Terry Vidler v Merit Engineering Pty Limited [1987] ACTSC 24 (3 April 1987)

SUPREME COURT OF THE ACT

TERRY VIDLER v. MERIT ENGINEERING PTY. LIMITED
S.C. No. 1590 of 1979
Evidence - Practice and Procedure

COURT

IN THE SUPREME COURT OF THE AUSTRALIAN CAPITAL TERRITORY
Miles C.J.(1)

CATCHWORDS

Evidence - interlocutory application - admissibility of hearsay evidence - Rules of the Supreme Court of the Australian Capital Territory Order 40 Rule 3(2)

Practice and Procedure - application to strike out an action for want of prosecution - Rules of the Supreme Court of the Australian Capital Territory Order 27 Rule 4 and Order 38 Rule 5 - applicable principles - no new matter of principle.

Practice and Procedure - statement of claim - amendment - original statement of claim pleaded one cause of action - proposed amendment may give rise to several causes of action all of which appear to be statute-barred.

Practice and Procedure - defence properly categorised either in whole or in part as a set-off or in whole or in part as a counter-claim - nature of counter-claim and set-off.

Shubrook v. Tufnell (1882) 9 QBD 621

Cox Brothers (Australia) Ltd. and Another v. Cox [1934] HCA 16; (1934) 50 CLR 314

Dudgeon v. Chie [1955] HCA 42; (1955) 92 CLR 342

Lombard Australia Ltd. v. Mulley and Ors. (1976) 9 ACTR 23

Warea Pty. Ltd. v. Waterloo Industries Pty. Ltd. (1986) 66 ALR 537 (Pincus J.)

The Supreme Court Practice (Eng.) (1985) Vol. 1 p 809 para 59/1/6

Allen v. Sir Alfred McAlpine & Sons Ltd and Another (1968) 2 QB 229

Calvert v. Stollznow (Supreme Court of New South Wales, unreported 1 April 1980)

Ritchie's Supreme Court Procedure NSW Vol. 2 p 8528

Ulowski v. Miller (1968) SASR 277

McKanna v. Aspect Homes Pty. Ltd (1983) 51 ALR 603

Argento v. Cooba Developments Pty. Ltd. (Federal Court of Australia, unreported, 17 February 1987

D Galambos & Son Pty. Ltd. v. McIntyre (1974) 5 ACTR 10

Hanak v. Green (1958) 2 QB 9

Stehar Knitting Mills Pty. Ltd. v. Southern Textile Converters (1980) 2 NSWLR 514

McDonnell & East Ltd. v. McGregor [1936] HCA 28; (1936) 56 CLR 50

HEARING

CANBERRA
3:4:1987

ORDER

The plaintiff's action be dismissed.

The oral application by the plaintiff to amend the statement of claim is refused.

By consent the plaintiff/respondent pay the costs of the applicant/defendant including those of 27 June 1986 and 1 August 1986 but with liberty to apply in respect of any particular adjournment.

DECISION

This is an application to strike out an action for want of prosecution. The application is made by way of notice of motion dated 19 May 1986. Counsel for the applicant defendant relied upon the combined operation of Order 27 Rule 4 and Order 38 Rule 5 of the Rules of Court. No reliance was placed upon the inherent jurisdiction of the Court, if any. The plaintiff's statement of claim was endorsed upon the writ of summons issued on 27 August 1979. Formal parts aside the statement of claim alleged as follows:

"The Plaintiff's claim against the Defendant is

for work and labour done and materials provided
therefore by the Plaintiff for the Defendant at
its request.

PARTICULARS

To the price of work and labour done and materials
provided therefore by the plaintiff for the
defendant at Lot 8, Aurora Avenue, Queanbeyan in
the State of New South Wales between the 3rd
November 1977 and the 15th July 1979 particulars
whereof have been provided by the plaintiff to the
defendant from time to time - $17,259.28."

2. The defendant formally sought particulars of the statement of claim or, more precisely, particulars relating to the price of the work and labour done and materials provided referred to in the statement of claim. Further and better particulars were supplied and on 27 November 1979 a defence was filed in the following terms, omitting formal parts:

"2. The defendant admits that the plaintiff
carried out for it work and labour and provided
materials at its request but denies that the
plaintiff completed the work in accordance with
his agreement with the defendant.

3. The defendant owes the plaintiff no moneys
for the work and labour done by the plaintiff and
the materials provided by the plaintiff."

3. During the hearing of the application, which was over three days of court time between 8 August 1986 and 12 March 1987, it became clear that neither party wished to rely upon the pleadings filed, and that those pleadings did not reflect the dispute between the parties. In fact, at the end of the hearing of the application to strike out, counsel for the plaintiff made oral application from the bar table for leave to amend the statement of claim.

4. There are some contested factual issues, but before dealing with these I should state what the uncontested facts are for the purpose of the application to strike out. The plaintiff was at all material times in business as a builder. Pursuant to an agreement he did some work for the defendant in relation to the construction of a factory at Queanbeyan. Tradesmen and the like were engaged for the purpose of the construction of the building and materials were purchased. The plaintiff paid for some of these goods and services and the defendant paid for some of them. Initially there was an agreed price of $27,000 for what the plaintiff was supposed to do. Later on, however, it was agreed that the size of the factory would be increased. The parties are then in dispute as to whether in fact the plaintiff finished the work as agreed, as to whether and how far the original price had to be varied by reason of the increase in the size of the building, whether the plaintiff or the defendant had the responsibility to pay for some of the goods and services supplied by other people in relation to the construction of the factory, how much the defendant did in fact pay, and other matters.

5. Prior to the filing of the defence the plaintiff's then solicitors gave consideration to the filing of an amended statement of claim and prepared a draft. On 27 November 1979 the defendant's solicitors sent a copy of the defence under cover of a letter indicating that if the matter could not be settled then the defendant would plead a set-off and counter-claim for moneys over paid and for "incidental expenses" in the nature of damages for breach. There was a letter from the defendant's solicitors to the plaintiff's solicitors dated 24 March 1980 in which they stated "we note that you are to let us have your client's instructions in relation to the money our client has paid out concerning the building erected on the subject land, and were also to let us know whether or not he wishes to continue with the action". There were some discussions relating to settlement of the dispute over the telephone in April and June 1980, but there was no further communication between the parties and their representatives between 25 June 1980 and 9 May 1986. On the latter date the plaintiff's present solicitors wrote to the defendant's solicitors stating that they had taken over conduct of the matter and suggesting that their perusal of the file indicated that "an amended statement of claim would perhaps assist in better clarifying the issues between the parties", and with some optimism enclosed the amended statement of claim with a request that consent to filing be endorsed on it. The defendant's solicitors do not appear to have replied to this communication. A notice of intention to proceed under Order 64 Rule 9 was then filed by the plaintiff's solicitors on 15 May 1986, although they did not file a notice of change of solicitors until 16 June 1986. In the meantime the defendants took out the present notice of motion on 19 May 1986.

6. An objection was taken to part of the evidence of Mr. Kenneth William Clingan, a director of the company, on the ground that it was based on hearsay. The defendant sought to justify the reception of that evidence pursuant to Order 40 Rule 3(2) which allows hearsay evidence based on disclosed information and belief in interlocutory proceedings. It was submitted on behalf of the plaintiff that the present application was not an interlocutory one in that it had the potential to put an end to the rights of the parties in relation to the cause or causes of action sued upon. However, a judgment or order is interlocutory where it cannot be affirmed that it finally disposes of the rights of the parties, see Shubrook v. Tufnell (1882) 9 QBD 621, Cox Brothers (Australia) Ltd. and Another v. Cox [1934] HCA 16; (1934) 50 CLR 314, Dudgeon v. Chie [1955] HCA 42; (1955) 92 CLR 342.

7. By analogy, an application or proceeding should be regarded as interlocutory where it cannot be affirmed that it will finally dispose of the rights of the parties; the potential that it have that effect is not enough. An application by a plaintiff for summary judgment is in a different category, probably a category of its own, see judgment of Blackburn J. in Lombard Australia Ltd. v. Mulley and Ors. (1976) 9 ACTR 23, dealing with hearsay evidence on applications for summary judgment under Order 15 (prior to amendment inserted by statutory rule No. 152 of 1977) and Warea Pty. Ltd. v. Waterloo Industries Pty. Ltd. (1986) 66 ALR 537 (Pincus J.). In any event, to dismiss the plaintiff's claim under Order 38 Rule 5 for failure to set down for trial is not necessarily to dispose finally of the plaintiff's cause of action. It may well be, and on the face of it, it does appear to be the case, that if the plaintiff were to recommence, then he would be likely to be met with a defence under the statute of limitations, and that that defence would be likely to be successful, but the defence would have to be raised and the Court would need to make a determination on it unless the plaintiff abandoned the further proceedings. The Supreme Court Practice (Eng.) (1985) Vol. 1 p 809 para 59/1/16 cites an unreported decision of the Court of Appeal Arnot v. Amber Chemical Ltd. 19 May 1953 as deciding that an order dismissing an action for want of prosecution is an interlocutory order. Accordingly, I hold that the present application is interlocutory and that the defendant is entitled to rely upon hearsay evidence based on identified information and belief.

8. The further objection is taken that part of the affidavit of Mr. Clingan does not disclose the source of his information. He states that the defendant company made a number of payments on behalf of the plaintiff to various persons, firms or companies in the Queanbeyan/Canberra area. He goes on to state that a number of those persons, firms or companies have gone out of business or left the area. However, I do not think that this latter statement is hearsay evidence. A witness is permitted to give evidence of enquiries as to the whereabouts of another person in order to establish the absence of that other person. Perhaps the statement in Mr. Clingan's affidavit may be objectionable on the ground that it is a summary or a statement of the effect of his enquiries, but that objection was not taken, and I think that that in proceedings such as the present application such evidence is to be received. It is to be noted that it was not challenged in cross-examination.

9. It was submitted on behalf of the defendant that the plaintiff bore the onus of showing cause why an order dismissing the action should not be made. No authority was cited for this proposition and I am not prepared to affirm that it is true. On the other hand, a plaintiff who delays six years from the time of delivery of defence before taking a further step in his proceedings has as a matter of practical reality a persuasive burden of showing that the delay occurred for some justifiable reason or excuse. The plaintiff has set out in his affidavit sworn 9 July 1986 copies of letters he received from his solicitors between 6 February 1980 and 29 March 1983. During that period it appears that his then solicitors made repeated requests to the plaintiff for his instructions. He did not reply in writing to any of those letters, although he did on at least two occasions reply by telephone, and he says that on 6 April 1983 he told the secretary to his then solicitor to "please re-activate this matter". The plaintiff says that during this period he was, in effect, preoccupied with other litigation which required more urgent attention than the present action, and that he was in financial difficulty and unwilling and, in effect, unable to incur further costs until he had met his financial commitments in regard to this other litigation. The plaintiff says that in May 1984 he repeated his instructions to his then solicitors to "re-activate the Merit matter", that between May 1984 and December 1985 he lost faith in his then solicitors and instructed his present solicitors in December 1985. He says further that he was advised by his previous solicitor on one occasion, and perhaps two, that he need not be worried by the statute of limitations. The plaintiff also says that in about February 1980, Mr. Clingan admitted inferentially that the defendant owed money to the plaintiff but defied the plaintiff to recover it by lengthy court proceedings. The plaintiff also says that he has suffered from diverticulosis which has further prevented him from giving attention to the action against the defendant. He lastly states that he believes there is no defence to the claim "except as to a possible set-off claimed by the defendant as to part of the sum claimed".

10. The affidavit of Mr. Clingan, to which I have already referred, states that a number of the persons, firms or companies to which payment was made by the defendant on behalf of the plaintiff in 1978 and 1979 are no longer to be found, that his own memory of the events in question has deteriorated since 1980, although it was reasonable at that time, and that he made no detailed statement to his solicitors about the events in question at that stage. He also states that the bank which held the cheques of the company for the period 1978 to 1980 has, according to what he has been told, destroyed those cheques. To his affidavit is annexed a detailed schedule (which counsel described as a computer printout) setting out details of the amounts claimed to be paid on behalf of the plaintiff, and the total amount appearing on these documents is $18,029.21.

11. The proposed amended statement of claim is also annexed to the affidavit of the solicitor for the defendant. In my view it is not necessary to set this document out in these reasons for judgment. What it does is to plead the original agreement of 15 November 1977, which is said to be partly oral and partly in writing, for the agreed sum of $29,000, then to allege variations to that original agreement in November 1977 and February 1978 relating to work to be done and materials to be supplied "extra to the agreement" and amounting to $17,609.20. After allowing for total payments made by the defendant to the plaintiff of $19,740.72, a balance is claimed of $26,868.48. There is also a somewhat cryptic claim for "damages for breach of contract".

12. Both the plaintiff and Mr. Clingan were cross-examined at length upon their affidavits. I have to say that the plaintiff was not an impressive witness. Exactly what he meant in paragraph 18 of his affidavit that there was a possible set-off as to part of the sum claimed, is not clear. He seemed to wish to retract that when he was cross-examined. On the other hand, the cross-examination of the plaintiff did not cause him to resile from any of the reasons he gave in his affidavit for the delay between 1980 and 1986. I accept those reasons, but the question remains as to whether in the light of all the circumstances they constitute justification. One at least of the reasons given may be irrelevant to deciding the issue, and that is the claim made inferentially that it was the plaintiff's solicitor who was responsible for the delay and not the plaintiff. I am not persuaded on the material before me in any event, however, that there was fault on the part of the plaintiff's then solicitor. The plaintiff's solicitor sought instructions on several occasions and the plaintiff has not explained satisfactorily why he failed to give those instructions except that he was preoccupied with other litigation and suffered from a certain degree of ill health. The evidence does not support a conclusion that his preoccupation with the other litigation took up all his time or sufficient of his time to deflect proper attention to the case between him and the defendant and the evidence is not persuasive that the plaintiff's illness was incapacitating.

13. 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 and Another (1968) 2 QB 229 and to the Australian cases to 1980 which were surveyed in detail by Cross J. in Calvert v. Stollznow (Supreme Court of New South Wales, unreported 1 April 1980), see Ritchie's, Supreme Court Procedure NSW Vol. 2 p 8528 (confirmed on appeal in (1980) 2 NSWLR 749). There is also the South Australian decision of Ulowski v. Miller (1968) SASR 277 in which Bray C.J. 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 explantion 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 p 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 C.J. is as helpful as may be obtained anywhere.

14. 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 re-commencing. Leave to file the statement of claim out of time was granted. On appeal the Full Court said at p 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."

15. After referring to authority, the Court went on to say at p 606:

"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"."

16. 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 C.J., I must exclude the conduct of the defendant in the litigation.

17. I turn then to consider the four remaining factors. Firstly, what of the length of the delay itself? It is undoubtedly a very substantial period. The delay in question is from 25 June 1980 until 13 May 1986, almost six years. That is a very substantial delay, and although it may not constitute a record, it is of such a length that it requires a convincing explanation. Next, what of the explanation given? As I have already indicated, whilst I accept the plaintiff's explanations as genuine, they are not totally convincing as furnishing justification or excuse. Thirdly, what of the hardship to the plaintiff if the action is dismissed and the cause of action left statute barred? There are a number of things to be said here. The plaintiff's claim is in effect admitted and I shall say something further about this in a moment. But the plaintiff in his own affidavit made a concession that the defendant may be entitled to a set-off for an unspecified amount. The affidavit of Mr. Clingan supported by his oral evidence establishes that the defendant has prima facie a set-off or a counter-claim or both which if proved in its entirety would entitle the defendant to judgment for a sum over and above that claimed by the plaintiff. The original statement of claim does not identify the time at which the cause of action arose, except that it implies that it was not later than 15 July 1979. The proposed amended statement of claim alleges an original agreement in November 1977, varied by further agreements in 1978 and 1980. Yet it is far from clear that there was one single agreement as varied on two occasions as compared with three separate agreements. The proposed amended statement of claim is to be contrasted then with the original statement of claim. The original statement of claim pleaded but one cause of action, whereas the proposed amended statement of claim pleads facts which may give rise to three separate causes of action, all of which would appear to be statute barred. The plaintiff would not be permitted to amend his statement of claim so as to include causes of action which are statute barred. This is a complex issue and could not be decided, as I see it, until a full determination of all the factual issues. Lastly, I deal with the prejudice to the defendant if the action is allowed to proceed notwithstanding the delay. I accept the evidence of Mr. Clingan that several of the persons who supplied the goods and services on behalf of the plaintiff and who were allegedly paid by the defendant on behalf of the plaintiff have left the area and are not available to give evidence. It was submitted on behalf of the plaintiff that their absence would be of little practical input in the circumstances because the defendant has or should have available to it documentary records which would be admissible under the Evidence Act 1905 as business records. Assuming that the records are admissible, their probative weight is, however, another matter and again I accept Mr. Clingan's statement that his memory of the relevant circumstances, whilst it may have been adequate in 1980, has deteriorated to the detriment of the defendant in 1987.

18. There is a final matter which deserves consideration, and as far as I am aware, it has not occurred in any of the reported cases. The matters which the defendant wishes to raise in opposition to the plaintiff's claim appear to me not to constitute a defence in the true sense but to be properly categorised either in whole or in part as a set-off or in whole or in part as a counter-claim. I do not hesitate to say that I find this area of law a difficult and obscure one: see Argento v. Cooba Developments Pty. Ltd. (Federal Court of Australia, unreported, 17 February 1987, D Galambos & Son Pty. Ltd. v. McIntyre (1974) 5 ACTR 10, Hanak v. Green (1958) 2 QB 9 and cp., Stehar Knitting Mills Pty. Ltd. v. Southern Textile Converters (1980) 2 NSWLR 514, McDonnell & East Ltd. v. McGregor [1936] HCA 28; (1936) 56 CLR 50.

19. In any event, if what the defendant wants to raise is a counter-claim, then the onus is clearly upon the defendant to establish the counter-claim. This is probably so in the case of a set-off as well since a set-off is, at least in some circumstances, a defence, but a defence in confession and avoidance. A defendant has the onus of proving a defence in confession and avoidance. To get to the essential point, where the onus lies upon the defendant, the prejudice caused by the plaintiff's delay is likely to be the greater.

20. I return to something I said at the beginning of these remarks. The applicant defendant does not rely upon the inherent jurisdiction of the Court, if any, but on an application of the Rules of Court. Order 27 Rule 4 provides as follows:

"4. Where there are pleadings, the plaintiff
shall, within four clear days after the close of
the pleadings, file a memorandum thereof, and pay
the fees and jury fees (if any) payable on
entering the cause for trial. The plaintiff shall
state in such memorandum whether the parties have
consented to a trial on affidavit. Such
memorandum shall be in accordance with Form 21 in
the First Schedule."

21. Order 38 Rule 5 provides as follows:

"5. If the plaintiff does not, within the prescribed
time, or within such extended time as the
Court or Judge allows, file the memorandum of the
close of the pleadings and pay the fees and jury
fees (if any) payable on entering the cause for
trial, or does not give the notice of trial
required by the last preceding rule, the defendant
may apply to the Court or Judge to dismiss the
action for want of prosecution, and on the hearing
of such application the Court or Judge may order
the action to be dismissed accordingly, or may
make such other order, and on such terms, as are
just."

22. Clearly, the plaintiff has not filed the necessary memorandum of the close of pleadings. He has not given the notice of trial required, and the defendant has, on the face of it, made out a case for relief under Order 38 Rule 5. The Court will not make an order with the severe consequences that flow from a dismissal of the action unless it is satisfied in the exercise of its discretion that it is just and proper to do so. However, in the light of all the considerations to which I have already referred, I am so satisfied in the present case. The delay is so long, and the reasons for that delay so inadequate that a balancing of the prejudice likely to flow to each of the parties consequent upon either making a decision to strike out or making a decision to allowing the proceedings to proceed, is such that an order for dismissal of the proceedings is well warranted. Accordingly, I order that the action be dismissed. I shall hear the parties on costs.