Bendeich v Clout [2003] QDC 305

DISTRICT COURT OF QUEENSLAND CITATION: Bendeich v Clout [2003] QDC 305 PARTIES: GRAHAM ROSS BENDEICH Plaintiff v DAVID LEWIS CLOUT Defendant FILE NO/S: Plaint 1744 of 1996 DIVISION: PROCEEDING: Application in proceeding ORIGINATING COURT: District Court, Brisbane DELIVERED ON: 12 September 2003 DELIVERED AT: Brisbane HEARING DATE: 8 August 2003 JUDGE: McGill DCJ ORDER: Application dismissed with costs. CATCHWORDS: PRACTICE – Leave to proceed – 5 years delay in 7½ year old claim – responsibility for delay – prejudice to defendant – limitation period not yet run – leave refused. Uniform Civil Procedure Rules r 389. Birkett v James [1978] AC 297 – not followed. Cooper v Hopgood & Ganim [1999] 2 Qd R 113 – applied. Quinlan v Rothwell [2001] QCA 176 – applied. Tyler v Custom Credit Corporation Ltd [2000] QCA 178 – applied. COUNSEL: M D Martin for the plaintiff G I Thomson for the first third party SOLICITORS: Morgan Conroy for the plaintiff Tucker Cowan for the defendant Dibbs Baker Gosling for the first third party Rinaudo & Co for the second, third and fourth third parties [1] This is an application by the plaintiff for leave to proceed pursuant to r 389 of the Uniform Civil Procedure Rules. The action was commenced on 20 December 1995 when a writ was filed in the Supreme Court. On 20 May 1996 a deputy registrar made a consent order that the action be remitted to the District Court at Brisbane. -- 1 of 17 -- 2 The last step taken in the action was the filing and service on 7 August 1998 of an entry of appearance and defence on the part of the fourth third party. The last step taken by the plaintiff was the delivery of a statement of claim on 6 March 1996. [2] The plaintiff alleged that his failure to prosecute the action thereafter was due to the failure of his then solicitors, Messrs Baker Johnson, to act on his instructions to proceed with it. He conceded that there was a time in mid 1998 when he instructed the firm to take no further steps for the time being, but alleged that in November 1998 he instructed a particular solicitor who had the conduct of the proceedings to prosecute them for him, and that was confirmed by a letter of 24 February 1999 to his solicitors.1 On 15 March 1999 the plaintiff’s solicitors wrote to the defendant’s solicitors indicating that the matter was to be reactivated, and the plaintiff was informed of this under cover of a letter of 15 March 1999. Apparently notice of intention to proceed was given on 14 May 1999 and shortly thereafter Baker Johnson were advised that new solicitors were acting for the defendant. In March 2000 there were a number of meetings between the plaintiff and his solicitors about further prosecuting the proceedings. On 24 January 2000 notice of intention to proceed was filed by Baker Johnson. On 9 March 2000 that firm sent letters to the defendant and third parties enquiring whether the proceedings could be mediated. It does not appear that any response from any party indicated that there was some justification in delaying the proceedings pending a mediation.2 [3] The plaintiff said3 that on 23 July 2002 he was advised by Baker Johnson that: “This matter appears to have simply remained in abeyance pending a statement to be obtained from you.” The plaintiff said that he had had numerous conversations with various people, none of whom currently work for Baker Johnson, asking for the matter to be pursued, and had been assured by them that appropriate steps would be taken, However, he does not say that he was ever told that an appropriate step had been taken, so this is not a case where the client had been misled into the belief that the action was being progressed when that was not the case. [4] Furthermore, the plaintiff is himself a solicitor4 and a liquidator, and therefore ought to have been aware that under the rules it was necessary for steps in the action to be taken from time to time otherwise leave to proceed would be required. He does not explain why he did nothing effective to ensure that the matter was progressed notwithstanding that for about four and a half years, to his knowledge, nothing was done by Baker Johnson to carry it forward. [5] The plaintiff’s inaction is particularly difficult to understand in circumstances where the plaintiff maintains that, as a result of events in 1994, it is clear that the defendant has no good defence to this action. [6] According to the statement of claim,5 the plaintiff is suing on a deed of indemnity given by the defendant on 28 December 1989 by which the defendant agreed to 1 Affidavit of Bendeich filed 17 July 2003, paras 5, 7, 8. The rest of this paragraph is based on this affidavit. 2 The first third party was not interested in mediating: Affidavit of Winter para 11. 3 Affidavit of Bendeich filed 17 July 2003, para 16. 4 Affidavit of Winter para 18. 5 The statement of claim is Exhibit 1; the deed of indemnity, Exhibit 2. -- 2 of 17 -- 3 indemnify the plaintiff “against all actions, claims, demands, proceedings, losses, expenses and liabilities whatsoever which may be made or arise by reason of the appointment of the [plaintiff] as directors of Braegrove or by reason of the directors’ exercising or attempting to exercise their rights, powers, duties or obligations as directors of Braegrove ….” The deed provided in clause 2 that the indemnity did not extend to actions etc which arise “as a result of the negligence or wilful default of [the plaintiff].” Background [7] In order to understand the claim, and the nature of the defence of the defendant, and the various third party proceedings, it is necessary to set out some of the factual background to this claim.6 Prior to 7 April 1989 the company Braegrove Pty Ltd (“the company”) was trustee of three trusts, the JAM Gray Family Trust, the Gordon Family Trust and the Birkdale Property Trust. There were two issued shares in the company (which had a paid up capital of $2), although it owned substantial property, which was held on one or other of those trusts. The two shares in the company were held by John Arthur Nicol Gray and Joy Gray, the second and third third parties in the present action. They had caused the trusts to be established, with their (then infant) daughter the beneficiary of two of the trusts, and a beneficiary of the third. [8] On 7 April 1989 Mr and Mrs Gray each filed a debtor’s petition in the Federal Court and thereby became bankrupt under s 55 of the Bankruptcy Act 1966. The defendant in the present action was appointed trustee in bankruptcy of their estates, and pursuant to the Bankruptcy Act the shares in the company that they held were vested in him. [9] On or about 3 November 1989 the defendant convened a meeting of shareholders of the company at which he removed the existing directors and appointed as directors of the company the plaintiff and another person.7 The plaintiff was at the time a partner in a firm of chartered accountants of which the defendant was also a partner. The other person appointed as a director of the company was an employee of that firm, and allegedly worked with the defendant on the bankruptcy. In connection with this appointment, on 17 November 1989 the plaintiff and the defendant entered into the deed of indemnity on which the plaintiff sued. [10] In response to this step by the defendant the daughter, acting through a next friend, issued proceedings in the Supreme Court seeking to restrain the company from exercising any of its powers as trustee of those trusts, and seeking the removal of it as trustee of those trusts. On 20 November 1989 an order was apparently made restraining the company from disbursing trust moneys except as required to fulfil 6 For the purposes of doing this I am assuming that the factual matters alleged in the statement of claim delivered in another action on 31 August 1992, Exhibit DCL1 to the affidavit of the defendant filed 25 July 2003, are correct. The plaintiff in paragraph 8 of his affidavit filed 1 August 2003 said that “there is no dispute as to what occurred” in relation to that action. 7 The statement of claim exhibited to the defendant’s affidavit alleged that at this time he was not recorded on the register of the company as the holder of those two shares, and that, because of this and because of a failure to give notice of the meeting to Mr and Mrs Gray, his purported appointment of these two directors was invalid. It is unnecessary for me to decide whether any such formal step was necessary in order to complete the vesting in him by the Bankruptcy Act of title to the shares. -- 3 of 17 -- 4 the obligations of the company as trustee of any of the trusts. Subsequently however, orders were made permitting the company to pay accounts rendered by a firm of solicitors in respect of disbursements incurred8 in the due administration of the trusts. [11] On or about 29 November 1989, the plaintiff and the other directors9 entered into an agreement with a firm of solicitors for the provision of legal services to them by that firm. It was alleged that this was wrong and in breach of their duty as directors, bearing in mind that that firm of solicitors were also the solicitors for the defendant as trustee of the estates of Mr and Mrs Gray, and the solicitors for a bank which was the major creditor in their bankruptcies. It is also alleged that the costs agreement provided for excessive rates of remuneration for that firm. Subsequently accounts were paid by the company as trustee to that firm of over $20,000. It is alleged that these payments were unlawful in that they were in breach of the order of the Supreme Court of 20 November 1989, in breach of the company’s obligation as trustee in respect of the three trusts, and in breach of the provisions of s 9 of the Solicitors Act 1891. [12] It was also alleged that the plaintiff and another director had authorised the company to pay accounts rendered by the firm of chartered accountants of which the plaintiff was a member, presumably for accounting services and advice, in an amount of over $25,000. These payments were alleged to have been in breach of the Supreme Court order, the company’s obligation as trustee and (if it is any different) fiduciary, the provisions of ss 229(1), 229(2) and 229(4) of the Companies Code, and article 63 of the articles of association of the company. [13] It was also alleged that on various dates between 17 November 1989 and 1 February 1990 the plaintiff and another director decided that the company was entitled to charge remunerations for acting as trustee of the trusts, in the total sum of about $220,000. The plaintiff in taking these steps acted on the advice of the firm of solicitors.10 [14] Subsequently, and allegedly at the suggestion of the defendant, Mr and Mrs Gray entered into an arrangement with the company under which the company would borrow against the security of the trust assets the sum of $200,000 which would be paid to the trustee on behalf of Mr and Mrs Gray, which funds would then be made available for a composition with creditors to be entered into by Mr and Mrs Gray. Those steps were apparently taken, and at creditors meetings on 16 March 1990 the composition proposals, supported by the defendant, were approved by the creditors. Subsequently, on application of Mr and Mrs Gray, the Federal Court approved the composition and annulled their bankruptcies. [15] It can be seen therefore that the practical effect of the steps taken by the plaintiff and the defendant was that, insofar as the three discretionary trusts were an exercise in shielding the assets of Mr and Mrs Gray from their creditors, that device was frustrated, and the creditors were, presumably, paid out the money they were entitled to receive. No doubt Mr and Mrs Gray were unhappy about that situation, 8 And presumably costs, although that does not seem to be alleged in the statement of claim. 9 By this time a third director of the company had been appointed, presumably by the defendant. 10 See the affidavit of the plaintiff filed 1 August 2003 paras 9, 10. -- 4 of 17 -- 5 but, in a broader sense, the steps taken by the plaintiff and defendant, and the others, would no doubt be regarded by the community generally as all very right and proper. Nevertheless, once Mr and Mrs Gray resumed control of the company, it, Mr Gray and the (still infant) daughter, on 17 March 1992, commenced proceedings in the Supreme Court11 against the plaintiff, the other two people who had been appointed directors of the company during the bankruptcy, the firm of solicitors, the firm of accountants of which the plaintiff and defendant were then members, and another solicitor who had given some advice to Mr and Mrs Gray in relation to the composition proposal. [16] When the statement of claim was delivered on 31 August 1992, it ran to 60 pages, and contained a large number of allegations of actionable wrongs against the various defendants, including the plaintiff.12 The claims for relief themselves run to nine pages. Relevantly it was alleged that the plaintiff had breached his fiduciary duty to the company in various ways, and had acted negligently in carrying out his duties as a director of the company, and had acted as a director of the company in bad faith. It is not immediately obvious that it is actually alleged that there was any loss suffered by any of the plaintiffs as a result of his alleged negligence, but the pleading is quite lengthy, and it is quite possible that I have missed it. In any case, it is clear enough that an allegation of negligence against the plaintiff was intended. [17] The 1992 action was resolved, so far as the plaintiff was concerned, by a deed executed on 26 August 1994, by which the various claims against the plaintiff were abandoned, and no order for costs was to be made either in favour of or against the plaintiff.13 The plaintiff also agreed to assist the plaintiffs in the 1992 action as a witness, and for that purpose produce documents to them and provide information to them, and not provide statements or other assistance to the other defendants in the action as a witness.14 It was also agreed that the plaintiffs in the 1992 action would withdraw objections that had been made to his application for registration as a trustee pursuant to the provisions of the Bankruptcy Act 1996; they had objected to that registration in the Federal Court, and they agreed to file a further affidavit in the Federal Court supporting his registration as a trustee, and swearing that he had provided them with a sufficient explanation of his conduct subject to the objection, and that in reliance on that explanation they wished to withdraw their objection. [18] In the course of his defence of the 1992 action, the plaintiff claims to have incurred legal costs in excess of $60,000. It was these costs which the plaintiff in the present action sought to recover from the defendant pursuant to the deed of indemnity. Curiously, paragraph 14 of the statement of claim in the present action is in the following terms: “Action number 380 of 1992 has not yet completed. The plaintiff additionally claims an indemnity against the defendant for future costs incurred by the plaintiff in defending and bringing to finality the Supreme Court proceedings.” That was a curious allegation for the plaintiff to make in 1996, bearing in mind the terms of the deed that he had entered into on 26 August 1994, which appear to me effectively to insulate the plaintiff from any further possible costs in connection with the 1992 action. It is I suppose consistent with the fact that, in the affidavit 11 “the 1992 action”. 12 ie, the plaintiff in the present action. 13 Affidavit of Rinaudo Exhibit RR2; affidavit of Bendeich filed 1 August 2003 para 4. 14 There is no evidence as to whether any such assistance was in fact ever sought or provided. -- 5 of 17 -- 6 filed initially in support of this application by the plaintiff on 17 July 2003, no reference was made to the fact that the 1992 action had been compromised in the way I have described prior to the commencement of the present action. Defence of the defendant [19] The defendant in his entry of appearance and defence filed 21 January 1998 alleged that the costs incurred in defending the 1992 action arose as a result of the negligence or wilful default of the plaintiff as a director of the company and were therefore excluded from the indemnity by clause 2 of the deed. The defendant also alleged that any costs incurred by the plaintiff were not reasonably incurred, and also alleged that it was not possible to determine whether the deed extended to the plaintiff’s costs incurred in defending the 1992 action until that action had been tried and concluded.15 [20] Whether the limitation of reasonableness is to be implied in relation to the costs would probably not involve much in the way of oral evidence. It does not appear whether the solicitors’ file of the solicitors acting for the plaintiff in the 1992 action is still available, but if it is, then there should be no difficulty in resolving either the question of whether a limitation of reasonableness is to be applied to the indemnity, or (if so) whether the costs incurred by the plaintiff were reasonable. [21] The more difficult question is whether, in view of the lapse in time, the defendant will still be able to pursue effectively the defence that the plaintiff was acting negligently or in wilful default as a director of the company. Assuming that “wilful default” means in breach of his duties as director, or, perhaps, in a way which made him a knowing participant in a breach of trust on the part of the company, such matters were certainly alleged against him in the 1992 action. It is not possible for me to determine whether there is any force in the allegations made in the 1992 action, but, if and to the extent that deliberate wrongdoing can be shown on the part of the plaintiff, or even a want of reasonable care on his part as a director, that would seem to take his claim outside the scope of this indemnity. These are matters which the defendant would have to prove at a trial. [22] It is not an answer to say that the persons alleging negligence or deliberate misconduct on the part of the plaintiff were the company and the other plaintiffs in the 1992 action, and that they are still available. Although the defendant has issued third party proceedings against Mr and Mrs Gray, for reasons I will deal with below those claims are doubtful, and it may well be that the defendant will not have much assistance in any trial of the action from the Gray interests. It is not an answer to say that they have in the deed of settlement of the 1992 action withdrawn their allegations against the plaintiff. The defendant is in no way bound by that, and it would still be open to the defendant to prove that there was in fact substance in those allegations. 15 Clearly that would not amount to a bar in law to the plaintiff’s claim, and, once the 1992 action had been settled so far as the plaintiff was concerned, did not provide any practical justification for delaying the present action. Curiously, the settlement of the 1992 action was not pleaded by the plaintiff in reply; no reply was filed. -- 6 of 17 -- 7 [23] One of the matters referred to in a little detail in the deed of settlement of the 1992 action is the question of what the plaintiff knew. That deed implies that the plaintiff can be absolved from any wrongdoing in relation to the Gray interests because of an absence of knowledge of various things at relevant times. That suggests that the question of whether or not the defendant in the present case can establish his defence turns on whether he can show that in fact the plaintiff had knowledge of various things at relevant times. Proof of that could well involve witnesses other than the defendant, and might be a matter depending heavily on the documentation produced at the time in relation to what was occurring.16 [24] If it is the case that it would be crucial to the defence of the defendant in the present action to be able to show that the plaintiff had knowledge of certain things at particular times in the course of the whole transaction, proof of that could well be seriously impaired by the lapse of time which has occurred, because of fading memories17 and the loss of documentation. The defendant has sworn that he has been unable to locate his bankruptcy files relating to the bankruptcies of Mr and Mrs Gray.18 These were archived some years ago when he thought the action was not proceeding any further, and he has not been able to locate them. Even if he can now locate them, I would expect it would be more difficult because of the passage of time to come to grips with them again. I do not think it is an answer to say that he is required as trustee to keep bankruptcy files for 15 years. The defendant does not say that he deliberately destroyed these documents, but merely that they have been misplaced. [25] It appears that since the settlement with the plaintiff nothing much has been done by the Gray interests to carry forward the 1992 action. The last document filed in that action was a notice of majority of the former infant plaintiff, filed 23 July 1998.19 Prior to that no documents had been filed since August 1996. Mr Gray was cross- examined before me and said that he had no present intention to carry that action forward: p.17. I would be surprised if the Supreme Court would allow it to be revived now. Another action [26] The plaintiff in March 1995 commenced another action in the District Court against a Mr Knight, which arose out of the plaintiff’s employment as an accountant, and subsequently as a salaried partner of Mr Knight. The plaint claimed various relief in relation to that employment, including an entitlement to an indemnity in respect of the costs incurred by the plaintiff in defending the 1992 action.20 It does not appear that any step has been taken in that action since August 1998, when an entry of appearance and defence by the second fourth party was filed. The plaintiff in his affidavit filed 1 August 2003 said that he successfully applied for summary 16 The defendant said that at the time he had tried to insulate himself from the directors’ decisions so he is “a little bit in the dark there”: transcript p.14. Presumably there were some people who had dealings with the plaintiff about this matter, although it might now be difficult to identify them. 17 Obviously the ability of all involved to recall details, especially such as what the plaintiff knew when, will have greatly diminished over this length of time. The defendant said (para 15(b)) that he is struggling to recall what happened in 1989 or 1990, and that is understandable. 18 Affidavit of Clout para 15(k). 19 Affidavit of Clout Exhibit DLC2. 20 Affidavit of Clout Exhibit DLC3, DLC4. -- 7 of 17 -- 8 judgment for part of the claim in March 1995, and that he has not proceeded with the balance of the claim: para 2. He does not say which part of the claim was the subject of a successful summary judgment application, but I will assume that it was not that part by which he claimed indemnity for the legal costs which are also the subject of this action. That summary judgment was apparently obtained prior to commencing the present action. [27] Evidently at one point consolidation of the present action with the plaintiff’s action against Mr Knight was contemplated. The plaintiff said21 that there was a delay in the filing of the defence in the present action “because the parties considered it was appropriate to consolidate this action with another related proceeding in the District Court. Consent orders were filed but the registrar refused to make the orders, as it required an application to the court.” It seems surprising that the parties spent so long considering an application for consolidation. It does not appear that any application was ever made to the court, which also seems curious. The failure of the plaintiff to apply to the court in such circumstances could well have led the defendant to think that the plaintiff was not serious about pursuing the action. [28] The defendant is also concerned about the possible loss of any entitlement to claim contribution from Mr Knight in relation to any liability to the plaintiff in the present proceedings. Whether or not such contribution could otherwise have been claimed is by no means clear, but if it could otherwise have been claimed an ability to pursue such a claim may well have been lost because of the settlement about June 2000 of separate litigation between the defendant and Mr Knight, which action was settled at trial.22 Although the terms of the settlement are not disclosed in the material, it would be unsurprising if it involved mutual release from all claims and demands arising out of the former partnership between those parties. The defendant said that some documents were destroyed at that time following that settlement, and that might have included some documents relevant to these proceedings (I suppose, in part because of the lapse of time, it is difficult to tell), although one would not expect that documents relevant to the present proceedings would have been deliberately destroyed at that time. Third party proceedings [29] Apart from these difficulties the defendant may well be prejudiced in the conduct of the third party proceedings which are already on foot. On 21 January 1998 the plaintiff issued a third party notice against the first third party claiming an indemnity in respect of any liability to the plaintiff on the indemnity on which the plaintiff sued, pursuant to a separate deed of indemnity dated 17 November 1989.23 In an entry of appearance and defence filed 17 July 1998 the first third party denied that there was an effective agreement of indemnity between the defendant and the first third party,24 and also relied on the proposition that the claim arose as a result of negligence or wilful default of the plaintiff. It is also alleged that the claim was 21 In his affidavit filed 17 July 2003, para 3. 22 Affidavit of Clout para 16. 23 A copy of the deed is Exhibit GRB1 to the affidavit of Bendeich filed 1 August 2003. 24 The third party denied that the defendant had executed the indemnity: transcript p.7. The signature on the deed looks different from that on the affidavit of the defendant filed 25 July 2003, but a person’s signature might change over 14 years. -- 8 of 17 -- 9 outside the scope of the indemnity, or during the period for which the indemnity was to operate. Presumably these issues arise on the basis of interpretation of the document, which is available, and which appears to have been signed by both parties. It may be however that there was some collateral agreement, or some other reason why a document, which on its face is a deed of indemnity and applicable to the transaction, would be ineffective. It is not clear that the defendant would have any great difficulty, attributable to the delay, in proving a claim for indemnity against the first third party. [30] The first third party alleges that there have been difficulties caused to it in defending that claim of indemnity, partly because the former chairman of the first third party who is said to have been much involved in the negotiations, died about five years ago, another employee of the first third party who was heavily involved in the negotiations has left its employment and his location is unknown, and the solicitor who was handling the file for the first third party at the time the third party proceedings commenced has limited recollection of the matter due to the time that has passed, and has left the firm.25 It is not immediately clear that these matters would cause any significant difficulty in the context of the defence as it is currently pleaded, but I suppose there is a risk that there is more to this defence than meets the eye. [31] On 21 January 1998 the defendant issued a third party notice against Mr Gray claiming an indemnity pursuant to a deed of indemnity dated 16 March 1990. Similar third party notices were issued against Mrs Gray, and the fourth third party, Ms Gordon, apparently a relative. By an entry of appearance and defence filed 7 August 1998, Mr Gray admitted that he entered into a deed of indemnity dated 16 March 1990, but denied that that indemnity provided an indemnity in respect of any liability of the defendant to the plaintiff in the present action, and further alleged that that deed of indemnity was unenforceable, as providing the indemnity was in the circumstances contrary to law. [32] The indemnity is pleaded in full in the defence, and relevantly contains an agreement to indemnify the defendant “against all actions, claims, demands, proceedings, losses, expenses and liabilities whatsoever that may arise by reason of or incidental to the payment” by the company to the defendant of the sums to be paid pursuant to the composition with creditors. Whether or not any liability of the defendant to the plaintiff in the present action falls within the terms of that indemnity seems to be a matter of construction of the document, but whether the indemnity is itself invalid as being part of the whole wrongful transaction would seem to involve substantial issues, and much the same issues as those raised in the 1992 action. The litigation of those issues by the defendant (and the third parties) could well be hampered by fading memories, and the loss of documents. Conversely, the ability of the second, third and fourth third parties effectively to defend the third party proceedings could well face the same difficulties.26 It seems to follow that there would now be significant obstacles to the possibility of a fair 25 Affidavit of Winter paras 15, 17. 26 Mr Gray has sworn that he has difficulty recalling all of the detail, and that he has lost some documents put away after the 1994 settlement deed, while original facsimiles are illegible: affidavit of Gray filed 5 August 2003 paras 1, 3, 5, 6. The fourth third party is now 82 years of age: ibid para 14. -- 9 of 17 -- 10 trial of the third party proceedings. I regard that as a further indication that, in the present circumstances, because of the length of time that has passed, there are now substantial difficulties in the way of having a fair trial of the action as a whole. [33] By letter of 11 August 1998 the solicitors for the defendant foreshadowed an amendment to the third party notices to the second, third and fourth third parties.27 However, since then no further step has been taken by the defendant in the third party proceedings, because of the failure of the plaintiff to take any step in the proceeding for in excess of two years. The authorities [34] On this application the plaintiff must show that there is good reason for excepting this action from the general prohibition in r 389(2) on the taking of a fresh step more than two years after the last step in the action: William Crosby & Co Pty Ltd v Commonwealth of Australia (1963) 109 CLR 490. A number of factors relevant in determining whether to give leave to proceed under r 389 were conveniently collected in the judgment of Atkinson J (with whom the other members of the court agreed) in Tyler v Custom Credit Corporation Ltd [2000] QCA 178. I shall address those factors as they apply in the context of the present action. [35] What matters in terms of any substantial dispute at the trial is not the facts alleged in the statement of claim, but the issue raised by the defendant, of whether there was negligence or wilful default on the part of the plaintiff. The facts relevant to that issue occurred between November 1989 and April 1990, a long time ago. Proceedings were not commenced until more than five years had elapsed since those events, although the plaintiff did not have the cause of action on which he now sues until he began to incur costs in defending the 1992 action. According to the particulars given in the statement of claim, he first paid costs in relation to that action at the end of March 1993, and the final payment in relation to that action referred to in the statement of claim was dated 20 March 1995, although that appears to be to himself; the previous payment was on 5 August 1994. It appears that once all of the costs had been incurred and the action was settled, the plaintiff commenced the proceedings reasonably quickly, in December 1995. No causes of action have been added since then. [36] The plaintiff’s prospects of success in the action depends entirely on whether the defendant can prove that the plaintiff acted as a director of the company with negligence or wilful default. It is difficult to make any firm assessment of that; the sequence of events described in the statement of claim in the 1992 action certainly suggests that the plaintiff was willingly participating in a scheme to make the trust assets available to the Gray creditors. It is difficult to see how a decision to charge substantial remuneration was of any benefit to the beneficiaries of the trusts, but there may well have been an entitlement to such remuneration under the trust deeds.28 Prima facie, a trustee is not entitled to remuneration,29 although there is an entitlement under the Trusts Act 1973, s 101, to apply to the Supreme Court (which 27 Affidavit of Rinaudo Exhibit RR1. 28 The trust deeds are not before me. It occurs to me that if they are not still available there would be considerable difficulty in properly trying this action. 29 Jacobs’ “Law of Trusts in Australia” (5th Ed 1986) p.416. -- 10 of 17 -- 11 presumably was not relied on in the present case). That suggests that there must have been an entitlement to remuneration in the trust deed, which the company was able to exploit once the interests of the shareholders of the company came to differ from the interests of the beneficiaries under the trusts. [37] If there was an entitlement to charge remuneration, the duty of the directors to the shareholders of the company would have required that remuneration be charged, so the decision to charge remuneration (assuming it was in accordance with the provisions of the relevant trust deeds) would be unlikely to involve any negligence or wilful default on the part of the plaintiff. On the other hand, it is more difficult to see how the steps apparently taken in connection with the composition proposal were consistent with the duties of the directors to the company, or the duties of the company to the beneficiaries under the trusts. [38] Insofar as the propriety of the plaintiff’s actions depends upon what he knew or did not know at any particular time, it is quite impossible for me on the present material to reach any conclusion. I do not regard the statements in the deed by which the 1992 action was settled as being of any significance in this regard; I do not doubt that what was put in that deed was what it suited the interests of the parties to put in the deed at that time. If the plaintiff was applying for registration as a trustee in bankruptcy at that time, I expect he would have needed to secure as part of the settlement some express acknowledgement from the Gray interests, who had objected to that registration, that he had acted properly in relation to these transactions. [39] The terms on which the 1992 action were compromised suggests that the Gray interests did not have any great confidence in it, which would be consistent with their failure to take the action further against the other defendants. Of course there may be other reasons for this; the Gray interests may have been unable to fund the action further. If, as the plaintiff alleges in the present action, he spent over $60,000 defending himself, he must have taken fairly seriously the threat posed by the 1992 action. [40] During argument I expressed a (very preliminary) view that there did not appear to be much substance to the 1992 claim, and that it was difficult to see that there was any real defence to the plaintiff’s claim in the present action. Having heard further argument in relation to those matters, and having considered the material, I accept that that initial reaction was not justified. I accept that there is a serious question as to whether there was negligence or wilful default on the part of the plaintiff in relation to these dealings. All I can say about the prospects of success in relation to that issue is that this is not one of those cases where it is so clear either that the plaintiff will succeed at the trial, or that the plaintiff will fail, for that feature to be of significance in the determination of the issue I have to decide. [41] There has been no disobedience of any court order or directions by any party. The litigation has been characterised by significant periods of delay, mostly attributable to the plaintiff. It does appear that there was some period of delay to which the defendant was at least a party, prior to the filing and service of the defence of the defendant, but this was not due solely to the delay of the defendant; it appears that it was really caused by the plaintiff’s failure to take further the proposal to -- 11 of 17 -- 12 consolidate the two District Court actions. There is no suggestion that the impecuniosity of the plaintiff has been responsible for the pace of the litigation, or that the defendant is responsible for any such impecuniosity. I shall return to the question of whether the litigation would be concluded by striking out the plaintiff’s claim, but note that this is not a case where a counter-claim or another action between the parties would be able to continue notwithstanding the striking out of this claim. [42] The litigation has not progressed very far at all. It is by no means clear that the pleadings have been finalised, and it is clear that nothing else has been done; in particular disclosure has not taken place, and that is likely to be a substantial matter in the present case.30 The litigation is at a relatively early stage; it is certainly not the case that the action is now ready or virtually ready to be tried.31 The initial cause for the delay was apparently dilatoriness on the part of the plaintiff’s lawyers, although the circumstances of this case do not suggest that the plaintiff can be absolved of personal responsibility. He claims to have frequently tried to have the matter carried further since late 1998, but did nothing effective until quite recently in the face of a persistent failure of his then solicitors to do anything to give effect to those instructions. Given that he is himself a solicitor and a liquidator, he is not in the position of many plaintiffs who reasonably assume that their solicitors are doing what is supposed to be done. There is no suggestion that his solicitors ever claimed that the action was progressing when it in fact was not. The position is simply that the plaintiff has sat by for about four and a half years and allowed his solicitors to do nothing to carry the action forward. If ever there was a case for a plaintiff personally to share responsibility for the dilatoriness of the solicitor, in my opinion this is that case. [43] The delay is explained in the sense that I do not doubt that I have been told all that there is to be said in relation to the circumstances of the delay. There is however no excuse for any of the delay suggested in the material. Given the nature of the issues as I have outlined them earlier, in my opinion it is quite likely that, because of the delay and the fading of memories and the misplacement of relevant documentation, it would now be very difficult to have a fair trial of the issues raised by the defence of the defendant. This is not a case where the matters in issue can still be readily resolved on the basis of available witnesses and documents. Effect of limitation period not having run [44] One issue raised by the plaintiff is that leave to proceed should be given regardless of other considerations simply because the limitation period has not yet run. The plaintiff is suing on a deed for which the limitation period is 12 years,32 and that period would appear to have begun to run at the time when the plaintiff first made a payment alleged to be within the terms of the indemnity, on 31 March 1993. Accordingly the limitation period for any of the claim will apparently not expire until 31 March 2005. The submission was that, if leave to proceed were refused, the 30 The first third party has a file on the matter which fills 14 boxes: transcript pp.8-9. I would expect that other parties would have even more documents, unless they have been lost. It would be extremely onerous to make disclosure now after all this time. 31 Contrast Quinlan v Rothwell [2001] QCA 176. 32 Limitation of Actions Act 1974 s 10(3). -- 12 of 17 -- 13 plaintiff could simply start a fresh action. I have been concerned about the significance of this feature, and whether this does mean that there is no point in refusing leave to proceed, however unsatisfactory that outcome might appear to be. There are however a number of reasons why I consider that it does not necessarily follow that leave to proceed should be allowed. [45] I was concerned by the proposition stated in Birkett v James [1978] AC 297, that an action would not ordinarily be dismissed for want of prosecution when the limitation period for the claim has not expired. That approach was justified by Lord Diplock (with whom three other members of the House agreed) at p.321 on the basis that: “Exceptional cases apart, where all that the plaintiff has done has been to let the previous action go to sleep, the court in my opinion would have no power to prevent him starting a fresh action within the limitation period and proceeding with it with all proper diligence notwithstanding that his previous action has been dismissed for want of prosecution.” Lord Salmon and Lord Edmund Davies made similar comments at pp.328 and 334. As a result of this approach, the House of Lords in England in Tolley v Morris [1979] 1 WLR 592 held that an action should not be dismissed for want of prosecution notwithstanding substantial delay prejudicial to the defendant, in circumstances where the plaintiff was an infant and the limitation period had not yet run.33 [46] Hence if by some chance the action were dismissed for want of prosecution, a fresh action could be commenced. That was the outcome in Bailey v Bailey [1983] 1 WLR 1129. The plaintiff was injured in 1973, and issued a writ in 1976. Originally the writ sought only damages in respect of the injuries, but subsequently it was amended to add a claim in the alternative for damages for misrepresentation in respect of a purported settlement of the plaintiff’s claim prior to the commencement of the action. In 1980 the defendant applied to have the action dismissed for want of prosecution, before that application was heard a fresh writ was issued repeating the claim for fraudulent misrepresentation, in respect of which the limitation period had not expired, but not the claim for damages in respect of the personal injuries, for which the limitation period had expired. The earlier action was then dismissed for want of prosecution, an appeal against that order was withdrawn, and the writ in the new action served. It was held that the plaintiff was entitled to proceed with the second action which did not amount to an abuse of process of the court, applying Birkett v James and Tolley v Morris (supra). [47] That approach was consistent with an earlier decision of the Full Court of Queensland, also applying Birkett v James, in similar circumstances although without the complication of the separate causes of action: Madden v Kirkegard Ellwood & Partners [1983] 1 Qd R 649. In that case an action was commenced in 1973, but no step was taken after January 1975, and in October 1978 an application pursuant to O 90 r 9 of the Rules of the Supreme Court for leave to proceed with that action was refused. The action was then discontinued, but in July 1978 (prior to the expiration of the limitation period, in September 1978) the plaintiff had issued a second writ claiming the same relief against the same parties, but did not serve it until after the hearing of the application under O 90 r 9. After it was served, the defendant applied to have it struck out as an abuse of process. The order was made 33 The plaintiff was injured in 1964, the proceedings commenced in 1967, and nothing was done between 1968 and 1977. -- 13 of 17 -- 14 by the chamber judge, but an appeal was allowed, the court simply accepting and applying what was said in Birkett v James. Kelly J, with whom other members of the court agreed, referred at p.651 to earlier English authority to the effect that it was an abuse of process to commence a second proceeding in respect of the same cause of action already the subject of an existing action. However, he regarded that as having been changed by the decision in Birkett v James, so that such conduct was not now regarded as being in itself an abuse of process: p.654. [48] The approach in Madden was taken to its logical conclusion in Williams v Zupps Motors Pty Ltd [1992] Qd R 493, when again Birkett v James was applied. The plaintiff was injured in 1966, and was of unsound mind, and likely to remain in that state. Accordingly it appeared unlikely that the limitation bar would ever apply to the plaintiff’s claim. In 1973 actions were commenced against two defendants but were not pursued and were said to have been ineffective: p.494. In 1977 another action was commenced, which was dismissed for want of prosecution in 1984 (after four and a half years inactivity). Presumably after due consideration, a fresh writ was issued in October 1988, more than 22 years after the original accident. This action was stayed by a master and an appeal to a single judge was dismissed, but the Full Court allowed an appeal and held that there was no power to stay the action, on the ground that pursuit of this action was not an abuse of process. The majority accepted the appellant’s proposition that at common law there was no period of time within which the action must be prosecuted, apart from the lifetime of the appellant, and that therefore there was nothing to prevent him from pursuing the action. The approach adopted in Birkett v James was applied, notwithstanding that the delay was unexplained and inexcusable, and a high degree of improbability of securing a fair trial: p.498. [49] There was some questioning of the decision of Birkett v James in the judgment of Thomas JA at p.494, his Honour also said, and this is of some significance I think for the present application, at p.495: “It is important that the court should not be driven by association to apply tests which have now become fairly well settled in applications under O 19 r 9, where prejudice to the opposite party in consequence of dilatory conduct of an action is an influential factor in the refusal of leave to proceed. In commencing the present action the plaintiff acted by right and not by indulgence of the court. The plaintiff is not seeking an indulgence of the court in responding to the present application to dismiss, and should not be seen in that role. The court’s discretion here is entirely different from that in O 90 r 9 applications.” [50] It is not a novel observation that the approach of Birkett v James has led to unsatisfactory and indeed absurd outcomes. There has been a good deal of criticism of that decision over the years, and it seems to me that it no longer represents the law in Queensland. I think it is sufficient to refer to three decisions of the Court of Appeal. [51] The first is Cooper v Hopgood & Ganim [1999] 2 Qd R 113. That case involved an appeal from a decision to strike out an action for want of prosecution, on the basis that there had been a breach of an order of the court requiring a particular step to be taken. Pincus JA referred to English authority moving away from the approach of Birkett v James, and an earlier Queensland decision in which it had been -- 14 of 17 -- 15 questioned34 and at p.119 was critical of treating what he described as the Birkett v James guidelines almost as if they were part of the rules of court: p.119. He identified one of these, “to the effect that an action should not be dismissed for want of prosecution before the limitation period has expired, other than in exceptional cases” but without specifically rejecting it. McPherson JA said that he would not be prepared to regard what was said in Birkett v James as laying down particular rules controlling the decision of whether to dismiss an action for want of prosecution (p.124) and also noted that the effect of the then Queensland rule O 90 r 9,35 which was peculiar to Queensland, made the applicability of the approach in Birkett v James doubtful in Queensland, notwithstanding its acceptance in Madden: p.123. [52] His Honour noted that the rule “operates without the need for any affirmative step to be taken to have the action dismissed. Having operated in that way, the action becomes subject to what is, in effect, an automatic stay unless on application under the rule leave is granted to proceed with the action. If leave is not sought and granted, the action may be struck out in reliance on other provisions in the rules … or under the Court’s inherent power to dismiss for want of prosecution. Even without applying to have it dismissed, the action is simply left to expire of its own inanition. … The provisions and effect of O 90 r 9 are sufficiently specific and special to make the underlying basis of the reasoning in Birkett v James not altogether relevant to proceedings in Queensland.” The third member of the Court, Derrington J, did not refer to Birkett v James. [53] That decision was applied by the Court of Appeal in Quinlan v Rothwell [2001] QCA 176. That case involved an appeal from an order to dismiss for want of prosecution which the court ultimately concluded it was not justified, although there is some strong language in the judgments of the Chief Justice and Thomas JA as to the approach to be adopted in relation to an action to dismiss for want of prosecution, and the difference between the current approach and the approach in the days of Birkett v James. None of their Honours specifically said that Birkett v James was wrong and would not be followed, but there is the clear message in the judgments that the law has moved on since that decision was given. [54] Finally there is the decision in Cummings v Davis [2001] QCA 293, where a majority of the Court of Appeal, in relation to an application to dismiss for want of prosecution, treated the fact that the limitation period had expired as a relevant consideration which favoured the plaintiffs, so as to tend against dismissing for want of prosecution.36 Since logically it cannot be the case that both the fact that the limitation period has not expired and the fact that the limitation period has expired are factors supporting the refusal to dismiss for want of prosecution, this decision is the anthesis of Birkett v James. In these circumstances, it is perhaps a little surprising that there was no reference in the majority judgments to the fact that the approach in the decision of the House of Lords, which had at one time been applied by the Full Court of Queensland, was no longer to be followed, but presumably their Honours took the view that, in the light of the earlier decisions of the Court of Appeal, it was unnecessary to say so. 34 Tricon Industries Pty Ltd v Abel Lemon & Co Pty Ltd (No 2) [1998] 2 Qd R 551. 35 The Supreme Court precursor of r 389. 36 See Bazley v State of Queensland [2001] QSC 476 at [75]. -- 15 of 17 -- 16 [55] In these circumstances, it seems to me by no means certain that, as the law stands now in Queensland, the fundamental proposition on which the decision in Birkett v James was based, namely that when one action by a plaintiff to enforce a cause of action has been dismissed for want of prosecution, a second action by the same plaintiff against the same defendants to enforce the same cause of action is not an abuse of process, is no longer part of the law of Queensland. That proposition had been limited to some extent anyway in England some time ago, in circumstances where the first cause of action was dismissed because of the failure to comply with an order of the court: Janov v Morris [1981] 1 WLR 1389, applying dicta in Tolley v Morris [1979] 1 WLR 592, where the House of Lords affirmed the general approach in Birkett v James. That however was confined to the situation where there had been a failure to comply with a court order, and did not apply where there had been mere delay: Bailey v Bailey [1983] 1 WLR 1129. [56] In Bailey Dunn LJ referred to the fact that in Janov the plaintiff was in contempt of court at the time he started the second action: p.1133. Since 1 July 1999, the Uniform Civil Procedure Rules have, by r 5(3) imposed on the plaintiff an implied undertaking to the court to proceed in an expeditious way. A breach of an undertaking to the court can be seen as an example of contempt of court, analogous to a breach of an order of the court. Indeed, contempt constituted by a failure to comply with an order of the court requiring a particular step to be taken may perhaps be purged by taking that step, but there is nothing the plaintiff can do now to remedy the failure to proceed expeditiously since 1 July 1999. This may provide a further reason why the fundamental proposition on which Birkett v James is based ought not now be regarded as part of the law of Queensland. [57] The proposition in Birkett v James also seems to me to be inconsistent with the analysis of the majority of the High Court in Walton v Gardiner (1993) CLR 378 at 393, where their Honours appear to reject a narrow view of the jurisdiction to stay an action as an abuse of process. That case concerned disciplinary or quasi-criminal proceedings, but the passage on this page appears to be applicable to civil proceedings, and the decision was cited by McHugh J in his Honour’s judgment in Taylor v Brisbane South Regional Health Authority (1996) 186 CLR 541 at 552, as relevant to delay in a civil action. In my opinion, once a plaintiff has had one reasonable opportunity to pursue a particular cause of action against a defendant, after that comes to an end, whether because of dismissal on the merits, or because of dismissal for breach of a peremptory order, or because of dismissal for want of prosecution, it should ordinarily be seen as an abuse of process to commence another action against the same defendant for the same cause of action. There is in my opinion no reason to treat the third of these situations differently, particularly in the light of rules 5(3) and 389. [58] However, that is concerned with the question of whether an action should be dismissed for want of prosecution, and that is not what I am presently asked to do. Refusing leave to proceed will not put an end to the present action in the formal sense. It remains on foot, unless discontinued. The plaintiff requires leave of the court or the consent of the other parties to discontinue the present action (rule 304(2)), and I expect that, as a condition of leave or consent, he would be required to pay the defendant’s costs of it, presumably including all of the costs payable by the defendant to the third parties. Any fresh action ought to be stayed until those -- 16 of 17 -- 17 costs have been paid.37 In addition, it may be that now a further action, in circumstances where leave to proceed has been refused in this action, would be seen as an abuse of process of the court, so that any further action would be struck out or stayed. It is unnecessary for me now to decide whether or not such step would be taken by a court; for present purposes it is sufficient to say that it does not appear to me to be the case that, if leave to proceed is refused, the plaintiff will necessarily be able to pursue his claim in a fresh action, or that he will necessarily do so. Conclusion [59] In the light of those considerations, I do not think that the argument that the limitation period has not expired is conclusive in favour of the applicant plaintiff. In my opinion, for the reasons outlined in more detail above, this is a case where there has been substantial and wholly unjustified delay which is likely to make it, to a significant extent, difficult for there to be a fair trial of the plaintiff’s claim, and is therefore likely to result in significant prejudice to the defendant’s ability properly to defend the action, and (to a lesser extent) effectively to pursue the third party claims. The delay has been so substantial, and the time since the relevant facts occurred has been so great, that in my opinion it would be unjust to expose the defendant and the third parties to the continued pursuit of this claim. I think that it was reasonable for them to have been arranging their affairs on the assumption that this claim was not going to proceed.38 In my opinion, bearing in mind all the relevant circumstances outlined above, and weighing up the significance of the various factors,39 there is a substantial preponderance against allowing the application, which is dismissed with costs. 37 Rules 307, 312; Sharpe v Wren [1917] St R Qd 317; Lominoga v Lominoga [1930] QWN 12. 38 Cooper v Hopgood & Ganim [1999] 2 Qd R 113 at 124. 39 Dempsey v Dorber [1990] 1 Qd R 418 at 420. -- 17 of 17 --