DISTRICT COURT OF QUEENSLAND

The Issues

1. [1]
   Mr Lowndes’ formal application is made according to Rule 389(2) of the UCPR. He asks that he be given leave to proceed, after a delay of more than two years without a step being taken in this proceeding.

2. [2]
   At the hearing, his application was framed differently. Mr English suggested that there could be a declaration that two years had not passed, on the basis that there had not been a period of two years before a new step was taken. He conceded that, if no step were taken for more than two years, then his client’s case would have to be dismissed for want of prosecution.

3. [3]
   Counsel for the defendants then made oral applications under Rule 371(2), for orders which would bring the plaintiff’s proceedings to an end, on the basis that there had been failures to give a month’s notice of Mr Lowndes’ intention to proceed, after no step had been taken in the proceeding for one year.

4. [4]
   So, the issues are these. Has more than two years passed between steps in the proceeding? If not, should Mr Lowndes’ most recent steps be disallowed, because of his failure to give notice of his intention to proceed, after a delay of more than one year?

The Investments

5. [5]
   Clairview Island is close to the Queensland coast, about 135 kilometres south of Mackay.  Its developer required funds in 1997.  Mr Delaney was a solicitor who provided funds from investors, who would take mortgages as security.  He put together a group of 16 clients who contributed $1,500,000.  Mr Lowndes contributed $100,000.  Those investments in Clairview Island were made in late 1997.  By the end of 1998 it became clear that most of the money had been lost.  The sale of the land returned about $244,000, leaving a net loss of about $1,256,000. 

6. [6]
   Mr Lowndes and the other investors retained Baker Johnson, then a widely known firm of solicitors, to act on their behalf. Mr Michael Baker, the senior partner in the firm, was in charge of the file. Mr Lowndes’ claim against Mr Delaney was started in December 1999.  It asserted that Mr Delaney, and a Mr Moore who was his employee, were responsible for his losses.

7. [7]
   In 2001 there was a mediation. It failed to achieve settlement because it appeared that another party should have been included in the proceedings. In February 2002 Short Punch and Greatorix, a firm of solicitors, was added as a party. The amended statement of claim alleged that a partner in that firm, Mr Johansen, made inaccurate representations to Mr Moore about (in effect) the standing of those who were to borrow the money. It says that Mr Johansen made false representations about the borrowers’ capacities, which led to the loss of the investors’ money.

8. [8]
   Mr Baker intended that this proceeding by Mr Lowndes would be a test case. However, he did not obtain the consent of the solicitors on the other side, to that course. It seems that all 16 actions were actively pursued against Mr Delaney, represented by Minter Ellison. However, only Mr Lowndes’ case was pursued at first against Short Punch & Greatorix, represented by McCullough Robertson. Later in the piece it appears that all of the claims were “activated” against Short Punch & Greatorix. The uncertainty of those arrangements did not assist the efficient management of Mr Lowndes’ claims. 

The Procedural Framework

9. [9]
   Rule 389 says this:

10. [10]
    There are many decided cases about what actions constitute a step in a proceeding. The significant decisions in this case are these:

11. [11]
    There seems to be no decided case, which deals with the status of offers to settle, when not made under the UCPR. In principle, such “without prejudice” negotiations do not amount to a step in the proceedings. They are not designed to progress the action. They are not revealed to the court. An unaccepted offer to settle takes the action no further.

Delays

12. [12]
    After the joining of Short Punch & Greatorix in early 2002, the usual steps were taken throughout that year. 2003 and 2004 were taken up with inefficient efforts by Mr Baker to give disclosure and copies of documents to the defendants’ solicitors. On 3 November 2004 a requested document was provided to McCullough Robertson. That was a step in the proceeding. The submissions here have concentrated on events after that date.

13. [13]
    On 4 March 2005, Minter Ellison brought Rule 389 to the attention of Baker Johnson, and anticipated that an application for leave to proceed would have to be made. However, that attitude was not maintained. On 21 November 2005 that firm made some helpful suggestions about a timetable to trial, and how the proceeding could be progressed. There was no complaint about any procedural irregularity. In fact, a year had passed since the step of 3 November 2004. The purpose of the letter was to get the cases on the call-over list by mid March 2006.

14. [14]
    During the second half of 2005 arrangements were made about a mediation. It seemed to be agreed that it would take place in late 2005. For reasons which are not explained here, it did not take place.

15. [15]
    On 14 March 2006 Baker Johnson sent unsigned requests for trial dates to Minter Ellison. Minter Ellison returned those documents, on 27 March 2006, saying that the request on behalf of Mr Lowndes was submitted prematurely. The letter said, “Subject to the requirement for leave, we refer to our fax of 21 November 2005 concerning pre-trial steps necessary in this and other proceedings …”.

16. [16]
    It should be noted that on 5 May 2006 Mr Baker, the senior partner of the firm, was struck off the roll of solicitors. Responsibility for this action was then passed to another solicitor, Mr S G Alexander. Mr Alexander had assisted Mr Baker in this matter up to May 2006, but Mr Baker remained in charge up to then. It may be assumed that Mr Baker was distracted before May 2006, by the disciplinary proceedings taken against him.

17. [17]
    On 7 September 2006, Baker Johnson sent signed requests for trial dates to Minter Ellison. That was a step in the proceedings. The requests were returned as “the matter is far from ready for trial”. That reason emerges from the otherwise inadmissible letters, “JJJJ” and “KKKK” to Mr Alexander’s affidavit.

18. [18]
    On 28 September 2006, Minter Ellison wrote, to say, “… These proceedings are not ready for trial … your clients have not addressed the preliminary matters raised in our previous correspondence of 27 March 2006 and 21 November 2005 … we ask that they please do so and meanwhile return the requests unsigned”. That is, the solicitors were concerned with the need to take steps to get ready for trial, and “the requirement for leave”. In fact, there was no requirement then for leave. The emphasis was on the steps to get ready for trial.

19. [19]
    On 7 June 2007, the Queensland Law Group gave notice that it had replaced Baker Johnson as solicitors for Mr Lowndes. From the point of view of these proceedings, there was no change, as Mr Alexander remained in charge of the Clairview Island files.

20. [20]
    The next step in the proceedings was on 15 June 2007, when the Queensland Law Group sent an amended list of documents to McCullough Robertson. That was another step in the proceedings. On 3 July 2007 McCullough Robertson replied, saying “… as your client has not taken a step in this matter for over 12 months, we consider it necessary for your client to make an Application for Leave to Proceed prior to following any steps to activate and progress this claim. We will disregard the amended list of documents until the courts have given leave”.

21. [21]
    On 10 July 2007 Mr Alexander drew attention to Rule 389(1), and went on to say:

“We note that on 15 June 2007 you were provided with an amendment list of documents. 

We note that we must provide you with one month’s notice under the UCPR rules and it is not necessary for us to make an application to the Court, but merely to give you notice. 

We look forward to your response by return…”

22. [22]
    In reply, Messrs McCullough Robertson asserted that no step had been taken for several years. The letter suggested that it was necessary for Mr Lowndes to make an application for leave to proceed.

23. [23]
    On 31 July 2007 Mr Alexander wrote to Minter Ellison and McCullough Robertson, to say that an application for leave to proceed further was being prepared. From then until this hearing, the parties proceeded on the basis that Mr Lowndes had to get leave to proceed, according to Rule 389(2). This application was filed on 8 January 2008.

24. [24]
    On 9 November 2007, a draft list of documents was sent by Mr Lowndes’ solicitors to Minter Ellison. As it was not signed, it cannot be regarded as a step.

25. [25]
    It can be seen from the above steps, that there was no delay of two years between steps in the proceeding. There was no need for an application to allow the action to proceed. After the step of 3 November 2004, further steps were taken on 7 September 2006, and 15 June 2007. Counsel for the defendants concede that there has not been more than two years between steps.

26. [26]
    Rather, their attention was focused on irregularities, in failing to give notices of intention to proceed, once a year passed after 3 November 2004. It was submitted that those further delays and irregularities should result in the dismissal of Mr Lowndes’ claims.  The defendants now ask that the steps after 3 November 2004 be set aside, as they were irregular.  That would be the end of this proceeding.

The Effect of Irregularity

27. [27]
    Since the 1965 revision of the Supreme Court Rules, non-compliance with a rule of court does not make the offending step void. Rather, it is to be regarded as irregular, to be dealt with as the court in its discretion sees fit. Order 93 Rule 18 required an application about the irregularity to be made within a reasonable time. In Perez v Transfield (Qld) Pty Ltd (1979) Qd R 444 the irregularity was setting the action down for trial, after more than the permitted delay (then three years) had passed.  No application to set aside that step was made within a reasonable time.  No application having been made to set aside the entry for trial, it stood as a valid step in the proceeding.  It was only an irregularity.  An irregularity might be waived by the party for whose benefit the provisions about time would operate.  Since Perez the consequence is that the irregular proceeding is valid and effective, unless the court orders otherwise. 

28. [28]
    The question of irregularity is now dealt with in UCPR Rule 371:

29. [29]
    O 93 R 18 is not reproduced in Rule 389. There is now no requirement for a party complaining about non-compliance to apply for an order setting aside the irregular process within a reasonable time, after which the court cannot act. However, delay in applying to set aside a step is always likely to be relevant in the exercise of the court’s discretion whether or not to invalidate the irregular procedure. See Bates & Ors v Queensland Newspapers P/L & Anor [2001] QSC 083 at paras [9] and [10] (Chesterman J).

30. [30]
    It should be kept in mind, that the irregularity in Perez involved the passing of more than three years’ delay.  Here, since a step was taken within the two year period, the irregularity is not that delay, but the failure of Mr Lowndes’ solicitors to give appropriate notices of intention to proceed.

31. [31]
    Minter Ellison’s concern was mainly about the need to get ready for trial. McCullough Robertson focused, up to September 2006, on a supposed delay of several years. They did not offer any encouragement, or assumption that the litigation would proceed, after their letter of 27 September 2004.

32. [32]
    It is submitted for Mr Delaney, that the irregular step of 7 September 2006 (the requests for trial dates) should now be set aside. The encouraging letter of 28 September 2006 from Minter Ellison, and the time that has passed up to the filing of this application, have to be taken into account.  The attitude of McCullough Robertson was different, from 7 September 2004, and it also has to be considered.

Discretionary Factors

33. [33]
    It is helpful here to consider the sort of matters that would be taken into account, in considering whether or not to dismiss an action for want of prosecution. Such a list was helpfully considered by the Court of Appeal in Tyler v Custom Credit Corp Ltd & Ors [2000] QCA 178.  That is not this case, but the considerations are similar. 

1. (a)
   The critical events took place about 10½ years ago.  The claim was filed about a year after the losses were suffered.  It does not appear here precisely what happened during that year – the delay of a year before starting proceedings does not seem unusual, and was not criticised here.

2. (b)
   It is now six years since Short Punch & Greatorix were added as parties to the litigation.  There has been a lot of delay.

3. (c)
   According to the statement of claim, the investors were reassured about the standing of those who were borrowing their money.  The pleading asserts that the true position was very much different, and should have been known, or was actually known by the defendants.  The fact that offers of settlement were made in mid 2006 by Minter Ellison’s client would tend to indicate that the plaintiffs have reasonable prospects of success in the proceedings. 

4. (d)
   There has been no disobedience of court orders or directions.  Rather surprisingly, in this sort of litigation, Mr Lowndes’ solicitors did not ask the court to give directions to speed up its progress.  In recent years, in proceedings of this kind, all courts have been quick to offer directions or case-management if asked to do so.  All the parties have impliedly undertaken to proceed here in an expeditious way.  That has not been done.  See the Court of Appeal in Ridolfi v Rigato Farms Pty Ltd (2001) 2 Qd R 455.  It was not suggested here that the defendants were guilty of any actual delay, with respect to the steps that they were obliged to take.

5. (e)
   The litigation has certainly been characterised by periods of delay. For whatever reason, Baker Johnson were slow, inefficient and disorganised.  Mr Alexander has slowly tried to progress all the proceedings, since mid 2006.

6. (f)
   The delay is attributable to the plaintiff’s solicitors.  Mr Lowndes was not asked to swear an affidavit and, it seems, barely knows about this application.  There is nothing to suggest that he or the other investors have been personally at fault, apart from allowing their solicitors to take a great deal of time. There is no suggestion that impecuniosity has been responsible for the delay. 

7. (g)
   The litigation would be concluded by the striking out of the plaintiff’s claim.  The limitation period must have well and truly passed by now. 

8. (h)
   The litigation has progressed to the stage where it should be able to be set down for trial without much more delay.  The solicitors for Mr Lowndes have on more than one occasion requested trial dates. 

1. (i)
   There is no real explanation for his solicitors’ delay.  It may have been contributed to by the disruptions and distractions caused by the disciplinary proceedings against Mr Baker personally. 

34. [34]
    Has the delay resulted in prejudice to the defendants, leading to an inability to ensure a fair trial? They say that it has. Mr Johansen, former partner of Short Punch & Greatorix, is available but it is suggested that his memory of conversations, in the absence of full diary notes, will have faded with the passing of time. Mr Delaney is available. A significant role in his office was taken by Mr Moore. Mr Moore has had Parkinson’s disease for seven years, and he also has a long history of mixed anxiety/depression. He is being treated for both conditions. His general practitioner says that his conditions and the types of medication are very likely to impair concentration and memory. His nervous condition is precipitated and aggravated by stress. The doctor says that Parkinson’s disease is associated with cognitive dysfunction. The drugs he is taking for that condition could certainly affect his memory recall and concentration. He does go on to point out, in his letter of 12 March of last year, that Mr Moore has not had any formal neuro-cognitive testing.

35. [35]
    Overall, it may be accepted that the defendants have been prejudiced by delay. The real extent is difficult to assess, without hearing and seeing the witnesses.

36. [36]
    It should be kept in mind that the interests of a group of plaintiffs are at stake. It can be assumed that their cases will all be at an end, if Mr Lowndes’ case is dismissed. The test case will have failed.

Conclusion

37. [37]
    The court has to exercise a discretion, in considering how to proceed under Rule 371(2).

38. [38]
    In my opinion, the step of 7 September 2006 should be declared to be effectual. The expressed attitudes of Minter Ellison, and the time that then passed, tilts the scales in favour of that conclusion, after all the facts are taken into account.

39. [39]
    On the other hand, considering Short Punch and Greatorix’s position alone, an opposite conclusion would be reached. Delays, the fading memory of Mr Johanson and the unsympathetic attitude of McCullough Robertson, would be against allowing the step of 13 June 2007 to stand.

40. [40]
    A possibility is to dismiss the proceedings against Short Punch and Greatorix, and allow them to continue against Mr Delaney. However, there are claims for contribution before the solicitors, so that Short Punch and Greatorix would have to continue to defend Mr Delaney’s claim against it.

41. [41]
    Overall, it can be seen that the most appropriate exercise of the discretion is to allow Mr Lowndes’ claim to proceed, subject to the strictest control by the court. There will be declarations that the steps of 7 September 2006 and 15 June 2007 are effectual.

42. [42]
    Otherwise, the parties can consider these reasons, and return with an agreement or suggestions about comprehensive directions, to achieve a very speedy end to this litigation.