NAB Ltd v Domnick[2012] QDC 35

DISTRICT COURT OF QUEENSLAND

Introduction

1. [1]
   There are two applications to be considered in this matter. The first made in point of time, is the second defendant’s application for an order dismissing the plaintiff’s claim, essentially, for want of prosecution. In this regard the second defendant relies upon UCPR 280 and/or UCPR 5(4).

2. [2]
   It is not in dispute that to the extent that it is necessary, the pre-condition for the potential application of UCPR 280 is satisfied. This is because the last step taken in this proceeding occurred over two years prior to the filing of this application.^[1]

3. [3]
   Accordingly, the plaintiff is required to and does cross-apply pursuant to UCPR 389(2) for leave of the court, to proceed. It is agreed that these applications be heard and determined together, as they are a logically related and similar considerations arise on each application.

The Circumstances

4. [4]
   The plaintiff’s claim and statement of claim was filed, in the Supreme Court, on 24 May 2007.  The plaintiff claims against both the first and second defendants, an amount of $69,899.99, for monies due pursuant to a guarantee and indemnity, dated 9 August 2004, together with interest at a contractual rate of 14.55% and costs.  The plaintiff also claimed, but only against the first defendant, an additional amount of $2,031,832.41 (with interest and costs), due pursuant to another guarantee and indemnity, dated 1 April 2005.

5. [5]
   On 13 February 2009 the Supreme Court ordered that the proceeding be transferred to the District Court at Maroochydore. This occurred consequentially to a case flow review of this matter and upon the plaintiff’s indication that the claim would not be pursued against the first defendant, due to his bankruptcy.

6. [6]
   From the statement of claim, it can be discerned that each guarantee and indemnity secured financial accommodation, provided by the plaintiff to Pepmint Pty Ltd ACN083144423 (“Pepmint”) and the claim brought against the second defendant is alleged to be in respect of her joint and several liability for the amount due and owing under the first of the guarantees.^[2]

7. [7]
   In her amended defence, the second defendant pleads a denial, as to entering into the guarantee and indemnity and alternatively that there was a lack of consideration for any such contract, as may have been entered into and raises issues of unconscionability and undue influence. An unusual aspect is that there is also a counter-claim in which the second defendant alleges unlawful, unfair or unconscionable conduct and misleading and deceptive conduct on the part of the plaintiff and in contravention of s 52 of the Trade Practices Act 1974 (Cth) and claims the following relief:

8. [8]
   It is clear then that, in the first instance, the second defendant’s application is not based on considerations of persistent or repeated contravention of court orders or directions or failure to comply with the requirements of the Rules, except to the extent that nothing has happened to progress this matter for over two years.^[3]

9. [9]
   However, the plaintiff points to the same lack of action on the second defendant’s counter-claim. Whilst that contention is true, it has to be noted that the counter-claim is effectively defensive in nature and apart from the claim for damages, entirely directed at defeating the claim of the plaintiff. As Mr Topp submitted, the main contentions might easily have been pleaded differently, as a defence rather than in the form of a counter-claim.

10. [10]
    The effect of all of this is that the resolution of this matter effectively devolves to a question as to whether the plaintiff is to be granted leave to proceed upon its application made pursuant to UCPR 398(2).^[4]

The Principles

11. [11]
    The applicant points to a number of observations made in decided cases in relation to the philosophy underlying the UCPR in relation to case management, such as:

“… the former laisse faire attitude by courts towards the leisurely conduct of actions at the will of the parties has ended … a change in attitude that has independently taken place in courts throughout Australia.  They suggest that courts will now be less tolerant of delay and that the expedition of proceedings should be encouraged to a greater extent than was formerly the case;”^[5] and

“When proceedings have been prosecuted by a plaintiff in a dilatory way, the court may dismiss a proceeding for want of prosecution or impose a sanction as to costs.”^[6]

12. [12]
    The applicant particularly emphasizes the observation of McPherson JA in Cooper v Hopgood and Ganim^[7].

“… 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.”

The applicant also refers particularly to the approach of P Lyons J in Field v Luxor Products Pty Ltd & Anor^[8], as an appropriate application of considerations of this kind. 

13. [13]
    On the other hand the respondent points to statements of competing considerations, such as by Daubney J in Dick v Alan Powell Holdings & Ors^[9]:

“All of that being said, the question is whether the applicant’s conduct in the principal proceeding has reached the stage of habitual non-compliance such as can warrant the imposition of the ultimate sanction by way of striking out the proceedings.  The matter is close.  I am far from impressed with the applicant’s flouting of orders of this court and lack of observances of the undertaking implied by Rule 5.  The exercise of my discretion in this regard, however, must be tempered by recalling that it is a ‘well established principle’ that the object of courts is to decide the rights of the parties, and not to punish them for mistakes they make in the conduct of their cases’ [citing Cropper v Smith] (1884) 26 Ch D 700 per Bowen LJ at 710]. 

I am also well mindful of the court’s appropriate high degree of caution in adopting the remedy of summarily terminating a claim [citing Dey v Victorian Railways Commissioner [1949] HCA 1].”

The respondent further points to the approach of Daubney J, in alternatively imposing strict case management requirements. 

14. [14]
    As the parties agree, the observations of Atkinson J in Tyler v Custom Credit Corp Ltd & Ors^[10] provides a useful collection of factors that may inform the exercise of discretion:

“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 (“UCPR”) 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;
2. (2)
   How long ago the litigation was commenced or causes of action were added;
3. (3)
   What prospects the plaintiff has of success in the action;
4. (4)
   Whether or not there has been disobedience of court orders or directions;
5. (5)
   Whether or not the litigation has been  characterized by periods of delay;
6. (6)
   Whether the delay is attributable to the plaintiff, the defendant or both the plaintiff and the defendant;
7. (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;
8. (8)
   Whether the litigation between the parties would be concluded by the striking out of the plaintiff’s claim;
9. (9)
   How far the litigation has progressed;
10. (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;
11. (11)
    Whether there is a satisfactory explanation for the delay; and
12. (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 having over them.”  (Citations omitted)

The Contentions

15. [15]
    The second defendant emphasises:

1. (a)
   The relative positions of the parties.  She is a forty-nine year old housewife and mother of two children, aged eleven and fifteen.  She left school at sixteen years, has no tertiary education and deposes to little understanding of this case.  She also deposes to her execution of the loan documentation, out of a sense of loyalty to her de facto husband (the first defendant) and for purposes related to the business activities he pursued.^[11]  On the other hand the plaintiff is a large bank;

2. (b)
   That the money advanced by the plaintiff was never seen nor spent by her but was rather consumed in connection with the business activities of the now liquidated company: Pepmint and that whilst she had previously been an officer of that company, she ceased being a director on 22 March 2002 and the company secretary on 10 April 2002; and

3. (c)
   The affect that the process of litigation (commencing with the plaintiff’s formal demand notices in 2005) has and continues to have on her psychological health.

16. [16]
    In respect of the psychological impact on her, the second defendant deposes:

“30. This case that the NAB has brought against me has caused me a great deal of stress.

31. This litigation started on 24 May 2007; I recall a man handing the court documents to me at around this time.

32. But the stress began 2 years earlier; attached and marked “CMHD” and “CMHE” are demand letters that Bernard and I received in the post around the 14 July 2005 and 7 November 2005 dates.

33. I recall being incredibly stressed about them since there was absolutely no way that I had the $95,832.97 and the $335,883.53 that the bank was demanding in those demand letters.

34. Plus I knew that my 79 Lakeside Crescent, Forest Lake was also at risk of the NAB selling it from under me.

35. The only form of re-assurance I got was from Bernard who kept telling me that things would work out.

36. But they didn’t; between 2005 and 2007 it seemed that our money worries got worse and worse, not better.

37. And then came May 2007 when the NAB sued me personally.

38. The stress on me has been terrible.

39. Before all this I was a happy and healthy person; I never ever needed medical help for my mental health.

40. But after all this started I needed to get help from Dr Amberley Boyer, who is a psychologist.

41. I have read her affidavit and agree that I don’t feel like I’m getting better.

42. Rather I do believe that I am getting worse and worse.

43. Not only because I had never been sued before this, and not only because I remain scared by the whole process and what consequences I will be forced to go through if I lose this case, I also feel so helpless because of the way my life feels like it has been ‘on hold’ since May 2007 when it started.

44. I also am scared because there is nothing else I can do because not only could I not have paid the $95,832.97 and $335,883.53 that the bank was demanding back in 2005, I can’t pay that, or even part of that, now either.

45. I feel so helpless and so devastated by it all.

46. So when my solicitor told me that because the NAB has apparently not taken “steps” in its action against me for two years, and that this somehow lets me ask the court to order that I be released from this action, I said yes when she asked if I wanted to ask the court to do this.

47. If this case was to end it would feel like a huge relief and that for the first time in the past difficult six years of my life I could feel like I can get on with my life.

48. Especially by being able to give my time and energy to my two children as they enter/go through their teenage years instead of worrying over and over about this case.

49. And also by trying to get my mental health fixed up.”

17. [17]
    In her affidavit, Ms Boyer (a registered and experienced practising psychologist) deposes to a diagnosis of the second defendant suffering from a general anxiety disorder, which she describes as a severe episode as at June 2011. Ms Boyer has been the treating psychologist of the second defendant since May 2009 and she provided her assessment of that condition and its prognosis, as follows:

18. [18]
    It can be further noted that the second defendant deposes to the plaintiff having realised the security it held over her property at 79 Lakeside Crescent, Forest Lake, by selling it.  And further that the evidence set out above as to the impact of the litigation upon the second defendant’s mental health, was not the subject of any challenge. 

19. [19]
    On the other hand, the plaintiff emphasises:

1. (a)
   That there is no issue of non-compliance with court orders or directions, on it’s part;

2. (b)
   That it has an apparently strong prima facie claim against the second defendant and also claims good prospects of success, in that although, in her defence the second defendant denies signing the guarantee, her affidavit on her application contains an admission that she did.  Further, and to the extent that the second defendant claims that she did not understand the nature and effect of the document, the plaintiff relies upon the disclosed certificate of the independent solicitor as to his having explained the nature and effect of the document to her and as to her apparent understanding of that explanation and execution of the document, in his presence; and

3. (c)
   That the explanation for its inactivity, leading to these applications, lies in not wanting to “cut across” in relation to a complaint of fraud in connection with the conduct of the financial facility which was afforded to Pepmint and was secured by the guarantee in issue.  In that regard it is pointed out that the first defendant was charged with an offence of fraud on 11 November 2010.  Further, it is pointed out that in the course of investigations, police officers took possession of some of the relevant bank documents. 

20. [20]
    The plaintiff further points out that, in the relevant period of delay, the effective failing is that neither party has moved to progress the litigation by completing discovery (as the next step pursuant to the UCPR).

21. [21]
    With some justification, the second defendant is critical of the explanation put forward. First, it is pointed out that it has only emerged in response to her application.^[12]  Secondly, that there is no suggestion that the second defendant has been subject of any criminal investigation.  Thirdly, that the subject proceedings are entirely civil in character^[13] and the suggestion of the plaintiff as to concerns that there may be a claim of spousal privilege by the second defendant, while any criminal proceedings against the second defendant remain unresolved, are misplaced given that she is his de facto spouse.^[14]  In any event, it was not made clear as to how any such prospect could justify or excuse the plaintiff’s lack of progression of this litigation. 

Discussion

22. [22]
    Having regard to the categories of factors identified in Tyler^[15] and as relevantly arising here, it can be noted that:

1. (a)
   The plaintiff’s demand in respect of default under the guarantee dates back to July 2005 and the current proceeding (which despite the form of the defence, essentially remains a prosecution of the plaintiff’s asserted rights under a guarantee) was commenced in May 2007;

2. (b)
   It can be further noted that in February 2009 the proceedings were transferred to the District Court at Maroochydore, after a case-flow review precipitated some action in relation to the matter and it was then disclosed that the claim only remained to be pursued against the second defendant, in the light of the first defendant’s bankruptcy.  That came after the initial response of the solicitors for the defendants to the case-flow management intervention notice, dated 5 December 2008, being a suggested timetable to be implemented by directions, in order to progress the matter and in lieu of such consent, an order for dismissal of the claim with indemnity costs;

3. (c)
   However and since then, the only step taken has been the disclosure of the solicitor’s certificate (as endorsed on the guarantee) made by the plaintiff to the second defendant on 2 June 2009.  This occurred in the context of the plaintiff’s suggestion by facsimile dated 15 May 2009 that it would apply for summary judgment against the second defendant and seeking a release of the solicitor who provided the certificate from “his duty of confidentiality in respect of the execution of the solicitor’s certificate”, so that he could provide an affidavit for the purpose of that application.  But nothing else has occurred except that by letter dated 17 November 2010, the solicitors for the plaintiff wrote in the following terms:

“We refer to previous correspondence. 

We note that we have not had any response in respect of the disclosure undercover of our letter dated 2 June 2009.  Please advise if you require any further documents. 

In accordance with rule 389(1) of the Uniform Civil Procedure Rules 1999 (Qld), we give you notice of our client’s intention to proceed in respect of its claim and statement of claim in the above proceedings after one month.  Of course, in the interim, please contact us if you wish to discuss the matter.”

There was no further correspondence in relation to this matter prior to the filing of the second defendant’s application on 19 July 2011;

4. (d)
   I proceed upon the basis that either an order dismissing the plaintiff’s claim or an order denying leave to proceed upon that claim would effectively bring this litigation to an end;

5. (e)
   The delay here is a result of the actions and desires of the plaintiff, rather than any dilatoriness on the part of its lawyers and the explanation for that delay is not entirely satisfactory for the reasons advanced by the second defendant, as set out above; and

6. (f)
   Whilst it is contended by the plaintiff that the case largely turns on documentary evidence, that is only so from its perspective and as best as can be gleaned, the matters raised by the second defendant involve more subjective considerations.  Accordingly and whilst it is difficult to assess what impact the delay which has occurred will have on an ability to ensure a fair trial, there will inevitably be the impact of dimmed memories and the ability of witnesses to recall precise and crucial facts, relating to events occurring so long ago, such as to raise the “problem of effectively hearing and determining questions of fact arising out of events that have taken place many years before.”^[16]

23. [23]
    As noted above, the second defendant also refers to the approach of P Lyons J in Field v Luxor Products Pty Ltd & Anor and particularly that part of His Honour’s judgment in which he identified that relevant prejudice is not limited to considerations relating to prejudice in respect to the conduct at the trial or an inability to ensure a fair trial.  His Honour said:

Conclusion

24. [24]
    In this instance, a critical factor is that the plaintiff cannot proceed with this litigation without obtaining an order of the court granting leave to do so, pursuant to UCPR 389(2). In Lilyville Pty Ltd v Colonial Mutual Life Assurance Society Ltd^[17], Chesterman J described the appropriate approach, as follows:

25. [25]
    The second defendant has provided evidence of the significant personal impact that the continued threat of this litigation has and will continue to have on her.

26. [26]
    In addition, the delay which has occurred to the point at which the plaintiff required leave to proceed, must necessarily have, to some extent, compromised the capacity of a fair trial, in the sense of the capacity to determine the precise facts which may be relevant to all the issues which are raised in the pleadings.

27. [27]
    Whilst the position is complicated by the form of the defence, in reality this proceeding is in essence at the behest of the plaintiff. Albeit, that what is being pursued from the second defendant remains as only a relatively insignificant part of the overall claim which the plaintiff set out to pursue against both defendants.

28. [28]
    The explanation put forward by the plaintiff for the delay which puts it in the position where it must seek leave to continue, must be considered in this light. Whilst it may be accepted that the plaintiff’s attention may have been distracted by the prospect and now reality of criminal proceedings against the first defendant, that does not provide any meaningful or satisfactory explanation for its inaction in pursuit of what it contends are its good prospects of recovery against the second defendant. The situation has a hallmark of some lack of resolve on the part of the plaintiff to commit resources to active pursuit of the claim against the second defendant, while attempting to keep options open.

29. [29]
    In these circumstances and on balance, I conclude that good reason has not been demonstrated for making an order to allow the plaintiff to proceed further with this proceeding, against the second defendant and the plaintiff’s application is therefore dismissed. Accordingly there is no need to separately decide whether the second defendant has otherwise made out her application.

30. [30]
    I will hear the parties further in respect of the need for any further formal order and as to costs.