New South Wales Supreme Court CITATION : Marquette v Byrne & 7 Ors [2001] NSWSC 148 revised - 14/03/2001 CURRENT JURISDICTION: Equity FILE NUMBER(S) : SC 3563/97 HEARING DATE(S) : 05/03/2001 JUDGMENT DATE : 5 March 2001 Atlantic Computer Enterprises Pty Limited (ACN 060 417 950) and the Corporations Law John Raymond Marquette (Plaintiff; Cross-Defendant) Mathew Neil Byrne (First Defendant; First Cross-Claimant) Tony Zaknic (Second Defendant; Second Cross-Claimant) PARTIES : Atlantic Computer Enterprises Pty Limited (ACN 060 417 950 (Third Defendant; Third Cross-Claimant) Power Logic Solutions Pty Limited (ACN 077 334 537) (Fourth Defendant) BMZ Properties Pty Limited (ACN 979 739 776) (Fifth Defendant) Anthony Protich (Sixth Defendant) Computer Broking & Finance Pty Limited (ACN 067 642 096) (Seventh Defendant) Atlantic Limited (Incorporated In the Republic of Vanuatu) (Eighth Defendant) JUDGMENT OF : Santow J J E Thomson/N Newton (Plaintiff) COUNSEL : J Sleight (First, Second, Third, Fourth, Fifth Defendants) D J Parton (Sixth Defendant) Manfred Dougall & Company (Plaintiff) SOLICITORS : Gilbert & Tobin (First, Second, Third, Fourth, Fifth Defendants) Henry Davis York (Sixth Defendant) CATCHWORDS : PROCEDURE — Pt 32A Supreme Court Rules — Striking out proceedings for failure to take any step in the court file for twelve months in the absence of special circumstances — Steps taken only in related proceedings — Appeal from Master — Relevant considerations by way of special circumstances — "Just, quick and cheap" as an overriding purpose of the Rules — undertakings required for future expeditious prosecution. LEGISLATION CITED : Supreme Court Act 1970 s63; s75A Supreme Court Rules Pt 32A CASES CITED : State Rail Authority of NSW v Earthline Constructions Pty Limited (in liq) (1999) 73 ALJR 386 DECISION : Appeal upheld. REVISED — 14 March, 2001 IN THE SUPREME COURT OF NEW SOUTH WALES IN EQUITY SANTOW J No. 3563/97 Atlantic Computer Enterprises Pty Limited (ACN 060 417 950) and the Corporations Law John Raymond Marquette Plaintiff Mathew Neil Byrne First Defendant Tony Zaknic Second Defendant Atlantic Computer Enterprises Pty Limited (ACN 060 417 950) Third Defendant Power Logic Solutions Pty Limited (ACN 077 334 537) Fourth Defendant BMZ Properties Pty Limited (ACN 979 739 776) Fifth Defendant Anthony Protich Sixth Defendant Computer Broking & Finance Pty Limited (ACN 067 642 096) Seventh Defendant Atlantic Limited (Incorporated In the Republic of Vanuatu) Eighth Defendant Mathew Neil Byrne First Cross-Claimant Tony Zaknic Second Cross-Claimant Atlantic Computer Enterprises Pty Limited (ACN 060 417 950) Third Cross-Claimant John Raymond Marquette Cross-Defendant JUDGMENT — ex tempore 5 March 2001 INTRODUCTION 1 There is a public interest in ensuring that the courts are not clogged with court files that truly are dormant. This Court in recent times has by new Rules taken firm steps to purge itself of genuinely inactive files. These are files where there is nothing on the court record to indicate any step taken in those proceedings for at least 12 months. But importantly to avoid injustice, all parties are first to be given the opportunity to show special circumstances to avert that consequence. Part 32A of the Supreme Court Rules, introduced 21 August 1998, gives effect to that purpose when it provides: " [32A.1] Application 1. This Part applies to proceedings in a Division that have not been disposed of by judgment, final order, discontinuance or dismissal. [32A.2] Dismissal 2 (1) If no party to proceedings has, for over 1 year, taken any step in the proceedings that appears from records maintained by the Court, the Court may of its own motion dismiss the proceedings, or part of the proceedings, unless a party satisfies the Court that special circumstances exist that render it desirable that such an order should not be made. (2) The Court may not make an order under subrule (1) without giving the parties a reasonable opportunity to be heard." 2 The present proceedings invoke those provisions of Pt 32A and are an appeal by the Plaintiff from Master McLaughlin's decision that the Plaintiff's proceedings be dismissed. 3 The salient facts are partly to be found in paragraphs 2 and 3 of the Master's judgment of 24 November 2000 which appears the first decision on the new Pt 32A. I quote those paragraphs below: "2. The present proceedings were instituted by a summons filed by the plaintiff, John Raymond Marquette, on 7 August 1997. Subsequently a statement of claim was filed on 28 May 1998. Six defendants were named to the summons. Eight defendants are named to the statement of claim. A number of the defendants filed a defence and cross-claim on 3 July 1998. The plaintiff has not filed any defence to that cross-claim. The plaintiff has, in fact, done nothing since the defence and cross-claim were filed on 3 July 1998, almost two and a half years ago. 3. The Court on 29 August 2000 sent to the solicitors for the plaintiff a letter putting the plaintiff on notice that pursuant to Part 32A the Court would, of its own motion, dismiss the proceedings upon the expiration of 28 days from the date of that letter unless a party satisfied the Court that special circumstances exist that render it desirable that such an order should not be made. That letter went on to say that: 'The Court will not make an order dismissing the proceedings pursuant to Part 32A without giving the parties a reasonable opportunity to be heard. Your written application must be lodged with the Court before the expiration of 28 days from the date of this letter.'" 4 To those facts I need to add some additional matters that bear centrally upon this appeal. The Plaintiff's solicitors did in fact respond to the letter of 29 August 2000 from the Court. They did so on 26 September 2000 (PX4) in the following terms: "The Registrar Equity Division Supreme Court of NSW DX 829 SYDNEY also forwarded by fax to 9230 8.. Dear Sir Re: File No 3563 of 1997 — Marquette -v- Byrne and Ors In this matter we act for the Plaintiff and refer to the Registrar's letter of 28 ult. The Plaintiff requests that this matter not be struck-out and further that the matter be listed for directions. The matter is associated with matter file number 3395/97 basically between, inter alia, the same parties with issues common to both matters. There has been no activity in matter number 3563 of 1997 as there have been interlocutory proceedings in the associated matter by way of a contested application for security for costs and discovery. We should be obliged if the matter could be listed for directions and if you could inform us the date for which the matter is listed. Yours faithfully MANFRED DOUGALL & COMPANY " 5 No mention is made in the Master's judgment to that response, though it appears in the court file and would have been in the court file before the Master. The Master's decision, as I explain in 7 below, proceeded on a basis which renders that letter material to his conclusion. The version of that letter in the court file contains the handwritten note "spoke w/Mr Dougall". Without more, one could infer that to be a note from the Equity Registrar or on his behalf. 6 That response by the Equity Registrar indeed is confirmed by the subsequent affidavit of Mr Dougall of 16 February 2001 which was not of course before the Master. That elaborates on the conversation with the Registrar. I have permitted it as additional evidence, pursuant to s75A of the Supreme Court Act 1970. While s75A precludes further evidence except on special grounds, that prohibition does not operate where "the appeal is from a judgment after a trial hearing on the merits", see s75A(8). The procedure contemplated by Pt 32A is a limited merits hearing but not a trial. It involves giving the parties a reasonable opportunity to be heard as to whether special circumstances exist. But it is fundamentally a proceeding by the Court of its own motion. I am satisfied that the limited further evidence of the Plaintiff's two further affidavits of 7 and 16 February 2001 should be allowed in the interests of proper fairness, though as emerges from my reasons I do not believe it is central to the issues before me. 7 Importantly, it appears from the following two passages in the Master's judgment that the Master incorrectly concluded that the Plaintiff did nothing after the Court's warning of 29 August 2000, when the Plaintiff's solicitor responded with the letter of 20 September 2000. "Neither is there any explanation offered in the affidavit or in the submissions as to why, after the plaintiff received the warning from the Court in the letter of 29 August 2000 — that is, just three months ago — the plaintiff has chosen to do nothing." 8 It is possible though less likely in context, that the Master intended merely to convey, correctly, that the Plaintiff chose not to take any step in the actual proceedings, that is, any step apart from responding to the Pt 32A notice from the Court. But even if that were what the Master intended to convey, the fact that the Plaintiff did respond by the letter of 26 September 2000 was a matter material to the exercise of the Master's discretion. Yet that was a fact to which the Master made no reference at all. 9 However, the Master gave other reasons for the conclusion he reached that the court should dismiss the proceedings, being unsatisfied that special circumstances exist that render it desirable that such an order should not be made. Those reasons are conveniently set out in paragraphs 4, 5 and 6 below: "4. There has been filed in Court to-day an affidavit of John Ramsay Dougall sworn 22 November 2000. Mr Dougall is the solicitor for the plaintiff. That affidavit attempts to explain why the plaintiff has done nothing in the proceedings for more than two and a half years. Paragraph 6 of the affidavit refers to what are described as "the related proceedings being proceedings numbered 3395/97". The present plaintiff is a defendant in the related proceedings. Paragraph 6 of Mr Dougall's affidavit says: 'The plaintiff as advised by counsel believed that these proceedings would be heard together with the related proceedings and the plaintiff has been awaiting the completion of interlocutory proceedings in the related proceedings.' 5. No reason is given as to this asserted belief on the part of the plaintiff that the present proceedings would be heard together with the related proceedings. No application has ever been made by the plaintiff to have the two sets of proceedings heard together. There is no identicality of parties in the two sets of proceedings. The present proceedings are an oppression suit. The related proceedings, in which the present plaintiff is a defendant, assert against the present plaintiff breach of his fiduciary duties. No explanation has been offered either in the affidavit of Mr Dougall or in the submissions of Counsel as to why the plaintiff has done nothing since at least July 1998 to bring the present proceedings on for hearing or even to file a defence to the cross-claim. Neither is there any explanation offered in the affidavit or in the submissions as to why, after the plaintiff received the warning from the Court in the letter of 29 August 2000 — that is, just three months ago — the plaintiff has chosen to do nothing. 6. The plaintiff has, through his Counsel, to-day foreshadowed various applications to have the two sets of proceedings heard together and to have certain orders and directions of a procedural nature made. The applications have never been the subject of correspondence addressed to the solicitors for any of the defendants, all of whom support the Court exercising of its own motion the powers set forth in Part 32A and all of whom dispute the assertion that the present proceedings are somewhat inextricably intertwined with the related proceedings to the extent that the two sets of proceedings should be heard together." 10 In the proceedings before me, the Defendants contrary to their earlier submissions before the Master, did through Counsel fairly acknowledge that the present proceedings were intertwined with the related proceedings. That should have been conveyed to the Master at the time and apparently was not. Counsel fairly went on to concede before me that should the present proceedings not be struck out, the Defendants would rely upon the matters the subject of claim in the related proceedings. Indeed the pleadings in the present proceedings make that concession inevitable as there is a substantial identity between the Defendants' claims in the related proceedings and the breach of fiduciary duty pleaded by the Defendants in their defence to the current proceedings. Thus pages 6 to 15 of the defence plead a particularised claim of breach of fiduciary duty which occupies the major portion of that defence and is essentially identical with that in the related proceedings. 11 Given that acknowledgment and concession properly made, albeit belatedly, it is clear that the Defendants no longer dispute that the present proceedings are "somewhat inextricably intertwined with the related proceedings". While it may be taken that the Defendants may still formally assert that the two sets of proceedings should not be heard together, any impediment to that course ceased when a settlement occurred in the related proceedings between the Plaintiffs and the First, Second and Fourth Defendants. Even apart from that, the evident relationship between the two proceedings make it readily apparent that the likelihood is that both proceedings should be heard together as enjoined by s63 of the Supreme Court Act 1970 requiring the resolution where possible of all matters in dispute between the parties. RESOLUTION OF APPEAL 12 These factors open the prospect of appellate review of the Master's decision. They bear upon the well-settled constraints on appellate review of a decision by a Master, particularly in procedural matters. However, while at one level the present proceedings could be said to be "merely" procedural, Pt 32A has a drastic and final substantive effect on the party forced to start again. That renders appellate review the more ready to intervene in a situation of unfairness to that party. Moreover, as the High Court has reminded appellate courts in State Rail Authority of NSW v Earthline Constructions Pty Limited (in liq) (1999) 73 ALJR 386, an appellate court is not precluded from concluding that, in the light of other evidence, the primary judicial officer had too fragile a base to support his relevant findings. There is of course here no issue of demeanour of witnesses which could possibly come into play which would inhibit review. 13 After careful consideration, I have reached the conclusion that the present is such a case, where the conclusion of the Master should not stand. I have already pointed to what appears to be an important finding of fact of the Master that overlooks the step taken in response by the Plaintiff in writing the letter of 26 September 2000. It is important because it supports the bona fides of the Plaintiff's case, to the effect that the Plaintiff is genuinely pursuing the present proceedings. I have also pointed to the probability, contrary to the understandable finding of the Master in light of submissions then made but now effectively withdrawn, that the two proceedings would be heard together. These two matters provide the starting point for questioning the correctness of the Master's ultimate conclusion and enliven the appellate court's discretion to review that conclusion. 14 Central to the matters raised before the Master and now before this Court is the Defendants' contention that notwithstanding the conceded substantial overlap between the two proceedings, the Plaintiff has failed to demonstrate that the steps he took in the related proceedings sufficiently advanced the present proceedings as to constitute special circumstances. 15 The Plaintiff responds by pointing to the evidence given by his solicitor, Mr Dougall. This was to the effect that discovery in the related proceedings should obviate discovery in the present proceedings or at least limit its extent. No such discovery has yet been applied for in the present proceedings. The Defendants fairly point out that no Defence has yet been filed by the Plaintiff in answer to the Defendants' Cross-Claim. Nonetheless I am satisfied that if and when discovery is sought in the present proceedings, it will be likely to be at least limited by what has occurred already by way of discovery in the related proceedings. This is so, even though the present proceedings involve other issues as well. The Plaintiff also contends that other steps such as seeking security for costs in the related proceedings will assist the present proceedings. That may or may not be so. Finally, the Plaintiff points to the fact that he has taken the step of filing most of his evidence in chief in the present proceedings whilst the Defendants have not filed their evidence. He does this to point to the Plaintiff's substantive progress in the present proceedings in comparison to the Defendants. 16 In sum, the Plaintiff's fundamental argument is that it was not unreasonable for the Plaintiff to hold back from taking any step as would appear in the Court records in prosecuting the present proceedings for over one year, indeed since July 1998. This was by reason of the substantial overlap in the related proceedings and the progress made in those, in turn assisting the advancement of the present proceedings. 17 However, I do not consider that the Plaintiff is blameless in the circumstances which have brought about the court's intervention under Pt 32A. It is not good enough for a party to labour silently so far as the court file is concerned on related proceedings on the basis that this is advancing other intertwined proceedings. The Court no longer stands passively by letting matters drift in so desultory a fashion. 18 But that said, the question is whether the Plaintiff has done enough to demonstrate special circumstances as would make it desirable not to make the dismissal order which the Master was persuaded to make. 19 On balance, I am satisfied that the Plaintiff has done enough and that the Master was in error in the exercise of his discretion, though understandably, and that error was an appealable one. One factor which weighs heavily upon me in the exercise of discretion is the overriding purpose of the Rules. It is to facilitate "the just, quick and cheap resolution of the real issues in [civil] proceedings". It would clearly be unjust to the Plaintiff vis a vis the Defendants, and a failure to deal with the real issues in the proceedings between the parties, for dismissal of the Plaintiff's claim to occur, so leaving lopsidedly only the Defendants' related claims before the Court. 20 Moreover, in considering the exercise of discretion under Pt 32A, relative dilatoriness as between the party with the interest in dismissal and the party opposing it is also relevant. That factor here favours the Plaintiff, though not by a large margin. This is when both parties ex hypothesi have failed to take any step for over one year. Here I am satisfied that the Plaintiff has been somewhat less dilatory than the Defendants, though the Plaintiff has still to file a Defence to the Defendants' Cross-Claim. But the Plaintiff is not to escape without consequence from its admitted neglect. I shall be requiring as part of my orders an undertaking that this defence be filed and the proceedings prosecuted by the Plaintiff with all due expedition having regard to the directions to be made. That stricture of course does not provide excuse for the Defendants to be dilatory in any steps they may have to take. ORDERS AND COSTS 21 The Plaintiff seeks his costs before the Master and on this appeal. So far as the Sixth Defendant is concerned it contends that no cost order should be made against him on the basis that he only appeared in the proceedings as the Plaintiff had not got round to implementing the discontinuance allegedly forthcoming. That will need to be confirmed by proper affidavit evidence and will be dealt with by the way in which I have framed my orders. 22 The proper course in my judgment is that the Plaintiff should have only half his costs before the Master. This is on the basis that the Plaintiff would have had to apply to avert dismissal under Pt 32A at his own cost in any event, he having let matters reach such a state that nothing had happened in the court file since July 1998. But the proceedings before the Master were extended by the Defendants' opposition. So far as this appeal is concerned additional evidence has occupied little time or weight and in any event this appeal has proceeded as adversarial proceedings. Costs should therefore follow the event. Accordingly, I order as follows: 1. The Plaintiff's appeal from the Master's judgment of 24 November 2000 succeeds. 2. The Defendants to pay half the Plaintiff's costs of the application before the Master and the whole of the Plaintiff's costs of this appeal provided that in the case of the Sixth Defendant, this order is stayed for fourteen days to permit the Sixth Defendant to put any matters in opposition so far as it is concerned by affidavit evidence accompanied by brief skeleton submissions, such to be provided by 12 March 2001. 3. The foregoing orders are made on the Plaintiff's undertaking (a) to file a Defence to the Defendants' cross-claim by 12 March 2001 in proceedings 3563/97 and by 19 March 2001 any other affidavits upon which the Plaintiff presently anticipates it will rely, and (b) otherwise to prosecute those proceedings with all due expedition; The matter is stood over to the Registrar's list at 9.30 am on 13 March 2001 for further directions. 23 Finally I note that the undertakings above are not intended to excuse the Defendants from their part in prosecuting their defences including the filing of affidavits in the present proceedings. ********** Last Modified: 03/14/2001 DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated.