Equuscorp Pty Limited v Lah [2009] ACTSC 113 (7 September 2009)

Last Updated: 26 October 2009

EQUUSCORP PTY LIMITED FORMERLY EQUUS FINANCIAL SERVICES LIMITED v FRANCIS XAVIER LAH

[2009] ACTSC 113 (7 September 2009)

PRACTICE AND PROCEDURE – proceedings struck out by operation of court rules – extensive delay while related proceedings completed – defendant’s financial exposure to an adverse judgment greatly increased by the passage of time – application to reinstate proceedings – consideration of principles to be applied – whether an acceptable explanation for delay – whether serious prejudice would arise – undertakings by plaintiff to admit all facts presently pleaded by defendant – relevance of possibility of future amendments to the defence – whether the interests of justice favour reinstatement of the proceedings.

Court Procedures Rules 2006 (ACT) r 75, 76
Aon Risk Services Australia Limited v Australian National University [2009] HCA 27
Australia and New Zealand Banking Group Ltd v Merribee Pastoral Industries Pty Ltd (1998) 84 FCR 367
Brisbane South Regional Health Authority v Taylor [1996] HCA 25; (1996) 186 CLR 541
Equuscorp Pty Limited v Harris [2009] VCC 558
FAI General Insurance Co Ltd v Southern Cross Exploration NL [1988] HCA 13; (1988) 165 CLR 268
Licul v Corney [1976] HCA 6; (1976) 180 CLR 213
Sophron v The Nominal Defendant [1957] HCA 27; (1957) 96 CLR 469
Stollznow v Calvert (1980) 2 NSWLR 749
Tenth Vandy Pty Limited v Natwest Markets Australia Pty Limited (No 2) [2006] VSC 241
Tenth Vandy Pty Limited (ACN 005 335 820) v Natwest Markets Australia Pty Limited (ACN 002 987 957) [2007] VSCA 75
Van Leer Australia Pty Limited v Palace Shipping KK [1981] HCA 11; (1981) 180 CLR 337
Victa Ltd v Johnson (1975) 10 SASR 496

No. SC 884 of 1994

Judge: Buchanan J
Supreme Court of the ACT
Date: 7 September 2009

IN THE SUPREME COURT OF THE )
) No. SC 884 of 1994
AUSTRALIAN CAPITAL TERRITORY )

BETWEEN: EQUUSCORP PTY LIMITED FORMERLY EQUUS FINANCIAL SERVICES LIMITED

Plaintiff

AND: FRANCIS XAVIER LAH

Defendant

ORDER

Judge: Buchanan J
Date: 7 September 2009
Place: Sydney (via video link to Canberra)

THE COURT ORDERS THAT:

1. Upon the plaintiff undertaking to the Court that it will not dispute such facts as are pleaded in the amended defence and cross-claim filed on 20 August 1999, and that it will file an amended reply admitting all such facts:
(a) the proceedings be reinstated;
(b) the plaintiff have liberty to file an amended reply within 14 days;
(c) the parties have liberty to apply on 3 days notice.
2. Costs of the application are reserved.

The application
1. This judgment deals with an application to reinstate a proceeding which had been allowed to languish, unattended, for almost ten years. The proceedings are taken to have been struck out by the operation of Rule 75(2) of the Court Procedures Rules 2006 which came into operation on 1 July 2006. Rule 75 provides:

“75 When proceeding struck out

(1) A proceeding is taken to be struck out in relation to a defendant if—

(a) at the end of 1 year after the day the originating process is issued, an affidavit of service of the process on the defendant has not been filed in the court; or

(b) at the end of 1 year after the day the originating process is served on the defendant—

(i) a notice of intention to respond or defence has not been filed in the court by the defendant; and

(ii) judgment has not been entered in relation to the defendant; and

(iii) the proceeding has not otherwise been disposed of in relation to the defendant.

(2) Also, a proceeding is taken to be struck out in relation to a party if the party does not take a step in the proceeding before the end of 1 year after the day the last step was taken in the proceeding.

(3) For subrule (2), the filing in the court of a notice of intention to proceed in relation to a proceeding is taken to be a step in the proceeding.

(4) A proceeding is taken to be struck out under subrule (1) or (2) on the day after the day the relevant 1-year period mentioned in the subrule ends.”

2. Notwithstanding that Rule 75 came into operation on 1 July 2006 the effect of Rule 75(2) and (4) appears to be that the proceedings are taken to have been struck out one year after the last step in the proceedings. That step was the filing of a further amended defence and cross-claim on 20 August 1999. The proceedings, therefore, are taken to have been struck out on 21 August 2000.
3. An application, under Rule 76, to reinstate the proceedings was filed on 4 March 2009. Rule 76 provides:

“76 Reinstating struck out proceeding

(1) A person whose proceeding has been struck out under rule 75 may apply to the court to reinstate the proceeding.

(2) The court may reinstate the proceeding if it is in the interests of justice to reinstate the proceeding.

(3) For any time limit (including a limitation period), a proceeding that is reinstated is taken to have started on the day the originating process for the proceeding was filed in the court and is taken never to have been struck out.”

The proceedings in outline
4. I shall, in due course, expand upon a number of events in the procedural history of the present proceedings but the following short summary will suffice at the outset.
5. The statement of claim in this matter was filed on 22 December 1994. It was filed after proceedings commenced against the defendant in the County Court of Victoria were stayed upon the footing that he should have been sued in the ACT.
6. The statement of claim alleged that the first third party, Rural Finance Pty Limited, lent the defendant $52,080 for six years on 30 June 1989. The benefit of the loan agreement was assigned to the plaintiff on 8 January 1991. It was alleged that the defendant defaulted and failed to pay principal and interest due on each of 30 June 1991 and 30 June 1992. Interest continued to accrue.
7. A defence was filed on 17 January 1995. Further parties were joined pursuant to third party claims made on 14 August 1995.
8. The matter was certified ready for hearing on 15 February 1996 and was listed for hearing on 20 May 1996. That hearing was vacated when Miles CJ gave leave to the defendant to amend the defence on the first day of trial. On 24 May 1996 an amended defence was filed.
9. Matters did not move speedily towards a new trial date, although that circumstance was not particularly the fault of the plaintiff. On 13 August 1999 the defendant was granted leave to further amend the defence and a further amended defence was filed on 20 August 1999.
10. The next document on the Court file is dated 4 March 2009. It is the application for reinstatement under Rule 76. That is the application with which this judgment deals.
The Glengallan case
11. The history of events between August 1999 and March 2009 may be gleaned from affidavits filed for the plaintiff by Mr Kotsanis, its in-house counsel, on 4 March 2009, by the defendant Dr Lah on 8 May 2009, by further affidavits of Mr Kotsanis filed on 27 May 2009 and 1 July 2009, and by Mr Brackenreg, solicitor for the plaintiff, filed 1 July 2009.
12 The arrangements into which Dr Lah entered on 30 June 1989 involved supposedly tax effective investments. The arrangement was known as the “Red Claw project”, located at Innisfail, Queensland. There were a number of other investors, in Queensland and elsewhere. The project failed. Litigation was commenced by the plaintiff against a number of investors, including Dr Lah. A number of the proceedings, which had been commenced in the Supreme Court of Queensland, were consolidated for hearing. They were described, for the purpose of the present proceedings, as the Glengallan case.
13. It appears from the evidence which was read on the present application that the plaintiff elected, in about 1999 or 2000, to concentrate its efforts on the Glengallan case. The Glengallan case resulted in a trial at first instance, an appeal to the Queensland Court of Appeal, an appeal to the High Court of Australia, remittal of some matters to the trial judge, a further appeal and later an unsuccessful application for special leave to appeal again to the High Court (Equuscorp Pty Limited & Anor v Glengallan Investments Pty Limited & Ors [2001] QSC 464; Equuscorp P/L & Anor v Glengallan Investments P/L [2002] QCA 380; Equuscorp Pty Limited v Glengallan Investments [2004] HCA 55; [2004] 218 CLR 471; Equuscorp Pty Limited v Glengallan Investments Pty Limited [2005] QSC 172; Equuscorp Pty Limited v Glengallan Investments Pty Limited [2006] QCA 194; Thornton v Equuscorp Pty Ltd [2006] HCA Trans 668 (8 December 2006)).
14. Mr Kotsanis’s affidavit showed that the hearings at first instance in the Glengallan case before Helman J in the Queensland Supreme Court extended between the commencement of hearing in February 2000 to judgment on 30 November 2001. An appeal to the Queensland Court of Appeal was heard on 15 and 16 May 2002 (with judgment on 27 September 2002). An appeal to the High Court was determined on 16 November 2004 and the matter was then remitted, in part, to the Queensland Supreme Court.
15. There were further proceedings before Helman J on 3 – 5 May 2005 (with judgment on 28 July 2005), a further appeal before the Queensland Court of Appeal on 20 and 21 February 2006 (with judgment on 7 June 2006) and, finally, special leave to appeal again to the High Court was refused on 8 December 2006.
16. That procedural history does not reveal delay which is out of the ordinary or which might be attributed to the plaintiff. Rather, it seems to me to represent an unremarkable course of events in proceedings which raised not only a series of factual issues for resolution but some complex questions of law. There is nothing particularly surprising about the plaintiff deciding to concentrate its efforts on those proceedings in an endeavour to resolve common issues, particularly common issues of law, which might arise there and elsewhere. If a criticism is to be made it concerns the fact the plaintiff acted, so far as the present proceedings against Dr Lah are concerned, unilaterally.
17. The plaintiff made no effort to seek Dr Lah’s agreement to the proceedings against him being postponed. It took no steps to seek the approval of the Court to the inactivity which ensued.
Proceedings in Victoria
18. As earlier indicated, originally proceedings against Dr Lah were commenced in the County Court of Victoria. He persuaded the County Court that they should have been commenced in the ACT. He secured a stay of the County Court proceedings as a result. An appeal against the stay was dismissed by the Supreme Court of Victoria. He was not the only defendant in proceedings commenced in Victoria.
19. While the Glengallan case was going on, other similar proceedings in Victoria were the subject of an agreement that those proceedings should be stayed. At some point the Victorian proceedings were struck out on the basis that an application could be made for their reinstatement without there being any presumptive right to such a course. After the conclusion of the Glengallan case an application was made by the plaintiff to reinstate proceedings in Victoria concerning a Mr Percival. The plaintiff apparently intended that this would provide some test or indication of whether other proceedings in Victoria should be reinstated against other defendants but it does not appear that other Victorian defendants accepted that such a consequence would necessarily follow. On 18 April 2008 Master Evans refused to reinstate the proceedings against Mr Percival. An appeal was filed. The appeal was allowed by consent upon the basis that the claim and counter claim in the reinstated proceedings would be dismissed with no order as to costs. I was told that was because the parties had reached an agreement as to the settlement of the proceedings.
20. An application was then made to reinstate proceedings in the County Court of Victoria against three other defendants, Messrs Harris, Hughes and Dorney. That application was refused by Shelton J on 24 April 2009 (Equuscorp Pty Limited v Harris [2009] VCC 558). The application was refused notwithstanding that Shelton J found that there had been a formal stay of proceedings against those defendants, with their consent effective until 31 October 2006.
21. Shelton J recorded (at [7]):
“These three proceedings are part of approximately forty similar proceedings which have been issued in Victoria, Queensland and the Australian Capital Territory. In each of these, Equus has brought proceedings, and in some Rural, which is now in liquidation, is also a plaintiff. In each of these proceedings, the defendant borrowed from Rural to finance the acquisition of an interest in an aquaculture managed investment scheme known as the “Red Claw” project. In each of these proceedings, as here, Equus claims to be the assignee of Rural’s interest in those loans and sues to recover principal and interest.”
22. Thereafter his Honour traced the procedural history of litigation in Queensland and Victoria. He recorded that there was no contact between the plaintiff or its solicitor and the defendants before him between November 2001 and October 2006 until Mr Kotsanis wrote to the defendants’ solicitors advising that the Glengallan case had been substantially resolved. His Honour recorded also that the plaintiff elected to test its prospects for reinstatement of proceedings by using the proceedings against Mr Percival as a vehicle and that no step was then taken in the proceedings against the other three defendants from 31 October 2006 until 15 August 2008. His Honour recorded his view that there had been an inordinate and inexcusable delay on the part of the plaintiff and/or its lawyers during that latter period.
23. He then examined whether the delay since 31 October 2006 might have caused the defendants to lose their right to a fair trial or be otherwise seriously prejudiced. He accepted (at [48] and [49]), after referring to the judgment of a Full Court of the Federal Court of Australia in Australia and New Zealand Banking Group Ltd v Merribee Pastoral Industries Pty Ltd (1998) 84 FCR 367:
“48 ... It would thus be inappropriate for me to allow the defendants to re-litigate identical issues already resolved in the Glengallan case. The practical effect of this is that were the issues in the three proceedings before me only the issues resolved in the Glengallan case, I should not dismiss these proceedings for want of prosecution on the basis that the defendant could not have a fair trial since these matters would not be in issue.
49 There are, however, additional matters in issue between Equus and the defendants which were not resolved by the Glengallan case even though most issues between the plaintiff and the defendants were resolved there.”
24. Three matters were identified as not resolved in the Glengallan case. They may not all be relevant, or potentially relevant, to the present proceeding but whether or not that is so is ultimately of no moment. What appeared to be of most significance was that Shelton J concluded, after an examination of the position and personal circumstances of each of the defendants with whom he was concerned, that it would be inappropriate to reinstate those proceedings. His Honour appears to have been particularly influenced by the state of health of two of the defendants as well as the evidence of the third that he felt no longer capable of recalling the substance of matters and felt incapacitated, therefore, from giving full instructions.
25. Mr Kotsanis has deposed that Shelton J’s judgment is under appeal.
Dr Lah’s position
26. Dr Lah deposed to the fact that he thought the plaintiff had decided not to pursue proceedings against him although he did not provide any particular foundation for that conclusion. He said his case is different to the litigation in the Glengallan case and he wishes, in any event, to further amend his pleadings to take advantage of legal issues exposed in the Glengallan case. He said he had not given any thought to the conduct of the matter for the last nine years. At the heart of his resistance to reinstatement of the proceedings was the proposition that his agreement was never sought to the delay which occurred. That was not denied. He also complained that he would be disadvantaged in the conduct of his defence by the lapse of time. The plaintiff has offered to take specific steps in that respect, to which I will return.
Principles to be applied
27. There is little guidance on the principles to be applied to an application made under Rule 76(2). The policy behind Rule 75 seems plain enough. It is one of a number of provisions which are aimed, each in their own way, at encouraging or requiring the timely and efficient management of proceedings. Provisions of this kind, in the Court Procedures Rules 2006, and in other similar rules of courts, are routinely accompanied by a discretion to grant relief against the consequence for default stipulated by the rule in question. Such a discretion is traditionally regarded as one which is available to relieve against injustice (see generally FAI General Insurance Co Ltd v Southern Cross Exploration NL [1988] HCA 13; (1988) 165 CLR 268 at 283-4). In the case of Rule 76 that is made plain by the terms of the rule itself.
28. In Van Leer Australia Pty Limited v Palace Shipping KK [1981] HCA 11; (1981) 180 CLR 337 Stephen J gave detailed consideration to the approach of courts in the United Kingdom, Canada and Australia to the circumstances in which, and the principles by which, relief ought be granted against a failure to comply with a limitation period imposed by a rule of court. His Honour preferred a more liberal approach, exemplified by the judgment of Bray CJ in Victa Ltd v Johnson (1975) 10 SASR 496, to the stricter approach in the United Kingdom, which requires the demonstration of exceptional circumstances to extend time. The two different approaches were also referred to by Gibbs J in Licul v Corney [1976] HCA 6; (1976) 180 CLR 213 at 228.
29. Stephen J concluded that the discretion should be exercised if “good reason” was shown. Among the factors he then considered were the length of delay, whether the delay was the result of deliberate conduct on the part of the plaintiff and whether the defendant had done anything to induce the delay or encourage the course which was taken.
30. In Victoria the question whether a case should be reinstated has often been decided by asking whether, if it was, it would be liable to be struck out for want of prosecution. That was the approach taken by Shelton J to the recent applications for reinstatement before him. However, it is not, in Victoria or elsewhere, a universal rule that the issue should be tested that way and I think there may be some dangers in so doing.
31. A conclusion that a proceeding was liable to be struck out for want of prosecution would, of course, emphasise the futility in reinstating it. Refusal of an application for reinstatement would, in light of such a conclusion, seem inevitable. Nevertheless, they are applications of a different character involving different burdens. They also proceed from a different procedural foundation.
32. When a proceeding is on foot, although apparently inactive, a party seeking to strike it out bears the procedural onus of justifying that course, however readily such an order may be made in some cases. Conversely, however, when a proceeding has been automatically struck out as a result of inactivity it is the plaintiff who must justify reinstatement. That depends on an assessment of the interests of justice. It is no empty formality. Some explanation of the position and, in particular, the reason for inactivity, is necessarily called for (and now see generally Aon Risk Services Australia Limited v Australian National University [2009] HCA 27). There is no occasion for an assumption that in every case the matter should be tested by asking whether, in any event, the proceeding would have been struck out for want of prosecution, or would be liable to be struck out if reinstated. Much less is there any reason to transfer the onus from a plaintiff who seeks reinstatement to a party who resists it. As I said, no such rule has developed.
33. In Tenth Vandy Pty Limited v Natwest Markets Australia Pty Limited (No 2) [2006] VSC 241 Hargrave J declined to reinstate a proceeding because he concluded that it would be liable to dismissal for want of prosecution (at [123]). He referred, during the course of his discussion, to the fact that Beach J, sitting in the Practice Court had refused a number of applications for reinstatement on that basis (see at [84]). However Hargrave J referred also to the judgment of Mandie J in Caruso v Jafer (Supreme Court of Victoria, unreported, 18 June 1998) where Mandie J stated that was not the sole matter to be considered in the exercise of the discretion as to whether to reinstate a proceeding. Hargrave J extracted the following statement from Mandie J:
“It seems to me that it is incumbent upon a plaintiff who seeks to reinstate a proceeding under this rule to satisfy the court that justice requires that the court exercise its discretion to reinstate the proceeding. Clearly if the proceeding is in such a state that had an application been made by a defendant to have it dismissed for want of prosecution, that application would have succeeded, then the court would not reinstate the proceeding.
If any authority be needed for that proposition, I would refer to Graham v Visy Board Pty Ltd, an unreported decision of Beach J made on 11 February 1998.
Counsel for the plaintiff submitted that that was the governing consideration, that if a proceeding would be dismissed for want of prosecution, then it could not be reinstated, but if it would not have been dismissed for want of prosecution, then it should be reinstated.
However, in my view, the second part of that proposition does not follow from the first and is not justified upon a proper construction of the rule. The court constituted by a judge is empowered in its discretion to reinstate the proceeding and it does not seem to me to treat the rule with any due regard to conclude that the question of reinstatement stands or falls on the test relating to the principles applied under an application to dismiss a proceeding for want of prosecution.
The proceeding has been dismissed and the question is whether the Court should exercise its discretion to reinstate. In my opinion, it is a question of what justice requires and all the relevant circumstances ought to be taken into account. No doubt many of the same circumstances as might be considered on an application to dismiss for want of prosecution are relevant, but the plaintiff comes seeking an indulgence and it is for the plaintiff to satisfy the Court that the proceeding should be reinstated, and there may be cases which had they not been dismissed under this rule would not have been dismissed for want of prosecution and yet the plaintiff might fail to have them reinstated once they are dismissed under this rule.”
34. At [86] Hargrave J adopted Mandie J’s statement of principle. On appeal Hargrave J’s decision was reversed but that was because the Court of Appeal took the view that the proceedings would not be struck out for want of prosecution and there were no other circumstances that supported refusal of reinstatement (Tenth Vandy Pty Limited (ACN 005 335 820) v Natwest Markets Australia Pty Limited (ACN 002 987 957) [2007] VSCA 75 at [31]). The reference to the absence of such other circumstances was footnoted with a reference to the judgment of Mandie J in Caruso v Jafer. I take it to have been accepted by the Victorian Court of Appeal that the statement of principle by Mandie J should be accepted as a correct one. With respect, I think it is correct also.
35. Stollznow v Calvert (1980) 2 NSWLR 749 (a New South Wales case) involved an application for dismissal of a proceeding for want of prosecution. Moffitt P referred to the absence of any authority in the High Court dealing with the exercise of such a discretion but referred to Sophron v The Nominal Defendant [1957] HCA 27; (1957) 96 CLR 469 which dealt with the question of whether time should be extended to commence proceedings. Moffitt P said:
“Although somewhat different considerations apply in such a case, because of the nature of a case against the nominal defendant and the particular significance to that defendant of delay, and because of the onus cast on a (plaintiff) applicant by the terms of the statute as compared with a defendant’s application to have terminated proceedings already in existence, in the end each involves the exercise of a discretion to do that which in the whole of the circumstances is just between the parties. The premise upon which an application is made in each case is that there has been delay in bringing or pursuing the plaintiff’s claim. In each case the cause of, blame for and prejudice caused by the delay are relevant factors.”
36. That passage, like the observations of Mandie J, identifies an important practical and legal difference between an application by a defendant to dismiss a proceeding which is on foot and an application by a plaintiff (or putative plaintiff) to commence a proceeding out of time, or to reinstate a proceeding which has been struck out automatically because of inactivity. In each case the applicant seeking to invoke the Court’s discretion must, in my view, necessarily bear the onus to persuade the Court that the discretion should be exercised in its favour. In the case of applications for an extension of time to overcome a statutory limitation period, that principle has since been clearly confirmed and the suggestion of any presumptive right to the exercise of a discretion has been further dispelled (see Brisbane South Regional Health Authority v Taylor [1996] HCA 25; (1996) 186 CLR 541 per Dawson J at 544, per Toohey and Gummow JJ at 547, per McHugh J at 553-4 and per Kirby J at 567).
37. Where a plaintiff, putative plaintiff or appellant desires relief from a failure to take a necessary step within a period limited by, or under, a statute it is normally fundamental to the success of such an application for relief that an acceptable explanation for delay be provided and that there be no serious prejudice to other parties which might result. One reason why some explanation for the delay, capable of exculpating a defaulting party from a lack of diligence, is necessary is that such a party is asking the Court to make an order exposing a defendant or respondent to a risk from which the latter party is shielded at the time the application is made. In my view the potential prejudice to such a party is obvious and the barrier to that party being exposed (or exposed again) to the risk of litigation is not a trifling one. I do not regard it as in accordance with principle, as submitted by the plaintiff in the present case, that delay might be overlooked unless a defendant discharged an independent onus of showing that he would be seriously prejudiced. To the contrary, I am satisfied that on the present application the plaintiff bears the overall onus of showing that the interests of justice favour reinstatement of the proceedings, including the task of satisfactorily explaining the delay as well as excluding not only the prima facie presumption of prejudice to a defendant arising from delay (see e.g. Brisbane South Regional Health Authority per Dawson J at 544) but any particular prejudice to which an opposing party might draw attention (Brisbane South Regional Health Authority per Toohey and Gummow JJ at 547).
The pleadings in the present matter
38. I have explained that the plaintiff allowed the proceedings against Dr Lah to subside into inactivity after he amended his defence for a second time in August 1999 but some further examination of the context in which that decision was taken is required.
39. The arrangements concerning Dr Lah’s involvement in the Red Claw project, upon which the proceedings were founded, took effect on 30 June 1989. The defaults which led to the commencement of the proceedings were alleged to have occurred on 30 June 1991 and 30 June 1992. A notice of default was served on 23 November 1992. The proceedings themselves were commenced on 22 December 1994. Interest has continued to accrue and the amount now sought is some multiples of the original claim.
40. A defence was filed on 17 January 1995 and later, on 14 August 1995, third party claims were made against the first and second third parties. Each has had receivers and managers appointed.
41. On 15 February 1996 the matter was certified ready for hearing and was listed for hearing for three days before Miles CJ commencing on 20 May 1996. As a result of an application made by the defendant for leave to amend the defence, the three dates set for trial were vacated when leave was granted on 20 May 1996 to amend the defence. Costs were awarded against Dr Lah. An amended defence was filed pursuant to that leave on 24 May 1996. On 13 June 1996 an amended reply to the amended defence was filed and served.
42. In October 1996 the defendant engaged Mr Michael Hehir to act as his solicitor. Mr Hehir, it was later argued, had acted for or advised other parties in the proceedings. An application was made by the plaintiff on 20 March 1998 that he be removed as solicitor for the defendant. An order to that effect was made on 23 July 1998. Further costs were awarded against Dr Lah. In August 1998 Dr Lah retained Lees Marshall Warnick, solicitors in Brisbane, as his solicitors. It appears that firm also acted for defendants in the Glengallan case.
43. On 9 October 1998 the plaintiff again served a certificate of readiness but Dr Lah’s solicitors failed to endorse it. The plaintiff applied for a listing conference. When a listing conference was held on 18 February 1999 Dr Lah foreshadowed an application to further amend his defence. The application to further amend the defence was opposed. It was in due course heard by Master Connolly on 5 August 1999. On 13 August 1999 Master Connolly granted leave to Dr Lah to file and serve a further amended defence and counter claim within seven days. Master Connolly recorded that the changes proposed were “very substantial changes, and would fundamentally alter the way the trial of the matters would proceed”. The changes which Dr Lah proposed, which Master Connolly permitted, brought the defence substantially into line with the defence being relied upon in the Glengallan case. It was in those circumstances that the plaintiff chose to concentrate its efforts upon the Glengallan case and to shift its attention from the proceedings it had commenced against Dr Lah and the other proceedings in Victoria.
44. The principal vice in the plaintiff’s position, so far as it affects the present application for reinstatement, is that it did not seek Dr Lah’s agreement or apparently even inform him of its intentions. It simply did nothing at all in the proceedings after the further amended defence was filed except take steps to secure payment, in 2001 and 2002, of the outstanding costs orders.
45. On the other hand, Dr Lah took no step to keep the proceedings moving either. It may be assumed that it suited his interests to some extent to allow them to become effectively inactive and to lie dormant while the Glengallan case was resolved. Had it been resolved in favour of the defendants in that case that would have been significantly to Dr Lah’s advantage and at no cost to him in the present proceedings.
Correspondence between the parties
46. In 2001 and 2002 the parties reached agreement about the payment of costs by Dr Lah to the plaintiff arising from the earlier orders of the Court granting Dr Lah leave to amend his defence and restraining Mr Hehir from acting as his solicitor. Apart from those matters there does not appear to have been any contact between the parties until the plaintiff attempted to communicate directly with Dr Lah by letter dated 31 October 2006. Both the plaintiff and Dr Lah were represented by solicitors. Dr Lah had nominated an address for service of documents in the amended defence filed on 20 August 1999. Nevertheless, on 31 October 2006 an account manager of the plaintiff wrote directly to Dr Lah at a private address in the ACT. According to Mr Kotsanis the address was obtained by the account manager from the White Pages. Dr Lah swore that this letter was not received by him. The letter said, in part:
“We write to inform you of the latest developments in this matter. As you may be aware, the Queensland Court of Appeal delivered its decision on the remitter of the Glengallen v Equuscorp matter in favour of our client on 7 June 2006.
This action against you has been held in abeyance on certain terms pending the decision which has now been delivered by the Court of Appeal.”
47. The reference to “certain terms” is cryptic. It had no application to Dr Lah or to the proceedings against him. The letter thereafter sought Dr Lah’s consent to the stayed proceedings being reactivated and to a number of orders being made by consent, including judgment against Dr Lah for all outstanding amounts.
48. A further letter, some months later, dated 4 April 2007 was sent to Dr Lah at the same address in the ACT. It identified the proceedings against him with a proceeding number in the County Court of Victoria. On this occasion Dr Lah received the letter, although he said that it was fortuitous that he did so. He replied, drawing attention to the fact that the action referred to, in the County Court of Victoria, had been stayed on 21 October 1993 and an appeal against the stay order had been dismissed. Dr Lah concluded, correctly enough:
“As far as I am concerned this was an effective end to your proceedings.”
49. At the head of his letter of reply dated 13 April 2007 Dr Lah provided an address in Carlingford, New South Wales. Nothing happened until another letter was sent to him, at the Carlingford address, on 18 August 2008. This letter was written directly to him by solicitors retained by the plaintiff. It referred to the earlier letters to him dated 31 October 2006 and 4 April 2007 and to his letter dated 13 April 2008 [sic]. It said:
“The cases you cite in your letter refer to proceedings commenced against you in the Victorian Supreme Court. However, the current proceedings against you were commenced in the ACT Supreme Court in December 1994.”
50. The cases referred to in Dr Lah’s letter referred to proceedings, in fact, commenced in the County Court of Victoria. He referred to those cases because they were the proceedings referred to in the letter to him of 4 April 2007. The letter to Dr Lah dated 18 August 2008 said also:
“We note that the proceedings against you in the ACT are currently being held in abeyance. We are instructed to present you with two possible courses of action in order to conclude these proceedings.”
51. No stay had ever been granted or agreed in the proceedings to hold them “in abeyance”. Their dormant state was due to inactivity. Well before the date of this letter, indeed before any of the letters to Dr Lah, the proceedings had been struck out. One option presented to Dr Lah was that he consent to the proceedings being “reactivated” and submit to consent orders to the payment of the full amount alleged to be outstanding. The other alternative was that the plaintiff would apply for summary judgment and indemnity costs. Dr Lah replied on 23 August 2008. He pointed out that no agreement had been given to delaying the proceedings against him in the ACT Supreme Court. No further contact appears to have been made before the filing of the present application for reinstatement.
52. Reference should also be made to an affidavit affirmed by Mr Gregory Brackenreg, a solicitor with carriage of the proceeding on behalf of the plaintiff since 1998. On 19 May 2000 Mr Brackenreg had a telephone conversation, of which he made a file note, with Mr Mark Leaker, an employee of the plaintiff. The file note records the following:
“I asked about where we were going with the actual case. He said that at the moment everything is adjourned on the basis that they are waiting for a decision from a judgment in QLD, as to whether or not they will proceed and one of the questions that they are asking themselves is whether or not they continue to wait until that judgment or simply proceed with the case here.”
53. Mr Brackenreg also said:
“6. Between late August 1999 to August 2001, negotiations in relation to costs ordered to be paid to the plaintiff by the defendant were undertaken. A formal bill of costs was prepared and provided to the defendant’s then solicitors however it was never filed and costs were settled by agreement.
...
9. I did not communicate with the defendant or the defendant’s solicitors from August 2001 until August 2008. I assumed the plaintiff was communicating directly with the relevant parties concerning the further conduct of all the plaintiff’s matters concerning the subject litigation.”
54. The proceedings against Dr Lah were not “adjourned”. It is clear, as Mr Kotsanis said, that not long after Dr Lah filed his amended defence the plaintiff elected to prosecute the proceedings in Queensland and decided to suspend the prosecution of other proceedings in Victoria and against Dr Lah. The plaintiff reserved to itself the decision as to whether the proceedings against Dr Lah would go ahead. Apart from attending to the satisfaction of outstanding costs orders the plaintiff did not ask its solicitors to take any further step in the proceedings until August 2008 when the latest letter was written to Dr Lah. The plaintiff itself did not take any step in the proceedings apart from the two rather unsatisfactory letters to Dr Lah dated 31 October 2006 and 4 April 2007. Those two letters may, I think, be fairly described as letters of demand rather than letters directed to the continuation of the proceedings which had, by then, been struck out in any event. They were not written by the plaintiff’s solicitors. They were not written to Dr Lah’s solicitors. They were not directed to Dr Lah’s address for service in connection with the proceedings.
The length of delay
55. The delay in this case was a long one. Although Rule 76 came into effect on 1 July 2006 there are two reasons why, in my view, the question in the present case is to be tested by the significance of delay from August 1999. The first is that the rule itself declares that the proceedings are taken to be struck out one year after the last step in the proceedings. The second is that in Brisbane South Regional Health Authority an approach which concentrated only on delay from the date a limitation took effect was not approved (see per Toohey and Gummow JJ at 548-9, per Kirby J at 568-9). For that reason, in my view the period of delay to be assessed is the whole of the period of inactivity occasioned by the plaintiff’s decisions and chosen course of action. Unlike the cases in Victoria, there is no stay of proceedings to be taken into account.
Explanation for the delay
56. Usually the first question to be addressed is, as I earlier indicated, whether there has been an acceptable explanation for delay. Had the plaintiff failed in the Glengallan case it appears common ground that the proceedings against Dr Lah, which were to be defended on substantially similar facts and legal principles, could not have succeeded. In that sense, the plaintiff’s chosen course was not without potential benefit to Dr Lah. However, in the present case the plaintiff may not, in my view, attribute any responsibility for the delay to Dr Lah, whether or not it may have suited his purposes.
57. The explanation for the plaintiff’s delay is that it elected not to proceed with the proceedings against Dr Lah while the Glengallan case was in train. In my view the plaintiff’s explanation, although it reflects a rational decision on the plaintiff’s part, does little to excuse the delay in the present proceedings. At no time was Dr Lah consulted, and nor were his solicitors on his behalf, about the plaintiff’s decision to suspend the proceedings against him to await the resolution of the Glengallan case. At no time was the Court approached for approval to such a course. The plaintiff’s decisions were, in every sense, unilateral and they were deliberate. They were ones taken in its own interests.
58. However, this is not a case where no sensible explanation has been offered, whatever other criticisms may be made of the plaintiff’s conduct. I would not refuse the application for reinstatement on the basis only that the plaintiff’s explanation was inadequate, although it has avoided that result only by a small margin.
The question of prejudice
59. The next question for examination therefore is whether there is a risk of serious prejudice to Dr Lah from the delay which has occurred and for which in this case, whatever its explanation, the plaintiff must take responsibility.
60. In one sense, any reinstatement of the kind sought, or any other extension of time, necessarily involves prejudice to the party who would otherwise avoid the risk posed by the proceedings in prospect. However, that prima facie position cannot be decisive. To decide an application such as the present by reference only to that circumstance would stifle the exercise of the discretion. A more sophisticated enquiry is required which accepts that it may be in the interests of justice to allow a statute barred proceeding to be maintained unless a defendant is seriously prejudiced by delay, including having lost the opportunity of a fair trial.
61. In my view, the plaintiff bears the onus of showing that serious prejudice to Dr Lah is unlikely to occur. Notwithstanding formal submissions to the opposite effect, the plaintiff set out to face that issue squarely on the present application.
62. The essence of the plaintiff’s position on this question is that the outcome of, findings in and legal conclusions resulting from, the Glengallan case leave no room for any defence of the kind represented by Dr Lah’s further amended defence filed on 20 August 1999. The contention depends on the proposition that Dr Lah’s arguments in this Court are limited by inevitable respect for the authority of the judgments of the Queensland Court of Appeal as considered, modified or left undisturbed by the High Court. No suggestion to the contrary was made. Dr Lah appears to accept that he would need to find a line of defence not so far considered.
63. The position also needs to be assessed by reference to the possibility that Dr Lah will be given leave to further amend his defence.
64. As to the current pleadings the plaintiff proffered an undertaking that it would, if the proceedings were reinstated, not dispute such facts as are at present pleaded in the defence filed on 20 August 1999 and would file an amended reply admitting all such facts.
65. The plaintiff’s preparedness to give such an undertaking is important. It represents a significant difference from the position in the Victorian proceedings where no such undertaking seems to have been proffered. Dr Lah’s ability to argue about the legal effect of the facts and circumstances which he has pleaded, so far as it remains open to him to do so after the Glengallan litigation, would not be compromised. Neither was it suggested that an undertaking of this kind would be ineffective to protect Dr Lah’s position on factual issues so far pleaded.
66. In any event, although in the Victorian proceedings Shelton J was particularly influenced by an assessment that the health of individual defendants was in a precarious state and that their capacity to recall significant events was substantially impaired, in the present proceedings it was not seriously suggested that, if it was necessary for him to present an evidentiary case, Dr Lah would be under other than moderate and normal difficulties of recollection occasioned by the passage of time. On his own evidence he has “notes which do help [him] to recall events and conversations that occurred”. The plaintiff has also taken steps to locate the various persons Dr Lah has said would need to give evidence in his case.
67. So far as the matter is to be tested by reference, therefore, to Dr Lah’s ability to argue the case he has pleaded I am satisfied that the plaintiff has shown that Dr Lah is unlikely to be deprived of a fair trial or otherwise exposed to serious prejudice.
68. Dr Lah has announced that he would seek leave to further amend his defence. I will assume that Dr Lah might be permitted to amend his defence again. The assumption seems a reasonable working hypothesis given the customary inclination of courts to permit reliance upon any arguable defence. However, there are limits and they have been recently emphasised (Aon Risk Services Australia Limited v Australian National University [2009] HCA 27). I should not be taken as endorsing or accepting the suggestion for any purpose beyond the present discussion. Whether or not leave to amend would be granted, in the fashion sought or in any other fashion, is a question for another day.
69. The possibility that Dr Lah might face some difficulty in marshalling evidence to support some differently pleaded factual position cannot be used to assist him. If leave to further amend his defence was sought and granted he could not, in my view, complain of any prejudice arising from the passage of time which was occasioned by his own late further amendments of his pleaded position.
70. In any event, any such difficulty for him seems unlikely. I was provided with a draft of a proposed further amended defence and counter-claim. That proposed further amended defence would, if leave was granted, plead additional matters intended to sustain legal defences (including promissory estoppel and reliance on s 51A of the Trade Practices Act 1974 (Cth)) which the Queensland Court of Appeal refused to allow the Glengallan defendants to rely upon late in the second appeal to that Court. The additional lines of defence would rely upon alleged representations which are already pleaded in the defence filed on 20 August 1999. It appears to be additional or alternative legal conclusions which Dr Lah contends should be drawn from those facts which would constitute the additional matters upon which he wishes to rely.
71. The undertaking offered by the plaintiff would facilitate reliance upon factual matters already pleaded. It seems to me that Dr Lah’s ability to argue about the legal consequences to be attributed to admitted facts would be sufficiently protected that it is unlikely that there could be any serious prejudice to him arising from that quarter.
72. There is one further matter to be addressed which was only raised in written submissions which I invited about a different aspect of the question of potential prejudice.
73. In those submissions counsel for Dr Lah drew attention to the fact that the contractual arrangements upon which Dr Lah was sued imposed interest on unpaid amounts at the rate of 20% per annum. As I indicated earlier the amount of the original loan was $52,080. At the time the statement of claim was filed the debt alleged to be due under the terms of the contract was $66,380.70, together with further unspecified interest at the rate of 20% from 30 June 1992. In their letter of 18 August 2008 the plaintiff’s solicitors indicated to Dr Lah that, as at 1 December 2006, the amount claimed to be due was $257,957.22, and that interest continued to accrue at 20% from that date.
74. 20% is a high rate of interest. Whether it was due to earlier economic conditions or the nature of the investment made by Dr Lah and others is not relevant to matters for present consideration. On one view, at such rates of interest the plaintiff would profit from delay if it ultimately succeeds in the proceedings. Conversely, the prejudice to Dr Lah would be magnified. It may be arguable that, in the circumstances of the present case, the plaintiff had a greater than usual obligation to seek either Dr Lah’s agreement or the Court’s approval to suspension of the proceedings for such a long time. A contrary view is that the Court should not, for the purpose of the present application, concern itself with the features of the investment made by Dr Lah or the terms upon which that investment was made.
75. There is a further matter which I regard as decisive for present purposes. In his further amended defence filed on 20 August 1999 Dr Lah pleaded that the rate of interest upon which the plaintiff relies was a “penalty” and is unenforceable against him. If he is right about that there will be no additional prejudice to him which arises from this feature of the claim against him. If he is wrong that will confirm that his liability (assuming the case is otherwise made out) arises from contractual terms which are enforceable against him. He cannot, for the purpose of the present application, impeach his own agreement or rely on prejudice claimed to arise from it. To permit him to do so would deny the plaintiff’s right to rely on the subject matter of the litigation, if it was otherwise in the interests of justice to reinstate the proceedings.
76. The plaintiff objected to Dr Lah being permitted to rely on the 20% interest rate as a matter relevant to any assessment of prejudice. Although it did not identify the precise ground that I have mentioned above, the general nature of its objection was that “the accumulation of the interest is an inherent component of the Plaintiff’s claim” and that insufficient was known factually to weigh advantage and disadvantage arising from the particular circumstances of the arrangements into which Dr Lah entered. I think these points are well made, although they would not have been decisive on the question of whether the plaintiff should have taken more effective steps to communicate its intention in the absence of the pleaded defence.
77. In its written submissions on this issue the plaintiff offered an undertaking, in the event that I decided it was open to Dr Lah to rely on this issue, to forego interest from 12 months after the last steps in the proceedings to the date of their reinstatement. I have decided that Dr Lah’s pleaded defence is fatal to any reliance by him on this point on the present application. I do not allow Dr Lah, therefore, to rely on the argument advanced in the written submissions. I note the undertaking conditionally offered by the plaintiff but do not require it to be given.
78. I have concluded that the plaintiff has, by a small margin, discharged its obligation to show that, notwithstanding the delay which has occurred, there is not likely to be any serious prejudice to Dr Lah’s capacity to defend the proceedings on their merits. Nor is it likely that Dr Lah would be impaired, to any appreciable extent, from taking full advantage of any legal arguments which are open to him.
Conclusion
79. The plaintiff has discharged its obligation to show that the interests of justice favour reinstatement of the proceedings, provided it formally gives the undertaking proffered by its counsel during the course of argument to amend its reply to admit facts pleaded by Dr Lah in his latest defence. On that condition the proceedings will be reinstated.
80. So far neither party has made submissions about the costs of the present application. Had the application been dismissed it would have been inevitable that the plaintiff pay the respondent’s costs. However, the reverse does not automatically follow. Should the case against Dr Lah be ultimately dismissed it may be appropriate that he have all his costs, including the costs of the present application. That would suggest that the appropriate order now might be that the costs of the application be costs in the proceedings. However, there may be matters of which I am not aware and the parties have not yet been heard, should that be necessary at the moment. Accordingly, the order which I will make is that costs are reserved. If no application for costs of the present application is separately made they will be determined in due course.

I certify that the preceding eighty (80) numbered paragraphs are a true copy of the Reasons for Judgment herein of his Honour, Justice Buchanan.

Associate:

Date: 7 September 2009

Counsel for the plaintiff: Mr M R Scott
Solicitor for the plaintiff: Meyer Vandenberg
Counsel for the defendant: Mr R J Arthur
Solicitor for the defendant: Bradley Allen Lawyer
Date of hearing: 8 July 2009
Date of judgment: 7 September 2009