Streamlux Pty Ltd v Land [1999] VSC 16

Supreme Court of Victoria|1999-02-12|Before: BEACH, J.

The plaintiff Streamlux Pty. Ltd. is a company controlled by Walter Land. The second named defendant C.L. Plastics and Consultants Pty. Ltd. is a company controlled by the first named defendant Charles Land. Charles Land is the son of Walter Land. For some years now there has been bad blood between Walter Land and his son. This is not the first occasion upon which there has been litigation between the Lands.

On 22 December 1994 the plaintiff filed the present proceeding in the Court. On 1 July 1997 the proceeding was deemed to stand dismissed by virtue of the operation of Rule 34.05 of the Supreme Court Rules.

I turn then to the background to the proceeding and the present applications.

Between about 1967 and December 1992 Charles Land was employed by the plaintiff. The plaintiff carries on business (inter alia) as the manufacturer of plastic components. Land was also a shareholder of the plaintiff and by December 1992 was its managing director. On or about 18 December 1992 Land resigned as the managing director of the plaintiff and terminated his employment with the plaintiff. Since that time Charles Land has continued to act as a consultant to the plastics industry through his own company, the second named defendant. The second named defendant is in direct competition with the plaintiff, the plaintiff now being controlled by Charles Land's father Walter Land.

Following Charles Land's departure from the plaintiff there was a dispute between him and his father concerning Charles Land's entitlement to superannuation, his entitlement to payments in respect of annual leave and long service leave, and his conduct whilst employed by the plaintiff, in particular whether he has misappropriated funds of the plaintiff and/or had been guilty of fraud whilst in its employ.

In late December 1992 an agreement was arrived at between Charles Land and his father concerning the dispute. The substance of the agreement was that Charles Land would receive $250,000 in respect of his superannuation entitlement and $25,136.52 in respect of his annual leave and long service entitlements. However, it was agreed that $50,000 of Charles Land's superannuation entitlement would be retained by Charles Land's solicitors in their trust account and would not be paid to him until the plaintiff was satisfied that he had not misappropriated funds of the plaintiff or been otherwise guilty of fraud whilst in its employ.

On 5 February 1993 the plaintiff's solicitors wrote to Charles Land's solicitors and authorised them to release the sum of $50,000 to Land.

On 22 December the plaintiff's solicitors instituted the present proceeding against Charles Land and his company.

By its statement of claim the plaintiff alleges that between 6 March 1989 and 18 December 1992 Charles Land:

(b) used Streamlux's purchase orders for goods which were paid for by Streamlux and sold by Land for his personal gain;

(c) opened a personal credit account in his own name and charged Streamlux for personal items and household expenses incurred on his personal behalf and not on behalf of Streamlux;

(d) used Streamlux's funds to pay for his wife's and his own doctor's bills and kept the Medicare rebate;

(e) obtained a personal telecard in the name of his wife;

(f) gave his wife permission to obtain expenses (petrol and repairs) in the name of Streamlux;

(g) used Streamlux for household insurances, entertainment expenses incurred in a personal capacity, medical, overseas travel, hotels and airfares incurred in a personal capacity together with Visa and American Express account incurred in a personal capacity;

(h) paid private school fees without the authority of Streamlux and falsified its books of accounts in respect thereof;

(i) sold quantities of Streamlux's products, plant and equipment, the proceeds of which were not paid to the plaintiff;

(j) wrote out cheques on the account of the plaintiff for his own personal gain;

(k) used the company's petty cash without accounting for same to the plaintiff;

(l) sub-contracted the plaintiff's products receiving secret commission known as 'the charlie fund';

(m) removed from the plaintiff's possession, boxes of samples;

(n) used the plaintiff's tool room to manufacture or repair tooling for the second defendant."

The plaintiff further alleges that when Charles Land left its employ he took with him confidential information of the plaintiff and that he has used that confidential information for the benefit of himself and his company to the detriment of the plaintiff; further that he took certain equipment belonging to the plaintiff or sold it to third parties.

There are other allegations made against the defendants by the plaintiff in its statement of claim. It is unnecessary to recite them in my reasons for judgment.

On 10 March 1995 the defendants filed and delivered their defence to the plaintiff's statement of claim. Between that date and March 1996 various interlocutory steps were taken by the parties the last of those steps being the service of the defendants' affidavit of documents on the solicitors for the plaintiff on 4 March 1996.

Between that date and 11 January 1999 when the plaintiff filed the summons which is presently before me, no further step was taken by the parties in the proceeding.

The principles to be applied in considering whether an action should be dismissed for want of prosecution were considered by the Appeal Division of this Court in Bishopsgate Insurance Australia Ltd. (in liquidation) v. Deloitte Haskins & Sells (unreported, 9 September 1994). In their joint judgment in the matter, Tadgell, J. and Ormiston, J. said at p.17

"These principles were most succinctly repeated by Lord Griffiths in the Chris Smaller (Transport) Case at p.1203, as follows:

'The power should be exercised only where the court is satisfied either (1) that the default has been intentional and contumelious, e.g. disobedience to a peremptory order of the court or conduct amounting to an abuse of the process of the court; (2) (a) that there has been inordinate and inexcusable delay on the part of the plaintiff or his lawyers, and (b) that such delay will give rise to a substantial risk that it is not possible to have a fair trial of the issues in the action or is such as is likely to cause or to have caused serious prejudice to the defendants, either as between themselves and the plaintiffs, or between each other, or between them and a third party'."

At p.24 of the judgment their Honours dealt with the question of prejudice and said:

"The plaintiff argued that there was no allegation and thus no evidence of prejudice of any relevant kind in the present case. So it was asserted that it was for the defendant to prove by evidence each matter of prejudice and that prejudice could not be inferred in the absence of such evidence. However, this would appear to overstate the obligation of a defendant on an application of this kind. Although there are many cases in which the necessity to establish prejudice has been stated as a condition precedent to the exercise of the power to dismiss for want of prosecution on the basis of delay, it is not correct, in our opinion, to say that the defendant is obliged to allege that prejudice upon affidavit as opposed to asking the court to infer from all the circumstances of the case that prejudice has been or will be likely to be suffered. This is not to deny that prejudice, actual and potential, must be established: it is merely a reminder that proof of any issue can be established by circumstantial evidence and of the necessity process of inference from such evidence. Nor are we suggesting, for it would be contrary to authority, that it is for the plaintiff to disprove prejudice; but the defendant is entitled to point to undisputed facts and ask the court to draw necessary logical inferences from them for this purpose."

The delay which has occurred in this case is the period of approximately two years and 10 months between March 1996 and January 1999. Can it be said that that delay is inordinate? In my opinion, in the circumstances of this case, it can.

The allegations made against the first defendant are the most serious of allegations. If a corporation chooses to allege that a former employee has been guilty of criminal behaviour and fraud, the interests of justice dictate that any proceeding instituted by that corporation against the employee be brought to trial with dispatch.

In the present case the former employee is now conducting his own business in competition with his former employer. It must be a constant embarrassment to the first defendant to have these allegations hanging over his head. If the fact that such allegation had been made against the first defendant became known to the commercial community with which the first and second defendant do business, and in all probability that has already occurred, that could not but fail to prejudice the second defendant.

In the circumstances of this case, and although the period of delay is only a little less than three years, I consider that it can properly be categorised as inordinate.

Is the delay excusable? In my opinion it is not.

In his affidavit sworn 23 December 1998 Walter Land has sought to shift the responsibility for the delay on to the shoulders of his then solicitor Ms. Kathy Constan. Whilst undoubtedly Ms. Constan must bear some responsibility for the delay, in my opinion, so also must the plaintiff. I consider that much is clear from the content of his affidavit sworn 23 December 1998.

In paragraph 7 of the affidavit Land talks of a conference he had with counsel and Ms. Constan in June 1996 at which they discussed the strategy they should employ in relation to the further conduct of the proceeding. At that conference it was determined that Land should prepare a history of events relating to the matters the subject matter of the proceeding.

Following the conference and on 4 July 1996 Ms. Constan wrote a letter to Land concerning the matter. The letter contains the following paragraphs:

"I refer to the above matter and to our conference with Tony Bean in relation to the strategy which we will employ in relation to the further conduct of the proceeding in order to prepare it for trial as a matter of urgency. It was apparent as a result of the meeting that a full and concise history of the events that have taken place in relation to this matter will need to be prepared. In some respects we have tended to avoid this task because of its enormity however you will well appreciate how essential it now becomes in this matter. To assist you with the preparation of the statement I have attached to this letter a list of broad headings of events as I see them which must be expanded upon in order to provide the full history. I agreed with Tony's advice that the initial story should be prepared by you and then added to by John Mills and I in order that the complete history is filled in. Until this is done then we should not hasten the progress of this proceeding as to do so may jeopardise our success."

"8. From the time I retained Ms. Constan in 1994 to act for me in this proceeding I have had numerous meetings and discussions with Ms. Constan. At these meetings and during these discussions, I believe Ms. Constan took notes of my instructions and retained copies of documents that were provided for the purpose of assisting her obtaining a full and complete background to the matters at issue in this proceeding. Consequently, I was frustrated that after more than 18 months since commencing action in relation to this matter, my solicitor was requesting further information that I believed she had already received. 9. I received subsequent letters dated 31 July 1996, 10 September 1996 and 19 December 1996 from Hercules Constan advising, amongst other things, that Ms. Constan was still awaiting the history of events that I was to prepare and that further progress in this proceeding was dependent on receipt of the same. Now produced and shown to me and marked respectively 'WL2', 'WL3', and 'WL4' are true copies of these letters. 10. By letter dated 4 February 1997 from Hercules Constan, Ms. Constan offered to assist me in the preparation of the history of events. Now produced and shown to me and marked respectively 'WL5' is a true copy of that letter. 11. In or about June or July 1997, Ms. Constan prepared the history of events, however, I was not satisfied with the substance of the summary as it appeared incomplete. 12. I met with Ms. Constan on 14 August 1997 where various matters were discussed in relation to the history of events. By letter dated 22 August 1997 from Roth Warren Solicitors (a firm to which I believe Ms. Constan had relocated the practice of Hercules Constan in contemplation of a merger which did not eventuate), Ms. Constan requested my reply to issues that were raised at the previous meeting dealing with the history of events. Now produced and shown to me and marked 'WL6' is a true copy of that letter. 13. Soon after my receipt of Ms. Constan's letter dated 22 August 1997 as noted above, I subsequently replied to Ms. Constan that I remained unsatisfied with the amendments that had been made to the history of events and indicated the need to make further amendments. 14. Because of the contents of Ms. Constan's letter dated 22 August 1997 from Roth Warren Solicitors as noted above, I verily believe that Ms. Constan subsequently took annual leave from 1 September 1997 to 23 September 1997. 15. In or about October 1997, after Ms. Constan returned from annual leave, I discussed with her my concern that there seemed to be little or insufficient activity in progressing the proceeding. We agreed to make a rejuvenated start in the new year."

It is unnecessary to set out what Land then alleges occurred in 1998 in my reasons for judgment. In my view such matters do not really advance his case.

The fact of the matter is that as long ago as June 1996 Land knew that it was necessary for him to prepare the history in question and simply neglected to do so in a manner satisfactory to his legal adviser. In my opinion the serious nature of the allegations he makes against his son is such as to make that behaviour and the delay occasioned by it inexcusable.

Have the defendants been prejudiced by the delay? Clearly they have. For Charles Land to have the stigma of these allegations hanging over his head for such a long period of time must be prejudicial to him in the conduct of his business as a consultant to the plastics industry and through him his company, all the more so since the allegations are made against him by his own father.

In that regard it is pertinent to note the observations of Tadgell and Ormiston, JJ. (as they then were) in Bishopsgate (supra). At p.52 their Honours said:

"Where a claim is made against individuals relating to their probity or their competence, especially their professional competence, and the claim is for many millions of dollars, then it is not hard to infer that defendants against whom such allegations are made are under a heavy burden. When that burden is not merely deferred but then unjustifiably drawn out over many years, it is easier still to infer serious prejudice of the relevant kind to a defendant. It has sometimes been said that where a defendant is insured or likely to be insured then the prejudice is not so great and the risk of litigation has been said not to be so great in cases of compulsory insurance, such as that applicable to motor accidents, especially where the premiums cannot be increased if the plaintiff is successful. But where a claim extends beyond mere casual negligence to acts which reflect upon the competence or probity of a defendant, especially when that competence or probity is critical to the defendant's future livelihood, then the delay in bringing an action on for hearing will properly be held to impose severe additional prejudice on a defendant. This is particularly the case in claims alleging professional negligence, although such a description is not to be confined merely to the negligence of accountants, solicitors, doctors and the like for it is relevant to any person in respect of whom an unfavourable finding will be likely to place at risk his or her capacity to earn a living."

Any unfavourable finding against Charles Land in the present proceeding must place at risk his capacity to earn a living in the plastics industry.

In the circumstances of this case I consider that not only has the delay caused serious prejudice to the defendants, it also has given rise to a substantial risk that it is no longer possible to have a fair trial of the issues in the action.

It must be remembered that in some instances the theft of moneys and the plaintiff's equipment are alleged to have occurred in 1989. If this action is reinstated, in the ordinary course of events it would not come to trial before the year 2000, by which time Walter Land will be 81 or 82 years of age (see para. 21 of his affidavit sworn 23 December 1998). The difficulties the defendants' counsel will encounter in cross-examining Land concerning the multiplicity of allegations made by him against his son would be apparent to any practitioner experienced in litigation. But of some importance perhaps is the difficulty that the first defendant will face in gathering evidence to refute the allegations.

As Mandie, J. pointed out at p.1 of Caruso v. Jafer & Anor. (unreported 18 June 1998):

"It seems to me that it is incumbent upon a plaintiff who seeks to reinstate a proceeding under this rule (R.34.05(2)) to satisfy the court that justice requires that the court exercise its discretion to reinstate the proceeding. Clearly if the proceeding is in such a state that had an application been made by the defendant to have it dismissed for want of prosecution, that application would have succeeded, then the court would not reinstate the proceeding."

In my opinion, in this case justice does not require the Court to exercise its discretion to reinstate the proceeding. It is further my opinion that if the proceeding was reinstated it should then be dismissed for want of prosecution.

I order that the plaintiff's summons filed 11 January 1999 be dismissed.

I order that the defendants' summons filed 28 January 1999 be struck out.

I order that the plaintiff pay the defendants' costs of the proceeding including the costs of the two summonses in question and any reserved costs.

At a glance

Court

Decision date

Before

Source

Judgment (44 paragraphs)

Parties