BETWEEN : KOKOS INTERNATIONAL PTY LTD t/as Murray Street Backpackers Hostel (ACN 009 404 611)

Practice and procedure - Springing order - Non-compliance with springing order - Subsequent application to extend time for compliance - Turns on own facts

Application to extend time for compliance dismissed

Mariotti v Wanneroo North Pty Ltd [2008] WASCA 243

MTQ Holdings Pty Ltd v Lynch [2007] WASC 49

BEECH J: (These reasons are an edited version of the reasons delivered extemporaneously on 6 April 2009.)

1 The plaintiff applies to extend the time for compliance with springing orders made by Newnes J on 23 December 2008, or for a stay of those orders. For the reasons that follow I would dismiss the plaintiff's application.

2 The subject matter of the application is the orders made by Newnes J on 23 December 2008. Those orders were, relevantly, to the following effect:

(1) the action be removed from the inactive cases list, without prejudice to the defendants' right to bring any application to dismiss the action for want of prosecution;

(2) the action be listed for directions before Newnes J on 19 February 2009 at 9.15 am;

(3) unless by 4.00 pm on 16 February 2009, the plaintiff's solicitors deliver to the associate to Newnes J and serve on the solicitors for the defendants a minute of proposed directions in accordance with par 4, then the action do stand dismissed and the plaintiff pay the defendants' costs of the action to be taxed;

(4) the minute of proposed directions shall contain a timetable of interlocutory steps to be taken by the parties for the purpose of achieving entry for trial as soon as reasonably practicable, and it shall set out all the steps which the plaintiff's solicitors consider are necessary to be completed before the action is entered for trial;

(5) unless on or before 13 February 2009 the plaintiff provides to the defendants copies of the documents numbered 88 and 89 in its supplementary list of documents, the action be dismissed and the plaintiff pay the defendants' costs of the action to be taxed.

3 The orders of 23 December 2008 were made on the plaintiff's application for the matter to be removed from the inactive cases list. The action had been in that list for almost six months. Accordingly, dismissal of the plaintiff's action by force of O 29A r 21 of the Rules of the Supreme Court 1971 (WA) was imminent.

4 It is necessary to give attention to the circumstances in which the springing order was made. For that reason, I set out some of the history of the action and of the plaintiff's non-compliance with earlier orders which led to the making of the springing orders on 23 December 2008.

5 On 10 May 2006 the plaintiff wrote to the defendants saying that financial documents being prepared by the plaintiff's accountant still needed to be discovered.

6 On 8 June 2006 Registrar Johnston ordered that the plaintiff provide the financial statements to the defendants by 8 August 2006. That did not occur.

7 On 7 September 2006 Registrar Johnston ordered that the plaintiff provide the financial statements to the defendants by 21 September 2006. Again, that order was not complied with.

8 On 5 October 2006, Registrar Johnston ordered that unless the plaintiff provides the financial statements to the defendants by 12 October 2006 the plaintiff be precluded from adducing the evidence at trial without leave of the trial judge.

9 On 12 October 2006 a supplementary affidavit of discovery was filed and served. Document 88 in the list was the plaintiff's financial statements for the five years preceding 30 June 2006. Document 89 was daily registration sheets for the plaintiff's business since 1999.

10 In the remainder of 2006 there were problems with non-attendance on behalf of the plaintiff at one or more status conferences.

11 On 20 March 2007 the defendants wrote to the court in response to a request by the court for an update on the status of the matter, complaining that despite repeated requests the plaintiff had not produced copies of documents 88 and 89.

12 In 2007 attention appeared mainly to be directed to arguments about the pleadings or proposals for amendments to the pleadings.

13 On 3 April 2008, Newnes J ordered that the time for the plaintiff to serve its expert evidence be extended to 30 April 2008 and that the plaintiff provide copies of documents 88 and 89 by 11 April 2008. Those orders were not complied with.

14 On 26 June 2008 the matter was placed on the inactive cases list by Newnes J. That order was made in circumstances where the plaintiff had failed to comply with his Honour's orders of 3 April 2008, including its failure to provide copies of documents 88 and 89.

15 As I have said, the application that came before his Honour on 23 December 2008 was an application by the plaintiff for the action to be removed from the inactive cases list. The application was made just prior to the elapsing of six months since the action had been placed in that list. It was supported by an affidavit of the plaintiff's solicitor, Mr Tihomir Galic. Mr Galic stated that Mr Darron Brahe, the former manager of the hostel business, had been managing the litigation and instructing solicitors on the plaintiff's behalf. In par 10 of his affidavit Mr Galic said that Mr Chul Kim, an officer of the plaintiff, had informed him that Mr Brahe's whereabouts were now 'said to be unknown', and that the last information he had from Mr Kim was to the effect that Mr Brahe had apparently gone missing several months ago and no-one had seen or heard from him for many months. Mr Galic said that he himself had not seen or heard from Mr Brahe for a period of at least six months, maybe more.

16 In par 16 of his affidavit Mr Galic stated that there appears to be an expectation on the part of the directors of the plaintiff that Mr Brahe intends to return to instruct solicitors in relation to the proceedings; that the only locally based director, Mr Kim, appeared to have difficulties in instructing solicitors himself but that those difficulties may not be insurmountable as there are records available. Further, Mr Galic said that he believes that Mr Kim does have some knowledge of the proceedings, although to what extent he does not know.

17 It is clear from those matters that when the orders of 23 December 2008 were made, Mr Brahe had already been missing for some months and that this was known to Mr Kim, Mr Galic and to the court. It was in those circumstances that the times the subject of the springing orders of 23 December 2008 were fixed.

18 I turn to the principles relevant to an application of this nature. I refer to the principles set out in detail in the decision of Master Newnes in MTQ Holdings Pty Ltd v Lynch [2007] WASC 49 [38] - [41] and [46] - [57] as follows:

It is clear, and it was not in dispute, that a court at first instance has the power to extend time under a self-executing order which has 'sprung': FAI General Insurance Co Ltd v Southern Cross Exploration NL [1988] HCA 13; (1988) 165 CLR 268.

It is axiomatic, however, that peremptory orders are made to be obeyed and they are generally only made where (as in this case) the party in default has already failed to comply with the requirements of the rules of court and with an order of the Court. As Auld LJ noted in Hytec Information Systems Ltd v Coventry City Council [1996] EWCA Civ 1099; [1997] 1 WLR 1666 at 1676, an 'unless order' is by its nature intended to mark the end of the line for a party who has failed to comply with it and any previous orders of the Court.

It is, moreover, plainly important to the administration of justice that orders of the Court are complied with. Browne-Wilkinson VC observed in Re Jokai Tea Holdings Ltd (above), that obedience to orders of the Court is the foundation on which its authority is founded. It follows that any approach which tends to encourage the development of a culture of non-compliance, where orders, even peremptory orders, of the Court are not given the attention and priority they require, must inevitably tend to undermine that foundation.

Accordingly, the power to extend time when a springing order has not been complied with is a power to be exercised cautiously and with due regard to the necessity for maintaining the principle that orders are made to be complied with and not to be ignored: Samuels v Linzi Dresses Ltd [1981] QB 115, per Roskill LJ at 126 - 127.

...

I do not, however, understand Re Jokai Tea Holdings Ltd (above) to be laying down a principle that a party who fails to comply with a peremptory order is entitled to an extension of time unless the failure was intentional and contumelious. The Vice-Chancellor's judgment makes it clear that he considered a party seeking to avoid a springing order must establish both that there was no intention to ignore or flout the order and that the failure to comply with it was due to circumstances outside the party's control.

...

In Hytec Information Systems Ltd v Coventry City Council (above), having considered a number of authorities, including Re Jokai Tea Holdings Ltd (above) and Caribbean General Insurance Ltd v Frizzell Insurance Brokers Ltd (above), Ward LJ (with whom Auld LJ and Lord Woolf MR agreed) concluded (at 1675) that where there has been non-compliance with a peremptory order 'a sufficient exoneration will almost inevitably require that [the defaulting party] satisfies the court that something beyond his control has caused his failure to comply with the order.'

Of course, on an application of this nature the exercise of the discretion must in the end depend upon all the circumstances of the case, without being limited by conditions or guidelines articulated in other cases, and there must always remain sufficient flexibility to make reasonable allowance for human error. And whilst it is important that 'legal business be conducted efficiently': Bomanite Pty Ltd v Slatex Corporation Australia Pty Ltd [1991] FCA 536; (1991) 32 FCR 379 at 387, that is not an end in itself. The ultimate objective must be to do justice: State of Queensland v JL Holdings Pty Ltd [1997] HCA 1; (1997) 189 CLR 146 at 155.

But given the nature of a springing order, the starting point must be that it is for the defaulting party to establish why it should be permitted to continue with the litigation despite its non-compliance. In my view, it will generally not be sufficient simply to show that the non-compliance was not intentional and contumelious. The authority of the Court will equally be undermined, and the quality of justice for the innocent party eroded, if the ultimate sanction effected by the operation of a springing order can be avoided by showing that non-compliance with the springing order came about by the same sort of inattention or laxity that caused the order to be made in the first place.

Whether the consequences of non-compliance should be visited upon the litigant when the fault lies wholly with its solicitor will depend upon the particular circumstances. But I do not consider that the fact the litigant did not contribute to the default, or even that it was unaware of the springing order, is necessarily sufficient to enable it to avoid the consequences of non-compliance.

Much that occurs in the course of the interlocutory process in litigation is done, and necessarily done, by the solicitors alone, without the active, or any direct, involvement of the litigants. The litigant reasonably leaves such matters wholly in the hands of its solicitors. But that does not mean that the litigant is necessarily excused from the consequences of its solicitor's failure to comply with the requirements imposed by the rules and the orders of the Court in respect of such matters.

The failure to comply with a springing order is an egregious breach. A springing order is intended to be the last opportunity offered to the party to put its case in order. The proper administration of justice, and the quality of justice for the other party, generally requires that it be just that, its last opportunity. That will generally mean that the litigant must bear the consequences of a failure to comply with a springing order, whether the failure was due to the litigant or its solicitor.

The matters to which I have referred above provide the backdrop, in my view, against which the specific matters to which, in any particular case, the Court is to have regard in the exercise of its discretion are to be considered. And while no hard and fast rules can be laid down as to the matters to which the Court should have regard, in my view in the exercise of its discretion the Court will normally have regard to at least the following matters:

(1) the circumstances in which the springing order came to be made;

(2) the reason for non-compliance with the springing order;

(3) the prejudice to the defaulting party if the time were not extended; and

(4) the prejudice to the other party if the time were extended.

It will also normally be a relevant consideration whether or not the defaulting party has a reasonably arguable case on the merits - there being no point in resuscitating a case that is devoid of merit - but, on the other hand, the fact that a party has an apparently meritorious case cannot be permitted effectively to act to insulate it from the consequences of a failure to comply with a peremptory order of the Court.

But as I have said, in the end the matters that are to be weighed in the balance, and the weight to be given to each, cannot be stated definitively but must depend upon the circumstances of the particular case [46] - [57].

19 I also refer to Mariotti v Wanneroo North Pty Ltd [2008] WASCA 243 [53].

20 The only evidence in support of the application before me today is the affidavit of Mr Kim sworn 13 February 2009. In the affidavit Mr Kim deposes to the fact that the business the subject of this action is the backpackers hostel business in Murray Street, Perth. That business, he says, was in effect managed and operated for a long time by Mr Brahe until the time when the defendant retook possession of the premises leased by the plaintiff in December 2007.

21 As Mr Brahe was the hostel manager, he alone is said to have knowledge of all the facts and circumstances relating to the proceedings. Mr Kim says that he is 'not very familiar at all' with the factual details underpinning the subject matter of these proceedings.

22 Mr Kim says that Mr Brahe held all the business records relating to the hostel business in his possession, and that he knows that some or much of those records remained on the premises when the defendant retook possession. He says he does not know whether and to what extent Mr Brahe retrieved any of those records.

23 Mr Kim says that Mr Brahe has 'unfortunately disappeared in the last six months' and has not been seen or heard from within that time. Mr Kim says that he has attempted to contact Mr Brahe on his mobile phone, by calling and by text message, but he has had no response. He also refers to some health problems experienced by Mr Brahe.

24 Mr Kim says that he has been made aware by the plaintiff's solicitors of self-executing orders made by the court requiring the delivery of copies of discovered documents and expert evidence in relation to these proceedings. No mention is made in Mr Kim's affidavit of the other self-executing order relating to the provision by the plaintiff of a minute of directions progressing the action.

25 Mr Kim says that he has searched everywhere for documents answering the description of those that he has been asked to provide and which have been discovered, but that he cannot find them. He says he believes they would still be in the possession of Mr Brahe. He says the plaintiff is in a difficult position because it cannot comply with the court orders without Mr Brahe's involvement. Mr Brahe is also, he says, a material witness.

26 Mr Kim summarises the position of the plaintiff in par 15. He says that the plaintiff is in a difficult position, and seeks the court's indulgence for a short period as it seeks to determine Mr Brahe's whereabouts before 'deciding whether or not to proceed with the action'.

27 A number of observations can be made about what is and is not said in the affidavit of Mr Kim. First, as I have said, there is no mention in the affidavit of the springing order regarding the provision of the minute of directions to bring the matter to the point where it can be entered for trial. Thus the affidavit does not put forward in terms any reasons for noncompliance with that self-executing order.

28 In oral submissions made on behalf of the plaintiff it was suggested that the court might infer that because Mr Brahe was the person who knew all about the action it would not have been possible for anybody to prepare a minute of directions. To some degree an inference of that character may be open, but it seems to me to be unsatisfactory that the evidence in an application to extend the time for compliance with a springing order does not descend to the specifics of what could and could not be done given Mr Brahe's absence.

29 Next, there is nothing in the affidavit of Mr Kim to explain why the springing orders were made in the terms that they were, in circumstances where Mr Brahe was already then absent and had been for some months.

30 Further, there remains no explanation for the failure by the plaintiff to produce documents 88 and 89 for inspection in the period from at least early 2007 through to June 2008.

31 There is very little detail in the affidavit as to what steps have been taken to search for Mr Brahe. All that is said is that there have been attempts to contact him by mobile telephone and that he is no longer at the address at which he had been living.

32 Further, the affidavit does not state in any detail how long an extension is sought by the plaintiff and what steps will now be taken to attempt to locate Mr Brahe.

33 It is, I think, noteworthy that seven weeks have passed since Mr Kim's affidavit was sworn. No further evidence is put forward by the plaintiff as to what has or has not occurred in that seven weeks. Of course, it is to be inferred that Mr Brahe has not in that time been located.

34 The position is then that Mr Brahe had been missing for months by December 2008. By the time this application was filed by the plaintiff in February 2009, he had been missing for another seven or so weeks. A further seven or so weeks have elapsed again since the application for an extension of time to comply with the springing orders of 23 December 2008 was filed. There seems to me to be very little in the evidence to support any conclusion that there is any reasonable likelihood of locating Mr Brahe in the short term.

35 The thrust of the plaintiff's submissions in support of this application is that the plaintiff cannot find Mr Brahe and wishes to have some more time to attempt to do so. In the circumstances that I have outlined, and taking into account the principles as to when it may be appropriate to extend time for compliance with the springing order, I am not satisfied that the plaintiff's application should be granted.

36 It does not seem to me that the plaintiff's failure to comply with the springing order can be said to have been brought about by circumstances beyond its control. It is true that the inability of the plaintiff to contact Mr Brahe can in one sense be said to be of that character. However, it is a circumstance which has pertained for somewhere between six and nine months and which existed at the time when the springing order was made.

37 Moreover, when regard is had to the lack of detail as to precisely what has been done by the plaintiff to attempt to locate Mr Brahe, the lack of detail as to what is said it is proposed now to be done, and the other aspects of the evidence of Mr Kim to which I have drawn attention, the evidence in support of the plaintiff's application falls short of satisfying me that it is appropriate to grant the extension sought.

38 The plaintiff submits that in considering the question of prejudice to the defendants, regard should be had to the existence of other litigation between these parties. The plaintiff says that the presence of the other actions will mean that there is little prejudice to the defendants if this action is allowed to remain alive for a period of a few more months. I do not accept that submission.

39 In CIV 2477 of 2002, there is only an issue of costs outstanding. A bill of costs remains to be taxed. In CIV 1212 of 2006 there is, it is conceded by the plaintiff, no practical life left in the issues in the action apart from their potential relevance to any questions of costs. That action was a claim for relief against forfeiture. It became essentially academic after December 2007 when the defendant retook possession at the expiration of the lease.

40 In those circumstances, the existence of the two other actions seem to me to make very little difference on the question of prejudice. I do, of course, take into account the prejudice to the plaintiff in the dismissal of its action.

41 For the reasons that I have given I am not satisfied that it is appropriate to extend the time for compliance with the orders of 23 December 2008. Accordingly, the application is dismissed.