Australia: Third party claim defeated due to defendant's delay

In brief - Defendants must take appropriate formal steps in third party proceedings

In Medina v Electro Industry Group Queensland Ltd and Anor [2016] QSC 143, Justice Martin of the Supreme Court of Queensland found that there had been an inexcusable delay resulting in prejudice in the third party proceedings commenced by Electro Industry Group Queensland Ltd (EIG) against O'Donnell Griffin Pty Ltd (ODG). ODG sought a declaration that EIG may not take a step in the proceedings or, alternatively, an order dismissing the third party proceeding for want of prosecution. The Court found in ODG's favour and the third party proceedings were struck out.

Rule 389 of Uniform Civil Procedure Rules considered, as well as if "proceeding" can mean third party proceeding

The incidents giving rise to the claim occurred in 2003 and 2004. Pre-procedural steps were undertaken between 2004 and 2009, with ODG being joined as a contributor by EIG during this time. Litigation commenced in 2009 and a third party statement of claim was issued to ODG by EIG around this time. Informal negotiations were attempted and further disclosure was undertaken from around 2010 to early 2012. EIG changed solicitors in October 2013. Shortly afterwards, ODG's solicitors advised EIG's solicitors they were closing their file. In 2016, EIG filed an amended third party statement of claim against ODG which expanded the allegations against ODG.

The Court examined rule 389 of the Uniform Civil Procedure Rules 1999 (Qld) (UCPR) and relevantly, subsections 1 and 2, which provide, respectively:

  1. that if no step has been taken in a proceeding in one year, a new step must not be taken without serving a notice of intention to proceed on the other parties, and
  2. that if no step has been taken in a proceeding in two years, a new step must not be taken without the order from the Court

In the present case there were several instances in which periods of one and even two years had elapsed without EIG taking steps in the proceedings against ODG. The Court considered whether any steps taken between the plaintiff, Mr Medina, and EIG were relevant for determining whether any steps had been taken in the third party proceedings between EIG and ODG.

It was found (at [17]) that "any steps taken in the main proceeding which solely affect the plaintiff and defendant are not steps for the purposes of the third party proceedings. ..." The relevant "proceeding" was not the entire dispute involving the plaintiff, the defendant and the third party. It was the activity of the defendant vis-à-vis the third party that was the relevant consideration.

Third party proceedings dismissed for want of prosecution

ODG's major complaint was that the lapse of time put it in a position of difficulty because of the absence of a witness. In particular, ODG contended that a witness they had made contact with some nine years earlier was unable to be contacted. At the time of contact in 2007, ODG obtained diary notes from the witness. It was considered that the site diaries may well be admissible under section 92 of the Evidence Act 1977 (Qld).

The Court considered the factors set out in Tyler v Custom Credit Corporation Ltd & Ors [2000] QCA 178 and placed particular weight on:

  • the unsatisfactory explanation for the delay
  • the current inability of the third party to locate witnesses, and
  • the inevitable deterioration in the memories of any witnesses who might be found

The Court held that ODG had been prejudiced by EIG's delay as the witness could not be called to give evidence about the diary notes. Even if the witness could have been located, ODG would still be prejudiced in that his recollection of events would have deteriorated substantially after the passage of some 13 years.

There was a suggestion that if the third party proceedings were to be struck out, EIG may seek to rely on section 40(1)(a) of the Limitations of Actions Act 1974 (Qld), which would allow it to commence third party proceedings against ODG within two years from the date of judgment. While the Court was not required to determine the issue, it referred to a decision of Bendeich v Clout [2003] QDC 305 and hypothesised that this may amount to an abuse of process.

Defendants should not neglect third party proceedings

Even where a principal proceeding is not being meaningfully progressed by a plaintiff, the defendant must ensure that it takes appropriate formal steps in any third party proceedings and serves notices of intention to proceed at the intervals mandated by the UCPR. This will avoid having to seek the Court's leave to continue the third party proceedings in long running matters. If the defendant does not do this, and a third party can establish prejudice, the defendant may lose its right to pursue its contribution claim against the third party.

EIG has filed a notice of appeal and the matter is before the Queensland Court of Appeal.

Stuart Unwin
Insurance and reinsurance
Colin Biggers & Paisley

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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