Envol P/L v Perceptive Systems P/L [1998] VSC 53

Supreme Court of Victoria|1998-09-07|Before: BEACH, J.

On 23 September 1997 Teague, J. ordered that a mediation take place in this proceeding on or before 27 March 1998. His Honour further ordered that if the mediation was not completed before that deadline then the proceeding would stand dismissed.

No mediation was held in the proceeding and accordingly it is now deemed to be dismissed.

It is necessary therefore to consider the nature of the plaintiff's cause of action and the history of the proceeding.

The plaintiff's case is that in May 1986 the defendants represented to the plaintiff that the first named defendant Perceptive Systems Pty. Ltd. was developing two projects namely a scanning election microscope x-ray analyser and a three DIS musical instrument. I should add that the second and third named defendants Simon John Veitch and John Clifford Veitch are the directors of Perceptive Systems.

As a result of the representations the plaintiff alleges that it was induced to invest $100,000 in shares in Perceptive Systems. The plaintiff now alleges that the representations were false and that its investment in the company is valueless. In that situation it seeks cancellation of the agreement for the purchase of the shares and damages.

The writ in the proceeding was filed in the Court on 22 May 1992, that is almost six years to the day on which the representations were alleged to have been made. The defendants entered an appearance on 4 June 1992. The plaintiff filed its statement of claim on 3 July 1992 and the defendants filed their defence on 3 August 1992. Between that date and 25 June 1993 various interlocutory steps were taken by the parties.

On 25 June 1993 the defendants filed a summons in the Court whereby they sought security for costs. Master Wheeler dismissed the application on 27 August 1993 and an appeal against his order was dismissed by Ashley, J. on 15 September 1993.

On 20 December 1993 the plaintiff filed a summons in the Court seeking to have the costs the defendants were ordered to pay it in connection with the application and the appeal taxed. On 23 February 1994 Master Bruce made a consent order in the proceeding that the defendants pay the plaintiff's costs fixed at $3,200 within 14 days. Thereafter the parties took no further step in the proceeding.

On 30 June 1997 the proceeding was picked up by the Litigation Support Group as part of its investigation into dormant proceedings. On 23 September 1997 the parties consented to a number of orders being made in relation to interlocutory steps in the proceeding designed to bring the proceeding to trial, including the order that there be a mediation on or before 27 March 1998 failing which the proceeding would stand dismissed.

In my opinion the plaintiff in this proceeding has been guilty of inordinate and inexcusable delay. In the first place it chose to wait until its cause of action was almost statute barred before filing its proceeding in the Court.

The view a court is entitled to take of pre-issue delay was considered by this Court in Bishopsgate Insurance Australia Ltd. (In Liquidation) v. Deloitte Haskins & Sells (unreported, 9 September 1994). In their joint judgment Tadgell and Ormiston, JJ. (as their Honours then were) said at p.22:

"On the other hand it is clear from the reasoning in Birkett v. James and in subsequent cases that plaintiffs are obliged to move with greater speed if they have left the issue of proceedings until very late in the limitation period. Thus Lord Diplock expressed the correct approach to such delay in the ordinary case in these words (at p.323 of Birkett v. James):

'To justify dismissal of an action for want of prosecution some prejudice to the defendant additional to that inevitably flowing from the plaintiff's tardiness in issuing his writ must be shown to have resulted from his subsequent delay (beyond the period allowed by Rules of Court) in proceeding promptly with the successive steps in the action. The additional prejudice need not be great compared with that which may have been already caused by the time elapsed before the writ was issued; but it must be more than minimal ..."

Similar views were expressed by Lords Salmon and Edmund-Davies. In an unreported decision of the Full Court in Australia and New Zealand Banking Group Ltd. v. Donovan (19th December 1986) it was said (at p.9) that it was not 'settled law' that a party who permits the limitation period almost to expire is then 'obliged to process those proceedings with expedition': see also the Jack Brabham Holdings Case at p.649. The House of Lords returned to this issue in the Chris Smaller (Transport) Case and confirmed the approach expressed in Birkett v. James. After a re-consideration of the significance of the limitation periods set by Parliament, Lord Griffiths (with whom Lords Keith, Roskill, Oliver and Goff concurred) stated (at pp.1207-1208):

'I have not been persuaded that the case has been made out to abandon the need to show that the post writ delay will make a fair trial impossible or prejudice the defendant. Furthermore, it should not be forgotten that long delay before issue of the writ will have the effect of any post writ delay being looked at critically by the court and more readily being regarded as inordinate and inexcusable than would be the case if the action had been commenced soon after the accrual of the cause of action. And that if the defendant has suffered prejudice as a result of such delay before issue of the writ he would only have to show something more than minimal additional prejudice as a result of the post writ delay to justify striking out the action.'

Those observations appear to have direct relevance to the present appeal."

It cannot be said that there was any undue delay on the part of the plaintiff between the date on which it filed its writ in the proceeding and the date upon which Master Bruce made the consent order in respect of the plaintiff's costs. It is the delay from that latter date to 30 June 1997 of which the Court can be critical. There is no valid reason why the proceeding should have lain dormant for almost three and a third years. Had it not been caught up in the Litigation Support Group's project it may very well have remained in the archives to this day. Whether that be so or not, the fact of the matter is that no step was taken by the plaintiff during that lengthy period of time and in my opinion, when one has regard to that fact and takes account of the other circumstances to which I have referred, in particular the period of time which elapsed before the writ was issued, it can properly be said that the delay in this case has been inordinate and inexcusable.

Has that delay caused prejudice to the defendants?

In affidavits filed in opposition to the plaintiff's application both the second and third named defendants have sworn of the prejudice they would suffer if this proceeding was allowed to go to trial. The relevant paragraphs in the affidavit of the second named defendant sworn 11 August 1998 read:

"3. My father suffered a number of minor strokes in June 1995. Since he suffered those strokes, his memory has been seriously impaired and he also suffers from other medical problems set out in the medical report of Dr. Bella Freeman now produced and shown to me and marked with the letters 'SJV-1'. 4. On Friday the 26th day of June 1998, my mother Catherine Pell Veitch died suddenly of a stroke. My mother was the first Defendant's company secretary until early 1994. She was a vital witness in this proceeding in that she was present during discussions held with John Birch, a director of the Plaintiff, which led to the Plaintiff purchasing shares in the first Defendant company. Now produced and shown to me and marked with the letters 'SVJ-2' is a copy of an Extract of Death Registration in respect of my mother Catherine Pell Veitch. 5. I was not present at various discussions between the said John Birch and my father John Clifford Veitch and I am accordingly unable to give evidence as to many of the matters in dispute in this proceeding. 21. The Defendants have been severely prejudiced by the Plaintiff's delay in prosecuting this proceeding by the effluxion of time and, in particular, by the death of my mother who was the first Defendant's Company Secretary for the entire period from mid 1986 to early 1994 and as a result of my father, the Third Defendant's stroke and his resulting disabilities therefrom."

"Mr. Ellinghaus Ellinghaus and Lindner 109 Drummond Street CARLTON VIC. 3053. Dear Mr. Ellinghaus,

RE: Mr. John Clifford Veitch DOB 2/4/27 1 Richard Crt., Mt. Eliza

My Veitch has been my patient for about ten years, but I have access to his medical records extending back to 1970. Mr. Veitch suffered a number of mini strokes in June 1995. At the time he was admitted to the Royal Melbourne Hospital for assessment and treatment. Since that time his memory has been increasingly unreliable. Mr. Veitch was for a long time dismissive of the changes his mini strokes had wrought. The correct diagnosis for his problems now is CEREBRO VASCULAR DEMENTIA. I referred Mr. and Mrs. Veitch to the Memory Clinic at Repatriation Hospital Heidelberg September 1997 for assessment. For a number of reasons, Mr. Veitch's poor memory included, he was not assessed until February 1998. At that stage they were in transit between St. Kilda and Mt. Eliza. They did not attend for follow up review. Nevertheless I have a full neuropsychological report on Mr. Veitch from February this year. More recently, and particularly with the death of Mrs. Veitch his unreliable memory and his general competency has become more of an issue. He now lives a great distance from this practice. I have recommended that he find a local general practitioner. I also referred him to the local geriatric service: Mt. Eliza Aged Care Assessment Service. I enclose copies of the information from the Austin Repatriation. I would point out that Mr. Veitch sounds very convincing in conversation until you ask for specific details. At that point it becomes apparent, that although language and vocabulary are well preserved, he has poor memory for recent and medium term events. He has very poor recall. Mr. Veitch is recently bereaved. He is easily confused. He would have great difficulty in attending a court case on a daily basis and in trying to consistently follow proceedings. His physical health is not the issue, it would be the psychological status that I am concerned about. Despite the above, Mr. Veitch does have significant cervical spondylosis and hypertension. The spondylosis results in headaches, dizziness and occasionally impaired vision. Should you require more information about Mr. Veitch please telephone me. Yours faithfully, BELLA FREEMAN."

The relevant paragraphs in the affidavit of the third named defendant also sworn 11 August 1998 read:

"3. I suffered a number of mini strokes in June 1995. Since then my memory has been seriously impaired. Details of my illness and as to my current health are set out in the medical report from Dr. Bella Freeman now produced and shown to me and marked with the letters 'JCV-1'. 4. On Friday the 26th day of June 1998, my wife Catherine Pell Veitch died suddenly of a stroke. My wife was the first Defendant's company secretary until early 1994. She was an active member of the first Defendant company and a vital witness in this proceeding in that she was present during discussions held with John Birch who was the director of the Plaintiff at the time that the Plaintiff purchased shares in the first Defendant company. She was also a participant at numerous meetings subsequent to the Plaintiff's purchase of shares in the first Defendant company when matters relating to that purchase by the Plaintiff were discussed."

In an affidavit sworn 11 August 1998 by a director of the plaintiff company John Alexander Birch, Birch has stated that Catherine Pell Veitch was not present during any material discussions held by him with the second and third named defendants which led to the plaintiff purchasing shares in the first named defendant. Clearly, I am in no position to resolve that dispute. The dispute itself, however, highlights the disadvantage the defendants will suffer if this matter were to proceed to trial.

My conclusion therefore is that the defendants would suffer such prejudice if the proceeding was reinstated that any application by them to have the proceeding dismissed for want of prosecution would be bound to succeed. I order therefore that the plaintiff's application to have the proceeding reinstated be dismissed with costs to be taxed and paid by the plaintiff.

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