Leave to appeal
147 It is convenient to address Proposed Grounds 1 and 4 together.
148 There is little discussion by the primary judge as to the nature and content of the cross-claim of the Shepherd parties and the amendments the Shepherd parties sought to raise by leave: see the brief references at J [32], [34], [35] and the last four sentences of [56].
149 That may well be due to the circumstance that the primary judge had been case managing the litigation and was entirely familiar with it and felt no need to explain the burden of the potential orders in the particular context of the rights and remedies agitated or to be agitated in the proceeding. However, the proposed amended statement of cross-claim had only been filed after 5.00 pm on the day before the hearing.
150 We take the view that in exercising a discretion under the civil practice and procedure provisions (s 37M(4)), which has the effect of bringing about the effective finality of the proceedings in the circumstances of a failure of a party to comply with a direction or order of the Court, the primary judge ought not only take into account the circumstances of the failure, explanations given and whether the party and its advisers have complied with the obligations arising under s 37N(1) and s 37N(2) respectively, but also clearly take into account the subject matter, scope and content of the claims and any cross-claims effectively brought to finality by the exercise of the discretion, and whether the exercise of the discretion in the manner contemplated brings about the "just resolution of the dispute".
151 The character of the proceeding, its complexity, scope and scale and proposals to amend the framing of issues to be quelled by an exercise of judicial power in the proceeding would usually compel some reflection for weighing in the balance the bundle of rights and interests in issue in the proceeding overall affected by the proposed orders. That process of weighing would involve considering the detail of the rights and issues in question and the consequences of effectively extinguishing the defences and cross-claims of, in this case, the Shepherd parties and the rights and interests they sought to agitate in the controversy. That is to say, the prejudice likely to be suffered if the orders were made.
152 The amended pleading settled by counsel had not been before the primary judge previously and the ex tempore reasons themselves do not reflect a discussion of (or any detailed consideration of) the complexity of the proceedings which would in every practical sense be brought to an end by the orders made that day, as explained by the ex tempore reasons pronounced that day.
153 We have already noted the chronology of events from the commencement of the proceedings by the Watt parties on 13 June 2019 to the orders made on 20 May 2021 (and beyond): see [8] to [26] of these reasons.
154 The following additional aspects of the chronology ought to be noted here.
155 The proceeding was commenced by an originating application and the SOC pleading the matters already noted. In order to formulate the SOC addressing all of the elements of the transactions and each one of the many pleaded representations mentioned earlier, considerable time and effort must have been dedicated by the Watt parties, solicitors and counsel to gathering the relevant instructions, considering the documents and drafting and finalising the pleaded case. Even with the advantage of that preparation, the Watt parties who had been directed on 21 February 2020 to serve outlines of evidence together with any documents upon which they intended to rely by 17 April 2020 (55 days later) were not able to do so until 12 October 2020, seven months and 21 days later (essentially eight months later). Orders were made on 25 June 2020 adjusting the date for service by the Watt parties of their material until 10 July 2020 and then further orders were made on 24 September 2020 again adjusting the date to 2 October 2020. Those various orders were made with the consent and support of the Shepherd parties. Ultimately, on 12 October 2020, the Watt parties served outlines of evidence of eight witnesses and 1,400 pages of documents.
156 As the primary judge notes at [19] of his reasons, the solicitor for the Shepherd parties made no criticism of the almost eight months' delay brought about by disruptions to the Watt parties caused by the COVID-19 pandemic and related restrictions and difficulties.
157 The order of 24 September 2020 also provided for the service by the Shepherd parties of their outlines of evidence and documents by 11 December 2020, a period of 60 days (almost nine weeks, but not eight months), from the date of service on 12 October 2020 by the Watt parties of their material. The Shepherd parties could not meet that 60 day requirement and the parties agreed a consent order on 3 February 2021 extending the time until 2 April 2021. The primary judge required an explanation for the extension until 2 April 2021. The solicitors for the Shepherd parties responded to the chambers of the primary judge advising that a number of factors (reasons) had made the extension of time necessary including that the two key witnesses had been ill and insurance issues (the extent of coverage) needed to be resolved (and had been resolved).
158 On 4 February 2021, the primary judge made orders extending the time for the Shepherd parties to serve outlines of evidence and documents until 2 April 2021.
159 The extension of time under the order of 4 February 2021 would provide the Shepherd parties with additional time, calculated from 11 December 2021, of three months and three weeks until 2 April 2021, and taking into account the period from the date of service of the material of the Watt parties on 12 October 2020, the total time available to the Shepherd parties was five months and three weeks.
160 By the time of the making of the order on 4 February 2021, both sets of parties, by consent, were content with the way in which the proceeding had evolved, no doubt with the parties and their solicitors taking into account the difficulties of dealing with complex factual matters in a period of social anxiety and threats to health, and the difficulties of conducting the litigation and gathering instructions in an orthodox way brought about by the pandemic and other factors. such as the illness of witnesses and insurance issues. The primary judge had expressed concern about the extension to 2 April 2021, but, in light of the submissions of the Shepherd parties and recognising the consent of the Watt parties to the proposed extension, the primary judge made the orders of 4 February 2021 extending the time available to the Shepherd parties to 2 April 2021.
161 The present issue began when the Watt parties advised the primary judge on 27 April 2021 of non-compliance by the Shepherd parties with the order of 4 February 2021, described by the Watt parties as "slippage" in compliance with the order. The primary judge listed the matter for case management on 7 May 2021 and directed the Shepherd parties to file an interlocutory application by 14 May 2021 seeking an extension of time for the outlines (to 28 May 2021) and leave to amend (by 17 May 2021). Programming orders were made for a hearing of the application on 20 May 2021. The Interlocutory Application was supported by the affidavits of Mr Nurse filed on 14 May 2021 and 19 May 2021. We have noted the content of those affidavits: see [27]-[39] of these reasons.
162 On 20 May 2021, the primary judge was confronted with a number of possible ways in which to exercise the discretion conferred by ss 37P(5) and (6), his Honour finding for the purposes of the exercise of the discretion that the Shepherd parties had failed "to conduct the proceeding in a way consistent with the overarching purpose" as required by s 37N(1) and that the solicitors had failed to properly "take account" of that duty and had failed to "assist" the party to comply with it: s 37N(2)(a) and (b).
163 A number of possibilities arose in relation to the exercise of the discretion including these possibilities:
(a) extend the time by eight days to Friday, 28 May 2021 to enable the Shepherd parties to serve their outlines of evidence and documents, with a guillotine order (as suggested by the Shepherd parties) that their defence be struck out if they failed to comply with the extension order, or without a guillotine order, coupled in either case with an order listing the matter for Monday, 31 May 2021 for review so as to supervise the consequences of non-performance of the extension order should that occur (listed for case management no doubt at the cost of the Shepherd parties having sought the indulgence);
(b) make the above order and grant leave to amend in terms of the proposed draft amended statement of cross-claim settled by counsel as put before the Court and the parties;
(c) grant the extension to 28 May 2021 and refuse leave to amend; or
(d) refuse the extension application; refuse leave to amend as proposed or at all; strike out the defence and the notice of cross-claim of the Shepherd parties; dismiss the interlocutory application; make procedural directions to determine the terms of the judgment and orders to be entered and made in the proceeding in reliance on rules 5.23 and 1.40 of the FCR.
164 The primary judge exercised the discretion to bring about effective finality in the proceeding and the rights and interests of the parties by exercising the discretion in the manner described in the last of these options.
165 The question for the Full Court, of course, is not one of whether, standing in the position of the primary judge, the Full Court would have exercised the discretion differently according to one of the other possibilities described above (or other possible orders), but whether the decision of the primary judge is attended with sufficient doubt to warrant its reconsideration on appeal and whether substantial injustice would result if leave were refused. Because the orders of the primary judge have the practical effect or practical operation of finally determining the whole of the proceeding and thus the rights and interests of the parties, a prima facie case exists for granting leave to appeal. As the Full Court observed in Samsung at [33] citing Bucknell at 225-7: "Leave should readily be granted if, as a practical matter, the interlocutory order has the effect of determining the whole of the proceeding or an important issue in the proceeding" (emphasis added).
166 The question of whether the orders bring about effective finality of the proceedings goes to both questions of "sufficient doubt" and "substantial injustice".
167 In exercising the discretion to bring about effective finality in the proceeding by making the orders of 20 May 2021, the primary judge had particular regard to the failure of the Shepherd parties to discharge the s 37N(1) duty to conduct the proceeding in a way consistent with the overarching purpose. In Expense Reduction, the Court (French CJ, Kiefel, Bell, Gageler and Keane JJ) considered provisions of the Civil Procedure Act 2005 (NSW) (CPA) and provisions of the Uniform Civil Procedure Rules (UCPR) which are in substantially the same terms as ss 37M, 37N and 37P of the FCA Act. At [51], the Court recognised that speed and efficiency, in the sense of minimum delay and expense, "are essential to a just resolution of proceedings" and that the achievement of a "just but timely and cost-effective resolution of a dispute" has effects upon the parties, the Court and other litigants, and that in making interlocutory decisions, the Court must have regard to the "wider objects of the administration of justice".
168 The CPA is a little different in its terms in some respects. Section 58(1)(b) provides that, although the Court has power under s 61(1) of the CPA to make such order or direction "as it thinks fit" and power under s 61(2) to make such orders "as it considers appropriate" in the conduct of the proceeding, any orders made under the discretionary powers conferred by the CPA must be in accordance with the "dictates of justice" and the matters to be taken into account in deciding where the dictates of justice lie, include "the degree of injustice that would be suffered by the respective parties as a consequence of any order or direction made in the process of case management": Expense Reduction at [54], quoting s 58(2) of the CPA.
169 In Expense Reduction, the Court observed (at [56]) (in terms equally applicable to ss 37M, 37N and 37P of the FCA Act) that the "evident intention and expectation" of the CPA is that the Court use the broad powers to facilitate the "overriding purpose" (or in the case of ss 37M, 37N and 37P, the "overarching purpose"). At [57], the Court observed that the overarching purpose "may require a more robust and proactive approach" on the part of courts.
170 The Court was not there concerned with the entry of final judgment in favour of a party, and clearly did not have orders of that kind in mind, as the Court (at [57]) immediately added, after the observations concerning a need for courts to be more robust and adopt a proactive approach, the further observation that "unduly technical and costly disputes about non-essential issues are clearly to be avoided" (by an exercise of the powers so conferred) and observed that the "powers" are "not at large" but governed in the case of the CPA by the "dictates of justice". The Court observed (at [57]) that in exercising the discretionary powers (analogous to the FCA Act powers) "regard is to be had in the first place to how to how the overriding purpose of the CPA can be furthered [in exercising the powers], together with other relevant matters including those referred to in s 58(2) [the "dictates of justice" and the matters quoted at [74] of these reasons]" (emphasis added). In many respects, the matters comprehended by the "dictates of justice" and the conceptions quoted at [74] of these reasons are comprehended by s 37M(1) and (2) of the FCA Act.
171 In exercising the discretionary powers in ss 37P(5) and (6), it is necessary to undertake a balancing exercise in which consideration is to be given to how the overarching purpose of s 37M can be furthered, together with other relevant considerations such as enabling the "just determination of all proceedings before the Court" as one of the recited "objectives" of the overarching purpose (s 37M(2)(a)) of facilitating the "just resolution of disputes according to law and as quickly, inexpensively and efficiently as possible" (s 37M(1)(a) and (b)), by, for example, avoiding unduly technical and costly disputes about non-essential issues. That balance involves an assessment of the consequences of making (or not) the proposed orders for each of the parties.
172 In this case, however, there was no or no sufficient assessment of the consequences of making (or not) making the proposed orders on either the Watt or the Shepherd parties. In short, this is the principal reason why we respectfully conclude that the exercise of the discretion, in this case, miscarried.
173 The balancing exercise that needed to be undertaken involved assessing the prejudice to the Shepherd parties in the context of the subject matter, content and complexity of the proceedings should the application for an extension to Friday, 28 May 2021 and the application to amend the statement of cross-claim be refused, on the one hand, and the prejudice to the Watt parties should either or both orders have been made, on the other hand.
174 In assessing where the balance lies, the primary judge was required to keep in mind that the focus of the overarching purpose, the recited objectives and powers conferred in order to "best promote the overarching purpose" (s 37M(3)), are directed to facilitating the just resolution of the issues in the proceeding, according to law quickly, inexpensively and efficiently, of which there are many, rather than a conferral of power for the purpose of, in effect, disciplining a party by imposing final relief in the proceedings because that party has failed to comply with a direction or order of the Court or has failed to discharge the duty imposed under s 37N(1).
175 We do not, by these observations, underestimate the gravity of the concerns held by the primary judge about the conduct of the Shepherd parties that so significantly informed his Honour's exercise of the powers in the way he did, as expressed in his reasons at [22] and [52]-[60].
176 The consequences contemplated by ss 37P(5) and (6) are that if a party fails to comply with a direction given by the Court about the practice and procedure to be followed in any part of a proceeding (see also, s 37P(2)), the discretionary power to make such order as the Court or a judge "thinks appropriate" is engaged. The discretion thus engaged is not at large and must be exercised according to settled principle recognising that the focus of the powers conferred by s 37P (taken in conjunction with the statutory framework created by ss 37M, 37N and 37P) is to identify how the overarching purpose can be furthered in facilitating a just, but quick and cheap, resolution of the real issues in the proceeding having regard to the subject matter, content and complexity of the proceeding, which is not confined to exercising the powers to bring the proceeding and the rights and interests of the parties to effective finality as, in effect, a punitive consequence of a failure to comply with orders and a failure to discharge the duty cast upon a party by s 37N(1) of the FCA Act.
177 We respectfully consider that the difficulty in the present case is that notwithstanding the matters emphasised by the primary judge and the characterisation of the conduct adopted by the primary judge, the steps taken by the Shepherd parties assisted by Mr O'Neill of counsel ultimately resulted (albeit after a period of delay) in a position on 20 May 2021 where the outlines were then eight days away from completion and service, and the amendments were then in final form (emerging as they often do in commercial litigation out of the intensity of the preparation of the outlines by counsel and counsel's focus upon the then state of the pleadings in the proceeding and whether other matters needed to be properly raised, pleaded and agitated).
178 What follows is that, at that point, the primary judge, in our respectful opinion, was required to examine the consequences for the Shepherd parties in refusing them an opportunity to put on their evidence, assert their defences to the various (and many) claims of the Watt parties and to agitate the cross-claims they sought to assert in the context of the rights and interests in controversy in the proceeding. That evaluative process would also have engaged an assessment, in the context of the complexity of the proceeding, of the precise consequences for the Watt parties should the primary judge grant the extension and the amendments. The Shepherd parties and their solicitor had both offered their apology to the Court, trial dates had not been allocated and the Shepherd parties were willing to accept a guillotine order striking out their defence should the 28 May 2021 deadline not be then met.
179 In our respectful opinion, that evaluative balancing exercise, fully taking into account the subject matter of the proceeding and the truly "determinative" consequences for the Shepherd parties, is not properly reflected in his Honour's reasons in explaining the basis for the exercise of the discretion.
180 At [59], the primary judge found that if he were to grant the extension of time to 28 May 2021 and the proposed amendments, there would be further delay in the proceeding being heard, beyond the delay already occasioned by the extension on 4 February 2021 to 2 April 2021. That, in part, would be due to new parties being joined to the cross-claim beyond those already joined (which must be a reference to Riverina, Mr Sergi and Mr Murray) with each new party likely to have their own defence to plead and possibly cross-claims to be made. The primary judge considered that the additional delay would also impact upon the capacity of the parties to recall the relevant events, and the expansion in the cross-claim by the proposed amendments would compound that problem.
181 But the fact remains that at 20 May 2021, the extension sought was for a further eight days and the extension beyond the due date set on 4 February 2021 of 2 April 2021 amounted to an additional period, in all, of about eight weeks. The exercise of the discretion, in taking into account the matters of concern to the primary judge just mentioned, ought also to have taken into account other possible orders such as allocating a trial date later in the year, setting expedited programming orders working back from the trial dates, together with a number of dates allocated for case management hearings in order to supervise the progression of the matter. If trial dates could not be allocated, expedited programming orders might nevertheless have been considered coupled with the allocation of dates for supervisory case management hearings of the proceeding.
182 In other words, we respectfully consider that the concerns about additional delay ought also to have been addressed by mechanisms other than the dismissal of the interlocutory application bringing about practical finality in the proceeding by the orders as made in the exercise of the primary judge's discretion.
183 Accordingly, we are satisfied that the decision of the primary judge is attended by sufficient doubt to warrant its reconsideration on appeal and we are also satisfied that the effective finality in the rights and interests of the parties brought about by the orders gives rise to substantial injustice in the event that leave to appeal is refused.
184 Thus, leave to appeal is to be granted with respect to Proposed Grounds 1 and 4.
185 We now turn to address Proposed Grounds 2, 3, 5 and 6. They can be addressed briefly.
186 As to Proposed Grounds 2, 3 and 5 we accept that no application was made by the Watt parties for the making of orders pursuant to rule 5.23 of the FCR as submitted by the Shepherd parties. It is clear, however, that the primary judge also relied on ss 37P(5) and (6) to make Orders 3 and 4. On the assumption that the primary judge had not erred in making Order 1, contrary to the findings that we have made above, given the extent of the non-compliance by the Shepherd parties with the directions to serve their evidence, we are satisfied that s 37P(5) and (6) provided the primary judge with the power to make Orders 3 and 4 of his own motion independently of any application by the Watt parties.
187 Proposed Grounds 2, 3 and 5 have insufficient prospects of success to justify leave to appeal. Leave to appeal on these grounds is refused.
188 As to Proposed Ground 6, we do not accept that the primary judge failed to afford procedural fairness to the Shepherd parties prior to making Orders 3 and 4 striking out the defence and dismissing the cross-claim.
189 The Shepherd parties were at all relevant times represented by competent and experienced solicitors and counsel.
190 The Shepherd parties were expressly put on notice by the primary judge at the case management hearing on 7 May 2021 that his Honour required an explanation for their failure to comply with earlier orders for the provision of their evidence and that he would need to be persuaded by evidence to allow any further extension of time for the Shepherd parties to serve their evidence. The matter was adjourned at the conclusion of the case management hearing to permit the Shepherd parties to file an interlocutory application and affidavit evidence in support of the relief that they sought. No application was made for further time to prepare the application and supporting evidence.
191 At the hearing of the Interlocutory Application on 20 May 2021, the Shepherd parties moved on the application and read the supporting affidavits of Mr Nurse. The primary judge made clear to counsel for the Shepherd parties that he was considering the entry of default judgment against the Shepherd parties and invited counsel to address him on why he should not to do so. Counsel for the Shepherd parties made submissions in response to the primary judge's invitation. It was not suggested by the Shepherd parties that they had been given insufficient time to make submissions or adduce further evidence to address why the primary judge should not make orders dismissing the defence and cross-claim.
192 Proposed Ground 6 has insufficient prospects of success to justify leave to appeal. Leave to appeal on this ground is refused.