Deagol Pty Limited v Hospital Equipment of Australia Pty Limited [1999] NSWSC 579 (10 June 1999)

Last Updated: 17 June 1999

NEW SOUTH WALES SUPREME COURT

CITATION: Deagol Pty Limited v Hospital Equipment of Australia Pty Limited [1999] NSWSC 579

CURRENT JURISDICTION: Equity Division

FILE NUMBER(S): 1525/94

HEARING DATE{S): 10 June 1999

JUDGMENT DATE: 10/06/1999

PARTIES:

Deagol Pty Limited (P)

Hospital Equipment of Australia Pty Limited (D1)

Graeme John Thompson (D2)

Wendy McTackett (D3)

JUDGMENT OF: Master McLaughlin

LOWER COURT JURISDICTION: Not Applicable

LOWER COURT FILE NUMBER(S): Not Applicable

LOWER COURT JUDICIAL OFFICER: Not Applicable

COUNSEL:

Mr. R. Dalgleish (P)

SOLICITORS:

Barraclough Jones & Associates (P)

Conditsis & Associates (D)

CATCHWORDS:

ACTS CITED:

DECISION:

JUDGMENT:

- 11 -

SUPREME COURT OF

NEW SOUTH WALES

EQUITY DIVISION

MASTER McLAUGHLIN

Thursday, 10 June 1999

1525/94 DEAGOL PTY LIMITED -v- HOSPITAL EQUIPMENT OF AUSTRALIA PTY LIMITED

JUDGMENT

1 MASTER: There is presently before the Court a notice of motion filed by the defendants, Hospital Equipment of Australia, Paul Graeme John Thompson and Wendy McTackett on 4 June 1999. The respondent to that notice of motion is the plaintiff, Deagol Pty Ltd.

2 Although the notice of motion seeks substantively an order that the statement of claim be struck out, the hearing of the applicant proceeded upon the basis that it was not merely the pleading which was the subject of the plaintiff's application but that the plaintiff also sought that the proceedings themselves be dismissed. The grounds for the application were threefold:

(1) That since the plaintiff company was deregistered by the Australian Securities and Investment Commission on 8 December 1995 the company no longer has any legal existence and thus does not have the legal capability to maintain the present proceedings.

(2) That the proceedings should be dismissed for want of prosecution on the part of the plaintiff.

(3) That no reasonable cause of action is disclosed.

3 At the outset, Counsel for the plaintiff made application for an adjournment of the hearing of the notice of motion. The ground for that adjournment application was that there has been made an application by Robert Francis Doyle, the principal of the plaintiff company, for reinstatement of the plaintiff pursuant to the provisions of section 601AH of the Corporations Law. That application for reinstatement has been made by way of summons filed on 2 June 1999, that is, a little over one week ago. The summons is returnable on 17 June 1999.

4 As I understand it, the ground for the adjournment application was that if the summons for reinstatement of the plaintiff is successful, then one of the three grounds upon which the defendants rely for the dismissal of the present proceedings will be removed.

5 Without finally determining the application for an adjournment, I adopted the course that I should embark upon the hearing of the defendants' notice of motion for dismissal, and that if I reached the conclusion that, in any event, the proceedings should be dismissed then, of course, there would be no purpose in the reinstatement application of the plaintiff, and that, therefore, I would not grant the adjournment. If, however, I arrived at the view that apart from the status of the plaintiff the proceedings should not at this stage be dismissed, then I would grant such an adjournment.

6 It should here be recorded that the evidence discloses that the only purpose for which Mr Doyle is making the application for reinstatement of the plaintiff company is to enable the present proceedings to remain on foot.

7 I should also here observe that there is, in fact, a logical and conceptual problem concerning the representation of the plaintiff in the hearing of the present application, since the plaintiff is not, of course, in a position to give instructions to a Solicitor or to authorise Counsel to be retained on its behalf. No point, however, was taken by the defendants upon the hearing of the present application to challenge the retainer of Counsel who announced his appearance for the plaintiff.

8 It seems to me, that the proper course has been followed of allowing Counsel to present the arguments in resistance to the defendants' notice of motion. That Counsel could be regarded as appearing for the plaintiff, if such be possible, or (probably more accurately) as Counsel representing the interests of Mr Doyle.

9 The substantive proceedings were instituted by summons filed on 28 February 1994. That summons sought injunctive and other relief. Subsequently, a statement of claim was filed on 18 April 1994. That statement of claim alleged breaches by the second defendant Graeme John Thompson of his fiduciary duty as a director of the plaintiff company in setting up a business in competition with the plaintiff, and also alleged unauthorised payment of personal expenses with cheques drawn upon the plaintiff company, and further alleged misuse of confidential information.

10 The first defendant appears to have been established by the second and third defendants. The third defendant is asserted in the statement of claim as having participated in the activities of the first and second defendants.

11 The defendants, with reasonable promptitude, filed their defences on 22 May 1994. The plaintiff did not (as was required by the Supreme Court Rules: Part 33 rule 6(1)) set the proceedings down for trial. The plaintiff, however, either through itself or through Mr Doyle personally, had by then instigated a criminal prosecution against the second defendant, Mr Thompson.

12 Those criminal proceedings against Mr Thompson were heard in the Local Court at Gosford on 30 and 31 March 1995, and the charges against Mr Thompson were dismissed. In the meantime, however, the plaintiff had been informed by the Australian Securities Commission on 8 March 1995 that deregistration action which the Commission was in the process of taking against the plaintiff for its failure to comply with the statutory requirements of lodging returns had, upon the application of the plaintiff, been deferred for 180 days from the date of that notice.

13 Subsequently, on 16 August 1995 the Australian Securities Commission gave formal notification to the plaintiff that its registration would be cancelled and the plaintiff company would be dissolved at the end of three months from the date of that notice unless cause be shown to the contrary. There is some evidence of telephonic communications between Mr Doyle and somebody not identified, except as to gender, at the Australian Securities Commission.

14 At all events, on 8 December 1995 the plaintiff was deregistered for failing to file annual returns. It is said by Mr Doyle in his evidence that he was unaware of the fact of that deregistration until, in May of this year, the solicitors for the defendants, who had obtained an up to date company search in respect of the plaintiff, communicated that fact to the solicitors for the plaintiff. The plaintiff had chosen not to file any returns not only for some years before the deregistration in December 1995 (thus giving rise to the deregistration action by the Australian Securities Commission) but for the next three years after that date.

15 The Court must look therefore somewhat askance at the suggestion by Mr Doyle that he had no idea that the plaintiff company had been deregistered on 8 December 1995. Nevertheless, whether or not Mr Doyle was aware of that fact, the company had done nothing in the present proceedings since it had filed its statement of claim on 18 April 1994, apart from purporting to serve a notice of discovery on 17 January 1996. That notice of discovery, since the company no longer existed in January 1996, was, of course, of no legal effect. The defendants on 1 February 1996 although unaware of the deregistration of the plaintiff some two months earlier, objected to the notice of discovery being served upon them, and the plaintiff did nothing further in that regard.

16 It was only after the communication of the deregistration of the plaintiff by the solicitors for the defendants in the letter of 10 May 1999, to which I have referred, that Mr Doyle made the application returnable on 10 June 1999 to have the plaintiff reinstated.

17 Evidence has been placed before the Court by affidavit of Richard Michael Barraclough, the solicitor for the plaintiff, sworn 9 June 1999, concerning the conduct of the proceedings (or, more accurately, the lack of conduct of the proceedings) on the part of the plaintiff and its legal advisers. I do not consider that the material in that letter adequately explains the very lengthy delays which have occurred.

18 It has been submitted on behalf of the defendants that there has been inordinate and inexcusable delay in the conduct of these proceedings on the part of the plaintiff. I am in agreement with that submission. Part 33 rule 6 (to which I have earlier made reference) provides, in subrule (1), that:

Where a plaintiff does not, within six weeks after the pleadings are closed, set the proceedings down for trial, the Court, on motion by any other party, may, on terms, dismiss the proceedings or make such other order as the Court thinks fit.

19 Some suggestion was made on behalf of the plaintiff that the plaintiff was justified in not setting the matter down for trial within six weeks of the close of pleadings, the pleadings having closed by about mid-June or late June 1994. Thus the six week period had elapsed no later than the end of August or early September 1994. The reason proffered as justification for the plaintiff not having set the proceedings down for trial by that time was the criminal proceedings instigated by the plaintiff, or by Mr Doyle, against the second defendant, which were not disposed of until the end of March of the following year.

20 I do not regard the pendency of those criminal proceedings as constituting any sufficient explanation for the conduct of the plaintiff in not setting the matter down for trial by, at the latest, September 1994. But even if there were, contrary to that view, sufficient excuse for the plaintiff not setting the matter down for trial until the disposition of the criminal proceedings against Mr Thompson, there is no explanation whatsoever as to why the plaintiff did not take any step to set the proceedings down for trial for a period of more than four years after the disposal of the criminal proceedings.

21 The plaintiff was requested in correspondence from the solicitors for the defendants, by letter dated 25 October 1995 --- that is more than six months after the disposition of the criminal proceedings --- to set the matter down for trial. They were asked when they proposed to do so. They were asked to provide that information as a matter of urgency, and a mere holding response was sent by them. More than four years elapsed before the plaintiff chose to set the matter down for trial, on 14 April 1999.

22 It has been submitted on behalf of the defendants that the inordinate and inexcusable delay (which I do not consider has in any way been adequately explained by the evidence) also constitutes an abuse of the process of the Court. It may well be that when a party chooses to delay the matter without any reason for such a period that such conduct does constitute abuse of the process of the Court. However, in the light of the ultimate conclusions which I have reached upon the present application, it is not necessary for me to express any final view as to whether or not the conduct of the plaintiff in the instant case does constitute such an abuse of the process of the Court.

23 It will be appreciated that this inordinate and inexcusable delay of itself merely attracts the discretion of the Court to dismiss the proceedings. It does not make such dismissal inevitable. Part 33 rule 6(2) provides:

Where a plaintiff makes default in complying with any order or direction as to the conduct of the proceedings, or does not prosecute the proceedings with due despatch, the Court may, on application by any party or of its own motion, stay or dismiss the proceedings.

24 I am under no doubt that the conduct of the plaintiff constitutes conduct falling within the description that the plaintiff "does not prosecute the proceedings with due dispatch". Accordingly, it becomes necessary for the Court to consider whether the discretion to dismiss the proceedings should be exercised in the instant case. I have been taken to various authorities concerning the way in which Courts on various occasions have exercised that discretion. Each case must be decided upon its own facts and its own merits. The Court must do justice between the parties.

25 The plaintiffs have submitted that if the proceedings are dismissed at this stage there will be prejudice to the plaintiff as a result of the expiry of a relevant limitation period in relation to various cheques which are the subject of the substantive proceedings. The value of those cheques totals $29,000. In consequence, even if the plaintiff achieved reinstatement and were to institute fresh proceedings, it would be defeated, as a result of the expiry of the relevant limitation period, in respect to its claim for reimbursement relating to cheques of the plaintiff allegedly used for personal purposes of the second defendant.

26 The defendants point to the prejudice caused to them by the delay. They refer to evidentiary problems which must inevitably follow from delay where the plaintiff has done nothing to advance the progress of the litigation for a period of more than five years. Those evidentiary problems relate to the obtaining of bank records and to attempts to locate former customers of the plaintiff whose evidence would be material in resisting the claim of the plaintiff concerning the breach of fiduciary duty asserted against the second defendant in setting up the first defendant in competition with the plaintiff.

27 I have reached the conclusion that, on account of the inexcusable and inordinate delay, it is proper in this case that the proceedings should be dismissed, and I propose so to order.

28 I will, however, for completeness make reference to the third ground upon which the defendants have brought the present application: that no cause of action is disclosed.

29 The defendants refer in particular to the allegation in the statement of claim in relation to the setting up of the first defendant in competition to the plaintiff in the early part of July 1993, and to the fact that the evidence of Mr Doyle himself disclosed that the plaintiff ceased trading on 31 July 1993. It is not for the Court on an application for summary dismissal to decide the merits of the case. If the Court in the present application were dealing with the application summary dismissal only upon the ground that no reasonable cause of action is disclosed, it seems to me that it could not be said that the claim of the plaintiff was hopeless or that it was inevitable that the plaintiff's claim would be unsuccessful, with the consequence that the plaintiff should be deprived of the opportunity of having its claim heard by the appropriate tribunal at a full trial of the proceedings.

30 Accordingly, I would not propose, upon the third of the grounds relied upon by the applicant defendants, to dismiss the proceedings in a summary fashion.

31 Having expressed, however, my view that the proceedings should be dismissed for want to prosecution on the part of the plaintiff, it then becomes necessary for me to return to a consideration of the adjournment application which was made by the plaintiff on the ground of the pending application by the plaintiff for its reinstatement.

32 Since I have arrived at the conclusion that the proceedings should be dismissed for want of prosecution and since the evidence discloses that the only purpose for which the plaintiff, or Mr Doyle, is seeking a reinstatement of the plaintiff is to enable it to pursue the present proceedings, it seems to me, that there is no purpose to be served in adjourning the defendants' notice of motion, to enable the hearing of the claim for the reinstatement of the plaintiff, in circumstances where the present proceedings should be dismissed on the ground of want of prosecution on the part of the plaintiff.

33 Therefore, I formally now refuse the application for adjournment which was made by the plaintiff at the outset of the hearing of today's application.

34 I summarise as follows my foregoing conclusions. The proceedings must be dismissed, firstly, because the plaintiff does not exist and has no standing to maintain the proceedings. Even if the plaintiff were in existence, the proceedings would be dismissed because the plaintiff has not prosecuted them with due dispatch and has been, in my conclusion, guilty of inordinate and inexcusable delay.

35 The defendants are seeking an order that Mr Doyle pay the costs on the party and party basis up to and including 10 May 1999 and that thereafter he pay the costs on the indemnity basis.

36 (Mr Dalgleish objected to an indemnity costs order.)

37 I make the following orders:

1) I order that the proceedings be and hereby are dismissed.

2) I make orders as in paragraphs 3 and 4 in the notice of motion filed by the defendants on 4 June 1999.

3) I order that the costs of the aforesaid notice of motion be included in the costs referred to in paragraph 4 in the said notice of motion.

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LAST UPDATED: 17/06/1999