to Cliffs Asia's request for further and better particulars dated 25 September 2012.

(ii) By 9 December 2013, Westonia file and serve the expert witness statement of Mr Gordon Jones.

23 Westonia did not file its further substituted statement of claim until 9 December 2013. The expert witness statement of Mr Gordon Jones was not filed until 21 January 2014.

24 The substituted statement of claim is said by Cliffs Asia to have substantially changed Westonia's claim because the issue of oversized materials no longer requires expert evidence for determination.[7]

25 The parties returned to mediation on 14 February 2014. They failed to reach a settlement.

26 Mr Quigley, the Deed Administrator, filed by e-lodgment an affidavit late on 26 May 2014, with an email sent to my associate after working hours attaching the affidavit. He says that since the mediation on 14 February 2014 he has 'endeavoured to gain a detailed understanding of the litigation' and considers it prudent to 'undertake a review of the merits of the litigation.'[8] He does not explain why he had not endeavoured to gain this understanding for the previous 7 months since his appointment. Nor does he explain why the parties went to mediation without him having endeavoured to gain a detailed understanding of the litigation.

27 At a directions hearing on 26 February 2014 I made orders staying the proceedings until Westonia pay $50,000 into the Court as security for Cliffs Asia's costs of the proceedings. On that date, a representative of Westonia informed the Court that Westonia needed three months to hold a creditor's meeting in order to obtain money for the security for costs.

28 No payment of security for costs has been made. The Court has not been informed of the consequences of any creditors' meeting. The proceedings have now been stayed for 3 months.

29 Mr Quigley now asserts that he needs to gather further factual information before he can determine whether the litigation has a reasonable prospect of success, or whether it should be discontinued.[9]

30 He informed the court yesterday, by way of his affidavit, that he requires additional time in these proceedings for the following three reasons.

31 First, he intends to make an application to the Court pursuant to s 596B of the Corporations Act 2001 (Cth) to conduct examinations of the employees of Roadswest Engineering Group WA Pty Ltd, the company which supervised and administered the construction contract on behalf of Cliffs Asia.[10]

32 Secondly, he intends to obtain an opinion from senior counsel on the prospects of success of this litigation to determine whether it is in the best interests of the creditors of Westonia to continue.[11]

33 Thirdly, he recently approached the Australian Taxation Office as to whether the ATO will fund the cost of the examinations of Roadswest's employees, the advice from senior counsel, and the litigation to trial. Mr Quigley was advised on 23 May 2014 that an answer from the ATO is likely to take another four weeks.[12] Other matters such as the possibility of litigation funding were raised orally this morning without any affidavit evidence of the prospect or timing of that eventuating.

34 Mr Quigley says that he is unable to provide the Court with an estimate of the time period involved in these three steps outlined above. He does not explain why an opinion from counsel, or senior counsel, has not been sought in nearly a year since his appointment, including prior to a mediation of this case. He does not explain why an application under s 596B, if such an application were thought to be appropriate, has not been made for nearly a year. Nor does he explain why an approach to the Australian Taxation Office, if one were thought to be appropriate, has not been made until recently.

35 The manner in which Westonia has prosecuted this proceeding is wholly unsatisfactory. Westonia has been informed of this on numerous occasions.

36 It is appropriate to make the springing order sought. Westonia should be given six weeks to pay the $50,000 into Court as security for costs. I should add that in light of these matters, Mr Birman, for Westonia, quite properly accepted this morning that a springing order was within the proper exercise of my discretion, although there was dispute about the period for compliance.

37 The conduct of these proceedings has been unacceptable. This matter is not overly complex. But almost 2 years have now elapsed and the matter is not close to trial. Westonia has been warned again, and again, and again, about the delay in these proceedings. Mr Fielding, for Cliffs Asia, also provided affidavit evidence concerning an alleged failure of Westonia's solicitors to confer and communicate with the solicitors for Cliffs Asia. This must change. And affidavits should no longer be provided one or two days before directions hearings.

38 I order that if, by 9 July 2014 (within 6 weeks), Westonia fails to pay $50,000 into the Court as security for the Cliffs Asia's costs of the proceeding, which is to be deposited with the Public Trustee for investment:

(i) the substituted statement of claim dated 9 December 2013 be struck out;

(ii) Westonia's claim against Cliffs Asia be dismissed; and

(iii) Westonia pay Cliffs Asia's costs of the action, including reserved costs, to be taxed if not agreed.

39 Although there was some confusion in written correspondence about the nature of this order, this order does not dismiss Westonia's proceedings for want of prosecution. Nor does it deny Westonia its day in court. It merely requires Westonia to do that which Westonia should have done for almost the last two years. That is, Westonia must prosecute this matter efficiently.

40 I will provide Westonia with liberty to apply in relation to these orders. But it should not be assumed that an application to vary these orders will be successful unless there is compliance with at least the following matters. If Westonia seeks to vary or extend this springing order then it will need to provide evidence that (i) it has acted with serious expedition following these orders, (ii) its solicitors have properly conferred, preferably in person, with the solicitors for Cliffs Asia, (iii) any further delay will not be substantial, (iv) there are good reasons to extend the date at which the springing order takes effect, and (v) any such application is made well in advance of the expiry of 6 weeks.

41 Westonia accepted that it could not resist an order that it pay Cliffs Asia's costs of this directions hearing. These costs should include the costs of Cliffs Asia's preparation of affidavits and submissions, to be taxed if not agreed.

[1] See affidavit of Mr Fielding (26 May 2014) [22].

[2] Dallas Development Corporation Pty Ltd v Western Australian Land Authority [2000] WASCA 49.

[3] Esteem Holdings Pty Ltd as Trustee for the Esteem Trust v Caratti [No 2] [2012] WASC 391 [15].

[4] Affidavit of Mr Quigley (26 May 2014) [2].

[5] Affidavit of Mr Quigley (26 May 2014) [3].

[6] Affidavit of Mr Quigley (26 May 2014) [1].

[7] Affidavit of Mr Fielding (26 May 2014) [12].

[8] Affidavit of Mr Quigley (26 May 2014) [7].

[9] Affidavit of Mr Quigley (26 May 2014) [8].

[10] Affidavit of Mr Quigley (26 May 2014) [8].

[11] Affidavit of Mr Quigley (26 May 2014) [9].

[12] Affidavit of Mr Quigley (26 May 2014) [10].