Barton v Atlantic 3-Financial

SUPREME COURT OF QUEENSLAND

CITATION: Barton v Atlantic 3-Financial (Aus) Pty Ltd & Anor [2010] QCA223

PARTIES: NATHANIAL KELBURN DUNBAR BARTON (plaintiff/appellant) v ATLANTIC 3-FINANCIAL (AUST) PTY LTD ACN 056 262 723 (DEREGISTERED) (first defendant/first respondent) ATLANTIC 3 FUNDS MANAGEMENT LIMITED ACN 092 110 097 (second defendant/second respondent)

FILE NO/S: Appeal No 1295 of 2010 / SC No 6621 of 2003

DIVISION: Court of Appeal

PROCEEDING: General Civil Appeal

ORIGINATING COURT: Supreme Court at Brisbane

DELIVERED ON: 24 August 2010

DELIVERED AT: Brisbane

HEARING DATE: 17 August 2010

JUDGES: Muir and White JJA and Mullins J / Separate reasons for judgment of each member of the Court, each concurring as to the orders made

ORDERS: **The appeal be allowed;****The order of 4 February 2010, except insofar as it relates to costs, be set aside;****The proceedings be reactivated;****The second respondent pay the appellant’s costs of the appeal;**The second respondent be granted an indemnity certificate under s 15 of the Appeal Costs Fund Act 1973 (Qld).

CATCHWORDS: PROCEDURE – SUPREME COURT PROCEDURE – QUEENSLAND – PROCEDURE UNDER RULES OF COURT – JUDGMENTS AND ORDERS – OTHER MATTERS – primary judge refused appellant’s application for reactivation of proceedings – Supreme Court Practice Direction No. 4 of 2002 paragraph 5.4 outlines the procedure for reactivating a matter that has been deemed resolved – whether primary judge erred in failing to correctly identify the principles or factors relevant to the exercise of the discretion under the Practice Direction – whether exercise of primary judge’s discretion miscarried – whether Court should exercise discretion afresh / APPEAL AND NEW TRIAL – APPEAL - PRACTICE AND PROCEDURE – QUEENSLAND – APPEAL COSTS FUND – POWER TO GRANT INDEMNITY CERTIFICATE – GENERAL PRINCIPLES AS TO GRANT OR REFUSAL –second respondent sought to apply for an indemnity certificate under s 15(1) Appeal Costs Fund Act 1973 (Qld) – whether indemnity certificate should be granted / Appeal Costs Fund Act 1973 (Qld), s 15 / Uniform Civil Procedure Rules 1999 (Qld), r 5, r 389 / Aon Risk Services Australia Limited v Australian National University (2009) 239 CLR 175; [2009] HCA 27, cited / Holdway v Arcuri Lawyers (A Firm) [2008] QCA 302, cited / Mitchell v Pacific Dawn P/L [2003] QCA 526, cited / Multi-Service Group Pty Ltd (in liq) & Anor v Osborne & Anor [2010] QCA 72, applied / Sali v SPC Ltd (1993) 67 ALJR 841; [1993] HCA 47, cited

COUNSEL: D A Savage, with P D Tucker, for the appellant / T Matthews for the respondents

SOLICITORS: Malcolm Johns & Company for the appellant / Cusack Galvin & James for the respondents

1. MUIR JA: The appellant plaintiff appeals against an order of the primary judge made on 4February 2010 dismissing with costs the appellant's application, pursuant to Practice Direction 4 of 2002, to reactivate the proceedings.

2. In her ex tempore reasons the primary judge stated that the principles relevant to the determination of an application to reactivate a proceeding which had been deemed resolved by operation of the practice direction were those propounded by her in Multi-Service Group Pty Ltd (In Liquidation) & Ors v Osborne & Ors¹ and Arc Holdings Pty Ltd v Riana Pty Ltd.²

3. The primary judge summarised the matters which were required to be addressed on the hearing of such an application as including:

"1.The conduct of the litigation prior to directions being given: which may include how long ago the events in the alleged statement of claim occurred, what delay there was before the litigation was commenced, how long ago the litigation was commenced or causes of actions were added, and whether or not the litigation has been characterised by periods of delay;

What explanation is provided for the failure to comply with the directions which has led to the matter being deemed resolved, and whether the failure to comply with Court directions is attributable to the plaintiff, the defendant or both the plaintiff and the defendant or their legal representatives;

Whether or not the failure to comply with directions has resulted in prejudice to the defendant leading to an inability to ensure a fair trial;

How far the litigation has progressed and how close it is to trial;

What prospects the parties have of success in the action. A plaintiff must be prepared to show that it has sufficient prospects of success and, where relevant, a defendant that it has sufficient prospects of defending the action, that the litigation should be allowed to continue. If the case is not one needing judicial determination, then there is, as I have said previously no point in reactivating it."

4. Her Honour concluded that: the appellant's delay in prosecuting the proceedings had been "egregious, and … insufficiently explained"; (inferentially) the delay would cause prejudice to the second respondent; the proceedings had not progressed substantially; the second respondent would have difficulty obtaining summary judgment and the appellant had "comprehensively failed to comply with its (sic) implied undertaking to prosecute his claim expeditiously".

5. The construction of the practice direction and the correct approach to the exercise of the court's discretion on applications for reactivation were explained as follows by the Court in Multi-Service Group Pty Ltd (in liq) & Anor v Osborne & Anor:³

"[43]… There was no application by the respondents under rr 280, 371 or 374 and the primary judge (assuming she had power to do so) did not call on the appellants to show cause why the proceedings should not be set aside under r 371. Consequently, there being no serious question that the appellants lacked an arguable case, the focus of the primary judge on the application for reactivation should have been on the matters identified in paragraph 5.4 of the Practice Direction, namely, whether the appellants had:

(a)explained and justified the circumstances in which the proceeding was deemed resolved; and

(b)prepared a plan to facilitate its timely determination.

[44]The nature and extent of the explanation and justification of the circumstances which led to the deemed resolution are, of course, relevant to, but not determinative of the exercise of the discretion to reactivate. That discretion needs to be exercised consistently with the objectives of the Practice Direction. The focus of the Practice Direction is on the timely disposition of proceedings, not on their retention by means of a de facto stay: its objectives could not be served by allowing the proceedings to linger indefinitely in the twilight zone of 'deemed resolution'."

6. The Court had said earlier:

"[40]The deemed resolution of a proceeding may be contrasted with a process under the Rules which brings the proceeding to an end with the consequence that parties' rights and obligations are permanently affected. Such processes include:

• the dismissal of proceedings for want of prosecution (r 280)

• judgment by default (rr 283 – 288)

• summary judgment (rr 292, 293)

• an application to set aside all or part of a proceeding for failure to comply with the Rules (r 371).

[41]The Practice Direction does not purport to establish another mechanism extraneous to the Rules for concluding proceedings. Rather, it is apparent from its terms and, in particular, paragraphs 1.3, 5.1 and 6.2, that its provisions are intended to be utilised in conjunction with the Rules. The Practice Direction's character as a case management tool is further recognised by its inapplicability to proceedings on the Supervised Case List and the Commercial List and by the provision in paragraph 6.2 that non-compliance with the Practice Direction or directions under it may 'on the application of a party, or at the court's own initiative' result in an order pursuant to r 371(2)."

7. In my respectful opinion the exercise of the primary judge's discretion miscarried as a result of undue focus on past delay and the giving of insufficient consideration to the appellant's prospects of advancing the proceedings in a timely way. Consequently, this Court is required to exercise the discretion afresh. Counsel for the appellant argued in their outline of argument that the primary judge had erred by giving undue weight to case management principles at the expense of "determining where justice lies". The justice of the case was said to be found by "examining the relevant, and quite unique, factual matrix to the application". In oral submissions a different approach was adopted. Senior counsel for the appellant focussed his attention on: the absence of any incentive for the appellant to activate these proceedings as long as the first respondent (A3F) and the second respondent (A3FM) were not actively pursuing him in proceedings in the Supreme Court of New South Wales; the respondents' own inertia in the proceedings which suited their convenience and the appellant's present resolve to have these proceedings transferred to New South Wales and concluded.

8. Before considering the merits of the appellant's submissions it is desirable to summarise the facts. A3F lent the appellant $278,900 on the security of a mortgage over his farm in Wellington, New South Wales, in August 1999. In about November 1999, the appellant guaranteed the obligations of Loawave Pty Ltd under a Deed of Loan between it and A3F and gave A3F a second mortgage over his farm to secure his obligations to A3F in that regard. The two mortgages became assets of an unregistered management investment scheme known as the Barton Scheme.

9. The appellant alleges that A3F breached its obligations under the Loawave Deed of Loan causing Loawave to default and that A3F sold Loawave's property at under value. Loawave also alleged that its default was caused by a breach of the Deed of Loan by A3F and that it suffered loss in consequence of the breach.

10. The appellant defaulted under the first mortgage and commenced proceedings in New South Wales (the NSW proceedings) against A3F, Loawave and another to set aside the Deed of Loan. A3F counter-claimed in respect of the two mortgages. The NSW proceedings were compromised on terms that the appellant pay A3F $420,000 and that the appellant consent to the dismissal of the NSW proceedings against A3F.

11. In May 2003 Loawave assigned its rights against A3F to the appellant who commenced these proceedings claiming in his own right and as Loawaves' assignee.

12. The appellant contended that the terms of the offer "to compromise this action as against [A3F]" which was accepted by A3F in June 2003 left it unclear whether or not the compromise encompassed A3F's counter-claim. He also alleged that he was not bound by the compromise agreement, as A3F and subsequent assignees of A3F's rights could not procure the release of the mortgages which was a requirement of an express or implied term of the compromise.

"Speed and efficiency, in the sense of minimum delay and expense, are seen as essential to a just resolution of proceedings."

Their Honours had earlier⁵ implicitly approved the observation of Toohey and Gaudron JJ in Sali v SPC Ltd⁶ that case management reflected:

"[t]he view that the conduct of litigation is not merely a matter for the parties but is also one for the court and the need to avoid disruptions in the court's lists with consequent inconvenience to the court and prejudice to the interests of other litigants waiting to be heard …"

25. The inactivity of A3F and A3FM and the fact that it served the purposes of A3F and A3FM that the Queensland proceedings lay dormant would be relevant to an application to strike out the proceedings for want of prosecution. As A3FM was complicit in the delay in the prosecution of the proceedings, it would not be ideally placed to rely on prejudice to it as a result of the delay in any application to dismiss the proceedings for want of prosecution. To the extent that an applicant's past delay is relevant on an application for reactivation, similar considerations would apply.

26. Counsel for A3FM accepted that the primary judge had taken an approach to the determination of the reactivation application which was inconsistent with the decision in Multi-Service Group. He argued forcefully, however, that the conclusion reached by the primary judge was correct as:

(a) Reactivation of the proceedings would not enable the appellant to take a step in the proceedings unless the appellant obtained leave of the Court under r 389;

(b) The explanation given by the appellant for delay was unsatisfactory;

(c) A3FM was prejudiced by the extensive delay in the proceedings;

(d) The proceedings had not been advanced to the point at which a statement of claim against A3FM had been delivered;

(e) The appellant had not proposed a plan to facilitate the timely determination of the proceedings.

27. Some of these matters, and in particular the prejudice allegation which has already been discussed, go more to the merits of an application for dismissal for want of prosecution, which application could have been brought but was not. It is correct that the proposal put forward by the appellant for the timely determination of the matter leaves much to be desired, but there was a proposal. The appellant, as I have said, swore to having retained senior and junior counsel "in order to facilitate a timely determination of the matter". He also swore to an intention to "actively prosecute" the proceedings and there was no reason to doubt counsel's assertion at first instance that he held instructions that an application for cross-vesting of the matter was to be made.

28. Counsel for the respondent candidly informed the Court that his client had no interest in having the proceedings progressed. The Court, however, does have an interest in the timely disposition of proceedings and that is the focus of the practice direction. The fact that an application under r 389 may be needed to enable the appellant to take a step in the proceedings would not appear to have much bearing on the exercise of the court's discretion unless, perhaps, it was apparent that such an application would be futile. That can hardly be said to be the case here. The evidence does not suggest that the appellant does not have an arguable case. The appellant explained his delay. The fact that the explanation did not amount to a justification is not a bar to reactivation. The fact that a statement of claim against A3FM had not been filed and served by the time of the hearing at first instance is not of much significance. The appellant was prevented from taking a step in the proceedings and his counsel explained to the primary judge that the pleading against A3FM would not differ substantially from the statement of claim against A3F. He explained the way in which it would differ.

29. While it would be within the sound exercise of the discretion of a judge exercising a hearing an application for reactivation to require a party in the position of the appellant to put forward a more precise timetable for the finalisation of the litigation and to produce a draft properly particularised statement of claim and any affidavits he proposed to rely on in support of any cross-vesting application, I am of the view that the better, and most cost effective, course is to order that the proceedings be reactivated and that the appellant make application within 21 days of the date hereof for an order under r 389. That will enable the appellant to further his objective of having the NSW proceedings and these proceedings heard together and disposed of.

30. A3FM filed a notice of contention in which, in substance, it was contended that even if the primary judge erred in her approach, an order that the proceedings be dismissed for want of prosecution was warranted and that the primary judge erred only in not inviting an oral application for dismissal or in not utilising r 371(2) in order to determine the proceedings. Fortunately for it, A3FM does not need to rely on these contentions. The application before the primary judge was by the appellant for reactivation of the proceedings, not by the respondent for their dismissal for want of prosecution. Plainly, having regard to the interlocutory nature of the former and the finality of a dismissal order, it cannot be assumed that the appellant's case would have been presented in the same way and on the same material had the appellant been facing the risk of dismissal of his proceedings.

Conclusion

32. For the above reasons I would order that:

(a)The appeal be allowed;

(b)The order of 4 February 2010, except insofar as it relates to costs, be set aside;

(c) The proceedings be reactivated;

(d) The second respondent pay the appellant's costs of the appeal;

(e) The second respondent be granted an indemnity certificate under s 15 of the Appeal Costs Fund Act 1973 (Qld).

33. It is appropriate not to disturb the costs orders below. The appellant placed himself in a position in which the proceedings were deemed resolved. An application for reactivation had to be brought and the second respondent's conduct was not unreasonable.

34. It is appropriate that the certificate under the Appeal Costs Fund Act requested by the second respondent be granted. The outcome of the appeal depended essentially on the finding that the primary judge erred in law in applying Practice Direction 4 of 2002. That error did not result from any conduct on the part of the second respondent.⁷

35. WHITE JA: I have read the reasons of Muir JA and I agree with those reasons and the orders that he proposes.

36. MULLINS J: I agree with Muir JA.

Footnotes

1. [2009] QSC 286 at [3] - [5]. ↩

2. [2008] QSC 191. ↩

3. [2010] QCA 72. ↩

4. (2009) 239 CLR 175 at 213. ↩

5. At para [93]. ↩

6. (1993) 67 ALJR 841 at 849. ↩

7. See Mitchell v Pacific Dawn Pty Ltd [2003] QCA 526 at para [17] and Holdway v Arcuri Lawyers (A Firm) [2008] QCA 302 at para [9]. ↩