Supreme Court of WA|2009-04-22|Before: Martin CJ

SMITH -v- COMMISSIONERS OF THE RURAL AND INDUSTRIES BANK OF WESTERN AUSTRALIA [2009] WASC 100 (22 April 2009)

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA

CITATION : SMITH -v- COMMISSIONERS OF THE RURAL AND INDUSTRIES BANK OF WESTERN AUSTRALIA [2009] WASC 100

HEARD : 26 AUGUST & 25 NOVEMBER 2008, 14 JANUARY & 12 FEBRUARY 2009, ON THE PAPERS (26 FEBRUARY 2009)

COMMISSIONERS OF THE RURAL AND INDUSTRIES BANK OF WESTERN AUSTRALIA

Practice and procedure - Dismissal for want of prosecution - Forensic strategy employed by the plaintiffs - Over 22 years have elapsed since last substantive step was taken in these proceedings

Doctrines of election and waiver - Proceedings against defendant instituted in 1982 - Proceedings against counsel formerly representing the plaintiffs instituted in 1995 - The 1995 proceedings concerned alleged liability of former counsel for plaintiffs' loss of opportunity to pursue claim against the defendant - Whether plaintiffs elected to pursue 1995 proceedings instead of 1982 proceedings

Practice and procedure - Abuse of process - Principles established in Batistatos' case - Whether continued prosecution of the proceedings amounts to an abuse of process - Whether inconsistency in the claims advanced between the two proceedings constitutes an abuse of process

Practice and procedure - Leave to be heard - Party seeking intervention has indirect interest in the proceedings

Rules of the Supreme Court 1971 (WA), O1 r 4A, O1 r 4B

Defendant's application to dismiss proceedings granted

Defendant : Mr K J Martin QC (26 August 2008), Ms R J Lee (25 November 2008, 14 January & 12 February 2009) and Mr A Chai (26 August 2008)

Intervener : Mr M N Solomon (26 August 2008 & 12 February 2009), Mr S C R Sudweeks (14 January 2009) and Mr S M Lurie (25 November 2008 & 14 January 2009)

Agricultural and Rural Finance Pty Ltd v Gardiner [2008] HCA 57

Batistatos v Roads and Traffic Authority of New South Wales [2006] HCA 27; (2006) 226 CLR 256

Baxter v Obacelo Pty Ltd [2001] HCA 66; (2001) 205 CLR 635

Commonwealth of Australia v Albany Port Authority [2006] WASCA 185

Dye v The Griffin Coalmining Co Pty Ltd (1998) 19 WAR 431

Hancock Family Memorial Foundation Ltd v Fieldhouse [2005] WASCA 93; (2005) 30 WAR 398

Levy v The State of Victoria (1997) 189 CLR 579

Monaveen Pty Ltd v ABB Service Pty Ltd [2007] WASCA 273

Oceanic Sun Line Special Shipping Co Inc v Fay [1988] HCA 32; (1988) 165 CLR 197

Sargent v ASL Developments Ltd [1974] HCA 40; (1974) 131 CLR 634

Seltsam Pty Ltd v Ghaleb [2005] NSWCA 208

Smith v McCusker QC (Unreported, WASC, Library No 970415, 5 September 1997)

Smith v McCusker QC [2000] WASCA 320

Smith v McCusker QC [2001] WASCA 85

Smith v McCusker QC [2003] WASC 150

Smith v McCusker QC [2005] WASCA 226

Smith v McCusker QC [2009] WASC 101

United Australia Ltd v Barclays Bank Ltd [1941] AC 1

Weldon v Neal (1887) 19 QBD 394

1 These proceedings were commenced in 1982. The plaintiffs (the Smiths) claim damages from the defendant (the Bank) for breaches of contract and a duty of care (by giving negligent advice) during 1977 and 1978. The Bank applies for an order dismissing these proceedings for want of prosecution, or alternatively, on the ground that the Smiths have elected to pursue rights that are inconsistent with the rights they assert in these proceedings and are bound by that election. In the further alternative, the Bank seeks an order permanently staying these proceedings because they are an abuse of process as a result of the inordinate delay in their prosecution.

2 These proceedings are related to proceedings which the Smiths commenced in this court in 1995 against their legal advisers, Mr Malcolm McCusker QC and Mr John Gilmour QC (as his Honour then was). I will explain that relationship later in these reasons. The Smiths' claim against Mr Gilmour QC was dismissed many years ago. Their claim against Mr McCusker QC continues. In 2006, Mr McCusker QC issued a notice joining the Bank of Western Australia Ltd as a third party to those proceedings. It is common ground that the corporate entity which is the third party in those proceedings is, for all relevant purposes, to be treated as the same entity as the defendant in these proceedings, as it has assumed all the rights and liabilities of that entity. Because all parties have been content to proceed on that basis, it is unnecessary for me to chart the reasons for that conclusion. As the entity which is the third party in the 1995 proceedings has assumed all the rights and liabilities of the entity which is the defendant in these proceedings, for convenience I will describe both entities as 'the Bank' in these reasons.

3 The Bank also applies for an order dismissing the third party proceedings in the 1995 action. Although I will provide separate reasons for the conclusion to which I have come in relation to that application (see Smith v McCusker QC [2009] WASC 101), the fate of that application depends significantly upon the outcome of the Bank's application to dismiss or permanently stay these proceedings. That is because counsel for Mr McCusker QC concedes, quite properly, that if these proceedings are dismissed or permanently stayed, there is no basis for joining the Bank as a third party to the 1995 proceedings.

4 Because of the relationship between these proceedings and the 1995 proceedings, it is necessary to provide an abbreviated history of both proceedings in order to provide the context for the Bank's applications.

5 These proceedings were commenced by a writ issued on 4 August 1982. The writ was generally endorsed, and claimed damages for breach of contract and negligence. A statement of claim, prepared and signed by Mr B W Rowland QC was filed on 6 August 1982. The Bank entered an appearance on 16 August 1982, and requested further and better particulars of the Smiths' claim on 27 August 1982.

6 On 2 September 1982, the Smiths requested discovery from the Bank. On 10 September 1982, the Bank served its defence, after which, on 14 September 1982, the Smiths again requested discovery from the Bank. An affidavit of discovery sworn by an officer of the Bank was filed on 29 September 1982.

7 On 13 October 1982, the Bank requested discovery from the Smiths. On 11 November 1982, the Bank applied to strike out part of the Smiths' statement of claim. The fate of that application is unclear from the court file, but it seems likely that the application was adjourned sine die at the request of counsel for the defendant. An application in identical terms filed on 4 February 1983 was adjourned sine die on 11 February 1983.

8 On 20 December 1983, the Bank filed a substituted request for further and better particulars of a document described in the request as 'the amended statement of claim'. If there was an amended statement of claim by then, it does not appear to have been filed.

9 On 26 April 1984, the Bank applied for an order that the Smiths provide discovery on affidavit. An order to that effect was made on 4 May 1984. An affidavit of discovery by the Smiths was filed on 24 September 1984.

10 On 17 May 1985, the Smiths sought leave to amend their statement of claim in terms of a minute filed with their application. An order to that effect was made by consent on 27 May 1985, and an amended statement of claim corresponding with the minute was filed on 6 June 1985. This was the last substantive step taken by the Smiths in these proceedings. That statement of claim was prepared and signed by Mr Gilmour, who had by then become the solicitor representing the Smiths.

11 In the statement of claim, the Smiths allege that in or about March 1977, they sought an advance of funds from the manager of the Bank's branch at Ongerup, so as to enable them to acquire a tractor, and by way of overdraft facility in order to enable them to expand their farming operations on land at Borden. The statement of claim further alleges that in the course of negotiations relating to the provision of finance by the Bank, the branch manager, Mr Danks, prepared and provided to the Smiths a cash flow budget which contained representations as to the income likely to be derived from their proposed farming operations. The Smiths further allege that Mr Danks represented that the Bank would provide the funds which they had requested, and that the communications between the parties gave rise to an agreement on certain terms.

12 The Smiths allege that they entered into the agreement for the provision of finance in reliance upon the representations made by the Bank, through its manager Mr Danks. They further allege that they expanded their farming operations in accordance with the terms envisaged in the budget. However, it is alleged that the budget was 'completely unrealistic ... and was incapable of being implemented by the plaintiffs'.

13 In their statement of claim, the Smiths allege that by reason of expanding their farming operations in the manner indicated in the budget provided by the Bank, they incurred debt and suffered loss of income. They further allege that the Bank breached the terms of the agreement by failing to provide the overdraft facility sought. The representations allegedly made by the Bank are also relied upon to sustain the Smiths' claim for damages for breach of a duty of care.

14 In the statement of claim it is further alleged that representations were made by the branch manager of the Bank in September 1978, which became part of the contract between the Smiths and the Bank and upon which they relied. The Smiths allege that those representations were made negligently, and that, insofar as the representations gave rise to terms of the contract between them and the Bank, the Bank breached those terms.

15 On 3 February 1986, the Bank applied to substitute its defence in terms of a minute filed with that application. An order to that effect was made on 14 February 1986, and the substituted defence was filed on 26 February 1986.

16 In its defence, the Bank admits that it entered into a banking relationship with the Smiths on certain terms, and further admits the preparation of a cash flow budget, but asserts that the budget was prepared on the basis of information supplied by the Smiths. The Bank further alleges that the Smiths did not comply with the budget, or with subsequent budgets prepared by the Bank. The Bank alleges that the Smiths' failure to comply with the budgets prepared came about because of the inaccuracy of the information supplied by the Smiths and which were used in those budgets, their poor and unskillful management and conduct of their farming activities, and because they incurred expenditure outside the terms of the budgets prepared.

17 The filing of the defence by the Bank in February 1986 was the last substantive step taken by the Bank in these proceedings before bringing this application for their dismissal. The only documents filed between 1986 and the commencement of the Bank's application to dismiss these proceedings were a notice of change of solicitors filed on behalf of the Smiths in September 1991, and a notice of change of solicitors filed on behalf of the Bank in June 2008.

18 The 1995 proceedings were commenced by a writ filed on 13 March 1995. As I have mentioned, the defendants named in that writ were Mr McCusker QC and Mr Gilmour QC. The writ was not served upon Mr McCusker QC until 29 January 1996.

19 The Smiths have represented themselves at all times in the course of the 1995 proceedings. This is no doubt at least part of the reason why those proceedings have been so protracted and beset with interlocutory disputes.

20 The first statement of claim was filed by the Smiths on 22 February 1996. That statement of claim was subsequently struck out by order of the Acting Master, with leave to serve a substituted statement of claim. Following a number of extensions of time, on 31 January 1997, the Smiths served a minute of their proposed substituted statement of claim. Following further revisions to the proposed pleading, on 15 April 1997, the Smiths applied for leave to amend the writ and to file and serve an amended statement of claim asserting causes of action in defamation, fraud, fraudulent misrepresentation, breach of fiduciary duty and negligence.

21 On 5 September 1997, the Master refused the Smiths' application (Smith v McCusker QC (Unreported, WASC, Library No 970415, 5 September 1997)). He foreshadowed that he was considering entering judgment against the Smiths, and provided them with an opportunity to provide submissions and materials in support of the proposition that their claims were arguable. After the Smiths provided a substantial quantity of material pursuant to the opportunity provided to them, the Master concluded that the action was unlikely to succeed and entered judgment for the defendants.

22 The Smiths appealed against that decision. Although the application to the Master essentially was an application relating to the adequacy of the Smiths' pleading, because of the course taken by the Master, the ambit of the issues ventilated on the appeal expanded somewhat beyond those ordinarily considered on a pleading issue. Directions were made in relation to the appeal which resulted in 16 questions being formulated and answered by the Full Court.

23 The Full Court upheld the Smiths' appeal in part, insofar as it related to their claim against Mr McCusker QC, but dismissed their appeal insofar as it related to their claim against Mr Gilmour QC (Smith v McCusker QC [2000] WASCA 320). The reasons for that decision were provided by Templeman J, with whom Malcolm CJ and Owen J agreed. Templeman J described the nature of the Smiths' claim in the following terms at [8]:

The gravamen of the Smiths' claim in the present action is that Mr John Gilmour QC, who was then their solicitor, and Mr Malcolm James McCusker QC, who was their leading counsel, were negligent in the conduct of their action against the R & I Bank, with the result that legal aid funding was withdrawn, so that the action could not be pursued.

24 The answers given by the Full Court to the questions posed for its determination led to the conclusion that the only cause of action which the Smiths proposed to pursue against Mr McCusker QC which was arguable was their claim in negligence. The reasoning of the Full Court on that topic is conveniently provided by the following summary of conclusions provided by Templeman J at [160]:

I have come to the conclusion, assuming the facts pleaded in the statement of claim to be true, it alleges that Mr McCusker was negligent in the following respects:

(1) he failed to read or to take into account that part of his brief which disclosed that the Smiths did not rely on the 1977 cash flow budget, but on the Bank to provide proper advice as to the implementation of the Smiths' proposal for the expansion of their farming activities;

(2) he therefore placed undue emphasis in his opinion on the difficulties which the Smiths would face in seeking to prove that they had relied on the budget;

(3) he failed to read or to take into account that part of his brief in which Mrs Smith explained that she and Mr Smith had provided only approximate figures to Mr Danks for inclusion in the cash flow budget, on the basis that they would not be held to those figures;

(4) he therefore failed to point out that the allegation in the Bank's defence, that the figures had been provided by the Smiths, while true up to a point, was largely irrelevant to their case;

(5) he failed to recognise an inconsistency in the Smiths' statement of claim against the Bank, which would have been cured by omitting references to reliance on the budget and pleading reliance on the Bank to provide a proper budget;

(6) he failed to familiarise himself with that part of his brief in which it was explained how the actual costs for 1977 had exceeded the budget;

(7) he failed to familiarise himself with that part of his brief in which Mrs Smith described how the application to the Rural Adjustment Authority came to be made, thus explaining why, as he put it in his opinion (par 18) 'there is not a hint ... of any suggestion that the R & I Bank was responsible for [the Smiths'] difficulties ....';

25 It is important to emphasise that those conclusions depended entirely upon the assumption that the facts pleaded in the proposed statement of claim are established at trial. Whether or not they will be established, of course, remains to be seen.

26 One of the questions formulated for the determination of the Full Court was posed in the following terms:

Do the facts and matters set out in par 10 [of the proposed statement of claim filed on 15 April 1997] disclose that the allegedly negligent opinion provided by the first respondent caused the appellants to suffer loss by causing the Legal Aid Commission to terminate the grant of legal aid in reliance on the opinion so that the appellants lost the opportunity of having a trial of their action against the R & I Bank?

It is to be inferred that the Smiths acquiesced in this formulation of the question which they asked the Full Court to determine as part of their appeal from the decision of the Master.

27 The Full Court answered that question in the affirmative. The reasons for that conclusion can be seen from [167] of the reasons of Templeman J:

In all the circumstances, and particularly as it seems the Legal Aid Commission regarded the case as being somewhat borderline, it seems to me to be arguable that if there had not been negligence as alleged, and the opinion had been more favourable, legal aid would not have been terminated. The Smiths therefore arguably lost the opportunity of having their case tried. Consequently, they lost the chance of recovering damages against the R & I Bank. Whether, and to what extent, the loss of that chance meant that they actually suffered financial loss and damage it is not possible to say. Subject to those qualifications, the answer to Question 3 is 'Yes'.

28 It can therefore be seen that the case presented by the Smiths to the Full Court, and upon which the decision of the Full Court was based in part, was a case to the effect that by reason of Mr McCusker QC's negligence, they had lost the opportunity to pursue their claim against the Bank (being the claim initiated by these proceedings), but not precisely in the form of the statement of claim in these proceedings.

29 Following the publication of the reasons of the Full Court, Mr McCusker QC applied to recall some of the orders made by the Full Court on the ground that he had been denied an opportunity to be heard in relation to some matters, and on the further ground that the reasons delivered by the court contained errors. That application was rejected (Smith v McCusker QC [2001] WASCA 85). At [10] of its reasons for rejecting that application, the Full Court reiterated its view of the claim propounded by the Smiths:

In any event, we do not accept the respondent's submission on its merits. As stated in par 167 of the earlier reasons, the Smiths' complaint, in substance, is that they lost the opportunity of pursuing a case against the R & I Bank. That opportunity was denied them because the respondent wrote an unfavourable opinion which, they allege, caused the Legal Aid Commission to terminate their funding.

30 Following the decision of the Full Court, the Smiths revised their claim to accord with what they took to be the consequences of that decision. A revised statement of claim was filed on 24 February 2003. Mr McCusker QC applied for summary judgment which was granted by the Master on 14 August 2003 (Smith v McCusker QC [2003] WASC 150). The Smiths appealed against that decision. For reasons published in November 2005, their appeal was upheld (Smith v McCusker QC [2005] WASCA 226).

31 Wheeler JA referred to the statement of claim filed in February 2003 for the purpose of identifying the essential features of the claim which the Smiths wished to pursue against Mr McCusker QC. In that context at [45] she observed that par 30 of the then statement of claim:

... pleads that the plaintiffs have lost their opportunity to have a trial of their action against the Bank, and as a consequence have lost the damages which they might have recovered in that action.

32 Wheeler JA pointed out a number of the deficiencies in the then statement of claim. She concluded at [54]:

In my view, however, the statement of claim was and still is significantly defective. It fails to identify in any way the 'proper advice' which the Bank should have given. It also fails to plead how the failure to give that advice is linked to any loss suffered by the plaintiffs. As I have already noted, the mere finding by the Full Court that there may have been a viable cause of action which would permit the plaintiffs to replead, says nothing about the precise form which that pleading should take.

33 So, although Wheeler JA concluded that the Master had erred by entering summary judgment, she considered that the Smiths should be required to amend their statement of claim to specifically plead to a number of issues which she identified in her reasons. The other members of the court agreed with that course (see [106]), although their reasons for upholding the appeal were different. In the view of McLure JA, with whom Roberts-Smith JA agreed, the decision of the Full Court in Smith v McCusker QC [2000] WASCA 320 precluded entry of summary judgment in favour of Mr McCusker QC. McLure JA described the position taken by the Full Court on the subject of causation of loss in the following terms at [98]:

The Full Court then went on to consider whether any loss flowed from the alleged negligence. In doing so, the Court confined its consideration to the question whether the alleged negligence caused the appellants to suffer loss by causing the Legal Aid Commission to terminate the grant of legal aid in reliance on the opinion, so that they lost the opportunity of having a trial of their action against the Bank.

34 McLure JA also reiterated [167] of the reasons of Templeman J, which I have set out above at [27].

35 Since the decision of the Court of Appeal, the Smiths have attempted to comply with the directions given by the Court of Appeal with respect to reformulation of their statement of claim. Mr McCusker QC denies that they have done so effectively, and has applied to strike out their statement of claim. As case manager, I took the view that determination of that application on an interlocutory basis would carry the grave risk of further protracting the interlocutory disputes which have bedevilled the resolution of the Smiths' claim. On 16 May 2007 I therefore directed that Mr McCusker QC's application be adjourned to be heard, if he wished, at the outset of the trial, and made various directions which were aimed at taking the matter to trial within a reasonable time-frame. However, my ambition to get the matter to trial within a reasonable time-frame has been thwarted by a number of factors, not least the difficulties created by the fact that the Smiths are representing themselves, and do not reside in Perth.

36 A further version of the statement of claim was filed by the Smiths on 15 August 2006. That pleading commences by advancing a claim against the Bank in rather different terms to the claim enunciated in the statement of claim in these proceedings. Consistently with the manner in which the Smiths' claim was formulated by Templeman J in the Full Court, a rather different emphasis is placed upon the budgets provided by the Bank.

37 The pleading goes on to assert that Mr McCusker QC breached a duty of care owed to the Smiths by reason of his retainer, as a result of which he provided written advice which resulted in the termination of legal aid previously granted to the Smiths. Paragraph 45 of that pleading asserted:

On 9 April, 1994, following review of the Smiths' case in accordance with its said policy, in reliance on the errors in the opinion and in view of the projected costs and the diminishing availability of legal aid money the Legal Aid Commission terminated the Plaintiffs' grant of legal aid, so that the Plaintiffs lost the opportunity of having a trial of their action against the bank, and consequently they lost the damages and interest they might have recovered in that action. The termination was confirmed on 13 August 1994 following review of the files.

The Plaintiffs have lost their opportunity to have a trial of their action against the bank, have lost the opportunity to have such a trial in a reasonable time and have lost their opportunity to have Senior Counsel represent them at such a trial, and as a consequence the plaintiffs have lost the damages they might have recovered in the R & I matter and have lost interest on the said damages and have suffered other losses and ought to recover those damages and other damages.

38 The Smiths filed an amended version of their statement of claim on 8 May 2007. That pleading follows the same general format as its predecessor, although it focuses rather greater emphasis upon the Smiths' reliance upon the Bank's branch manager for advice with respect to their conduct of farming operations. However, the formulation of the claim against Mr McCusker QC is not materially different to its formulation in the pleading of August 2006. The paragraphs in that pleading numbered 45 and 48 and which I have set out above, remain in the pleading of May 2007 (which is the latest version of the statement of claim) as pars 59 and 62 respectively.

39 On 4 September 2006, Mr McCusker QC filed a third party notice joining the Bank as a third party to the 1995 proceedings on the ground that if he was found liable to the Smiths, then he would claim indemnity, alternatively, contribution from the Bank. The basis of that claim was the assertion that if the Bank is found to have been liable in breach of contract, or breach of a duty of care, it caused the loss and damage suffered by the Smiths for which he was also liable. As will be seen from my reasons for upholding the Bank's application to dismiss the third party proceedings, Mr McCusker QC now concedes, properly, that his claim for contribution and indemnity from the Bank had no basis, because the damage suffered by the Smiths, as a consequence of his breach of retainer and/or a duty of care, is both conceptually and practically different to that suffered by the Smiths as a consequence of any breach of contract or duty of care by the Bank (see example, Seltsam Pty Ltd v Ghaleb [2005] NSWCA 208 [34]). However, in response to the Bank's application to dismiss the third party proceedings, Mr McCusker QC has proposed an amendment to the third party notice, deleting any claim for contribution and indemnity from the Bank, and instead asserting that some of the questions and issues which arise in the Smiths' claim against him, are substantially the same as questions and issues which arise in these proceedings between the Smiths and the Bank.

Mr McCusker QC's application to be heard in these proceedings

40 Mr McCusker QC is not a party to these proceedings. However, he has applied to be heard in opposition to the Bank's application to dismiss these proceedings. In support of that application, he asserts that he is a person whose interests would be affected by the dismissal of the Smiths' claim against the Bank for a number of reasons. The first, and most obvious, is that if the Smiths are permitted to pursue their claim against the Bank, and succeed in that claim, then a substantial component of the Smiths' claim against him falls away, being the component which asserts that by reason of his negligence, they lost their opportunity to pursue their claim against the Bank. The second way in which his interests are affected is that if the Smiths' claim against the Bank is dismissed, he accepts that he would have no basis for maintaining his joinder of the Bank as a third party in the 1995 proceedings, with the result that the Bank will cease to be a party to those proceedings, to his forensic disadvantage.

41 The jurisdictional basis for the power of the court to commit intervention by a non party was examined by Brennan CJ in Levy v The State of Victoria (1997) 189 CLR 579. It is an incident of the court's jurisdiction to hear and determine matters falling within its jurisdiction. Where a non party's legal rights and interests will be directly affected by the determination of the court, the non party will have a right to intervene, consistent with basic considerations of procedural fairness. Where the interests of the non party will be indirectly affected by the determination of the court, the court has a discretion to permit intervention if such intervention would be in the interests of justice.

42 In this case, the legal rights and interests of Mr McCusker QC will not be directly affected by the determination of the Bank's application to dismiss these proceedings. The only parties whose rights will be directly affected by that determination are the Smiths and the Bank. However, the interests of Mr McCusker QC will be indirectly affected by that determination in at least the ways I have described. Accordingly, the court has a discretion to permit him to intervene, if it would be in the interests of justice to do so.

43 In this court, the exercise of discretions such as the discretion to permit intervention will be heavily influenced by the considerations enunciated in O 1 r 4A and r 4B, which set out the overriding principles by which the Rules of the Supreme Court 1971 (WA) (the Rules), and the case management powers of the court, are to be construed and administered. In the unusual circumstances of the relationship between these proceedings and the 1995 proceedings, it is in the interests of the efficient disposition of the issues raised by both proceedings for all parties concerned in them to be heard in relation to all aspects of them, because of their substantial practical connection. Further, although the rights and interests of Mr McCusker QC are not directly affected by the determination of the application to dismiss these proceedings, the indirect effect of that determination upon his rights and interests is significant, and of such a character that it is appropriate to exercise a discretion in favour of permitting him to be heard in relation to the Bank's application. Accordingly, I have received, and will consider and give due weight to, the submissions advanced on behalf of Mr McCusker QC in relation to the Bank's application to dismiss, or permanently stay these proceedings.

The documents recently discovered by the Smiths

44 The finalisation of the Bank's application to dismiss these proceedings has been substantially delayed as a result of various extensions of time sought by the Smiths in order to place documentary materials before the court which they consider to be relevant to the Bank's application. These are documents which are said to have been provided by the Bank from its archives to the State Records Office, where they have been inspected and copied by Mrs Smith. A substantial quantity of documents have been annexed to an affidavit of Mrs Smith sworn 18 December 2008.

45 The Smiths assert that the documents annexed to that affidavit are relevant to the Bank's application to dismiss the 1982 proceedings because they show that the discovery given by the Bank in those proceedings was inadequate. This is said to be relevant because it is submitted that if the Bank had given adequate discovery in 1982, the Smiths would have been able to pursue their claim against the Bank with appropriate expedition and vigour. So, it is suggested that the failure of the Smiths to prosecute their action against the Bank is due, at least in part, to the Bank's breach of its obligation to give adequate discovery.

46 Pursuant to directions which I made, the Smiths have filed written submissions addressing the relevance of the various documents annexed to Mrs Smith's affidavit of 18 December 2008. As far as I can tell from those submissions and from my review of the documents themselves, none of the documents refer to the Smiths or their dealings with the Bank. It seems that in only three of the documents is any reference made to the Ongerup branch manager, Mr Danks, or the Ongerup branch. Almost all the documents are concerned with general systems and procedures utilised by the Bank from time to time, and the policies of the Bank from time to time with respect to attracting new business. None of the documents appear to me to be relevant to the issues identified on the pleadings in these proceedings as they were at the time discovery was given by the Bank. Nor do they appear to me to provide any material support for the Smiths' claim against the Bank.

47 There are so many documents annexed to Mrs Smith's affidavit of 18 December 2008 that it is impractical to provide detailed reasons to support my conclusion that none of those documents fell within the Bank's obligation of discovery in 1982. A few examples should suffice to illustrate the process of reasoning I have applied.

48 Annexure EAS2 to Mrs Smith's affidavit is a memo dated 25 August 1982 from the senior manager of Branch Banking Division to each regional manager of the Bank. It deals with the general subject of legal claims against the Bank. It is not concerned with the proceedings which had been commenced by the Smiths. The thrust of the memo is to point out that internal bank correspondence is likely to be discoverable in the event of litigation, and that communications passed through the Bank's solicitors might be withheld from inspection (presumably on the ground of legal professional privilege). While there are obviously reasons for doubting the validity of the contentions advanced in the memo, they are simply irrelevant to the proceedings which the Smiths have brought against the Bank. There is no suggestion that any documents which are discoverable in these proceedings have been withheld from inspection because they were passed through the offices of the Bank's solicitor.

49 Annexure EAS4 to Mrs Smith's affidavit is a pro forma service agreement between the Bank and its employees. It contains a clause empowering an employee to disclose information concerning the business of the Bank to the extent required by law. It is impossible to see how that pro forma agreement has any relevance whatsoever to the matters in issue in these proceedings.

50 Annexure EAS5 to Mrs Smith's affidavit is a copy of a document entitled 'Book of Instructions - Delegated Agencies'. Its relevance is said to be that it shows that there were government agencies in existence which could have assisted the Smiths at the time when they made their initial approach to the Bank. That is said to be relevant because of an alleged failure on the part of the branch manager to refer the Smiths to those agencies. However, an allegation of that kind has never been made in these proceedings. Accordingly, the Bank was under no obligation to discover this document in these proceedings.

51 The document EAS5 is also said to show that a loan on more concessional interest terms would have been available to the Smiths than that which was approved. Again, no allegation of breach of contract or duty in this respect has ever been made in these proceedings, so the document is not discoverable on this basis either.

52 Annexure EAS6 to Mrs Smith's affidavit is one of a series of General Circular Memos issued by the Bank to its branch managers and heads of department from time to time. The particular memo attached to Mrs Smith's affidavit refers to the possible effect which a drought in 1976 might have upon the review, in the latter part of 1976 and early 1977, of advances made to farmers. It is irrelevant to these proceedings.

53 Other documents annexed to Mrs Smith's affidavit concern the general level of delegations to branch managers, the amendment of procedures and instructions given to branch managers from time to time, the encouragement given to branch managers to generate new business by opening particular accounts from time to time and such things as the provision of diary/file note pads to be used by bank officers at interviews with clients. None of these matters have any relevance to the issues arising on the pleadings in this action.

54 The documents attached to Mrs Smith's affidavit of 18 December 2008 are irrelevant to the Bank's application to dismiss these proceedings. I reject the contention that those documents show that the discovery given by the Bank in 1982 was inadequate. I reject the contention that there was any conduct on the part of the Bank which contributed to or justified the Smiths' failure to prosecute their action against the Bank.

55 The principles governing applications to dismiss an action for want of prosecution were reviewed by the Court of Appeal in Hancock Family Memorial Foundation Ltd v Fieldhouse [2005] WASCA 93; (2005) 30 WAR 398. As Pullin JA has pointed out in Monaveen Pty Ltd v ABB Service Pty Ltd [2007] WASCA 273 [66], it may be that those principles will require review in the light of the decision of the High Court in Batistatos v Roads and Traffic Authority of New South Wales [2006] HCA 27; (2006) 226 CLR 256. However, I will deal separately with the Bank's application based on the decision in Batistatos in due course.

56 In Hancock Family Memorial Foundation Ltd v Fieldhouse, the Court of Appeal emphasised that the power to dismiss for want of prosecution called for the exercise of a broad discretion to be exercised so as to serve the ends of justice and which is not to be fettered by any absolute or inflexible rules. While there are five matters often relevantly considered in the exercise of that discretion being (at [100]):

the length of the delay;
the explanation for the delay;
the hardship to the plaintiff if the action is dismissed and the cause of the action left statute-barred;
the prejudice to the defendant if the action is allowed to proceed notwithstanding the delay; and
the conduct of the defendant in the litigation,

the court deprecated the tendency to use those matters as a checklist in which relevant matters will be ticked off one after the other [103]. The court in that case also made it clear that a defendant is under no positive obligation to take steps to force the plaintiff to prosecute a case with diligence [195]. It follows that the submission of the Smiths to the effect that the Banks' failure to apply to dismiss these proceedings for want of prosecution prior to now somehow counts against the Bank must be rejected. The situation would be different if there had been some agreement, express or implied, between the Smiths and the Bank to the effect that the Bank would not insist upon the prosecution of the proceedings with due diligence, or would forego its right to move to dismiss the proceedings for want of prosecution. However, there is no basis for any suggestion that there was such an agreement in this case.

57 In this case, the most significant, indeed overwhelming, factor relevant to dismissal for want of prosecution is the extraordinary and inordinate delay. The Smiths' claim against the Bank depends upon events which occurred in 1977 and 1978. The proceedings were commenced in 1982, more than five years after the first events said to have given rise to a cause of action against the Bank. Although the proceedings were not prosecuted with great alacrity, by 1986, they had reached the point where the pleadings were closed, and both sides had given discovery. Nothing then prevented the Smiths' claim being entered and listed for trial.

58 However, the Smiths have taken no substantive step in these proceedings since 1985, when they amended their statement of claim. By early 1986, the Bank had amended its defence in response to the amended statement of claim. Twenty-three years have now elapsed without the Smiths taking any step in the action. That is delay of a magnitude which is, in my experience, unprecedented.

59 It is significant that in the 1995 proceedings, the Smiths assert that the written opinion of Mr McCusker QC was provided to the Legal Aid Commission in March 1989. They further assert that notwithstanding the provision of that advice, on 5 August 1991 they were given an extension of legal aid to proceed to trial. Their case against Mr McCusker QC depends in significant part upon their assertion that on 9 April 1994, legal aid was withdrawn - in part, they say, because of Mr McCusker QC's opinion. This is more than eight years after the pleadings had closed, and about nine years after the Smiths had taken any substantive step in the 1982 proceedings. It was almost three years after they had been given an extension of legal aid in order to take the matter to trial.

60 Some of the delay following the last substantive step in the proceedings in 1986 is attributable to the delay taken by Mr McCusker QC in providing his written advice (which was more than two years after receipt of the brief for advice). Mr McCusker QC asserts that the reason his advice was delayed was because of delay in the provision of information by the Smiths. Whatever be the true position in relation to the causes of the delay between delivery of the brief and the provision of Mr McCusker QC's opinion, it is clear that there was substantial and inordinate delay between the last substantive steps in the proceedings in 1985/1986, and the termination of legal aid in 1994, and which cannot be attributed to Mr McCusker QC.

61 Since 1994, when legal aid was withdrawn, there has been a further lapse of 15 years in which the Smiths have taken no steps whatever in these proceedings. While it is true that the Smiths have not been legally represented in these proceedings following the withdrawal of legal aid, they are well aware of their capacity to prosecute proceedings without legal representation, as their pursuit of the 1995 proceedings demonstrates.

62 The only inference reasonably open from the sequence of events which I have related above is that, some time after the withdrawal of legal aid in 1994, and the commencement of proceedings against Mr McCusker QC and Mr Gilmour QC in 1995, the Smiths decided to refrain from pursuit of their claims against the Bank, and instead put all their energy and resources into their claims against their legal advisers. That inference emerges unmistakably from the fact that no step whatever has been taken in these proceedings, while a considerable amount of effort and energy has been injected into the 1995 proceedings. The inference is strongly reinforced by the way in which the 1995 proceedings have been formulated - in the argument before the Full Court in 2000 and 2001, and in the argument before the Court of Appeal in 2005, and in statements of claim filed and served in 2006 and 2007. Although reference is made to delay in the prosecution of these proceedings in those statements of claim, the gravamen of the claim advanced and adjudicated upon in both the Full Court and the Court of Appeal is the proposition that the negligence of Mr McCusker QC caused the Smiths to lose the opportunity to pursue their claim against the Bank. It follows that while some small part of the delay prior to 1989 might be found to be attributable to the delay in the provision of the opinion of Mr McCusker QC, there was significant and inordinate delay prior to 1994 which could not be attributed to Mr McCusker QC, and extraordinary delay after 1994 which can only be attributed to the conscious strategy adopted by the Smiths.

63 The Smiths' total inactivity presents a further problem for their prosecution of these proceedings. At least since the decision of the Full Court in 2000 (Smith v McCusker QC [2000] WASCA 320), it has been clear that the statement of claim in these proceedings does not accurately reflect the case which they wished to run against the Bank. That conclusion was a significant component of the reasoning which led to the success of their appeal. The 1995 proceedings have been reformulated, so that the claim against the Bank, which the Smiths assert they have lost the opportunity of pursuing by reason of the negligence of Mr McCusker QC, is expressed in rather different terms to the manner in which their claim is formulated in these proceedings. The Smiths have foreshadowed an application to amend their statement of claim in these proceedings, in order to bring their claim against the Bank into line with that formulated in the 1995 proceedings, if the Bank's application to dismiss these proceedings is dismissed. However, as the limitation period for the Smiths' claim against the Bank expired long ago - 25 years ago in fact (Limitation Act 1935 (WA), s 38), there must be a question as to whether any such application to amend could be allowed consistently with the rule in Weldon v Neal (1887) 19 QBD 394 (see Dye v The Griffin Coalmining Co Pty Ltd (1998) 19 WAR 431). It would also be likely that questions of prejudice to the Bank would arise from such a belated application to amend the claim.

64 The Bank does not rely upon any specific prejudice said to flow from the extraordinary lapse of time, such as the unavailability of witnesses or the lack of recall of a particular witness. However, the presumptive prejudice suffered by the Bank if called upon to litigate events which occurred 32 years ago is obvious and substantial. The allegations of negligence give rise to detailed factual issues concerning the cost of farming, and the revenues likely to be derived from farming 30 years ago. It is inevitable that access to information on those issues will be substantially diminished by the lapse of such a lengthy period of time. As I have observed, it cannot be suggested that the Bank is, in any sense, responsible for the prejudice it would suffer if this litigation were allowed to continue.

65 I do not leave out of account the hardship which the Smiths might suffer if their action against the Bank is dismissed, because, of course, any claim by them against the Bank is long since statute-barred. However, the significance of that factor in this case must be diminished by the fact that the dismissal of these proceedings is the consequence of the strategy which they have adopted since at least 1995, when they decided to pursue claims against their legal advisers on the basis that they had lost the opportunity to pursue their claims against the Bank. Through this means, they are endeavouring to recoup damages which would include the value of their lost opportunity to pursue their claim against the Bank.

66 In summary, this is a case in which there has been an extraordinary period of delay, which for a substantial period is unexplained, and which for an even greater period is explained by the forensic strategy adopted by the Smiths. The hardship suffered by the Smiths in the event of dismissal of their claim against the Bank is, to a significant extent, the consequence of that strategy, and may be mitigated if their claim against Mr McCusker QC succeeds. The presumptive prejudice to the Bank by reason of the extraordinary delay is substantial, and could not be said to be in any way attributable to the conduct of the Bank. In addition, there is a significant doubt as to the capacity of the Smiths to amend their claim in these proceedings so as to bring it into line with the claim against the Bank which they assert they have lost the opportunity of pursuing in the 1995 proceedings. When the factors relevant to dismissal for want of prosecution particular to the circumstances of this case are weighed in the balance, they point strongly and inexorably to the conclusion that these proceedings must be dismissed.

67 The Bank relies in the alternative upon the principles enunciated by the High Court in Batistatos. That case establishes that delay in the prosecution of proceedings is capable of giving rise to an abuse of the processes of the court which will result in the court ordering a permanent stay of the proceedings. Such an abuse can occur without it being necessary for the party seeking the stay to show misconduct of some kind by the party responsible for prosecuting the proceedings.

68 In Batistatos, the basis for the application for the permanent stay, and for the ultimate decision of the High Court, was the proposition that by reason of the effluxion of time, a fair trial was not possible. In that case the plaintiff, who had suffered from an intellectual disability from the age of 5 years, was involved in a motor vehicle accident at the age of 33 years, and, as a result of which, he was left a quadriplegic, with the consequence that because of his intellectual disability, the limitation period did not run against him. In the result, proceedings claiming damages for personal injury were commenced 29 years after the accident, in late 1994.

69 The defendant's proposition that a fair trial was not possible was supported by its inability to obtain any police records of investigations relating to the accident, the inability to locate hospital or medical records concerning the plaintiff's treatment before 1980, the lack of most of the documents relating to the design and construction of the street in which the accident was said to have occurred, the difficulty of locating any witness who had been involved in road maintenance at or about the relevant time at the relevant place, the inability to locate any documentary records which would identify the insurer who would have been on risk at the relevant time, and physical changes in the configuration of the road on which the accident occurred, making it impossible to identify its particular configuration at the time of the accident.

70 These were powerful considerations supporting the conclusion that a fair trial of the plaintiff's claim would not have been possible as a consequence of the lapse of time. They go well beyond the presumptive prejudice arising from significant delay and to which I have referred in this case. As I have observed, in this case the Bank does not support its application by pointing to specific prejudice of any particular kind. To the contrary, counsel for the Bank advised the court that the Bank manager, Mr Danks, continues to be available to give evidence and has a good recollection of the events in question (ts 218, 26 August 2008). Accordingly, in this case, while it is undoubtedly the case that the Bank would suffer significant prejudice by reason of the delay in prosecution of these proceedings, it could not be concluded, on the limited materials put before me, that a fair trial of the Smiths' claim against the Bank is impossible because of the lapse of time. It follows that these proceedings cannot be characterised as an abuse of process simply because of the delay in their prosecution, and the Bank's argument for a permanent stay, based upon the principles enunciated in Batistatos should be rejected.

71 The uncertainty of the language used in cases concerning the doctrines of election and waiver has been the subject of recent commentary in the High Court (see Agricultural and Rural Finance Pty Ltd v Gardiner [2008] HCA 57 [56]). That case also points up the distinction between the doctrine of election at common law, and the equitable doctrine. The equitable doctrine has no potential application to this case. Further, the common law doctrine may be subdivided into cases involving election between inconsistent rights on the one hand, and election between inconsistent remedies on the other. In the latter case, an election is not made until the entry of judgment (see Agricultural and Rural Finance Pty Ltd v Gardiner [59]; United Australia Ltd v Barclays Bank Ltd [1941] AC 1; Baxter v Obacelo Pty Ltd [2001] HCA 66; (2001) 205 CLR 635). Obviously that point has not been reached in these proceedings, so the only aspect of the doctrine of election which can apply is that which concerns election between inconsistent rights.

72 In Sargent v ASL Developments Ltd [1974] HCA 40; (1974) 131 CLR 634, Stephen J observed (at 641):

The doctrine of election as between two inconsistent legal rights is well established but certain of its features are not without their obscurities. The doctrine only applies if the rights are inconsistent the one with the other and it is this concurrent existence of inconsistent sets of rights which explains the doctrine; because they are inconsistent neither one may be enjoyed without the extension of the other and that extension confers upon the elector the benefit of enjoying the other, a benefit denied to him so long as both remained in existence.

73 As this passage emphasises, the doctrine only applies if the rights are inconsistent, in the sense that one right cannot co-exist with the other. A classic illustration of the application of the doctrine is found in contract law, in the case of a party confronted with a repudiatory breach by the other party to the contract. The innocent party may either treat the repudiatory breach as bringing the contract to an end, or may insist upon due performance of the contract, but may not do both. That is because an insistence upon performance of the contract is inconsistent with the contract having come to an end, and vice versa.

74 On the other hand, if the rights are alternative in the sense that one can co-exist with the other - perhaps up until the point of judgment, both rights can be maintained and no question of election arises (at least until judgment).

75 Accordingly, in order for the doctrine to apply to this case, it must be concluded that the rights asserted by the Smiths in the 1995 proceedings are inconsistent with the rights asserted against the Bank in these proceedings.

76 In one sense the rights asserted by the Smiths in both proceedings are consistent in the sense that both proceedings depend upon the Smiths having had a good cause of action against the Bank. However, in another sense, the rights asserted are inconsistent. That is because these proceedings assert that cause of action, whereas the 1995 proceedings include the assertion that the Smiths have lost their opportunity to pursue their claim against the Bank. If any of the rights asserted by the Smiths in the 1995 proceedings are dependent upon their loss of their cause of action against the Bank, by asserting those rights, they have elected rights which are inconsistent with the continued existence of the cause of action against the Bank.

77 In the appeals brought by the Smiths in the 1995 proceedings, they have argued that the essence of their claim against Mr McCusker QC is that, by reason of his negligence, they have lost the opportunity to pursue their claims against the Bank. Although their subsequently pleaded case also refers to, and relies upon, other consequences of the alleged negligence, including delay in the prosecution of their claim against the Bank, and their incapacity to pursue their claim against the Bank with the assistance of Senior Counsel, the complete loss of the opportunity to pursue their claim against the Bank has been alleged in each pleading filed subsequent to the decision of the Full Court in 2000. To the extent that the Smiths' claim against Mr McCusker QC is brought in tort, damage is an essential element of the cause of action which they assert. The most significant component of the damage which they claim to have suffered, and that which was relied upon by both the Full Court and the Court of Appeal in the course of upholding the appeals by the Smiths against the dismissal of their claims against Mr McCusker QC, was the alleged loss of the opportunity to pursue their claims against the Bank. To that extent, the rights which they assert against Mr McCusker QC in the 1995 proceedings are inconsistent with their continued enjoyment of a right to pursue their claims against the Bank. I therefore conclude that the conduct of the Smiths in their pursuit of the 1995 proceedings, constitutes an election by them to discontinue their pursuit of their claim against the Bank.

78 It also seems to me that the commencement and conduct of the 1995 proceedings by the Smiths leads to the conclusion that these proceedings are an abuse of process, although not because of delay preventing a fair trial of those proceedings. Rather, I would categorise any prosecution of these proceedings by the Smiths as an abuse of process because they have commenced and prosecuted other proceedings in which they assert that they have lost the opportunity of pursuing these proceedings. In the face of that assertion, continued prosecution of these proceedings would, in my view, constitute an abuse of the processes of the court. The term 'abuse of process' has been variously described as proceedings that are 'seriously and unfairly burdensome, prejudicial or damaging' and 'productive of serious and unjustified trouble and harassment' (Oceanic Sun Line Special Shipping Co Inc v Fay [1988] HCA 32; (1988) 165 CLR 197, 247, see also Commonwealth of Australia v Albany Port Authority [2006] WASCA 185 [21]). However, Gaudron & Gummow JJ made it clear in R v Carroll [2002] HCA 55; (2002) 213 CLR 635, [73] that:

The circumstances in which proceedings will constitute an abuse of process cannot be exhaustively defined and, in some cases, minds may differ as to whether they do constitute an abuse. (emphasis added)

Accordingly, although in this case I do not consider that the delay in prosecuting these proceedings leads of itself to the conclusion that they are an abuse of process, the fundamental inconsistency between the claims advanced in the 1995 proceedings, and the pursuit of these proceedings is such that I would characterise any further step by the plaintiff in these proceedings as an abuse of process. If I had not concluded that these proceedings should be dismissed for want of prosecution in any event, I would have granted a permanent stay of these proceedings on the basis that their pursuit would be an abuse of process.

79 For these reasons I have concluded that the Bank's application to dismiss the 1982 proceedings should be granted. I have concluded that the proceedings should be dismissed for want of prosecution, and that the Smiths have elected to pursue rights against Mr McCusker QC which are inconsistent with the continued assertion of a claim against the Bank. I would also characterise these proceedings as an abuse of process, having regard to the commencement and conduct of the 1995 proceedings, and had I not concluded that these proceedings should be dismissed, I would have granted a permanent stay on that basis.

SMITH -v- COMMISSIONERS OF THE RURAL AND INDUSTRIES BANK OF WESTERN AUSTRALIA [2009] WASC 100 (22 April 2009)

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Judgment (130 paragraphs)

SMITH -v- COMMISSIONERS OF THE RURAL AND INDUSTRIES BANK OF WESTERN AUSTRALIA [2009] WASC 100 (22 April 2009)

Cases Cited (8)