Incentive Dynamics Pty Ltd (in liquidation) & Anor v Robins, Douglas Robert McNeill & Ors [1998] FCA 1046

REASONS FOR DECISION HIS HONOUR: I have entertained this morning an application made orally by the second respondent for leave to file and serve a counterclaim on behalf only of the second respondent against the second applicant in the terms of the document which is annexure A to the affidavit of John Haigh Robins sworn on 12 August 1998 and filed in Court by leave this morning. Having heard Mr Robins in support of that application, and having regard to the matters which Mr McLean of counsel put when this proposed application was foreshadowed, I indicate that I refuse the application. It is appropriate that I make a few remarks about why I do so. Under O 5 r 9(2) of the Federal Court Rules, a cross-claim may be made against any applicant by a respondent, but leave to do so is required after the first directions hearing. This proceeding was instituted on 21 February 1997 by application and statement of claim. There have been a series of directions hearings, as well as interlocutory hearings, including a directions hearing on 12 August 1997, when directions were given setting a timetable for the filing and serving of amended defences and any cross-claim or cross-claims. That timetable was not adhered to, and in particular no cross-claim was then made. As Mr Robins has indicated, on 21 November 1997 North J further provided an opportunity to the respondents to institute any cross-claims by 17 December 1997. But again, they have not done so. I understand Mr Robins' reasons why he personally did not do so, as he had solicitors acting for him at the time. But the fact remains that no cross-claim was then instituted, notwithstanding the elapse of time and the two directions which the Court had given. In Trade Practices Commission v Allied Mills Industries Pty Ltd & Ors (1980) 33 ALR 127, Sheppard J addressed the question of when leave should be given under O 5 r 9(2). His Honour expressed the test, as one might expect, as assessing the impact upon the trial of allowing the cross-claim to be instituted at the time at which it is sought and in the terms in which it is sought, in particular whether to do so would cause injustice to the applicants, and if so, whether that injustice would be out of proportion to the injustice to the cross-claimant or proposed cross-claimant if the cross-claim were not permitted to be pursued. I refuse the application for the following particular reasons. The proposed cross-claim raises issues which are significantly more extensive than issues which have been ventilated in the proceedings to date. It is true that certain of the issues relate to the way in which the second applicant is alleged to have taken possession of documents, and in particular, but not confined to, a reconciliation file, and I should add, whether in fact he took possession of that file and other documents and what has happened to them. But the proposed cross-claim more generally alleges dishonesty against the second applicant in the steps which he took to obtain possession of documents on three separate occasions - 19 April 1996, 5 June 1996 and 7 June 1996 - how the documents were then stored and how the documents were then used. It also alleges that in the securing, maintaining and controlling of those documents, he has misplaced or wilfully lost them. It also alleges that in the conduct of the administration of the liquidation of the first applicant he has failed in his duty to properly liaise and correspond with the first, second, third and fourth respondents. Those issues, self evidently, are much more extensive than those issues relating to the existence and whereabouts of the reconciliation file and some other documents which have been litigated in these proceedings. In effect, the proposed cross-claim will involve a general inquiry into the conduct of the liquidator's administration. The second applicant was not cross-examined on all those issues, and it would be unfair to him now to require him to go back into the witness box and to justify his administration without the opportunity of knowing properly the nature of those allegations. It may require him to re-open his case. It may require him to call a number of his officers to give evidence as to the way in which various things were done in the course of the administration. At this point, none of those officers were called in his case because they were not relevant. Secondly, because of the breadth of the allegations, there is a potential to prolong this trial significantly, which has now proceeded on three separate blocks of hearing time. In my view, it is in the interests of the parties, including the applicants, but the other respondents as well, that this litigation be brought to completion within a timely fashion. It is inevitable, I think, that if the issues raised in the proposed cross-claim were to be ventilated, it would require an adjournment for the proper pleading of the cross-claim, for its investigation and for the adducing of evidence, both on the cross-claim and in response to the cross-claim. That would involve a delay of some further months before the matter was ready to be resumed, and then considerably more hearing time. I do not think that the reasons Mr Robins has offered for the delay in producing the cross-claim in the form in which it now is, which I accept, are adequate reasons for the delay because it is important that Court directions as to the management of a matter be complied with, not simply for the litigants in a given proceeding but generally, for other litigants in other matters before the Court, so that Court time is used efficiently in the interests of the community as a whole. In my view, it is not a sufficient explanation simply to say that at the time the directions were given, and the decision apparently made not to pursue a cross-claim, the second applicant was represented by solicitors and Mr Robins now representing himself, wishes to take a different course. In that sense, shielding behind the fact of representation is, in my view, an insufficient reason to explain the delay. I have mentioned above that, in any event, I do not think the pleading is adequate to put the second applicant on proper notice, particularly given the serious nature of the allegations which are sought to be made. I have identified those allegations, but they are not properly pleaded. The proposed cross-claim also does not plead adequately the general damages. It does not plead details of special damages. It does not plead the facts upon which some particular aspects of the general damages are said to give rise to a loss of a compensable nature. I next note that there is no offer made by the second respondent with respect to the costs of any delay, either costs incurred by the applicants or by other respondents. Any delay will incur costs on their part and there is no suggestion, or offer made, that they would be protected in respect of costs occasioned by that delay. Finally, in balancing injustice I note that Mr McLean of counsel for the applicants and the proposed cross-respondent has acknowledged that the cross-claim, if it is to be pursued, can be pursued by separate proceedings. [Discussion as to scope of submission made] MR McLEAN:But for the record I will make it plain that when I said he can bring another proceeding what I meant to convey to your Honour was that he can go and issue it. My comments were more directed to the limitation period issue. I didn't mean to convey that in the fresh proceeding we won't take the estoppel defence. [Further discussion ensued] HIS HONOUR: On the question of injustice to the second respondent, Mr McLean of counsel for the applicants has risen to indicate that I had misapprehended the extent to which a submission by him could properly be made use of on this application. I entirely understand the point he is making. He indicated to me in submissions that Mr Robins could bring the proposed cross-claim in a separate proceeding but did not intend thereby to indicate that the applicants would not seek to raise an estoppel against Mr Robins in respect of the issues now sought to be ventilated in the proposed cross-claim. It is likely but not certain (because I have not had to finally address what needs to be decided in this proceeding) that findings made in this proceeding may touch some of the matters upon which this proposed cross-claim relates. To the extent to which such findings are made, they will constitute findings of fact giving rise to issues estopped as between the second respondent and the second applicant and generally between the parties to this proceeding. There is a risk that, beyond that, the second applicant may assert in respect of the proceeding that the proposed cross-claim contemplates that an estoppel in the nature of an Anshun estoppel will arise: Port of Melbourne Authority v Anshun Pty Ltd (1981) 147 CLR 589. Without having seen the proposed cross-claim fully pleaded in a way which indicates the nature and extent of the conduct which is the subject of proposed criticism on the foreshadowed cross-claim, it is not possible as to whether any such estoppel might or might not be made out. Indeed, it would probably not be appropriate for me to do so. I accordingly make my decision on the basis that the proposed cross-respondent can bring a separate proceeding as he is within time to do so, and that the scope of the proposed proceeding is significantly more extensive than the issues which have been ventilated touching on the circumstances of the second applicant taking possession of documents and the preservation or otherwise of documents relevant to this proceeding. In those circumstances the risk of prejudice to the second respondent, the proposed cross-claimant, of any estoppel in the nature of an Anshun estoppel to which I have referred, is one which I take into account. Notwithstanding that consideration, I am not of the view that at this point in the proceeding, in terms of this particular cross-claim as proposed, leave should now be given. Sometimes on such an application as this there is considerable evidence adduced as to the merits of the proposed cross-claim. No such evidence has been adduced on this application. I indicate that although in a general way evidence has been led on some aspects of the proposed cross-claim incidental to issues arising before me, I have not heard all the evidence, and I have simply taken that to be a neutral consideration for the purposes of the ruling which I have given. I accordingly decline the oral application for leave at this stage of the proceedings to file and serve a cross-claim by the second respondent against the second applicant in terms of the document annexure A to the affidavit of Mr Robins sworn on 12 August 1998. I certify that this and the preceding four (4) pages are a true copy of the Reasons for Decision herein of the Honourable Justice Mansfield. Associate: Dated: Counsel for the Applicants: Mr T McLean Solicitors for the Applicants: Marshalls & Dent Mr J H Robins appeared in person on behalf of the First, Second, Fifth, Sixth and Eighth Respondents Counsel for the Third Respondent: Mr A Radojev Solicitors for the Third Respondent: Richmond & Bennison Mr J D Hudson appeared in person with Mr C T H Chessun on behalf of the Fourth and Seventh Respondents Date of Hearing: 14 August 1998 Date of Decision: 14 August 1998