Shellard & Ors v Orlanski [2001] VSCA 147

8. Not only do I think that the learned judge erred in the test he imposed as to the effect of delay, but I am also not satisfied that the appellants were guilty of inordinate and inexcusable delay of the relevant kind. Undoubtedly there was a good deal of delay, most of which was caused by either incompetence or, more likely, inexperience in conducting an action of this size, particularly on the part of the former solicitors when they originally drew the first affidavit of documents and first gave inspection. It is one thing, however, to say that the conduct of the discovery process was tardy but quite another to say that the delay was inordinate and inexcusable, even at the present day when controlled lists and the like have made the courts less tolerant of incompetence and unnecessary delay. Unfortunately this case fell between two stools, for it was commenced before the era of compulsory summons for directions under the Litigation Support scheme, so that when eventually it was brought in, discovery apparently was largely left to the parties to work out through the conventional means of interlocutory applications before the Masters. This case certainly cried out for some special directions to simplify the discovery process.

11. For discovery purposes this proceeding had one unusual characteristic. The appellants brought the proceeding against their former accountant but, before the proceeding got under way, the accountant had already delivered all the relevant files (and indeed all irrelevant files) to the appellants, primarily to ensure that the tax returns which had not been put in and which had already led to the imposition of penalties could be completed as soon as possible by new accountants. The consequence was that when the action got under way virtually every relevant document was in the hands of the appellants as plaintiffs and only a very few were held by the respondent as defendant. Upon the assumption, which was largely borne out in practice, that the former accountant's papers were for the most part kept in the form in which they were received, it was more than likely that the defendant accountant knew far more about those documents than did the plaintiffs. Nevertheless the respondent seems at all times to have insisted on comprehensive, conventional discovery with virtually every document marked or numbered. After the first interlocutory application had been heard, the dispute was largely about the form of the affidavit and the method of inspection. Indeed it could be said as to that first application that it was more likely that the defendant would have known of the omitted documents than the plaintiffs, although it must be conceded that there were some documents then sought which had not been supplied to the defendant.

14. The bizarre feature of the case was that the defendant's solicitors kept on complaining that they could not find their way through and did not know of the contents of the documents which were discovered by the plaintiffs, although those documents had originally been put in place and organised by their own client. They even engaged a specialist accountant to give expert evidence in the matter who made similar complaints. It never seemed to occur to them that the state of the documents reflected on the manner in which their own client had conducted his professional activities in preparing accounts and taxation returns for the plaintiffs. Nor does it seem to have occurred to them to take their own client along at the time of inspection in order to show them how the files, many of which were still contained in green hanging folders, were organised. One might even suspect that the defendant's solicitors were being as difficult as they could in seeking to impose the most rigorous regime for discovery and inspection on the plaintiffs who have had virtually nothing to do with the preparation and keeping of most of the relevant papers. Commonsense cried out for a different solution but none was forthcoming so that the complaints increased and became more and more pettifogging.

17. Moreover, it can be seen that, as the defendants' requests for more and more discovery and far more and greater particularity increased, so the Master's orders, at least on the last two applications, became far more specific and confined. In the order made by the Master on 28 September 1999, he found it sufficient to order only that the first-named plaintiff state whether the file notes of attendances from 1983 to 1989 related to any question raised by the pleadings and did not direct any new affidavit of documents as such. That particular order was complied with within time and before the appeal from that order was heard by the judge who chose to order that the proceedings be struck out for want of prosecution. It may be noted that the Master's order was in response to an application supported by materials which asserted, albeit in the non-expert eyes of the consulting accountant, that the discovery was "totally disordered" and that there had been no attempt to group all relevant documents together. Clearly the Master, who had made the earlier order of 19 November 1998, which was confined to ordering that some 20 or so documents be properly described and numbered, did not see the method of discovery which the plaintiffs adopted in the same light as the defendant's solicitors and expert, nor, one must assume, in the same light as the learned judge.

(1) No explanation was given by the defendant for his failure to give a notice for discovery before 20 June 1996, although the pleadings had closed on 28 March 1995 and full (and unchallenged) particulars of the statement of claim had been provided by August 1995. It must be thought remarkable that, if the defendant's solicitors were so concerned about their client's reputation, they should wait so long to serve a document of this kind whose terms extend for no more than one paragraph.

(2) Although the plaintiffs' first affidavit of documents were served by 10 July 1996, the first inspection did not take place until 5 September of that year.

(3) Although there was a gap of over eight months before the defendant took out its first summons for further discovery, it may be conceded that some considerable part of that time might be attributed to the plaintiffs. As the defendant's solicitors pointed out by letter dated 9 September 1996, clearly many documents were not produced on the first inspection and even by December that had not been remedied. Although a considerable number of documents were sent on 10 December, no answer was made to a letter of 3 December and no complaint until April the following year, albeit that there were certainly some items which had not been provided by that time. I would treat most of the eight months period of delay as substantially caused by the plaintiffs.

(4) The plaintiffs' response to the Master's order of 30 May 1997 was reasonably prompt. On this occasion it took from either 16 or 21 July 1997 to 12 September that year before the defendant sought inspection. Unfortunately just at that time the plaintiffs' former solicitors retired and new solicitors were appointed in their place, thus leading to a substantial delay before the documents were available for inspection on 12 November 1997. For no explained reason the defendant's solicitors did not inspect those documents until 29 January 1998 but it was not then completed. Difficulties arose because the plaintiffs' accountants then required access and it took some time before it was agreed that the documents might be inspected at those accountants' premises. There was a further inspection on 16 March 1998 which led to the taking out of a summons on 9 April that year and an order of the Master on 17 April directing that the documents be properly enumerated and identified. It may be noted that no further documents were thereby ordered to be discovered. The third affidavit of documents was sworn on 28 May 1998. The delay from the previous affidavit, which amounted to some ten months, seems largely again to be attributable to defects in the form of the plaintiffs' discovery. But there were at least three months of that time where it might be said that the defendant did not act promptly.

(5) Thereafter it is by no means so clear who was responsible for delays and in my opinion it appears that the defendant became more and more technical and sought more by way of better, i.e., better ordered, discovery than they fairly could have asked. A fourth affidavit of documents was sworn on 7 August 1998 in circumstances where it seems that the plaintiffs agreed that that should be done. It seems from the materials that no attempt was made to inspect further after the service of this fourth affidavit but it led eventually to a carping letter of 20 October 1998 and shortly thereafter to a summons of 12 November 1998 seeking an order that the proceeding be dismissed or that the plaintiffs comply with the earlier orders. The letter extended for some ten pages and contained complaints over such minor issues as the separate description of landlord's statements and invoices relating to the repair of premises. The Master did not strike out the proceeding but made an order on 19 November 1998 requiring greater particularity with relation to some 20 bundles of documents.

(6) The required affidavit was not served until 12 January 1999, an unnecessarily slow response to the Master's order.

(7) Thereafter the delay does not appear to be primarily the responsibility of the plaintiffs. No attempt was made to inspect the documents until 12 May 1999, over three months later, and shortly before the summons for directions was due to come on for hearing. In fact at that time it was not convenient for the inspection to take place, so there was a further delay of three weeks, the inspection taking place on 10 and 17 June 1999.

(8) For various reasons, none of them very satisfactory to me, further objection was taken to the form of the discovery, but it took to 3 September 1999 for the defendant to issue the present summons seeking to strike out for want of prosecution.

26. As I have perceived the matter, delays of the plaintiffs of an inexcusable kind did not account for much more than 18 months of the period since the defendant had first served its notice for discovery. Apart from the discovery/inspection dispute the action was ready for hearing in that the pleadings and closed and all particulars had been given much earlier. In my opinion the defendant's complaints were unjustified in the latter stages of the dispute and were expressed in high blown terms which do not seem to have been borne out by the additional discovery which the Master in fact ordered on the latter two occasions. No attempt was made to work out a more logical means of discovery of these documents in a case where it was the defendant himself who had a peculiar and detailed knowledge of them which, if he had bothered to attend the inspections, ought largely to have overcome the difficulties, or at least revealed where the real problems lay, if any. I confess to thinking that the confusion about the defendant's files, which their solicitors have pressed for so persistently, suggests that they had been "disordered", as the expert accountant described them, in the first place, a factor which may not be insignificant in due course. I shall forebear from saying any more about the oppressive way in which it appears that discovery was sought by the defendant of his "own" documents.

29. The action should not have been dismissed for want of prosecution and the appeal should be allowed. The summons for directions should now be re-listed directed to the actual hearing of the dispute between the parties. Doubtless some sensible means of resolving this paper war between the parties can be worked out with good will and common sense. If not, a judge or master will have to make specific, but practical orders for this purpose.

34. This appeal arises out of a proceeding commenced in the Trial Division by the present appellants in August 1994. The appellants (to whom we shall refer as "the plaintiffs") sued the respondent ("the defendant"), an accountant by profession, for damages for work which he had done, or had failed to do, when acting for them. In September 1999 the defendant applied by summons to have the proceeding dismissed purportedly under Rule 24.05 of Chapter I of the Rules and, when the Master did not so order, the defendant appealed to a judge in the Practice Court who gave judgment for the defendant on 22 December 1999. The plaintiffs now appeal, by leave.

38. According to the agreed statement of facts on this appeal, the defendant acted as accountant and tax agent for the plaintiffs in and between the years 1983 and 1990, the firstnamed plaintiff being one Shellard and the others, corporations associated with Shellard. The accounting work performed by the defendant related to the management of the plaintiffs' business affairs, the preparation of appropriate business accounts and records and the preparation and lodgement of all necessary tax returns.

41. On 5 March, 1990 the Australian Tax Office made a detailed request of the plaintiffs for further information with respect to various taxation returns prepared and lodged by the defendant on behalf of the plaintiffs and for production of all financial records. Neither the plaintiffs nor the defendant on their behalf responded to the request and as a consequence the Australian Taxation Office issued notices of assessment for the years ending 30 June, 1983 to 30 June, 1989 against the first, second, third and fourth plaintiffs.

44. In this proceeding the plaintiffs allege that they also engaged the defendant to advise and act for the plaintiffs with respect to the request made in 1990 and that the defendant advised the plaintiffs that it would be best not to respond. By way of defence the defendant alleges that upon receipt of the request on 5 March 1990, the plaintiff Shellard instructed him to cease acting for the plaintiffs and to inform the Australian Taxation Office accordingly, and to return the plaintiffs' files and documents to him, Shellard. The plaintiffs allege that the defendant ceased acting for them in September, 1990, an allegation denied by the defendant who alleges that he ceased to carry on the practice of Gordon & Orlanski in June or July 1990 and had in fact ceased to act for the plaintiffs shortly after 5 March, 1990.

47. The plaintiffs engaged new accountants to lodge outstanding tax returns and amended tax returns and notices of objection against notices of assessment. Amended assessments were then issued by the Australian Taxation Office. The plaintiffs claim to have incurred penalties for late payment of taxation, penalties for culpability in relation to various tax returns, additional primary tax on declared income that was not income, and additional costs with respect to the engagement of new accountants.

51. On 16 August, 1994 the plaintiffs filed the writ, seeking damages from the defendant for professional negligence. On 2 December 1994 a defence was filed, together with a request for further and better particulars of claim. On 28 March 1995, the plaintiffs filed their reply, together with a request for further and better particulars of the defence. On 14 July 1995, further and better particulars of defence were supplied and on 30 August 1995 the plaintiffs supplied further and better particulars of statement of claim. So far, one year had passed since the commencement of the proceeding.

54. Then, some ten months later, on 20 June 1996, the defendant gave notice for discovery. Promptly, on 10 July, came the plaintiffs' first affidavit of documents and a couple of months later, on 5 September, the plaintiffs inspected the defendant's documents for the first time.

57. On 21 May 1997 - and thus more than eight months later - the defendant filed a summons for further discovery. On 30 May, Master Evans ordered that a further and better affidavit of documents be filed by the plaintiffs and on 16 or 21 July the plaintiffs' second affidavit of documents was filed. Again there was a gap until more than seven months later, on 29 January 1998 and after the plaintiffs had changed solicitors, the defendant inspected the plaintiffs' documents a second time.

60. On 16 March, there was a third inspection and on 9 April 1998 the defendant filed a summons seeking an order that the plaintiffs comply with the earlier orders of Master Evans. The complaint was with the plaintiffs' second affidavit of documents, which, as already noted, had been filed more than eight months previously. On 17 April 1998, Master Evans ordered that within 28 days the plaintiffs comply with the orders he had made on 30 May 1997. On 28 May 1998, the plaintiffs filed their third affidavit of documents and on 7 August, their fourth affidavit of documents.

63. On 12 November 1998, the defendant filed a summons seeking an order that the proceeding be dismissed or alternatively an order that the plaintiffs comply with the orders made by Master Evans on 30 May 1997 and 17 April 1998. On 19 November 1998, Master Wheeler ordered that the plaintiffs file and serve a further supplementary affidavit of documents by 8 December 1998 and that further supplementary affidavit was in fact filed on 12 January 1999. Again there was a gap, in that inspection of the plaintiffs' documents did not follow until 10 and 17 June 1999.

66. On 3 September 1999, the defendant filed the summons already mentioned, seeking an order that the proceeding be dismissed. On 24 September 1999, the plaintiffs filed a summons seeking leave for the sixth, seventh, eighth and ninth plaintiffs to discontinue the proceedings - a step which, it would appear, the solicitors on both sides had known for some time was pending. On 28 September 1999, leave to discontinue was given as sought and Master Wheeler ordered that the remaining plaintiffs file and serve an amended statement of claim by 12 October. Mr. Shellard was also ordered to file and serve an affidavit relating to certain file notes, and other orders were made for the taking of certain interlocutory steps. We observe in passing that the order of the Master for further discovery on 28 September was very limited, implying that otherwise the Master saw discovery as now complete.

69. The defendant was far from satisfied with this outcome and so, on 1 October 1999, he filed notice of appeal against Master Wheeler's orders. On 28 October the defendant's expert witness and counsel attended at the office of the plaintiffs' solicitor to inspect yet again discovered documents of the plaintiffs. On 22 December 1999, the defendant's appeal was heard in the Practice Court and, as earlier indicated, it was successful. An order was made allowing the appeal, setting aside the orders made by Master Wheeler and in lieu giving judgment for the defendant with costs.

72. In his reasons for judgment, the learned judge noted that the writ had been filed almost four years after the defendant had ceased practice as an accountant, in September 1990, and so four years after the plaintiffs had retrieved from the defendant all the defendant's files and records relating to the affairs of the plaintiffs. The judge said:

"Yet here we are more than nine years down the road and still the plaintiffs have not provided satisfactory discovery to the defendant in relation to their claim, despite the various orders made against them by Masters of the Court and to which I have referred."

77. On this appeal the plaintiffs assert that the judge fell into error in exercising his discretion as he did, by allowing the appeal and giving judgment for the defendant for want of prosecution on the part of the plaintiffs. In our opinion, essentially for the reasons summarised below, the appeal should be allowed and the proceeding reinstated, the defendant to pay the plaintiffs' costs before the judge and this Court, including reserved costs.

80. In our opinion his Honour erred in his pivotal conclusion that there had been inordinate and inexcusable delay on the part of the plaintiffs and their legal advisers in pursuing the plaintiffs' claim. Undoubtedly there had been delay on the part of the plaintiffs and inadequacy in their making discovery as witness the successive orders for further affidavits. There was also - although it seems not to have been relied upon below or before us - delay earlier in the plaintiffs' providing further and better particulars of the statement of claim. But analysis of the chronology, and of the events behind the chronology, since the defendant gave notice for discovery on 20 June 1996 shows tardiness on the part of the defendant too, not all of it to be explained away, as was suggested in argument, by exchanges between solicitors seeking to advance matters (not always successfully) or otherwise by circumstances outside the control of the defendant. Indeed, at one stage in the argument Mr. Ruskin was so bold as to put the submission that the plaintiffs had essentially done little or nothing to comply with the defendant's notice for discovery, but plainly that was not so; at times the plaintiffs made strenuous efforts to meet - or if not to meet, then to answer - the demands of the defendant for further discovery and the defendant too must bear some of the responsibility for the time that elapsed between the notice for discovery and the defendant 's last summons before the Master.

83. First, it may be noted, the notice for discovery was itself given more than 15 months after close of pleadings, a delay which Mr. Ruskin was unable to explain. Then the detail of the steps taken thereafter, at the instance of the defendant, shows the defendant pressing for discovery - and particularly a form of discovery ("configured discovery") - beyond that to which he was entitled under the rules. It shows, too, the defendant taking at times a somewhat leisurely course in inspecting documents discovered by the plaintiffs, his second inspection occurring some six months after the plaintiffs' second affidavit of documents was sworn and his fourth inspection some five months after the fifth affidavit of documents was sworn. True it is that the plaintiffs' changing solicitors must have caused some interruption and may have caused delay but that does not explain all of the time taken. Moreover the defendant did not appear to hurry in making his several applications for further discovery, some ten months (for instance) being allowed to elapse between the swearing of the plaintiffs' first affidavit of documents and the filing of the first summons for further discovery. Whatever may be said to justify some of the time thereby consumed, and doubtless some of it was the direct result of fault or default on the part of the plaintiffs, the conclusion seems to us inescapable that the defendant was responsible for at least some part of the time between 20 June 1996 and 3 September 1999, when the defendant filed the summons on which the Master made the order against which the defendant appealed to the judge. Some of that time was not due to the plaintiffs at all.

86. A similar point can be made by reference to the correspondence. For example we mention the somewhat carping letter of 20 October 1998 from the defendant's solicitors to the plaintiffs' solicitors. That letter was addressing the fourth affidavit of documents which was sworn by Mr Shellard on 7 August 1998 and in which one item included this:

"16.18 Bundle of documents marked Peter Shellard (personal) 1/7/86 to 30/6/1987, comprising - ... (3) landlords' statements of Armstrong & David (13 sheets)".

The letter of 20 October from the defendant's solicitors was ten pages long and was given over to detailed complaints about the affidavit of documents. That affidavit was described as "defective for the following reasons" which were then listed on eight closely typed pages. In relation to document 16.18(3) it was said:

"Although the landlord statements are discovered as a group of documents, you have not sufficiently identified them by providing a date range."

It cannot be supposed that these "landlord statements" did not themselves contain identifying dates, which would surely have been apparent on the most cursory of inspections.

93. Moreover, these documents were identified in the affidavit as comprising but one part of the "bundle of documents marked Peter Shellard (personal) 1/7/86 to 30/6/1987" and it must not be forgotten that these were, essentially, the documents of the defendant himself which had been recovered by the plaintiffs after the defendant had ceased to act for them. In the context that there were thousands of these documents, arranged (if at all) according to the defendant's choice, not the plaintiffs', it is scarcely surprising that they were described as they were in the affidavit of 7 August 1998. In our opinion the plaintiffs' solicitor was making a valid and important point in response to this criticism when, in an affidavit filed on 21 January 2000, he said this in paragraph 19:

"The Defendant had only discovered two documents in this proceeding in his Affidavit of Documents sworn on 17 July 1995. .... The reason for this was that the Plaintiffs had taken all their files from the Defendant in 1990. I was therefore concerned to preserve the integrity of those files for the purposes of this proceeding and to retain the same numbering of the files in all of the Plaintiffs' Affidavit[s] of Documents."

Given the subject matter of the proceeding, that there was good reason to preserve the integrity of the files should surely have been apparent to both sides.

98. In short, it seems to us that when one considers matters such as the chronology of events since the notice of discovery, the letter of 20 October 1998 from the defendant's solicitors, and the limited terms of the later orders for discovery, there are grounds for suspecting that this was a case in which the defendant or those supporting him had determined that discovery should be used as an engine of oppression to keep the case from ever coming to trial. Yet, rather than taking the foregoing matters into account - and in particular the fact that the lapse of time since notice was first given for discovery was not wholly the responsibility of the plaintiffs but was in part due to the defendant and his legal advisers - it appears that his Honour committed the error of principle which was identified in Spitfire Nominees Pty. Ltd. v. Ducco[1], of "gross[ing] up the period of delay as elapsed time, instead of, as was the judicial obligation, considering what the net delay occasioned was and what prejudice, if any, was sustained as a consequence of that, rather than the general elapsing of time". The need to find the source of prejudice in a plaintiff's inexcusable delay is also emphasised in Bishopsgate Insurance Australia Ltd. (In liq.) v. Deloitte Haskins & Sells[2].

101. In addition, statements by his Honour such as, "Yet here we are more than nine years down the road and still the plaintiffs have not provided satisfactory discovery..." make it apparent that he took a wrong date as the starting point for the calculation of delay[3]. Moreover, his Honour was, in our respectful view, incorrect in considering, as the statement quoted shows, that at the time the proceeding was before him discovery on the part of the plaintiffs was not yet in order. Significantly, in that regard Mr. Ruskin conceded that, if his Honour was not entitled to be satisfied that discovery was not then in order, he erred.

104. Finally, although his Honour did towards the end of his reasons state that the unjustifiable and inexcusable delay on the part of the plaintiffs was likely to cause serious prejudice to the defendant so much so that he considered there was a substantial risk that there could no longer be a fair trial of the proceeding, it is clear from the immediately preceding paragraphs in his reasons that he was determining whether a fair trial could be had by reference to the fact that "[a]t the trial of the proceeding [the defendant] will be required to give evidence concerning matters which occurred 10 and more years ago." Rather, assuming (contrary to our view) that there had been inordinate and inexcusable delay, his Honour should have asked whether there was "in the circumstances a substantial risk that a fair trial cannot be had because of inordinate and inexcusable delay."[4]

108. Accordingly we conclude that for a number of reasons his Honour's discretion miscarried. It may well be that this was in part due to the pressure of work in the Practice Court, for the papers before us were voluminous and a great deal of time was needed to come to terms with them; and doubtless we had the benefit of more elaborate argument than was possible in the Practice Court. But the discretion having miscarried, this Court must re-exercise it. For that purpose we would give the defendant leave to file the further affidavit tendered by Mr. Ruskin, to show that the defendant had not ceased practice altogether in 1990 but had resumed practice shortly thereafter, a point bearing upon prejudice to him as a professional man whose reputation was under attack in this litigation.

111. None the less we have written enough to show that in our opinion the delay on the plaintiffs' part (whether or not generated at least in part by tactics of the defendant) was in the circumstances not inordinate. In any event, whilst acknowledging that the defendant, a professional person, has been exposed to the plaintiffs' claim for that extra period by reason of their delay, we are not satisfied that any significant prejudice is shown to be attributable to that delay. We bear in mind, too, that in this proceeding the plaintiffs' case, with particulars, has been known since 31 August 1995 and its sufficiency as a matter of pleading and particularity has never been challenged[5].

114. For these reasons we would allow the appeal, set aside the orders made by the judge and order in lieu that the defendant's appeal to his Honour be dismissed. It is regrettable that so much time has been allowed to pass since leave to appeal was given to the plaintiffs last year but though the parties might have sought to have the appeal expedited no such application was made. This may mean that if the defendant was guilty of seeking to extend discovery unnecessarily those tactics have now rebounded to his disadvantage. But if so, so be it.

[1] [1998] 1 V.R. 242 at 248.

[2] [1999] 3 V.R. 863 at 875.

[3] Contrast Latrobe Country Credit v. Smith [1998] VSCA 74; [1999] 1 V.R. 440 where even after the lapse of several years the plaintiff had still not been able to produce a proper pleading of its own case.

[4] Spitfire Nominees at 248 (original emphasis).

[5] Contrast again Latrobe Country Credit v. Smith, supra.