KESTRAL HOLDINGS PTY LTD (in liq) (ACN 009 068 795)

Practice and procedure - Appeal from Master - Application to set aside judgment - Judgment result of springing order - Applicant not present or represented when order made - Practice for service of springing order in such circumstances

Aura Herbert D Stolle GMBH and Ors v Turbo Chairs International Pty Ltd [1999] WASC 260

Australian Coal & Shale Employees' Federation & Anor v Commonwealth & Ors [1953] HCA 25; (1953) 94 CLR 621

Grigoriou v Nitsos, unreported; FCt of WA [1999] WASCA 42

Hawter and Reid v Stevens and Ors, unreported; SCt of WA (Master Sanderson); Library No 970645; 25 November 1997

Skahill and Thoms v City of Wanneroo, unreported; SCt of WA (Master Bredmeyer); Library No 970410; 15 August 1997

1 JUDGMENT OF THE COURT: The applicants seek leave to appeal against the dismissal by a Master of an appeal against a springing order made by a Registrar. Failure to comply with the order resulted in the entry of judgment in default.

2 These proceedings arise out of a dispute over the construction of a two storey house for the applicants at Quinns Rock. They complain that the building is structurally unsound, largely because the specifications were designed for a single storey, rather than a two storey, building. On 30 May 1997 they brought this action against the builder, which is a private company, and joined its two directors as well as the local authority. The builder went into liquidation and the applicants discontinued their claim against it although it is still named as a party in the heading of this action. Their claim against the directors is based on the provisions of the Trade Practices Act 1974 (Cth) and their claim against the local authority is for negligence in approving the plans for construction of the house. The two directors and the local authority are the respondents to the present application.

3 In managing the case the Registrar has given a series of directions and has made orders relating to expert evidence and other matters. The applicants failed to comply with an order that they provide expert evidence by 28 May 1999. They provided it only after 15 June 1999 when the Registrar made a springing order requiring them to do so. On 31 August 1999 there was a meeting of experts in the course of which it was agreed that the applicants' expert would supply certain further information to the respondents' expert. At a case evaluation conference on 23 September 1999, because the information had not been provided, the Registrar ordered that it be provided by 30 September 1999. It was not provided even then. On 4 November 1999, at a further case evaluation conference, the Registrar made the following order:

"Unless by 18 November 1999 the plaintiffs provide to the defendants the further information and calculations agreed to be exchanged at the meeting of experts on 31 August 1999 the Statement of Claim be struck out and judgment entered for the defendants with costs."

4 The information was not provided until 7 December 1999. Meanwhile, on 23 November 1999 judgment had been entered for the respondents. On the following day the applicants filed notice of appeal to a Master, seeking to have the Registrar's order and the judgment set aside. There was some controversy whether it was proper for the plaintiffs to proceed by way of appeal or whether they were seeking an extension of time within which to comply with the springing order. The Master seems to have been of the view that the proper course was to apply under O 3 r 5(2) for an extension of time: see FAI General Insurance Co Ltd v Southern Cross Exploration NL [1988] HCA 13; (1988) 165 CLR 268 at 283 - 84. Nothing turned on the controversy for the purpose of the Master disposing of the application. However, it is something which we will cover in the orders which we propose. On 18 February 2000 the Master dismissed the appeal.

5 When the springing order was made on 4 November 1999 neither the applicants nor their counsel attended before the Registrar. In the course of his reasons for dismissing the appeal the Master said:

"The reasons for the non-attendance are set out in the affidavit of Peter John Whyte sworn 28 January 2000 and filed in support of this application. Mr Whyte is the plaintiffs' solicitor. He says that on 19 October 1999 he received notice of the relisted case evaluation conference. The notice specified that the conference was listed at 4.06 pm. Mr Whyte says that he noted the time in his diary and advised Mr T J Stephenson of counsel, who was briefed to appear on behalf of the plaintiffs, of the date and time of the conference. On 20 or 21 October 1999 Mr Whyte received an amended notice of relisting of the case evaluation conference. The time of the listing was changed from 4.06 pm to 10.00 am. The day of the listing remained the same. It would appear that by an administrative oversight, Mr Stephenson was not advised of the amended time of the conference. Accordingly, counsel attended at 4.06 pm to be informed that the matter had been disposed of at 10.00 am. Counsel immediately advised Mr Whyte of what had happened. Counsel also sent a rather terse letter to the Court seeking advice as to what orders had been made at the conference. This was, with respect, inappropriate. It was for counsel, or his solicitor, to ascertain what orders had been made at the conference. Counsel had no basis for demanding an explanation from the Court.

It is worth pausing at this point to note that a prudent solicitor would have been concerned about orders made at the case evaluation conference. The plaintiffs were in default of orders made on 23 September 1999 and no explanation for that default had been provided. It was almost six months since orders had first been made with respect to expert evidence and the position was still unresolved. Springing orders had been made in the past and there was every reason to believe that, without an explanation for the plaintiffs' failure to provide the required information, one could have been made at the case evaluation conference. Everything pointed to the plaintiffs' solicitor ascertaining, as a matter of urgency, what occurred at the case management conference.

In effect, the plaintiffs' solicitor did nothing. He anticipated that, in due course, a copy of the orders would be forwarded to him. He says he attended the court on 11, 12, 17 and 22 November 1999 but on none of these occasions did he request to see the file, as he was entitled to do, so as to ascertain what orders had been made. Furthermore, on 16 November 1999 the second defendant's solicitor wrote to the plaintiffs' solicitor referring to the orders made at the case evaluation conference and asking for the information from the expert to be provided. On 18 November the second defendant's solicitor telephoned the plaintiffs' solicitors office and attempted to speak to Mr Whyte. Mr Whyte was unavailable and a message was left asking for a call back urgently. No response was received to this telephone call."

"In the circumstances, the inaction of the plaintiffs' solicitor was inexcusable. The springing order made by the Registrar was, in my respectful view, entirely appropriate. During the course of his submissions counsel for the plaintiffs suggested that this was not a case where there had been contumelious disregard of a court order. Rather, he suggested, it was a case of inadvertence. In my view that submission misses the point. The parties must comply with the orders of a Case Management Registrar. If they do not do so they act at their peril. This is not blind adherence to case management as an end in itself. The system of case management is designed to ensure that orders are made which fit the needs of each particular case. But once those orders are made the case moves forward to trial or ultimate resolution. The parties are not to dictate the pace which the case moves at their whim.

The case evaluation conference held on 4 November 1999 was the fifteenth case management conference held on this file. It is the case that, from time to time, a party may not be able to comply with case management directions or may be in default. Steps should be taken to remedy the non-compliance or the default and to re-programme the case. It is not the function of Case Management Registrars to nursemaid a case from its inception to its resolution battling the indifference of solicitors all the while. Case management will work effectively if these principles are borne in mind. It will break down entirely if the burden for progressing the action is borne by the Case Management Registrars and not, as it should be, by the solicitors for the parties."

7 The Master acknowledged that his decision would have profound consequences for the applicants. He observed that, as the time limit for bringing proceedings under the Trade Practices Act had long since expired, they would be unable to proceed against the directors of the company and that, if they wished to commence fresh proceedings against the local authority they might well have difficulty in obtaining the necessary leave under s 47A of the Limitation Act 1935. The Master also took into account that there was no evidence tending to show that the applicants themselves were in any way complicit in the delay which led to the springing order.

8 On the hearing of the appeal before us there were three main grounds upon which counsel for the applicants relied. He submitted that the Master failed to:

(1) attach appropriate weight to the fact that it was the fault of their solicitors and not of the applicants themselves which allowed the order to spring;

(2) recognise that in the circumstances the springing order should have been expressed to operate from the date of service and not independently of service; and

(3) undertake any appropriate balancing of the prejudice to the respective parties flowing from his decision.

9 As to the first ground, clearly the evidence showed that non-compliance with the springing order was due to fault on the part of the applicants' former solicitor, Mr Peter Whyte, in that, having failed to arrange for representation at the conference on 4 November 1999, he failed to obtain a copy of the order made. There is no evidence that the applicants were aware of the default in providing further information from their experts, or of the listing of the case evaluation conference, or of the absence of representation on their behalf at the conference, or of the making of the springing order. There is no reason why they should have known or even should have enquired about such matters.

10 Of course, a solicitor acting in his professional capacity is the agent of the client and, as a consequence, the solicitor's neglect or other fault will often be visited upon the client. Nevertheless, the absence of fault on the part of the client always will be relevant, and might be a significant factor, when the justice of the case is an important consideration: see Esther Investments Pty Ltd v Markalinga Pty Ltd (1989) 2 WAR 196 at 199. The Master's reasons for decision go into great detail as to the inaction of the solicitor. He also says: "... there is no evidence that the plaintiffs themselves, as opposed to their solicitor, were in any way complicit in the delay which led to the springing order". In our opinion, it is not apparent, either from the reasons which he gave for his decision or from the decision itself, that the Master failed to give adequate weight to the absence of fault on the part of the applicants.

11 In our view, the first ground of appeal has not been made out.

12 In support of his second ground counsel for the applicants referred to Hitachi Sales (UK) Ltd v Mitsui OSK Lines Ltd [1986] 2 Lloyd's Rep 574 at 578 where, in dealing with an "unless" order made under O 42 r 2 of the English rules, O'Connor LJ said:

"When one looks at O.42 r 2, par. 1, it is obvious that the first requirement is that the order must state the period within which the order is to be obeyed starting with the date of service. One can see that the object of that is that an 'unless' order enabling the party obtaining it to sign a judgment in default is so grave a matter that one would expect the rules to provide that the time should not run until the party against whom it was made had been made aware of the order."

13 The order under consideration in that case provided that: "Unless the defendants do serve within 14 days [further and better particulars] the defence be struck out ...". For present purposes, the English O 42 r 2 is in substantially similar terms to the equivalent rule in this jurisdiction, namely O 42 r 3. Our rule, relevantly, provides: "Every judgment or order requiring any person to do an act ... shall state the time, or the time after service of the judgment or order, within which the act is to be done". The problem with the order in the Hitachi case was that it did not specify the date or time from which the 14 day period would commence to run. The Court held that the order was irregular and so too was the judgment obtained as a consequence of it. Accordingly, the judgment had to be set aside ex debito justitiae. There is an obvious point of difference between Hitachi and the facts of this case. It is not mandatory under our rules for a springing order to be conditioned on the expiry of a certain period of time after service of the order. A springing order that requires compliance by a specified date is not irregular so as to cause a judgment obtained as a result to be set aside ex debito justitiae.

14 However, the Hitachi decision is important because it emphasises the gravity of the consequences of a springing order. The question arises whether, notwithstanding that the order was technically regular, there is a practice affecting reliance on a springing order as the means by which a judgment may be obtained. As Master Adams commented in Marzo v Marzo, unreported; SCt of WA (Master Adams); Library No 950110; 14 March 1995, there is no rule that unrepresented persons should have orders of this kind served upon them when they are present in court and hear the order pronounced. But Master Adams went on to say: "It is invariably the practice that orders, particularly springing orders, should not be made where a party is not present unless the order is framed so that the time for compliance runs from the date of service". What has happened in this particular case emphasises the wisdom of the practice to which Master Adams has referred. Actual, and not merely constructive, knowledge of such an order is necessary on the part of the person against whom it is made. Subject to what we say later, a party will have "actual knowledge" of the order if it is served at the address for service.

15 It is clear that the solicitor became aware on the afternoon of 4 November 1999 that some orders had been made in the absence of any representative of the applicants. He made no effort to ascertain what those orders were. The solicitor has deposed to the fact that he was not aware of the terms of the orders or that they contained a springing order until he collected from his pigeon hole in Central Office the letter dated 4 November 1999 from the Registrar. In the letter, the Registrar sought an explanation for the non-attendance at the case evaluation conference and enclosed a copy of the orders that had been made. It is not clear what actually happened because there is a copy of the letter in evidence (attachment "PJW11 to the affidavit of Whyte sworn 28 January 2000) which carries the notation "posted, 4/11/99". This suggests that the letter was posted by a Court officer on 4 November 1999. If that is so, then under O 72 r 6 the letter is deemed to have been served at the time when it would have been delivered in the ordinary course of post. Nothing turns on it because, as we have said, the practice to which Master Adams referred requires actual, rather than constructive, notice. It is difficult to see how deemed service under the rule could constitute more than constructive notice.

16 There is nothing in the Court record to indicate that either Hitachi or Marzo were cited to the Master or that the existence or extent of the practice were raised with him. We believe they should have been. To that extent, the second ground of appeal has been made out.

17 There is not a great deal of detail in the reasons of Master Adams in Marzo concerning the practice relating to springing orders. We believe that the Court should take this opportunity to give some guidance. At pages 6 and 7 of his reasons in this case the Master commented on difficulties which non-compliance with orders creates for case management. He also commented on the obligation of solicitors to facilitate the reasonable progress of the action. We respectfully endorse those comments. Devising and applying appropriate sanctions for non-compliance is one of the major problems which case managers face. An innocent party is entitled to expect that the Court will act to support the integrity of its processes where another party is in default. On the other hand, case management is a means to an end and not an end in itself. All processes and sanctions must be carried out and imposed in a way that will facilitate the achievement of justice.

18 Some case managers may regard springing orders as a legitimate and effective sanction to assist in achieving the proper ends of justice. Each case has to be assessed on its facts and in accordance with its merits. Accordingly, we would respectfully question whether the practice to which Master Adams referred should be an "invariable" one. In our view the following principles should guide the practice relating to springing orders. All of what follows is, of course, subject to any orders that the case manager may make to suit the circumstances of a particular case.

1. If the party against whom the order is made is present in Court, personally or by solicitor or counsel, when the order is made, the party can be taken to have had actual knowledge of the making of the order and of its terms and no special steps need be taken by a party seeking to enforce the order. In those circumstances there is no objection to the order being framed so that compliance is required by a specified date.

2. If the party against whom the order is made is not present in Court, personally or by solicitor or counsel, when the order is made, the order ought normally to be framed so that the party is required to comply within a specified number of days after the order has been served on the party.

3. In a case to which the preceding paragraph applies, the onus is on the party seeking to rely on the order to serve the order on the party against whom it is made. It should not be left to the Court to bring the orders to the notice of the defaulting party. Where the defaulting party is represented by solicitors and has an address for service that complies with the Rules, service at the address for service in accordance with O 72 r 5 normally would be sufficient. Where the litigant is unrepresented, actual personal service normally would be required.

19 Under the system which the Registrars currently use, orders made at case management conferences are usually engrossed, signed and given to the parties at the conclusion of the conference. If a party is present and receives a copy of the orders, there can be no question that it has actual notice. Where a party is not present, it is the practice of the Registrars to write to the defaulting party seeking an explanation for the non-attendance and forwarding to it a copy of the orders. That was done in this case. However, that is no substitute for the party in whose favour the order was made itself taking all appropriate steps (including service, if necessary) so as to be in a position to enter judgment if there is non-compliance with the order.

20 As to the third ground, it is apparent that the Master took into account the prejudice to the applicants which would result from his decision. There was no evidence before the Master of prejudice to be experienced by the respondents. There has been compliance, albeit belated, with the order of the Registrar and, apart from the comparatively short delay between the time when the order should have been performed and when it was performed, the only significant prejudice suffered by the respondents could have been remedied by an appropriate order for costs. In view of the fact that there was no evidence of prejudice flowing to the respondents, it is hardly surprising that the Master did not make express reference to it. But this does not mean that he failed to carry out the balancing act that an exercise of this nature obviously requires. Reading the reasons for decision as a whole, we are not persuaded that the third ground raises an appealable error.

21 In our view the fact that the existence and extent of the practice relating to the service of springing orders was not alluded to in argument and did not find its way into the Master's reasons constitutes an appealable error. Grave consequences will flow to the applicants from the entry of judgment. The applicants will be deprived of the chance of having their grievance litigated, certainly against the second and third respondents and perhaps against the fourth respondent. We are not in a position to assess the merits of the applicants' case against the respondents but the prospect that they may not be able to prosecute the action at all is, of itself, to their prejudice. Accordingly, we are of the opinion that substantial injustice may be done if the decision is left unreversed.

22 It is true that the applicants may have some recourse against the solicitor. However, the applicants' damages in such a case would be based on the loss of the chance of succeeding in their claim against the respondents: Instant Nominees Pty Ltd v Redman [1987] WAR 218 at 226. This will not necessarily equate to the damages that they could obtain, were they successful, against the respondents. On the other hand, there is no evidence of prejudice flowing to the respondents other than for the continuation of the litigation.

23 We will hear counsel as to the orders that should be made but suggest that the following may be appropriate:

4. The time for compliance with the order of the Registrar made 4 November 1999 be extended until 7 December 1999.

5. The applicants pay the costs of and incidental to the entry of judgment, the appeal to the Master and of this application and appeal, such costs to be taxed on an indemnity basis.

6. The applicants' former solicitor be called upon to show cause why he should not personally pay those costs.