Imaging Applications Pty Ltd v Sun Alliance Australia Ltd [1999] VSC 230

Imaging Applications Pty Ltd v Sun Alliance Australia Ltd [1999] VSC 230 - VSC 1999 case summary — Zoe

[27]

From 1987 to 1990 Petch's practice dwindled. He was then struggling to meet overheads, meet the family needs (he had three children) and high interest rates. He feared foreclosure by the NAB at any time. He decided that he would sue Sun Alliance and Stenhouse and possibly the LIV but had no money. He was afraid that if he missed an interest payment to NAB everything would collapse. Not having the money to pay counsel he drafted his own statement of claim and issued in the Commercial List. He found he did not have the technical pleading skills or tactical knowledge for commercial litigation and struggled to cope at a time when his medical and psychological state was deteriorating. His net income since 1989 to 1990 to the end of 1997 was (apart from minus $3,758 in 1990 to 1991) fluctuated from a low of $30,000 in 1989 and 1990 to a high of $46,348 in 1995 to 1996. This would appear to be a pre-tax income. His net income has been very modest for a practising solicitor of his background and experience. He has virtually no assets, an old car, clothes and minimal cash. His wife has not been employed and he has three sons, two of whom have concluded secondary school. He could not obtain Legal Aid. During 1992 and 1993 they could not continue to pay the interest due to N.A.B. His wife's parents bought out the Bank and took a mortgage over the Petch family trust owned house. About $270,000 is owed to his wife's parents in respect of this, and there is still a second mortgage to the N.A.B. securing his solicitor's overdraft. The house thus stands as security for about $550,000 worth of debt. He tried to pressure his wife to agree that the family trust should sell the house, to finance the litigation in 1992. She would not and the ensuing disputes led to a breakdown of the marriage. Proceedings were commenced in the Family Court of Australia which were resolved when he agreed not to try to get the trust to sell the house. He next sought to get Legal Aid through the Commonwealth Attorney-General's Department but Legal Aid was unavailable to him.

[33]

An affidavit of Mr. Petch's wife, Nivia Petch, of 22 July 1998 confirms many of the matters referred to in his affidavit. Mrs. Petch was a director of Imaging but simply signed documents which her husband gave her, when he told her that this was proper, and necessary. Since 1983 she has suffered from fibro-myalagia, a condition said by her specialist to be triggered by her husband's drinking and admission to hospital for alcoholism in 1983, and connected with anxiety and stress allied to her hereditary propensity to it. According to her, this condition causes a loss of functioning and there is no cure for it. She too has been on a disability pension since September 1997. In 1990 she was diagnosed with osteoarthritis in the right hip but was told to put off surgery which she had ultimately twice, with unhappy complications, in 1997. In the period 1990 to 1996, she said she tried to help her husband when he attempted to get back to the insurance claim, by collating documents but found it too hard. In the early 1990's she was trying to help Mr. Petch cope but they were in a hopeless financial position with no surplus cash, with interest crippling them. Her husband was very difficult because she would not agree to the house being sold. Although he had been off alcohol for many years, he became raging and incoherent about that, almost as though he was on alcohol, the so-called phenomenon of the "dry-drunk" condition, explained to her by Alannon, an AA adjunct. Their conflict worsened because his income from his practice could not service the NAB loan. Her parents with difficulty bailed them out by buying out the bank and taking a mortgage. Her husband said he had no money to run the case properly. In 1992 their second son became very ill, anorexic and suicidal, and that continued to be a big drain on both of their energies and added to their family problems. In October 1992 she commenced Family Court proceedings which added further stress. These were ultimately adjourned while they endeavoured to cope with their financial and family problems. From 1994 on she was trying to provide a home but they were not able to pay for phones, gas and electricity on time. Both of them became anxious and depressed. She had always been dependent upon her husband and had not worked. They had virtually no money, no income and she did not know enough about the case to help him cope and he could not cope.

[37]

I turn to events that occurred at the time of and subsequent to the revivification of activity in this proceeding. The first orders made were by Teague, J. on 10 June 1997 "on the papers", pursuant to Practice Note No. 1 of 1996. This order was activated by the plaintiffs in order to avoid the dismissal of the proceedings pursuant to Rule 34.05. The effect of the order, no party appearing, was that Rule 34.05 was not to apply to the proceeding and that a directions hearing would be scheduled unless specific directions were sought. Each party had leave to apply to Teague, J. for orders. On 11 November 1997 all parties appeared before Teague, J. who made a commonplace set of orders as to the time for taking of various steps in order to progress the proceeding. These, as is customary, involved an end date for the completion of interlocutory steps, a date for Notice of Trial and pre-trial directions hearings. Unfortunately, an error was made in the November orders that each date given was said to be in 1997 instead of, as his Honour clearly intended, 1998. This matter was ultimately corrected by the making of orders For example, the date for a pre-trial directions hearing had been given as 2 December 1997. This was corrected by an order of Master Bruce making that date, 1 December 1998. Subsequently the whole of the order of 11 November 1997 was corrected to provide a date for the completion by all parties of the interlocutory steps by 25 September 1998 and a notice of trial by 6 November 1998. This order was dated 11 November 1997. That must have meant that it was back-dated to that date because it was clearly made subsequently. Much of this is not of significance but there was some dispute before me as to whether or not the defendants on 11th November 1997 indicated to Teague, J. that they wished to make an application to have the proceedings struck out for want of prosecution. An affidavit of the solicitor for the third defendant, one Rickarby, refers to some of these matters, derived from a memo prepared shortly afterwards, which would indicate that Mr. Arnold, counsel for Sun Alliance, told Teague, J. that his client was in the process of deciding whether to make an application to the Court for the matter to be struck out for want of prosecution and an order for security for costs. He also indicated that he would want further and better particulars. According to that affidavit and the exhibit, the solicitor for the Law Institute also indicated to the Court that the L.I.V. was content for the timetable to be extended for six months but not the 12 months period which the plaintiffs were seeking. According to this deponent, Teague, J. stated that the first defendant should have a reasonable time in which to make a strike out application and security for costs application. Initially, the Court was prepared only to allow a month. At the request of counsel for the first defendant, no specific date be fixed for that but it was left to the defendants to arrange for the application to be made and within a six months' period. Mr. Rickarby claims that Petch indicated that he was prepared to accept that arrangement. Orders were made that the parties would have until 25 September 1998 to complete interlocutory steps. In the event, the first defendant did not take out its summons until 26 May 1998 and the second and third defendants on 25 June 1998. The plaintiffs took no step during that period, claiming that it would have been premature to do so in the light of the claim made to Teague, J. that the defendants might commence strike-out proceedings. Master Evans heard the application on 1 and 30 July and reserved his decision until a date in mid-October. This meant that the self-executing deadlines would expire and steps were taken to cope with that. On 11 November 1998 the Master dismissed the applications of each defendant, both as to strike out and security for costs. He ordered on that date that the plaintiffs file and serve further and better particulars in response to the 1990 request within 28 days and the plaintiff did so. It is the defendants' appeals against these orders that have fallen to me for determination.

[41]

I have no inclination to add to the overburdened corpus of authority by reproduction of pronouncements of principle in this sphere. All counsel delivered volumes of authorities, ingeniously selecting helpful discrete passages. I choose to refer to some of the critical principles pronounced in Masel v. Transport Industries Insurance Co. Ltd. & Ors. [1995] VicRp 59; (1995) 2 V.R. 328, in which the Appeal Division of this Court stated the following matters as guidelines in this sphere,. Those principles are: first, that the guiding principle for the exercise of the discretion to dismiss a proceeding for want of prosecution was that an order for dismissal would be made if the justice of the occasion demanded it. I pause to say that that principle applies equally to plaintiff and defendant, and reflects the law's objective to attain justice, whilst paying due regard to the maintenance of orderly legal principle. The second principle articulated in that decision was that the criteria driving the exercise of discretion to dismiss for want of prosecution were but broad guidelines directed to arrive at a just result, capable of being departed from in appropriate cases. The third principle was that even in cases in which both inordinate and inexcusable delay by a plaintiff had occurred, resulting in serious prejudice to a defendant, that did not necessitate the dismissal of an action for want of prosecution, because circumstances might exist that made it inappropriate to make the order. Masel v. Transport Industries in effect had followed and applied mainstream authority. Birkett v. James [1978] A.C. 297; Bishopsgate Insurance Australia Ltd. v. Deloitte Haskins & Sells (unreported, Full Court, 9 September 1994); Department of Transport v. Chris Smaller (Transport) Ltd. [1989] A.C. 1197. I hardly need to refer to the cases applying these principles, many of which have been re-visited in the Court of Appeal; see Sacco v. Renault (Wholesale) Pty. Ltd. (Court of Appeal, unreported, 8 September 1995); Leyburd Nominees Pty. Ltd. v. Coates Brown & Co. (unreported, Court of Appeal, 12 September 1995); Spitfire Nominees Pty. Ltd. and Melibee No. 2 Pty. Ltd. v. Franco Ducco (Court of Appeal, unreported, 27 February 1997) and, as important as any other case, the old authority of Shepperdson v. Lewis [1966] VicRp 59; [1966] V.R. 418. My approach for the purpose of disposing of this matter is to apply the principles pronounced in these cases and, where necessary to do so, specifically to refer to applicable authority.

[47]

The difficulty with respect to the reasonable disposition of litigation, the orderly and economic dispatch by courts of their business, of permitting protracted delay as a consequence of impecuniosity of plaintiff litigants as an excuse is self-evident. It is another matter to say that impecuniosity could never be a relevant factor in determining whether a delay in the prosecution of litigation is excusable. It would rarely be a stand-alone ground. Since the principle underwriting the exercise of the discretion to strike out is the attainment of justice in the circumstances, and the needs of the particular case, it would be an unacceptable view to conclude that impecuniosity could never be a ground, perhaps, even standing alone, and even more dubious to state that it could not be taken into account in conjunction with other reasons for delay. In this case, in my judgment, I need go no further than to take the view that the impecuniosity of the plaintiffs, in my view established on the material, is a relevant matter to take into account in conjunction with other features raised by the affidavits. As a general principle, I would regard it as being a rare case in which impecuniosity, standing alone, could amount to a reasonable excuse for the failure to prosecute a proceeding. In a legal-aid denuded legal world, one in which the cost to plaintiffs of maintaining litigation has become prohibitive, serious delays could thus always be explained away. I take the view that impecuniosity is a matter appropriate to be considered, in conjunction with other matters, here raised, in determining whether the delay in the progression of this litigation is excusable. Based upon the affidavits of Mr. And Mrs. Petch, I have no doubt that they had insufficient funds to enable them to retain independent legal advice and representation. They have always been struggling to meet the basic bills of survival, and had major business, family and bank debt. I am satisfied that they could not have employed and paid for appropriate legal representation, that is barristers and solicitors. I am also satisfied on the material, that, notwithstanding Mr. Petch's special skills concerning the connexion of the law and technology, that he was not a trained and experienced litigator. As he himself has stated, he was immediately in difficulties once the case was put out of the judge controlled management of the Commercial List, incapable of mounting the forward progress of the action in a practical way, no matter how well or ill he grasped the technological matters that are no more than part of the background on the issues here.

[55]

I turn to these grounds and address the first of them, namely the loss of the underwriting file. The first matter to note is that this does involve the concession that there was an underwriting file created. No details have been provided of searches for the file, the loss of which cannot be laid at the plaintiff's door. Nor does the first defendant go so far as to say that it cannot obtain copies of relevant documents and communications. The first defendant has been given discovery. The first defendant rejected the plaintiff's claim by letter of 15 December 1987 saying that the claim had been refused. Moreover, it is clear enough from the plaintiff's own material in this case that copies of many of the critical documents, if not all, are available. Second, the defendants' explanation concerning witnesses is, to say the least, evasive and unconvincing. As one who has appeared in and heard as judge many cases of this kind, one is immediately struck by the absence from the defendants' material of the detail one would ordinarily encounter in these cases, such as (1) as the names, occupations, function and relevance of the witnesses who might have been called but are no longer able to be called or who no longer have any recollection; (2) what critical evidence might have been called and can no longer be called because of the death, absence, unknown whereabouts, illness or infirmity of a particular witness or witnesses, or other similar matters. There is no identification of any important witness who has died or is unavailable. It is clear that Mr. Evans, then an executive of the second defendant and who negotiated, confirmed and documented the insurance cover of the plaintiffs was "proofed" to some extent. I note that the affidavit of Petch of 23 July 1998 specifically identifies the delivery of the claims for insurance indemnity on the second defendant, accompanied by a full lever arch file of documents. The file included copies of affidavits from the Cullinan proceeding, and affidavits of Petch, Fahnle and of Mr. Bramall of Rice Growers, of 13 October 1997 with exhibits. It also included an affidavit of Dr. Osborne of the Chisholm Institute, with exhibits, of 22 May 1998, plus copy court documents, the defence, interlocutory orders, reasons for judgment and many of the documents that are a feature of this proceeding, including documents which explain the industrial imaging involved and the effect of the theft by Cullinan of the software. Fahnle's affidavit suggests that the handwritten notes produced by the second defendant are almost certainly those of Evans recording the details of the meeting he had with Fahnle in which most of the relevant matters were explained, including the software and required insurance cover. The proceeding was commenced in the Commercial List from the outset in 1990. It was in the List for four months. A number of the affidavits filed detailed the steps taken by the parties and appearances before the Judge-in-charge of the List. The reasons for this were to endeavour to show from the outset the failure of the plaintiffs to press their case forward with competence and despatch. This was, I would judge, largely due to the inexperience of Petch, coupled with his psychological incapacities. However, it also makes it almost impossible to believe that the three defendants, an insurance company, an insurance broker and the Law Institute of Victoria, did not get around to interviewing witnesses to meet the plaintiffs' claim during the first four or five months after the commencement of the action. That would be a level of incompetence falling far below the standards that one's experience instructs is likely found in such well-resourced professional litigants. Taking into account the failure to identify the witnesses, I am unconvinced that the defendants have been denuded by time of the opportunity to call relevant witnesses with memory of these events. Furthermore, it seems to me to be significant that not only have the first and second defendants failed to identify who the four additional witnesses are, nor the subject matter of their evidence; there is no evidence that any one of them has forgotten, or has diminished recollection, of whatever it is the witness would be expected to address. One should not overlook that, although the period here is very substantial, courts every day hear witnesses giving evidence about events which have occurred many years before. I note that the first defendant's solicitors, in responding to the plaintiffs' claim which had been made by their letter of 15 December 1998, had asserted: "After careful consideration our client has come to the conclusion the claims by you and Imaging Applications Pty. Ltd. do not fall within the cover provided under the policy." (Emphasis added.) The first defendant had been in possession of the detail of the claim for some time at that stage and one is entitled to assume that the "careful consideration" of the matter which it investigated was likely to have included contact with the insurance broker, the second defendant, and almost certainly witnesses. The first two defendants must have been aware of Evans' dealings with Imaging and Petch (and Fahnle), leading to the giving and granting of the insurance and, significantly, its renewal. This case may be distinguished from cases such as John Holland (Construction) Ltd. v. Jordan (1992) 8 F.L.R. 174 or Spitfire Nominees Pty. Ltd. v. Thompson and Hall (1999) VSC 12, cases in which it was concluded that because of the death of a party in one case and a critical witness in another, a fair trial of the issues could not be held. The plaintiff's case against the first defendant heavily relies on a combination of the documents which constituted the giving of the insurance and its renewal. The discovered documents in this case are sufficient to throw appropriate light on this and, coupled with the conversations with and representations by Stenhouse in May and August 1986, dealt with in Fahnle's affidavit (admissible against both first and second defendants because of the arguable relationship of the principal and agent between them), the plaintiff's case can be known and understood. It is not specifically suggested in the first defendant's material that any of the dealings between the plaintiff and evidence cannot now be properly tried because of known defects or failures of recollection. Instead reliance is placed upon cases such as Casuaria v. Dekiva (unreported, 21 November 1994, Hayne, J.) where some appropriate emphasis is placed upon the Court's right to infer prejudice in the case of lengthy periods of delay. It seems to me that Hayne, J.'s view in that case was to some extent influenced by the fact the claim was one for professional negligence (that claim hanging over the heads of the relevant complaining defendants for some years). But the first defendants' material does not condescend to suggest what it is the four "unproofed" witnesses might address. The material does not suggest that the witnesses were not interviewed; on the contrary, one might infer that they were. What a "proof" means to this defendant is not made clear. It would be strange indeed if some record did not exist, not even with the solicitors for the first defendant who had acted in the proceeding from 15 December 1988 (see letter written to Petch in Exhibit NP15 to Petch's affidavit). It was the first defendant which was the party applying to have the speedy process of the Commercial List circumvented, although in my view it was likely to have been removed by the judge because of the number of parties and the issues in any event. It was the plaintiff at that time who was anxious to keep the matter in the Commercial List. Petch would have had to bear with the personal wear and tear on him if the matter was sent out of the List. The defendant has not given any information about the identity and the relevance of the witnesses or that any recent attempts to gather information from them has proved unavailing because of the elapsing of the time. One would think that it is likely that Evans is the critical witness and clearly enough he was interviewed. I do not draw any distinction between the first and second defendants in this respect and I am not persuaded that prejudice of the necessary kind has been established.

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Judgment (76 paragraphs)

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