Court of Appeal (WA)|2001-09-07|Before: Mr P, Wheeler J, Lure J

Duke v Royalstar Pty Ltd [2001] WASCA 273 (7 September 2001)

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA

CITATION : DUKE -v- ROYALSTAR PTY LTD [2001] WASCA 273

Contracts - Executory contract - Limitation period applicable to action for specific performance

Practice and procedure - Application to strike out for want of prosecution - Delay - Prejudice - Factors to be considered

1 JUDGMENT OF THE COURT: This is an application for leave to appeal, brought by a defendant, from the refusal by the Master to strike out the plaintiff's (respondent's) action for want of prosecution. It is convenient first to set out the history of the dispute and of the action.

2 The defendant is and was at all material times the registered proprietor of land in Yokine. In May 1994 the plaintiff agreed to buy the land from the defendant for the sum of $235,000. In that month the parties agreed to cancel that contract and to enter into a further contract by which the defendant granted the plaintiff an option to purchase the land. As to those facts there is no dispute.

3 The plaintiff says that on or about 28 May 1994 it entered into an option agreement with the defendant and paid to the defendant's agent $1000 as an option fee. It exercised the option by paying to the defendant's agent the sum of $4,800 as the agreement required. The defendant then refused to settle on the sale of the land and is in breach of the contract that arose upon exercise of that option. The plaintiff seeks specific performance of the agreement for the sale of the land and damages for breach of contract.

4 By contrast, the defendant asserts that the parties never entered into an option agreement. She has said that the person named in the statement of claim as the defendant's agent was in fact the plaintiff's agent and therefore payment of the option fee was not made to the defendant, and it is further pleaded that there are certain deficiencies in the way in which the option was signed which render it ineffective. In short, the defendant says that no valid and enforceable contract for sale of the land ever came into existence.

5 It is obvious, as the Master observed, that the dispute between the parties is of narrow compass and that by any standard it is a straightforward action which would occupy no more than two days of trial time.

6 The statement of claim was indorsed on the writ which was dated 25 September 1994 and served shortly after its issue. There was a defence filed on 2 November 1994. Thereafter only two steps in the proceedings have been initiated by the plaintiff. The plaintiff filed a request for discovery on 9 November 1994 and an affidavit of discovery on 7 July 1995.

7 Over a year after the filing of the plaintiff's affidavit of discovery, in November 1996, the defendant filed an application for summary dismissal of the claim. The plaintiff filed an affidavit in opposition to that application in January 1997 and there were a couple of appearances in Master's chambers for mention of that application. The application was apparently withdrawn in June 1997.

8 Although the plaintiff deposes in an affidavit (to which we will return) that it with its solicitors was taking various steps to get the matter ready for trial, no further step was taken in the action until 3 November 2000, when the plaintiff filed a notice of intention to proceed. It appears that in March 2000 there had been some without prejudice settlement negotiations; on the view most favourable to the plaintiff, there were a number of discussions, although its affidavit does not descend to any particularity about dates and times and it appears that even on the best view they were fairly quickly abandoned. The notice of intention to proceed led the defendant's solicitors to give notice of intention to make the strike out application and the application was filed on 23 January 2001 and heard by the learned Master on 28 February 2001.

9 It is apparent that there have been very significant periods of delay. Apart from the response made by the plaintiff to the defendant's summary dismissal application, the plaintiff has taken no step in this very simple action between early July 1995 and early November 2000, a period of four years and four months.

10 In enunciating the principles relevant to an application to strike out for want of prosecution, the learned Master referred to the decision of this Court in Lewandowski v Lovell (1994) 11 WAR 124 and in particular referred to the passage from the reasons of Murray J at which his Honour adopted the statement of principle enunciated by Bray CJ in Ulowski v Miller (1968) SASR 277 at 280. In that case Bray CJ referred to five "paramount matters" to be considered, they being:-

3. The hardship to the plaintiff if the action is dismissed and the cause of action left statute barred;

4. The prejudice to the defendant if the action is allowed to proceed notwithstanding the delay; and

5. The conduct of the defendant in the litigation.

11 The Master observed that generally in this jurisdiction applications are made to strike out for want of prosecution "rather than on the basis that delay in and of itself constitutes an abuse of process". The Master seems to have taken the view that the "abuse of process" basis of such an application could only be made out if it appeared that the proceedings were designed to achieve some collateral benefit or in some other way were initiated for an improper purpose. It is unnecessary for the purposes of this application to determine whether the overall approach of the learned Master to the "first limb" of the want of prosecution test was correct. The view he seems to have taken appears not to extend even to intentional and contumelious delay. While this appears on its face to be too narrow a view, it is not necessary to determine the precise scope of the "first limb" in this case.

12 As to the relevance of delay, however, it is important to note that in Hughes v Gales (1995) 14 WAR 434 at 499-500, Malcolm CJ, in reasons with which the other members of the Court agreed, made observations to the effect that it may well be that the case flow management principles contained in O 1 r 4A and r 4B of the rules of the Supreme Court within an appropriate case, justify dismissal on the grounds of delay alone without the need for any other ingredient to be established. The relevance of case management principles was emphasised also in Levi v Stirling Brass Founders Pty Ltd, unreported; FCt SCt of WA; Library No 97029; 9 May 1997. Giving effect to those observations would mean that the earlier practice in this jurisdiction to which the learned Master referred is (since March 1993) not an appropriate guide to the way in which delay should be approached.

13 Turning to the factors set out in Ulowski, the learned Master found no difficulty in concluding that there had been lengthy delay in the matter. He expressed the view that the evidence of the plaintiff purporting to explain the delay had a "hollow ring" and was "inadequate and unconvincing". We will return to this matter shortly.

14 The Master then noted that there was a dispute between the parties as to whether, if the action were to be dismissed, the plaintiff's cause of action would be statute barred. He noted that the plaintiff asserted that the limitation period was 12 years, while the defendant asserted that there was in law no limitation period. Before us the defendant appears to have taken the view that the relevant period of limitation was 6 years, either as provided by s 38(1)(c)(v) of the Limitation Act in the case of simple contract, or alternatively because equity followed the law and the remedy sought was in relation to a contract. It is by no means clear that this was the argument put before the learned Master.

15 However, it is fair to observe that the learned Master's reasons on this point are not entirely clear. The Master said that if the limitation period had not expired it was in his view a factor in favour of the striking out of the action, because there would be no hardship caused to the plaintiff if a fresh action could be commenced. He also expressed the view that it was "open to question" whether it was appropriate to strike out an action for want of prosecution when in all likelihood a fresh action would be commenced. The learned Master referred to FAI General Insurance Co Ltd v Southern Cross Exploration NL [1988] HCA 13; (1988) 165 CLR 268 at 288 per Gaudron J in this context. We would note that Birkett v James (1978) AC 297 deals more directly with this issue and is to the effect that it would only be in exceptional circumstances that a power to strike out will be exercised where a limitation period has not expired, since the probable result would in such a case be duplication and further expense.

16 In any event, in this case the Master expressed the view that if the limitation period had not expired then the plaintiff would be required to pay the defendant's costs of the action if it were struck out and in all probability could not proceed with a fresh action until those costs were paid, which might be of "some small advantage to the defendant". He also observed that there was presently a caveat lodged by the plaintiff over the land and that steps by the defendant to remove the caveat "will result in the issues raised in these proceedings being ventilated". That view seems to be predicated on the assumption that the limitation period has not expired. If the plaintiff's claim were unable to be maintained because the limitation period had expired or, as we consider later in these reasons, because of the doctrine of laches, then it seems that it would not be necessary in any proceedings for removal of the caveat to ventilate the merits of the plaintiff's action.

17 The Master took the view that it was unnecessary to resolve the limitation issue and that in his view, "the position is evenly balanced on the question of hardship to the plaintiff if the action is dismissed". In our view, he was in error in this respect, for reasons to which we will return.

18 The Master then observed correctly that this was not a case where the defendant was able to point to any particular prejudice she would suffer if the action were allowed to proceed. This was not a case in which witnesses had died or documents been lost, or the like.

19 However, as the Master did note, the evidence before him, which appeared to be undisputed, was that as at May 1994 $240,000 was a fair value for the land, but that its value declined in 1996 to approximately $165,000. It is now agreed to be worth in the region of $375,000. The defendant asserts that in those circumstances, the reference in Boomalli Ltd v Hake (1985) WAR 7 to the unfairness of holding the possibility of a decree for specific performance for too long over the head of a party, particularly where the agreement concerns property of a fluctuating value, is applicable. The Master took the view that matters of this kind were not appropriate to be taken into consideration in the context of an application to strike out for want of prosecution, but were rather properly to be raised in the context of the hearing of the action in determining whether relief should be granted. In our view, this overstates the position. Where questions of laches and the like arise, it is generally appropriate to consider them in the context of an action when all material facts have been found. However, there are cases, of which this appears to be an example, where the material facts are before the Court. The fluctuation in the value of the property is apparent in the evidence, and the plaintiff has put before the Court an affidavit purporting to explain his delay in pursuing the action, which singularly fails to present any credible explanation. It is difficult in those circumstances to see what further material would be likely to emerge from an action, and both the delay and the prejudice in our view are appropriate to be taken into account.

20 Finally, the Master noted that it was true that the defendant had taken no steps to push the matter to trial, but of course the responsibility for the proceeding rested with the plaintiff. He found that there was no action or want of action on the part of the defendant which was open to criticism.

21 The crux of the Master's reasoning appears from the penultimate paragraph of his written reasons, in which he found that he was not satisfied that in the circumstances of this case the delay was such as to "hopelessly prejudice" the capacity of the Court to fairly try the issues, and that there was a "real prospect" that if the action was struck out a new action would be commenced by the plaintiff. In our view, there was error manifest in both limbs of this reasoning. First, the question of whether the delay was such as to "hopelessly prejudice" the possibility of a fair trial puts the matter too high. Second, in observing that there was a real prospect that a fresh action could be commenced, the Master was, it appears, proceeding on a particular view of the limitation point, which point he had expressly declined to determine. We will deal with those two issues in reverse order.

22 The best view seems to be that there is no limitation period applicable to an action for specific performance. Section 4 of the Limitation Act, to which the plaintiff referred, prohibits making an entry for distress or bringing an action to recover land or rent once a 12 year period has elapsed. The action for specific performance is not an action to "recover" land, even where the contract is one for the sale of land. It is an action to enforce a contract; in this case land is the subject matter of the contract.

23 The plaintiff's submission is that its interest is in the nature of an "equitable interest" in the land as a result of the exercise of the option to purchase. It asserts that it has been "dispossessed" of that interest because the defendant has refused to proceed to settlement. This appears to confuse a number of concepts. It may well be that the plaintiff has an equitable interest acquired as a result of the exercise of an option. However it is not seeking to assert that interest in these proceedings; rather, it is seeking performance of the contract which, if performed, will give it the legal title. Section 24 of the Limitation Act, to which the plaintiff also refers, does not assist since it refers to a person "claiming any land ... in equity". This is not a claim to land in equity, but a claim for performance of an executory contract the subject matter of which is land.

24 If none of s 4, s 24 or s 38 are applicable, there is no limitation period in relation to a claim for specific performance. This was the view taken by the Law Reform Commission of Western Australia in its Report on Limitation and Notice of Actions (Project no 36 Pt II par 13.12)

25 If the action is not the subject of a specific provision of the Limitation Act, then there appear to be a number of possibilities. One is that, since the plaintiff could not now sue at law for damages for breach of the contract, specific performance cannot be granted in respect of it; Firth v Singsby (1888) 58 LT 481, R v McNeil [1922] HCA 33; (1922) 31 CLR 76 at 100 (per Isaacs J). Alternatively, the statute will be applied by analogy, and since an action for damages for non performance of contract could not be brought after six years, that will be the appropriate period (Talmarsh v Muggleston 4 LJ Ch 200).

26 Alternatively it will be necessary to rely upon the doctrine of laches. In that event, it is not the case that an action cannot be struck out for want of prosecution where there is no specific period of limitation. Rather, where it appears that a defendant will rely upon the doctrine of laches, it would be necessary for the plaintiff to at least establish that there was a prima facie case of its being able to overcome that doctrine, in order to avoid the striking out of the action: Joyce v Joyce [1978] 1 WLR 1770.

27 In this case, it seems to us that the plaintiff has failed to make out any prima facie case for being able to overcome the doctrine of laches. On the contrary; not only is there no credible explanation given for the plaintiff's delay, but the period of delay and the timing of the plaintiff's attempted revival of the action are such as to suggest that the plaintiff may have deliberately stood by while the value of the land diminished, and only sought to rely upon this action once the value of the land had increased. This is precisely the sort of conduct which the doctrine of laches is designed to prevent: see Lamshead v Lamshead [1963] HCA 60; (1963) 109 CLR 440and Boomalli Ltd v Hake.

28 As we have noted, it appears that the learned Master adopted a correct view of the relevant principles at an early stage during his reasons when he referred to Lewandowski v Lovell and the passage referred to from Ulowski v Miller. However, at the conclusion of the learned Master's reasons he appeared to regard the question of "hopeless prejudice" to the litigation as the paramount consideration, when it appears from the cases that what is involved is a balancing of relevant interests. It also appears to us that during the course of his reasons, the learned Master placed insufficient emphasis on delay as a factor of importance, as would appear to be required by Hughes v Gales.

29 It seems to us that a correct balancing of these factors would be along the following lines.

30 We have already referred to the length of the delay. It is an extraordinary delay, when one considers the straightforward nature of the action.

31 We accept the Master's description of the explanation for the delay. However, it is perhaps necessary to explore that matter in a little more detail. The managing director of the plaintiff, Mr Torre, swore an affidavit purporting to explain the delay. He explains that it was intended by the plaintiff that it would subdivide both the defendant's land and a piece of adjacent land owned by the plaintiff and develop them. He asserted that such a development would have been "a large undertaking and required the support of all the plaintiff's resources", from which one can draw the conclusion that the plaintiff did have significant resources. He then goes on to assert that there was a diminution of the value of the adjacent land and the defendant's land as a result of rezoning. He asserts that in the meantime the plaintiff has suffered "financial hardship" because it was not "viable" to develop the plaintiff's land on its own.

32 There is no explanation as to how the financial hardship arose; for example what were the holding costs in relation to the plaintiff's land and what impact this had on the plaintiff's various businesses. There is no material which suggests that it would not have been possible for the plaintiff to meet the necessary legal expenses had it wished to continue with the action. Indeed, although one paragraph in the affidavit deposes that by January 1998 the plaintiff was in arrears with its legal fees, that passage goes on to say that it was therefore "necessary for the plaintiff to undertake other property developments", so that it is apparent that the plaintiff had sufficient resources to undertake other property developments and obtain income from them. It also appears from the affidavit that during April or May of 1997 and following Mr Torre was able to instruct the plaintiff's solicitors to deal with a number of issues related to the action, including the "finalising" of statements of "all witnesses". It would appear that very little extra expense would have been required in order to have the matter proceed to trial.

33 It appears then, from the only affidavit proffered by the plaintiff, that it had substantial resources, such that it was able to undertake significant property development; that it was in a position to instruct solicitors to carry out a significant proportion of work; but that it suffered what Mr Torre regarded as some form of undefined and unparticularised "financial hardship" at some time during the course of the period of 1995 to 2001 which, the Court is invited to assume, may have had some effect on its ability to progress this matter. It seems to us that it is appropriate to characterise this affidavit as providing no explanation for the delay at all. It is however noteworthy that the plaintiff's period of inaction in relation to this matter seems to have commenced at about the time at which Mr Torre became aware of the intended rezoning which led to a diminution in the value of the defendant's land.

34 So far as hardship to the plaintiff is concerned, if the Limitation Act is applicable under the principle in R v McNeil or by analogy, the plaintiff would be unable to maintain a fresh action, because of the lapse of time. If the doctrine of laches applies, there is no material before us which suggests that the plaintiff will be able to overcome that doctrine. It is a serious matter to strike out an action in these circumstances. However, it appears to us that the principles discussed in Lamshead v Lamshead and Boomalli v Hake lead to the conclusion that it is not unjust to do so. This is particularly so where, as here, the plaintiff's lengthy and unexplained delay points to the conclusion that it did not, until very recently, consider the right which it seeks to assert to be of sufficient value to justify the relatively limited expense involved in pursuing this action.

35 There is no prejudice to the defendant in allowing the action to proceed, in the sense of lost witnesses or documents or the like. However, there is the general prejudice which appears to be assumed in the cases to which we have referred, and which is illustrated in this instance by the fluctuating value of the land in question. So far as the conduct of the defendant is concerned there is, as the Master noted, nothing to criticise in her conduct in this action.

36 It appears to us that, balancing all the factors to which the Master referred in the earlier part of his reasons, the appropriate conclusion would be that this action should be struck out for want of prosecution.

37 We would grant leave to appeal, since it seems that there a number of issues of significance arising in the appeal and there is a real potential for hardship to the defendant if the Master's decision is allowed to stand. We would allow the appeal and in lieu of the order made by the learned Master, we would dismiss the plaintiff's action for want of prosecution.

Duke v Royalstar Pty Ltd [2001] WASCA 273

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Judgment (46 paragraphs)

Duke v Royalstar Pty Ltd [2001] WASCA 273 (7 September 2001)

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Cases Cited (5)