(1) The court may, by order, give such directions as it thinks fit (whether or not inconsistent with rules of court) for the speedy determination of the real issues between the parties to the proceedings.
...
(3) If a party to whom such a direction has been given fails to comply with the direction, the court may, by order, do any one or more of the following:
(a) it may dismiss the proceedings, whether generally, in relation to a particular cause of action or in relation to the whole or part of a particular claim,
...
(4) Subsection (3) does not limit any other power the court may have to take action of the kind referred to in that subsection or to take any other action that the court is empowered to take in relation to a failure to comply with a direction given by the court. "
3 There are three defendants to the proceedings. The third defendant did not appear on either application.
4 Both applications arise from repeated defaults by the plaintiffs in complying with orders for service of affidavits. The first such order was made on 15 November 2007 and required the plaintiffs to file and serve their evidence by 30 January 2008. There have been seven subsequent orders, none of which has been complied with.
5 The plaintiffs' statement of claim was filed on 21 December 2006. It has been amended partly by reason of matters occurring since the proceedings were commenced.
The Plaintiffs' Claims
6 The first and second plaintiffs are wife and husband. They control the third plaintiff. The third plaintiff, Dunlec Pty Ltd ("Dunlec"), owns land at Lavington near Albury in New South Wales. The plaintiffs allege that in November 2005 they entered into an oral agreement with the first and second defendants for a joint venture for the acquisition and development of land to be acquired by a company in which both families would have an equal interest, being land adjacent to the land owned by Dunlec. The plaintiffs allege that it was orally agreed that the land so to be acquired would be developed, marketed and sold in conjunction with the land owned by Dunlec which had already been approved for development by the Albury City Council. The plaintiffs allege that the first defendant, Mr Tate, was to arrange the finance for the purchase of the adjacent land and when the plaintiffs had refinanced their assets they would reimburse him for a half share of the deposit. The plaintiffs plead that the third defendant, Wamego Pty Ltd ("Wamego"), purchased land adjoining Dunlec's land at auction on 11 November 2005 for $970,000. Mr Tate was then the sole shareholder of Wamego. The plaintiffs allege that in June 2006 they reimbursed Mr Tate for a half share of the deposit and for a half share of the costs incurred up to that date, presumably the costs incurred in connection with the purchase of the land. They allege that it was a term of the joint venture agreement that the plaintiffs would prepare and lodge the development application to the Albury City Council for approval for development of the land.
7 The plaintiffs allege that it was a term of the joint venture agreement that the costs of the joint venture would be borne equally between the plaintiffs and the defendants and that the profits would also be shared equally. They allege that the first and second defendants failed to cause half of the share capital of Wamego to be issued to Dunlec. They say that this was a breach of the joint venture agreement.
8 The plaintiffs also allege that on or about 30 November 2006 the first and second defendants entered into an agreement with a Mr Kovacevic to sell to him all of the shares in Wamego. They say this was a repudiation of the joint venture agreement which they have accepted. The plaintiffs plead that the sale to Mr Kovacevic was completed in November 2007 and that the defendants are required to account for the profit made on the sale of the shares. (They have not alleged that the parties stood in a fiduciary relationship or that the sale was a breach of fiduciary duty.)
9 The plaintiffs claim damages for breach of the alleged joint venture agreement, being the loss of the chance of sharing in profits which would have been derived had the joint venture agreement been performed. It is not clear from the pleading whether the alleged loss of profit is a loss of profit from the development and sale of the land acquired by Wamego, or a loss of profit on the development, marketing and sale of that land in conjunction with the adjoining land owned by Dunlec. As the plaintiffs allege that it was a term of the joint venture agreement that the land to be acquired by Wamego would be developed, marketed and sold in conjunction with adjoining land owned by Dunlec, which adjoining land had already been approved for development by the Albury City Council, I presume that the claim is put on the latter basis, at least in the alternative.
10 The plaintiffs separately plead that the first defendant required the second plaintiff, Mr Strelec, to provide his professional services as an engineer and project manager to Wamego. They alleged that this requirement was made orally in November 2005 when Mr Strelec was asked to prepare and lodge a development application with Albury City Council in relation to the development of the land acquired by Wamego. The plaintiffs claim a quantum meruit for a reasonable sum for the work carried out by Mr Strelec at the request of Mr Tate in connection with that work. An amount of approximately $50,000 is sought on this basis. This appears to be an alternative claim.
11 The defendants deny that a joint venture agreement was entered into. They admit that in November 2005 there were discussions between the parties as to the possibility of Wamego purchasing the land on terms that the land would be developed by Wamego and marketed in conjunction with the adjoining land owned by Dunlec, and that the plaintiffs and defendants would share the acquisition and development costs and profits equally. The defendants plead that the first plaintiff, Ms Duncan-Strelec, refused that proposal and as a consequence Wamego proceeded to purchase the land on 11 November 2005. The defendants allege that on 11 November 2005, after Wamego had successfully bid for the land at auction, the parties agreed that in consideration of the plaintiffs paying to the defendants expeditiously, and no later than the settlement of the purchase, one half of the deposit and one half of the costs incurred by Wamego in acquiring and developing the land, that Wamego would cause to be issued to Dunlec shares equivalent to 50 percent of the issued share capital of Wamego, and that the land would be developed by Wamego and marketed in conjunction with the adjoining land owned by Dunlec. The defendants plead that the purchase of the land acquired by Wamego was completed on 14 February 2006, but the plaintiffs did not comply with their obligations to provide half of the costs.
12 The defendants admit the payment by the plaintiffs in June 2006 of the sum of $205,815 representing one half of the costs then incurred by Wamego in the acquisition and development of the land. The defendants plead that this payment was made pursuant to an agreement that if the payment were made, Wamego would consider the request of the plaintiffs to enter into a new agreement in the terms of the old agreement. The defendants plead that the plaintiffs paid Wamego $205,815 in about late June 2006. They plead that in July 2006 Mr Strelec asked for the return of that sum. They plead that in accordance with his request the payment was returned by Wamego on 25 July 2006.
13 According to affidavits of Ms Duncan-Strelec, the return of the moneys was intended by the plaintiffs to be a temporary arrangement. In an affidavit affirmed on 20 December 2006 by her in support of an application for interlocutory injunctive relief, she deposed that the plaintiffs were prepared to return the sum to Wamego or to allow it credit for that sum.
14 In a case in which the plaintiffs rely upon an alleged oral agreement for a joint venture for the acquisition and development of land, one would expect that before proceedings were commenced, or if not before, at a very early stage, detailed proofs of evidence from at least the plaintiffs would have been taken.
Lack of Progress of Proceedings
15 Directions hearings for the matter were adjourned on six occasions between January and June 2007. The first and second defendants' solicitor deposes that the reason for these adjournments was due to "certain commercial transactions occurring which may have had an impact upon the manner in which the parties dealt with the dispute". On 14 June 2007 orders were made for the filing of amended pleadings. In August 2007 orders were made for discovery.
16 On 15 November 2007 orders were made that the plaintiffs file and serve their evidence by 30 January 2008 and the defendants file and serve their evidence by 29 February 2008. On 3 March 2008 the time for the service of the plaintiffs' evidence was extended to May 2008. On 12 May 2008 the time was further extended to 30 May 2008. On 30 June 2008 orders were made for the plaintiff to serve a proposed further amended statement of claim by 9 July 2008. No evidence from the plaintiffs had by then been served.
17 The first and second defendants proposed to sell their shares in the third defendant. On 23 January 2007 orders had been made by consent and until further order restraining them from doing so unless $247,000 from the proceeds of sale was paid into an interest bearing account to await further order of the court and certain "forestry bonds" were held by the defendants' solicitors on trust pending further orders of the court. The orders also restrained the third defendant from dealing with the land. On 30 November 2007 the share sale agreement was completed. On the same day the third defendant by its new director mortgaged the land. A further mortgage was given by the third defendant in February 2008. This led to contempt proceedings being instituted by the plaintiffs against the third defendant. A notice of motion seeking orders to punish the third defendant for contempt was filed on 15 July 2008. On 24 October 2008 Young CJ in Eq (as his Honour then was) declared the third defendant to be in contempt of court (Duncan-Strelec v Tate [2008] NSWSC 1145).
18 Further orders in relation to the service of the plaintiffs' evidence were not made until 15 December 2008. The plaintiffs were required to serve their affidavits by 2 March 2009. Orders extending the time for service of the plaintiffs' evidence were made on 4 March 2009, 28 May 2009 and 10 August 2009. The effect of these orders was that the time of the filing and service by the plaintiffs of all their affidavits was extended to 31 August 2009. On 10 August 2009 the court ordered that if no evidence were filed by the plaintiffs by 31 August 2009, no further evidence was to be relied upon by them without leave of the court. The matter was listed for further directions on 19 October 2009. Orders were made for the defendants to file their affidavits by 12 October 2009.
19 No affidavits were served by the plaintiffs by 31 August 2009. On 19 October 2009 the Registrar referred the proceedings to Bergin CJ in Eq as duty judge. The plaintiffs sought leave to rely upon evidence in chief to be served by 6 November 2009. In support of the application the plaintiffs relied upon two affidavits of their solicitor, Ms Rae. Her Honour was not satisfied with the evidence to explain the delay. Nor did the plaintiffs produce the evidence upon which they sought leave to rely. Her Honour said that if the plaintiffs wished to seek leave to rely on any further evidence they would have to annex that evidence to an affidavit to show the court what they had done, and then seek the leave in an application to rely on that evidence as prepared. On 19 October 2009 Bergin CJ in Eq directed that a notice of motion for such leave be filed by 26 October 2009. On 29 October 2009 the plaintiffs filed and served a notice of motion for leave to rely upon affidavits in chief served by 6 November 2009. On 30 October 2009 the matter came before me as duty judge. The plaintiffs then filed an amended notice of motion which sought leave to rely upon expert evidence served by 14 December 2009 and lay evidence in chief served by 6 November 2009. The first and second defendants filed in court a notice of motion for summary dismissal of the proceedings. Both applications were heard together. I reserved my decision and subsequently invited submissions from counsel on the question of the significance for the defendants' application of the fact that the limitation period for the plaintiffs' causes of action has not expired.
Explanations for Delay
20 On 19 October 2009 Ms Rae deposed that the lay evidence of the first and second plaintiffs had been substantially drafted. She deposed that the plaintiffs were both ordinarily resident in Albury-Wodonga, but that the first plaintiff had been resident in Alaska between mid-March 2009 until late July 2009 and during that period she was unable to take instructions from the first plaintiff. She deposed that the second plaintiff was currently residing in south-western Sydney where he was engaged as a project manager for the construction of a major road upgrade in south-western Sydney and that this occupation required his full-time presence at site between five to six days a week. In her first affidavit of 19 October 2009 Ms Rae deposed that:
" ... the Plaintiffs may seek to file expert valuation evidence in support of their allegations of loss arising from the alleged failed joint venture.
I have arranged to retain a valuation expert on behalf of the Plaintiffs should the Plaintiffs seek to file expert evidence. The Plaintiffs cannot instruct the expert valuer until their lay evidence has been filed as the valuer will need to be provided with the Plaintiffs' factual evidence in support of any expert report on loss and damage. "
21 In her second affidavit, also sworn on 19 October 2009, Ms Rae deposed that in the week of 17 August 2009 she asked the second plaintiff if a solicitor could visit him at the site office as he was not available to travel to the solicitor's office to draft his evidence. She was told that that was not possible, partly for occupational health and safety reasons. She deposed that there were about 20 folders of documents for review by witnesses. She deposed that the second plaintiff had been working at the Narellan site since about July 2009. She deposed that "Previously in these proceedings, I have taken instructions only from one Plaintiff [the first plaintiff] on behalf of the three Plaintiffs." There is no explanation as to why this course was thought appropriate. She deposed that she and another solicitor in the employ of Kemp Strang commenced drafting the evidence of the plaintiffs following a directions hearing on 15 December 2008. (The proceedings were commenced in 2006.) She deposed that she could not "substantially progress and finalise the Plaintiffs['] evidence" until after she knew whether the third defendant intended to amend its defence substantially or at all as any amendments might have an impact on the evidence to be filed on behalf of the plaintiffs. She said that it was not until 11 March 2009 that it became clear that the third defendant was not defending the proceedings.
22 Ms Rae deposed that she was informed by another solicitor in the employ of Kemp Strang, a Mr Crossley, that on 4 March 2009 he informed the Registrar that the plaintiffs might have difficulty in complying with the timetable for which directions were then given requiring the plaintiffs to serve their evidence in chief by 14 April 2009 due to the unavailability (at the time) of the plaintiffs' expert witness and the unavailability of the first plaintiff overseas. I assume therefore that by March 2009 the plaintiffs had engaged an expert witness.
23 Rule 31.19 of the Uniform Civil Procedure Rules requires that any party intending to adduce expert evidence at trial, or to whom it becomes apparent that he or she, or any other party, may adduce expert evidence at trial, must promptly seek directions from the court in that regard. No such directions were sought.
24 It was not until 23 October 2009, after the hearing before Bergin CJ in Eq, that the plaintiffs' solicitors wrote to the defendants' solicitors to enquire about the obtaining of a joint expert report. In that letter Kemp Strang stated that if the defendants were found liable for breach of the joint venture agreement, there would need to be expert evidence as to the plaintiffs' loss. They advised that the plaintiffs would allege that their consequential loss and damage included not only loss of profits in the joint venture agreement, but also losses which have arisen and continue to arise due to the plaintiffs' having delayed the development of the Dunlec land because of their entry into the joint venture agreement. They advised that they were seeking the plaintiffs' instructions in relation to the retention of a joint expert. They also floated the prospect of a separate hearing on liability and damages. The response of the defendants' solicitors was to oppose any separation of issues and to state that it was premature to consider the retention of a joint expert when the question of whether the plaintiffs should have leave to rely upon any evidence was still unresolved.
25 Ms Rae deposed that the plaintiffs had arranged to retain a Mr Toohey of Knight Frank Valuers, to prepare expert evidence on damages and had done so "prior to 27 October 2009". She said that on that day she was informed by Mr Toohey that he did not consider he had the necessary expertise. On the same day she telephoned the office of a registered valuer in Wagga Wagga. He was on leave until 16 November 2009. She deposed that in May and June 2009 she contacted three registered valuers in Sydney but was told that it was more appropriate to obtain evidence from a valuer in or around the Albury-Wodonga region who had greater local knowledge.
26 Mr Strelec deposed that he had been working full-time since February 2009 on the south-western Sydney project which required his attendance at site. He said that for approximately three months (that is, from July 2009) he had been working five or six days a week from 7am to 5pm or later. He deposed that he had not been able to meet with his solicitors during normal working hours due to his work responsibilities. He deposed that a final substantial draft of his affidavit was completed on 22 October 2009. He said that his affidavit remains in draft as there were a number of matters he needed to check against other records before he finalised his affidavit.
27 The plaintiffs' solicitors rendered an invoice for costs in February 2009 which was not paid until about 27 August 2009. Mr Strelec deposed that the plaintiffs' solicitors continued to work on the matter until approximately 14 August 2009 at which time they indicated that the tax invoice needed to be paid before they could advance the matter further. The delay in payment of the tax invoice therefore does not explain the delay in service of the plaintiffs' affidavits, although it might provide an explanation as to why an expert witness was not retained earlier in 2009. The fact remains that it should have been apparent to the plaintiffs from the outset that expert evidence would be required and directions should have been sought in 2007 in accordance with r 31.19.
28 An affidavit of the first plaintiff has been prepared and has been served. It is undated but was provided in October 2009 shortly before the hearing on 29 October 2009.
29 There were some mitigating factors for the delay between July and October 2009 in serving Mr Strelec's affidavit and for the delay between March to July 2009 in preparing Ms Duncan-Strelec's affidavit. Those factors do not explain the entirety of the default.
30 Ms Rae deposed that she was told on 15 December 2008 by the solicitor for the third defendant that subject to the outcome of the contempt proceedings, the third defendant might wish to substantially amend its defence. I do not accept her evidence that "I could not substantially progress and finalise the Plaintiffs' evidence until after I knew whether the Third Defendant intended to amend its defence substantially (or at all) as any amendments may have had an impact on the evidence to be filed on behalf of the Plaintiffs." The plaintiffs were subject to a timetable requiring the service of their evidence. It was not for the plaintiffs to ignore the court's orders because of the possibility that the third defendant might seek leave to amend. In any event, the core of the plaintiffs' case against all defendants would be unaffected by any amendments to the third defendant's defence. Nor is there any explanation for the plaintiffs' failure to obtain directions at an early time in relation to expert evidence. If a claim for loss of profits from not having the opportunity to share in the development of the land acquired by Wamego required expert evidence, then that should have been apparent from the outset. If an additional or an alternative claim for damages is made arising from the alleged delay in developing the Dunlec land, which presumably is attributed to the defendants' breach, no doubt expert evidence to establish such damages would be required. But the need for such evidence must have been apparent from the outset. There is no satisfactory explanation as to why the necessary directions were not sought, nor as to why no adequate steps to obtain such evidence have been taken.
31 This case is another illustration of the need, or at least desirability, for plaintiffs' lawyers to obtain proofs of evidence before a case is started.
Summary Dismissal for Want of Prosecution
32 In deciding whether to make orders for summary dismissal as sought by the first and second defendant, or to make the orders as sought by the plaintiffs for leave to rely on other evidence, the court must seek to act in accordance with the dictates of justice (Civil Procedure Act, s 58(1)). Section 58(2) provides:
"58 Court to follow dictates of justice