Multi Service Group Pty Ltd (In Liquidation) v Osborne
[2009] QSC 286
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- Unreported Judgment
- Appeal Determined (QCA)
- Multi Service Group Pty Ltd (In Liquidation) v Osborne[2009] QSC 286
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Multi Service Group Pty Ltd (In Liquidation) v Osborne[2009] QSC 286
Multi Service Group Pty Ltd (In Liquidation) v Osborne[2009] QSC 286
SUPREME COURT OF QUEENSLAND
CITATION: | Multi Service Group Pty Ltd (In Liquidation) and Ors v Osborne and Ors [2009] QSC 286 |
PARTIES: | BS 4620/06 |
FILE NO/S: | 4620 of 2006 5388 of 2004 |
DIVISION: | Trial Division |
PROCEEDING: | Applications to reactivate a matter |
ORIGINATING COURT: | Supreme Court at Brisbane |
DELIVERED ON: | 11 September 2009 |
DELIVERED AT: | Brisbane |
HEARING DATE: | 31 July 2009; 6 August 2009; 10 August 2009 |
JUDGE: | Atkinson J |
ORDER: | The applications for reactivation are refused |
CATCHWORDS: | PROCEDURE – SUPREME COURT PROCEDURE – QUEENSLAND – PROCEDURE UNDER RULES OF COURT – JUDGMENTS AND ORDERS – OTHER MATTERS – where case-flow management of proceedings in the civil jurisdiction in Brisbane gives practical effect to r 5 of the Uniform Civil Procedure Rules 1999 – where case- flow management imposes timeframes for taking steps in litigation – where Practice Direction No 4 of 2002 paragraph 5.5 provides the procedure for reactivating a matter that has been deemed resolved – whether a matter that has been deemed resolved should be reactivated PROCEDURE – SUPREME COURT PROCEDURE – QUEENSLAND – PROCEDURE UNDER RULES OF COURT – JUDGMENTS AND ORDERS – OTHER MATTERS – where both matters were deemed resolved as a result of not filing request for trial dates – where there was substantial non-compliance of case-flow management orders on the part of the plaintiffs – where the defendants also failed to comply with some aspects of the orders – where defendants argued substantial prejudice if litigation continues – whether plaintiffs demonstrated sound reasons for reactivating the matter as per the relevant criteria – whether the matters should be reactivated Supreme Court of Queensland Act 1991 (Qld), s 118D(2)(a) Uniform Civil Procedure Rules 1999 (Qld), r 5, r 366 Arc Holdings Pty Ltd v Riana Pty Ltd and Another [2008] QSC 191, applied Aon Risk Services Australia Limited v Australian National University [2009] HCA 27, considered Bazley v State of Queensland [2001] QSC 476, cited Birkett v James [1978] AC 297, cited Bishopgate Insurance Australia Ltd (in liquidation) v Deloitte Haskins and Sells, Supreme Court of Victoria, Appeal Div, No 4901 of 1989, 9 September 1994, cited Brisbane South Regional Health Authority v Taylor (1996) 186 CLR 541, cited Buderim Ginger Ltd v Booth [2003] 1 Qd R 147, cited Campbell v United Pacific Transport Pty Ltd [1966] Qd R 465, cited Collingwood v Calvert CA No 3028 of 1996, 6 December 1996, cited Cooper v Hopgood & Ganim [1999] 2 Qd R 113, cited Cousins v Mt Isa Mines Ltd [2006] 2 Qd R 343, cited Dempsey v Dorber [1990] 1 Qd R 418, cited Department of Transport v Chris Smaller (Transport) Ltd [1989] 1 AC 1197, cited Evans v Speakman [2008] QCA 034 147, cited Gleeson v Brock [1969] Qd R 361, cited Hall v RH & CE McColl Pty Ltd [2007] QCA 182, cited Holmes v Civil & Civic Pty Ltd CA No 15 of 1992, 14 September 1992, cited Hood v State of Queensland [2003] QCA 408, cited Hoy v Honan CA No 4058 of 1996, 19 August 1997, cited Kaats v Caelers [1966] Qd R 482, cited Keioskie v Workers’ Compensation Board of Queensland CA No 46 of 1992, 15 September 1992, cited Lewandowski v Lovell (1994) 11 WAR 124, cited Norbis v Norbis (1986) 161 CLR 513, cited Quinlan v Rothwell [2001] QCA 176, cited Raso v Bayliss [2005] ACTSC 94, cited Randell v Charter [2003] QCA 180, cited Stollznow v Calvert [1980] 2 NSWLR 749, cited Tate v McLeod [1969] Qd R 217, cited Tyler v Custom Credit Corp Ltd & Ors [2000] QCA 178, applied Witten v Lombard Australia Ltd (1968) 88 WN (pt 1) NSW 405, cited |
COUNSEL: | I A Erskine for the Plaintiffs P D Tucker for the Defendants |
SOLICITORS: | Tucker & Cowen Solicitors for the Plaintiffs Ernst & Young Law for the Defendants |
- The plaintiffs made two separate applications for matters BS 5388/04 and BS 4620/06 (the matters) to be reactivated pursuant to paragraph 5.5 of Practice Direction No.4 of 2002 (PD 4/2002). The applications were necessary because the matters were deemed resolved on 22 May 2009 as a result of the failure to file request for trial dates as required by orders made on 30 May 2008.
- Although no formal order has been made that these matters be heard together, both involve identical plaintiffs and similar defendants. The court material in both matters is very similar and identical steps have generally been taken in relation to the litigation.
Case flow management
- Case flow management of proceedings in the civil jurisdiction in Brisbane has been implemented to give practical effect to r 5 of the Uniform Civil Procedure Rules 1999 (Qld) (UCPR) and the rules imposing times for taking steps in litigation and the direction making power of the court (UCPR r 366; Supreme Court of Queensland Act 1991 (Qld) s 118D(2)(a)). It is regulated by Practice Direction 4 of 2002 (PD 4/2002). The aim is to ensure that proceedings progress to a timely and cost-effective resolution.
- At the heart of the Queensland case flow management system is the concept that ordinarily a matter should be ready for trial within 180 days of the defendant’s notice of intention to defend being filed. If no request for trial date has been filed by that time, the case flow manager will send the parties a notice known as a Case flow Management Intervention Notice (CFM2). In response the parties must propose an acceptable case management plan or the matter will be referred to the case flow management judge who will give directions for the timely disposition of the proceedings. The directions are designed to ensure that any case management plan ordered at the directions hearing is comprehensive, including a date by which the request for trial date must be filed or the matter will be deemed resolved, to ensure cases are properly prepared for trial, to excise those which are not going to trial and to deem resolved those cases which should in fact be finalised or in which the parties cannot comply with directions.
- The court expects the legal profession and parties to progress matters to resolution by early formulation of final pleadings to define the issues, communication with all other parties involved to propose a case management plan and to prepare the matter for an early resolution through negotiation or mediation or trial, if it cannot be otherwise resolved. The case flow management system is designed to ensure that those expectations are met and to facilitate the just and expeditious resolution of the real issues in dispute at a minimum of expense. This is designed to meet the public interest as well as the interests of the parties. As I said in Arc Holdings Pty Ltd v Riana Pty Ltd, “The days of litigating at leisure are over.”[1]
Orders made
- On 30 May 2008 the matters came before me at a case flow review after a CFM2 dated 14 May 2008 was sent to the parties. Identical orders were made in each matter in accordance largely with the orders sought by the parties. The directions provided specific dates to progress the matters to trial as follows:
- On or before 30 June 2008, the first and second plaintiffs (the plaintiffs) file and serve an amended statement of claim.
- On or before 14 July 2008, the first and second defendants (the defendants) deliver any request for further and better particulars of the amended statement of claim.
- On or before 28 July 2008, the plaintiffs file and serve the requested further and better particulars of the amended statement of claim, save all just and reasonable exceptions.
- On or before 11 August 2008, the defendants file and serve any further amended defence in response to the amended statement of claim.
- On or before 8 September 2008, the plaintiffs deliver any request for further and better particulars of the further amended defence.
- On or before 22 September 2008, the defendants file and serve the requested further and better particulars of the further amended defence, save all just and reasonable exceptions.
- On or before 6 October 2008, the plaintiffs file and serve any reply.
- On or before 20 October 2008, the parties make any interlocutory applications with respect to the pleadings, caveats or security for costs.
- On or before 27 October 2008, the plaintiffs provide the defendants with a solvency report by the second plaintiff with respect to the times material to the action.
- On or before 3 November 2008, the defendants request from the plaintiffs any specific documents relating to the solvency report or the solvency of the first plaintiff (“the solvency documents”) they wish to inspect.
- On or before 12 November 2008, excepting any reasonably objections, the plaintiffs make the solvency documents available for inspection by the defendants.
- The action then be referred to mediation, and:
- on or before 12 November 2008, the plaintiffs nominate for consideration by the defendants three persons proposed as mediator;
- on or before 17 November 2008, the defendants notify the plaintiffs of the mediator of choice (the mediator) from the 3 persons proposed by the plaintiffs;
- the person selected by the parties be appointed mediator;
- on or before 19 November 2008, the plaintiffs are to inform, in writing, the mediator of the appointment;
- on or before 24 November 2008, the parties are to provide the mediator with
- the most recent pleadings and particulars;
- the solvency report;
- statements of issues; and
- documents to inform the mediator of the dispute and the present stage of the action between the parties;
- the parties are to negotiate a fee with the mediator, to be paid: -
- by the plaintiffs as to one half; and
- by the defendants as to one half;
- the parties must pay their respective percentage of the fee negotiated by the parties with the mediator to the mediator on or before the payment date specified by the mediator;
- the mediation must be completed no later than 13 February 2009, and may extend beyond that time only with the authorisation of the parties;
- the action is stayed until 6 business days after the mediator’s certificate is filed in the registry or further earlier order; and
- the requirements, otherwise, of rule 323(5) of the Uniform Civil Procedure Rules 1999 be dispensed with.
- In performing disclosure, the parties are to: -
- exchange lists of documents by 27 March 2009; and
- deliver copies of any documents requested by 3 April 2009.
- By 8 May 2009, the defendants are to either:-
- deliver to the plaintiffs any expert report(s); or
- notify the plaintiffs in writing that they will not be delivering any expert report(s).
- By 15 May 2009, the plaintiffs sign and serve on the defendants a request for trial date.
- By 22 May 2009, the defendants sign and file with the registry the request for trial date, or the matter be deemed resolved.
The matters were deemed resolved
- No request for trial date in either matter were filed by 22 May 2009, and so an order of the deputy registrar was made on 25 May 2009 in respect of both matters, deeming them resolved.
- On 21 July 2009 the plaintiffs filed applications in both matters to have them reactivated proposing a plan for their timely determination. The matters were initially listed for mention on 31 July 2009 and adjourned for hearing to 6 August 2009 due to time constraints. On 6 August 2009 the matters were again adjourned to allow counsel to file further submissions taking into account the recent High Court decision of Aon Risk Services Australia Limited v Australian National University[2]which had been handed down after the applications were filed.
Case management principles
- In Aon Risk Services Australia Limited v Australian National University, after the trial had commenced, the Australian National University (ANU) made an application to adjourn the trial and sought leave to file amended pleadings which raised new and different allegations. The High Court ruled against the ANU and held that “an application for leave to amend a pleading should not be approached on the basis that a party is entitled to raise an arguable claim, subject to payment of costs by way of compensation. There is no such entitlement.”[3]
- More relevant to this application, is that the decision of Aon Risk overrides in part the decision of Queensland v JL Holdings[4] by elevating the importance of case-flow management considerations and questions of the proper use of court resources in the exercise of discretion to give leave to amend or adjourn proceedings. As Chief Justice French observed “courts are concerned not only with justice between the parties…..but also with the public interest in the proper and efficient use of public resources.”[5]
- The same principles apply where a party applies to have a matter reactivated after non-compliance with the court ordered timetable and the matter has been deemed resolved. The court expects practitioners to be aware of the importance of case-flow management principles and complying with court orders in the interests of litigants and in the interests of the efficient use of public resources.
- In Aon Risk the High Court held, per Gummow, Hayne, Crennan, Kiefel and Bell JJ:[6]
“An application for leave to amend a pleading should not be approached on the basis that a party is entitled to raise an arguable claim, subject to payment of costs by way of compensation. There is no such entitlement. All matters relevant to the exercise of the power to permit amendment should be weighed. The fact of substantial delay and wasted costs, the concerns of case management, will assume importance on an application for leave to amend. Statements in J L Holdings which suggest only a limited application for case management do not rest upon a principle which has been carefully worked out in a significant succession of cases.[7] On the contrary, the statements are not consonant with this Court's earlier recognition of the effects of delay, not only upon the parties to the proceedings in question, but upon the court and other litigants. Such statements should not be applied in the future.
A party has the right to bring proceedings. Parties have choices as to what claims are to be made and how they are to be framed. But limits will be placed upon their ability to effect changes to their pleadings, particularly if litigation is advanced. That is why, in seeking the just resolution of the dispute, reference is made to parties having a sufficient opportunity to identify the issues they seek to agitate.
In the past it has been left largely to the parties to prepare for trial and to seek the court's assistance as required. Those times are long gone. The allocation of power, between litigants and the courts arises from tradition and from principle and policy.[8] It is recognised by the courts that the resolution of disputes serves the public as a whole, not merely the parties to the proceedings.
Rule 21 of the Court Procedures recognises the purposes of case management by the courts. It recognises that delay and costs are undesirable and that delay has deleterious effects, not only upon the party to the proceedings in question, but to other litigants. The Rule's objectives, as to the timely disposal of cases and the limitation of cost, were to be applied in considering ANU's application for amendment. It was significant that the effect of its delay in applying would be that a trial was lost and litigation substantially recommenced. It would impact upon other litigants seeking a resolution of their cases. What was a "just resolution" of ANU's claim required serious consideration of these matters, and not merely whether it had an arguable claim to put forward. A just resolution of its claim necessarily had to have regard to the position of Aon in defending it. An assumption that costs will always be a sufficient compensation for the prejudice caused by amendment is not reflected in r 21. Critically, the matters relevant to a just resolution of ANU's claim required ANU to provide some explanation for its delay in seeking the amendment if the discretion under r 502(1) was to be exercised in its favour and to the disadvantage of Aon. None was provided.”
Application to reactivate
- The applications are governed by paragraphs 5.4 and 5.5 of PD 4/2002. Paragraph 5.4 provides:
“A proceeding deemed resolved may be reactivated by an application by any party, supported by affidavit material explaining and justifying the circumstances in which the proceeding was deemed resolved, and proposing a plan to facilitate its timely determination.”
- Pursuant to paragraph 5.5, the registrar may refer the matter to a judge for decision. In accordance with the registrar’s usual practice where an order that the matter be deemed resolved was made by a judge, the application was appropriately referred to a judge for decision. Once a matter has been deemed resolved by court order, the parties cannot have it reactivated by a consent order.
- On an application for reactivation, the party seeking that relief must, by affidavit, satisfactorily explain and justify the circumstances in which the matter was deemed resolved. Matters which will inform the discretion of the court as to whether or not to reactivate the proceedings are similar to those factors which are relevant to considering whether or not to dismiss an action for want of prosecution under UCPR r 280 or whether to give leave to proceed under UCPR r 389 which were set out in Tyler v Custom Credit Corp Ltd & Ors [2000] QCA 178 at [2].[9] The matters that the court will consider were set out in full in Arc Holdings Pty Ltd v Riana Pty Ltd at [9].[10] These factors relate to the conduct of the litigation and the reasons for the failure to comply with directions leading to the matter being deemed resolved, as well as a consideration of the utility of the litigation. 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.[11]
- The relevant factors include:
- The conduct of the litigation prior to the directions being given. This may include: how long ago the events alleged in the statement of claim occurred;[12] what delay there was before the litigation was commenced; how long ago the litigation was commenced or causes of action were added;[13] and whether or not the litigation has been characterised by periods of delay;[14]
- What explanation is provided for the failure to comply with the directions which has led to the matter being deemed resolved;[15] and whether the failure to comply with court directions is attributable to the plaintiff, the defendant or both the plaintiff and the defendant or their legal representatives;[16]
- Whether or not the failure to comply with directions has resulted in prejudice to the defendant leading to an inability to ensure a fair trial;[17]
- How far the litigation has progressed[18] and how close it is to trial;[19]
- What prospects the parties have of success in the action;[20] a plaintiff must be prepared to show that it has sufficient prospects of success and, where relevant, a defendant that it has sufficient prospects of defending the matter, that the litigation should be allowed to continue. If the case is not one needing judicial determination then there is no point in reactivating it.
The prior conduct of the litigation
- The first defendant (Mr Osborne) in each of the proceedings was the former Managing Director of the first plaintiff in both matters, Multi Service Group Pty Ltd (In Liquidation) (MSG). Mr Osborne resigned from his position at MSG on 26 October 2001. The second defendant in the 2006 matter (GRO Services) is a corporate trustee of the Osborne Family Trust, of which Mr Osborne is a beneficiary. Graeme and Roslyn Osborne are the directors and shareholders of GRO Services and are married to each other. The second defendant in the 2004 matter is Roslyn Osborne. MSG went into liquidation on 1 July 2003. The second plaintiff in both matters, Mr Murphy, was appointed as liquidator.
- Both proceedings involve disputes in relation to an “agreement” or “agreements” relating to Mr Osborne’s resignation.[21]
- On 21 June 2004, matter BS 5388/04 commenced against Mr and Mrs Osborne. The plaintiffs claimed:
- $100,000 against both defendants in relation to a cheque made payable to MSG but deposited into the defendants’ joint home loan account; and
- $11,436.90 against Mr Osborne for him taking for himself a rebate which MSG was entitled to receive; and
- that the “heads of agreement” was unenforceable against the first plaintiff.
- On 2 June 2006, matter BS4620/06 commenced against Mr Osborne and GRO Services. The plaintiffs sought relief against Mr Osborne including a sum of money due and owing; a declaration that Mr Osborne had breached his fiduciary duties arising from his position as director of MSG; an order that Mr Osborne compensate MSG for breaches of his equitable and fiduciary duties as a director; a declaration that Mr Osborne held any benefits and advantages acquired by reason of his breach of fiduciary duties on constructive trust for MSG; a declaration that Mr Osborne had contravened section 180, 181 and 182 of the Corporations Act; compensation under the Corporations Act; a declaration that the Heads of Agreement was unenforceable as against MSG and void at law; and damages.
- Relief was also sought against GRO Services in the form of a sum of money; a declaration that it was knowingly involved in Mr Osborne’s breach of duty; a declaration that GRO Services held certain property pursuant to a constructive trust in favour of MSG; or alternatively, a declaration that the property was charged with the payment to MSG of the sum of $17,500; and further, in the alternative, compensation.
- The conduct of the matters by the parties prior to their being deemed resolved demonstrated a complete disregard for the directions made by the court. Almost none of the orders made on 30 May 2008 were complied with by the dates specified in the orders and many were not complied with at all.
- The plaintiffs filed and served an amended statement of claim on 3 July 2008, three days late.
- The defendants filed a further amended defence on 8 August 2008, over three weeks late.
- The plaintiffs filed and served the requested further and better particulars of the amended statement of claim on 28 October 2008, three months late.
- The defendants complied with paragraph 4 of the orders by filing and serving a further amended defence on 8 August 2008, three days early.
- Paragraph 5 of the orders required the plaintiffs to file and serve any requested further and better particulars of the further amended defence on or before 22 September 2008. This did not occur until 2 February 2009 in relation to the 2004 matter and 15 July 2009 in relation to the 2006 matter, some four and ten months late respectively.
- The defendants have not yet filed and served the requested further and better particulars of the further amended defence, and have therefore not complied with paragraph 6 of the orders.[22]
- Paragraph 7 of the orders were not complied with. The plaintiffs have not filed and served a reply in relation to either matter.
- The defendants filed interlocutory applications for security for costs on 31 October 2008, 11 days late. The applications were heard and dismissed by Justice Dutney on 10 November 2008.
- Paragraph 9 of the orders required the plaintiffs to provide the defendants with a solvency report on or before 27 October 2008. The plaintiffs have still not complied with this order.
- Paragraphs 10 to 15 of the orders have not been complied with. These directions related to requesting solvency documents; exchanging lists of documents; limited disclosure of solvency documents; mediation; disclosure and expert reports.
- The parties failed to file request for trial dates on or before 22 May 2009. They therefore failed to comply with paragraph 16 of the orders and the matters were deemed resolved.
- The proceedings were not completely inactive between the period of 31 October 2008, when the application for security for costs was filed, and 22 May 2009, when the matters were deemed resolved.
- On 5 November 2008 the defendants requested the plaintiffs provide a list of books and records held by the plaintiffs. The plaintiffs responded to this request on 8 December 2008. After receiving the request for further and better particulars of the further amended defence on 2 February 2009 in relation to the 2004 matter,[23] the defendants wrote to the plaintiffs on 5 February 2009. In that correspondence the defendants requested an explanation for the substantial delay in providing the request, questioned the extent of the request and argued that requests were made for information peculiarly within the knowledge of the plaintiffs. No response to this letter was received by the defendants from the plaintiffs.
- The plaintiffs submitted that between November 2008 and February 2009, they corresponded with the defendants regarding the costs order of 10 November 2008 and a previous costs order made against the defendants on 16 February 2007. On 3 February 2009 the plaintiffs served the defendants with costs statements for the costs claimed by the plaintiffs pursuant to the cost orders. By the end of February the parties came to an agreement as to these costs, and on 2 May 2009 the defendants paid the agreed costs amount.
- The plaintiffs submitted that between September 2008 and 22 April 2009, the parties engaged in negotiations with respect to a request by the defendants for the removal of caveats lodged by the plaintiffs on the title of the second defendant’s real property. The interest claimed by the plaintiffs in the caveats is the subject of relief claimed by the plaintiffs.[24] An agreement “in principle” in relation to the caveats was reached on about 22 April 2009.
- On 19 May 2009 the plaintiffs’ solicitor sent an email to the defendants’ solicitor requesting the defendants sign a consent order to vary the orders made on 30 May 2008. In this correspondence the plaintiffs noted that “while some steps contemplated by the orders of 30 May 2008 made by the Honourable Justice Atkinson have been carried out, the timetable set out by those orders is no longer current.” The new proposed date for filing the request for trial date was 12 February 2010.
- On 21 May 2009 the defendants’ solicitor advised by telephone that they had not received instructions from their clients regarding the proposed consent order. The matters were then deemed resolved on 22 May 2009.
- On 9 June 2009 the plaintiffs’ solicitor emailed a letter and proposed draft application under the Uniform Civil Procedure Rules 1999 (UCPR) r 444 in respect of both proceedings. On 16 June 2009 a UCPR r 445 letter was issued by the defendants in relation to both matters.
- On 16 July 2009, in response to the request for further and better particulars from the plaintiffs dated 15 July 2009 in relation to the 2006 matter, the defendants’ solicitor advised that the matter was deemed resolved and they did not propose to put their clients to the cost of providing the particulars.
- In summary, by the time the applications for reactivation were heard, it could be said that the pleadings had not even closed.
Explanation for failure to comply with directions
- There has been a failure to comply with directions by both parties. However, litigation is supposed to be plaintiff-driven, and if the plaintiff does not drive the litigation, they have more to lose when the matter is deemed resolved.
- To the extent that the plaintiff is responsible for the failure to comply, the ‘crux’ of the delay was identified as the fact that the solvency report has not been completed. Paragraph 9 of the orders made on 30 May 2008 required this be completed on or before 27 October 2008, almost one year ago.
- The plaintiffs’ counsel explained this delay as being largely due to the difficult winding up process. MSG was part of a group of companies and the records of the companies and entities within the group were intermingled. As a result, there was also intermingling and blurring of financial and accounting records of those companies. There were over 500 documents which had to be considered and the financial records were incomplete, poorly kept and deficient. The process of gathering information and undertaking the required work has taken much longer than expected. The extent of the task was underestimated by the liquidator.
- Specific to the 2004 proceeding was the delay caused by the pending completion of the public examinations which were conducted between June and August of 2006. Counsel for the plaintiffs argued that it was not unusual for a liquidator to carry out public examinations before continuing or commencing proceedings.
- Counsel for the plaintiffs also attributed the delay to both parties in September 2008 and March to May 2009 engaging in “without prejudice” communications which sought to avoid an adjudicated outcome, and the consequential prospect of a greater return to creditors.
- No proper explanation was given by the plaintiffs as to why a reply was not filed as required by the orders of 30 May 2008. To date, no reply has been filed. In sworn evidence the plaintiffs’ solicitor deposed that the further amended defences in both matters provided insufficient particulars. The plaintiffs considered it desirable that proper particulars of important allegations were provided before their replies were pleaded. However, the requests for further and better particulars of the further amended defences were filed by the plaintiffs five and ten months late in the 2004 and 2006 matters respectively.
- The defendants failed to file and serve the requested further and better particulars as required by paragraph 6 of the orders. Their failure to comply in relation to the 2006 matter was explained by the fact that the plaintiffs did not file their request until after the matter was deemed resolved. In relation to the 2004 matter, the defendants’ solicitor is still waiting for a reply to correspondence to the plaintiffs’ solicitor requesting an explanation for the delay, and questioning some of the particulars requested. That matter has also been deemed resolved.
- The failure to comply with the remaining orders of 30 May 2008 was explained largely by the fact that the solvency report has not yet been completed, and as such mediation, disclosure and further expert reports have not been possible.
- On 19 May 2009, just three days prior to the matter being deemed resolved, the plaintiffs wrote to the defendants providing them with proposed consent orders to vary the current timetable and extend the date for requesting a trial date. The plaintiffs’ solicitor was aware on 21 May 2009, one day before the matter was to be deemed resolved, that the defendants’ solicitor had not yet received instructions from their clients. While it appears that the defendants were not forthcoming with their consent, the plaintiffs’ solicitor had a responsibility to prevent the matter from being deemed resolved. They should have been proactive in ensuring that if consent orders for varying the orders made on 30 May 2008 could not be agreed between the parties other arrangements were made by contacting the court.
- As soon as there is an expectation that either party may be unable to comply with court orders, the matter should be brought back before the case-flow management judge, or another judge, so that the directions may, if necessary, be adjusted. The plaintiffs failed to do this, and the result was that the matters were deemed resolved.
Prejudice
- The relevant conduct the subject of the litigation took place between 1995 and 2001. The defendants submitted that a substantial period of time has elapsed since the occurrence of the relevant events which has given rise to self-evident prejudice.[25]
- The onus is on the plaintiffs to demonstrate that the defendants will not suffer significant prejudice by reason of the delay.[26] The plaintiffs submitted that there would be no prejudice from a decision to reactivate the matters other than that the proceedings against the defendants would continue until resolved.
- The plaintiffs identified priority creditors of $198,478.42 (unpaid superannuation entitlements of former employees) and unsecured creditors of approximately $2,000,000 (subcontractors and trade creditors). According to the plaintiffs, the only remaining assets of MSG that might be realised for the benefit of the creditors were claims made in both matters totalling approximately $575,000 plus interest and costs and unfair preference recovery proceedings prosecuted in the District Court of $129,000 plus interest and costs.
- The plaintiffs submitted that the 2004 and 2006 proceedings were the only prospect of any return to the unsecured creditors and if the matters were not reactivated, the claims would be statute barred. But it is the plaintiffs’ failure to comply with court orders and to prosecute the matters expeditiously that has led to this parlous situation.
- Apart from the general risk of prejudice, two specific issues were raised by the defendants in relation to prejudice: caveats lodged in relation to both claims and the poor health of Mr Osborne.
- On 5 July 2006 MSG in liquidation lodged a caveat over land at Finney Street owned by GRO Services Pty Ltd, which is also Mr and Mrs Osborne’s residential address. On 15 July 2006 a second caveat was lodged over the property in relation to certain claims made in the 2004 proceedings against Mr and Mrs Osborne. The property was valued between $900,000 and $990,000.[27] The defendants pointed out that this was in excess of the cumulative amount of the 2004 and 2006 claims. The plaintiffs lodged a notice relating to proceedings having been filed which ensured that the caveats remained on the land.
- The defendants’ solicitor deposed that the caveats registered over land owned by the GRO services was causing a significant disadvantage to Mr and Mrs Osborne in raising money for financing their personal needs and their defences.
- The plaintiffs submitted that the issue was now resolved as a result of an agreement between the parties whereby the plaintiffs consented to transactions proposed to increase access to equity for borrowings without the removal of the caveat.
- However, the defendants submitted that it took over seven months for the parties to agree to the proposed deed, involving inevitable cost. Furthermore, the defendants’ counsel submitted that the deed still included terms which imposed burdens on the defendants in terms of their ability to deal with the property concerned. The example given by the defendants was that if a sale of the property were contemplated, this would involve further protracted negotiations before any resolution might be reached in relation to the application of the proceeds of sale.
- In relation to Mr Osborne’s health, the defendants’ solicitor deposed that Mr Osborne advised that he had suffered significant health problems including acute thrombocytopenic purpure (a rare blood condition causing blood clots to form in the small blood vessels), prostate cancer, two bouts of Hodgkin’s Lymphoma requiring chemotherapy and stem cell transplantation. His ill health was suffered during the period of 2004 to 2006. In a letter dated 9 March 2006, Mr Osborne’s treating physician, Dr Fanning, reported that he was in remission from Hodgkin’s disease and his long term prognosis was excellent. However his quality of life had been severely impacted due to his suffering severe crush fractures of the verterbral column.
- The plaintiffs submitted that the health of Mr Osborne had only been raised twice in the litigation, in this application and during the public examinations. Further the plaintiffs said that the evidence does not indicate that the state of his health would preclude him giving from evidence.
- The defendants asserted that the plaintiffs have long been aware of Mr Osborne’s ill health. This was a dominant reason in his resigning from his position at MSG in 2001 and it was pleaded in the further amended defence of the 2006 matter that his health was a reason for his diminished ability to continue as Managing Director.
- Sworn evidence filed on behalf of the plaintiffs from Mr Hambleton, their accountant, stated that the defendants would not be prejudiced as the matters the subject of the proceedings have already been the subject of evidence given by Mr and Mrs Osborne in the public examinations of 2006. Hence, oral evidence relevant to the matters in issue in the litigation has in a large part already been obtained.
- However, the defendants submitted that in light of the solvency and record keeping issues as well as the factual issues in dispute, any trial is likely to extend for weeks rather than days and if these proceedings are permitted to continue, the burden and costs to the defendants will increase.
How close the matter is to trial
- In written submissions, the plaintiffs asserted that the litigation is at an advanced stage. However, the plaintiffs have not served a reply in either matter. Hence the pleadings have not yet closed. It was conceded by counsel for the plaintiffs during oral submissions that it was unusual to have a matter which commenced five years ago where the pleadings have not yet closed.
- Nevertheless, the liquidator plaintiff has provided instructions to its solicitor to finalise a reply in relation each further amended defence whether or not further particulars of the further amended defences are provided.[28]
- At the time of hearing the application in early August, the plaintiffs’ accountant believed the solvency report would be completed and provided to the defendants by the end of August 2009. Furthermore, on 8 December 2008 the plaintiffs provided the defendants with a list of books and records of the Multi-Service Group in possession of the liquidator and have invited the defendants to identify documents for inspection.
- The plaintiffs assert that in the event of reactivation the matters would require limited disclosure which, at the time of the application, the plaintiffs’ solicitor deposed could be undertaken by the plaintiffs and provided to the defendants by the end of August 2009.
- The plaintiffs’ solicitor noted that the defendants may require disclosure of further specific documents relating to the solvency report. It was deposed that this could be disclosed within a matter of weeks of their request.
- After these steps are completed, the plaintiffs submitted that there is a reasonable expectation that mediation could be conducted, or alternatively, if the defendants prefer, a request for trial date could be filed.
- The defendants submitted that the pleadings have not closed and there has been no disclosure and no delivery of the expert reports. In written submissions, counsel for the defendants suggested that even after the delivery of the solvency report the plaintiffs would be obliged to obtain expert reports as to MSG’s solvency, whether MSG’s records were sufficient to determine its financial position at relevant time and possible appropriate executive remuneration while Mr Osborne was the Managing Director of MSG.
Prospects of success
- Mr Hambleton, the accountant for the plaintiff, and the liquidator, Mr Murphy, deposed that there were good prospects of success at the trial for the following reasons:
- The issues of dispute in both matters are of narrow compass being MSG’s insolvency and the Resignation Agreement (whether there is such an agreement); and
- MSG was insolvent at the relevant times; and
- MSG’s impecuniosity is substantially attributable to the conduct of Mr Osborne during his time as a director and after he had resigned; and
- the trial would be “short and sharp” .
- The first and fourth matters are not strictly relevant to the plaintiff’s prospects of success. If, as the plaintiffs suggest, the matter can be resolved in relatively short compass, it begs the question as to why the pleadings have not closed and the plaintiffs have not been able yet to deliver a solvency report. An insolvency involving 500 documents could hardly be considered a large insolvency matter.
- Mr Hambleton further deposed that the defence relied upon by the defendants in each matter based on the “resignation agreement” was likely to fail. His belief was based on the information elicited at the public examination and from the inability of the defendants to provide proper particulars.
- The defendants, as might be expected, asserted that the plaintiffs do not have a good cause of action considering the level of indifference displayed in pursuing the proceedings. It is further submitted that any suggestion that the proceedings could be resolved quickly was untenable considering:
- The length and detail of the pleadings
- The volume of documents
- The requirement that both parties adduce expert evidence as to solvency, record keeping and executive remuneration
- The factual issues in dispute.
Conclusion
- These proceedings have not been prosecuted at any time with the expedition required of parties under the UCPR. Whatever the justification for that, it could not be sustained once orders had been made for the timely resolution of the matter which were not complied with and yet no variation of those orders was sought. This was compounded when the matter was deemed resolved. Even then, an application for the matters to be reactivated was not filed for many months. It would not be in the public interest to allow these proceedings to be reactivated when prejudice will be suffered by the defendants and the plaintiffs themselves have been substantially responsible for the delays.
- The applications are refused. I will hear submissions as to costs.
Footnotes
[1] [2008] QSC 191 at [4].
[2] [2009] HCA 27.
[3] [2009] HCA 27 at [111].
[4] (1997) 189 CLR 146.
[5] [2009] HCA 27 at [23].
[6] [2009] HCA 27 at [111] – [114].
[7] See John v Federal Commissioner of Taxation (1989) 166 CLR 417; Imbree v McNeilly (2008) 82 ALJR 1374 at 1385-1386.
[8] Jolowicz, On Civil Procedure (2000) at 79.
[9] See also Bazley v State of Queensland [2001] QSC 476 at [22]–[23]; Buderim Ginger Ltd v Booth [2003] 1 Qd R 147 at [22]; Randell v Charter [2003] QCA 180 at [20]; Hood v State of Queensland [2003] QCA 408 at [4] ; Raso v Bayliss [2005] ACTSC 94 at [18]; Cousins v Mt Isa Mines Ltd [2006] 2 QdR 343 at [29]; Hall v RH & CE McColl Pty Ltd [2007] QCA 182 at [13]; Evans v Speakman [2008] QCA 034 147 at [49].
[10] This case has recently been applied in ex temp reasons given by Justice Mullins in Murphy v Schultz Toomey O'Brien Lawyers, unreported, 2 September 2009, Supreme Court of Queensland.
[11] Witten v Lombard Australia Ltd (1968) 88 WN (Pt1) NSW 405 at 412; Stollznow v Calvert [1980] 2 NSWLR 749; Norbis v Norbis (1986) 161 CLR 513 at 538; Cooper v Hopgood & Ganim [1999] 2 Qd R 113 at 118-119, 124.
[12] Department of Transport v Chris Smaller (Transport) Ltd [1989] 1 AC 1197 at 1207-1208 per Lord Griffiths; Bishopgate Insurance Australia Ltd (In liquidation) v Deloitte Haskins and Sells, Supreme Court of Victoria, Appeal Div, No 4901 of 1989, 9 September 1994 at 22, 23; Hoy v Honan CA No 4058 of 1996, 19 August 1997 at 4; Cooper v Hopgood & Ganim at 120, 121.
[13] Cooper v Hopgood & Ganim at 120 per Pincus JA.
[14] Birkett v James [1978] AC 297 at 322-323; Bishopgate Insurance Australia Ltd (In liquidation) v Deloitte Haskins and Sells at 27; Cooper v Hopgood & Ganim at 119, 120, 124.
[15] Campbell v United Pacific Transport Pty Ltd [1966] Qd R 465 at 473-474; Witten v Lombard Australia Ltd at 412; Dempsey v Dorber [1990] 1 Qd R 418 at 420; Keioskie v Workers’ Compensation Board of Queensland CA No 46 of 1992, 15 September 1992 per Thomas J at 4; Cooper v Hopgood & Ganim at 124.
[16] Campbell v United Pacific Transport Pty Ltd at 473, 475; Kaats v Caelers [1966] Qd R 482 at 497; Tate v McLeod [1969] Qd R 217 at 224-225; Gleeson v Brock [1969] QdR 361 at 369; Holmes v Civil & Civic Pty Ltd CA No 15 of 1992, 14 September 1992; Keioskie v Workers’ Compensation Board of Queensland per Thomas J at 7; Lewandowski v Lovell (1994) 11 WAR 124; Hoy v Honan at 5; Collingwood v Calvert CA No 3028 of 1996, 6 December 1996 at 5, 7, per Fitzgerald P; Cooper v Hopgood & Ganim at 124.
[17] Witten v Lombard Australia Ltd at 412; Dempsey v Dorber at 420; Keioskie v Workers’ Compensation Board of Queensland; Bishopgate Insurance Australia Ltd (In liquidation) v Deloitte Haskins and Sells at 24-25; Brisbane South Regional Health Authority v Taylor (1996) 186 CLR 541 at 554-555 per McHugh J; Cooper v Hopgood & Ganim at 118, 124.
[18] Keioskie v Workers’ Compensation Board of Queensland at 10 per Thomas J.
[19] Bazley v State of Queensland at [58]; Quinlan v Rothwell [2001] QCA 176 at [9], [35].
[20]Keioskie v Workers’ Compensation Board of Queensland at 2-3 per McPherson J; Cooper v Hopgood & Ganim at 124.
[21] The Plaintiffs allege that the relevant agreement was formed on 9 October 2001 titled “Heads of Agreement”. Mr Osborne asserts that a “Resignation Agreement” was formed on 26 October 2001.
[22] However, refer to paragraph [24] and [30] which provides an explanation for the non-compliance.
[23] Refer to paragraph 22. This Order was complied with some 4 months late.
[24] See paragraph [47].
[25] See Brisbane South Regional Health Authority v Taylor (1996) 186 CLR 451 and 551 per McHugh J; Tyler v Custom Credit Corp [2000] QCA 178 at [3].
[26] Tyler v Custom Credit Corp [2000] QCA 178 at [46].
[27] As at October 2008.
[28] Refer to paragraphs [37] and [38].