SUPREME COURT OF THE NORTHERN TERRITORY OF AUSTRALIA
ROBERT	RONALD	WILLIAM	SOUTHWELL as Liquidator of DORCON
CONSTRUCTIONS PTY LTD (in liquidation) and SPECIALISED ENGINEERING SERVICES PTY LTD
Before the Master at Darwin on 9, 16 November 1989, 2, 16 February 1990.
PRACTICE AND PROCEDURE: dismissal for want of	prosecution nature	of		discretion - principles applicable - effect  of delay - whether prejudice	to	defendant			fact	that plaintiff		may	have remedy against solicitor considered - whether prejudice due to	defendant's	own	fault	through inaction	relevant - weighing of competing prejudices - rr
24.01 and 24.05 Supreme Court Rules. Cases considered:
Gemmell Investments Pty Ltd v Commissioner of Taxation
7 ACLR 3
Janov v Morris (1981) 3 All ER 780
Jenkins v Bushby (1891) 1 Ch 484
McKanna v Aspect Homes Pty Ltd (1983) 51 ALR 603 McMillan v TIO (N.T. unrepor ed)
Ulowski v Miller (1968) SASR 277
Vidler v Merrit Engineering Pty Ltd (1987) 86 FLR 213

Cases followed:
Patsalidies v Magoulias (1984) 29 NTR 1
Stollznow v Calvert (1980) 2 NSWLR 749
White v Northern Territory of Australia (N.T. unreported)

Cases referred to:
Allen v Sir Alfred McAlpine & Sons Ltd, (1968) 1 All ER 543, (1968) 2 QB 229
Birkett v James (1977) 2 All ER 801
Kostokanellis v Allen (1974) VR 596
Krakaver v Katz (1954) 1 WLR 278
Niemann v Electronic Industries (1978) VR 431 Re Atlas Truck Service Pty Ltd (1974) 24 FLR 220 Re Narby; Ex parte Official Receiver 19 ABC 201;
(1961) ALR 748
Re Ward; Thomas v L.G. Abbott & Co. Ltd (1950) 16 ABC 214
Shepperdson v Lewis (1966) VR 418
Tellsa Furniture Pty Ltd (in liq) v Glendale Pty Ltd
13 ACLR 64
Witten v Lombard Australia Ltd (1986) 2 NSWLR 529

Solicitor for the Plaintiff: Counsel for the Plaintiff:

Solicitor for the Defendant: Counsel for the Defendant:

Mildrens Mr Reeves
Philip & Mitaros Mr Wyvill

IN THE SUPREME COURT
OF THE NORTHERN TERRITORY OF AUSTRALIA
AT DARWIN
No. 485 of 1983	BETWEEN:
ROBERT RONALD WILLIAM SOUTHWELL
as Liquidator of
DORCON CONSTRUCTIONS PTY LTD
(in liquidation)
Plaintiff
and
SPECIALISED ENGINEERING SERVICES PTY LTD
Defendant

MASTER LEFEVRE: REASONS FOR DECISION
(Delivered 22 March l990)

In	this	application,	I	am	asked	by	the defendant to dismiss for want of prosecution the plaintiff's claim.

The following facts are relevant and are not  in dispute. On 27 July 1982, a petition was presented for the winding up of Dorcon Constructions Pty Ltd (the Company). The petition was advertised on 24 September 1982. At the time of the petition, the Company was in the process of carrying out work at Tennant Creek under a contract with the Department of Transport and Works (the Department). On 1 September 1982, the Company paid the defendant the sum of $15,510-94 being part of monies then due by the Company to the defendant. On 9 September 1982, the Company executed a deed giving an equitable charge over its assets and undertaking to a company called Jardio Pty Ltd (Jardio) in return for the receipt from that company by way of loan of a sum of
$50,000-00.	On	10	September	1982,	$50,000-00	was
transferred	from		the		defendant to Jardio.		The Company gave	2	cheques	to	the	defendant	which	were	met	on

presentation.    One,  for the sum of $27,304-68 and dated
9 September 1982, represented the balance of the  money due  to  June  of  that  year.    The  second  cheque, for
$18,851-24 and post-dated to 30 September 1982, was in payment of the July account.

On 24 March 1983,  the  company  was  wound  up  and Robert Ronald William Southwell, the plaintiff, was appointed its liquidator.

On 22 September 1983, the plaintiff, as liquidator of the Company, commenced this proceeding. He  sought declarations that the payments from the Company to the defendant to which I have referred, totalling in all
$61,666-86, were void dispositions under section 227 of the Companies Act (since repealed) which section has its equivalent in section 368 of the Companies Code. In the alternative, the plaintiff claimed under section 293 of the repealed Companies Act (see now section 451 of the Code) which introduced the Bankruptcy Act provisions making preferential payments void against a liquidator.

On 4 October 1983, the Company applied for an order that this proceeding be tried with another proceeding (152 of 1983) which had been  commenced in this court by Jardio and which sought validation of the equitable charge to which I have referred. On 20 October 1983, that application came on for hearing and the order sought was refused. Jardio had opposed the making of the order.

Throughout (Goldsmith)

the was

relevant	time, a	director	of

one	Richard both		Jardio

Goldsmith and	the

defendant and both companies had common shareholders.

On 5 October 1983, the defendant entered an appearance in this proceeding and, on 12 October 1983, the Company delivered  its statement of claim.  On 18 November 1983, it was agreed between the solicitors representing the

parties that the defendant need not deliver a defence until after the delivery by the plaintiff of an amended statement of claim.

On 20 February 1984, the application sought by Jardio for validation was refused. On 24 August 1984,  Jardio's appeal from that refusal was dismissed by the Federal Court.

On 28 September 1989, the plaintiff's solicitor gave the defendant's solicitors notice of the  plaintiff's intention to proceed in the proceeding. On 7 November 1989, the application with which I am asked to deal was filed and, on 18 December 1989, the plaintiff delivered and filed an amended statement of claim.

With	the defendant

application filed	an

with which I am affidavit	of

asked to deal, the Goldsmith	sworn

7 November 1989 to which is annexed copy of an affidavit of Geoffrey John Stirk (Stirk) purporting to have been sworn on 13 October 1983. On 14 November 1989, the plaintiff filed an affidavit of Stirk, sworn 13 November 1989 to which is annexed reasons for judgrnent of Nader J in proceeding 152 of 1983 being the validation proceeding between Jardio and the Company to which I have already referred. The application first came on for  hearing before me on  9 November 1989, but was adjourned to 16th of that month, when it was again adjourned to
2 February 1990. On that day the application was adjourned, part-heard, to 16 February 1990.

Before 2 February 1990, further affidavits had been filed on the plaintiff's behalf being the affidavit of the plaintiff, sworn 10 January 1990; a further affidavit of Stirk, sworn 12 January 1990 and an affidavit of David Dylan Walters, sworn 23 January 1990. The defendant had filed another affidavit of Goldsmith, sworn 31 January 1990. On 2 February 1990, I dealt with objections taken

by the plaintiff to certain affidavits and to portions of certain of the other affidavits filed by  the  defendant. I allowed all the affidavits,  but disallowed parts of some of them. I also granted the plaintiff leave to cross-examine Goldsmith on his affidavits.

After the adjournment on 2 Febrary 1990, the defendant filed a further affidavit of Goldsmith sworn 8 February 1990, and an affidavit of Richard William Morgan (Morgan), sworn 9 February 1990.

The	applic.ation

was	eventually	heard	by	me	on

16	February	1990.

Despite	objection,	I	allowed the

affidavits to which		I	have	just	referred.	Goldsmith attended	and	was	cross-examined on his affidavits.	On

objection affidavits

taken	by	the	defendant,	certain	parts	of filed		by		the		plaintiff were struck out.		I

then heard submissions from both counsel and reserved my decision.

Before proceeding, I believe that I should mention one matter. The defendant relied on material in  the affidavit of Stirk, sworn 13 November 1989, and filed by the plaintiff. Annexed to that affidvit by virtue of paragraph 4 are, as I have already mentioned, the reasons for judgment of Nader Jin the action by Jardio (152 of 1983) to which I have also referred. The plaintiff took objection to the document's admissibility on the ground  of relevance. I reserved the question of relevance and allowed the paragraph to remain. Later, when the plaintiff chose to rely on the same affidavit after Goldsmith had been cross-examined as to certain of the Judge's findings, the defendant inter alia objected to paragraph 4. I allowed the paragraph and annexure to remain. Howev.er, I now make it clear that, in applying the principle of res inter alios acta alteri nocere non debet, I take the view that Nader J's findings are not evidence in this application. I have not therefore

4

taken the contents of the reasons for judgment into account in determining this application.

What is clear however on ,tpe evidence before me is that there was a connection between the loans from the defendant to Jardio and from Jardio to the Company and the   payments  the  subject  of  this  proceeding. The
plaintiff alleges that they were a "round-robin"  series of  transactions  designed,  because  of the then existing

petition	for	winding
unsecured		debts	into payment	of		the	debts

up of the Company, to convert secured ones and gain preferential due to the defendant. The

defendant's argument is that the series of transactions were designed to help the Company out of a liquidity problem and to  have the debts due to the defendant paid by the Company and so allow the defendant to continue to supply goods to the Company to enable it to complete its contract with the Department. What the real  motives behind the series of transactions were are not for me to decide; they would be a matter for the Judge who might hear the proceeding. I mention the allegation and counter-allegation to put into perspective what would be the substance of the contest between the parties and to emphasise the interrelation which appears to me to exist between the Jardio proceeding and the present one.

The defendant has brought this application under rule

24.01	and		in satisfied	that

the	alternative,	rule	24.05.
I	have jurisdiction under either

I	am
rule to

deal with the matter - see rule 77.01 (2)(c)(iii). In either case, the power to. dismiss the proceeding is discretionary.   This is clear from the  wording  of rule
24.01. As to the discretion under the court's inherent power to dismiss a proceeding for want of prosecution see Birkett V James (1977) 2 All ER 801; Patsalidies v Mag:oulias (1984) 29 NTR 1 and  White v Northern Territory of Australia,  an  unreported  decision of Asche
CJ of this court delivered on 13 June 1989.

Courts both in England and Australia have sought to indicate how the discretion should be exercised. In White's case, the Chief Justice (at page 10 of the unreported decision), referred to those authorities as furnishing "guidelines" . His Honour said: "(i)t can never be laid down that certain categorised acts or omissions will automatically excuse or bar the parties seeking the exercise of the court's discretion.•
His Honour continued:
"In	Shepperdson v Lewis	(1966)	VR	418	at
423 to 425, Smith J., in one of those clear and rational judgments which so amply justify the great respect accorded to him by both the bench and bar of his day, effectively called a halt to what he saw as a growing tendency to fetter the exercise of discretion by the application of automatic tests to all but exceptional cases.

"He	found	such		a	tendency in Krakaver v Katz	(1954)	l	WLR
=n e nn--i n-g-LJ=-=,.....,.h-a d,-said at page 280:

cases such as 278,	where

'I am disposed to agree with what Mr Marmon suggested, namely that by analogy with the statute of limitations, if a plaintiff allows an action to go to sleep for 6 years, the court in its discretion will usually dismiss the case for want of prosecution, unless the plaintiff can show some good reason why he should be allowed to go on with it. In this case, it is not 6 but 12 years and I am quite clear that this plaintiff ought not, after that length of time to be allowed to go on with the action.'
•smith J.'s comment was this:
'This passage has rightly, as it seems to me, been construed in later cases, despite the reference in it to discretion, as an invitation to courts to enjoy the ease of travelling in a groove; that groove being one which, when available, will lead automatically to a solution in all but exceptional cases. And to fetter the discretion in this way is, as I have said, wrong in principle.'

"That his words were heeded  and  the Victorian courts preserved from heresy, is shown by the (sic) Kostokanellis v Allen (1974) VR 596, where the Full Court at pages 605 to 606 stressed that the discretion must be exercised on the facts of the particular case and said:

'In this connection, reference may be made to passages in the judgment  of Smith J. in  Shepperdson v Lewis where, in dealing with the discretion to be exercised on an  application to dismiss an action £or want of prosecution,  it was pointed out that the adoption of a formula created by erecting what are merely relevant factors into arbitrary principles so as to allow the automatic production of a solution in all but the exceptional case, is a quite fallacious approach to the exercise of a discretion.•
The Chief Justice's view is one which I have held in previous decisions. It also finds support in such authorities as:-
Jenkins V Bushby (1891) 1 Ch  484,  where at page 495, Kay LJ said:
the Court  cannot  be  bound  by a previous decision, to exercise its discretion in a particular way because that would be in effect putting an  end to the discretion•;
MacMillan v TIO, a decision of the Motor Accident (Appeal) Tribunal, delivered on 23 August 1988 by Gallop J, which dealt with the discretion given to the Board of  the Territory Insurance Office under section 31
(2) of the Motor Accidents (Compensation) Act in which his Honour said:
"As no hard and fast rule has  been stated in the Act, the decision whether to consider the claim is unconfined and must be approached in a broad fashion, taking into account all the relevant matters."; and
Gemmell Investments Pty Ltd v

Commissioner of Taxation 7	ACLR	3 Anderson	J	of the Supreme Court of dealing with discretion	under	the Code said at page 6:

in which Victoria, Companies

•Although the discretion to be exercised is said to be an unfettered discretion, discretions are constantly fettered by the observations of judges who, having said the discretion is unfettered, then sometimes seek to lay down principles, which, however, are not applicable in all cases, but only to the circumstances then before them.  Indeed, each case must depend upon its own circumstances ••• .•.
The		defendant's		counsel			in opening his submissions said that there is• •••	a	general		discretion	in	the	court to	dismiss	proceedings		in	accordance	with the court's inherent power to dismiss proceedings that	are		an	abuse of	process	where the delay is such as that (sic) justify that		dismissal.•		He			added		that considerations	to be taken into account are those ••• set

out	by	Bray	CJ	in 277].

Ulowski v Miller•	[(1968)	SASR

Vidler v Merrit Engineering Pty Ltd (1987) 86 FLR 213, following Ulowski v Miller, held that, when a court is asked to determine whether to dismiss a claim,
•matters which (are) paramount for the court's consideration (are) the length of delay, the explanation for the delay, the hardship to the plaintiff if  the action were dismissed and the cause of action left statute- barred, and the prejudice to the defendant  if the action were allowed to proceed notwithstanding the delay.•- see headnote (3).

In Vidler's case, Miles CJ, at 217-218 said:
"There is a considerable body of  case law both in this country and overseas relating to the striking out of a claim for want of prosecution. Extensive reference was made to these cases during the course of  argument  before me.  I was reminded of the 'stern approach' taken by the English courts to these matters and in particular of Allen v Sir Alfred  McAlpine  &       Sons Ltd [1968] 2 QB
229 and to the Australian cases  to 1980

-	..

which	were surveyed in detail by Cross J in		Calvert		v			Stollznow		(unreported, Supreme		Court	of		New	South	Wales,		1 April 1980): see Ritchie's Supreme	Court Procedure			New	South		Wales,	vol	2, p8528 (confirmed on appeal	in	Stollznow   v	Calvert	(1980]		2 NSWLR 749).		There is also the South Australian decision	of Ulowski		v	Miller		(1968]	SASR	277	in which Bray .CJ		surveyed		the wealth of case law in various places and concluded that, 'five paramount matters to be considered are the length of the delay, the explanation for the delay, the hardship to the plaintiff if the action is dismissed and the cause of action left statute-barred, the prejudice to the defendant if the action is allowed to proceed notwithstanding the delay, and the conduct of the defendant in the litigation' (at 280).  With  the greatest of respect to everyone who is recorded as having said anything on this subject, I think that the statement of Bray CJ is as helpful as may be obtained anywhere."

On the principle that, in the	exercise	of powers,	a	court	should	not		be bound by

discretionary authorities to

follow pre-set grooves, I take Vidler's case and Ulowski's case as indicating by way of guidelines only how the court's discretion might be exercised in actions to dismiss for want of prosecution. The authorities set

down	no	iron-clad		principles	other	than discretion		should	be	exercised judicially. by judges may be persuasive as showing paths merit		exploration	in	the	course	of	the

that		the Comments which	might exercise		of

discretion, but in the end each case "must depend upon its own circumstance": Gemmell Investments Pty Ltd v Commissioner of Taxation (supra); see also Stollznow v

Calvert	(1980)	2
Ltd (1968) 2 NSWLR

NSWLR 529.

749; Witten v Lombard Australia

In the exercise of my discretion factors for constderation are undoubtedly the delay involved in the prosecution of the plaintiff's claim and the reason for that delay. It is suggested that, the longer the delay, the greater the need for satisfactory explanation.

In November 1983, the Plaintiff's solicitor, Stirk, had, as I have said, told the defendant's solicitor of his intention to amend the plaintiff's statement of claim. Last December, the amended statement of claim was delivered after a gap of some 6 years.    The defendant's
counsel drew to my attention that the statement of claim was amended some 3! years after the expiry of the limitation  period,  which  he submitted had expired on 24
March 1986.

Miles CJ had called a delay of 6 years in Vidler's case a "very substantial delay" and had said of that delay that

"..• although it may not such a length that explanation."

constitute a record, it (was)	of it	(required)	a	convincing

The evidence here is that the file	was	inactive	between

20	October	1983

and 7 November 1989 - as I have said, a

period of	some	6

years.

There	has	undeniably	been

delay.

There

is	evidence	enough	to	call	it

inordinate.

Asche CJ in White's case said, however	that

there	cannot	be an automatic cut-off point "beyond which any delay must be fatal".	All	the	circumstances	that

are	relevant	must	be	weighed.

Justice	between	the

parties is an important consideration: see Neimann v Electronic Industries (1978) VR 431 mentioned in White's case.

In	White's	case,	Asche	CJ

also	referred	to

Kostokanellis v Allen	(1974)	VR	596	and cited the Full

Court's observations at page 605.

There the Full	Court,

in	considering	the	need	of	a defendant to explain his

non-appearance, said • it  does  not  necessarily  follow that if the explanation does not amount to
something which can be categorised as a 'sufficient reason,' the defendant's application should fail. It must all depend on the circumstances.•

The defendant drew my attention to a delay of more than 8 years in Patsalidies' case which delay O'Leary J, as he

then was, said was inordinate "on any	score". 7, his Honour said:
"So	far	as	the	present	case	is

At	page

concerned, as I have said, the delay is quite inordinate. What  the cause of the delay has been I do not  know. Again, I do not know whether it has been the fault of the litigants themselves or either of them or the fault of their legal advisers, or perhaps a combination of both. I simply have not been told."
The	plaintiff's	evidence	here	is		that	he	"left	the matter	to	(his)		solicitors•	and	that	he		has	not

"at	any

time

instructed

them

not	to	pursue

(the)

action".

He	points

out,

quite

correctly,	that,	as

liquidator

of	the

Company,

he	is

bound to pursue

the

action he has taken.

In	the

copy

affidavit	wh.i.ch	is

annexed to Goldsmith's affidavit of 7 November 1989, Stirk had said that it was "possible  to  close pleadings and have all pre-trial proceedings completed prior to 2nd November 1983 provided that (the Court made) consequential orders with respect to delivery of defence, close of pleadings and mutual discovery.•

There is no evidence that such orders were made or even sought by the plaintiff in the proceeding. Stirk in his affidavit of 12 January 1990  says that the "reason  for the delay (was) that many other Dorcon matters were dealt with and this was not considered a priority for early resolution.•  He  adds  that  he  had  "anticipated that it would eventually be resolved."

In his affidavit of 13 November 1989, Stirk says that he had the care and conduct of the matter only until 30 September 1988. The defendant's counsel submits that there is no explanation given for the delay after that date, which he calls "the second period of delay".

The defendant through its counsel argues that the decision not to pursue the matter was a deliberate one. It is not suggested, he says, by the plaintiff that the cause was inadvertent omission or forgetfulness. It was, he says, a delay which occurred because of a deliberate act on the part of the plaintiff's solicitors not to continue to prosecute the claim in the period in question.

There is no evidence, he submits, as to the grounds upon which that inaction was justified or of what were the pressing matters that warranted the delay. I have, he says, only a statement of what were the plaintiff's solicitors' beliefs which he describes as "baseless".

In Janov v Morris (1981) 3 All ER 780 at 783, Dunn	LJ	at 783 says:
•Ever	since	Allen v Sir Alfred McAlpine
&    Sons Ltd [1968] 1 All ER 543, [1968]	2
QB 229 it has been accepted that the power of the court to strike out actions for want of prosecution should be exercised only where the court is satisfied either that there has been an intentional and contumelious default,  for example, disobedience of  a peremptory order of the court, or that there has been inordinate and  inexcusable delay."
The defendant does not suggest that there	was	a	failure

to	comply	with	an	order.	He argues that the

default,

being deliberate, has gone beyond what can be said

to	be

inordinate	and inexcusable and into the realms of what is

intentional and contumelious. of	process.	I do not accept

It was, he says, that submission.

an	abuse
I am not

prepared to hold that the actions (or perhaps more correctly the inaction) of either the plaintiff or his solicitors amount, even if intentional, to contumelious conduct. For any conduct to fall into that category, it must be either a flagrant breach of a peremptory order of the court or some conduct of a like kind. There is no evidence of conduct of this kind on the part of the plaintiff or his solicitors.

.

The plaintiff does not (or indeed cannot) argue that
,.·-
there has been no delay nor does he deny that it is fully
explained, but he says it is neither inordinate or inexcusable. In his counsel's words it is not such that should "tip the balance in favour of the action being dismissed".

The plaintiff stresses that, at the time this proceeding was pending, there were a number of other matters involving the Company in what was a complex winding up. Differing priorities had to be considered which meant that some matters had to be set aside while preference was given to others.

In Patsalidies' case (supra), where, as I have said, the delay was held to be "quite inordinate" and the Judge was given no explanation or indication of who was at f ult, the decision rested on the question of prejudice. Here it is clear to me that the delay is that of the solicitors and that, as to the part for which an explanation has been offered, the explanation is weak and unsatisfactory. As to the balance of the delay, there is no explanation at all. Following Patsalidies, I too consider that justice lies in looking further than just the length and cause of the delay. I must consider the question of prejudice. I must ask myself whether there are aspects of prejudice caused by the delay which would affect the plaintiff if his claim were dismissed. On the other hand, I must weigh the prejudice to the

defendant of a refusal to make the order for which it asks.

The defendant submits that, while my granting the application will deprive the Plaintiff of the right to pursue his claim (it being now time-barred), the loss sutained would be small. He suggests that the plaintiff's claim represents only a negligble part of the overall amount of the liabilities of the Company. Further, the plaintiff (or in reality the creditors of the Company) will not lose, he says, because the plaintiff has a claim against his solicitors. The creditors cannot mind from whom the money comes. If, therefore, the plaintiff suffers prejudice, it will, the defendant submits, be insignificant.

What is clear is that the defendant makes no allegation that the plaintiff is personally responsible for the delay except to suggest that, as an officer of the court, he had an obligation to monitor, as it were, his solicitors' conduct of the proceeding. I have found  that the responsibility was that of the plaintiff's solicitors. As the plaintiff's counsel suggests, the plaintiff is nothing more than a nominal plaintiff; the real plaintiffs are the creditors in the liquidation and they are clearly, on the evidence, innocent of any misconduct. It has been suggested that the  blamelessness of a plaintiff personally is a relevant factor for consideration: Stollznow v Calvert (supra). There is also authority to support the argument .that the defaults of a solicitor should not vicariously be made those of his client personally innocent of the default: see again Stollznow v Calvert. In White's case, the Chief Justice adopted the approach in Birkett v James (supra), where at 814-5, Lord Salmon regarded the right to claim against the solicitor as "an ancillary consideration" and said that, while it was not irrelevant, it "may carry little weight".

I find that, in the circumstances of the present case, there is no justification in making the plaintiff responsible for his solicitors' fault. Nor do I accept that the quantum of the plaintiff's claim, however small, is a factor for consideration.

I turn now to consider the question of what prejudice the defendant may suffer. The defendant's counsel submits that that prejudice or injustice will be "substantial and real". Its defence is, he submits, in reality a counterclaim a right to ask the court to validate the payments: Re: Atlas Truck Service Pty Ltd (1974) 24 FLR
220. The defendant bears the onus of establishing the counterclaim: see Vidler's case, Miles CJ at 219. In addition, the defendant must show special circumstances that justify a validation order: Tellsa Furniture Pty Ltd (in Liq) v Glendale Pty Ltd 13 ACLR 64. The defendant carries a double burden, its counsel suggests, which enlarges the prejudice caused to it because of the delay - •••• where the onus lies upon the defendant, the prejudice caused by the plaintiff's delay is likely to be the greater•, per Miles CJ at 219 in Vidler's case. It is put to me that these submissions apply also to the claim to which the provisions of the Bankruptcy Act apply, with regard to which, the defendant's counsel submits, the onus is still on the defendant.

Where then is the prejudice? It is suggested that certain documents which the defendant says are of importance or value to its defence and its counterclaim cannot be located. The defendant claims that a person deemed by it to be an important witness, namely one Barry Ladd, cannot be found, and that another witness has lost recollection of the relevant events. Even Goldsmith himself has, it was put to me, difficulty in recalling
facts. Because of this, the defendant argues, it cannot get a fair trial. Material information or evidence, is denied to it, says the defendant, and this is a matter directly attributable to the plaintiff's delay.

Further, argues the defendant, the expiry of the limitation period has lost it the right to sue for or claim return of goods supplied to the Company. The defendant had stopped supply of goods to the Company, but, after having received the payments the subject of this proceeding, resumed the supply of goods to the Company which the latter needed, it is said, to complete the contract with the Department. If those payments are declared void, the defendant will be obliged to return the payment received for the goods and will have suffered the loss of its right to claim for payment or return of those goods because the claim is now statute-barred.

The defendant claims it had a right to sue its former solicitors for negligence arising from the granting of the equitable charge and the transactions associated with it. This right it says is now statute-barred.

The defendant sought to make something of an alleged claim by Jardio against its solicitors, arising from the equitable charge. That claim it says is also statute-barred. The loss of this right, the defendant says, is attributable to the delay. I am not satisfied, however, that the question of Jardio's right to sue its solicitors is relevant to this application and therefore it is not a factor for consideration.

The main thrust of the plaintiff's argument is that, if the defendant is in any way prejudiced by the deprivation of its cause of action against its former solicitors, or by the loss of documents and witnesses or by the impairment of their recollection, it has brought that state of affairs upon itself. The situation in which it finds itself today is of its own making. It is put to me that a party cannot rely on circumstances arising from its own fault as constituting prejudice to be relied on as a ground for defeating another's right to have his
claim litigated.

The plaintiff submits that, on the evidence, I can conclude that the defendant and its solicitors had, early in the history of the proceeding before the operation of any limitation period, considered "time limits" in relation to its right to a counterclaim for validation of the payments. Notwithstanding this,  it  took  no action. It allowed the effluxion of time ultimately to defeat its right to pursue such actions as it might have pursued,

No action was taken by the defendant to file a counterclaim or to warn the plaintiff that delay was prejudicing its right to counterclaim. When there was the opportunity to have the issue in this proceeding tried with Jardio's action, which was heard and disposed of in 1984, the defendant successfully opposed the making of such an order.

It was only in the last few months, and not before that, that the defendant first considered possible action for

negligence	against	its	former	solicitors. plaintiff asks, can this be his fault.

How,	the

The argument is that, while it is alleged plaintiff in the offending period of time, did the defendant in that time also did nothing.

that the nothing, It sat by

and	watched	time	defeat	its	rights	to	claim	and
counterclaim. It failed to see the risk that time might affect such evidence as was available to it. There is therefore,  counsel  submits, no causal link between the

plaintiff's delay and the prejudice the defendant it	has	suffered	or	will	suffer.	The claim

alleges that the

defendant has suffered prejudice	through	loss	of	legal

rights, loss of

loss	of witnesses, loss of memory in witness documents, indeed all it says	it	has	lost,

and
is,

according to the plaintiff, therefore groundless.

Mr Ladd left Australia in early 1983 and, by November of that year, could not be found. He had left before the commencement of this  proceeding.  His  disappearance, says the plaintiff, was well before the occurrence of the alleged delay and so not attributable to it.

There is no evidence, says the plaintiff, that the defendant did anything about ascertaining the whereabouts of the  missing documents until this year.  The facts as to when the search was undertaken are as deposed to in Morgan's affidavit of 9 February 1990. There is no evidence of any earlier attempts to locate the documents in question. There is also no evidence  that  the documents or copies of them are not in fact in the defendant's possession, the  possession of its solicitor or former solicitors or are elsewhere. In fact, the evidence is very much that they might well be able to be found.

Neither the plaintiff nor his brother (a witness, I am told, with a fading memory) have provided the defendant's solicitors with a statement of facts. How can the

plaintiff be blamed, the plaintiff asks, no earlier statements in existence to memories?

for there being jog	flagging

One would xpect that, immediately upon service of the originating process in this matter the defendant would have set about initiating the preparation  of  its defence. There is no evidence that it did, but  it  must be remembered that the defendant was waiting for an amended statement of claim to be delivered.

In McKanna v Aspect Homes Pty Ltd (1983) 51	ALR	603	the Full Court of the Federal Court at 606 said:

"It was said that the defendant could have taken the steps necessary for the defence of the action long ago, and that he had instead done nothing.  The fallacy in this argument, we think, is that the plaintiff's default has at all times been in delivering a statement of claim, which must be the basis of the whole action. How can the defendant reasonably be expected to prepare a defence against a claim of which he knows only what is expressed in the general endorsement on the writ - an endorsement which does not mention any dates? It was suggested that the defendant's solicitors should have used the statement of claim which had been sent to them with a letter which formed part of the exchange of correspondence in mid-1978, as a basis for taking instructions, obtaining statements of witnesses, and generally preparing the defence. In our opinion it is unreasonable to expect a defendant to incur the expense of instructing his solicitors to prepare a defence to a statement of claim which (a) has not been filed; (b) has been sent to them only for the purpose of seeking consent to its late filing; and (c) is promply followed by an agreement that the action should remain in suspense till further notice. Any failure to incur expense  in those circumstances was shown to be justified when more than three years later the defendant's solicitors were told that a different statement of claim would be relied on.•

The defendant in the matter before me	had	been	told	in 1983	that	an	amended	statement	of		claim	was	to	be

delivered.

The original

was obviously

defective.

The

defendant

argues	that

it	is

"not	open	to

the

plaintiff,

in those

circumstances,

to	argue	that

(the

defendant)

should

have

been

chasing	witnesses

and

obtaining instructions when the whole nature of the claim had not yet been disclosed" to the defendant or the court. A submission which obviously finds some support from McKanna's case.

In	Vidler's	case	(decided	in 1987) the CJ at 218 cited McKanna's case in the following manner:
"However, there is a decision of the Full Court of the Federal Court of Australia which is binding on this Court and which has to be taken into account. McKanna v Aspect Homes Pty Ltd (1983) 51 ALR 603 was an appeal from a decision of this Court. The plaintiff had served a writ but not filed a statement of claim. He applied for leave to file the statement of claim out of time. By that stage it appeared that the plaintiff's claim would, if he had to start again, be statute-barred. The learned judge at first instance found that the defendant had deliberately declined to apply to have the action struck out for want of prosecution whilst the plaintiff was still within time for recommencing. Leave to file the statement of claim out of time was granted. On appeal the Full Court said at 606:
'It thus becomes necessary to consider the law relating to the dismissal of actions for want of prosecution, not because such an application is before the court, but because the learned judge made the defendant's refraining from making such an application one of the facts relevant to the exercise of his discretion.'

"After	referring	to	authority,	the went on to say at 606:

court

'In our opinion it must follow from this principle that a defendant is not to be put at a disadvantage by the court on the ground that he advisedly refrained from applying for the dismissal of the action before the expiration of the limitation period. The situation may well be different if the defendant's conduct is misleading, or in breach of an undertaking but that is not the situation in this appeal.
'It seems to us, therefore, that the learned judge exercised his discretion on a wrong principle when he held that the deliberate refraining by the defendant, until the expiry of the limitation period, from applying for the dismissal of the action, 'contradicted any justification based on prejudice to the defendant' ••

•As there is no allegation or suggestion in this present case of misleading conduct or a breach by the defendant of an undertaking, it follows from McKanna's case that of those criteria mentioned by Bray CJ, I must exclude the conduct of the defendant in the litigation.•
Moffit P however in Stollznow's case (decided in 1980 and cited with approval in Patsalidies) made the following observations:

"	despite concerning the

some judicial observations right	of	defendants	to

let	sleeping defendants should earlier	inaction application		is proceedings	for rigid	rule	can matter.• at p753;

dogs			lie	and	that not		be			penalized		for when		subsequently		an made				to		dismiss want of prosecution, no be	laid			down	on		the

• in some cases  inaction  by  a defendant in the face of impending prejudice to him if delay continues, may render a later claim of actual prejudice less creditworthy, and the prejudice, if established, a less weighty factor.• at p753;
"It is too simplistic an approach to regard preparation for, and bringing the proceeding to trial, as a one sided affair resting entirely on  the plaintiff, who has the carriage of the action. I cannot accept, for example, that a defendant, who has written complaining of the delay and  warning that particular prejudice will occur to him if delay continues, is not, on  a later application to dismiss the proceedings, in a position superior to that of a defendant who has lain silent, and later claims for the first time that prejudice has occurred by reason of the delay. Whatever may have  been  past views of the adversary system in regarding skill in exploiting the rules in an adversary duel as some kind of virtue, current ideas of justice, at least in this country, are directed to the substance of things.  The  exercise of the undoubted right of a defendant to
do	nothing		runs	the	risk	of	being classified	in	the circumstances of some

-.

cases as
•ambush"
754

being in athe approach	to

category	of	the litigation.• at p

. ,.,_Bray CJ, in	Ulowski v Miller	(supra) I	poi'nted	out I	at
page	282,	that	a	defendant's	inaction	was	not
•entirely irrelevant to the question of whether  (it would) in fact suffer any prejudice if the action (were) allowed to continue.•

The judgment of Moffit P, (with which Hope and  Mahoney JJA agreed) in Stollznow, although mentioned in Vidler's case, was not cited in McKanna's case. However I  find what was said in Stollznow's case persuasive and propose to adopt the same view.

I find that the alleged loss of the right to sue the defendant's allegedly  negligent former legal advisers is a matter which the defendant, by its own action, could
have	avoided.	Admittedly,	what	damage	the defendant
would have suffered as a result of his	advisers'	alleged
negligence would not have been fully known until judgment was delivered in this proceeding.  I  am  satisfied however, that the defendant, in protecting its rights, could have filed a  writ  against  its  former solicitors

before	expiry

of	the	limitation

period.

There is no

evidence	that

the

defendant	did

so.

Even	if	the

defendant had wished to avoid costs by not serving the writ on those solicitors, there would, it seems to me, have been grounds for the validity of the writ to have been extended from time to time pending the outcome of this proceeding. The defendant's  inaction  in  this regard is due either to a deliberate decision on its part or to its own carelessness. In either case, the loss of

its right clearly

to not

claim	against attributable

its to

former the

solicitors delay	in

is this

proceeding.

It would have been another matter	had	such

a writ been filed and, because the court refused to extend its validity, the Limitation Act had operated to bar further proceeding being taken.

I have come to the same view with regard to  the allegation that the defendant has lost the opportunity to claim recovery or the value of the goods supplied to the Company. It has failed to make any attempt to  preserve its right to sue its former solicitors, and likewise it has allowed the passage of time to bar any possible right of action in relation to return of the  goods  in question. It seems to me however that the defendant  is not without some recourse to a remedy. It has, for example, a right to apply for an extension of time under section 44 (3)(b) of the Limitation Act.

There		is		no	evidence	that	I can accept which suggests that the documents said to be	missing		are	irretrievably lost	or	irreplaceable.			In		fact,	as		I		have already observed,			the		evidence		implies			the		contrary. Goldsmith's			evidence	confirms that they may exist in his files or be in the possession of	his	solicitors		or	his former		solicitors.		It		has		not	been		shown that the Evidence (Business Records) Interim Arrangements Act cannot be relied upon to permit the admission  of extrinsic evidence of the documents and of their contents if indeed they are vital  to  the defendant's defence. Even if that Act were not available, the rules  of evidence permit secondary evidence of lost documents. There is no evidence of why resort cannot in this case be had to that kind of evidence. Admittedly an additional burden is cast on the party wishing to avail itself of proof by secondary evidence, but I am not convinced that the additional burden is of such magnitude that it should amount to prejudice of the kind relevant to the exercise of my discretion.

I am not persuaded that the loss of the witness, Ladd, is directly attributable to the delay. He was out of the Northern Territory before the commencement of the proceeding and there is no evidence that satisfies me that his whereabouts would have been traced but for the
delay.

The more difficult matter for consideration is whether the defendant contributed to or even caused its own prejudice by failing to take earlier action to oblige prosecution of the claim by the plaintiff. The essence of the defendant's argument is that its right to counterclaim  for  validity  is  now  statute-barred: Re Ward; Thomas v L.G. Abbott & Co. Ltd(1950) 16 ABC 214;

Re Narbey; Ex parte Official Receiver 19 ABC	201; ALR 748.

(1961)

The facts here differ from McKanna's case in that in that case no statement of claim had been delivered. The defendant there had before it only a broad allegation in the endorsement on the writ. Here a statement of claim had been delivered but the defendant had been told by the plaintiff that it was to be amended. It seems  to me that there is no reason to justify the defendant's not having taken, as time passed and the expiry of the limitation period loomed, such action as it might to protect its right to counterclaim. It gave to the plaintiff no notice of its likely predicament. It could have filed and served a defence and counterclaim to the

plaintiff's	existing

statement	of	claim.

If	that

document	were	later

amended,	inevitably	consequential

amendments

to	the

defence

and	counterclaim	would

follow.

If by any chance it were necessary	in	the	new

defence or counterclaim to have raised claims barred by time, the defendant could have sought to avail itself of sections 44 (2)(b)(ii) or 48A of the Limitation Act. Having filed a defence to the existing statement of claim, the defendant would also have been in a position, should the plaintiff's delay have persisted, to make an
earlier	application	of	the	kind	with	which	I am now
dealing. The courses which I have suggested could have been taken  in  sufficient  time  to have preserved the

defendant's right to counterclaim. action were taken.

No	such	courses	of

There is no evidence to satisfy me that the defendant could not have done what was necessary to proof witnesses at an early stage when their memories were still fresh. Information so obtained may not have been entirely relevant as a consequence of the proposed amendment to the Statement of Claim, but I cannot conclude that such proofs could not now have been used to refresh ebbing memories.

I have had the opportunity of observing Goldsmith under cross- examination and I am not satisfied that his recollection is so vague or disjointed as to be incapable of being revived or refreshed by means of the documents which Goldsmith says might be still in his possession or that of his solicitors. He has access also to the transcript of the proceeding before Nader J (152 of 1983) in which he gave evidence relevant to the transactions the subject matter of the present proceeding.

It has not been made clear to me of the extent to which Goldsmith's brother is an essential witness in this proceeding. It seems to me, however, that, if in fact his evidence is needed, it is not unreasonable to assume that his flagging memory is capable of being revived in a similar fashion to that of Goldsmith.

Adopting what Moffit p said about inactivity in Stollznow's case, I am of the view that the defendant's overall inactivity has rendered its claim of prejudice less creditworthy and the prejudice it has or will suffer, such as that might be, "a less weighty factor".

It must be apparent from what I have said that I have not disregarded the fact that the defendant has or  will suffer some prejudice in the presentation of its defence or in prosecuting any counterclairn. The period  of 6 years cannot have gone by without having ..taker,t its toll. There will be some residual difficulties. I am

25
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··············~-------

satisfied	however	that	the	most	significant	of those difficulties or prejudices arise from the defendant's	own

inactivity,	which, make	its	claim	of creditworthy.

for	reasons	I	have already stated, prejudice	less		weighty	and	less

What	then		is	the	plaintiff's dismiss the plaintiff's claim, he again.		The	plaintiff	is	an

prejudice?		Were will be unable to officer	of	the

I to start court

responsible for protecting the interest of the creditors in the winding up of the Company. Dismissing his claim deprives those creditors of the right through the plaintiff of prosecuting what prima facie is a good claim on the merits. All that would be left to them is the plaintiff's right to pursue a claim against his solicitors for damages or their right to claim recovery of damages against the plaintiff himself. Either course results in a proliferation of litigation and an increase in complexity without enhancing the chances of success. In addition there will be further loss of time and increased costs. It will be the plaintiff and those who have been called the "innocent real plaintiffs" who would thereby be prejudiced. I am not persuaded that such residual prejudice as the defendant, after discounting what arises from its own fault or inactivity, may suffer in being required to go to trial will be greater than that of the plaintiff and the creditors of the Company.

In the circumstances justice requires that I dismiss the application. Accordingly,  it is dismissed.  I  will hear counsel on the question of costs.

26