DISTRICT COURT OF QUEENSLAND

 Applications

1. [1]
   There are two applications:

1. (a)
   One by the plaintiff, to dismiss the counterclaim of the first defendants for want of prosecution, pursuant to r 280 of the Uniform Civil Procedure Rules (“UCPR”); and

2. (b)
   One by the first defendants, for leave to proceed pursuant to r 389 UCPR.

The second defendant

2. [2]
   The position of the second defendant is a little uncertain, but it appears that it is now a deregistered company. After purchasing the second defendant from the plaintiff, the first defendants registered a new ACN with the some company name. That company has since been sold to a third party. Hence it seems reasonable to regard the second defendant as a non-entity so far as these proceedings are concerned.

Legal Representation

3. [3]
   The first defendants are not legally represented in these applications. They have been represented in the past but there have been periods when they have not been legally represented.

4. [4]
   On the hearing of these applications the first defendant’s Mrs Hartley, acting for her husband and herself, was at a significant disadvantage in dealing with matters of law arising in both applications. Mrs Hartley had been informed of that disadvantage in this hearing and on earlier reviews of this proceeding. She did, however, consult QPILCH and other legal advisory services for assistance and, as I understand, received some legal advice. 

5. [5]
   She was, at a previous review of the proceeding, given the opportunity to make further efforts to obtain legal representation, but that was apparently without success. The principal, if not the only, reason is her and her husband’s impecuniosity.

6. [6]
   At the outset of the hearing of these applications, she stated to me that she was prepared to proceed without legal representation and to advocate her and her husband’s case herself.

Background

7. [7]
   The second defendant had carried on the business of “office stationery sales and supplies” in premises located in Townsville. The plaintiff had been the sole director, secretary and shareholder of the plaintiff. The first defendants’ Mrs Hartley was an employee of the plaintiff and worked, as I understand, as a bookkeeper and secretary in the business of the second defendant. 

8. [8]
   The second defendant was sold by the plaintiff to the first defendants by an “agreement for sale of shares”, on or about 3 October 2002. The agreement involved the sale of the plaintiff’s 1,000 ordinary fully paid shares, held in the second defendant, in equal numbers to each of the first defendants, for a price of $1.00. The agreement, so far as further relevant, provided that the plaintiff would continue to guarantee monies owing to the Commonwealth Bank of Australia (“CBA”) with respect to a loan (that had a balance due and owing to the CBA, as at the date of the agreement, of $65,000.00) which was secured by a mortgage over the plaintiff’s residential property. The loan was a personal liability of the plaintiff. It was used by him to pay out an overdraft liability of the second defendant to the National Australia Bank.

9. [9]
   The plaintiff claimed that the agreement included a collateral oral “agreed term” between himself and the first defendants to the effect that, as part of the consideration in the agreement, the first defendants would assume liability for the loan by being substituted as debtors in lieu of the plaintiff; would pay the amount of the loan debt to the CBA; would apply to the CBA for a loan sufficient to discharge the plaintiff’s loan debt; and would indemnify the plaintiff in respect of the loan debt.

10. [10]
    The plaintiff’s loan debt was not discharged by the first defendants, beyond some initial payments made by them. As at 17 December 2009 the plaintiff’s loan debt was $51,707.63.

11. [11]
    The first defendants initially defended the claim on the basis that the “agreement for sale of shares” constituted the entire agreement between themselves and the plaintiff and that their liability under the agreement did not include liability for the loan.

12. [12]
    The first defendants’ counterclaim alleged, inter alia, misleading and deceptive conduct by the plaintiff as to the true value of the financial and trading position of the second defendant and the debt liability carried by the second defendant; and claimed damages of about $230,000.00.

13. [13]
    However, by letter dated 26 March 2003 from the solicitors then acting for the first defendants, Arthur Browne & Associates, it was confirmed that in the sale and purchase transaction the first defendants, as directors of the second defendant, had “agreed to assume liability for a loan for the Commonwealth Bank in the amount of approximately $65,000 and has indemnified Richard Ian Wright in relation thereto”. 

14. [14]
    Thereafter, whilst represented by MacDonnells Solicitors, the first defendants disputed that statement of confirmation on the basis that they had believed the loan to be a loan to the second defendant (the company), rather than a personal loan to the plaintiff.

15. [15]
    However, on an application for summary judgment heard on 18 June 2007, consent orders were made by me in the following terms:

16. [16]
    Hence the plaintiff’s claim is no longer an issue in these proceedings.

The last step in the proceeding

17. [17]
    Rule 280 of the UCPR provides as follows:

18. [18]
    For the purpose of these applications the last step in the proceeding was made on 24 November 2009, the date of a letter enclosing further and better particulars of the Amended Reply served on the first defendants. There was subsequent correspondence about, inter alia, forensic accounting and disclosure of documents. For the purpose of r 389 UCPR the end‑date of the period of two years is 23 November 2011. 

19. [19]
    Mr Raeburn for the plaintiff conceded that the plaintiff had waited for two years following the last correspondence between the parties and/or their solicitors - which appears to be a letter from the further solicitors then acting for the first defendants, S R Wallace & Wallace (although the same solicitor, Mr Jeffrey Smith, had moved from MacDonnells Solicitors to that firm), before filing the application to dismiss the counterclaim for want of prosecution. This conservative approach appears to have been made, despite what may have been considered with some certainty was the last step in the proceeding, to give confidence, so far as the plaintiff was concerned, of what constituted the last step in the proceeding.

Discussion

20. [20]
    The court has the power to dismiss a claim for want of prosecution for a substantial and persistent failure to comply with the rules. The power does not depend on the need to show prejudice to the defendant or that a fair trial was no longer possible: Cooper v Hopgood & Ganim (a firm) [1999] 2 Qd R 113. 

21. [21]
    Rule 280 has a more direct and determinative effect, when applied, than did the courts inherent power to dismiss an action for want of prosecution. When the court considers the application of the rule, r 5 of the UCPR - as is always the case since it is a philosophical expression applicable across the rules - has application:

22. [22]
    There are several preconditions required to be satisfied before the power to dismiss a claim is enlivened:

1. Rule 280(1)(a) prima facie must be invoked by a step not being taken. 

2. “A step” is something which carries the proceeding forward and is intended to continue the litigation.  The step in an action must have an impact upon the opposite party to the litigation. It does not include steps done in preparation of a party’s own case: Citicorp Australia Ltd v Metropolitan Public Abattoir Board [1992] 1 Qd R 592.

3. Alternatively, a failure by the plaintiff to do what is required by an order of the court within the time stated in the order: r 280(1)(a) and (b).  In other words, there must be timely compliance with the steps required by the rule or an order of the court. 

4. A party must make application to the court to dismiss the action for want of prosecution: Bazely v Queensland [2001] QSC 476.

23. [23]
    The discretion of the court is unfettered. The matters which will be considered relevant in an application to dismiss an action for want of prosecution include the following:

24. [24]
    Of course, the power in r 280 includes the power for the court to make “any other order it considers appropriate”, rather than dismiss the action.

Leave to proceed

25. [25]
    Rule 389 of the UCPR provides as follows:

26. [26]
    Rule 389(1) requires one month’s notice to be given to all parties before a step is taken more than one year after the previous step in the proceeding. Where two years have elapsed since the last step in the action, leave of the court is required to proceed.

27. [27]
    The proper approach under r 389 is “to identify the relevant factors, assess the weight to be given in the circumstances of the case to each of them, and then to determine whether, on balance, there is a good reason for making the order”: Chesterman J in Lilyville Pty Ltd v Colonial Mutual Life Assurance Society Ltd [1999] QSC 372.  His Honour wrote, at [2]:

“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 to r 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 three 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 the discretion but the ultimate onus of satisfying the court that the action should be allowed to proceed remains on the applicant: see Brisbane South Regional Health Authority v Taylor (1996) 186 CLR 541 at 547, per Toohey and Gummow JJ.”

28. [28]
    In Tyler v Custom Credit Corp Ltd [2000] QCA 178, the court set out a non-exhaustive list of 12 factors to be taken into account in determining whether the interests of justice require a case to be dismissed under r 389 (I have described the parties so as to reflect their respective positions in this application):

29. [29]
    In Tyler, Atkinson J wrote, at [2] - in concluding the list of factors - the following:

“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.”

Discussion

30. [30]
    The latter statement is of particular relevance to the circumstances of this case.

31. [31]
    Also of particular relevance is the impecuniosity of the first defendants, a state of affairs which they would argue has been brought about by the conduct of the plaintiff, in terms of the allegations made in the counterclaim.

32. [32]
    Also of relevance is the conduct of at least one of the lawyers who has represented the first defendants, who was initially employed by MacDonnells Lawyers and subsequently by SR Wallace & Wallace Solicitors. There may be a number of reasons for his not pressing the first defendants’ case with expedition but I am unable to make any finding about that, in the absence of evidence from him or from some other source made upon affidavit, that can inform in first hand terms what the first defendants have described as an illness that affected him.

33. [33]
    Mrs Hartley was given the opportunity to produce affidavit evidence from other sources, in addition to affidavit evidence by herself and/or her husband, but she declined so to do. In fact, she said she doubted that she would be able to have a deposition upon affidavit made by the solicitor or anyone else who could speak relevantly to the information that she was trying to impart from the bar table and to which objection had been made, quite properly, by the plaintiff’s solicitor, Mr Raeburn.

34. [34]
    Consequently the reasons for the delay in prosecuting the counterclaim have not been explained in a manner that is admissible and acceptable to the court. The passage of time since the cause of action in the Counterclaim arose, since the commencement of the proceedings by Defence and Counterclaim; and since the last step in the action, is very significant and unquestionably there has been some prejudice to the plaintiff by reason of that.

35. [35]
    I was informed by Mr Raeburn that the credibility of the plaintiff and Mrs Hartley were equally in issue: for example, the information that she alleges she was told about the financial status of the second defendants and what she claims the documents showed upon which she purportedly acted, as against the actual records of the second defendants.

36. [36]
    Mrs Hartley in oral submissions referred to the lack of communication with or by her lawyers. She said she and her husband had spent time on determining financial matters in difficult financial circumstances after their purchase of the second defendant. She blamed her lawyers, including a barrister who had been briefed at one point in about mid to late 2009 for advice, an advice that she claims was full of error and - at least impliedly - demonstrated a lack of rigour in assessing the financial circumstances that she alleges reflected the true position of the second defendant at the time of its purchase.

37. [37]
    That information came by way of oral submissions by her, unsworn and without a deposition or affidavit from any other person who might have relevant statements to make. She also referred to her husband’s illness and his being unable to work for that reason in 2010-2011 and to other impacts upon the family in 2011.

38. [38]
    So far as any future progress of the Counterclaim is concerned, Mrs Hartley frankly conceded there was no prospect of any legal assistance being afforded to her and her husband and she acknowledged the difficulty they faced in preparing for and running a trial. In my view, formed from the several Reviews and the hearing of the applications, there is absolutely no possibility that she could martial the documents, retain and instruct experts, proof other witnesses and master the evidence which would inevitably be required for her Counterclaim be advocated in court, let alone to succeed. In my view, neither she nor her husband, with respect to each of them, have the capacity to take this matter to trial as self represented litigants and hence the possibility that they could even prepare the trial by taking further necessary steps, of which there are many if the matter was to proceed, including the necessity to have expert financial and accounting evidence prepared, is remote and means simply that she and her husband have no prospect of ever being able to advance the Counterclaim beyond its present point. That is a factor which weighs heavily in favour of the granting of the application, despite those other matters that I may properly take into account in an exercise of discretion.

39. [39]
    There has been no adequate explanation for the delay in taking a step, at least none upon which the court could properly act. Statements from the bar table otherwise unsupported by affidavit are of little cogency to the court and to accept them would be to visit upon the other party a very significant unfairness and prejudice.

40. [40]
    The first defendants’ Counterclaim is complex and fraught with difficulty. It requires analysis by financial or accounting experts, it alleges very significant matters of impropriety and deceit against the plaintiff and will inevitably involve significant matters of credibility in respect of both the plaintiff and Mrs Hartley for determination.

Conclusion

41. [41]
    The plaintiff’s claim is not a relevant issue because by reason of the consent order made in June 2007, the first defendants having accepted liability for the loan to the CBA but not having made payments in respect of it since December 2006.

42. [42]
    The litigation has been proceeding for a very significant period of time and the prosecution of the Counterclaim by the first defendants has been fraught with delay and by numerous amendments to the Counterclaim. It is notable that further amendments to the counterclaim were in more recent times (in the context of the length of this litigation) appear to have been foreshadowed. No further amended Counterclaim even in draft form was provided by the first defendants to the court in support of their application for leave to proceed. Consequently, I doubt very much whether that would ever be forthcoming and hence I would anticipate that there would be further delay. The possibility of another failure to take a step in the action is a very real one.

43. [43]
    As presently prepared the plaintiff does not in my view have a complete appreciation of what it is that is being advanced by the first defendants with respect to the issues raised in the counterclaim.

44. [44]
    In the circumstances that I have outlined, I do not see that the first defendants have any reasonable prospect of being able to progress their counterclaim or to prosecute it on trial. I refuse the application of the first defendants for leave to proceed.

45. [45]
    The application of the plaintiff to dismiss the counterclaim for want of prosecution is supported by the objective evidence in the case and in my view the plaintiff is entitled to succeed.

46. [46]
    Taking into account all of the circumstances and particularly those matters which the court is obliged to consider, to which I have made reference in the course of this judgment, the application of the plaintiff to dismiss the counterclaim of the first defendants for want of prosecution is granted.

Costs

47. [47]
    The plaintiff having succeeded in its application and the first defendants having failed in their application, costs should follow the event. I order that the first defendants pay to the plaintiff his costs of and incidental to this application and for the proceedings, including reserved costs if any.

Orders

1. The application of the first defendants for leave to proceed is refused.

2. The application of the plaintiff to dismiss the counterclaim is granted.

3. The counterclaim of the first defendants is dismissed for want of prosecution.

4. The first defendants are to pay to the plaintiff his costs of and incidental to his application and of the proceedings, including any reserved costs, on the standard basis or as otherwise assessed.