Talana Corporation Pty. Ltd. v O'Loan
[2013] QDC 266
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- Unreported Judgment
- Talana Corporation Pty. Ltd. v O'Loan[2013] QDC 266
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Talana Corporation Pty. Ltd. v O'Loan[2013] QDC 266
Talana Corporation Pty. Ltd. v O'Loan[2013] QDC 266
DISTRICT COURT OF QUEENSLAND
CITATION: | Talana Corporation Pty Ltd v O'Loan [2013] QDC 266 |
PARTIES: | TALANA CORPORATION PTY LTD (ACN 120 230 784) (plaintiff/applicant) V CASSANDRA RACHAEL O'LOAN (defendant/respondent) |
FILE NO/S: | DC No 739 of 2010 |
DIVISION: | Civil |
PROCEEDING: | Application |
ORIGINATING COURT: | District Court at Brisbane |
DELIVERED ON: | 23 October 2013 |
DELIVERED AT: | Brisbane |
HEARING DATE: | 13 June 2013 |
JUDGE: | Devereaux SC DCJ |
ORDER: |
|
CATCHWORDS: | PROCEDURE – SUPREME COURT PROCEDURE – QUEENSLAND – PROCEDURE UNDER UNIFORM CIVIL PROCEDURE RULES AND PREDECESSORS – TIME – DELAY SINCE LAST PROCEEDING – where, upon request, plaintiff’s solicitor sent to defendant’s new solicitor a copy of the previously filed and served reply and answer – whether a declaration should be made that such ‘service’ of the reply and answer was a step in the proceeding – whether the plaintiff should be granted leave to proceed pursuant to rule 389 Uniform Civil Procedure Rules 1999Uniform Civil Procedure Rules 1999, r 389Artahs Pty Ltd v Gall Standfield & Smith (A Firm) [2012] QCA 272Lilyville Pty Ltd v Colonial Mutual Life Assurance Society Ltd [1999] QSC 372Tyler v Custom Credit Corp Ltd & Ors [2000] QCA 178 |
COUNSEL: | C M Tam for the plaintiff/applicant B A Hall for the defendant/respondent |
SOLICITORS: | Catton Roderick Lawyers for the plaintiff/applicant Everingham Lawyers for the defendant/respondent |
- [1]By application filed 4 June 2013, the plaintiff seeks a declaration that ‘service of the reply and answer on the defendant on 3 August 2010’ was a step in the proceeding; or leave to proceed, under r. 389(2) of the Uniform Civil Procedure Rules 1999. Rule 389 provides:
“389 Continuation of proceeding after delay
- (1)If no step has been taken in a proceeding for 1 year from the time the last step was taken, a party who wants to proceed must, before taking any step in the proceeding, give a month’s notice to every other party of the party’s intention to proceed.
- (2)If no step has been taken in a proceeding for 2 years from the time the last step was taken, a new step may not be taken without the order of the court, which may be made either with or without notice.
- (3)For this rule, an application in which no order has been made is not taken to be a step.”
Background
- [2]In August 2006, the plaintiff agreed to buy the defendant’s accounting practice. The purchase price was $350,000. Pursuant to the agreement, the plaintiff paid a deposit of $10,000 and about $235,000 at settlement on 16 October 2006. In December 2006, the plaintiff provided a bank guarantee for $100,000.
- [3]A special condition provided that if the gross fees rendered by the business, as reviewed by the parties, from 1 October 2006 to 30 September 2007, were less than $350,000, then the purchase price would reduce according to a formula. The plaintiff’s case is that the fees rendered during the relevant period were $216,446.84 and so, according to the formula, the purchase price was to be adjusted by (about) $133,000; given what the plaintiff had already paid, it was entitled to a refund and the defendant was not entitled to call on the bank guarantee.
- [4]The defendant called on the bank guarantee on 5 October 2007, receiving $102,672.
- [5]The plaintiff’s claim is, primarily, for the refund of the overpayment, about $133,000.
When was the last step?
- [6]The pleadings were filed as follows:
- (i)9 March 2010 - claim and statement of claim;
- (ii)12 April 2010 – notice of intention to defend, defence and counter-claim;
- (iii)18 June 2010 – reply and answer.
- [7]Mr Catton, the plaintiff’s present solicitor, says the reply and answer was served, by the plaintiff’s then solicitor on the defendant’s then solicitor on 29 June 2010. Although no correspondence is exhibited in support of that assertion, it seems to be common among the parties and I act on that basis.
- [8]On 30 July 2010, Everingham Lawyers wrote to the plaintiff’s then solicitors informing that they now acted for the defendant, that they had various correspondence and had instructions ‘there may be a Reply and Answer which you have just recently forwarded to Bribie Island Law’. Everingham Lawyers requested a copy.
- [9]On 2 August 2010, Everingham Lawyers filed a notice of change of solicitor for the defendant.
- [10]On 3 August 2010, the plaintiff’s then solicitors sent a copy of the reply and answer to Everingham Lawyers.
- [11]The plaintiff argues that sending, on 3 August 2010, the copy of the reply and answer as requested by Everingham Lawyers was a step in the proceeding.
- [12]In Artahs Pty Ltd v Gall Standfield & Smith (A Firm) [2012] QCA 272, the Court had to consider whether an order made by a judge in the Trial division, prepared with the consent of the parties but initiated by a case flow management intervention notice (and not met), was a step in the proceeding. McMurdo P, with whom Fraser JA agreed, did not consider it so because the order did not, itself, advance the action. Peter Lyons J considered the making of an agreement for disclosure, formalised by the court order, constituted a step. Their honours agreed that it was not necessary, for an action to be a step, that it be something required by the rules. But it must progress the action towards a conclusion. So, the filing and service of a reply – a pleading which is not required under the rules – would amount to a step.[1]
- [13]The plaintiff argues the sending of a copy of the reply and answer, in response to the request of lawyers recently engaged, amounted to a step in the peculiar circumstances of this case.
- [14]Even if serving, as opposed to filing and serving, a reply would be a step in a proceeding, that step was complete in the present proceeding on 29 June 2010. I am not persuaded that sending a copy of a pleading earlier filed and served to a party’s new solicitors is ‘serving’ the pleading. The rules require a party to be served, although of course that may be done by serving a document on the party’s solicitor authorised to accept service.[2]Sending another copy, as a matter of courtesy, to the new solicitor is not service and should not be classified a step in a proceeding. The action did not meaningfully progress the claim, although it might have helped the defendant’s new solicitor comprehend the issues.
- [15]On this analysis, the last step was taken on 18 or 29 June 2010.
Notice of Intention to Proceed
- [16]On 10 April 2012, Catton Roderick Lawyers filed a notice of change of solicitor for the plaintiff.
- [17]In his affidavit, Mr Catton writes that on 2 July 2012, the plaintiff’s solicitors wrote to Everingham Lawyers enclosing a notice of intention to proceed, under UCPR r. 389(1).
- [18]Everingham Lawyers replied, on 10 July 2012, that the plaintiff needed leave to continue because the last step was taken on 18 June 2010 when the plaintiff filed the reply and answer.
- [19]Purporting to act pursuant to notice of 2 July 2012, the plaintiff’s list of documents was served on 31 July 2012.
- [20]Mr Catton’s affidavit does not include this notice, although it does include a notice of change of solicitor of the same date. He deposes to having sent both notices. That he did so does not seem to be in issue. It is a curious side issue in this case that, assuming notice was given under r. 389(1), service of a list of documents, if that be the next step taken, on 31 July 2012 was premature.
- [21]In any case, the question is whether the plaintiff should be given leave to proceed.
Leave to proceed?
- [22]Both parties refer to the list of considerations relevant to the exercise of the discretion to be exercised upon such an application set out in Tyler v Custom Credit Corp Ltd & Ors [2000] QCA 178 by Atkinson J with whom McMurdo P and McPherson JA agreed. In another regularly cited passage, Chesterman J said, in Lilyville Pty Ltd v Colonial Mutual Life Assurance Society Ltd [1999] QSC 372:
“Whether there is a satisfactory explanation for the delay in the prosecution of the action and whether the defendant will suffer prejudice if the action proceeds are always relevant factors. The discretion conferred by rule 389 is one to allow an action to proceed despite the general prohibition against an action continuing in which no step has been taken for [two] years. The applicant must satisfy the court that grounds exist for exercising the discretion in its favour. There is an evidentiary onus on the defendant to raise any considerations telling against the exercise of discretion but the ultimate onus of satisfying the court that the action should be allowed to proceed remains on the applicant.”
- [23]This application was filed on 4 June 2013, almost 3 years since the last step was taken. The plaintiff was on notice, from 10 July 2012, that the defendant took the point. Thereafter, much of the correspondence concerned a potential application for security for costs should the plaintiff, over the defendant’s objection, obtain leave to proceed. In fact, Everingham Lawyers had written, on 5 August 2010, to the plaintiff’s then solicitors, seeking ‘satisfactory evidence of your client’s capacity to pay our client’s costs’ and foreshadowing an application.
- [24]To examine the plaintiff’s prospects of success in the action and the questions of delay before and since commencement of the proceeding, it is necessary that I refer to the relevant contractual terms and the conduct of the parties such as it is revealed in the materials before the court.
- [25]Clause U of the contract required the defendant to provide seller’s assistance for each business day in October 2006. After that, by special condition 3, the defendant undertook to ensure that she and her business partner, Mr Gilday, were available to provide seller’s assistance to the plaintiff. The plaintiff was required to pay either the defendant or Mr Gilday (it was for them to choose who did the work) $40.00 per hour to consult to the business for at least thirty hours per week from 1 November 2006 to 31 January 2007 and at least 10 hours per week from 1 February 2007 to 30 September 2007.
- [26]That scheme then was to lead, by special condition 4, to a review of gross fees on 31 March 2007 ‘to determine a plan to maintain the gross fees rendered’. On 30 September 2007, the parties were to again review the gross fees rendered which would in turn trigger either the full or adjusted payment to the defendant of the balance of the purchase price.
- [27]The parties agreed, by special condition 6, that any dispute arising in relation to special condition 4 would be dealt with under the dispute resolution clause in standard condition 13.
- [28]Ms Christodoulou, managing director of the plaintiff, in her affidavit, says Ms O'Loan and Mr Gilday did not give assistance as required under the contract. In particular, she says they did not give tuition regarding certain software, systems and policies. She puts any decline in gross fees down to the disorganised state of the files she inherited. She gives detailed particulars of difficulties she suffered resulting from the inadequacy of the business practices of the defendant.
- [29]There is a dispute between the parties about a process, prompted by the defendant in April 2007, which led to a meeting on 31 May 2007. The defendant pleads that at the meeting Ms Christodoulou agreed to produce documents within seven days and advise a specific proposal for seller’s assistance. There was then to be another meeting in one month’s time. The plaintiff, in reply, agrees there was a process initiated by the defendant in April 2007, admits there was a meeting on 31 May 2007, but ‘denies the plaintiff agreed to produce documents within seven days to two weeks because no time frame was agreed’; denies the plaintiff agreed to advise a specific proposal for seller’s assistance and denies there was an agreement for another meeting one month later.
- [30]Ms Christodoulou says the defendant failed to participate in the review of gross fees that was to occur, according to the terms of the contract, in late September 2007.
- [31]Ms Christodoulou says she attempted, through her solicitors, to resolve the dispute in the period from December 2009 to February 2010. Some of the correspondence is attached to her affidavit. It seems the parties could not agree on the process and so this proceeding was commenced, in March 2010. It is apparent that the defendant did not respond until new solicitors (not her current representatives) wrote on her behalf in early February 2010.
- [32]The defendant, in her affidavit, disputes, in equivalent detail, the evidence of Ms Christodoulou. On the matter of seller’s assistance, she says she and Mr Gilday worked for the plaintiff free of charge for some of October and November 2006. Because she hoped to gain part time work with the practice in the future, she was keen to remain involved. However, despite her approaches, she was not asked to assist thereafter. The only evidence (from either party) broadly relevant to the contractual review of 31 March 2007, is a note in the defendant’s diary that she telephoned on 13 February 2007 and was told ‘no room to come in’. She went to the practice to speak to Ms Christodoulou to find her things had been packed up. Ms Christodoulou asked her to leave, saying any further assistance would be provided by Mr Gilday only.
- [33]The defendant says she met Ms Christodoulou on 31 May 2007. Ms Christodoulou complained she was not receiving the seller’s assistance she was entitled to. It was agreed Ms Christodoulou would provide certain documents but nothing was produced.
- [34]As the plaintiff submits, a trial judge’s task will include construction of the contract, which task is not particularly affected by the delay. However, the real disputes between the parties will require the examination of events which occurred up to seven years ago. The defendant, in her affidavit, says she would require, as witnesses, staff members and customers of the business for the period 2006 to 2007. Recovering evidence could be more difficult if, as the defendant believes, the practice is no longer operating.
- [35]The defendant also states that the litigation would cause her significant financial and other stress. Ms Wallace, of Everingham Lawyers, deposes to the defendant’s home position – caring for three young children, one of whom has serious health problems. These matters may not be of direct relevance to the exercise of discretion, except to highlight the desirability ‘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.’: Tyler v Custom Credit Corp Ltd at [2].
- [36]In view of the above, and considering the factors set out by Atkinson J. in Tyler v Custom Credit, despite the fact that the plaintiff’s claim would be concluded by a refusal of leave to proceed, I am not satisfied leave should be granted:
- The events in dispute occurred up to seven years ago;
- There is a two-year delay between 7 October 2007, when Ms Christodoulou says she instructed her then solicitor to request a meeting of the parties which, she says, the defendant refused to attend, and 24 December 2009, when her solicitors (a different firm) wrote to the defendant’s earlier solicitors seeking to activate the contractual dispute resolution scheme.
- There is then the delay between 3 August 2010, when the plaintiff’s then solicitors sent a copy of the reply and answer to Everingham Lawyers, and 10 April 2012, when Catton Roderick Lawyers filed the notice of change of solicitor for the plaintiff. The plaintiff’s explanation for part of that delay is that, between late 2010 and April 2011 she was involved in a partnership dispute with former colleagues at another accountancy practice, so her attention was diverted from her dispute with the defendant.
- There is also the further though shorter delay from 10 April 2012 to 2 July 2012, when the plaintiff’s solicitors wrote to the Everingham Lawyers enclosing a notice of intention to proceed.
- Ms Wallace, of Everingham Lawyers, deposes to a further delay. In her affidavit, she says that between 31 July 2012 and 4 June 2013 ‘Everingham Lawyers heard nothing from the plaintiff’ and then, on 5 June 2013, without notice, the plaintiff served the present application.
- The litigation has not progressed much beyond the pleadings. The plaintiff served a list of documents on 31 July 2012.
- The only evidence of the gross fees rendered for the relevant period is the assertion in the solicitor’s affidavit that it was $216,446.84. That amount is not admitted on the pleadings. As to this and the other factual disputes between the parties, it is difficult to assess the plaintiff’s prospects of success but the material before the court does not inspire optimism.
- The defendant makes a case that the delay in proceedings is prejudicial to a fair trial, given the intended reliance on witnesses and the effect of delay on memory.[3]
- There is no evidence that impecuniosity on the part of the plaintiff contributed to the delays, nor that delay should properly be sheeted home to her (various) legal representatives.
- [37]What has concerned me, with respect to the potential merits of the plaintiff’s case, is the appropriateness of the defendant’s action in calling on the bank guarantee, thereby receiving the balance of the purchase price without the satisfactory completion of the review scheme provided for in the special conditions. It seems to be accepted that the defendant commenced a dispute resolution process according to standard clause 13. That is, it is not contested that a process commenced. I have referred to the pleadings and evidence concerning this process. Once that process failed, the defendant obviously decided simply to take the balance of the purchase price. The defendant has not plainly asserted a contractual right, in the circumstances existing in early October 2007, to call on the bank guarantee. In response to the plaintiff’s allegation that the defendant unlawfully and in breach of the contract called on the guarantee, the defendant pleads a denial on the basis that the plaintiff is estopped by its conduct from relying on the special condition and has waived the special condition by failing to conduct the reviews.[4]Arguably, the defendant’s (only) remedy, upon the failure of the dispute resolution process, was to commence proceedings. The counter argument may be that the outstanding amount was part of the contract purchase price, and upon the failure of both the process which might have adjusted it and the dispute resolution process, nothing prevented the seller receiving that part of the contract purchase price. If calling on the bank guarantee was in breach of the contract or otherwise unlawful, what is the plaintiff’s loss? That, it seems to me, returns one to the central factual disputes in the case. And I have, so far as the materials allow, drawn the conclusion that the plaintiff has not shown such prospect of success as would outweigh other relevant considerations, particularly unexplained delay and potential prejudice to the defendant in the continuation of the litigation.
- [38]The applications for a declaration and leave to proceed will be dismissed. I will hear the parties as to further orders. It is proper that an order dismissing the proceeding follow. The defendant filed, by leave, at the hearing of the application, an application for such an order.