Hallett v S L A Partners Pty Ltd [2005] VSCA 318

2 The applicant, Arthur Hallett, seeks leave to appeal against orders made by a judge of the County Court on 3 November 2005. On that date the judge had before him an application brought by the respondent seeking an order that the applicant's proceedings against the respondent be dismissed for want of prosecution and/or abuse of process, pursuant to Rule 24.02 of the County Court Rules. The judge refused an application made on behalf of the applicant for an adjournment of the hearing of the summons and made the order dismissing the proceedings for want of prosecution.

3 To obtain leave the applicant must show that the orders are attended with sufficient doubt to warrant the grant of leave and that substantial injustice will result if the orders are allowed to stand: see Dodoro v. Knighting[1].

4 The decision to refuse an adjournment is the exercise of a discretion which will only be overturned where the exercise of the discretion has been tainted by error of fact or law or is so plainly unreasonable or unjust as to manifest error: see House v. R.[2]; Mobilio v. Balliotis[3].

5 The circumstances giving rise to the application require some elaboration. The task is made somewhat difficult by the failure of the parties to place before the Court all of the relevant material, including copies of all of the orders made by judges of the County Court, and indeed all affidavits that were before the judges. The applicant, Hallett, had been partner in a legal practice with Bernadette Johnston pursuant to a partnership agreement, which partnership was dissolved on 12 March 1999. The applicant continued as the sole principal of the firm. From October 1998 until dissolution of the partnership, SLA Partners Pty Ltd, the respondent to this action, was the firm of accountants engaged to prepare the accounts of the partnership.

6 The applicant commenced proceedings against the respondent on 3 June 2004, claiming damages for negligence in the preparation of the accounts and/or for breach of contract. A statement of claim was filed on 9 September 2004 and the respondent served a defence on 21 October 2004. In addition to commencing proceedings against SLA Partners Pty Ltd, the applicant also commenced proceedings against another accounting firm, L. Patison & Partners, which had performed accounting services after August 1999 with respect to the partnership, and also against Bernadette Johnston and Neil Whitehead, an employee of L. Patison & Partners.

7 By summons issued 28 September 2004, the applicant sought orders from the court to consolidate the four separate proceedings and seeking leave to serve an amended writ and statement of claim on each of the respective defendants. The applicant also sought the vacating of the hearing date of 14 October 2004 which had been fixed with respect to proceedings concerning L. Patison & Partners. Those applications were heard in the Practice Court of the County Court on 5 October 2004 and consolidation was refused.

8 In July 2005, Hallett went overseas for an extended period. He is due to return to Australia today. His practice was placed in the hands of a locum, Felix Gordon-Clark, who met the applicant only half an hour before he departed Australia. Gordon-Clark and an articled clerk were left to attend to the applicant's own proceedings and plainly they were given little assistance by the applicant.

9 Although we have not been provided with any relevant orders, it seems that in the action against this respondent there have been, in all, some three occasions on which judges of the County Court made orders for the delivery of an amended statement of claim, and in each instance the applicant failed to meet the deadline imposed for filing and delivery. The first such occasion was an order by Judge Harbison made on 11 April 2005 for delivery of an amended statement of claim on or before 30 April 2005. On 19 July 2005, in respect of each of the many actions, Judge Harbison ordered Hallett to deliver amended statements of claim by 30 August 2005. That date, too, passed without delivery of the statement of claim. Although a statement of claim had been prepared by counsel, Hallett instructed Gordon-Clark not to deliver that document, as he wanted further investigations of his claims to be made and a statement of claim to then be settled by senior counsel. Being unable to file the amended statement of claim by 30 August, Gordon-Clark issued a summons on 5 September 2005, seeking a further extension of time, until 5 December 2005, for delivery of the amended statement of claim.

10 Similar applications were made with respect to the proceedings involving Johnston and Whitehead. Johnston and Whitehead, in turn, issued cross-summonses seeking that Hallett's actions against them be dismissed for want of prosecution, and Judge Gaynor, on 16 September 2005, acceded to those applications and dismissed the proceedings against both Johnston and Whitehead. Her Honour, however, granted an extension of time in the proceedings against SLA until 7 October 2005.

11 The solicitors for the respondent placed the applicant on notice that if he failed to comply with the order of Judge Gaynor, for the delivery of the amended statement of claim, the respondent would apply to have the proceeding struck out. The applicant failed to file and serve an amended statement of claim by 7 October, which led to the summons being issued on 26 October 2005, by the respondent, for hearing in the Practice Court on 3 November. Upon the return of the respondent's summons in the Practice Court on 3 November, counsel for the applicant applied for the matter to be adjourned, asserting that the summons and affidavit in support of the application were only served on the solicitors for the applicant at or about midday 2 November. Counsel for the respondent disputed that assertion and submitted that the materials had been served by facsimile on 26 October, when the summons had been filed. An affidavit by Hayley Robin Williams, sworn 30 November 2005 and filed on behalf of the respondent, deposes that the summons dated 26 October was served by facsimile on Thursday 27 October at 9.27 a.m. Served at the same time was a letter enclosing the summons. On Friday 28 October, a letter was posted to the applicant at his address for service, enclosing the affidavit in support and the exhibits of Abigail Thornbeck sworn 25 October, upon which the respondent proposed to rely on the application in the Practice Court. Service of the summons by facsimile is permitted pursuant to Rule 6.07(1)(e) of the County Court Rules.

12 Upon the return of the present summons before the Practice Court, counsel for the applicant advised the judge that Mr Hallett had been overseas since July 2005. The submissions made to the judge for an adjournment, and in opposition to the application to dismiss the proceedings for want of prosecution, were not supported by any affidavit evidence on behalf of Hallett. Counsel for Hallett told the judge that there had been insufficient time to prepare such material. He submitted that the claim had merit and that there would be no prejudice if an adjournment was granted. Counsel for the respondent disputed the contention of late service of the summons and supporting affidavit. He submitted to the judge that this was the third occasion where a deadline imposed by the court for the filing and service of an amended statement of claim had been ignored. He submitted that if an adjournment was granted then the applicant would achieve by stealth what the court had expressly refused to grant, namely, an extension of time for compliance until Mr Hallett returned to Australia. Counsel submitted that the non-compliance amounted to an abuse of process because the applicant was a solicitor and had a duty to the court to comply with its orders. Furthermore, there had been three separate orders for costs made against the applicant, none of which had been satisfied. He submitted that there was severe prejudice to the respondent, which was a firm of professional accountants, which firm suffered in its reputation by having an outstanding proceeding against it, such as this.

13 In the application for leave to appeal, counsel for the applicant contends that the learned judge was in error in failing to accede to the adjournment request. In the submissions filed on behalf of the applicant it was submitted that no substantial prejudice would have been done to the respondent had the application been acceded to. In the circumstances, so it was submitted, insufficient time had been allowed for preparation of the defence to the summons and the judge's decision was unreasonable and ought to be set aside.

14 On the application for leave, affidavits by articled clerk Diana Kretzer and by Mr Felix Henry Gordon-Clark were filed. Gordon-Clark deposes by affidavit of 22 November that it was not until Thursday 3 November, at approximately 12.30 p.m., that copies of the summons to dismiss Hallett's proceedings against SLA, for want of prosecution, were received by him at his office. The summons was returnable the following day. He endeavoured to have the proceedings adjourned by consent, but that was refused. He arranged for counsel to appear to apply for an adjournment. In her affidavit, Ms Kretzer deposed that she first learnt of the strike-out summons at 12.30 p.m. on 3 November, and as to the suggestion that the summons had been served by facsimile, she deposed that no such facsimile had been received at the office, and she further deposed: "The office has suffered from a number of computer network and power problems over the past couple of months." She went on to further state that investigations by a consultant disclosed that that was no fault of the firm.

15 In my view, we ought not go behind the affidavits which assert that the first notice of the summons to strike out the applicant's claim arose only the day before the hearing of the application. Indeed, it seems today that no attempt is being made to deny what is stated in those affidavits. The judge did not have such material before him, however, and having regard to the matters then put to him on behalf of the respondent, it is more understandable that he took the approach that he did. But, in my view, the decision taken has been shown to have been erroneous, in all the circumstances. Although the dismissal of proceedings for want of prosecution would generally not prevent the issuing of fresh proceedings, that option was not available in this case because the applicant would be statute barred. That is not a matter that seems to have been raised with the judge. A decision to refuse an adjournment is not one that would readily be overturned on appeal,[4] but in this case the impact of refusing the adjournment was substantial, leading as it did to a relatively unprepared and unsuccessful response to the application to dismiss the proceedings. In my view there was no significant prejudice to the respondent which could not have been met by costs orders in allowing the adjournment, and once it was accepted that the solicitors representing the applicant had not received notice of the application until the last minute, there were strong reasons why an adjournment ought to have been granted. In saying that I recognise that the solicitors for the applicant expected a summons to issue sooner rather than later. None the less, requiring the applicant's counsel to defend the dismissal application, when he was quite unprepared to respond to it, and in circumstances where there was no prejudice to the respondent if an adjournment had been granted, was tantamount to a denial of natural justice.[5] In my opinion the respondent's solicitor ought to have agreed to the request by Mr Hallett's solicitor for an adjournment of the hearing of the summons. The fact that he had only received very late notice of the summons seems not to be disputed. However irritating that may have been to the respondent and its solicitors, a short adjournment would have avoided the incurring, on both sides, of considerable additional cost and of further delay.

16 The grounds for granting leave to appeal having been made out, and the President having exercised his power under s.11(1A) of the Supreme Court Act 1986 to declare the court of two to constitute a Court of Appeal capable of disposing of the appeal, in my opinion the appeal ought to be treated as having been heard instanter and allowed and (putting to one side for the moment the question of costs) the orders sought by the applicant in the summons ought be granted.

17 I agree, and I would add only the following additional remarks of my own.

18 It appears not to be widely appreciated that the rules of natural justice apply with as much rigour to decisions of courts of law as they do to administrative decisions. This is the second time in a week when I have had to deal with an issue where solicitors refused to agree to a reasonable request for adjournment. It is axiomatic that a party required to respond to a proceeding, an application, a summons, is entitled to reasonable notice of that application and a reasonable opportunity to prepare his or her case in answer to it. That is a bedrock principle of justice and it is vitally important that every practitioner be aware of it.[6]

19 Leaving aside for the moment the inconvenience and cost which the respondent's refusal of the adjournment has occasioned, the refusal of the adjournment appears to me to betray a failure to appreciate that fundamental principle. The solicitors for the respondent were informed, by a person whose credibility they had no reason to doubt, that he had just received the papers for an application to be heard the following day. He requested an adjournment for 14 days and it was refused.

20 The reasons given in the affidavit of the solicitor in question are consistent with the mistaken position which the respondent has adopted throughout in relation to the question of adjournment. That is, the respondent has mistakenly treated its quite legitimate complaints about what is said to be Mr Hallett's non-compliance with procedural rules of the County Court as somehow affecting his bedrock entitlement to natural justice. Mr Hallett may well have been egregiously in default of County Court orders. He may have gone overseas in a way which would be capable of being characterised as showing indifference to the proceeding that he was supposedly conducting. But these matters were nothing to the point. No prior default on his part could in any way have disentitled him to procedural fairness in relation to the application to dismiss.

21 It is a matter of real concern that this principle appears not to have been appreciated even as late as today. The respondent still maintains in this Court that to have allowed Mr Hallett an adjournment would have enabled him "to achieve by stealth" an extension of time with respect to the pleadings. That submission confuses two quite different concepts. What the applicant wanted, and what he was entitled to, was reasonable time to prepare to meet a very serious application - of which his solicitor had just received notice - to dismiss his proceeding. That had nothing to do with getting more time to file a pleading. The time was required to enable him to deal with an attack based on his non-compliance, which may turn out to have been wholly justified. It is no more relevant to say in opposition to this application for leave to appeal that there had been default than it was relevant to say that in opposition to the adjournment application at the time. Nor, I would add, is it in any way relevant to raise on this application an argument that there were costs orders unpaid and that this was another reason why the County Court judge should have dismissed the proceeding. To repeat, the plaintiff's application for adjournment did not raise the question of the merits of the application to dismiss the proceeding. The only issue was whether the applicant required time in order to exercise his right at law to respond to the application.

22 For the reasons given by Eames, J.A., it is clear that the plaintiff was not given that opportunity and that there was a breach of natural justice. The decision dismissing his proceeding must therefore be set aside because it was arrived at in breach of natural justice.

23 Finally, subject to any submissions to be made on behalf of the respondent, it seems to me that the costs of this successful appeal should follow the event, for the reason which I put in argument to Mr Davis. Had the solicitors for the respondent done what they ought to have done and agreed to the adjournment, the substantive application would have been heard by the County Court in mid-November. Had the solicitors for the respondent conceded this appeal, as they might have done had they attended to the principles involved, the application itself might have been unnecessary. But the application has been opposed to the last and, as I say, subject to submissions from Mr Davis, it is my view that the ordinary costs order should follow.

1 MR DAVIS: If your Honour pleases, we would simply seek a certificate. We do so on the basis that in paragraph 18 of Ms Thornbeck's affidavit of 29 November it is pointed out that his Honour was given a choice, in that it was put to his Honour that if his Honour was not minded to dismiss the proceeding, his Honour might have entertained a self-executing order in the alternative, and his Honour made a decision not to adopt that course. If your Honour pleases.

MAXWELL, P.: No, there will be no grant of a certificate. The costs of the appeal have been entirely occasioned by the respondent's conduct of the adjournment application and of this appeal. For the reasons I have given, the respondent has mistaken the nature of the adjournment application and the appeal and the principles in issue.

24 Accordingly, the order of the Court is as follows:

Leave to appeal is granted.

The appeal is treated as having been heard instanter and allowed.

The orders of His Honour Judge Lewis made on 3 November 2005 whereby his Honour refused an adjournment of the summons and dismissed the proceeding for want of prosecution are set aside.

The proceeding is reinstated.

The summons is remitted to the County Court for re-hearing before another judge and for directions as to the filing and service of any further affidavit material by the parties.

The respondent pay the applicant's costs of the application of 3 November 2005 in the County Court and of this application and of the appeal.

[1] [2004] VSCA 217, at [3] and [24].

[2] [1936] HCA 40; (1936) 55 C.L.R. 499, at 504-5.

[3] (1998) 3 V.R. 833.

[4] McColl v. Lehmann [1987] VicRp 46; [1987] V.R. 503; Smith v. Gannawarra Shire Council [2002] VSCA 69; (2002) 4 V.R. 344.

[5] Onus v. Sealey [2004] VSC 396; (2004) 149 A.Crim.R. 227.

[6] See Commissioner of Police v Tanos [1958] HCA 6; (1958) 98 CLR 383 at 395-6 per Dixon, C.J. and Webb, J.; Pavic v Magistrates' Court (203) [2003] VSC 99; 140 A Crim R 113 at 115 per Nettle, J.