//
[2010] VSC 594
General information, not legal advice.
Supreme Court of Victoria
2010-12-17
BEACH J
Original judgment source is linked above.
PRACTICE AND PROCEDURE - Application to dismiss for want of prosecution - Whether any inordinate and inexcusable delay - Prejudice - Discretion - Justice of the occasion not demanding dismissal of proceeding for want of prosecution.
1 This is an application by the first defendant (Mr Gjergja) brought by summons filed 3 August 2010 to dismiss the plaintiff's proceeding as against him for want of prosecution pursuant to Order 24 of the Supreme Court (General Civil Procedure) Rules 2005; alternatively, pursuant to the Court's inherent jurisdiction.
2 The principles in respect of applications for dismissal for want of prosecution are not in doubt, having been stated and re-stated many times:
"The power should be exercised only where the Court is satisfied either (1) that the default has been intentional and contumelious, e.g. disobedience to a pre-emptory order of the Court or conduct amounting to an abuse of the process of the Court; or (2)(a) that there has been an inordinate and inexcusable delay on the part of the plaintiff or his lawyers, and (b) that such delay will give rise to a substantial risk that it is not possible to have a fair trial of the issues in the action or is such as is likely to cause or to have caused serious prejudice to the defendants, either as between themselves and the plaintiffs, or between each other, or between them and a third party."[1]
3 This proceeding was issued on 1 December 2005. It involves allegations concerning Mr Gjergja's conduct as a director of Newtronics from 1993. The background to the proceeding may be summarised as follows:
(a) The defendants (Mr Gjergja and Mr Tescher) were directors of Newtronics, which carried on the business of designing, manufacturing and selling electronic controllers.
(b) In late 1994, Newtronics supplied a customer, Seeley International Pty Ltd, with electronic components. Seeley subsequently alleged that the electronic components supplied by Newtronics were negligently designed and constructed and, when incorporated into Seeley's air conditioners, caused fires which burnt down three houses in February 1995.
(c) In a Federal Court proceeding issued in 1998, Seeley successfully sued Newtronics for damages. By a judgment given on 21 December 2001, Seeley was awarded $8.9 million plus interest (later fixed at $5 million) and costs.
(d) In February 2002, Newtronics was wound up and a liquidator was appointed.
4 In this proceeding, it is alleged that the defendants, as directors, knew or ought to have known that the components Newtronics supplied to Seeley were defective or might fail, yet (in contravention of s 232(4) of the Corporations Law 1989 (Cth), and their general law duty as directors) the defendants took no steps to rectify the position or to withdraw the defective product.
5 As a result of the various breaches of duty alleged against them, Newtronics contends that it suffered loss and damage including (but not limited to):
(b) legal costs of defending the Federal Court proceeding; and
(c) the time Newtronics' personnel spent in dealing with the consequences of the fires and the Federal Court proceeding.
In the alternative, Newtronics seeks the difference between these amounts and the amount that Newtronics would have been liable to pay had there been no breach of duty.[2]
6 As appears from the allegations in the statement of claim, allegations are made in relation to a joint venture in 1989, with respect to representation in North America until at least the end of 1993, with respect to design from in or about August 1992, and with respect to manufacture and supply from in or about January 1991 through to in or about February 1995 (the relevant fires occurring in February 1995). However it might fairly be said that the allegations in relation to the joint venture in 1989 and in relation to the representation of Newtronics in North America are more in the nature of background, rather than central to the resolution of this proceeding.
7 The proceeding is not yet fixed for trial. The issues in this application are whether there has been inordinate and inexcusable delay on the part of the plaintiff or its lawyers, and whether any such delay has given rise to a substantial risk that it is not possible to have a fair trial of the issues in the proceeding or is likely to cause or to have caused serious prejudice to Mr Gjergja. Put more generally, the question is whether, in the circumstances of this case, the justice of the occasion demands the dismissal of this proceeding for want of prosecution.[3]
8 The procedural history of this proceeding so far as it concerns Newtronics and Mr Gjergja may be summarised as follows:
(b) 10 July 2006: Writ and statement of claim served on Mr Gjergja.
(c) 8 September 2006: Directions hearing at which the following orders were made:
(i) Mr Gjergja file and serve a defence by 6 October 2006;
(ii) Newtronics file and serve a reply by 13 October 2006;
(iii) the parties make discovery by 24 November 2006;
(iv) inspection of discovered documents be carried out by 13 December 2006; and
(v) the directions hearing be adjourned to 15 December 2006.
(d) 6 October 2006: Mr Gjergja filed his defence (no reply was or has been filed by Newtronics).
(e) 15 December 2006: Directions hearing at which the following orders were made:
(ii) there be an inspection of discovered documents by 9 February 2007; and
(iii) the directions hearing be adjourned to 15 February 2007.
(f) 29 January 2007: Mr Gjergja filed and served his affidavit of documents.
(g) 15 February 2007: Directions hearing at which the following orders were made:
(i) the proceeding be entered into the Major Torts List;
(ii) the date for Newtronics to file and serve its list of discoverable documents be extended to 26 April 2007;
(iii) Newtronics file and serve any application for an extension of time pursuant to s 1322 of the Corporations Law on or before 1 March 2007; and
(iv) Mr Gjergja file and serve any application for security for costs on or before 1 March 2007.
(h) 28 February 2007: Newtronics applied by summons for an order pursuant to s 1322(4)(d) of the Corporations Law to extend the time limited by s 1317HD within which to commence this proceeding.
(i) 1 March 2007: Mr Gjergja made application by summons for security for his costs.
(i) the date for Newtronics to file and serve its list of documents be extended to 15 June 2007; and
(ii) the directions hearing be adjourned to 29 June 2007.
(k) 29 and 30 May 2007: Newtronics' application for an extension of time and Mr Gjergja's application for security for costs heard by Byrne J.
(l) 28 June 2007: Byrne J delivered judgment dismissing the application for an extension of time and ordering the plaintiff to provide security for costs in the sum of $129,000 (which security was subsequently given).
(m) 11 July 2007: Newtronics applied for leave to appeal from the judgment of Byrne J.
(n) 22 August 2007: Court of Appeal granted leave to appeal to Newtronics.
(o) 24 August 2007: Newtronics filed a notice of appeal against the judgment of Byrne J, pursuant to the leave granted to it by the Court of Appeal.
(p) 13 May 2008: The appeal from Byrne J was heard by the Court of Appeal.
(q) 27 June 2008: Newtronics' appeal was dismissed (on the basis that s 1322(4)(d) did not apply to extend the limitation period specified in s 1317HD(2)).
(r) 27 August 2008: Newtronics applied for special leave to appeal to the High Court.
(s) 11 February 2009: Newtronics' application for special leave dismissed.
9 In addition to the above steps, the second defendant (Mr Tescher) filed his defence on 31 August 2006; filed an amended defence on 25 October 2006; and filed his affidavit of documents on 15 January 2007.
10 So far as Newtronics is concerned, it would appear that it has not taken any step in the proceeding (other than to defend the current application) since the High Court dismissed its application for special leave in February 2009. Specifically, Newtronics has not made discovery - discovery having been initially ordered by 24 November 2006; extended to 29 January 2007; extended to 26 April 2007; and finally extended to 15 June 2007.
11 Mr Gjergja submits that the writ in this proceeding was issued either after or close to the expiration of the limitation period for the common law and equitable claims pleaded in the statement of claim. Further, it is submitted that, on any view, the writ was issued after the expiration of the limitation period in respect of the Corporations Law claims. So much may be accepted for present purposes.
"On the other hand it is clear from the reasoning in Birkett v James and in subsequent cases that plaintiffs are obliged to move with greater speed if they have left the issue of proceedings until very late in the limitation period. Thus Lord Diplock expressed the correct approach to such delay in the ordinary case in these words (at 323 of Birkett v James):
'To justify dismissal of an action for want of prosecution some prejudice to the defendant additional to that inevitably flowing from the plaintiff's tardiness in issuing his writ must be shown to have resulted from his subsequent delay (beyond the period allowed by Rules of Court) in proceeding promptly with the successive steps in the action. The additional prejudice need not be great compared with that which may have been already caused by the time elapsed before the writ was issued: but it must be more than minimal ...'
Similar views were expressed by Lords Salmon and Edmund-Davies. In an unreported decision of the Full Court in A.N.Z. Banking Group Ltd. v Donovan (19 December 1986) it was said at 9 that it was now 'settled law' that a party who permits the limitation period almost to expire is then 'obliged to process those proceedings with expedition': see also the Jack Brabham Holdings case at 649. The House of Lords returned to this issue in the Chris Smaller (Transport) case and confirmed the approach expressed in Birkett v James. After a reconsideration of the significance of the limitation periods set by Parliament, Lord Griffiths (with whom Lords Keith, Roskill, Oliver and Goff concurred) stated at 1207-8:
'... I have not been persuaded that the case has been made out to abandon the need to show that the post writ delay will either make a fair trial impossible or prejudice the defendant. Furthermore, it should not be forgotten that long delay before issue of the writ will have the effect of any post writ delay being looked at critically by the court and more readily being regarded as inordinate and inexcusable than would be the case if the action had been commenced soon after the accrual of the cause of action. And that if the defendant has suffered prejudice as a result of such delay before issue of the writ he will only have to show something more than minimal additional prejudice as a result of the post writ delay to justify striking out the action.'
Those observations appear to have direct relevance to the present appeal."[6]
13 Mr Gjergja then identifies, what he submits, are periods of inordinate and inexcusable delay. Prior to the service of the writ on him, he identifies three periods as follows:
(a) The period before the writ was filed - noting that the events about which the plaintiff complains were already more than ten years in the past and that the statement of claim was filed almost four years after the liquidator was appointed. Further, as Byrne J said, in the extension of time application:[7]
"The liquidator was appointed in February 2002, nearly four years before the proceeding was commenced in December 2005. I accept that much of this period has been the subject of explanation by the liquidator. Nevertheless, the delay is inordinate."
(b) The writ and statement of claim were not served on Mr Gjergja until 10 July 2006, more than seven months after the filing of the writ. As to that, Byrne J said:[8]
"Having commenced the proceeding, the writ was not served until mid 2006. This is permitted by the rules, but it had the consequences of further delaying the proceeding."
(c) The filing of the writ, without seeking an extension of time to rely upon the Corporations Law claims, led to further delay.
14 As to delay after the service of the writ, Mr Gjergja submits:
"More than four years have elapsed since the service of the writ. In that time the plaintiff has done nothing more than address (unsuccessfully) the necessity to obtain an extension of time within which to institute the Corporations Law claims."
15 Specifically, Mr Gjergja's submissions direct attention to the fact that the deadline for discovery in June 2007 has passed without discovery being given or any application being made by the plaintiff. It is then submitted that the plaintiff's delay should be regarded as intentional, the plaintiff making a deliberate and considered decision not to prosecute this proceeding.[9]
16 Mr Gjergja then submits that each of the pre and post-service delay periods contributes to the inordinate character of the delay, and that, since the extension of time application before Byrne J, the plaintiff has been "on notice" to bring the matter on for hearing as quickly as possible.[10] In refusing to extend time,[11] Byrne J said:
"The events which gave rise to the proceeding occurred in 1994. While many of the issues will depend upon evidence which has been given in the Seeley proceeding and upon documentary evidence, there will be a good deal of oral evidence on the question as to the state of mind of the directors. There is a serious risk of injustice where this evidence must be given some 13 years after the event."
It is to be noted that it is now "some 16 years after the event".
17 Ultimately, Mr Gjergja identified the period from 2002, when Mr James Stewart was appointed as official liquidator of Newtronics,[12] to date as the period of inordinate and inexcusable delay, in respect of which complaint is made, in this proceeding. Further, as I have said above, Mr Gjergja placed reliance upon Byrne J's classification of the delay between February 2002 and the commencement of the proceeding in December 2005 (although much of which had been the subject of explanation by Mr Stewart) as "inordinate".[13] However, it was submitted on behalf of Newtronics that Byrne J used the word "inordinate" to describe the delay in the context of an application for an extension of time under s 1322(4)(d) of the Corporations Law - rather than in the way that word is used and understood in the dismissal for want of prosecution context. Against this, it was submitted on behalf of Mr Gjergja that "inordinate delay is inordinate delay".
18 Whilst Byrne J's use of the word "inordinate" to describe the delay he was referring to must be read in the context of the application that was then before him, there is force in Mr Gjergja's submission that Byrne J concluded that the delay between the appointment of Mr Stewart as official liquidator and the commencement of this proceeding was inordinate as that word is ordinarily understood. Nevertheless, the issue that remains to be determined in this case is whether there has been any inordinate and inexcusable delay - and if so, what prejudice (if any) has been occasioned thereby.
19 If the present proceeding was the only proceeding between the parties, it might be more readily concluded that there has been inordinate and inexcusable delay - at least from February 2009, if not from as far back as February 2002 (alternatively, it might more easily be thought that there were periods of inordinate and inexcusable delay, e.g. February 2002 until July 2006 and later February 2009 to date). However, this is not the only proceeding between the parties. There is a history of events subsequent to the Seeley judgment, including the issuing of other proceedings in this Court. Newtronics places considerable reliance upon this history. On the other hand, Mr Gjergja contends this history has little (if any) relevance and does not provide an answer to his application to dismiss this proceeding for want of prosecution. In the circumstances, before proceeding further, it is necessary to set out in greater detail the history to which I have just referred.
History subsequent to the Seeley judgment
20 The Seeley judgment was handed down on 21 December 2001. On that day, Atco Controls Pty Ltd, Newtronics' parent company, served a demand upon Newtronics pursuant to a mortgage debenture. Newtronics' liquidator (Mr Stewart) swore, in the present proceeding, that this demand was served notwithstanding the provision of a letter of support to Newtronics' auditors by Atco. In January 2002, that demand not being satisfied, Atco appointed receivers and managers to Newtronics. On 26 February 2002, when Mr Stewart was appointed, it appeared to him that Newtronics' creditors included:
(a) Atco - Approximately $20 million - apparently secured.
(b) Seeley - Approximately $19 - $20 million - unsecured.
(c) Other creditors - Approximately $700,000 - unsecured.[14]
21 On 17 February 2003, Mr Stewart reported to Newtronics' creditors that he had obtained an indemnity from Seeley in relation to his investigations to date. In his report to creditors, Mr Stewart went on to say that "in the absence of funding from Seeley or other creditors, I have no other means of funding the cost of any investigation into Newtronics' affairs".
22 On 16 May 2003, Mr Stewart filed an application in the Federal Court seeking to examine 17 persons pursuant to ss 596A and 596B of the Corporations Act. In August and September 2003, Mr Stewart conducted 16 examinations.
23 On 15 June 2004, Mr Stewart filed an application in the Federal Court seeking to conduct a further nine examinations. In July, August and September 2004, these examinations were conducted.
24 In approximately September 2004, Mr Stewart instructed solicitors to commence preparation of a statement of claim dealing with "all claims that Newtronics had arising out of the circumstances that led to the supply of defective components to Seeley, the failure to warn Seeley in a timely fashion regarding the defective components, the manner in which the Seeley proceeding was defended and Atco's desertion of Newtronics upon [the] handing down of ... Justice O'Loughlin's reasons for judgment".[15] Ultimately, Mr Stewart concluded that in order to best preserve and get in all of the assets of Newtronics, rather than launch one composite proceeding, it would be better for a number of proceedings to be issued. In the result, the present proceeding was issued; a proceeding against Atco was issued,[16] described by Mr Stewart as "the Promise of Support Action"; and another proceeding was issued against Mr Gjergja and others, [17] described by Mr Stewart as "the Conduct of Litigation Action".
25 On 24 August 2007, Gordon J, pursuant to s 477(2B) of the Corporations Act, gave retrospective approval to Mr Stewart to enter into the following agreements (they already having been entered into on or about their dates):
(a) an indemnity agreement between Seeley and Mr Stewart dated 22 March 2002;
(b) a deed of indemnity made between Seeley and Mr Stewart dated 27 March 2006;
(c) a deed of variation to the deed of indemnity made between Seeley and Mr Stewart dated 10 July 2006;
(d) a deed of variation to the deed of indemnity made between Seeley and Mr Stewart dated 13 December 2006;
(e) a deed of variation to the deed of indemnity made between Seeley and Mr Stewart dated 16 March 2007; and
(f) a deed of variation to the deed of indemnity made between Seeley and Mr Stewart dated 6 June 2007.
26 The circumstances in which the present proceeding was issued in the absence of an indemnity to issue proceedings, and the circumstances in which the subsequent agreements were entered into are as set out in the reasons of Gordon J in Stewart, in the matter of Newtronics Pty Ltd.[18] It is convenient to set out those circumstances here.
27 On 1 December 2005 and in the absence of an indemnity to issue proceedings, Mr Stewart commenced this proceeding. The general indorsement alleged that Mr Gjergja and Mr Tescher were both directors of Newtronics during specified periods and that each of them had, during those specified periods, breached their duties as a director of Newtronics.
28 On 27 March 2006, Seeley and Mr Stewart executed a deed of indemnity ("the Deed of Indemnity"). By that deed, Seeley agreed to provide Mr Stewart with a further indemnity to commence proceedings on behalf of Newtronics against Atco seeking to enforce an agreement between Newtronics and Atco allegedly recorded, inter alia, in a letter of support dated 21 July 2001 from Atco to Newtronics. On 3 April 2006, Mr Stewart commenced the Promise of Support Action against Atco in this Court. Atco was served on the same day.
29 On 13 April 2006, administrators were appointed to Atco and the Promise of Support Action was stayed in accordance with s 440D of the Corporations Act.
30 On 10 July 2006, Seeley and Mr Stewart entered into a deed to vary the terms of the Deed of Indemnity ("the First Variation Deed"). By the First Variation Deed, Mr Stewart and Seeley agreed to vary the Deed of Indemnity to provide a further indemnity to Mr Stewart to pursue on behalf of Newtronics:
31 On 1 December 2006, Mr Stewart filed an application in the Promise of Support Action seeking leave to proceed against Atco (a company then in liquidation) and seeking leave to add Newtronics' receivers as defendants to the proceeding. On 8 December 2006, Hargrave J granted Mr Stewart leave to proceed against Atco and added Newtronics' receivers as second defendants to the proceeding. The Promise of Support Action was served on the Newtronics' receivers on 14 December 2006.
32 On 13 December 2006, Seeley and Mr Stewart entered into a further deed ("the Second Variation Deed"). By the Second Variation Deed, Mr Stewart and Seeley agreed to vary the Deed of Indemnity (as varied by the First Variation Deed) to provide a further indemnity to Mr Stewart:
33 On 16 March 2007, Seeley and Mr Stewart entered into a further deed ("the Third Variation Deed"). By the Third Variation Deed, Mr Stewart and Seeley agreed to vary the Deed of Indemnity (as varied by the First and Second Variation Deeds) to provide that Seeley would provide certain bank guarantees by way of security for costs in favour of the defendants in the Promise of Support Action. The bank guarantees were provided on 22 and 23 March 2007.
34 On 6 June 2007, Seeley and Mr Stewart entered into a further deed ("the Fourth Variation Deed"). By the Fourth Variation Deed, Mr Stewart and Seeley agreed to vary the Deed of Indemnity (as varied by the First, Second and Third Variation Deeds) to provide that Seeley would provide a further indemnity to Mr Stewart to pursue on behalf of Newtronics a further action for damages against Mr Gjergja, two other directors of Newtronics and Newtronics' solicitors in the Seeley proceeding (Russell Kennedy) in the Supreme Court of Victoria. This proceeding (number 6897 of 2006) was issued in this court on 9 June 2006 and is the Conduct of Litigation Action.
35 Whilst the Promise of Support Action was issued after the present proceeding and after the Conduct of Litigation Action was issued, Mr Stewart deposed[19] to his reasons for deciding to focus his attention on the Promise of Support Action. Mr Stewart said the Promise of Support Action was the narrowest in compass and therefore was able to be run expeditiously in the commercial list. Further, Mr Stewart deposed to his opinion that the Prospect of Support Action "held the prospect of substantial, if not full, recovery for Seeley together with the setting aside of the appointment of the receivers and managers and subordination of the rights of the secured creditor, Atco".[20]
36 It is not necessary to set out all of the procedural steps in the Promise of Support Action. It is sufficient to set out the following chronology in respect of that proceeding:
(a) 26-27 November, 1, 4 and 9 December 2008: Trial of the Promise of Support Action before Pagone J.
(b) 17 December 2008: Judgment for Newtronics against Atco in the sum of $17,361,031.69 plus interest. Newtronics' claims against the receivers were dismissed.
(c) 14 January 2009: Atco filed a notice of appeal from the decision of Pagone J in the Promise of Support Action.
(d) 16 January 2009: Newtronics filed a notice of appeal from the decision of Pagone J in respect of the claim against the receivers.
(e) 3 September 2009: Court of Appeal (Warren CJ, Nettle and Mandie JJA) heard Atco's appeal. Newtronics' appeal was settled.
(f) 21 October 2009: Court of Appeal allowed Atco's appeal against the judgment of Pagone J.
(g) 23 April 2010: High Court dismissed Newtronics' application for special leave.
37 In the Conduct of Litigation Action, the claim by Newtronics against Mr Gjergja arises out of an alleged failure by Mr Gjergja, as a director of Newtronics, to settle the Seeley proceeding. The procedural history of the Conduct of Litigation Action may be summarised as follows:
(b) 26 June 2007: Writ and general endorsement served on Mr Gjergja.
(c) 18 July 2007: Newtronics filed its statement of claim.
(d) 20 March 2008: Newtronics filed an amended statement of claim.
(e) 5 June 2008: Russell Kennedy filed its defence.
(f) 29 May 2008: Mr Gjergja and the second and third defendants in the Conduct of Litigation Action applied for (and on 13 August 2008 were granted), security for costs of the Conduct of Litigation Action.
(g) 13 November 2008: Mr Gjergja and the second and third defendants made application to strike out parts of the amended statement of claim.
(h) 12 February 2009: Application to strike out parts of the amended statement of claim heard.
(i) 30 April 2009: Judgment given in the application to strike out parts of the amended statement of claim.
(j) 23 September 2009: Newtronics filed and served a further amended statement of claim.
(k) 15 January 2010: Mr Gjergja and the second and third defendants filed and served a defence to the further amended statement of claim.
(l) 29 January 2010: Mr Gjergja and the second and third defendants filed and served a list of documents.
(m) 30 April 2010: Directions hearing at which the following orders were made by consent:
(i) the Conduct of Litigation Action be entered into the Commercial Court;
(ii) on or before 11 June 2010 the parties make available for inspection certain categories of documents;
(iii) the Conduct of Litigation Action be referred to mediation to take place by 13 August 2010; and
(iv) the matter be set down for further directions on 10 September 2010.
Discovery was made in accordance with these orders. Further, the mediation contemplated by these orders was conducted. However, the Conduct of Litigation Action did not settle.
(n) 10 September 2010: Directions hearing at which a case management conference was ordered to take place on 25 October 2010.
(o) 25 October 2010: Case management conference/proceeding adjourned to 4 February 2011.
38 In the Conduct of Litigation Action, Newtronics seeks by way of loss and damage against Mr Gjergja and the other defendants:
(a) the difference between the judgment sum of $8.9 million together with interest of $5 million and the amount for which the Federal Court proceeding would have been compromised;
(b) the liability for the costs of Seeley incurred after August 2000 (said to total slightly in excess of $1 million); and
(c) the further costs incurred by Newtronics after August 2000 (said to total almost $5 million).[21]
39 The Promise of Support Action has been finally determined against Newtronics. The Conduct of Litigation Action is currently being managed in the Commercial Court. Whilst Mr Stewart deposed[22] to the possibility of a trial of the Conduct of Litigation Action occurring in April 2011, I was told from the Bar table (and subsequent material relating to discovery seems to confirm) that the prospect of a trial of the Conduct of Litigation Action in April 2011 is remote. Indeed, one could not say that a trial in 2011 was particularly likely on the material filed in this application.
40 After the High Court dismissed Newtronics' application for special leave on 11 February 2009, Mr Stewart gave further consideration to the completion of discovery in this proceeding.[23] Whilst this consideration does not appear to have resulted in any significant work being done with respect to discovery in 2009, Mr Stewart's evidence discloses that significant work has been done to progress Newtronics' discovery during 2010. However, the point is fairly made by Mr Gjergja that the bulk of this work has been done after the issuing of the current application (and probably in response to it).
41 Mr Stewart also deposes to the fact that consideration has been given to exploring with Mr Gjergja's solicitors the idea of merging both the present proceeding and the Conduct of Litigation Action. Whilst there are clearly common underlying issues, it is not possible for me to say on the material in this application whether or not these proceedings should be merged. At present, the position, so far as Newtronics is concerned, is that consideration of this issue has been deferred pending the outcome of Mr Gjergja's application to strike the present proceeding out for want of prosecution.
42 When I raised the issue with Senior Counsel for Mr Gjergja, his response was:[24]
"Your Honour, whether an omnibus trial would be appropriate would need to be carefully looked at. There would seem to be some overlap. How that is dealt with ultimately is another matter. One can see that there may be good sense in being managed together. How trials should proceed might need careful examination of exactly what the ultimate issues are and what the evidence is, but whatever as I say might be the fate in that respect, the occurrence of the trial is still some considerable distance off."
43 Substantial work is now being undertaken by Newtronics in completing discovery. As at 8.30pm on 9 December 2010, it would appear that approximately 150,000 documents will have been scanned and loaded into a computer system. Of these documents, some 73,000 documents have been responsive to current keyword search terms. Further, some 71,000 documents have been reviewed, of which a little over 9,000 have been tagged as discoverable in this proceeding. From 7 October 2010 until 7 November 2010, there has been an average of five supervised full-time paralegals reviewing electronic documents on a daily basis. From 8 November 2010 onwards, there has been a team of five full-time paralegals and a solicitor reviewing electronic documents. Quality control processes are in place. Ultimately, it is estimated that there may be of the order of 19,500 documents to be discovered. Coding of those documents in a manner compliant with Practice Note No. 1 of 2007 (headed "Guidelines for the Use of Technology in any Civil Litigation Matter") is expected to be completed by mid to late January 2011.[25]
Has there been any inordinate and inexcusable delay?
44 There is no doubt that, save for Newtronics' recent work on the issue of discovery, this proceeding has effectively not been prosecuted since the dismissal of the application for special leave in February 2009. Similarly, there is no doubt that Newtronics is currently in breach of discovery orders which required it to give discovery more than three years ago. Mr Gjergja submits that there has been a deliberate and considered decision not to prosecute the present proceeding. Indeed, he submits that the plaintiff has conceded this is so in Mr Stewart's principal affidavit.[26] For present purposes, it can be accepted that this proceeding has not been prosecuted since February 2009, and that decisions have been made to pursue the other proceedings to which I have referred.
45 In support of his application, Mr Gjergja relies upon the decision of Tsolakkis Nominees Pty Ltd & Ors v Low & Duff (Developments) Limited.[27] In that case, Beach J held that there had been inordinate delay on the part of the plaintiffs. The issue then to be determined was whether that delay was inexcusable. The reason given by the plaintiffs for the delay in prosecuting that proceeding was, to use his Honour's words, "that it was not so much the impecuniosity of the plaintiffs which caused them to allow this action to remain dormant ..., but the fact that they deliberately chose to use the significant funds available to them at that time to fund their litigation involving the National Australia Bank rather than this litigation".
46 It must be noted that in Tsolakkis, the plaintiffs were suing the manufacturers of certain high technology food industry processing machinery, which machinery was alleged to be deficient and failed to comply with certain warranties. The litigation involving the National Australia Bank was unrelated to this proceeding. The affidavit material filed on behalf of the plaintiffs in Tsolakkis disclosed that the plaintiffs had received advice that the effect of any judgment given in their favour in the proceeding against Low & Duff Developments "would have been merely to the benefit of the bank". Unsurprisingly, Beach J was not persuaded that this constituted an excuse for the inordinate delay that had occurred in that proceeding.[28]
47 The present proceeding is of a different kind. The facts that are at the ultimate root of this proceeding are the same as the facts that are at the ultimate root of the Conduct of Litigation Action. The three proceedings (this proceeding, the Conduct of Litigation Action and the Promise of Support Action) are interrelated in that their object is[29] the pursuit of all claims that Newtronics has arising out of the circumstances that led to the supply of defective components to Seeley; the failure to warn Seeley in a timely fashion regarding the defective components; the manner in which the Seeley proceeding was defended and Atco's desertion of Newtronics on the day judgment was handed down in the Seeley proceeding.
48 Further, this is not the case of a purely self-interested litigant choosing to pursue one proceeding at the expense of another proceeding. Mr Stewart, as official liquidator of Newtronics, had and has a duty to preserve and get in all the assets of the company. As the history I have set out shows, this has, from time to time, involved making decisions as to the best course to take. Contrast this with the facts in Tsolakkis. In Tsolakkis, the plaintiffs were purely self-interested litigants. They chose not to prosecute their proceeding in a timely manner because they had a liability to a bank (which was unrelated to the proceeding before his Honour, and the subject of other proceedings), and they had received advice that if they pursued their current proceeding, any judgment would end up going to the bank. Those facts are a long way from the facts in the present case. In the present case, the liquidator has sought (and seeks) to recover the assets of Newtronics in a cost-effective manner.
49 Notwithstanding the debate between the parties concerning the context in which Byrne J used the word "inordinate" in referring to the delay between the appointment of Mr Stewart and the commencement of this proceeding,[30] I, too, would describe this delay as inordinate - as I would the seven month delay in serving the writ and the coming up for two years delay since the dismissal of the special leave application in February 2009. Whilst there was delay during the period July 2006 to February 2009, I would not describe it as inordinate in the circumstances. It was submitted on behalf of Mr Gjergja that this delay was inordinate because those causes of action in the proceeding which were unaffected by the judgment of Byrne J and the subsequent Court of Appeal and High Court proceedings, could have been continued and prosecuted pending the resolution of the application for the extension of time of the Corporations Law causes of action. Theoretically this is so, but in my view this overlooks the realities of litigation of this kind where parties often put a proceeding on hold pending the outcome of appeals in relation to important questions in the proceeding.
"Yes, so that's why we've started at 2002. That is when the liquidator could have been taking steps and was obliged to take steps promptly because of the lateness of the circumstances which attended that which was then an available cause of action which hadn't been invoked.
It was then that the liquidator was required to act promptly and if ever he was to bring a proceeding: (a) to get his information base up as quickly as possible so he could formulate the claim; (b) to organise his funding as quickly as he could so he could mount the claim; and (c) having mounted the claim, the prosecutor with maximum efficiency can bring the matter to a conclusion.
In all of those respects, in our submission, the liquidator failed. He was appointed, as my friend said, in January 2002. It was September 2003, more than 18 months later, before he got his 596 examinations up. He then went back in July 2004 to further examine Mr Gjergja's, so two and a half years after his appointment, he was still engaging in the public examination process, and then having done that in July 2004, it was another 18 months before the proceeding was issued, December 2005, and another seven months before the proceeding was heard, July 2006.
Now, maybe all of those steps needed to be taken by the liquidator, we don't contest that, but it's the failure to take those steps with promptitude that has exacerbated, even throughout this period the consequences of the passage of time and the point at which the critical events occurred, and it's plain that there was funding available to the liquidator from the outset - I mean, the very conduct of the public examination demonstrates that - so it's not as though he had zero funding until shortly before July 2006 and he hasn't deposed that it wasn't open to him to organise funding at a much earlier point of time, so we rely upon those circumstances."
51 Whilst one can always identify a step or steps which could have been done within a shorter timeframe, in my view the delays in this proceeding have been adequately explained by Mr Stewart. Put simply, I do not accept Mr Gjergja's submission that there has been inordinate and inexcusable delay in this proceeding. In my view, the evidence discloses a steady pursuit by the liquidator of the various causes of action available to him: a pursuit governed by Mr Stewart seeking to ensure that he preserved and obtained the assets in a cost-effective manner. It is of course to be noted that had Mr Stewart made a different decision and pursued all his claims in a single proceeding,[33] it is unlikely any application for dismissal for want of prosecution would have been made if Mr Stewart took all the steps he has taken in the individual proceedings in such a composite proceeding.
52 It follows that, in applying the principles set out in paragraph [2] above, Mr Gjergja's application to have this proceeding dismissed for want of prosecution must fail. Further, and in any event, for the reasons I have given, in the circumstances of this case, the justice of the occasion does not demand the dismissal of this proceeding for want of prosecution.[34]
53 Having regard to the conclusions I have reached in respect of delay, it is strictly speaking not necessary for me to consider further the issue of prejudice. However, if I had concluded that there was inordinate and inexcusable delay from the time of the dismissal of the special leave application in February 2009, I would not have concluded in the circumstances of this case that this delay occasioned prejudice of a kind justifying the dismissal of this proceeding for want of prosecution. Whilst "prejudice may exist without the parties or anybody else realising that it exists"[35] and whilst "what has been forgotten can rarely be known",[36] I was not persuaded that there was any actual specified prejudice in this case.
54 Further, whilst Mr Gjergja relied upon Duncan v Lowenthal[37] in support of an argument that there was prejudice in continuing to have allegations of breach of duty hanging over his head, no affidavit was sworn by Mr Gjergja specifying the detail of this claim. Additionally, to some extent the claims of prejudice in this case are ameliorated by Mr Gjergja's involvement as a director instructing in the Seeley trial,[38] the existence of documentary evidence,[39] the fact that Mr Gjergja has had to give his account in the past and can have his memory refreshed from the transcript of this account,[40] and the fact that the Conduct of Litigation Action remains on foot in any event.[41]
55 For the reasons given above, the first defendant's application to dismiss the plaintiff's proceeding as against him for want of prosecution must be dismissed.
[1] Per Lord Griffiths in Department of Transport v Chris Smaller (Transport) Limited [1989] AC 1197, 1203. See also Allen v Sir Alfred McAlpine & Sons Limited [1968] 2 QB 229; Muto v Faul [1980] VicRp 3; [1980] VR 26; Birkett v James (1979) AC 297, 318; Masel v Transport Industries Insurance Co Limited [1995] VicRp 59; [1995] 2 VR 328 and Bishopsgate Insurance Australia Limited v Deloitte Haskins and Sells [1999] 3 VR 863.
[2] See Newtronics' statement of claim. But cf the claim as formulated in paragraph 29 of the affidavit of James Henry Stewart sworn 8 October 2010, in which Mr Stewart deposes to the following amounts being claimed from Mr Gjergja:
(a) the Seeley judgment debt in the sum of $8.9 million plus the sum of $5 million in interest; plus
(b) interest pursuant to the Federal Court Act on the sum of $8.9 million from 18 January 2002 (the date on which orders were made) until 26 February 2002, the date upon which Newtronics was placed into liquidation; plus
(c) interest pursuant to the Federal Court Act on the sum of $5 million from the date of O'Loughlin J's order fixing interest, 31 January 2002 until 26 February 2002; plus
(d) the sum of $1.89 million, being Seeley's party/party costs certified by the Federal Court on 2 December 2008; less
(e) the amount which Newtronics would have spent had it conducted a recall of the defective product in a timely manner; plus
(f) interest pursuant to the Supreme Court Act from 1 December 2005 on the sum of ((a) plus (b) plus (c) plus (d)) minus (e).
[3] See Masel v Transport Industries Insurance Co Limited [1995] VicRp 59; [1995] 2 VR 328.
[6] See also Sacco v Renault (Wholesale) Pty Ltd, unreported Court of Appeal, 8 September 1995.
[7] [2007] VSC 195, [40].
[9] See the first defendant's outline of argument dated 19 October 2010 at paragraphs 23-28.
[10] Cf Australia and New Zealand Banking Group v Donovan, unreported Full Court, delivered 19 December 1986.
[11] Cf the approach of the Court of Appeal, to which I have already referred.
[12] Mr Stewart was appointed on 26 February 2002.
[13] [2007] VSC 195, [40].
[14] These figures have apparently altered over the course of the liquidation.
[15] Affidavit of James Stewart sworn 8 October 2010 at paragraph 12.
[18] [2007] FCA 1375, [12]-[20]: see the affidavit of Mr Stewart sworn 8 October 2010 at paragraphs 15 to 18.
[19] In his affidavit sworn 8 October 2010.
[20] Affidavit of Mr Stewart sworn 8 October 2010 at paragraph 19.
[21] See paragraph 27 of the affidavit of Mr Stewart sworn 8 October 2010.
[22] In paragraph 26 of his affidavit sworn 8 October 2010.
[23] Affidavit of Mr Stewart sworn 8 October 2010 at paragraph 48.
[25] See the supplementary affidavit of Mr Stewart sworn 13 December 2010 at paragraphs 6 to 15.
[26] Sworn 8 October 2010 - see in particular paragraphs 13, 14, 19, 32 and 46.
[27] Unreported, Beach J, delivered 20 March 1998.
[28] As to impecuniosity (lack of funds), in addition to Tsolakkis Nominees Pty Ltd & Ors v Low & Duff (Developments) Limited (supra), see Tenth Vandy Pty Ltd v Natwest Markets Australia Pty Ltd [2007] VSCA 75, [24].
[29] Or in the case of the Promise of Support Action, was until it was finally determined against Newtronics.
[30] Newtronics v Gjergja & Anor [2007] VSC 195, [40].
[31] More precisely, inordinate and inexcusable.
[33] Cf paragraphs 12 to 14 of Mr Stewart's affidavit sworn 8 October 2010.
[34] Cf Shepperdson v Lewis [1966] VicRp 59; [1966] VR 418, 419 and Masel v Transport Industries Insurance Co Limited & Ors [1995] VicRp 59; [1995] 2 VR 328, 332 and following.
[35] Brisbane South Regional Health Authority v Taylor [1996] HCA 25; (1996) 186 CLR 541, 551 (per McHugh J).
[38] As to some of the issues canvassed and determined in that trial, see the judgment of O'Loughlin J at paragraphs [46] to [48], [50], [67], [171] and [229] to [236].
[39] Newtronics v Gjergja & Anor [2007] VSC 195, [40].
[40] See the transcript of Mr Gjergja's examinations conducted on 17 September 2003 and 30 July 2004 (Exhibits JHS6 and JHS7 to the affidavit of Mr Stewart sworn 8 October 2010).
[41] Strictly speaking, whilst this last fact does not ameliorate prejudice, its existence takes away part of the force of the argument that to allow the present proceeding to hang over Mr Gjergja's head is productive of substantial prejudice, when a related proceeding involving like issues is on foot in any event.
Newtronics Pty Ltd (recs & mgrs apptd) (in liq)
Gjergja & Anor [2010] VSC 594
(1996) 186 CLR 541