Ipsofactoj.com: International Cases  Part 7 Case 5 [NZCA]
COURT OF APPEAL, NEW ZEALAND
Savril Contractors Ltd
- vs -
Bank of New Zealand
12 FEBRUARY 2004
Nearly 20 years ago the Bank of New Zealand (BNZ) made foreign currency loans to various interests associated with Mr. Robin Murray. These proved disastrous for those Murray interests due to adverse currency movements. Various court proceedings have followed. These appeals and cross-appeals arise out of three judgments of Baragwanath J that dealt with applications to strike out the latest Murray proceedings and/or for summary judgment in favour of the BNZ.
Substantially similar proceedings had been struck out by Morris J in May 2000, a decision upheld by this Court in June 2001. The main issue for this appeal is whether, given the history of the matter, these latest proceedings should be struck out as being an abuse of process.
In October 1984 interests associated with Mr. Murray borrowed from the BNZ the equivalent of NZD1.2m in foreign currency. The funds were used to purchase the Glenbyre Tavern in Christchurch. Security was taken over the assets acquired and certain guarantees were also given, including that of Mr. Murray. In February 1985 the BNZ provided a further loan of the foreign currency equivalent to NZD1.1m. This was used to finance the purchase of the Golden Mile Tavern in Christchurch by other interests associated with Mr. Murray. Security and guarantees were provided.
The loan agreements allowed the borrowers to switch currencies at rollover dates and switches were made, at first on the advice of the BNZ pursuant to a management agreement and later on the advice of a specialist foreign currency manager, Marshalls Corporate Finances Limited (Marshalls), employed by the Murray interests. There was also the facility for forward foreign exchange contracts to be entered into over the term of the loans.
By May 1987 the liabilities of the borrowers were said to have increased to some NZD2.7m due to adverse currency movements. Agreement was reached between the borrowers and the BNZ on the refinancing of all the offshore loans with a commercial bill facility. A company controlled by Mr. Murray, John-Stuart Ltd, was incorporated to undertake the refinancing transaction. The existing securities remained in place, along with guarantees by Mr. Murray and the original borrowers.
John-Stuart Ltd, the borrowers and Mr. Murray were unable to meet their obligations under the refinancing arrangements and the BNZ ultimately called in the loan and realised all securities.
HISTORY OF THE LITIGATION
The Scottwood Charitable Trust and the RF Murray Family Trust issued proceedings against the BNZ in August 1992. Injunctions restraining the BNZ from realising certain assets belonging to them were granted by Doogue J on 30 November 1992 but were discharged by this Court on 19 April 1994, some 16 months later in Bank of New Zealand v Scottwood Charitable Trust CA 22/93, 19 April 1994 – see later discussion.
Subsequent to this Court’s discharge of the injunctions, the R F Murray Trust again made, but eventually abandoned, an attempt to obtain an interim injunction to prevent the BNZ exercising its power of sale of the Golden Mile Tavern. A second amended statement of claim was filed, accompanied by a memorandum from the trusts’ then counsel, Mr. Hassell QC, dated 22 June 1994, in which an allegation of fraudulent fictitious foreign currency loans which had earlier been made was omitted. The memorandum said that the allegation that there was "no genuine foreign currency at all" and which was the cause of action relied on by the Judge in granting the injunction was no longer relied on, subsequent to discovery of further documentation by the Bank.
Savril Contractors Ltd, Mr. Murray and the Robin Murray Family Trust issued proceedings against the BNZ in March 1995. At the same time the Scottwood Charitable Trust and the RF Murray Family Trust filed amended statements of claim. The five new statements of claim made substantially the same allegations against the BNZ as the earlier statements of claim filed by the trusts. In particular, we note here that the allegation of fraudulent fictitious foreign currency loans that had been omitted from the trusts’ second amended statement of claim in June 1994 was reinstated, appearing in each of the five March 1995 statements of claim.
Taking the statement of claim filed by Savril Contractors Ltd as an example, the first cause of action was contractual, being alleged breaches of the loan agreement. The second cause of action was fraud or alternatively breach of fiduciary duty. The third cause of action was negligence, the fourth under the Contractual Remedies Act 1979, the fifth in mistake and the sixth under the Credit Contracts Act 1981. The final cause of action alleged unconscionable bargain or alternatively unjust enrichment or alternatively monies had and received or alternatively constructive trust. The relief sought in respect of all causes of action was essentially the same (modified only to take into account the particular context) and included a declaration that no monies were owing, judgment for sums overpaid and general and exemplary damages.
All five proceedings were struck out for want of prosecution by Morris J in Scottwood Charitable Trust v Bank of New Zealand HC AK M159/92, M 160/92, CP11/95, CP12/95, CP13/95, 25 May 2000. The strike-out was upheld by this Court in Scottwood Charitable Trust v Bank of New Zealand (2001) 15 PRNZ 534. The Murray interests’ application for conditional leave to appeal to the Privy Council was dismissed by this Court in Scottwood Charitable Trust v Bank of New Zealand  2 NZLR 305.
In the meantime, in December 2000, the Murray interests filed further proceedings against the BNZ. It is these further proceedings that are the subject of this appeal. It is, however, necessary to review in some detail the whole course of the litigation and we now do this.
1994 COURT OF APPEAL DECISION
In this Court’s decision to discharge the injunctions granted by Doogue J, Gault J, for the Court, criticised the trusts’ pleadings, both procedurally and substantively. He noted that, when the trusts had applied for the interlocutory injunctions, the statement of claim alleged five causes of actions that he described as "technical points as to the enforceability of the security documents". However, less than a week before the hearing of the injunction application, an amended statement of claim was filed alleging no fewer than 16 causes of action, including fraud, oppressiveness, breaches of the Fair Trading Act 1986, misrepresentations, breach of fiduciary duties and breaches of contract.
Gault J noted that the sole factual basis for these allegations was Mr. Murray’s statement that he had recently come to believe that the loan arranged by the BNZ was not an offshore loan or foreign currency loan. Affidavits had been produced describing enquiries made from which the deponents had ascertained information on the practices of banks in conducting foreign exchange loan transactions. There was, however, no evidence before Doogue J as to what actually occurred in the particular transactions. Likewise the Court considered that allegations of negligence in contract and tort suffered from a lack of evidential support.
The Court also found that the way in which the guarantees had been executed did not result in a tenable argument that they were void. The cause of action seeking relief on the grounds of oppressiveness under the Credit Contracts Act did not necessarily rest on the alleged fictional nature of the foreign currency loans. The Court considered, however, that, if the loans were genuine and their losses truly incurred, there could be no oppressiveness in the Bank exercising its rights under the loan documents. The injunctions were therefore discharged on the basis there was no serious question to be tried.
DECISION OF MORRIS J
In his decision to strike out the 1995 proceeding, Morris J regarded the delay in prosecuting the proceeding as inordinate, inexcusable and the fault of the Murray interests. He criticised their failure to progress the substantive proceedings between August 1992, when they were issued, and April 1994, when the Court of Appeal discharged the interim injunction granted in November 1992. He also criticised delays in complying with an order for security for costs where the order was made in June 1996 but the security was not given until 29 January 1998 and only after a December 1997 order that the proceedings would be struck out unless the $100,000 first instalment of security for costs was given by 30 January 1998. Morris J concluded that a fair trial could no longer be achieved as the claims were stale and it would be bordering on the impossible to ask people who had been involved in the transactions, even if they could even be traced, to recall accurately the events which occurred in 1984-1985.
2001 COURT OF APPEAL DECISION
This Court, upheld the strike-out, holding that, between April 1994 and May 2000, the Murray interests were responsible for delays over periods totalling 42 months during which time no progress was made by the trusts in bringing the first proceeding to trial, in circumstances where the proceeding was issued in 1992 and concerned events between 1984 to 1987. For the second proceeding the delay was 31 months from March 1995 to May 2000. In the Court’s view, even though it had put aside the question of whether the Murray interests were responsible for delays prior to April 1994, the delays were particularly inexcusable given the time that had elapsed since the events that were the subject of the proceedings.
The Court agreed with Morris J that the delays had seriously prejudiced the BNZ, in particular because of the problem of the unavailability of staff involved in dealings at the time and the fading of recollections of those still available. In addition, there was the difficulty of calling expert evidence as to the standard for management of foreign currency loans during the period from 1984 to 1987. Lastly the Court referred to the Law Commission report, "Limitation Defences in Court Proceedings" (NZLC R6, 1988) which cited Canadian observations that a fair judicial decision is unlikely by the time ten years has passed after the occurrence of the events on which a claim is based, due to the deterioration of the evidence of the true facts. The Court said that adjudication under such circumstances could undermine the effectiveness of the judicial system. In this case the decline over time of the quality of evidence that could be given put the case beyond the capacity of the judicial system to decide fairly. At para  the Court set out the passage from the Law Commission report as follows:
The judicial system must, insofar as possible, ensure that the adjudicative process secures justice for claimants and defendants. By the time that ten years have passed after the occurrence of the events on which a claim is based, we believe that the evidence of the true facts will have so deteriorated that it will not be sufficiently complete and reliable to support a fair judicial decision. At this point adjudication will as likely result in a judicial remedy for a claimant with a spurious claim as one with a meritorious claim. Adjudication under these circumstances can only detract from the credibility of the judicial system, and undermine its effectiveness. The judicial system is a human system, and we think it is counter productive for a society to require it to attempt to do what it cannot do properly.
EVENTS LEADING TO PRESENT APPEALS
As indicated above, in December 2000, after the strike-out by Morris J but before this Court’s decision on the appeal, the Murray interests filed further proceedings against the BNZ. In the case of Savril Contractors Ltd, the statement of claim filed was identical to that filed in the proceedings that had been struck out by Morris J, apart from the addition of a paragraph alleging that the facts giving rise to the causes of action pleaded were not discovered by the plaintiff and could not have been discovered by the plaintiff with reasonable diligence until 1 March 1995. The statement of claim was not even renumbered, with the additional paragraph being inserted as paragraph 20A. The statements of claim filed by the other appellants were also substantially the same.
On 8 June 2001 the BNZ applied for summary judgment against the Murray interests, or alternatively for an order striking out these new proceedings, on the basis that they were statute barred, that they were an abuse of process and, in the case of some of the plaintiffs, that the claims were not maintainable by them.
In the course of the hearing of these applications before Baragwanath J, the then counsel for the Murray interests, Mr. Hassall QC, conceded that all causes of action were statute barred except two. Those not conceded were the Credit Contracts Act cause of action and the allegations in the second cause of action that the BNZ had acted fraudulently at inception because the so-called foreign currency element of the loans was fictitious. The Murray interests now seek to withdraw this concession.
In his judgment of 8 May 2002 (discussed in more detail below) Baragwanath J struck out all causes of action other than the cause of action under the Credit Contracts Act 1981. In a supplementary judgment of 15 August 2002 Baragwanath J considered, but did not uphold, further grounds advanced by the Bank as justifying strike-out. However, on the Murray interests’ application, in a further judgment of 18 December 2002, Baragwanath J recalled part of his 8 May 2002 judgment, insofar as it struck out the allegations in the second cause of action relating to the alleged fraud at inception of the loans. The basis of the recall was that the Judge had, in his 8 May judgment, relied on an affidavit by a Mr. Drumm to support his finding that the Murray interests could have discovered the alleged fraud in 1994. The affidavit had never been filed and counsel for the Murray interests had not appreciated that the Judge would rely on it in this way. Baragwanath J held that the strike-out applications on that cause of action should be reheard. It was directed in a minute of 28 February 2003 that the rehearing would not extend beyond the fraud plea. Such rehearing has not yet taken place.
The Murray interests appealed against the 8 May 2002 judgment. The BNZ cross-appealed against Baragwanath J’s refusal to strike out the Credit Contracts Act cause of action and his refusal in the 15 August 2002 judgment to strike out the proceedings on additional grounds advanced by the BNZ. The Murray interests abandoned their appeal against the 8 May judgment following Baragwanath J’s 18 December 2002 judgment. The discontinuance was recorded by the Court of Appeal on 18 March 2003. They now seek to reinstate that appeal. The BNZ has also appealed against the 18 December 2002 judgment and the Murray interests wish to cross-appeal against that judgement.
MATTERS NOW AT ISSUE BETWEEN THE PARTIES
The matters at issue in the proceedings have now changed in that the Murray interests have now conceded that the initial loans were true foreign currency loans. They say, however, that this was not the case with the rollovers. They have filed further amended statements of claim alleging fraudulent conduct in relation to those rollovers, allegedly designed to benefit the BNZ at the expense of the appellants.
We understand from Mr. Dugdale and from those amended statements of claim that the allegation is that, although it is accepted now that the loans were genuine foreign currency loans at inception, the rollovers were not true foreign currency transactions. It is alleged that any currency movements favourable to the Murray interests would be unfavourable to the BNZ, thus creating a conflict of interest. The losses while the BNZ was managing the loans were, in the Murray interests’ submission, of such magnitude that the only reasonable inference is that the BNZ fraudulently favoured its own position. Mr. Dugdale conceded, however, that if the BNZ had hedged to remove its exposure (and he accepted that banks commonly would do so), there would have been no conflict of interest. He submitted, however, that this was a matter that should be examined at trial.
The new allegation relating to the rollovers is also based on the bad performance of the loans while under BNZ management as compared to when they were managed by the professional manager, Marshalls. We comment that such evidence was considered insufficient by this Court in 1994 to provide a basis on its own even to sustain an allegation of negligence. Gault J said:
There also are allegations of negligence in contract and in tort directed to the management by the Bank of the foreign currency loans over the period it was contracted in that role. These allegations too suffer from lack of evidential support. The only evidence is that over the period the exposure was managed by Marshall Corporate Finance Ltd the overall cost of the loans to the borrowers was very much less than over the earlier period during which the Bank was responsible. That is not evidence of negligence by the Bank. Without more, and presently there is no more, it cannot be said there is a serious question of negligence.
We have examined in a preliminary manner the additional affidavits filed on behalf of the Murray interests in answer to the Drumm affidavit. Those affidavits do not take matters much further. They refer to the documents attached to the Drumm affidavit and point to alleged gaps in that documentation in relation to the rollovers and lack of evidence of dispatch of other documents. The affidavits assert that, because the BNZ has said that full discovery has been made, it can be inferred from the alleged gaps in the documentation that the rollovers did not occur. The alleged lack of documentation, however, appears to us to be at least partially explicable by the fact that the focus of the Murray allegations has always been on the alleged fictional character of the loans at inception rather than on the rollovers per se. We note here, and accept, the BNZ’s submission that the position of the Murray interests has changed. Insofar as they had previously alleged that the rollovers were fictitious, this was parasitic on the allegation that the loans themselves had been fictitious because, if the loans had been fictitious, then obviously there were no loans to roll over and therefore the foreign currency rollovers must also have been fictitious. It is therefore not surprising that the Drumm affidavit concentrated on the documentation relating to the setting up of the loans. As the BNZ has submitted, what was relevant in 1994 depended upon what was then pleaded. In particular, there was then no stand-alone allegation of fictitious rollovers. It has of course now been conceded that the loans at inception were genuine foreign currency loans.
The incomplete documentation may also be explicable by the sheer lapse of time. Mr. Bransgrove, the head of International and Corporate & Institutional Banking Operations in the Domestic and International Payments division for the BNZ, and the person ultimately responsible for the records of the Bank’s corporate and institutional banking and certain international business transactions, swore an affidavit on 22 September 2003. He deposed that he had received a request from the Bank’s solicitors that he try to locate further documents in the Bank’s records relating to the rollover transactions but that he had been unable to locate such documents. He noted that the Bank’s general practice is to release documents for destruction after ten years. Mr. Bransgrove said that he nevertheless contacted Pickford’s Limited where the Bank’s records for the period 1984-1987 were stored and asked for these records to be retrieved but received confirmation that the records had been destroyed in accordance with the destruction cycle.
We also note here the comments this Court has previously made with regard to the discovery process in the course of these proceedings. In Scottwood Charitable Trust v Bank of New Zealand (2001) 15 PRNZ 534, McGrath J said (at para ) that in March 1994 the BNZ had supported its position that there was nothing further it could discover by filing an affidavit from its employee who had in August 1993 made the affidavit verifying the list of documents. Whilst acknowledging that some documents may have been destroyed, the affidavit asserted that the BNZ had discovered all that was relevant. In McGrath J’s view, (at para ) what was said in the BNZ’s affidavits was not necessarily the final word on whether it had given adequate discovery but did place on the Murray interests the responsibility of promptly bringing the issue of inadequate discovery before the Court if it wished to maintain that that was the position. The Court said that might have been a difficult tactical decision to make but it was not permissible to delay taking the step for an inordinate period.
BARAGWANATH J'S DECISION OF 8 MAY 2002
We now move to a discussion of Baragwanath J’s decision of 8 May 2002. As a preliminary point, Baragwanath J held that, pursuant to Birkett v James  AC 297, proceedings should not be struck out on the grounds that a fair trial is impossible by reason of delay if they can be reinstated by the simple expedient of issuing fresh proceedings. Such proceedings can be instituted, provided the limitation period has not expired. As the Judge put it (at para ):
Some may find it surprising the proposition that proceedings struck out on the grounds that a fair trial is impossible by reason of delay can be reinstated by the simple expedient of issuing fresh proceedings, so long as the limitation period has not expired. That is however the law as settled by the House of Lords in Birkett v James  AC 297 ....
As indicated above, counsel for the Murray interests, Mr. Hassall QC, had, during the course of argument, conceded that all causes of action, save those under the Credit Contracts Act and of fraud at inception of the loan via an alleged fictional foreign currency loan, were statute barred. The other causes of action were therefore struck out and the focus of the case was on the construction of the limitation provision of s12 of the Credit Contracts Act and of s28 of the Limitation Act 1950.
Baragwanath J dismissed the BNZ’s application to strike out in relation to the Credit Contracts Act cause of action as the limitation period had not expired. Despite the BNZ’s submission that a literal construction of s12 means that a debtor could keep the limitation period open perpetually simply by withholding 10 cents of the debt due, the Judge regarded himself bound by the approach to s12 of the Court of Appeal in Autohelp & Towage Ltd v Central Acceptance Ltd CA 144/91, 11 June 1992, in which it was held that the time began to run only when no obligations remained to be performed under the contract.
Turning to the fraud plea at that stage, it was the submission of the Murray interests that the loans were never foreign currency loans and further that the limitation period for this cause of action had been postponed pursuant to s28 of the Limitation Act which provides that, where a cause of action is based on fraud, the limitation period only begins to run when the plaintiff has discovered or could reasonably have discovered the fraud. Despite the allegation of fraud in 1992, which was withdrawn in 1994 due to insufficient evidence, the Murray interests alleged that the discovery of fraud had occurred and could only have occurred after 22 December 1999 when an expert appointed by those interests, Mr. Paynter, had examined the documents produced by the BNZ on discovery and was able to depose in his affidavit of 14 February 2002 that there was no evidence of foreign currency lending by the BNZ. The main submission for the BNZ was that if there had been fraud, which was denied, then the Murray interests had or could have discovered it at least by 1994, when discovery was completed.
In setting out the history of the proceedings in relation to the fraud allegation, Baragwanath J referred to the withdrawal of that allegation in 1994 and in particular the memorandum stating that the cause of action was no longer relied on due to "discovery of further documentation by the defendant". The Judge said he inferred that the documentation referred to was the affidavit of Mr. Drumm which had been prepared for use at the 1994 Court of Appeal hearing, and seemed to have been alluded to by the Court, but had not been filed. The affidavit included records of the purchase of foreign currency and instructions to repay a foreign loan and redraw it in another currency. In the Judge’s view, it was not surprising that the Court of Appeal refused to sustain an injunction with such documentation available.
Baragwanath J recorded that the BNZ had submitted before him that summary judgment should be entered on the footing that the existence of bona fide overseas transactions had been affirmatively established. Counsel for the Murray interests, however, objected to this submission on the basis that it had not been foreshadowed as a response to the Murray interests’ defence under s28. The Judge agreed that the BNZ had not sufficiently alerted the Murray interests to this argument and thus, while recognising that there might be grounds for scepticism about the allegation of no overseas component to the transactions, proceeded on the assumption that it was a triable issue.
In the event, Baragwanath J struck out the cause of action alleging fraud on the basis that the facts relied on by the Murray interests to support the plea could, with reasonable diligence, have been discovered in 1994. In particular, the Judge noted the affidavit of a Mr. Hilton sworn in August 1995 and filed by the Murray interests. Mr. Hilton, a financial consultant and former BNZ employee who assisted litigants in identifying contractual breaches in the offshore lending area, had in his affidavit stated that Mr. Murray’s allegations of conflict of interest were not misguided. Baragwanath J found it significant that Mr. Hilton did not, however, infer fraud on the part of the BNZ.
Baragwanath J considered that the proposition that the discovered documentation failed to establish an overseas component of the transactions, which had been relied upon before both Doogue J and the first Court of Appeal hearing, must have been at the forefront of the Mr. Murray’s mind and that of his counsel when Mr. Hilton was consulted. In the Judge’s view it was not credible to suggest that the topic was not raised with Mr. Hilton or that Mr. Hilton was too concerned to protect his position with the BNZ to respond. It was more realistic to conclude that Mr. Hilton, like Mr. Paynter, had access to Mr. Drumm’s affidavit and attached documentation but was not prepared to make a positive assertion that an inference of fraud could safely be drawn.
SUBMISSIONS OF THE PARTIES
In support of the BNZ’s cross-appeal against the 8 May 2002 judgment of Baragwanath J, Mr. Craddock QC submitted that the proceedings issued by the Murray interests in December 2000 constituted an abuse of process. He referred to High Court Rules 186 and 477 and the court’s inherent jurisdiction as expressed by the House of Lords in Hunter v Chief Constable of West Midlands  AC 529 and this Court in Reid v New Zealand Trotting Conference  1 NZLR 8.
In Mr. Craddock’s submission, the present proceedings are the reincarnation of proceedings struck out by this Court in 2001, inter alia, because the Court held that it was no longer possible to fairly adjudicate on the proceeding. Where a case is still capable of resolution it may be that a fresh writ can be brought, despite an earlier one having been struck out even for some form of non-compliance with court rules, but where it is impossible for the courts to reach a fair decision, Mr. Craddock submitted that the dictates of justice call for an attempt to re-litigate the matter in question to be struck out.
Mr. Craddock submitted that Baragwanath J should not have held that the decision in Birkett v James  AC 297 prevented his striking out of the Murray interests’ proceedings. Even though the Court in Birkett v James was considering whether a cause of action with a finite limitation period could be struck out, the House of Lords nonetheless recognised that, in some exceptional cases, causes of action could be struck out before the expiry of the limitation period. Further, the House of Lords was not considering the position of a cause of action not subject to any limitation period and, in respect of which, the courts had already determined that a fair trial was impossible.
Finally he submitted that the decision in Birkett v James is now 30 years old. The approach in England has been to move away from Birkett v James – for example in Arbuthnot Latham Bank Ltd v Trafalgar Holdings  1 WLR 1426 and Securum Finance Ltd v Ashton  Ch 291, 309 where the English Court of Appeal held that the non-expiry of limitation periods does not act as a bar where proceedings which are being struck out constitute an abuse of process.
Mr. Craddock next submitted that the present proceedings are an abuse of process on the basis that they attempt to raise issues that ought to have been raised in defence to the BNZ’s strike-out applications in the last incarnation of these proceedings. The Credit Contracts issue was relevant to the original strike-out applications heard by Morris J but was not raised before him or the Court of Appeal. The principle of res judicata has been held by the House of Lords in Henderson v Henderson (1843) 3 Hare 100; 67 ER 313 to apply, except in special circumstances, not only to points upon which the Court was actually required by the parties to pronounce judgment but also to every point which properly belonged to the subject of litigation and which the parties, exercising reasonable diligence, might have brought forward at the time. To allow new issues to be raised in what is effectively a second hearing of the Murray interests’ initial proceedings would, in Mr. Craddock’s submission, detrimentally affect the public interest and confidence in the administration of justice.
For the Murray interests, Mr. Dugdale submitted that the effect of time on the quality of evidence was the reason for statutory limitation rules and that Birkett v James was quite clear that, in the absence of very special circumstances not present here, courts have no inherent power to impose stricter rules than those imposed by a limitation statute. In this case, if the Murray interests can successfully resist a limitation plea, it is in that context that the matters relied on by the BNZ as constituting abuse of process must be decided.
In Mr. Dugdale’s submission, the contention that current proceedings are an abuse of process because they are repetitive of previous litigation cannot be sustained. To illustrate this proposition he submitted that the Murray interests’ case in relation to the fraud allegations is that the required specialist expertise was not readily available and it has taken time to access documents in the possession of others. The proper context for the inquiry into when the fraud alleged could have been discovered is the relevant Limitation Act provision and not a broad test of abuse of process which would amount to giving the courts power to impose a shorter limitation period than Parliament has seen fit to impose.
Mr. Dugdale further submitted that the reconsideration by English courts is of no help in New Zealand where there have not been the same procedural changes. In addition, Mr. Dugdale submitted that, as the BNZ has acknowledged, the current claims do not merely reiterate the claims in the struck out actions.
Finally Mr. Dugdale submitted that, in relation to the suggestion of deterioration in the quality of the evidence, once the reasonable diligence issue is disposed of, this is a case that turns on documents. Banks are expected to be, and in practice are, meticulous record keepers. Documents do not deteriorate with age. There is no basis for the BNZ’s submission that it is impossible to reach a fair decision and the observation of the Court of Appeal that the BNZ relied on was, in his submission, made without a proper understanding of the extent to which the determination of this case will be document-based. We remark at this point that this Court has already held that issues in the case would require assessments of credibility of witnesses and expert evidence as to the standard of management of foreign currency loans during the relevant period. The Murray interests cannot say now that the claims are based on documentary evidence when this Court has previously rejected that assertion.
Written submissions were also filed in relation to other matters and with regard to the other appeals and cross-appeals but it will not be necessary to address these as the abuse of process point is in our view determinative.
ABUSE OF PROCESS
As noted above, Baragwanath J, on the basis of the decision of the House of Lords in Birkett v James  AC 278, held that these proceedings should not be struck out on the grounds that a fair trial is impossible by reason of delay because, in the case of the Credit Contracts action, the limitation period had not yet expired.
The precise scope of the principles set out in Birkett v James, and in particular the exceptions that apply, have been the subject of subsequent authority. It is therefore necessary to traverse the relevant cases in England in order to assess the extent of the continuing relevance of the decision. It is important to note that, although Birkett v James appears to stand for the proposition that fresh proceedings may be issued after previous proceedings have been struck out for delay so long as the limitation period has not expired, it was in that case recognised that in some cases the later proceedings may nevertheless be struck out on the basis of abuse of process. This ground is, in New Zealand, additionally set out in r477 of the High Court Rules which provides that a Court may order that a proceeding be stayed or dismissed if it considers that the proceeding is an abuse of the processes of the court. It is necessary, therefore, to discuss what circumstances are encompassed by that concept. We understand that the abuse of process point was not the subject of argument in the High Court, although it was set out as a ground in the strikeout/ summary judgment applications.
THE DECISION IN BIRKETT V JAMES
We begin by discussing in more detail the Birkett v James decision itself. The plaintiff in that case was claiming a sum of £1 million, allegedly owing under an oral contract. Some six months before the limitation period applicable to the plaintiff’s cause of action was due to expire, the defendant applied for an order to dismiss the action for want of prosecution. The district registrar refused the order and the defendant successfully appealed. Before the conclusion of the hearing of the appeal and delivery of the judgment, however, the plaintiff issued a fresh writ in respect of the same cause of action.
Lord Diplock delivered the principal speech. He referred with approval to Allen v McAlpine  2 QB 229, in which the Court of Appeal laid down the principles on which the jurisdiction to dismiss an action for want of prosecution should be exercised. These principles were, said Lord Diplock (at 318) as follows:
The power should be exercised only where the court is satisfied either
In the case before the House, Lord Diplock stressed that their Lordships were only concerned with the application of the second principle. He also observed that the cases dealt with in Allen v McAlpine were concerned with dismissal of actions after the limitation period had expired and that the relevance of the fact that the limitation period had not expired was there left undecided, as was the relevance of the period which the plaintiff had allowed to elapse before action was brought, when this was done within the limitation period. On these questions Lord Diplock said that there was a divergence of views in the Court of Appeal.
Turning to the limitation issue Lord Diplock said (at 320) that it was crucial, before dismissing an action, to consider whether a plaintiff could issue further proceedings still within the limitation period. If that were able to be done the result of any dismissal for want of prosecution would be to prolong the time which must elapse before the trial can take place beyond the date it could have if the previous proceeding had remained on foot. This would benefit the plaintiff and aggravate the prejudice to the defendant. Lord Diplock described as "attractive" an argument that, if a court has power to dismiss an action because the time the plaintiff has allowed to elapse since the cause of action accrued has resulted in a substantial risk that justice may not be done to the defendant at trial, it should also have power to prevent a fresh action being started. However he went on to say (at 320) that this would be to treat as inordinate delay a shorter period than Parliament had laid down in setting a limitation period. He said (at 320):
[T]his begs the very question that your Lordships must decide. It assumes that the court has power to treat as amounting to inordinate and inexcusable delay in proceeding with an action a period shorter than that within which Parliament by a Limitation Act has manifested its intention that a plaintiff should have a legal right to commence proceeding with his action. No one has been bold enough to argue that if the plaintiff has not issued a previous writ he could be deprived of that right at the discretion of a judge because the judge thought that in the circumstances of the particular case the statutory limitation period was too long. So in such a case, at any rate, time elapsed before issue of the writ which does not extend beyond the limitation period cannot be treated as inordinate delay; the statute itself permits it.
Lord Diplock recognised, however, that in exceptional cases the court might strike out proceedings despite the fact that the limitation period had not expired. This is where a second action could be stayed for abuse of process. He said, however, that mere inaction in a proceeding cannot make it an abuse of process to start another action. He said (at 320):
There may be exceptional cases, of which Spring Grove Services Ltd v Deane (1972) 116 SJ 844 (to which I shall be referring later) may be an example, where the plaintiff's conduct in the previous proceedings has induced the defendant to do something which will create more difficulties for him in presenting his case at the trial than he would have had if the previous proceedings had never been started. In such a case it may well be that the court, in the exercise of its inherent jurisdiction, should stay the second proceedings on the ground that, taken as a whole, the plaintiff's conduct amounts to an abuse of the process of the court. But, such exceptional cases apart, where all that the plaintiff has done has been to let the previous action go to sleep, the court in my opinion would have no power to prevent him starting a fresh action within the limitation period and proceeding with it with all proper diligence notwithstanding that his previous action had been dismissed for want of prosecution.
Lord Diplock later in more detail referred to the case of Spring Grove Services Ltd v Deane. In that case the original action had been struck out within the limitation period and the plaintiff had issued fresh proceedings for what the Court of Appeal held to be the same cause of action, thinly disguised. These proceedings were struck out as an abuse of process. Lord Diplock, while disapproving of the reasoning in the case, considered (at 321) that the decision in that case may have been justified on the ground of estoppel (the defendant having lost touch with a witness as a result of being told by the plaintiff’s solicitor that the action had been abandoned).
In conclusion on this point Lord Diplock said (at 322) that the fact that the limitation period had not expired would be generally a conclusive reason for not dismissing an action for want of prosecution (at least where no contumelious default was involved). In Lord Diplock’s words:
the fact that the limitation period has not yet expired must always be a matter of great weight in determining whether to exercise the discretion to dismiss an action for want of prosecution where no question of contumelious default on the part of the plaintiff is involved; and in cases where it is likely that if an action were dismissed the plaintiff would avail himself of his legal right to issue a fresh writ the non-expiry of the limitation period is generally a conclusive reason for not dismissing an action that is already pending.
Lord Diplock next turned to consider the relevance of the period that the plaintiff had allowed to elapse before bringing the action. In his view this period could never amount to inordinate delay if it was within the limitation period. Instead the delay relied on had to relate to the time since proceedings had been issued. He stressed, however, that a late start would make subsequent delays less excusable. Noting that this was a consistent view in the Court of Appeal he said (at 322):
It follows a fortiori from what I have already said in relation to the effect of statutes of limitation upon the power of the court to dismiss actions for want of prosecution that time elapsed before the issue of a writ within the limitation period cannot of itself constitute inordinate delay however much the defendant may already have been prejudiced by the consequent lack of early notice of the claim against him, the fading recollections of his potential witnesses, their death or their untraceability. To justify dismissal of an action for want of prosecution the delay relied upon must relate to time which the plaintiff allows to lapse unnecessarily after the writ has been issued. A late start makes it the more incumbent upon the plaintiff to proceed with all due speed and a pace which might have been excusable if the action had been started sooner may be inexcusable in the light of the time that has already passed before the writ was issued.
He continued (at 323) that, in order to justify dismissal for want of prosecution, the defendant would need to show some prejudice additional to that which would inevitably flow from the delay before the proceedings were issued.
In a brief concurring speech Lord Salmon stressed (at 328) that it would not be impossible for an action to be properly dismissed for want of prosecution before the expiry of the limitation period but that this could happen only in rare and exceptional circumstances. He went on to say (at 328) that he agreed with Lord Diplock that:
if an action is dismissed for want of prosecution or even for the contumelious failure to comply with a peremptory order before the limitation period has elapsed, this would not empower the court to strike out a writ for the same cause of action subsequently issued within the limitation period. The fact that the plaintiff or his solicitor has behaved badly in the first action does not make him into a vexatious litigant barred from bringing any further proceedings without permission of the courts. Nor does the dismissal of the first action without any decision on the merits constitute res judicata. If the plaintiff had not brought the first action at all but had delayed (as he was legally entitled to do) until the last day of the limitation period before issuing his writ, the defendant would have been in no better position than if the first action had never been brought. Indeed his position would have been worse because the first action at least gave him some information concerning the plaintiff's claim which he would not otherwise have obtained until after the issue of the second writ. In my view, the second action could not be dismissed as an abuse of the process of the court whatever inexcusable delay there may have been in the conduct of the first action.
Lord Edmund-Davies, in the other substantive speech, said that, in his view, a plaintiff was free to issue further proceedings within the limitation period and it was irrelevant to the competency of the second action that the defendant might be even more prejudiced than if the first action had been permitted to proceed to trial. He said that he therefore agreed with Lord Diplock that, where there appeared any likelihood that a plaintiff would issue further proceedings, it would be an exceptional case where the court should dismiss an action within the limitation period simply for want of prosecution. He said (at 334) that, if the effect of this was to place the defendant at the mercy of a dilatory plaintiff:
a partial answer is that in a flagrant case the defendant can always seek peremptory orders which, if disobeyed, render the plaintiff liable to have his action struck out on the ground of contumelious default; though there, too, a second writ can properly be issued within the limitation period, unless the circumstances are such that it could on other grounds be regarded as frivolous or vexatious.
Lord Simon of Glaisdale was content to record his agreement with the three substantive speeches and Lord Russell of Killowen concurred with the speech of Lord Diplock.
SUBSEQUENT ENGLISH DECISIONS
The House of Lords has reaffirmed the principles in Birkett v James on a number of occasions. The first, Tolley v Morris  1 WLR 592, was the case of an infant beneficiary who had suffered personal injury. Proceedings were commenced on her behalf followed by 13 years of inaction. New solicitors then served a notice of intention to proceed. As the plaintiff was entitled still to issue new proceedings the House of Lords by majority held that this meant the proceedings should not be struck out.
Lord Diplock considered (at 603), however, that defendants were not helpless in such a situation as they would have been able to obtain peremptory orders requiring compliance with procedural steps. Disobedience of any such order would justify dismissing an action and striking-out any subsequent action as an abuse of process. Lord Edmund-Davies and Lord Keith of Kinkel agreed with Lord Diplock. Lord Edmund-Davies, however, made one qualification. Referring to the view he had expressed in Birkett v James that, even if a plaintiff had had previous proceedings struck out for disobedience to court orders, a fresh action could be started within the limitation period (if the plaintiff was not declared vexatious), he said (at 604):
I am not presently persuaded that a person who starts an action within the limitation period is liable to have it struck out as constituting an abuse of the process of the court, for the sole reason that a previous suit instituted by him in respect of the same cause of action was itself struck out on the ground that his disobedience to the court's orders (peremptory or otherwise) amounted to contumelious default.
Lord Wilberforce and Viscount Dilhorne dissented. Lord Wilberforce disagreed that the Limitation Act provisions required a result that would mean the plaintiff had the opportunity to start another action 15 years after the event and 12 years after the start of the existing action. For Lord Wilberforce the objective of the provisions was to protect a plaintiff only when he or she had justifiably been unable to bring the action within the normal limitation period and not as here where valid proceedings were started but not continued. He was prepared to read the words of the section to give a meaning that he said prevented injustice and he did not consider that the case came within the doctrine of Birkett v James (at 596). Viscount Dilhorne considered that Parliament could not have intended that a number of actions could be brought by an infant in respect of one cause of action at any time before the expiry of three years after he or she ceased to be an infant (at 598).
The next reaffirmation of the Birkett v James principles by the House of Lords was in Department of Transport v Chris Smaller (Transport) Ltd  AC 1197. The House of Lords gave leave to appeal in that case so that it might reexamine the principles that had governed applications to strike out for want of prosecution since Birkett v James in the light of criticisms as to the effectiveness of those principles. Lord Griffiths, with whose speech the other members of the House agreed, discussed the decision of the House in Birkett and the effect it had had on the conduct of proceedings. He began by noting that Birkett had not worked to deter dilatory conduct. He also noted that several Court of Appeal judges had criticised the principles in Birkett as providing insufficient sanctions for delays in the conduct of proceedings. He declined, however, to depart from the principles laid down in Birkett v James and (at 1207) endorsed the proposition that the courts must respect the limitation periods set by Parliament. Plaintiffs therefore cannot be penalised for any delay that occurs between the accrual of the cause of action and the issue of the proceedings, provided they are issued within the limitation period.
In Lord Griffiths’ view (at 1207) there was no need to abandon the requirement that delay after the issuance of proceedings must be shown to prejudice the defendant or make a fair trial impossible. Otherwise the only purpose of such a measure would be to punish a plaintiff and thereby deter others from similar delays. Lord Griffiths stressed, however, (at 1208) that a long delay before issuance of proceedings would have the effect of any post–writ delay being looked at critically and being more readily regarded as inordinate and inexcusable than would be the case if the action had been commenced soon after the accrual of the cause of action.
Lord Griffiths accepted that prejudice to the defendant was not limited to prejudice affecting the actual conduct of the trial. While it could also include damage to business interests, he was not prepared to go as far as passages in some of the judgments, (especially that of Lord Denning) in the Court of Appeal decision in Biss v Lambeth, Southwark and Lewisham Health Authority  2 All ER 125, which suggested that anxiety accompanying litigation (described by Lord Griffiths (at 1209) as "the mere sword of Damocles, hanging for an unnecessary period") might be enough to justify striking out an action. Lord Griffiths considered that this would be justified only in an exceptional case.
The final case on this topic in the House of Lords was that of Grovit v Doctor  1 WLR 640. Lord Woolf delivered the only speech in the House of Lords. He (at 643) considered the criticisms of the present approach, observing that the requirement that the delay had to cause serious prejudice to the defendants had been criticised inter alia because it undermined the effectiveness of the court’s power to strike out proceedings as a sanction against delay. The requirement of prejudice prevented the court taking into account the adverse effect delay can have on the reputation and efficiency of the justice system as a whole. In his view what was regarded as capable of amounting to prejudice was too restricted. Little regard was paid to the anxiety caused to litigants as a result of the litigation.
Lord Woolf pointed out, however, that criticisms of the Birkett v James decision had been considered by the House in the Department of Transport case but that it had been concluded in that case that the time was not appropriate to adopt a different approach. In Lord Woolf’s view, there had not been any improvement in the problems caused by delay in the conduct of civil proceedings since that time. Nevertheless reforms were imminent. The courts and defendants could, in the meantime, achieve greater control over delay by the use of peremptory orders, and this appeal, in which the respondents were not represented, was not the appropriate one for making significant inroads on the Birkett v James principles.
Lord Woolf noted (at 642) that the prevention of abuse of process had by itself long been a ground for the courts striking out or staying actions by virtue of their inherent jurisdiction, irrespective of the question of delay and that Birkett v James did not affect this separate ground for striking out or staying proceedings. In addition, he endorsed Lord Diplock’s linking of abuse of process with delay which is intentional and contumelious. After considering the facts of the case and the judgments in the lower courts, Lord Woolf concluded (at 647) that the lower courts were entitled to find (from evidence suggesting that the plaintiff intended to maintain a state of anxiety on the part of the defendants) that the plaintiff’s conduct constituted an abuse of process. Because the purpose of the courts is to resolve disputes, starting and continuing litigation with no intention of concluding it may amount to an abuse.
There have also been a number of important Court of Appeal decisions. In the case of Janov v Morris  3 All ER 780, it became necessary to decide between the differences of opinion that had been expressed (obiter) in the House of Lords as to whether bringing a second action after the first was struck out for contumelious conduct is an abuse of process. The plaintiff’s position was that he was entitled to bring a second action at any time within the limitation period notwithstanding that the first action had been struck out for failure to comply with a peremptory order of the Court. The defendant contended that, as a claim identical to that raised in the second action had been struck out by the dismissal of the first action, it was an abuse of process to allow the claim to be prosecuted.
As Dunn LJ accepted that the point arose directly for determination in the case before him, he said that the Court must, in view of the differing opinions in the House of Lords, decide the question according to principle. In this regard, the first point was that the court has a discretion as to whether to strike out or not. Secondly, the Court would have due regard to the necessity of maintaining the principle that orders are made to be complied with. There had been no explanation for the failure to comply with the order and no indication in the second action that the plaintiff intended to comply with orders of the court any more than in the first action for which he was still in contempt of court. The second action was therefore struck out.
The next case of note was the decision of the Court of Appeal in Culbert v Stephen G Westwell (1993) PIQR 54 which allowed an appeal against a refusal to strike out proceedings, in circumstances where the proceedings, in respect of an accident that occurred in 1981, had been issued in 1984, some three months prior to the expiry of a three year limitation period and were followed by complete inactivity for three years until the defendant applied in 1987 to strike out the plaintiff’s claim for want of prosecution. This application failed and some four years later the defendant again applied to strike out the claim, having in the meantime applied for various orders to try to progress the litigation. Parker LJ, with whom the other members of the court agreed, considered that the defendants had well satisfied the burden of showing that a final period of delay, admitted as it was to be inordinate and inexcusable, had given rise to such additional prejudice as would put at risk the prospects of a fair trial in respect of an accident which had occurred some 11 years previously.
In Parker LJ’s view there was, however, another aspect of this matter. He noted that an action may also be struck out for contumelious conduct, or abuse of the process of the court or because a fair trial is no longer possible. While conduct was ordinarily only regarded as contumelious where he said "there is a deliberate failure to comply with a specific order of the court", he continued (at 65-66) that a series of separate inordinate and inexcusable delays in complete disregard of the rules of court can also properly be regarded as contumelious conduct or to an abuse of the court. This and the question of fair trial do not depend on a defendant raising the position of prejudice. Parker LJ considered that the way in which the action had been conducted amounted to an abuse of process and it would be a further abuse of process if the action were allowed to continue, with a fair trial no longer possible. In such circumstances Parker LJ considered that the action could not be allowed to proceed.
This approach was also taken by the Court of Appeal in the case of Arbuthnot Latham Bank Ltd v Trafalgar Holdings  1 WLR 1426 and its sequel of Securum Finance Ltd v Ashton  CH 291. The facts were as follows. Arbuthnot lent money to Trafalgar. The Ashtons guaranteed the loan and, to support the guarantee, they provided a mortgage in favour of Arbuthnot over their home. In the first set of proceedings Arbuthnot sought repayment of the debt and claimed against both the debtor and the guarantors. After issuing proceedings in 1989 it took no further action until 1996, several months after the expiry of the six year limitation period applicable to the claim. The Ashtons applied to strike out the claim on the ground of delay. The application was dismissed on the basis that, although the delay was inordinate and inexcusable, Arbuthnot could rely on the charge to commence fresh proceedings subject to a 12 year limitation period. On appeal, the Court of Appeal struck out the action and used the opportunity to provide guidance for the profession as to the likely consequences of delay in the conduct of legal proceedings in the context of imminent changes to the rules of procedure.
Lord Woolf MR. delivered the judgment of the Court of Appeal. After setting out the principles in Birkett v James, he reiterated (at 1432) from his speech in the House of Lords in Grovit v Doctor that, where there has been contumelious conduct on behalf of a plaintiff or where the proceedings have been struck out as an abuse of process, the non-expiry of the limitation period is not such a significant factor. As Lord Woolf put it (at 1432):
The fact that the limitation period has not expired, does not figure to the same degree in a case where there has been contumelious conduct on behalf of a plaintiff or where the proceedings which are being struck out constitute an abuse of process: see Grovit v Doctor  1 WLR 640. In such circumstances, the plaintiff may well find that if he brings fresh proceedings after the original proceedings are struck out they are stayed because of his conduct.
Applying the authorities to the case before him Lord Woolf held that the court below had been wrong to take into account the fact that, if the action was struck out, the plaintiffs would commence fresh proceedings based on a new cause of action on which they had not so far relied. Birkett v James had not considered such a situation. The defendant was entitled to assume that normally the court would only determine the issue as to whether to strike out on the basis of the cause of action that had been pleaded and was before the court.
Lord Woolf turned next to the changes to the civil procedural process that were then being introduced. It was Lord Woolf’s view that the introduction of a system of case management imposed additional burdens upon the courts and it was therefore in the interests of litigants as a whole that the courts’ time was not unnecessarily absorbed in dealing with "satellite litigation" created by noncompliance with the timetables laid down by the rules. While the consequences of inordinate delay to litigants generally and to the courts had not been a consideration at issue in Birkett v James, Lord Woolf stressed that it would become an issue of increasing significance. He warned that delay would be assessed not only from the point of view of the prejudice caused to the particular litigants whose case it is but also in relation to the effect it could have on other litigants waiting to have cases heard and the prejudice caused to the administration of civil justice (at 1436).
Lord Woolf noted that the case of Grovit v Doctor had already recognised that to continue litigation with no intention to bring it to a conclusion could amount to an abuse of process. He suggested that the change in culture which was taking place would enable courts to recognise more readily than in the past that a wholesale disregard of the rules is an abuse of process as had previously been suggested by Parker LJ in Culbert. He went on to say that an abuse of process was not only identified as a ground for striking out in Birkett v James but was also a separate ground which did not depend on the need to show prejudice to the defendant or that a fair trial was no longer possible.
A more ready recognition that wholesale failure to comply with the rules would justify an action being struck out, as long as it was just to do so, would, in Lord Woolf’s view avoid the time and expense involved in determining questions of prejudice and allow the striking out of actions whether or not the limitation period had expired. The question of whether a fresh action could be commenced would then be a matter for the court’s discretion. Lord Woolf continued (at 1437) that in exercising its discretion as to whether to strike out the second action, a court should start with the assumption that, if a party has had one action struck out for abuse of process, some special reason has to be identified to justify a second action being allowed to proceed.
In the sequel to the Arbuthnot case, Securum, the relief sought was related to the mortgage. The question was therefore whether it is an abuse of process to seek to litigate, in subsequent proceedings, issues which had been raised but not adjudicated upon in earlier proceedings which have themselves been struck out. Referring to the Arbuthnot case in which the court had pointed out that the consequences of inordinate delay to other litigants and to the court would now be of increasing significance, Chadwick LJ said that the court would take into account that earlier proceedings had been struck out for delay in an application to dismiss a second set of proceedings. He said (at 308):
The reason, as it seems to me, is that, when considering whether to allow the fresh proceedings to continue, the court must address the question whether that is an appropriate use of the court's resources having regard (i) to the fact that the claimant has already had a share of those resources in the first action and (ii) that his claim to a further share must be balanced against the demands of other litigants.
Next Chadwick LJ noted that the House of Lords in Birkett v James had recognised that the power to strike out a first cause of action could be exercised where a plaintiff’s conduct amounted to an abuse of process and further that the court would have power, in an appropriate case, to strike out a second action (founded on the same claim) notwithstanding that it had commenced within the limitation period if the plaintiff’s behaviour as a whole amounted to an abuse. This would, however, require more that merely allowing the action to go to sleep. In the Arbuthnot case, however, the court had spoken of a "change of culture" taking place that would enable courts to recognise more readily that a wholesale disregard of the rules is an abuse of process and there had since been numerous observations in the Court of Appeal to the same effect. Chadwick LJ concluded therefore (at 309):
The time has come for this court to hold that the "change of culture" which has taken place in the last three years – and, in particular, the advent of the Civil Procedure Rules – has led to a position in which it is no longer open to a litigant whose action has been struck out on the grounds of inordinate and inexcusable delay to rely on the principle that a second action commenced within the litigation period will not be struck out save in exceptional circumstances. The position, now, is that the court must address the application to strike out the second action with the overriding objective of the Civil Procedure Rules in mind - and must consider whether the claimant's wish to have "a second bite at the cherry" outweighs the need to allot its own limited resources to other cases.
Accordingly the Judge said the courts should now follow the guidance given in Arbuthnot where it was held that in exercising its discretion as to whether to strike out a second action, the court should start with the assumption that, if a party has had one action struck out for abuse of process, some special reason has to be identified to justify a second action being allowed to proceed. In the event the claim was not struck out. While the claim for payment made in the new action was in substance indistinguishable from the claim for payment made in the first action, it did not stand alone. By striking out the claim for payment, the court would not extinguish the underlying debt which remained secured on the mortgaged property, where the claim to enforce the security was not made in the first action and there was no reason why it should have been. In the circumstances, it was considered that striking out as a mark of disapproval of the delay in the first proceeding would be a wrong exercise of discretion.
SUMMARY OF THE ENGLISH POSITION
While Lord Diplock in Birkett v James made it plain that it would be an exceptional case that could be struck out within the limitation period, he recognised that the Court could, in its inherent jurisdiction, stay further proceedings if the plaintiff’s conduct as a whole amounted to an abuse of process. Lord Diplock did not define abuse of process except to say what it was not. It would not be established merely by letting an action "go to sleep". Lord Diplock, however, said that the decision in Spring Grove Services Ltd v Deane (1972) 116 SJ 844 might well have been justified on the ground of estoppel. This may suggest that not a great deal more than letting an action go to sleep was required. In that case the plaintiff’s solicitor in the original action had told the defendant that the action had been abandoned and, as a result of this information, the defendant had lost touch with one of his intended witnesses who had gone overseas. If that was the extent of the prejudice then it might be thought relatively minor. Lord Diplock also appeared to suggest in Birkett v James that it would be an abuse of process to start another action if a previous action had been struck out for intentional and contumelious default, although the two other Law Lords giving substantive speeches took the contrary view. This conflicting view was carried through to Tolley v Morris  1 WLR 592. It now appears, however, from Janov v Morris  3 All ER 780 and from comments in the House of Lords in Grovit v Doctor  1 WLR 640, that it is accepted that issuing new proceedings after prior proceedings have been struck-out for disobedience of peremptory orders is likely also to be held to be an abuse of process.
A wider role for the doctrine of abuse of process in the control of dilatory plaintiffs has arisen with the advent of the civil procedure reforms. Such a role was first suggested by the Court of Appeal in 1993 in Culbert v Stephen G Westwell (1993) PIQR 54. With the change in culture taking place in the courts towards a system of case management and, therefore, greater regulation by the courts of their processes, Lord Woolf was able to say in the Arbuthnot case that the courts would recognise disregard of the rules as an abuse of process more readily than in the past. Most significantly, when an action has been struck out for want of prosecution, it is prima facie an abuse of process for the plaintiff to commence fresh proceedings unless some special reason can be identified to justify a second action being allowed to proceed.
The new position has been described as follows by N H Andrews in "Slow Progress in Striking out Dilatory Litigants: No Second Bite at the Cherry" (2001) 60 CLJ 56, 58:
The new institutional value-judgment is that a claimant who makes inefficient use of the public amenity of civil litigation is guilty of "abuse of process". In short Birkett v James has been overtaken in this respect by the strictures of the new procedural code.
As expressly required by the civil procedure reforms, the overriding consideration, however, remains the interests of justice.
NEW ZEALAND DECISIONS
Birkett v James has been accepted as authoritative in New Zealand. In Mead v Day  1 NZLR 100 this Court referred to it as the now leading English authority. At the same time it reiterated that the power to dismiss for want of prosecution is discretionary and that the Court, in terms of (what is now) r478, must make such order as may be just. The Court stressed that the overriding consideration is whether justice can be done despite the delay. The Court concluded in that case that the delay was inexcusable but that justice was still possible. It did, however, say that delay in complying with procedural requirements and court orders might in some circumstances amount to an abuse of process. The relevance of the non-expiry of the limitation period was not adverted to by the Court but it did express its approval of the High Court decision of Roe v Cullinane Turnbull Steele & Partners  1 NZLR 33 that had, some six months previously, applied Birkett v James in holding that a three year delay in prosecuting a negligence action was not inordinate or inexcusable, had not caused serious prejudice as a result and had held that, in light of Birkett v James, the fact that the limitation period had not expired was decisive.
The leading authority on striking out in New Zealand is Lovie v Medical Assurance Society New Zealand Ltd  2 NZLR 244 where Eichelbaum CJ traversed the authorities and summarised the general principles applicable to an application under r478. He said (at 253):
By itself, delay prior to the issue of proceedings cannot constitute inordinate and inexcusable delay for purposes of a striking out application.
If such delay has occurred, further delay after issue of proceedings will be looked at more critically by the court, and will be regarded more readily as inordinate and inexcusable than if the proceeding had been commenced earlier.
The defendant must show prejudice caused by the post-issue delay. If however the defendant has suffered prejudice as a result of pre-issue delay, he will need to show only something more than minimal additional prejudice to justify striking out the proceeding.
An overriding consideration is whether justice can be done despite the delay. As to that, all factors, including pre-issue prejudice and delay, have to be taken into account.
This Court emphasised that last overriding consideration in Commerce Commission v Giltrap City Ltd (1998) 11 PRNZ 573, in allowing an appeal against an order striking out proceedings commenced by the Commerce Commission against the defendant, in circumstances where the defendant alone out of other defendants declined to participate in settlement negotiations with the Commission which did not take any further steps in the proceeding for over two years while it concentrated on negotiations with the other defendants. As Tipping J said for the Court (at 579):
in cases of delay and alleged want of prosecution, the right of all citizens and organisations to have access to the courts for the determination of the issues they have raised should be denied only if that important right is outweighed by a stronger right vested in the defendant to have the case dismissed because justice can no longer be done in the light of the delay. This case does not approach that level. Case management principles and practices are important, indeed vital, for controlling crowded calendars and promoting the expeditious despatch of Court business; but they should not be allowed to obscure or undermine the fundamental purpose of any system of justice which is to deliver justice to all concerned.
The principles applicable to striking out for want of prosecution pursuant to Rule 478 have also been discussed in several other cases that involved proceedings against the BNZ in respect of foreign currency transactions entered into in the 1980s. In all of the cases the proceedings were struck out – see Nikau Holdings Ltd v Bank of New Zealand  11 PRNZ 254 (Master Thomson), Upper Clutha Transport Limited v Bank of New Zealand CP920/91, 7 May 1998 (Gallen and Doogue JJ), Barbery Holdings Limited v Bank of New Zealand CP257/92 HC WN 12 August 1999 (Master Thomson), and Williams v BNZ CP280/91 HC CHCH 24 March 2000 (William Young J).
The cases of Upper Clutha Transport and Williams can be seen as bearing some similarities to this case. In Upper Clutha Transport Limited Gallen and Doogue JJ upheld an order of Master Thomson striking out proceedings for want of prosecution after the plaintiff had sought leave to file an amended statement of claim raising new causes of action. Referring to the principles expounded in the Lovie case Doogue J, for the Court, looked at the cumulative delay of five years before proceedings commenced, four years to comply with a request for particulars and two years that had elapsed from the last step in the proceeding. In the circumstances Doogue J concluded that the delay was inordinate and inexcusable given that the plaintiff had effectively slept on its rights until the commencement of the claim and more importantly from the time of the commencement of the claim until its attempt to reformulate the claim. In addition, that attempt at reformulation was made after the plaintiff had represented to the defendant that it was quantifying its claim and that settlement negotiations should be undertaken. Doogue J considered that the BNZ would be seriously prejudiced if the plaintiff was permitted to continue proceedings and amend its statement of claim, even though s28 of the Limitation Act contemplated that a defendant might have to deal with conflicts of oral evidence of events that had taken place more than six years previously.
In Williams William Young J struck out proceedings against the BNZ that had commenced in 1991 and progressed until 1994 whereupon progress stopped completely. The next step was the filing in 1999 of the plaintiff’s application for leave to continue with the proceedings pursuant to r426A which was met with an application to strike out by the BNZ. Relying on the principles as to want of prosecution discussed by Eichelbaum CJ in Lovie, William Young J found that the five year delay was inordinate and inexcusable. In common with other claims by foreign exchange borrowers against the Bank, and given the shifting nature of the claim and failure to adhere to a consistent set of allegations in the context of events that had taken place nearly 15 years ago, there was likely to be significant prejudice to the Bank if the matter was to go to trial.
For William Young J the fundamental area of prejudice was, however, to be found in the impact of a lengthy delay on the ability of a defendant to receive justice in a case which would depend partly on oral evidence and partly on the ability to put in place a full documentary record. As the Judge said (at para ):
Plaintiffs tend to choose the ground upon which such cases are fought. Common sense and self-interest dictate that the issues which plaintiffs raise will tend to be in areas of the case where either such documents as exist are in their favour or where, at least, there are no inconsistent contemporaneous documents. The events in question in stale cases will normally have been more momentous for the plaintiff than the defendant. So plaintiffs can and do give narratives of events very much in the way in which similar evidence is given in cases which are not stale. In contradistinction, defence witnesses generally are required to give evidence as to what they "would have done" by reference to their ordinary practice of 10 or 15 years before. Defendants are frequently prejudiced by the difficulty in producing, and obtaining genuine co-operation from, witnesses who are not in the litigation as parties and who are also likely to have forgotten the relevant events. The task of assembling all relevant documentary material once held by such parties is likely to be impossible.
William Young J also referred to Grovit v Doctor and the change of culture taking place in the English courts as seen in the Arbuthnot case. He said that, whether it was an abuse of process for the plaintiff to endeavour to keep his case alive with a limited thread of activity in the hope that some other plaintiff would go to trial, was a matter upon which opinions might differ. He did not, however, find it necessary to decide the point given the view he had reached on prejudice and also, he said, because the issue was unlikely to arise again in New Zealand with current case management systems.
Birkett v James was most recently referred to in this Court in Hemmes v Young  1 NZLR 193, a case concerning the Status of Children Act 1969. The Court accepted Birkett v James as authority for the proposition that striking out because of pre-issue delay will be pointless because the litigant may simply reissue proceedings if still within any statutory limitation period. In this case the proceedings had been brought after some 46 years had elapsed seeking an order that the appellant was the father of the respondent and his deceased twin sister. The appellant had argued that, where there is no limitation period, a plaintiff has to proceed without inordinate delay or risk the proceeding being struck out under r478. In the appellant’s submission, the absence of a limitation period did not confer on a plaintiff an unlimited right to delay proceedings because otherwise that would effectively negate r478. The appellant had submitted that there was inexcusable delay pre- and post-commencement and the question of prejudice had to be assessed with reference to the total effect of the delay.
The Court rejected the appellant’s argument on the ground that it was difficult to apply to proceedings envisaged under the Status of Children Act where the lack of a limitation period reflected the fact that an application may not arise until many years after the birth of a person to whom the application relates. The proceedings were not based on a "cause of action" under which it could be said that a litigant has time running. The concept of "delay" by an applicant was a concept resting more easily with the enforcement of rights. Furthermore, there would be different times at which delay could be said to commence depending on who the applicant may be and it would not be possible to say with precision when a period of delay might commence.
The Court nevertheless stressed that this did not mean that no remedy could ever exist for pre-issue delay when there is no limitation period. The Court retains its supervisory jurisdiction to strike out if, after issue, there is want of prosecution in terms of r478. It also has its inherent jurisdiction to prevent abuse of process and the circumstances in which such jurisdiction may be exercised are never closed. In the instant case the Court agreed with the High Court Judge that there was no realistic prejudice to the appellant from any post-issue delay. Any pre-issue delay from dimming of memories or loss of witnesses could be overcome with modern scientific methods. The Court concluded by reiterating (at 203):
the well-established principles analysed in Lovie remain appropriate to strike out applications for delay. That applies whether or not any limitation periods are fixed by statute for the particular proceedings under consideration. There is no logical basis for the proposition that the Birkett v James line of authority does not apply in situations where Parliament has allowed an applicant to bring an application at any time. The courts’ inherent jurisdiction, of course, remains. In terms of the Declaratory Judgments Act 1908 (which applies to these applications) the court has a discretion to make an order and may refuse to do so on any grounds which it deems sufficient. However, there is no basis for this Court to refine or revisit the law in relation to R 478 applications as it has been consistently applied in New Zealand since Lovie.
COMPARISON OF NEW ZEALAND AND ENGLISH POSITIONS
It is clear that the principles in Birkett v James apply in New Zealand. The subsequent English authority will as a consequence be persuasive. We do note, however, that in New Zealand the overriding consideration in strike out applications for delay has always been whether justice can be done despite that delay. In this regard, the concern has been to achieve justice between the parties and the administration of justice in a general sense has not figured in the decisions to the same extent as it does in the more recent English decisions of, for example, Arthbuthnot and Securum. New Zealand courts have not been prepared to go as far as those decisions in placing the same significance on the assessment of the delay from the point of view of litigants generally and the courts. It was stressed by this Court in Commerce Commission v Giltrap City Ltd (1998) 11 PRNZ 573, 579 that case management principles should not be allowed to undermine the delivery of justice to the parties. There may be different considerations where an application is based on failure to comply with peremptory orders, commonly called "unless orders", but that is not the case here.
ARE THE CURRENT PROCEEDINGS AN ABUSE OF PROCESS?
As the principles in Birkett v James are part of New Zealand law the exceptions in Birkett v James are also part of New Zealand law. In particular there remains the ability to strike out proceedings as an abuse of process. This is reinforced by the explicit power in this regard set out in r477 of the High Court Rules.
In Reid v New Zealand Trotting Conference  1 NZLR 8, 9 Richardson J explained the abuse of process principle as follows:
Misuse of the judicial process tends to produce unfairness and to undermine confidence in the administration of justice. In a number of cases in recent years this Court has had occasion to consider the inherent jurisdiction of the High Court, and on appeal this Court, to take such steps as are considered necessary in a particular case to protect the processes of the court from abuse. (See particularly Moevao v Department of Labour  1 NZLR 464 and Taylor v Attorney-General  2 NZLR 675). In exercising that jurisdiction the court is protecting its ability to function as a court of law in the future as in the case before it. The public interest in the due administration of justice necessarily extends to ensuring that the courts' processes are fairly used and that they do not lend themselves to oppression and injustice. The justification for the extreme step of staying a prosecution or striking out a statement of claim is that the court is obliged to do so in order to prevent the abuse of its processes.
Richardson J referred to the House of Lords decision in Hunter v Chief Constable of the West Midlands Police  AC 529 in which Lord Diplock began his speech by stressing that the circumstances which might amount to an abuse of process should not be limited to fixed categories. As Lord Diplock said (at 536):
It concerns the inherent power which any court of justice must possess to prevent misuse of its procedure in a way which, although not inconsistent with the literal application of its procedural rules, would nevertheless be manifestly unfair to a party to litigation before it, or would otherwise bring the administration of justice into disrepute among right-thinking people. The circumstances in which abuse of process can arise are very varied; those which give rise to the instant appeal must surely be unique. It would, in my view, be most unwise if this House were to use this occasion to say anything that might be taken as limiting to fixed categories the kinds of circumstances in which the court has a duty (I disavow the word discretion) to exercise this salutary power.
Richardson J noted in particular that the importance of the doctrine to the fair and proper administration of justice was such that Lord Diplock had characterised the exercise of the power in appropriate cases as a duty rather than a discretion.
The question here is whether it is an abuse of process to bring second proceedings in substantially similar terms when prior proceedings have been struck out for inexcusable delay. As long ago as 1994 this Court expressed concern about the delay in the progress of the first proceeding. At that time the events that were the subject of the litigation stretched back nearly ten years. In 2001 this Court recognised that justice could no longer be done between the parties and that adjudication under such circumstances would undermine the credibility of the justice system.
As the courts exist to resolve disputes in a just manner, filing new proceedings and asking the courts again to resolve a dispute that has already been held to be no longer capable of being decided fairly, must (absent very special circumstances) be an abuse of the processes of the court. Nothing put forward on behalf of the Murray interests has convinced us that any special circumstances exist here. Allowing such proceedings to continue would not only be unfair to the defendant but would bring the administration of justice into disrepute.
There is also in our view an important distinction between these proceedings and those that were considered in Birkett v James. In Birkett v James the limitation period at issue was six years. This Court in Autohelp & Towage Ltd v Central Acceptance Ltd CA 144/91, 11 June 1992 held that there is effectively no limitation period for proceedings seeking the reopening of a credit contract on the grounds of oppressiveness under the Credit Contracts Act where a debtor is in default. This was because s12 prescribes a time limit for re-opening a contract of six months "after the date the last obligation to be performed under the contract is performed". For Hardie-Boys J, who delivered the judgment of the Court, the question to be asked was whether any obligations remain to be performed. It is only when none remain that time begins to run. The BNZ submitted that the Autohelp decision was wrong and should not be followed. Although we did not hear oral submissions on this point, we would not have been inclined to differ from Autohelp as it is a relatively recent decision and in any event accords, in our view, with the words and policy of the statute. (We note here that the time limits have been changed in s125 of the Credit Contracts and Consumer Finance Act 2003).
As there is, therefore, effectively no limitation period, we consider that it is nevertheless incumbent on any plaintiff to act with due diligence in prosecuting a cause of action once commenced. The lack of a limitation period is a protective measure for consumers and is not designed to protect dilatory plaintiffs who are clearly aware of their rights. In this regard, we are attracted to the minority view in Tolley v Morris  1 WLR 592, although we doubt it would be applied in New Zealand to an infant or person under a disability. Plaintiffs cannot expect to continue to get the advantage of no limitation period if justice can no longer be done between the parties because of their delays after proceedings have been commenced.
This reasoning is not inconsistent with this Court’s decision in Hemmes v Young. For a start that case did not involve post issue delay, apart from a delay in service of the proceedings. Furthermore, the Court considered in that case that the concept of "delay" by an applicant was a concept resting more easily with the enforcement of rights than applications under the Status of Children Act. It was stressed in Hemmes v Young, however, that the Court was in any case not powerless to remedy delay where no limitation exists, either by striking out for want of prosecution after issue in terms of r478 or in the exercise of its inherent jurisdiction to prevent abuse of its process. Furthermore, unlike the present case which is impossible to decide fairly, the Court found in Hemmes no realistic prejudice arising from delay, either pre-issue or post-issue.
There is an additional reason why the current proceedings can be seen as an abuse of process. The Credit Contracts Act cause of action was one of the causes of action struck out by Morris J in 2000 and the BNZ had raised as an affirmative defence that the proceedings were issued out of time. The Murray interests, however, did not at that time raise the issue of the construction of s12 of the Credit Contracts Act (which was successfully argued before Baragwanath J in May 2002) as having the effect that the claim was not statute barred. We accept Mr. Craddock’s submission that such failure engages the principle set out by Sir James Wigram VC in Henderson v Henderson 3 Hare 100, 114-115, explained recently by Lord Bingham in Johnson v Gore Wood & Co (a firm)  2 AC 1, 23 as covering issues or facts which are so clearly part of the subject-matter of the litigation and so clearly could have been raised that it would be an abuse of the process of the court to allow a new proceeding to be started in respect of them. The Henderson principle is usually applied in cases where the first proceeding has been tried on its merits but there is no reason it should not also be applicable in procedural cases of this kind.
The same point can be made with regard to the Murray interests’ assertion that the limitation period in respect of the fraud plea has been postponed pursuant to s28 of the Limitation Act because the fraud could not have reasonably been discovered. Despite an allegation of fraud and the Bank’s defence that the claims were statute barred, the argument that the fraud was not discoverable was not raised before Morris J. In any case there is the difficulty that the argument for postponement seems to be based on the assertion that there were no experts who could possibly have discovered fraud before then. In our view it is difficult to believe that outside experts did not exist or that the BNZ’s method of operation was so different from other institutions that only someone within the Bank itself could have advised on the point.
The rule of law requires the existence of courts for the determination of disputes and that litigants have a right to use the courts for this purpose. Courts must also, however, be alert to their processes being used in a way that results in oppression or injustice or that would bring the administration of justice into disrepute. This is because, as Justice Felix Frankfurter once explained (in Baker v Carr 369 US 186, 267 (1962)) "[t]he Court’s authority - possessed of neither the purse nor the sword - ultimately rests on sustained public confidence in its moral sanction". The transactions that are the subject of these proceedings happened some twenty years ago now and litigation in respect of those transactions has been before the courts for over ten years. This Court has already determined that the delay in prosecuting substantially similar proceedings was inordinate and that a fair trial is now impossible. To allow the proceedings again to come before the courts is in these circumstances an abuse of process. The litigation must end.
RESULT AND COSTS
The BNZ’s cross-appeal against the 8 May 2002 judgment of Baragwanath J is allowed and the remaining Credit Contracts Act cause of action is struck out.
The Murray interests’ application to revive their appeal against the 8 May 2002 judgment of Baragwanath J is refused. We note in any event that this application would have faced major procedural hurdles.
It has not been necessary to deal with the 15 August 2002 judgment of Baragwanath J. The BNZ’s appeal against this judgment of Baragwanath J is accordingly dismissed.
Given the view we have taken of the matter there should be no rehearing of the strike-out application. Therefore the BNZ’s appeal against the 18 December 2002 judgment of Baragwanath J is allowed and the Murray interests’ cross-appeal against that judgment is dismissed.
Costs of $8,000 are awarded to the BNZ plus reasonable disbursements, including travel and accommodation costs of counsel, to be set by the Registrar if necessary.
Bank of New Zealand v Scottwood Charitable Trust CA 22/93, 19 April 1994; Scottwood Charitable Trust v Bank of New Zealand HC AK M159/92, M 160/92, CP11/95, CP12/95, CP13/95, 25 May 2000; Scottwood Charitable Trust v Bank of New Zealand (2001) 15 PRNZ 534; Scottwood Charitable Trust v Bank of New Zealand  2 NZLR 305; Birkett v James  AC 297; Autohelp & Towage Ltd v Central Acceptance Ltd CA 144/91, 11 June 1992; Hunter v Chief Constable of West Midlands  AC 529; Reid v New Zealand Trotting Conference  1 NZLR 8; Arbuthnot Latham Bank Ltd v Trafalgar Holdings  1 WLR 1426; Securum Finance Ltd v Ashton  Ch 291; Henderson v Henderson (1843) 3 Hare 100; 67 ER 313; Allen v McAlpine  2 QB 229; Spring Grove Services Ltd v Deane (1972) 116 SJ 844; Tolley v Morris  1 WLR 592; Department of Transport v Chris Smaller (Transport) Ltd  AC 1197; Biss v Lambeth, Southwark and Lewisham Health Authority  2 All ER 125; Grovit v Doctor  1 WLR 640; Janov v Morris  3 All ER 780; Culbert v Stephen G Westwell (1993) PIQR 54; Mead v Day  1 NZLR 100; Roe v Cullinane Turnbull Steele & Partners  1 NZLR 33; Lovie v Medical Assurance Society New Zealand Ltd  2 NZLR 244; Commerce Commission v Giltrap City Ltd (1998) 11 PRNZ 573; Nikau Holdings Ltd v Bank of New Zealand  11 PRNZ 254; Upper Clutha Transport Limited v Bank of New Zealand CP920/91, 7 May 1998; Barbery Holdings Limited v Bank of New Zealand CP257/92 HC WN 12 August 1999; Williams v BNZ CP280/91 HC CHCH 24 March 2000; Hemmes v Young  1 NZLR 193; Johnson v Gore Wood & Co (a firm)  2 AC 1; Baker v Carr 369 US 186 (1962)
High Court Rules: Rule 477, Rule 478
Authors and other references
Law Commission Report, "Limitation Defences in Court Proceedings" (NZLC R6, 1988)
NH Andrews, "Slow Progress in Striking out Dilatory Litigants: No Second Bite at the Cherry" (2001) 60 CLJ 56
DF Dugdale and KJ Crossland for Appellants in CA108/02 and Respondents in CA12/03 (instructed by Stace Hammond, Hamilton).
RJ Craddock QC and CS Chapman for Respondent in CA108/02 and Appellant in CA12/03 (instructed by Buddle Findlay, Wellington).
all rights reserved