Multi-Service Group Pty Ltd (in liq) & Anor v Osborne & Anor [2010] QCA 72

In June 2002, the Queensland Supreme Court introduced its case-flow management system. The aim of the system is to facilitate the just and timely disposition of proceedings, with the minimum necessary commitment of resources by the court and litigants. This process is achieved by the court monitoring the progress of individual proceedings against pre-determined timelines and intervening when a proceeding is not progressing satisfactorily.

The case-flow management process applies to all civil claims filed in the Brisbane registry since June 2002.

As a part of the process, where a request for trial date has not been filed 180 days after the date of filing of notices of intention to defend, the registrar may issue an Intervention Notice calling on the plaintiff to show cause why the proceeding should not be deemed resolved. Usually, the plaintiff would respond by entering judgment, filing an application for trial date, or bringing an application for directions to facilitate the timely determination of the proceeding.

However, if cause is not shown, the registrar will notify the parties that the proceeding is ‘deemed resolved’.

A proceeding that has been deemed resolved may be reactivated by any party in certain circumstances. The party seeking to reactivate the proceeding must make an application to the court, supported by affidavit material explaining and justifying the circumstances in which the proceeding was deemed resolved and proposing a plan to facilitate its timely determination. [1]

The situation in which a proceeding may be reactivated was considered recently in Multi-Service Group Pty Ltd (in liq) & Anor v Osborne & Anor [2010] QCA 72.

Background

Multi-Service Group Pty Ltd (MSG) commenced two separate actions in the Supreme Court. The first action was against Graeme Osborne, the former managing director of MSG, and Roslyn Osborne, Mr Osborne’s wife. The second action was against Mr Osborne and GRO Services Pty Ltd (GRO), the corporate trustee of the Osborne Family Trust.

Both proceedings involved disputes in relation to an ‘agreement’ or ‘agreements’ relating to Mr Osborne’s resignation from MSG.

On 14 May 2008, the Deputy Registrar sent an Intervention Notice in respect of each proceeding to the solicitors on both sides. The parties proposed directions to the Court and identical orders were made in each matter. The directions required various interlocutory steps and also provided that:

• by 15 May 2009, MSG serve a request for trial date on the defendants, and
• by 22 May 2009, the defendants sign the request for trial date or the matter be deemed resolved.

As it turned out there was extensive non-compliance with the interlocutory requirements of the Order and MSG were not in a position to serve a request for trial date by 15 May 2009. MSG’s solicitors wrote to the defendants’ solicitors on 19 May 2009 in an attempt to agree revised directions, but the defendants’ solicitors did not respond.

Inevitably, on 22 May 2009, the Deputy Registrar made an order in each proceeding that ‘the matter is deemed resolved’.

On 21 July 2009, MSG filed applications to have both actions reactivated and proposed a plan for their timely determination. The applications were heard by Justice Atkinson on 11 September 2009.

Referring to explanations for delay advanced by counsel for MSG, Justice Atkinson noted that the crux of the delay was that a solvency report had not been completed. Specifically, Justice Atkinson noted reference to some 500 documents which MSG said needed to be assessed before a solvency report could be completed and commented that ’an insolvency involving 500 documents could hardly be considered a large insolvency matter’.

In relation to MSG’s plan to facilitate the timely resolution of the proceedings, Justice Atkinson stated that, ‘if, as the plaintiffs suggest, the matter can be resolved in a relatively short compass, it begs the question as to why the pleadings have not closed and the plaintiffs have not been able yet to deliver a solvency report’.

Consequently, Justice Atkinson refused the applications for reactivation on the basis that it would not be in the public interest to allow the proceedings to be reactivated in circumstances where prejudice would be suffered by the defendants and the plaintiffs themselves have been substantially responsible for the delays.

Court of Appeal decision

The Court of Appeal concluded that the Primary judge’s approach in exercising her discretion was erroneous. They held that the ‘deemed resolution’ of a proceeding is not in the same class as other processes under the Uniform Civil Procedure Rules (UCPR) which bring proceedings to an end (i.e. dismissal for want of prosecution, or summary judgment), and that the focus of the primary judge ought to have been on the matters specifically identified in paragraph 5.4 of the Practice Direction No. 4 of 2002, namely, whether MSG had:

• explained and justified the circumstances, and
• prepared a plan to facilitate its timely determination.

The Court of Appeal also held that the primary judge erred in the exercise of her discretion by basing her decision on facts not supported by and contrary to the evidence.

In her judgment, Justice Atkinson had dismissed MSG’s explanation for the circumstances of delay on the basis that the examination of 500 documents would not have caused a lengthy time delay. However, in actual fact, there were not 500 documents to be checked, but 500 boxes of documents requiring examination.

Dealing with the delay in providing the solvency report, Mr Hambleton, an accountant who assumed responsibility for MSG’s winding up in the absence of the liquidator, swore that the winding up of MSG had been long and difficult. He further stated that at 80% completion, some 150 hours had been spent preparing the report.

The Court of Appeal considered that the primary judge had erred in her implicit conclusion that the liquidator did not face a complex and time consuming task in disentangling the financial affairs of MSG.

Further, the Court of Appeal stated that due to the continued ‘without prejudice’ negotiations between the parties, the matter had not simply ‘gone to sleep.’

It was held that the nature and extent of the explanation and justification of the circumstances that led to the deemed resolution are relevant to, but not ultimately determinative of the exercise of the discretion to reactivate proceedings. Specifically, the Court of Appeal held that this discretion must primarily be considered in light of achieving a timely disposition of the proceedings.

In its application, MSG supplied a plan that, it said, would allow it to prosecute the claim diligently and in accordance with the UCPR.

In upholding the appeal, the Court of Appeal held that MSG’s evidence did in fact explain and justify the delay, and that the plan would facilitate the timely determination of the proceedings. Both proceedings were accordingly reactivated.

Implications

The salient point which arises from this decision is that the bar to reactivate a proceeding is actually set much lower than other mechanisms which provide for the early conclusion of proceedings.

The focus of the discretion is to be pointed specifically at the elements identified in the Practice Direction (i.e explanation and justification of the delay, and provision of a plan to facilitate timely determination), and does not necessarily involve a consideration of the underlying merits of the action.

Until this decision, there may have been an expectation on the part of defendant litigants that they may gain an advantage by allowing a plaintiff to go into default of the ‘deemed resolution’ provisions, thereby bringing an end to the proceedings.

However, given the bar for reactivation has now been shown to be somewhat lower than may have been previously understood, defendants can no longer rely on these provisions as bringing a definitive end to the proceedings in circumstances where the plaintiff is able to adequately explain away the delay and provide a sensible plan for the future determination of the matter.

Parties should, as always, abide the overriding philosophy of the UCPR - that is, to facilitate the just and expeditious resolution of the real issues in civil proceedings at a minimum of expense.

For further assistance or enquiries please contact:

Guy Humble on 07 3233 8844
Tim Case on 07 3233 8960.