Kossaifi v ACN 111 804 383 Pty Ltd

1. [1]

   HIS HONOUR: The plaintiffs commenced these proceedings by statement of claim filed on 6 February 2015. Not much has happened since.

2. [2]

   The statement of claim was served on the defendants under cover of a letter dated 9 February 2015 from the plaintiffs’ solicitor in which unspecified amendments to the pleading within 28 days were foreshadowed. No amended pleading materialised.

3. [3]

   The plaintiffs again threatened the defendant with an amended pleading to be finalised prior to a directions hearing listed for 15 May 2015. That also came to nothing. When the matter came before Registrar Kenna on that day she ordered the plaintiffs to serve any proposed amended statement of claim by 10 July 2015. That date passed without incident.

4. [4]

   On 20 July 2015 the plaintiffs’ solicitor once again foreshadowed that an amended statement of claim would be served upon the defendants by 10 August 2015. Nothing came of that. In the meantime, on 21 July 2015, Registrar Van der Veen made orders in chambers including an order that any proposed amended statement of claim be served by 17 August 2015. That order was not obeyed.

5. [5]

   On 24 August 2015 Registrar Kenna extended the time for the plaintiffs to serve a draft proposed amended statement of claim by midday on 1 October 2015. The proceedings were listed by the Registrar for further directions the following day. No proposed amended statement of claim had emerged by then.

6. [6]

   Registrar Kenna therefore referred the matter to me in order that the plaintiffs might show cause why the proceedings ought not to be dismissed pursuant to s 61(3)(a) of the Civil Procedure Act 2005 and/or UCPR 12.7. On 6 November 2015 I ordered the plaintiffs to provide an affidavit explaining their position and adjourned the matter for hearing before me on 13 November 2015. On that occasion the defendants sought orders dismissing the proceedings with costs.

7. [7]

   The plaintiffs rely on two affidavits sworn on 12 November 2015 in order to demonstrate why the proceedings should not be dismissed. The first is sworn by Joseph Kossaifi, the first plaintiff, and the second is sworn by the plaintiffs’ solicitor, David Sweeney.

8. [8]

   The first plaintiff by his own account is an experienced property developer. The plaintiffs’ pleaded case against the defendants is that they negligently mismanaged a shareholders’ dispute that arose between the plaintiffs and the Eliases, who were their corporate business associates, concerning the identification and distribution of the assets of Joe and Joe Developments Pty Ltd. This resulted in the company being placed into voluntary administration and the execution of a deed of company arrangement. The plaintiffs complain that neither of these courses was necessary or appropriate, that the terms of the deed were unfavourable to them and that the company should instead have been wound up on the just and equitable ground. The company had a surplus of assets over liabilities in the order of $2M. The plaintiffs complain that the advice they received from the defendants resulted in the incurring of unnecessary and exorbitant costs in the order of $1.7M associated with the company administration and that, in effect, their substantial shareholder equity in it was entirely or significantly reduced or dissipated.

9. [9]

   The burden of the plaintiffs’ contentions before me is that they are unable to progress the litigation because of their current financial situation for which the defendants are entirely or predominantly responsible. It would in those circumstances be unfair for the proceedings to be dismissed when the matters of which the defendants complain are the result of their own acts or defaults.

10. [10]

    The defendants respond by drawing attention to what they contend is the plaintiffs’ failure properly or adequately to provide evidence of the matters upon which they seek to rely. According to the defendants, neither Mr Kossaifi nor Mr Sweeney has deposed to any matters that admissibly demonstrate or even suggest that the plaintiffs are without sufficient assets or resources to fund the litigation in an efficient and timely way. In this regard the defendants complain specifically of two principal issues:

    1. (1)

       Mr Sweeney’s so-called instructions about the plaintiffs’ financial position and the adverse effect upon their cash is not explained in a way that informs the plaintiffs’ failure to comply with orders of the Court concerning proposals to amend the statement of claim.

    2. (2)

       The application for assessment of costs upon which the plaintiffs place some reliance is immaterial in the absence of any evidence establishing the plaintiffs’ true financial position.

11. [11]

    Moreover, the defendants submit that the proceedings involve serious and disputed allegations of professional negligence against a solicitor who is entitled to be freed as quickly as possible from the anxiety, distraction and disruption that litigation causes: Bomanite Pty Ltd v Slatex Corp Aust Pty Ltd (1991) 32 FCR 379 at 392; Queensland v JL Holdings Pty Ltd [1997] HCA 1; (1997) 189 CLR 146 at 170. There is as well some evidence that the defendants are suffering from the effects of adverse publicity associated with the continual pendency of these proceedings.

12. [12]

    In summary, the defendants contended that the proceedings should be dismissed having regard to the following additional matters:

    1. (1)

       The plaintiffs have breached three orders of the Court to file an amended statement of claim by 15 May 2015, 21 July 2015 and 24 August 2015.

    2. (2)

       There has been no progress of the substantive proceedings since they were first commenced.

    3. (3)

       In all a total of six court attendances have been wasted.

    4. (4)

       The affidavits filed by the plaintiffs do not adequately explain any of the delays.

    5. (5)

       The plaintiffs are in breach of s 56 and s 60 of the Civil Procedure Act.

    6. (6)

       Some of the events giving rise to the proceedings are now approximately six years old.

    7. (7)

       The cause of the delay is attributable to the plaintiffs and not their legal advisers.

    8. (8)

       The case pleaded by the plaintiffs “is at best problematic”.

    9. (9)

       There can be no guarantee that the defaults and delays so far will not be repeated.

    10. (10)

        There can be no suggestion that the defendants are in any way at fault.

13. [13]

    It will be apparent that the last of those propositions is very much in contest.

Consideration

1. [14]

   Section 61 of the Civil Liability Act provides relevantly as follows:

2. [15]

   UCPR 12.7 is in these terms:

3. [16]

   Supreme Court Practice Note SC CL 1 paragraph 16 provides as follows:

4. [17]

   An order dismissing proceedings for want of prosecution is an exceptional order and is a power not to be exercised lightly: Fairey v Fairey (No 2) [2000] NSWCA 173 at [51] – [58]. In Rivera v State of New South Wales [2102] NSWSC 1360, Johnson J dismissed proceedings commenced in 2006. His Honour commented as follows at [74]:

5. [18]

   In dismissing proceedings in Kang v Australian Broadcasting Corporation [2015] NSWSC 893, McCallum J said this at [20] – [22]:

6. [19]

   There can be no doubt that the plaintiffs have disregarded orders with which they would have been expected to comply. I am less certain that their failure to do so is the result of financial considerations that have disrupted their ability to secure appropriate legal assistance. The evidence about that is unsatisfactory as the defendants have emphasised.

7. [20]

   By the same token, at the express urging of the plaintiffs, the defendants have not been put so far to the trouble or expense of preparing a defence or of taking any specific steps beyond waiting for the plaintiffs to organise their litigious position. Although there is no evidence about it, I anticipate from the material that is before me that the defendants will not have been required to expend very much time or money having regard to the plaintiffs’ generally lackadaisical attitude to the proceedings to date.

8. [21]

   The matter has been on foot for a little less than ten months. That is not a long time in the scheme of things or in comparison to much litigation in this Court that is prosecuted efficiently. I am also without any satisfactory basis to determine either the viability of the plaintiffs’ claim on the one hand or the extent, if at all, to which the plaintiffs’ alleged financial inability to progress the proceedings is related to the conduct of the defendants.

9. [22]

   It is well understood that an award of costs is not to be regarded as a universal salve for the disruption and prejudice actually or potentially caused by unwarranted or tardy litigation. However, the peremptory dismissal of proceedings that are otherwise worthy of timely judicial consideration may cause corresponding substantial injustice. The draconian powers to which McCallum J has referred that might produce that result should therefore be exercised with caution.

10. [23]

    Counsel for the plaintiffs accepted that at the very least an order for the payment of the defendants’ costs to date was the price of keeping the proceedings on foot. He argued against the suggestion that an order for indemnity costs should also follow.

11. [24]

    In my view it would not be appropriate to dismiss the proceedings. The plaintiffs should be put on terms for the further conduct of the proceedings. I will make the following orders:

    1. (1)

       Adjourn the proceedings for mention on Friday 12 February 2016 at 9.30 before me.

    2. (2)

       Direct the plaintiffs to serve upon the defendants any proposed amended statement of claim upon which they intend to rely by no later than 4.00pm on Friday 5 February 2016.

    3. (3)

       Order the plaintiffs to pay the defendants’ costs of the proceedings to date.

    4. (4)

       Grant liberty to the parties to apply on three days’ notice.