New South Wales Supreme Court CITATION : Westpoint v Ariff [2004] NSWSC 156 HEARING DATE(S) : 1 March 2003 JUDGMENT DATE : 2 March 2004 JURISDICTION: Equity JUDGMENT OF : Austin J DECISION : Order for summary dismissal of proceedings CATCHWORDS : PRACTICE AND PROCEDURE - summary dismissal - plaintiff defaulted in complying with directions of the Court - plaintiff did not prosecute the proceeding with due dispatch - no convincing explanation - (no issue of principle) Westpoint Corporation Pty Ltd (P) PARTIES : Stuart Karim Ariff (D1) Carlovers Carwash Ltd (Admin Apptd) (D2) FILE NUMBER(S) : SC 5965/03 COUNSEL : Mr M J Horton (Solicitor) (P) Mr R D Glasson (D) SOLICITORS : RBHM Commercial Lawyers (P) Clayton Utz (D) IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION CORPORATIONS LIST AUSTIN J TUESDAY 2 MARCH 2004 5965/03 WESTPOINT CORPORATION PTY LTD V STUART KARIM ARIFF & ORS JUDGMENT 1 HIS HONOUR: By an interlocutory process filed on 9 February 2004, the defendants seek an order under Part 13 rule 5A of the Supreme Court Rules that the present proceeding be summarily dismissed. The first defendant is the administrator of the second defendant under a deed of company arrangement, which was entered into on 8 December 2003. 2 The plaintiff, which was already the plaintiff in a proceeding against the second defendant in the Supreme Court of Western Australia, commenced the present proceeding on 26 November 2003, when it approached this Court obtaining abridgement of time for the service of its originating process and an interlocutory process, which was made returnable on 28 November 2003. At that time the second defendant was in voluntary administration and the first defendant was its administrator. On the next day it served a notice to produce on the first defendant, also made returnable on 28 November 2003. On the latter day Campbell J heard and dismissed the interlocutory process. 3 The proceeding was listed for directions before the Corporations Judge on 1 December 2003. At that time the plaintiff was vigorously pressing for a hearing date for the final hearing. Barrett J adjourned the proceeding to 8 December 2003, by which time it was anticipated that a deed of company arrangement would be executed. On 8 December Barrett J stood the proceeding over to the Expedition Judge on 12 December 2003. 4 On 11 December 2003 the defendants filed an interlocutory process returnable on the next day, seeking an order setting aside plaintiff's notice to produce, and on the same day the plaintiff served an amended originating process seeking an order terminating the deed of company arrangement. The plaintiff also served an interlocutory process of 11 December, seeking orders that the hearing of the proceeding be expedited, an injunction restraining the first defendant from calling on the second defendant to transfer its assets pursuant to the deed of company arrangement without giving the plaintiff for three business days' notice of its intention to do so, and an order granting the plaintiff leave to join additional defendants. 5 The plaintiff's expedition application was heard by Gzell J on 12 December 2003, when his Honour dismissed the application and listed the proceeding before the Corporations Judge on 15 December 2003. During the course of the hearing counsel for the defendants informed the Court that under the terms of the deed of company arrangement, it was contemplated that payments would be made into the deed funds over a 12 month period, and the deed administrator would not be obliged to make any distribution until the expiry of 15 months from commencement of the deeds. Counsel said that it would not be likely, from a commercial perspective, that the deed administrator would make a distribution until June 2004. 6 On 15 December 2003 Windeyer J heard the plaintiff's application for injunctive relief and joinder of parties and the defendants' challenge to the notice to produce. He dismissed the plaintiff's notice to produce and made directions for the future conduct of the proceeding. The directions required that the matter proceed by way of pleadings, that the first defendant provide a list of creditors to the plaintiff's solicitors by 22 December 2003, and that the plaintiff to notify the creditors of the second defendant and of CarLovers Carwash (Aust) Pty Ltd by 15 January 2004. His Honour made provision for discovery, which was to take place by 20 February 2004. Windeyer J's timetable required the plaintiff to file and serve a statement of claim by 16 January and serve a list of documents required for discovery by the same day. The proceedings were stood over for further directions in the Corporations List on 23 February 2004. 7 The defendants complied with the directions by providing the plaintiff's solicitor with a list of creditors on 22 December 2003. However on 24 December 2003 the plaintiff's solicitor filed a notice of ceasing to act. On 16 December 2003 the solicitors had given the plaintiff notice of their intention to do so, which stated that until the plaintiff filed a notice of change of solicitor or a notice of address for service, any document to be served on the plaintiff would be taken to have been served if a copy of it was left at or sent to Level 9, Paragon Office Tower, 167 Georges Terrace, Perth. On 5 January 2004 the defendants issued a subpoena to Michael James Horton, a solicitor who had acted for the plaintiff, seeking the production of documents. 8 The plaintiff has not complied with any of Windeyer J's directions. On 29 December 2003 the defendants' solicitor sent a letter to the secretary of the plaintiff company by ordinary mail to the St Georges Terrace address acknowledging receipt of the plaintiff's former solicitors' notice of ceasing to act and seeking confirmation that the plaintiff would continue to prosecute the matter, and the name of its new solicitors. By letter to the secretary of the plaintiff dated 16 January 2004 and sent by ordinary e-mail to the St Georges Terrace address on 19 January 2004, the defendants' solicitors noted that they had received no reply to their letter of 29 December, and referred to Windeyer J's directions that the plaintiff notify creditors by 15 January and file and serve its statement of claim by 16 January. The letter foreshadowed an application to strike out the plaintiff's claim. 9 On 28 January 2004 the defendants' solicitors wrote to the Listings Clerk for the Corporations List of this Court asking that the proceeding be listed at the earliest available date in view of the plaintiff's non-compliance with various directions made by Windeyer J. A copy of this letter was sent by ordinary mail to the plaintiff at its St George Terrace address. On 30 January 2004 the defendants' solicitors sent a facsimile to the secretary of the plaintiff at facsimile number (08) 9322 8877, and received a positive transmission report. The facsimile stated that the proceeding had been listed before the Court on 2 February 2004. At the hearing before me on that date, there was no appearance on behalf of the plaintiff and I granted the defendants leave to make an application for the summary dismissal of the proceeding. On 4 February 2004 the defendants' solicitors sent a letter by ordinary mail to the secretary of the plaintiff at the same Georges Terrace address informing the plaintiff of the result of the hearing and enclosing a subpoena directed to Nicolas Dillon for the production of documents. 10 The present application was filed on 9 February 2004. On the same day the defendants' solicitors sent a letter by ordinary mail to the secretary of the plaintiff at the St Georges Terrace address, referring to their correspondence of 28 January, 30 January and 4 February to which they had received no response, and enclosing by way of service sealed copies of the interlocutory process returnable on 23 February, together with Mr Cowling's affidavit sworn on 6 February 2004. On 17 February the defendants' solicitors sent a facsimile to the secretary of the plaintiff at the same facsimile number, advising that the defendants would seek indemnity costs at the hearing on 23 February. Again the facsimile transmission report indicates that the result of the transmission was "OK". 11 There is evidence that according to the plaintiff's web site, the St Georges Terrace address is the address of its Perth office and the facsimile number, (08) 9322 8877 is the facsimile number for that office. 12 On 17 February 2004 Mr Horton, who had received the defendants' subpoena, made an affidavit in which he said that his firm, RBHM Commercial Lawyers, "are instructed by the Plaintiff in these proceedings", and that he has the conduct of the matter on behalf of the plaintiff. The purpose of the affidavit was to depose that documents he had produced in answer to the subpoena were confidential documents created for the dominant purpose of obtaining legal advice. On the same day the defendants' solicitors sent a facsimile to Mr Horton asserting that no notice of appearance had been filed by him in the proceeding and inviting him to confirm by return facsimile whether he was instructed to appear. Again the evidence includes a positive transmission report on that facsimile, but the facsimile does not appear to have been answer directly. 13 When the matter came before me on 23 February 2004, Mr Horton appeared on behalf of the plaintiff. At his request, I adjourned the application until later in the day, so he could make contact with his client in Perth and obtain instructions as to whether he was to act in the proceeding. Subsequently Mr Horton informed me that he had instructions to act, and I adjourned the application to 1 March to give Mr Horton additional time to prepare his client's case. 14 By a facsimile dated 27 February 2004 Mr Horton wrote to the defendants' solicitors, acknowledging receipt of the application papers (presumably for the summary dismissal application) and asserting that this had been his first opportunity to review the papers. Mr Horton's letter set out some reasons for resisting the defendants' request that Mr Carey, who had prepared an affidavit, be available to attend for cross-examination on 1 March. The defendants did not persist with this request at the hearing on that day. 15 The evidence that I have summarised points strongly to the conclusion that the plaintiff, after commencing the proceeding and pursuing it with great vigour for a few weeks, subsequently "ran cold", failing to comply with any of Windeyer J's directions made on 15 December 2003, and therefore failing to move forward, at any time during January and February 2004, litigation which it had sought to prosecute on an urgent basis in December. The evidence is such that, unless there is a convincing explanation for the plaintiff's default and lack of response to communications, the Court would dismiss the proceeding summarily. 16 The plaintiff's explanation for its notable change of direction, such as it is, is contained in an affidavit by Norman Phillip Carey, its managing director, made in Perth on 24 February 2004. Essentially there are four components to the plaintiff's case on the application, relating to non-receipt of communications, change of solicitors, lack of urgency, and prejudice. Non-receipt of communications 17 Mr Carey's evidence is that he has control and supervision of the proceeding, and as far as he is aware and from his investigations of the staff at the plaintiff's Perth office, no Court documents relating to the proceeding had been served at the Perth office or brought to his attention. He says that if any such Court documents had been brought his attention, he would have reacted to them. 18 However, there is evidence sufficient to establish that the various communications that I have identified from the defendants' solicitors were correctly addressed to the plaintiff's Perth office and, in two cases, its Perth facsimile number. These propositions have not been denied by the plaintiff. It seems to be more likely than not that the communications, properly addressed as they were, were received in the plaintiff's Perth office. Mr Carey's evidence amounts to no more than saying that the documents did not come to his attention. It is more likely than not that this was because of some administrative deficiency in the Perth office, than that the documents were never received. 19 It seems to me that, where there is evidence that seven communications have each been correctly addressed and despatched by mail or facsimile, over a period of more than one month, in circumstances where the evidence shows that Mr Carey was aware that his solicitors would cease to act in mid-December and that communications to the plaintiff would be made to the plaintiff's Perth address, the Court is entitled to conclude that the communications were properly made to the plaintiff regardless of whether Mr Carey personally saw them when they were received. 20 Of course, if the evidence had indicated non-receipt of the communications by the plaintiff, that evidence would not have served to explain the plaintiff's failure to comply with Windeyer J's directions, which were made at a time when the plaintiff was represented by solicitors in Sydney. Change of solicitors 21 Mr Carey says that Mr Horton's firm were originally engaged to represent the plaintiff but on or around 19 November Mr Horton said that as a result of other pressing commitments, his firm would have to withdraw from acting. The plaintiff then engaged other Sydney solicitors, who acted for it in commencing and prosecuting the proceeding up to 16 December 2003, when the solicitors served notice of their intention to cease acting. 22 Mr Carey says that the solicitors' withdrawal from acting was without good cause and that the notice period given was inadequate, although nothing in the evidence before me indicates any breach of this Court's Rules. He says that since receiving the solicitors' notice he has taken a period of leave up until 23 January, and since that time he has been intensively involved in helping his sister in an unrelated Federal Court proceeding. Of course, the fact that he has been distracted by other matters is no justification for failing to prosecute the present proceeding, particularly when one has regard to Mr Horton's letter of 27 February, which indicates that the plaintiff is a company of substantial size with over 100 employees. A company of that size ought to have been able to discharge its obligations under Windeyer J's directions notwithstanding the absence or distraction of one individual. 23 Mr Carey says that he has generally investigated alternative solicitors and since 3 February 2004, he has again requested Mr Horton's firm that to recommence acting for the plaintiff. It appears from Mr Horton's affidavit made on 17 February 2004 that the instructions may have been received at about that time, although his statements to the Court on 23 February implied that he received clear confirmation that he was to act only on the latter day. 24 The history of these events suggests that the plaintiff has acted in a tardy and unsatisfactory way in replacing it solicitors, especially having regard to the fact that there were existing directions of this Court that required attention in January and February. I do not regard the circumstances surrounding the plaintiff's change of solicitors as providing a satisfactory explanation for its failure to comply with the directions, or for its general tardiness in January and February. Lack of urgency 25 Mr Carey draws attention to the statements made by counsel for the defendants before Gzell J on 12 December 2003. He says that, given those statements, the defendants will suffer no prejudice should there be a delay of a few months in the finalisation of the proceeding. 26 That cannot be a justification for the plaintiff choosing not to comply with the directions made by this Court. Moreover, the defendants are faced with the inherent uncertainty involved in the existence of a proceeding in which an order is sought setting aside the company arrangement under which the second defendant is administered. The fact that no distribution to creditors is likely for a few months does not alleviate that uncertainty. Prejudice 27 Mr Carey has given some evidence, in quite general terms, concerning the plaintiff's costs incurred in the proceeding, including the cost of engaging an expert witness, and the risk that if the proceeding is dismissed the plaintiff will be delayed in seeking to require the first defendant to account to the creditors of the second defendant in relation to his conduct as administrator. Mr Carey also says that the plaintiff's proceeding in the Supreme Court of Western Australia will be adversely affected if the present proceeding is dismissed, and therefore the plaintiff's opportunity to recover damages claim of $6 million and legal costs of over $500,000 may be significantly prejudiced. 28 As far as the Western Australian proceeding is concerned, Mr Carey has not pointed to any prejudice that the plaintiff would suffer beyond the prejudice (if there is any, having regard to be financial state of the company) that might arise to any unsecured creditor under the deed of administration process. 29 I am not persuaded that the plaintiff has pointed to any prejudice sufficient to resist the defendants' claim for summary dismissal. Conclusion 30 I have therefore decided that the claim for summary dismissal should succeed. Although Part 13 rule 5A is no longer applicable, since eventually the plaintiff has appeared on the application, the Court has ample power to act under its inherent jurisdiction and also under Part 5 rule 12, in circumstances where the plaintiff has defaulted in complying with directions of the Court and has not prosecuted the proceeding with due dispatch. 31 I shall hear the parties on the question of costs. ********** Last Modified: 03/16/2004 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.