Newton v Ellis

Court of Appeal (NSW)|2012-03-21|Before: Beazley JA, Macfarlan JA, Whealy JA, Adam P, Rein J, MacFarlan JA

Judgment 1BEAZLEY JA: I agree with Macfarlan JA. 2MACFARLAN JA: These proceedings relate to a lease by Mr Daniel Ellis, the present respondent, of premises in Balmain to Stafford Moore & Farrington Pty Ltd ("the Company"). Mr Richard Newton, the first appellant and a director of the Company, guaranteed the Company's performance of its obligations under the lease. Mr Newton and his wife, Ms Robyn Newton (the second appellant), gave an unregistered mortgage over a property at Gladesville to secure Mr Newton's performance of his obligations as guarantor. After rent fell into arrears, Mr Ellis sued Mr Newton for the amount outstanding and sought orders against the appellants to facilitate enforcement of the mortgage. 3The appellants joined issue with Mr Ellis' quantification of his claim and Ms Newton claimed relief, including under the Contracts Review Act, in relation to the mortgage that she had given. 4By judgment dated 25 February 2011 Rein J, sitting in the Equity Division of the Court, granted Mr Ellis the relief that he sought. The appellants challenge that decision solely on the basis that his Honour erred in refusing two applications for adjournment made on the first day of the three day hearing of the proceedings. 5The appellants' grounds of appeal were in the following terms: "The exercise of discretion by the learned trial judge in refusing two applications for adjournment made on behalf of the Appellants on the first day of the trial miscarried in that: (a) The refusal of the adjournment in the circumstances has resulted in a denial of justice to the Appellants; Particulars (i) Counsel for the Appellants had in the circumstances an inadequate opportunity to prepare adequately or at all for the trial; (ii) The Appellants were deprived of the opportunity of amending their pleadings so as to claim a set-off as against the respondent. (b) The granting of the adjournment as sought would not have occasioned any injustice to the Respondent which could not have been cured by an order for costs. (c) The refusal of the adjournment was not the only way in which justice could be done to the Respondent". 6In his final judgment, the primary judge referred to the adjournment applications in the following terms: "2 When the matter was called on Monday 7 February, Mr Levet sought to vacate the hearing on the basis that he and his instructing solicitors had only received instructions that morning: see T1. The matter had been fixed for hearing on 16 September 2010. Mr Newton's solicitors had filed a Notice of Ceasing to Act on 6 August 2010 and although Mrs Newton's solicitor was still on the record at the time of this hearing, not having filed a Notice of Ceasing to Act, he did not appear on 7 February. Mr Levet made reference to the fact that there have been settlement negotiations between the parties in the week preceding the hearing. I rejected the application for an adjournment as no adequate reason for the failure to instruct solicitors and counsel prior to 7 February was provided. I should record also that during the course of the hearing, material in an affidavit of Mr Newton was objected to on the ground of relevance, it having no relation to the matters pleaded in the defence or cross-claim of Mr Newton. Mr Levet accepted that there was no claim of set-off due to alleged defaults in the Balmain premises pleaded and I rejected the evidence. The matter proceeded but after the lunch adjournment, Mr Levet stated that he had instructions to seek an adjournment to allow 'the various deficiencies in my client's case' to be advanced. No proposed amended pleading was proffered nor any indication given as to the time it would take to produce such a new pleading or attend to the other matters which were not specified, and I refused the second application for an adjournment: see T18.37-19.4". 7Before dealing with the challenges to his Honour's refusal of the adjournment applications, it is necessary to describe further the factual circumstances surrounding the applications.

FACTUAL CIRCUMSTANCES 8The proceedings were commenced by Statement of Claim filed on 28 November 2007. Defences were filed by Mr and Ms Newton on 10 November 2008 and 22 August 2008 respectively and Ms Newton filed a cross-claim on 26 August 2008. The proceedings were fixed for a hearing commencing on 16 February 2010 but were adjourned due to Mr Newton's ill-health. On 16 September 2010 they were fixed for hearing for three days commencing on 7 February 2011. 9The transcript records the following interchange between the primary judge and Mr B Levet, counsel for Mr and Mrs Newton, at the commencement of the hearing on 7 February 2011. "LEVET:I am instructed by Simmons and McCartney Lawyers. HIS HONOUR:There is no notice of appearance. LEVET:I received a telephone call at 7.30 am this morning. I have had no prior involvement in relation to this matter. HIS HONOUR: You can't do anything unless there is an appearance. Where is the notice of appearance for the solicitor? LEVET: He instructs me by telephone that he undertakes to file a notice today. I am instructed to seek to vacate the hearing and my friend opposes that. My instructing solicitor received telephone instructions this morning and he has not been able to have a conference with the client and I have had a conference only in the last 25 minutes outside. I have not seen all the documents in issue before the Court and I am not in a position to run the matter. ... LEVET:I am instructed there were discussions as a result of which it was thought that the matter was settling and we did not take any steps to instruct anybody ... In my submission there would be no prejudice save and except the timing of these proceedings if they were vacated on terms as to costs". 10There followed a discussion between Mr R Steele, counsel for Mr Ellis, and his Honour concerning non-compliance by Mr Ellis with procedural orders, during which Mr Steele proffered an explanation for the non-compliance that he had had "an unrealistic expectation that the matter would settle" (Transcript p 2). 11A short adjournment was taken soon after, apparently to enable the parties to discuss settlement. On resumption Mr Levet said that he was "not in a position to press on" because during the adjournment he had received an affidavit of Mr Ellis deposing to certain rental payments about which he was unable to obtain instructions. After further discussion concerning the amount of rent owing, the primary judge said that the matter would proceed (Transcript p 7). It may be that his Honour was expressing a view at this point only about the hearing of the principal claim as his Honour said in this context that he was "not interested in the cross-claim" (p 7). 12The Court Book, containing copies of affidavits and other documents, was then tendered by Mr Steele. His Honour said that the proper course was to mark it as Exhibit A "subject to objections". After a further short adjournment, Mr Levet indicated that "save and except for a set-off" he did not dispute the figures proffered by Mr Steele as to rent owing. This resolved the concern that Mr Levet had earlier expressed in relation to the new affidavit of Mr Ellis (see [11] above). 13Mr Steele then made the point that no set-off had been pleaded either by way of defence or cross-claim. After further discussion, Mr Levet accepted this fact. 14Affidavits were then read. Portions of an affidavit of Mr Newton of 12 November 2009, objected to by Mr Steele and rejected by his Honour on the grounds of relevance, included material under the headings "Water penetration", "Problems arising from pigeon dust", "Intermixture of supply of electricity", "Interference with quiet enjoyment and harassment" and "Professional fees as set-offs for rental arrears". These were the matters that the appellants had wished to rely upon by way of set-off. In light of these rejections Mr Steele subsequently indicated that he would not read parts of affidavits in reply. 15At 12.09 pm Mr Ellis, who had sworn a number of affidavits, was called to the witness box for cross-examination. Mr Levet sought and was granted an extended luncheon adjournment to enable him to take instructions in relation to the affidavits, and also seemingly to continue settlement negotiations. 16On resumption Mr Levet said that he was in a position to continue. The following discussion then ensued: "LEVET:Having said that, prior to doing so, during the course of the adjournment I identified I think are [sic] the various deficiencies in my client's case, obviously the main one being the lack of pleading of the cross-claim by way of set off. I am instructed to formally ask your Honour for an adjournment to allow that to be attended to, which I apprehend what your Honour's answer is likely to be, but I put that on instructions. HIS HONOUR:I will hear what Mr Steele says about it first. STEELE:That application is opposed, your Honour. HIS HONOUR:Yes, it's too late, Mr Levet. LEVET:Yes, your Honour" (Transcript pp 18 - 19).

PRINCIPLES AS TO APPELLATE INTERVENTION 17The primary judge's decisions on the adjournment applications were discretionary. The grounds upon which such decisions may be challenged are confined to those identified in House v The King [1936] HCA 40; 55 CLR 499 at 504 - 5. The difficulty of challenging the decisions is accentuated by the fact that they concerned a matter of practice or procedure, an area into which appellate courts have shown a marked reluctance to intervene (see In re the Will of F B Gilbert (dec) (1946) 46 SR (NSW) 318 at 323; Adam P Brown Male Fashions Pty Ltd v Philip Morris Inc [1981] HCA 39; 148 CLR 170 at 177). A "tight rein" on interference with such matters is necessary because the "disposal of cases could be delayed interminably, and costs heaped up indefinitely, if a litigant ... could, at will, in effect transfer all exercises of discretion in interlocutory applications from a Judge in Chambers to a Court of Appeal": In re the Will of F B Gilbert (dec) at 323 per Jordan CJ. 18In Sali v SPC Ltd [1993] HCA 47; 67 ALJR 841 the High Court, by majority, dismissed an appeal from decisions of the Full Court of the Supreme Court of Victoria to refuse adjournments of an appeal for a period of two weeks or alternatively until 2.15 pm on the same day. In dismissing the appeal the majority (Brennan, Deane and McHugh JJ) outlined the following relevant principles: "In Maxwell v Keun, the English Court of Appeal held that, although an appellate court will be slow to interfere with the discretion of a trial judge to refuse an adjournment, it will do so if the refusal will result in a denial of justice to the applicant and the adjournment will not result in any injustice to any other party. That proposition has since become firmly established and has been applied by appellate courts on many occasions. Moreover, the judgment of Atkin LJ in Maxwell has also been taken to establish a further proposition: an adjournment which, if refused, would result in a serious injustice to the applicant should only be refused if that is the only way that justice can be done to another party in the action. However, both propositions were formulated when court lists were not as congested as they are today and the concept of case management had not developed into the sophisticated art that it has now become. In determining whether to grant an adjournment, the judge of a busy court is entitled to consider the effect of an adjournment on court resources and the competing claims by litigants in other cases awaiting hearing in the court as well as the interests of the parties. As Deane J pointed out in Squire v Rogers this "may require knowledge of the working of the listing system of the particular court or judge and the importance in the proper working of that system of adherence to dates fixed for hearing". What might be perceived as an injustice to a party when considered only in the context of an action between parties may not be so when considered in a context which includes the claims of other litigants and the public interest in achieving the most efficient use of court resources" (References omitted). 19The importance of an adjournment's effect on "the claims of other litigants and the public interest in achieving the most efficient use of court resources" is confirmed by the more recent decision in Aon Risk Services Australia Ltd v Australian National University [2009] HCA 27; 239 CLR 175 (see also Hamod v State of New South Wales [2011] NSWCA 375 at [131] - [145]; compare State of Queensland v JL Holdings Pty Ltd [1997] HCA 1; 189 CLR 146).

SUBMISSIONS ON APPEAL 20The appellants were separately represented on the appeal. The following principal submissions were made by their counsel:

Refusal of the adjournment applications unjustly denied the appellants the opportunity to be represented by adequately prepared counsel and the opportunity to cross-claim to reflect the affidavit evidence concerning set-off.
Mr Ellis' counsel did not submit that adjournment of the hearing would cause Mr Ellis any prejudice, nor did the primary judge make any finding that it would.
The primary judge did not indicate that he gave any weight to any adverse impact that an adjournment might have on the resources of the Court or on the needs of other litigants.
The primary judge did not give any reasons for his rejection of the first adjournment application made at the outset of the hearing, simply saying that "the matter will proceed".
The only matter that the primary judge appeared to take into account in refusing the second adjournment application (concerning the proposed set-off claim) was its tardiness.
The primary judge did not request an estimate of the time required to re-plead the appellants' case.
As the primary judge did not invite submissions from counsel on either application, the appellants were deprived of a fair opportunity to be heard. 21The submissions made in response on behalf of Mr Ellis included the following:
The appellants did not provide any adequate explanation or justification for their late appointment of legal representatives.
The appellants did not suffer any injustice: their counsel was afforded three adjournments during the first day of the hearing to take instructions and review documents. Moreover, as the hearing was fixed for, and in fact extended for, three days, their counsel was sufficiently able to prepare himself during the overnight adjournments.
The nebulous way in which the appellants advanced their proposal to amend their pleadings justified the primary judge's refusal of the second adjournment application.
A defence of set-off would at least have required the joinder of the Company to the proceedings as a cross-claimant, significantly disrupting the existing course of the proceedings.

The first adjournment application 22It is clear from the primary judge's final judgment (see [6] above) that in rejecting the first adjournment application his Honour attached primary significance to the appellants' inadequate explanation for their failure to instruct their solicitor and counsel prior to the morning of 7 February 2011. The most that could be gleaned by way of explanation from the appellants' counsel was that the late instruction had stemmed from an expectation that the matter would settle. However even if a bona fide belief in the likelihood of settlement could have constituted an adequate excuse, this explanation was deficient because it said nothing about when negotiations had occurred and what the position had been immediately prior to the weekend when, if instructions had then been given, it would have been possible for a new solicitor and counsel to properly prepare for the hearing on the following Monday. The transcript reveals that Mr Newton was present in Court on 7 February 2011. However no evidence was called from him to justify either adjournment application. 23In making the first application, counsel seemed to assume that the appellants had a right to have the hearing adjourned unless Mr Ellis identified some prejudice, other than as to costs, that he would suffer. This assumption was ill-founded. It would make a mockery of the Court's listing arrangements and attempts to efficiently allocate its scarce resources if a party could, at the commencement of a three day hearing which had been fixed over four months earlier, seek and obtain an adjournment of the hearing without providing an adequate explanation of why it had been sought at such a late stage. Such an explanation should be the starting point of an adjournment application made in these circumstances. Unless it is provided I do not consider that, absent exceptional circumstances, it is incumbent upon the Court to examine the prejudice that an adjournment might cause to the other party or the precise impact it might have on the Court's efficient operation. 24The following remarks of French CJ made in Aon Risk Services Australia Ltd are apposite in this respect: "[5] In the proper exercise of the primary judge's discretion, the applications for adjournment and amendment were not to be considered solely by reference to whether any prejudice to Aon could be compensated by costs. Both the primary judge and the Court of Appeal should have taken into account that, whatever costs are ordered, there is an irreparable element of unfair prejudice in unnecessarily delaying proceedings. Moreover, the time of the court is a publicly funded resource. Inefficiencies in the use of that resource, arising from the vacation or adjournment of trials, are to be taken into account. So too is the need to maintain public confidence in the judicial system. Given its nature, the circumstances in which it was sought, and the lack of a satisfactory explanation for seeking it, the amendment to ANU's statement of claim should not have been allowed. The discretion of the primary judge miscarried. ... [30] ... Also to be considered is the potential for loss of public confidence in the legal system which arises where a court is seen to accede to applications made without adequate explanation or justification, whether they be for adjournment, for amendments giving rise to adjournment, or for vacation of fixed trial dates resulting in the resetting of interlocutory processes." 25In Aon, Gummow, Hayne, Crennan, Kiefel and Bell JJ expressed their general agreement with French CJ's statement of the principles applicable to adjournment applications (at [116]). They can be taken therefore to have endorsed the remarks of French CJ that I have quoted. 26In my view the primary judge did not err in effectively declining to entertain the first adjournment application in the absence of an adequate explanation for its timing. If the application had been for a delay in the commencement of the hearing, either to a time later on the first day or to the morning of the second day, its scrutiny, even in the absence of an adequate explanation, may have been warranted. However the application was one for vacation of the hearing dates altogether. It was within his Honour's discretion to reject it peremptorily when no adequate explanation for it was proffered. Contrary to the notion implicit, and to some extent explicit, in the appellants' submissions, it was not for the Court to indicate to counsel what was required in this respect or to invite further submissions beyond those counsel sought to make. It would have been desirable for the primary judge, on the day that he rejected the application, to give brief reasons for doing so. However, as counsel did not request reasons immediately and as his Honour gave reasons in his final judgment, I do not consider that this omission constituted an error.

The second adjournment application 27The appellants also failed to demonstrate that the primary judge erred in exercising his discretion to reject the adjournment application concerning the question of set-off. As submitted on behalf of Mr Ellis on appeal, the application was nebulous in character. It gave no detail of how the set-off claim was to be advanced or precisely what it was, which was unsurprising given that the point had only recently come to counsel's attention. The application was again one to vacate the hearing. It was not one for a limited period of time in which to amend a pleading or prepare an argument that the proposed set-off claim had some prospect of success. It was not, for example, an application to adjourn the proceedings until the next morning to enable this to occur. 28If only a limited adjournment had been sought, issues requiring attention overnight would have included whether it was necessary for the Company to become a party to the proceedings, whether Mr Newton was able to give instructions on behalf of the Company, whether the factual matters relied upon supported an argument that the Company was entitled to an abatement of rent, whether the Company was entitled to an equitable set-off in relation to any of those matters, whether the Company's claims against Mr Ellis were liquidated or unliquidated and whether there was any limitation of actions difficulty. Authorities that would have required consultation in this respect include Cellulose Products Pty Ltd v Truda (1970) 92 WN (NSW) 561; Langford Concrete Pty Ltd v Finlay [1978] 1 NSWLR 14; Covino v Bandag Manufacturing Pty Ltd [1983] 1 NSWLR 237 and Commonwealth Development Bank of Australia Ltd v Windermere Pastoral Co Pty Ltd [1999] NSWSC 518. 29It would also have been necessary to consider the likely consequences to the appellants of an adjournment being refused. This would have required counsel to examine whether the Company could have brought independent proceedings against Mr Ellis and whether the rights of Mr and Mrs Newton as guarantor and third party provider of security respectively, to indemnity from the Company for amounts paid to the creditor might mean that they would not suffer any prejudice from a rejection of the application. 30However these issues were not sought to be ventilated before his Honour. The second adjournment application was simply one to vacate the hearing dates altogether, based only upon a vague, unsupported assertion that there was a desire to claim a set-off. In these circumstances it fell within a proper exercise of the primary judge's discretion to refuse the application, particularly when the need for it had arisen out of the late instruction of solicitor and counsel by the appellants and the reason for that late instruction occurring had not been adequately explained.

Whether prejudice suffered 31In determining on appeal whether at the time the adjournment applications were made, the primary judge should have considered the likelihood that the appellants would suffer significant prejudice if the applications were rejected, it is useful to consider whether it has been shown that they did in fact suffer such prejudice and, if so, whether that could have been foreseen at the time of the adjournment applications. 32On appeal Mr Levet submitted that in conducting the hearing at first instance he had been hampered by his lack of familiarity with the matter. He referred particularly to his cross-examination, his taking of objections to affidavits and generally to his making of forensic decisions in relation to the conduct of the hearing. However, even with the benefit of hindsight, he accepted that he could not identify any matters of significance that were omitted from his cross-examination, or any objections to affidavits that he would have taken if he had been more familiar with the matter, or any other deficiency in his conduct of the hearing that was attributable to his unfamiliarity with the case. 33It seems in fact that Mr Levet conducted the matter in at least an adequate fashion. No doubt he took the opportunity to master his brief during the adjournments granted during the first day's hearing and during the overnight adjournments after the first and second days. If after the first day Mr Levet had identified any deficiencies in his conduct of the matter, it would have been open to him to raise such matters with the primary judge and to seek to cross-examine further or to be permitted to take further objections, as needed. 34Similarly, it was not demonstrated on appeal that the appellants suffered prejudice by the refusal of their second adjournment application. Various issues potentially relevant to the question of set-off that I have identified above (see [28]) remain unconsidered and unresolved. The proposed set-off has acquired no greater precision with the passage of time. In any event, as the plurality pointed out in Aon Risk Services, "[i]t cannot ... be said that a just resolution requires that a party be permitted to raise any arguable case at any point in the proceedings, on payment of costs" ([98]).

CONCLUSION AND ORDERS 35For the reasons that I have given, the appellants fail in their challenge to the primary judge's decisions concerning the two adjournment applications. As a result, the appeal should be dismissed with costs. 36WHEALY JA: I agree with Macfarlan JA.

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: 27 April 2012

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