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  4. Picton v Townsend Trading Pty Ltd - [2010] QDC 483

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Picton v Townsend Trading Pty Ltd[2010] QDC 483

Picton v Townsend Trading Pty Ltd[2010] QDC 483

DISTRICT COURT OF QUEENSLAND

CITATION:

Picton & Anor v Townsend & Ors [2010] QDC 483

PARTIES:

JOHN THOMAS PICTON

(first plaintiff)

and

ELIZABETH MARY PICTON

(second plaintiff)

V

TOWNSEND TRADING PTY LTD

(first defendant)

and

JOHN ROBERT TOWNSEND

(second defendant)

and

CHORLEY PROPERTIES PTY LTD

(third defendant)

and

BICKELL AND MACKENZIE QLD

(fourth defendant)

FILE NO/S:

BD 4374 OF 2004

DIVISION:

Civil jurisdiction

PROCEEDING:

Originating application

ORIGINATING COURT:

Brisbane

DELIVERED ON:

10 December 2010

DELIVERED AT:

Brisbane

HEARING DATE:

3 November 2010, 29 November 2010

JUDGE:

Judge Rackemann

ORDER:

Order that the plaintiffs be granted leave to proceed.

CATCHWORDS:

CIVIL PROCEDURE – leave to proceed pursuant to rule 389(2) of the Uniform Civil Procedure Rules – where delay of four years – where financial pressure experienced by plaintiffs – where deficient explanation for delay – whether reasonable prospects of success – whether any prejudice to defendants likely to be of such significance as to deprive them of a fair trial – where counterclaim by third defendant – where plaintiffs’ contentions relevant to defence of counterclaim – where potential liability under counterclaim from part of loss and damage claimed against other defendants

Tyler v Custom Credit Corporation Limited & Ors [2000] QCA 178

Brisbane South Regional Health Authority v Taylor (1996) 186 CLR 541

COUNSEL:

Mr Bowden for the plaintiffs

Mr de Jersey for the first and second defendants

Mr Williams for the fourth defendants

SOLICITORS:

Gateway Lawyers for the plaintiffs

Shand Taylor Lawyers for the first and second defendants

Flower and Hart Lawyers for the third defendants

Barry and Nilsson for the fourth defendants

  1. [1]
    The plaintiffs seek leave to proceed pursuant to Rule 389(2) of the Uniform Civil Procedure Rules (“UCPRs”), no step having been taken in the proceeding for in excess of two years.  The plaintiffs must establish a good reason for making the order, notwithstanding the general prohibition against an action proceeding after such a delay.[1]
  1. [2]
    The general considerations of relevance to applications of this kind were summarized by Atkinson J in Tyler v Custom Credit Corporation Limited & Ors [2000] QCA 178 as follows:

“When the court is considering whether or not to dismiss an action for want of prosecution or whether to give leave to proceed under Uniform Civil Procedure Rules (“UCPRs”) r 389, there are a number of factors that the court will take into account in determining whether the interests of justice require a case to be dismissed. These include:

  1. (1)
    how long ago the events alleged in the statement of claim occurred and what delay there was before the litigation was commenced;
  1. (2)
    how long ago the litigation was commenced or causes of action were added;
  1. (3)
    what prospects the plaintiff has of success in the action;
  1. (4)
    whether or not there has been disobedience of court orders or directions;
  1. (5)
    whether or not the litigation has been characterized by periods of delay;
  1. (6)
    whether the delay is attributable to the plaintiff, the defendant or both the plaintiff and the defendant;
  1. (7)
    whether or not the impecuniosity of the plaintiff has been responsible for the pace of the litigation and whether the defendant is responsible for the plaintiff’s impecuniosity;
  1. (8)
    whether the litigation between the parties would be concluded by the striking out of the plaintiff’s claim;
  1. (9)
    how far the litigation has progressed;
  1. (10)
    whether or not the delay has been caused by the plaintiff’s lawyers being dilatory.  Such dilatoriness will not necessarily be sheeted home to the client but it may be.  Delay for which an applicant for leave to proceed is responsible is regarded as more difficult to explain than delay by his or her legal advisers;
  1. (11)
    whether there is a sufficient explanation for the delay; and
  1. (12)
    whether or not the delay has resulted in prejudice to the defendant leading to an inability to ensure a fair trial.”

The court’s discretion is, however, not fettered by rigid rules but should take into account all of the relevant circumstances of the particular case including the consideration that ordinary members of the community are entitled to get on with their lives and plan their affairs without having the continuing threat of litigation and its consequences hanging over them.”

  1. [3]
    This litigation concerns the sale of a business by the first defendant to the plaintiffs. The second defendant was the sole director/secretary and sole shareholder of the first defendant. The business was an indoor rock climbing centre carried on from premises leased from the third defendant, with whom the plaintiffs entered into an agreement to lease. The fourth defendant acted for the plaintiffs in the conveyance of the business.
  1. [4]
    The business required a licence from the local government. The contract of sale, dated 1 October 2003, was in the standard form adopted by the REIQ. Item K under “Licences, Permits, Patents, Certificates and Consents” was filled in with the words:

“Logan City Council – Indoor Entertainment Licence”.

  1. [5]
    The relevant clause of the contract for the purposes of Item K was 8.1(b) and (e) which provided:
  1. ”(b)
    to the best of the vendor’s knowledge and belief the vendor has applied for or obtained all licences, permits, patents, certificates, consents or other approvals from any competent authority necessary for the proper carrying on of the business and that there is not, and at the date of the completion there will not be, any subsisting contravention of any licence, permit, patent, certificate, consent or other approval obtained by the vendor in relation to the premises for the carrying on of the business;”

…

  1. (e)
    that the vendor will execute all such documents and give such other assistance as the purchaser may reasonably require to enable all right, title and interest held by the vendor in the business and the business assets mentioned in Items J, K, L(a) and (m) to vest in the purchaser on completion, free from any charge, encumbrance or any other form of consensual or non-consensual security, interest or any restriction.”
  1. [6]
    Clause 8.2 provided that, in the event of a breach of clause 8.1, the purchasers could amongst other things:
  1. (a)
    the purchaser may terminate this contract by notice in writing to the vendor and may sue the vendor for damages for the loss suffered arising from the breach; or
  1. (b)
    the purchaser may affirm this contract and:
  1. (i)
      may sue the vendor for damages for the loss suffered arising from the beach

…”

  1. [7]
    Clause 19.1 of the contract provided:
  1. ”19.1
    The vendor warrants that at the date of this contract to the best of the vendor’s knowledge and belief there is no unsatisfied unlawful demands, requisitions, notices, orders or other communication to which attaches any legal impediment (each a ‘requisition’) in respect of the business or the premises by any local authority or other competent authority having jurisdiction in respect of the use of occupation of the business or the premises. Any requisitions issued prior to the date of completion by a court, local authority or competent authority having jurisdiction in respect of the use and occupation of the business or the premises shall be fully complied with by the vendor at the vendor’s cost and expense prior to the date of completion and any work performed by or on behalf of the vendor to satisfy any such requisition shall be carried out in a proper and workmanlike manner.”
  1. [8]
    The second defendant also made an oral representation, on or prior to 28 October 2003, to the effect that the business had the relevant licence.
  1. [9]
    It would appear that the business did not have the benefit of an indoor entertainment licence[2] and, on 1 April 2004, the Council issued an order to the plaintiffs, which ultimately saw the business close.  The plaintiffs claim that they thereby suffered loss and damage which they claim from:
  1. (i)
    the first defendant, for breach of contract and for misleading or deceptive conduct, in breach of the Trade Practices Act (TPA);
  1. (ii)
    the second defendant, for being knowingly concerned in the contravention of the TPA;
  1. (iii)
    the third defendant for misleading or deceptive conduct, in breach of the TPA, in connection with negotiating a lease agreement with the plaintiffs. The contravening conduct is said to arise by reason of an oral representation particularized as follows:

“In a conversation between the first plaintiff and Graham London, a director of the third defendant, between 8 and 28 October 2003 whilst negotiating the lease, Graham London said to the first plaintiff ‘You know this business comes with a licence’.“

  1. (iv)
    against the fourth defendant for negligence and breach of an oral retainer, in failing to inquire as to the existence of the     licence, discover the lack of the licence and failing to advise the plaintiff as to the lack of the licence.
  1. [10]
    There has been a long delay in the proceedings. The claim was filed on 1 December 2004 and proceeded at an acceptable rate of progress until the second half of 2006. The last step in the proceeding was a Notice of Intention to Defend and Defence filed on 19 September 2006 on behalf of the first and second defendants in response to a Third Party Notice given by the fourth defendant. No further step in the action has now occurred for more than four years. The subject application was not filed until 29 October 2010, even though the solicitors for the fourth defendant wrote to the plaintiffs’ solicitor on 9 November 2008, drawing his attention to the need for leave to proceed. The plaintiffs’ inaction puts them in serious breach of the implied undertaking in Rule 5, although this is not a case of disobedience with court orders or directions.
  1. [11]
    Whether there is an adequate explanation for the delay is always relevant, although it is not a necessary pre-condition to the grant of leave. When the application first came on for hearing it was asserted that temporary impecuniosity, arising from, or exacerbated by, losses sustained by reason of the conduct of the defendants, was the explanation for delay. The material relied upon was however, deficient.
  1. [12]
    In his affidavit filed on 2 November 2010, Mr Picton deposed, amongst other things that:
  1. (i)
    The purchase of the business was financed on security of the plaintiffs’ home.
  1. (ii)
    An extra $100,000 was financed in order to provide for the purchase price of $65,000, associated transaction costs and some working capital for the business.
  1. (iii)
    Following the closure of the business on 5 April 2004, the plaintiffs suffered significant financial pressure and went through a marital separation, between late 2004 and late 2005.
  1. (iv)
    In early 2005 the plaintiffs’ debt was re-financed and increased by another $25,000, which was primarily used to finance this action.
  1. (v)
    During the period of marital separation Mr Picton ran up a credit card debt in order to meet living expenses.
  1. (vi)
    The Pictons were unable to re-finance their debt until the credit card debt, a debt to the Australian Taxation Office and other debts were paid.
  1. (vii)
    It was not until July 2010 that they were able to borrow more money to finance the litigation.  Mr Picton says that “prior to that time, it was simply not possible for us to borrow any further money due to our financial position and we were unable to otherwise incur legal fees where we had little capacity to pay those fees.” 
  1. [13]
    The affidavit spoke, in general terms, of financial pressures since the business closed on 5 April 2004 and the couple temporarily separated, between late 2004 and late 2005. That is understandable, yet this was also the time when the proceedings were commenced (on 1 December 2004) and progressed. The Pictons’ capacity to do so is presumably explained by the additional borrowing of $25,000 in early 2005, but the affidavit did not go on to detail when that money ran out nor did it descend to explaining which steps, at what stage, the plaintiffs were unable to take by reason of their financial difficulties. While their solicitor deposed, on information and belief, that his clients were now in a position to prosecute the claim to trial (in the event that mediation is unsuccessful), the material did not descend to the details of any new funding arrangements to facilitate that.
  1. [14]
    In light of those deficiencies, counsel for the plaintiffs sought and obtained an adjournment, to permit further material to be prepared. This led to another affidavit by Mr Picton in which he explained that the “significant majority” of the additional borrowing of $25,000 was used to pay the plaintiffs’ previous solicitors, who acted for them until 2006. On 23 May 2006 the Pictons filed a Notice that they were no longer represented by that firm, but were now acting in person. On 23 October 2006, the plaintiffs’ current solicitors filed a Notice of Appointment.
  1. [15]
    Unfortunately the further affidavit of Mr Picton otherwise tends to raise more questions than it answers. The affidavit mainly exhibits copies of correspondence passing between Mr Picton and his current solicitor. Substantial parts of that correspondence are obscured, so that it is difficult to know what to make of some of it. It does suggest ongoing financial pressures, but it also reveals substantial correspondence passing between Mr Picton and his solicitor over the years, including the seeking and giving of instructions. It also reveals an ability, on Mr Picton’s part, to provide some funding for legal fees. In particular, on 20 October 2006, Mr Picton sent his solicitor a bank cheque in the sum of $4,000.
  1. [16]
    In mid 2007 Mr Picton decided against employing an expert witness, as had been discussed with the plaintiffs’ solicitor, because he was unable to then provide substantial funding. In March 2009, in response to a request from his solicitor for a further $3,000, Mr Picton claimed an inability to raise sufficient funds pending re-financing, which did not occur until relatively recently.
  1. [17]
    While the material provides some further detail, the defendants point out that it falls short of sufficiently explaining why the Pictons’ financial pressures prevented them from taking any step at all during any part of the period since 2006.
  1. [18]
    The affidavit exhibits material going to the scope of the solicitor’s instructions and the new funding which is now said to be in place. It suggests that the current solicitor’s instructions, from the outset, were to act for the Pictons only up to a proposed mediation. Further, the current funding arrangements appear only to cover the estimated costs associated with this application for leave to proceed and a proposed subsequent mediation. As Mr de Jersey pointed out, this raises a question mark over the assertion that the plaintiffs are in a position to prosecute the claim to trial, in the event that any mediation is unsuccessful.
  1. [19]
    It was suggested by counsel for the plaintiffs that, in the absence of correspondence from the Pictons’ solicitor clearly warning them about the impending expiration of the two year period, and the consequences of allowing that time to expire, ignorance on their part could be inferred. The material, however, does not assert such ignorance and I am not willing to draw such an inference on the basis of the material which has been filed.
  1. [20]
    Counsel for the plaintiffs appeared without an instructing solicitor for the resumed hearing. Apparently his instructing solicitor had gone away in the meantime. Counsel acknowledged that the quality of the affidavit material was somewhat embarrassing, but did not have instructions to seek any further adjournment.
  1. [21]
    The material evidences some financial pressure on the plaintiffs over the last four years. It may be reasonable to infer that they did not, at least from 2007 (when the correspondence suggests they did not have sufficient funds to engage an expert witness) until achieving a refinance, have the financial means to fund the matter going all the way to trial. The material does not, however, adequately explain why no step at all was taken since 2006. It also falls short of proving that the plaintiffs are now in a position to progress their matter to trial. These are relevant factors in the exercise of discretion but, as I have earlier noted, they are not necessarily fatal. Other relevant matters must also be considered.
  1. [22]
    In seeking to establish a basis for the favourable exercise of discretion, counsel for the plaintiffs submitted that there are excellent prospects of success against each of the defendants. He emphasised that the entirety of the purchase price was paid for a business which was subsequently found not to have the licence it was represented to have.[3] There are, however, other issues which must be addressed in order for the plaintiffs to succeed. They include matters of reliance, quantification of loss and damage and pleaded allegations of a failure to mitigate.
  1. [23]
    The plaintiffs claim raises triable issues but I am not in a position to carry out a detailed assessment of prospects. The plaintiffs’ case on liability would, on its face, appear to be strongest against the first and second defendants. They admit the oral representation relied on against them,[4] as well as the terms of the contract, although they assert that they had a basis to make the representations. The case against the third defendant relies, on the other hand, on a disputed oral representation in the context of a lease agreement which contained a clause stating that each party entered the lease without relying on a representation by the other or by any person purporting to represent the other.
  1. [24]
    The case against the fourth defendant turns on the scope of the retainer. The fourth defendant admits that it was a firm of solicitors retained by the plaintiff to act in the conveyance of the business and to advise the plaintiff with respect to the contract,[5] and owed the plaintiffs a duty to exercise skill and care to the standard of the ordinary skilled and reasonably careful practitioner within the scope of the retainer. The plaintiffs do not plead a specific request for advice on the licence. The fourth defendant disputes that the retainer extended to undertaking investigations or to providing advice on that matter and also asserts that, if such things fell within the scope of the retainer, then it was retained too late to establish whether the licence was in existence.
  1. [25]
    An important consideration is whether any prejudice would be occasioned to the other parties by reason of a grant of leave. No specific prejudice is alleged, although it was contended that some prejudice, in a general sense, was inevitable with the passing of some seven years since the relevant events. As McHugh J said in Brisbane South Regional Health Authority v Taylor (1996) 186 CLR 541 at 551:

“ ‘[W]here there is delay the whole quality of justice deteriorates’ (R v Lawrence [1982] AC 510 at 517 per Lord Hailsham of St Marylebone LC).  Sometimes the deterioration in quality is palpable, as in the case where a crucial witness is dead or when an important document has been destroyed.  But sometimes, perhaps more often than we realize, the deterioration in quality is not recognizable even by the parties.  Prejudice may exist without the parties or anybody else realizing that it exists.  As the United States Supreme Court pointed out in Barker v Wingo (1972) 407 US 514 at 532, ‘what has been forgotten can really be shown.’ ”

  1. [26]
    While some general prejudice, in that sense, cannot be discounted, I am satisfied that, in the context of this proceeding, it is unlikely to be of such significance as to deprive the defendants of a fair trial.
  1. [27]
    The plaintiffs’ case as against each of the defendants is in relatively short compass and has been known by the parties since a relatively short time after the events in question occurred.
  1. [28]
    Insofar as liability against the first and second defendants is concerned, the plaintiffs’ case largely relies upon the admitted contents of the contract and an admitted oral representation. The plaintiffs’ case on liability against the third defendant essentially relies on a single disputed oral representation of short compass. The plaintiffs’ case as against the fourth defendant turns on the content of the duty of a solicitor acting for a purchaser in a conveyance in these circumstances.
  1. [29]
    The questions of liability do not involve particularly large or complex factual investigations. The plaintiffs’ alleged loss and damage has been particularized in their Amended Statement of Claim. The delay in their proceeding is unlikely to significantly prejudice the defendants in relation to their investigation of quantum.
  1. [30]
    The nature of the plaintiffs’ case has been known to the defendants from a relatively early stage, such that there was ample opportunity for the defendants to take statements and otherwise conduct investigations before any substantial lapse of time. The proceedings were commenced on 1 December 2004, a little over a year after the relevant events occurred and at a relatively early stage within the permissible limitation period (which did not expire until last year). Further, within two days of instituting the proceedings, each of the plaintiffs filed affidavits detailing their version of events. The affidavit of the first plaintiff also detailed the steps taken in order to attempt to obtain the relevant licence, so as to mitigate loss. The plaintiffs’ solicitor deposes that the plaintiffs’ evidence at trial would be based on the contents of those statements and on documents.
  1. [31]
    It may also be observed that the action had significantly progressed by 2006. Particulars had been requested and supplied, pleadings had closed and the plaintiff had delivered its list of documents, albeit that some informal further disclosure was later provided. It is not suggested that delay has deprived the defendants of an opportunity of adducing any relevant evidence.
  1. [32]
    It is also relevant that the third defendant has an outstanding counterclaim against the plaintiffs for rent and other amounts said to be owing under the lease. While it has not sought to take any step, in the last four years, to advance that claim, it says that, subject to the leave of the court, it will do so.
  1. [33]
    A refusal of leave to the plaintiff would potentially leave them in the position of being exposed to ongoing litigation by the third defendant without the right to pursue their own claim. It was submitted that should be of little concern, since the lessor’s claim for rent and other moneys under the lease does not rely upon the issues raised by the plaintiffs in their proceedings. That may be so, but the matters relied upon by the plaintiffs in their claim are also relevant to their defence of the third defendant’s claim, as well as to whether they are entitled to look to the other defendants for any amount for which they may be liable to the third defendant, as lessor.
  1. [34]
    Central to the plaintiffs’ claim is that they would not have completed the purchase of the business or entered into a lease with the third defendant but for the misrepresentations on which they say they relied and but for their solicitor’s failure to alert them to the problem.[6]  In their Statement of Claim, the plaintiffs seek, in the alternative, an order, under s 87 of the TPA, that the lease be set aside.[7] Similarly, in their answer to the counter-claim of the third defendant, the plaintiffs’ plead that the lease ought to be set aside, by reason of the matters pleaded in their statement of claim.[8]  Further, their claims against the first, second and fourth defendants include claims for any amount for which they may be held liable to the third defendant. 
  1. [35]
    I am satisfied that, in those circumstances, it would not be in the interests of justice to refuse to grant leave to proceed to the plaintiffs. That is particularly so since a grant of leave will not be occasioned by any specific prejudice to the defendants nor is it likely that any general prejudice would be of such an extent as to deprive the defendants of a fair trial.
  1. [36]
    I appreciate that the material which attempted to explain the delay is deficient and raises a question mark about the plaintiffs’ financial capacity to now progress this action to trial, should it not be resolved by mediation. I also appreciate that the interests of justice must take account of the position of the defendants, who have had this litigation, and its potential consequences, hanging over them for years. On balance, however, I am persuaded that the interests of justice would, at this stage, best be served by granting the plaintiffs leave to proceed. I am inclined to do so on conditions as to the payment of outstanding costs orders. I am also minded to make directions to progress the matter. I will hear from the parties in relation to those matters.

Footnotes

[1] Lilyville Pty Ltd v Colonial Mutual Life Assurance Society Pty Ltd (1999) QSC 372

[2] Although this is not admitted on the pleadings.

[3] That a licence did not exist is not admitted in the pleading.

[4] See paras 2 and 10 of the defence, which admit

[5] Para 5 of the defence, but it denies being retained to advise with respect to the lease.

[6] See Amended Statement of Claim, paras 7, 17, 25 and 36.

[7] See para 28.2 of the Amended Statement of Claim.

[8] See para 6 of the Reply and Answer.

Close

Editorial Notes

  • Published Case Name:

    John Thomas Picton and Elizabeth Mary Picton v Townsend Trading Pty Ltd, John Robert Townsend, Chorley Properties Pty Ltd and Bickell and Mackenzie Qld

  • Shortened Case Name:

    Picton v Townsend Trading Pty Ltd

  • MNC:

    [2010] QDC 483

  • Court:

    QDC

  • Judge(s):

    Rackemann J

  • Date:

    10 Dec 2010

Appeal Status

Please note, appeal data is presently unavailable for this judgment. This judgment may have been the subject of an appeal.

Cases Cited

Case NameFull CitationFrequency
Barker v Wingo (1972) 407 US 514
1 citation
Jump To
Cite 1 - (1972) 407 US 514
Brisbane South Regional Health Authority v Taylor (1996) 186 CLR 541
2 citations
Jump To
Cite 1 - (1996) 186 CLR 541
Cite 2 - (1996) 186 CLR 541
Lilyville Pty Ltd v Colonial Mutual Life Assurance Society Ltd [1999] QSC 372
1 citation
Jump To
Cite 1 - [1999] QSC 372
R v Lawrence (1982) AC 510
1 citation
Jump To
Cite 1 - (1982) AC 510
Tyler v Custom Credit Corp Ltd [2000] QCA 178
2 citations
Jump To
Cite 1 - [2000] QCA 178
Cite 2 - [2000] QCA 178

Cases Citing

No judgments on Queensland Judgments cite this judgment.

1

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