Douglas & Anor v Madden & Ors

Troy Douglas (formerly known as Douglas Pestano) - First Plaintiff Morgan Price Limited - Second Plaintiff PARTIES : Phillip MacDonald Madden & Julia Anne Madden t/as Maddens Commercial Lawyers and/or Maddens Business & Property Lawyers - First Defendant Maddens Lawyers Business & Property Pty Limited - Second Defendant Andrew Tennent Sutherland, John Richard Cox, Christopher Hugh McCaffery,Timothy John Eakin, Michael John Patrick White & Michael Leo Stafford t/as Eakin McCaffrey Cox - Third Defendant

COUNSEL : Mr MJ Jenkins, counsel - Plaintiffs Mr I Griscti, counsel - Defendants

Bryan Gorman & Co - Plaintiffs SOLICITORS : HWL Ebsworth Lawyers - First and Second Defendants Middletons - Third Defendant

• 10 - IN THE SUPREME COURT OF NEW SOUTH WALES COMMON LAW DIVISION

020435/05 TROY DOUGLAS (FORMERLY KNOWN AS DOUGLAS PESTANO) & ANOR -V- PHILLIP MACDONALD MADDEN & JULIA ANNE MADDEN t/as MADDENS COMMERCIAL LAWYERS AND/OR MADDENS LAWYERS BUSINESS & PROPERTY LAWYERS & OTHERS

JUDGMENT 1 HER HONOUR: By amended motion of 22 April 2009, the plaintiffs again seek orders varying a self executing order made on 13 February 2009, to permit the filing of outstanding evidence by 12 noon on 2 March 2009, rather than by 4pm on 27 February 2009. The purpose of the order sought is to overcome the effect of the plaintiffs' failure to comply with the self executing order, with the result that the order took effect and the proceedings now stand dismissed. The same orders have already been sought and refused. (See Douglas & Anor v Madden & Ors (No 2) [2009] NSWSC 194.) The self executing orders dismissing the proceedings were made in a judgment given on 13 February 2009. (See Douglas & Anor v Madden & Ors [2009] NSWSC 47.) 2 On this occasion the motion was supported by an extensive affidavit sworn by the plaintiffs' solicitor, Mr Joseph Sampson, which explained not only how it came to be that the self executing order was made in February, but also why it was that the orders were not complied with, which led to the dismissal of the proceedings on 27 February. 3 It was common ground that it was not an abuse of process for the plaintiffs to again pursue the orders now sought. (See Nominal Defendant v Manning (2000) 50 NSWLR 139.) In this case, the plaintiffs' first application was refused, because they had failed to meet the onus which fell upon them to show that justice required that the orders which they sought be made. This conclusion flowed from their failure to provide any explanation as to why they had not complied with the self executing order. In the March judgment, I observed: 23 While the delay in compliance with the order was short, a matter undoubtedly to be considered in determining whether the discretion should be exercised, it must also be considered that there was no suggestion by the plaintiffs that they had experienced any unanticipated difficulty in doing what the order required. On this occasion there was no suggestion that the time given was inadequate, or that anyone, the plaintiffs, the expert, or the plaintiffs' legal advisers, had made any mistake, even though the order did not require the filing of the outstanding evidence and indeed, the Rules expressly provided that evidence was not to be filed (see Rule 35.9). Still, even if the affidavits had been served on 27 February, rather than being filed, still the order would not have been complied with, given what was not served until the following Monday. 24 It seems to me that a party who does not comply with a self executing order such as here in question and who advances no explanation for the failure to comply with the order, but simply relies on an argument that to extend the time for compliance would have no adverse consequences for the other party, faces a difficulty, given the requirements of the Civil Procedure Act. That is but one matter which must be weighed in the balance. 25 In the present circumstances, given the plaintiffs' history in the proceedings, to grant the plaintiffs yet another opportunity to advance their claims, despite the dismissal of the proceedings, would appear to be contrary to the overriding purpose of the Civil Procedure Act and the Rules, particularly having in mind what is contemplated by s 56(3) of the Act, namely that: (3) A party to civil proceedings is under a duty to assist the court to further the overriding purpose and, to that effect, to participate in the processes of the court and to comply with directions and orders of the court 26 There can be no question that the plaintiffs repeatedly failed to adhere to that duty. No explanation for the plaintiffs' most recent failure was advanced. In my view, in the absence of any such explanation, no basis for the exercise of the discretion sought was established. It would work an injustice to the defendants to now make the orders sought by the plaintiffs. It is not the refusal of the relief sought which 'snuffs out' the plaintiffs opportunity to advance their claims in these proceedings. That is rather the consequence of their failure to take advantage of the opportunity to advance their claims, which the self executing order gave them in February. I am satisfied that they have not established any basis upon which orders sheltering them from the consequences of that failure could now justly be granted them.

4 In his evidence, Mr Sampson gave a detailed explanation of what he, the plaintiffs, their expert and counsel then briefed, Mr Gor, had done to ensure that the self executing order was complied with. The result of that activity was that the expert's report and the affidavits were not finalised until 27 February. The affidavits were sworn after 2 pm and were then copied. There was not time to copy four ring binders of appendices, before Mr Sampson took the affidavits to the Supreme Court Registry for filing at about 3.30 pm. The Registry was busy that day and it was not until about 4.20 pm that he saw a Duty Registrar, who assured Mr Sampson that his client should not suffer any prejudice because of the waiting time. That assurance, of course, had no impact on the fact that by then, the self executing order had taken effect. The proceedings already stood dismissed. Mr Sampson served the affidavits at about 4.45 pm and the appendices, which took about four hours to copy, on the following Monday before noon. 5 On this occasion, it was candidly put for the plaintiffs that Mr Sampson was in error in seeking to file the affidavits. He ought instead to have served them, as the Court's order required. Had he done so, the order would still not have been adhered to, because he was not in a position to serve the four volumes of appendices. It was explained, however, that these were documents already in the defendants' hands, having earlier been discovered. 6 In his affidavit, Mr Sampson also explained how it came to be that when the earlier motion was pursued for the plaintiffs, there was no explanation given as to why the Court's self executing order was not complied with. Mr Sampson was admitted to practice in early 2008. He had sworn an affidavit in terms settled by Mr Gor. He explained that he had had no prior experience in making an application such as this, and that he did not appreciate that an explanation for the delay in complying with the Court's order had to be given. 7 The plaintiffs' case was that it was accepted that in an application such as this, an explanation for delay must be given. (See Itek Graphix Pty Ltd v Elliott (2002) 54 NSWLR 207.) Despite the failure to give that explanation earlier, the Court retained a discretion to grant the relief sought, an explanation having now been advanced. The relevant considerations were those discussed by French J in Goodwill Group Pty Ltd v Pongrass Associates Pty Ltd [2002] FCA 1203 at [106]:

106 In considering whether an action should stand dismissed without extension of time pursuant to a self-executing order or otherwise be dismissed under O 10 r 7, there is a number of relevant factors to be considered including: 1. The seriousness of the non-compliance.

3. The history of delay or breach of orders in the past on the part of the applicant.

4. Any prejudice to the applicant arising from the dismissal of the proceedings.

5. Any prejudice to the respondents from permitting the proceedings to continue.

6. The authority of the Court. 8 The explanation now advanced showed that there had not been any neglect, which had led to the Court's self executing order not being complied with. That had rather resulted from the continued difficulties experienced in obtaining an expert's report on the complex matters raised by the plaintiffs' claims, which had presented problems for the plaintiffs throughout the proceedings, including in the period after the self executing order was made. In that period, Mr Sampson was giving the matter close to daily attention. The late provision of material by the experts was beyond the control of Mr Sampson and the plaintiffs. 9 It was argued that the real reason for the final failure to adhere to the Court's order was Mr Sampson's misunderstanding that the order required the outstanding evidence to be filed, before it was served. Time was wasted in attending to this. Had this not occurred, the affidavits, apart from two appendices, which were documents already in the defendants' hands, could have been served on time. The plaintiffs ought not to be held responsible for these errors. 10 Also to be weighed was the question of prejudice. There was no suggestion that either documents or witnesses were no longer available to the defendants, as the result of the delay. No actual prejudice was claimed by the defendants. 11 It was accepted that there was inferred prejudice flowing from the time which had elapsed since the events in question had occurred. Nevertheless, greater weight had to be given to prejudice arising towards the end of a limitation period, than to prejudice which would have been suffered even if proceedings had been commenced promptly (see Smith v Morton (2004) 40 MVR 347 per Hodgson JA). 12 As to the plaintiffs' position, it was relevant that if the order stood, the time for taking proceedings against the defendants in contract expired in November 2008 and was now statute barred; the claims in tort and for misleading and deceptive conduct were also potentially now statute barred. It followed that the plaintiffs would suffer real prejudice if the relief it sought were not granted. This was also a matter to be weighed by the Court. 13 Also to be considered was the seriousness of the plaintiffs' breach. While it was accepted by the plaintiffs that there had been serious delay and breach of earlier orders, Mr Sampson's affidavit made it clear that the plaintiffs' conduct had not been contumelious. (See Rayscan Management Pty Ltd v Moodliar [2008] NSWSC 857 at [30].). It was submitted that the morality of the reasons for the delay were not relevant; the real question was whether reasons had now come forward. Those reasons, having been given, had to be considered, as did the authority of the Court. The evidence showed that despite the plaintiffs' failure to obey the Court's orders, there was no time when the plaintiffs' attention to the matter had languished and that the delay in serving the outstanding evidence, had been short. 14 It followed that the overriding purpose specified in s 56 of the Civil Procedure Act 2005 could not be served by refusing the plaintiffs' application, now that they had explained to the Court the reasons why the February self executing order was not complied with. 15 The defendants' case was that while there was no jurisdictional impediment to the plaintiffs' second application to have the self executing order varied, the fact that this was such a second application had to be weighed in the balance, given the Court's obligation to ensure the overriding purpose specified by the Civil Procedure Act. 16 It was also argued that while the plaintiffs had now proffered an explanation for what had occurred, through Mr Sampson's evidence, the explanation given was not adequate. No evidence had been called from the solicitor on the record; from counsel, Mr Gor; from the plaintiffs; nor from the expert. It was still not really apparent why there had been such long delay in getting the expert evidence on, or what problems were confronted after the self executing order was made, which had led to the evidence being served late. 17 In the circumstances, the Court would not be satisfied that all of the plaintiffs' claims were statute barred and would have regard to the fact that the defendants would lose the benefit of having the proceedings dismissed, after the plaintiffs' continued failure to adhere to the Court's orders. In the circumstances, justice required that the order sought be refused.

Consideration 18 In all of the circumstances, I am satisfied that the order sought must be made. The situation is that it is now clear that the failure to adhere to the Court's self executing order was representative error, as was the failure to advance any explanation for what had occurred, when the earlier application for variation of the self executing order was made in March. 19 While the defendants were critical of Mr Sampson's evidence as being inadequate, it was not challenged in cross examination. The explanation given must be accepted. Mr Sampson acknowledged that the errors which resulted in the failure to adhere to the Court's orders were his. As the defendants observed, there were others who could no doubt have given relevant evidence as to how those errors came to be made, particularly the solicitor on the record, who was presumably supervising Mr Sampson. His misunderstandings ought not to have been shared by that solicitor. 20 What the evidence led made clear was that there was no good reason for the orders not being adhered to. There was adequate time on 27 February to ensure that the affidavits, including the four folders of appendices, were served as the self executing order required, if the proceedings were not to stand dismissed. That was a matter, on the one hand, of appreciating that there was no need for the affidavits to be filed in the Registry before they were served, and on the other, of directing adequate resources to the photocopying of the folders, which were not copied until the following Monday. The evidence also established, however, that it was not the plaintiffs who were responsible for what occurred that day. 21 The evidence also showed that the failure to advance any explanation for the plaintiffs' failure to adhere to the Court's February orders, also lay with the plaintiffs' legal advisers.

22 It has long been accepted that a default which flows from the faults of a party's legal representative rather than the client personally, while not determinative, is a matter which may properly be taken into account in determining whether an application such as this, should be permitted to succeed. (See Sophron v The Nominal Defendant (1957) 96 CLR 469 at 474-5; O'Neill v Kaddatz [1964] NSWR 1280, Stollznow v Calvert [1980] 2 NSWLR 749 at 753 - 755.) 23 It is also pertinent to note that s 56 of the Civil Procedure Act expressly concerns itself with legal representatives, providing as it does: 56 Overriding purpose (cf SCR Part 1, rule 3) (1) The overriding purpose of this Act and of rules of court, in their application to civil proceedings, is to facilitate the just, quick and cheap resolution of the real issues in the proceedings. (2) The court must seek to give effect to the overriding purpose when it exercises any power given to it by this Act or by rules of court and when it interprets any provision of this Act or of any such rule. (3) A party to civil proceedings is under a duty to assist the court to further the overriding purpose and, to that effect, to participate in the processes of the court and to comply with directions and orders of the court. (4) A solicitor or barrister must not, by his or her conduct, cause his or her client to be put in breach of the duty identified in subsection (3). (5) The court may take into account any failure to comply with subsection (3) or (4) in exercising a discretion with respect to costs. 24 Section 58 also requires the Court to act in accordance with the dictates of justice in determining an application such as this. I am satisfied that in the circumstances, the order sought by the plaintiffs must be made, other than as to costs. 25 I am satisfied that justice would not be served by refusing the order sought by the plaintiffs. It may not be overlooked that the delay in filing the required evidence was very short. The failure to adhere to the self executing order resulted from representative error. The defendants raised no actual prejudice flowing from that short delay, other than that which flows from having to defend the plaintiffs' claims, long after the events out of which those claims arose. Nevertheless, also to be considered is that this is not a case where documents have gone missing, or witnesses are no longer available to the defendants. 26 In all of these circumstances, it would not be just to deprive the plaintiffs of the ordinary opportunity to have their case determined on the merits. It is in rare cases that justice will demand that result. This is not one of those situations. 27 I am satisfied that the plaintiffs must bear the defendants' costs of the motion. That will go some way to a rebalancing of the parties' respective rights. It would certainly not be just for the defendants to have to now bear the costs of their loss of the orders by which the proceedings brought against them stood dismissed, as the result of the plaintiffs' repeated breach of the Court's orders.

Orders 28 For the reasons given, I order that the orders made on 13 February 2009 be varied by replacing the words '4pm on 27 February' with the words '12 noon on 2 March 2009', and that the plaintiffs bear the defendants' costs of the motion, as agreed or assessed.

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