Moses v Ratner

Background

1. The plaintiff and the defendant entered into a joint venture agreement to develop land in Blake Street, Rose Bay. They agreed to and did purchase the land. They then arranged for it to be developed through the defendant's building company.
2. As is common with these types of property developments, the idea was that at the end of the development there would be a profit which would come from the sale of the two buildings developed and that, after accounting for all expenses and contributions, the profits would be divided between the plaintiff and the defendant.
3. The plaintiff says that he put in the funds. He did not claim interest. The defendant's contribution was that he carried out the building work, either personally or through his company. As it turns out, subsequent to the commencement of these proceedings, the two lots which arise from the development have been transferred; one to the plaintiff and one to the defendant. Indeed, the plaintiff has accepted that he should pay an additional sum of $200,000 having regard to the lot which he received. The plaintiff sought orders for partition in the original statement of claim. It was necessary to amend the statement of claim once the partition occurred.
4. The project has thus long since been completed and the plaintiff and the defendant now has or did have ownership of the individual lots. However, the plaintiff says that the defendant has not reimbursed him in respect of amounts which he says are owing to him as part of the joint venture arrangement.
5. The joint venture agreement was not in writing. There is no deed to which the Court can refer when considering the rights and obligations of the parties.
6. As set out in the statement of claim and subsequent iterations of that original pleading, the plaintiff says that, after allowing for the amount of contribution of the plaintiff and various other adjustments and allowing for the adjustment on account of the amount of $200,000 which the plaintiff must pay the defendant, the defendant owes the plaintiff approximately $287,000.
7. As I will detail later in this judgment, there has been considerable delay on the part of the defendant in finalising his defence and, indeed, in filing a cross-claim but the defendant's position (having regard to appropriate concessions made by Mr Fozzard during oral exchanges) is that he does not agree with the plaintiff's calculations and, in particular, says that the value of the building works undertaken by or on behalf of the defendant was significantly more than the plaintiff has allowed for in his claim.
8. The defendant suggests that the value of the building works undertaken should not be determined having regard to a spreadsheet, which was presumably prepared following completion of the matter and was accessed by the plaintiff through Dropbox, but rather through a proper assessment of the fair and reasonable value of the work undertaken by the defendant.
9. I apprehend that one argument advanced by the defendant will be that the building costs should be assessed on a per square metre basis.
10. The plaintiff says in response that his calculation as to the amount owing has been undertaken with reference to the spreadsheet to which he has obtained access. The plaintiff points out that, at least on the face of the spreadsheet, it includes all costs and expenses associated with the building as the date of the last entries appears to coincide with the time when the project was completed.
11. I am not determining the merits of either parties' position at this time, although it is appropriate to consider whether there is a reasonable basis for the defendant maintaining his defence. I can only say that I would not be striking out the defence on the basis that the defendant had no prospects of success. I am not asked to do so. I am not meaning to suggest that I have a view that the defendant has any reasonable prospects of success. I emphasise that it is not possible for me at this stage to gauge either parties' real prospects of success.
12. In any event, the real force in the plaintiff's application is that the delays have been so regular and so lengthy that I should exercise the discretion available to me under r 12.7 and strike out the defence for want of due dispatch.

Rule 12.7

1. As set out in r 12.7, if the defendant does not conduct the defence with due dispatch, the Court may strike out the defence, either in whole or in part, or make such other order that the Court seems fit.
2. In Borgese v Cater & Blumer Pty Ltd t/as Cater & Blumer [2] , Harrison J considered a similar application and the principles to be applied.
3. As his Honour said, the principles were succinctly summarised by Simpson J in Hoser v Hartcher [3] and then cited by McCallum J (as their Honours were then known) in Templar v Watt [4] at [25] as follows: "(1) the ultimate question is whether, on balancing the prejudice to the respective parties by making or not making an order, justice demands that the action be dismissed...;

(2) the discretion should be exercised only in a clear case where it is manifestly warranted... as is generally the case with discretionary decisions, each case depends upon its own facts. Rigid formulae should not be applied to the exercise of the discretion...;

(3) any explanation offered by the plaintiff for the delay in proceeding must be considered...;

(4) personal blamelessness on the part of a plaintiff (as distinct from any tardiness or other fault on the part of his/her/its legal representative) is relevant...;

(5) …A defendant has two choices: to attempt to prod the plaintiff into action, or to stand by, doing nothing, trusting that time will bring about the slow death of the action…;

(6) delay between the date the cause of action arose and the commencement of the proceedings may be a relevant factor ... But in my view, this circumstance must be treated with some caution. The weight that can be accorded to that delay is limited. Where an action is commenced within the period provided for by an applicable statute of limitations, it would not ordinarily be appropriate to take that period into account…;

(7) the onus lies on the defendant to establish any prejudice upon which reliance is placed. The disappearance or death of witnesses, the fading of their recollections, or the destruction of records, are some obvious examples of the kind of prejudice that might arise; (8) prejudice to a defendant caused by delay has to be balanced against prejudice to a plaintiff deprived of an otherwise valid claim; delay in the commencement of proceedings by a plaintiff is sometimes taken as evidence contra-indicating prejudice to the plaintiff in the sense that he/she/it has evinced no interest in his/her/its own case.... Such an inference may be contra indicated by explanatory evidence; in this regard the plaintiff's personal responsibility for the delay is an important factor as is any explanation provided for the delay;

(9) what the defendant has (or has not) done by way of preparation for trial may be a factor...;

(10) the plaintiff's prospects of success is a relevant factor. If it appears that the prospects are minimal, the discretion is more likely to be exercised in favour of the defendant. Conversely, where the plaintiff's case is strong (absent the kind of prejudice to the defendant to which I have referred) it is less likely that justice will be done by striking the action out...;

(11) the exercise of the discretion to strike out should not incorporate any element of punishing a tardy plaintiff, or of excluding one who may appear to have some unworthy characteristics.... The ultimate aim of a court is the attainment of justice.... To adapt the words of the High Court ... discretions such as that presently invoked ought not to be used to supplant the overall aim of the attainment of justice." [Citations omitted]

1. Of course, since Hoser, the Civil Procedure Act 2005 (NSW) ("CPA") has been introduced. As observed by Sackville AJA in Bi v Mourad [5] at [41], the statement of principle as set out in Hoser might be "too generous". However, it seems to me that the principles still have application, albeit regard must be had to s 56 and the dictates of justice as referred to in s 58.
2. Sections 56 and 58 CPA are intended to ensure, amongst other things, that in making any procedural or case management orders, justice is done to both parties. Indeed, in determining whether to exercise the discretion available under r 12.7 the aim is to ensure that justice is done between the parties.
3. In this matter, the effect of the plaintiff's submissions is that the failures of the defendant to comply with orders of the Court in terms of preparation of the matter have been so regular and caused such a delay that the defence should be struck out.
4. The defendant accepts that there has been delay but says that: 1. rule 12.7 should not be used as a form of punishment of the defendant and the effect of the plaintiff's application is really to punish the defendant for the conduct of the matter; 2. the delay has not been of an egregious nature; 3. each failure to comply with orders which has resulted in delay is explicable and the defendant has offered explanations; 4. each and every delay has been occasioned by an error, fault or oversight of the solicitors for the defendant rather than the defendant personally. This has been explained and accepted by Mr Conolly, the solicitor for the defendant. Indeed, somewhat unusually, counsel for the defendant invited me to find that each time there was a failure to comply with a court order or a delay in doing things, it arose through the fault of the solicitor, not the defendant himself. In circumstances in which there have been repeated failures to comply with the court orders, it is somewhat surprising that both counsel for the defendant and the witness called on behalf of the defendant, being Mr Conolly, specifically stated that each and every failure to comply lay at the foot of the solicitors rather than the defendant personally. It seems that the defendant has never failed to respond or ever failed to do what was required of him by his solicitors; and 5. it would be unfair to make an order striking out the defence in circumstances in which the plaintiff could then obtain the benefit of the deemed admissions (due to the defendant's failure to respond to the notice of admitted facts in time) for the purpose of obtaining judgment in default.
5. The plaintiff emphasises that the defendant has not adduced any evidence from the defendant himself. Rather he relies on an extensive affidavit from Mr Conolly. In addition, the defendant relies on voluminous material, most of which was not the subject of any reference in submissions.
6. It is necessary that I say something about Mr Conolly's evidence. Again, as emphasised by the plaintiff, it could have some significance because the defendant chose not to adduce any evidence himself. The plaintiff says that the Court might have expected to hear from the defendant in such a matter. However, the only inference I could draw is that evidence from the defendant would not have made his case on this application any better. I draw that inference.
7. Mr Conolly was cross-examined. His evidence was unsatisfactory. That does not mean that he was not telling the truth but his evidence was argumentative. He seemed to forget that he was called as a witness in the case and was not in giving evidence acting as the advocate for his client. He insisted on often making self-serving statements about his client's position, despite requests by me not to do so. Most significantly, he answered a number of questions using words such as "blame me". He plainly sought to have the Court accept that all responsibility for the regular failure to comply with Court orders rested either with him personally or other persons working in his firm.
8. He did not at any point accept that his client, being the defendant, should be considered in any way to be responsible for any delay or failure to comply with the Court orders. This was even in respect of the significant delay in producing documents in answer to the plaintiff's notice to produce.
9. Of course, one of the critical features in determining whether the discretion should be exercised under r 12.7 is whether there has been any fault by the defendant himself. According to Mr Conolly, there has been none.
10. As stated on a number of occasions by Mr Conolly, the fault is all his, not that of the defendant. Whilst there was an attempt to cross-examine Mr Conolly out of that position, in the end I am left in the position that there is no evidence from the defendant and the solicitor for the defendant, being a vastly experienced and well-known solicitor, said repeatedly that the reason for the delay was his firms rather than anyone else's. It seems to me that I should accept that. What consequences that has, may be left for later.
11. It is now necessary to say something about what has actually happened in these proceedings. On my analysis of the evidence, the defendant has failed to comply with the court orders perhaps more than 10 times.
12. Indeed, whilst Davies J accepted that the original notice to admit was an abuse of process and the defendant succeeded on his original motion, the fact is that the defendant did not respond to the notice within time.
13. Subsequent to the notice the subject of Davies J's decision, the plaintiff served another notice to admit facts. Once again, the defendant did not comply with the time provided for responding to that notice. Admissions were thus deemed to have been made. Once again, the defendant then filed a motion seeking to set aside the notice, again on the basis of an abuse of process and again seeking leave to withdraw the admissions. That motion has not yet been listed for hearing.
14. It is correct to say that the plaintiff is now up to his fourth iteration of the statement of claim. Further, by way of the most recent version filed pursuant to orders made by Registrar Jones on 13 February 2020, the plaintiff raises other issues.
15. Having said that, I do not accept the defendant's submission that the fact that the plaintiff has filed four versions of the statement of claim demonstrates failures on the plaintiff's part. The reason that the original statement of claim was amended was because, subsequent to the commencement of the proceedings, the parties agreed on the transfer of each lot to each other and some of the orders sought in the original statement of claim were no longer necessary.
16. Examples of some of what I will describe as the non-compliance by the defendant include: 1. failing to file pleadings in the time required; 2. failing to file and serve evidence in the time required; 3. failing to file a cross-claim in the time required; 4. failing to amend the cross-claim in the time required; 5. failing to serve expert evidence in the time required; and 6. failing to file evidence in support of its notices of motion in the time required.
17. Whilst the defendant seeks to explain some of these failures with reference to, for example, the solicitor with the conduct of the matter leaving the firm, COVID issues, communication issues, pressure of other work, and indeed receipt of 200 emails a day by Mr Conolly, the fact remains that the failure to comply with the Court's orders has been a feature of the conduct of this case by the defendant. Such an approach is unsatisfactory.
18. Having said that, in determining whether to exercise the discretion available under r 12.7, I must do justice between the parties. As far as I can determine most of the evidence has now been served. I anticipate that with case management whatever remaining evidence which might need to be served could be served within a short period.
19. Further, despite the extensive dealings between the parties, the issues are actually somewhat limited. The parties agree that the matter will only take three to four days.
20. I agree with counsel for the defendant that r 12.7 should not be used as some form of punishment of the defendant personally. I do accept Mr Conolly's repeated statements that the fault lies with him and his firm.
21. Further, this is an unusual matter in that, despite the regular failure of the defendant to comply with court orders, the defendant has ultimately done what has been required of him. It is just that he has only done what has been required of him after repeated delays.
22. It is not the position that the defendant has served no evidence or that the defendant has not filed the defence or has not outlined his position or that the plaintiff does not understand the defendant's position.
23. However, this matter has been proceeding since November 2019 and it has still not been allocated a hearing date. Whilst I do not suggest that the plaintiff is entirely blameless in the sense that the plaintiff has needed to re-draft pleadings, on my analysis of the delay, it has been caused by the way the defendant has conducted the matter.
24. However, it seems to me that the parties are now generally in a position to progress the matter further. It can be now progressed more expeditiously.
25. In all the circumstances I am not satisfied that the defence should be struck out for want of due despatch and I decline to do so.
26. It follows that the plaintiff's further application for default judgment also falls away.
27. Nor am I satisfied that I should make orders setting aside the defendant's motion in respect of the notice to admit facts at this time.
28. Whilst the defendant has again not complied with orders for service of all of his evidence in support of the motion, and again it is correct to say that the delay has been lengthy with little explanation, the defendant does point out that Mr Conolly's affidavit is in part in support of his client's motion to set aside the notice. It is just that, according to Mr Fozzard, the defendant wishes to serve a further affidavit in support of the motion.
29. I am not in a position to determine the merits of that motion at this time but I do not accept that the motion itself should be set aside or struck out.
30. In the circumstances I decline to make the orders sought in the plaintiff's motion.
31. I intend listing the defendant's motion before me next week for hearing. I then intend to case manage this matter. No further delay by the defendant will be countenanced. I would hope that this matter will be listed for hearing sometime this year.
32. Despite being unsuccessful in his motion the plaintiff seeks an order that the defendant pay the costs of the motion. The defendant opposes that order (and seeks costs) on the basis that the defendant has been successful in resisting the orders sought in the motion, and indeed submits that the defendant warned the plaintiff a day before the filing of the motion that he would be filing the motion the next day.
33. The point made by the defendant is really that costs should follow the event. The plaintiff was unsuccessful on their motion.
34. I consider that the defendant should pay the plaintiff's costs of the motion. It is correct that the day before the plaintiff actually filed the motion the defendant said he would be filing a defence the next day. It is also correct to say that was just another statement by the defendant that he would be doing that which he should have done long before.
35. The progress of this case has been delayed by the defendant. The plaintiff was quite entitled to bring an application to try and force the progress of this matter or have the defence struck out.
36. In my view the parties are here because the defendant has constantly and regularly delayed in doing what they have been doing, that is complying with the orders of the court.
37. I have a broad power to award costs. In my view the circumstances are exceptional.
38. I order that the first and second defendants pay the plaintiff's costs of the motion.

Endnotes

1. Moses v Ratner [2021] NSWSC 185.
2. [2016] NSWSC 1252.
3. [1999] NSWSC 527.
4. [2014] NSWSC 937.
5. [2010] NSWCA 17. DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 03 August 2021