Dowdle v Pay Now For Business Pty Ltd [2009] QSC 417

1-1 [2009] QSC 417 UPREME COURT OF QUEENSLAND S IVIL JURISDICTION C AUBNEY J D o 4514 of 2005 N ERRYN MAREE DOWDLE D Applicant nd a AY NOW FOR BUSINESS PTY LTD P Respondent RISBANE B .DATE 04/12/2009 . UDGMENT J -- 1 of 15 -- ) 1-2 JUDGMENT 1 10 20 30 40 50 60 HIS HONOUR: On the 6th of October 2009 at the express urging of the plaintiff and over opposition by the defendant I ordered that this matter be set down for trial on the 10th and 11th of December 2009. I also directed the parties to take part in mediation which they did unsuccessfully on the 9th of November 2005. The plaintiff has now applied for orders vacating the trial dates and for leave to join a further defendant in the proceeding. The defendant opposes the joinder of the further defendant on the basis of lack of utility because of expiration of the relevant limitation period and otherwise opposes the adjournment of the trial on the basis of prejudice. Much of the relevant factual background to the plaintiff's claim is set out in the judgment I gave in respect of the previous application by the defendant in summary judgment. See Dowdle v Pay Now For Business Pty Ltd [2008] QSC 224. It is not necessary for me to repeat those matters here but I should observe that the factual matrix of the case which the plaintiff would now seek to advance against the defendant (and its director if given leave to join him) includes allegations to the effect that as at February 2003 the plaintiff had the capacity to borrow $50,000 from sources other than the defendant without being required to guarantee Dowdle's debts, that on 19 February 2003 the defendant offered in writing to lend the plaintiff $50,000 which was to be guaranteed by -- 2 of 15 -- ) 1-3 JUDGMENT 1 10 20 30 40 50 60 Dowdle and secured by a mortgage over the Purcell Road property which advance was to be disbursed to Dowdle and applied to cover the expenses of the advance, that on 19 February 2003 the plaintiff accepted this offer, that this finance transaction did not proceed, and that on 21 February 2003 the defendant then wrote to Dowdle and advised that it had approved an advance to him of $50,000 guaranteed by the plaintiff and secured by a mortgage over the property. This then was the transaction described in my previous judgment under which, in effect, the plaintiff claimed she believed she was only guaranteeing to a maximum of $50,000. The proceeding currently articulated by the plaintiff against the defendant consists in large part of the claim under the Trade Practices Act 1974 which I discussed in my previous judgment at paragraphs 17 to 24. The plaintiff, however, now seeks to join Mr Donald Cunnington who was a director of the defendant and, it is alleged by the plaintiff, the controlling mind and principal representative of the defendant at all times material to the proceeding. The plaintiff seeks now to join Mr Cunnington as second defendant to pursue a claim against him in reliance on the accessorial liability provisions of section 75B of the Trade Practices Act (and for completeness the cognate provisions of the Australian Securities and Investments Commissions Act). Mr Peden of Counsel, who appeared for both the defendant and Mr Cunnington to resist his joinder, submitted that the joinder had no utility because the six-year limitation period -- 3 of 15 -- ) 1-4 JUDGMENT 1 10 20 30 40 50 60 under section 87(ICA) has expired. Under UCPR rule 69(2) the Court is precluded from joining a party after the expiration of the relevant limitation period unless one of the six stated provisions in that rule is satisfied. Mr Monks of Counsel who appeared for the plaintiff properly conceded that none of these six provisions were satisfied in the present case. For the plaintiff it was submitted that, although the subject guarantee was signed in February 2003, time did not begin to run against Mr Cunnington until the contingent liability under the guarantee eventuated, namely the risk that the defendant would make a demand on the plaintiff in purported reliance on the guarantee. This did not occur until March 2005 when the defendant refused to release its mortgage except on payment of the total said to be owing to it by Dowdle of some $1.3 million. In reliance on Wardley v Western Australia (1992) 175 CLR 514, and Murphy v Overton (2004) 216 CLR 388, the plaintiff submitted that the plaintiff's cause of action did not crystallise until 2005, citing and relying on the statement in Murphy v Overton at paragraph 55 that "the appellants suffered no loss as a result of undertaking the obligations they did unless and until the contingency which the misrepresentation hid...was first realised, that was a contingency in the sense that the adverse risk might never have eventuated." -- 4 of 15 -- ) 1-5 JUDGMENT 1 10 20 30 40 50 60 The defendant, however, submitted that this was not a case in which, by the terms of the relevant guarantee and mortgage, the plaintiff's liability under those documents was contingent. Moreover, the defendant pointed to the immediate effect which execution of a mortgage has on the value of the mortgagor's equity of redemption, citing the observations of the High Court in that regard in Wardley. The defendant also pointed to the terms of the guarantee and mortgage documents saying that they served to create immediate rather than contingent obligations upon their execution in 2003. Frankly, I am not at all sure as to the correctness of the application of these submissions by the defendant in the present case. If the plaintiff be vindicated by a finding at trial to the effect that she was misled into executing documents which might, on their face, have given rise to an immediate unlimited obligation while believing at worst that her obligation was limited to $50,000, it is presently difficult for me to see how it can be said that her cause of action did not become complete until the circumstance arose which elucidated the deception. On her case that did not occur until 2005. In Wardley's case Mason CJ and Dawson, Gaudron and McHugh JJ pronounced a clear admonition at 533: "We should, however, state in the plainest of terms that we regard it as undesirable that limitation questions of the kind under consideration should be decided in interlocutory proceedings -- 5 of 15 -- ) 1-6 JUDGMENT 1 10 20 30 40 50 60 in advance of the hearing of the action except in the clearest of cases." I do not consider this to be one of the clearest of cases. The question whether the proposed claim against Mr Cunnington is statute barred requires resolution of facts at a trial and findings as to the application of the relevant provisions of the legislation to those facts as found. That leads then to the allied question as to whether I ought exercise my discretion to allow the joinder at this stage. In practical terms the joinder would necessitate vacation of the trial dates. In support of the application the plaintiff's solicitor, whose firm was first retained to act for the plaintiff only in August of this year, swore an affidavit deposing to the chronology of the matter since his firm was instructed up to the mediation which was held on 9 November 2009. He then deposed: "9. On 11 November 2009 I received instructions from the plaintiff to: (a) apply for leave to join Donald Cunnington as a Defendant to the action; and (b) seek leave of this Honourable Court to amend the Claim and Statement of Claim. 10. The proposed joinder of Mr Cunnington has been necessitated by my enquiries revealing that the current Defendant has changed its name to 79 088 979 533 Pty Ltd, -- 6 of 15 -- ) 1-7 JUDGMENT 1 10 20 30 40 50 60 is a $2 company and is subject to a charge in favour of Cardinal Financial Securities Limited. Pages 1 to 7 of exhibit JBL-2 is a historical company extract of the Defendant. 11. I have been unable to locate any assets both real or personal of which it is seized either in this jurisdiction or in New South Wales. 12. I have formed the view that the matter is most unlikely to be finally heard and determined within 2 days, largely because since I have received instructions it has become apparent to me that no work has been undertaken by my predecessors to establish the exact nature and extent of the relationship that existed between Mr Cunnington and Mr Dowdle in the period between 2000 and early 2003, an issue which I believe is directly relevant to the proper determination of the issues in dispute between the parties. 13. In discussing this issue with Mr Dowdle it has transpired that their financial relationship was, during that time, very complex and somewhat convoluted. The evidence of each of Mr Cunnington and Mr Dowdle will take significant time to adduce. The trial is, in my opinion likely to require at least 4 and possibly 5 days to be heard and determined." He also exhibits to his affidavit a draft of the amended statement of claim which would be delivered if Mr Cunnington is joined. -- 7 of 15 -- ) 1-8 JUDGMENT 1 10 20 30 40 50 60 Mr Paul Dowdle has also sworn an affidavit in which he recounts in some detail his dealings over some years with Mr Cunnington. Relevant for present purposes he deposed: "28. The dispute between the Plaintiff and the Defendant arose in February 2005. During the course of these proceedings I have been largely responsible for instructing Clearly & Lee and the plaintiff's barristers that have been engaged from time to time. At no time have I or the Plaintiff (so she tells me and I believe) been informed by any of our advisers that the Defendant might be worthless. At no time have I or the Plaintiff (so she tells me and I believe) ever been advised that there might be a risk of the Defendant having no assets nor have we ever been advised of any cause of action that the Plaintiff might have against MR Cunnington. 29. During the course of numerous conferences with Mr Nunan of Cleary & Lee and Counsel engaged by that firm during the period 2005 to 2009 I have constantly raised with them the relevance of my course of dealings with Mr Cunnington. I expressed the opinion that these dealings were important. I was told on each occasion that I raised this issue that to introduce this issue would simply complicate matters and that it was unnecessary to do so." I should say that I discount as a reason the explanation that the plaintiff's solicitors have only recently conducted an ASIC search of the defendant company which reveals it to have a paid up capital of $15,000 and to be encumbered by a charge -- 8 of 15 -- ) 1-9 JUDGMENT 1 10 20 30 40 50 60 which was registered on the 11th of February 2009. This is hardly late-breaking news, and, in any event, the plaintiff has been content to be engaged in litigation with this defendant for some years without any apparent cry of concern as to the actual wherewithal of the defendant. The practical reality, however, is that the plaintiff now wishes to recast and effectively recommence the proceeding with Mr Cunnington as the principal target. The recent judgment of the High Court in Aon Risk Services v Australian National University (2009) 83 ALJR 951 has affirmed the relevance of the philosophy set out in UCPR rule 5 to the exercise of discretion in proceedings which are subject to case management. In that case the ANU had sued co insurers claiming indemnity in respect of the destruction of the Mt Stromlo Observatory in bushfires. It also sued the defendant insurance broker. On the third day of a trial which had been set down for four weeks the ANU settled with the co insurers. It then obtained an adjournment to argue for a further amendment of its claim against the broker to allege a breach of a duty not to under- insure (there is some suggestion in the judgments that a tactical decision had been made by ANU not to raise this issue against the broker before it had compromised with the insurers.) The amendment was allowed and obviously the trial went off. For present purposes it is sufficient if I refer to the joint judgment of Gummow, Hayne, Crennan, Kiefel and Bell -- 9 of 15 -- ) 1-10 JUDGMENT 1 10 20 30 40 50 60 JJ at paragraphs 111 to 114 (noting that the rule 21 to which their Honours refer is the cognate equivalent of UCPR rule 5): "111.An application for leave to amend a pleading should not be approached on the basis that a party is entitled to raise an arguable claim, subject to payment of costs by way of compensation. There is no such entitlement. All matters relevant to the exercise of the power to permit amendment should be weighed. The fact of substantial delay and wasted costs, the concerns of case management, will assume importance on an application for leaver to amend. Statements in JL Holdings which suggest only a limited application for case management do not rest upon a principle which has been carefully worked out in a significant succession of cases. On the contrary, the statements are not consonant with this Court's earlier recognition of the effects of delay, not only upon the parties to the proceedings in question, but upon the court and other litigants. Such statements should not be applied in the future. 112. A party has the right to bring proceedings. Parties have choices as to what claims are to be made and how they are to be framed. But limits will be placed upon their ability to effect changes to their pleadings, particularly if litigation is advanced. That is why, in seeking the just resolution of the dispute, reference is made to parties having a sufficient opportunity to identify the issues they seek to agitate. -- 10 of 15 -- ) 1-11 JUDGMENT 1 10 20 30 40 50 60 113. In the past it has been left largely to the parties to prepare for trial and to seek the court's assistance as required. Those times are long gone. The allocation of power, between litigants and the courts arises from tradition and from principle and policy. It is recognised by the courts that the resolution of disputes serves the public as a whole, not merely the parties to the proceedings. 114. Rule 21 of the Court Procedures Rules recognises the purposes of case management by the courts. It recognises that delay and costs are undesirable and that delay has deleterious effects, not only upon the party to the proceedings in question, but to other litigants. The Rule's objectives, as to the timely disposal of cases and the limitation of cost, were to be applied in considering ANU's application for amendment. It was significant that the effect of its delay in applying would be that a trial was lost and litigation substantially recommenced. It would impact upon other litigants seeking a resolution of their cases. What was a "just resolution" of ANU's claim required serious consideration of these matters, and not merely whether it had an arguable claim to put forward. A just resolution of its claim necessarily had to have regard to the position of Aon in defending it. An assumption that costs will always be a sufficient compensation for the prejudice caused by amendment is not reflected in r 21. Critically, the matters relevant to a just resolution of ANU's claim required ANU to provide some explanation for its delay in seeking the amendment -- 11 of 15 -- ) 1-12 JUDGMENT 1 10 20 30 40 50 60 if the discretion under r 502(1) was to be exercised in its favour and to the disadvantage of Aon. None was provided." The present case is distinguishable from the Aon Risk Services case in some respects, not least because this is a case in which it is effectively sought to pursue a new party by the joinder of Mr Cunnington and that the trial which has not yet commenced is set down only for a two-day hearing. It is, of course, regrettable to say the least that this application has been left until so late in the proceeding but it seems pretty clear that the case now sought to be advanced has only emerged by the attention of the plaintiff's new solicitors and the new counsel very recently retained in the matter. It is also clear on the material put before me that it is most unlikely that the trial (even without the joinder of Mr Cunnington) would be able to be concluded in two days. It is highly undesirable for trial judges and parties to be burdened by part-heard trials. Even despite the plaintiff's conduct in not advancing this case in a manner consonant with the philosophy stated in UCPR rule 5 I would not, in all the circumstances, be inclined to shut the plaintiff out from pursuing the case which she now really wants to prosecute which is, as I have noted, with Mr Cunnington as the principal target. That, of course, is subject to considerations of prejudice to the defendant. Any delay in a proceeding has the potential to produce what was -- 12 of 15 -- ) 1-13 JUDGMENT 1 10 20 30 40 50 60 described by French CJ in the Aon Risk Services case at paragraph 5 as "an irreparable element of unfair prejudice". In the circumstances of the present case, however, the real prejudice suffered by the defendant has arisen by virtue of the costs that have been incurred in dealing with the numerous aborted efforts by the plaintiff to get her case in order. The defendant's solicitor has deposed to the following: - that apart from the draft pleading which incorporates the case against Mr Cunnington the plaintiff has served six formal iterations of the statement of claim and two informal version; - that the defendant has been required to respond with five versions of the defence; - that the defendant has written no less than six letters under UCPR rule 444 seeking further and better particulars of the plaintiff's claim; - that the defendant has made three applications for further and better particulars. The defendant's solicitor has estimated the costs (presumably on a solicitor/own client basis) of repleading on four occasions, sending the rule 444 letters, and of making two of the applications for further and better particulars (the third not being included because the defendant has the benefit of a costs order for it) as being in the order of $57,000. -- 13 of 15 -- ) 1-14 JUDGMENT 1 10 20 30 40 50 60 For the reasons I have already expressed it seems to me to be unarguable that these costs have been completely wasted. In the circumstance that the plaintiff now wishes to proceed with Mr Cunnington as the principal target this is clearly a case in which the prejudice suffered by the defendant ought be ameliorated as much as possible by ordering those costs to be paid on an indemnity basis. The same applies to the costs of the present application. Moreover, given the history of this matter, those costs (or at least a significant sum on account of those costs) ought be paid by the plaintiff immediately and before the defendant is obliged to incur any further cost. Accordingly I would be inclined to make orders to the following effect: 1. that the trial dates of 10 and 11 December 2009 be vacated; 2. that Donald Cunnington be joined as a second defendant; 3. that the plaintiff have leave to file and serve an amended statement of claim in the form of Exhibit JBL2 to the affidavit of J B Loel filed 16 November 2009; 4. that the plaintiff have leave to amend the claim to accord with the relief claimed in the said amended statement of claim; 5. that the plaintiff pay the defendant's costs to be assessed on the indemnity basis of the attendances particularised in paragraph 11 of the affidavit of Sherrie Ann Angove sworn 2 December 2009; -- 14 of 15 -- ) 1-15 JUDGMENT 1 10 20 30 40 50 60 6. that by 18 December 2009 the plaintiff pay the sum of $45,000 into the trust account of the defendant's solicitors such sum to be held on account of the costs to be assessed under order 5; 7. that if the said sum of $45,000 is not paid on account in accordance with order 6 the claim shall be struck out with costs in addition to the costs orders made today; 8. the plaintiff pay the defendant's costs of and incidental to this application on an indemnity basis. I will hear the parties further as to the precise forms of orders and as to any necessary further directions. ... HIS HONOUR: I've already indicated my view on the matter. At the risk of repeating myself, the conduct of the plaintiff throughout the course of this matter has clearly resulted in significant prejudice to the defendant by virtue of the incurring of costs that are now effectively in utile and, in my view, the appropriate way to ameliorate that prejudice is by making the awards of costs on an indemnity basis as I have already intimated. ... ----- -- 15 of 15 --