First Plaintiff v First Defendant

2 The circumstances do not warrant the dismissal of the proceeding for want of prosecution and therefore the defendants' application must fail.

3 The first plaintiff (Company) operated a business as a supplier of products made from stone, masonry and concrete, including pavers, quarry tiles and wall block products. The Company was wound up in insolvency on 9 December 2015 and the second and third plaintiffs were appointed as liquidators (Liquidators).

4 The first defendant (Mr Mortazavi) is and was a director and member of the Company and the second defendant (Hunterstone Australia) is alleged to be a related entity of the Company that is now carrying on the same or substantially the same business as that previously carried on by the Company, and to be doing so from the same rented premises that the Company used to occupy to carry on its business.

5 The plaintiffs allege that during the period 28 November 2013 to 10 July 2015 Mr Mortazavi received more than $1,400,000 from the Company for no consideration and that Hunterstone Australia received assets of the Company with a value in excess of $5,800,000 (Assets), also for no consideration. They allege various contraventions of the Corporations Act 2001 (Cth) and seek repayment and other relief against the defendants.

6 The defendants deny liability. Mr Mortazavi admits to receiving more than $1,400,000 from the Company but alleges the payments were by way of reimbursement for Company expenses paid by him as part of a continuing business relationship. Hunterstone Australia says that it did not receive the Assets and also alleges that further particulars of the Assets are needed.

7 At a directions hearing on 24 November 2017 Sifris J made trial related orders and set a timetable for the various steps leading to trial and directed that the trial commence on a date to be fixed. The timetable contemplated that all necessary steps would be completed by 1 June 2018 and the matters addressed included expert evidence, witness statements, oral evidence, evidence objections, court books, chronologies and written outlines of opening submissions. Relevant dates included the following:

(a) Plaintiffs to file and serve any expert reports by 10 February 2018.

(b) Defendants to file and serve any expert reports by 10 March 2018.

(c) Plaintiffs to file and serve witness statements by 23 March 2018.

(d) Defendants to file and serve witness statements by 13 April 2018.

(e) Notification of objections and requirements to give oral evidence by 27 April 2018.

(f) Plaintiffs to serve a draft court book index by 4 May 2018 and the parties to consult and agree upon the court book contents by 18 May 2018.

(g) Plaintiffs to file and serve the court book by 25 May 2018.

(h) Plaintiffs to file and serve a chronology by 25 May 2018.

8 On 8 December 2017 the parties were notified that the trial date had been provisionally fixed for 12 June 2018 on an estimate of three to four days.

9 The defendants' summons was filed late on 11 May 2018 and is supported by an affidavit of the defendants' solicitor, Mr Mansour, affirmed on 9 May 2018. The written submissions relied on are dated 14 and 17 May 2018.

10 The plaintiffs rely on an affidavit of one of the Liquidators, Mr Kaso, and written submissions filed 15 and 17 May 2018. The plaintiffs also filed an application seeking to vacate the trial date and obtain further directions for the steps leading to a new trial date.

11 For the defendants, Mr Mansour deposed to the procedural history of the matter and the terms of the Orders. He also addressed communications between the parties and exhibited relevant correspondence. This evidence revealed: that the plaintiffs had not taken any of the steps contemplated by the Orders; that the defendants had communicated with the plaintiffs since late March 2018 regarding non-compliance and what the plaintiffs proposed regarding the future conduct of the proceeding; that the defendants had not received any substantive responses or meaningful information from the plaintiffs; and that the plaintiffs had not sought to contact the Court despite various dates in the timetable having passed.

12 The defendants also foreshadowed making an application if a satisfactory response was not received.

13 Subsequent to the receipt of this correspondence and the filing of the foreshadowed application, on 14 May 2018 the plaintiffs filed their application to vacate the trial date.

14 For the plaintiffs, Mr Kaso deposed to the background of the proceeding and other matters, including the following:

(a) The winding up of the Company and the appointment of the Liquidators on 9 December 2015.

(b) The Company owing debts of $962,988.47 to unsecured creditors and possessing only $700 in cash.

(c) The Company having no assets other than the claims made in this proceeding.

(d) That non-compliance with the Orders had resulted from difficulties encountered in connection with the Liquidators' investigations, the liquidation more generally, and the preparation of the proceeding for trial. These difficulties are said to include being shut out of the premises, the inability to communicate with the sole director, challenges and delays associated with the report as to affairs provided by Mr Mortazavi, the existence of two sets of financial statements, the Company's failure to maintain adequate records, and the absence of or limited primary source and supporting documentation.

(e) Why expert evidence will now not be relied on, that preparation of witness statements has commenced but will not be completed by 12 June 2018, and why some additional preparation time is needed.

15 The plaintiffs acknowledged that the 'slippage' in the timetable was 'regrettable' and indicated that they would not resist a timetable that brings the matter on for trial as quickly as possible.

16 The inherent jurisdiction of the Court to dismiss a proceeding for want of prosecution is well established and is recognised in rule 24.05 of the Supreme Court (General Civil Procedure) Rules 2015 (Vic) (Rules). It has been held that the power should be exercised sparingly and that it must be shown that there has been inordinate and inexcusable delay in complying with the Rules, and that the defendant or respondent is likely to be seriously prejudiced as a result.[1] However, as the Court of Appeal has observed, s 8 of the Civil Procedure Act 2010 (Vic) (CPA) casts new light on the inherent jurisdiction and gives statutory emphasis to the importance of compliance with orders of the Court for the management of a proceeding and widens the range of matters to be considered in connection with the exercise of the Court's inherent jurisdiction.[2] Consequently, even in cases where inordinate, inexcusable and prejudicial delay are not established, a failure to comply with the orders of the Court may nonetheless warrant summary dismissal, and the merits of the proceeding that is sought to be dismissed may bear on the exercise of the Court's discretion.[3]

17 It is also to be emphasised that the issue involves the exercise of judicial discretion which must be exercised having regard to the particular facts and circumstances of each case.

18 The principles are not in dispute and the focus of the submissions is properly the facts and circumstances in question.

19 The defendants rely on a range of factors including what is submitted is the plaintiffs' intentional non-compliance with the Orders, the provisional trial date of 12 June 2018, the failure of the plaintiffs to contact the Court, the limited and delayed responses from the plaintiffs, the delay to the timetable, what are said to be inadequacies with the explanation given by Mr Kaso, and the inability to adequately prepare for a trial on 12 June 2018. The defendants also initially contended that no steps have been taken by the plaintiffs since the commencement of the proceeding. Further, it is submitted that many facts relied on by the Liquidators by way of explanation were known at the time they embraced the timetable on 24 November 2017, and that if the trial proceeds on 12 June 2018 the defendants will not have a fair trial because they will not know what evidence the plaintiffs are to rely on.

20 The defendants express concern at the delay caused and the incurring of costs unrelated to the final determination of the proceeding, being costs in connection with the making of the application. They also submit that all parties had complied with their obligations under the CPA as at 24 November 2017 but that the primary issue is non-compliance with the timetable set down by the Orders.

21 As to prejudice, the defendants did not put on any evidence regarding material prejudice and they properly acknowledge that any relevant prejudice is 'minimal'. Further, on the evidence before the Court the defendants rightly do not contend that the plaintiffs' claims are bound to fail or have no reasonable prospect of success.

22 The plaintiffs rely upon Mr Kaso's affidavit and submit that there are numerous matters that mean the circumstances of this case do not warrant the proceeding being dismissed for want of prosecution. Whilst it is acknowledged by the plaintiffs that the delay is regrettable, it is submitted that the delay is neither inordinate nor inexcusable, and that no relevant or material prejudice has been or could be suffered by the defendants.

23 Emphasis is placed upon the difficulties encountered by the Liquidators, the plaintiffs' compliance with previous orders, additional steps taken since the proceeding was issued, the defendants' delay in providing discovery and particulars (which is properly acknowledged by the defendants), and that, in the context of ongoing litigation, legal professional privilege considerations impact on the extent to which comprehensive evidence can be given by way of explanation as to what has or has not been done and why.

24 The plaintiffs contend that any prejudice can be addressed by the setting of a revised timetable and that this will ensure a fair trial. They also informed the Court that they are content to have the proceeding proceed to trial expeditiously. It was further submitted that the defendants could have brought the matter back to Court earlier themselves.

25 Having regard to the circumstances of this case, the non-compliance by the plaintiffs with the timetable set by the Orders does not warrant dismissing the proceeding for want of prosecution at this point. Although of concern, it is correct that the delay is not inordinate and that a level of explanation has been provided by Mr Kaso (in paragraphs 15, and 19 to 23 of his affidavit) that demonstrates that the delay is not intentional and cannot be regarded as contumelious. Although a fuller explanation for non-compliance would have assisted and could likely have been provided without trespassing on legal professional privilege, what has been provided by the plaintiffs is sufficient. It is also not contradicted by evidence of the defendants.

26 The issues raised by the proceeding are material and, as observed by the defendants in their amended written submissions, it is of importance '...to obtain judicial determination of the issues in the present proceedings...'.[4] More importantly, there is no evidence of any relevant material prejudice to the defendants, a point underscored by the defendants' proper acknowledgment that any relevant prejudice is minimal.

27 Further, the failure to comply with the Orders does not create any risk of the defendants not having a fair trial. The trial date was provisional and will be vacated and a new date set. The timetable will be adjusted to reflect the steps previously ordered but the dates will be extended so as to allow the defendants the opportunity to better understand the case they are to meet at trial. They will also be given an opportunity to file and serve any expert evidence upon which they wish to rely even though the plaintiffs have now indicated that they will not be relying on expert evidence.

28 Finally, having regard to the circumstances of this case, and particularly the absence of any substantive responses to the defendants' reasonable written and oral requests for information regarding the future conduct of the proceeding, the plaintiffs' submission that the defendants' application is misguided and heavy-handed is rejected. The plaintiffs' application to vacate the trial date and their explanation for non-compliance was only forthcoming after several unsuccessful attempts were made by the defendants to obtain information, and after the application was foreshadowed and then filed. Although it is true that the defendants could have approached the Court earlier, by seeking to address the matter with the plaintiffs in the repeated way that they did, the defendants did not act unreasonably.

30 The provisional trial date of 12 June 2018 will be vacated and the parties will be heard on the revised timetable, the trial date, and costs.

31 As the plaintiffs' application for leave to amend their points of claim is no longer opposed, leave to amend will be granted.

[1] Sullivan v Greyfriars Pty Ltd [2015] VSCA 196, [21]-[24] (Whelan and McLeish JJA) and the cases there cited.

[2] Ibid [28]. See also Smith and Anor v State of Victoria [2017] VSC 190, [9].

[4] Amended submissions filed 15 May 2018 at [16.g.].