Annamalay v Ng
[2007] WADC 217
•21 DECEMBER 2007
ANNAMALAY & ANOR -v- NG & ANOR [2007] WADC 217
| DISTRICT COURT OF WESTERN AUSTRALIA | Citation No: | [2007] WADC 217 | |
| Case No: | CIV:2875/2003 | 14 NOVEMBER 2007 | |
| Coram: | KEEN DCJ | 20/12/07 | |
| PERTH | |||
| 25 | Judgment Part: | 1 of 1 | |
| Result: | Appeal dismissed | ||
| PDF Version |
| Parties: | HARRIDAS ANNAMALAY PARIMALAM ANNAMALAY NEE YONG NG GAUT KEM HENG |
Catchwords: | Springing order for particulars Failure to comply Refusal to set aside judgment or extend time for compliance Contumelious disregard of Court's order |
Legislation: | Corporations Act 2001 Trade Practices Act 1987 |
Case References: | Chesson v Green [2002] WASCA 67 Cropper v Smith (1884) 26 Ch D 700 Dow Corning Australia Pty Ltd v Dirys [2001] WASCA 361 FAI General Insurance Co Ltd v Southern Cross Exploration NL (1988) 165 CLR 268 Gardner Corp Pty Ltd v Zed Bears Pty Ltd [2003] WASC 13 Johnson v Gore Wood & Co (A Firm) [2002] 2 AC 1 Kellogg Brown & Root Pty Ltd v Douglas Partners Pty Ltd [2007] WASCA 275 Magenta Nominees Pty Ltd v Bonini [1999] WASCA 249 Osgood v Wham [2007] WASCA 178 Re; Jokai Tea Holdings [1992] 1 WLR 1196 Thomas v D'Arcy (2005) 52 ACSR 609 Tipperary Developments Pty Ltd v State of Western Australia [2004] WASCA 15 Walthamstow Pty Ltd v Giovinazzo [2003] WASC 249 |
JURISDICTION : DISTRICT COURT OF WESTERN AUSTRALIA
- IN CHAMBERS
- First Appellant
PARIMALAM ANNAMALAY
Second Appellant
AND
NEE YONG NG
First Respondent
GAUT KEM HENG
Second Respondent
Catchwords:
Springing order for particulars - Failure to comply - Refusal to set aside judgment or extend time for compliance - Contumelious disregard of Court's order
(Page 2)
Legislation:
Corporations Act 2001
Trade Practices Act 1987
Result:
Appeal dismissed
Representation:
Counsel:
First Appellant : Mr S Singh
Second Appellant : Mr S Singh
First Respondent : Mr P Mendelow
Second Respondent : Mr P Mendelow
Solicitors:
First Appellant : Friedman Lurie Singh & D'Angelo
Second Appellant : Friedman Lurie Singh & D'Angelo
First Respondent : Karp Steedman Ross-Adjie
Second Respondent : Karp Steedman Ross-Adjie
Case(s) referred to in judgment(s):
Chesson v Green [2002] WASCA 67
Cropper v Smith (1884) 26 Ch D 700
Dow Corning Australia Pty Ltd v Dirys [2001] WASCA 361
FAI General Insurance Co Ltd v Southern Cross Exploration NL (1988) 165 CLR 268
Gardner Corp Pty Ltd v Zed Bears Pty Ltd [2003] WASC 13
Johnson v Gore Wood & Co (A Firm) [2002] 2 AC 1
Kellogg Brown & Root Pty Ltd v Douglas Partners Pty Ltd [2007] WASCA 275
Magenta Nominees Pty Ltd v Bonini [1999] WASCA 249
Osgood v Wham [2007] WASCA 178
Re; Jokai Tea Holdings [1992] 1 WLR 1196
Thomas v D'Arcy (2005) 52 ACSR 609
Tipperary Developments Pty Ltd v State of Western Australia [2004] WASCA 15
Walthamstow Pty Ltd v Giovinazzo [2003] WASC 249
(Page 3)
1 KEEN DCJ: On 22 June 2007 the respondents (plaintiffs) herein entered judgment against the appellants (defendants) whereby the defendants' amended defence and counterclaim dated 15 September 2006 was struck out and it was ordered that the appellants should pay the respondents' damages to be assessed and costs to be taxed. That judgment arose by reason of a springing order made on 21 February 2007 against the appellants not having been complied with.
2 This is now an appeal against the decision of Deputy Registrar Hewitt given on 15 June 2007 wherein the Deputy Registrar refused an application on the part of the appellants to set aside the conditional order for judgment or alternatively have an extension of time for providing further and better particulars of defence and counterclaim the subject of the order.
The nature of the action
3 By an amended statement of claim bearing date May 2006 the respondents (plaintiffs) claimed against the appellants (defendants) for damages and interest arising out of their acquisition of shares in a business known as The Fresh Fudge Factory.
4 Relevantly it was pleaded that the respondents were business migrants from Singapore. The second appellant was a director of a company known as The Fresh Fudge Factory Pty Ltd. The first appellant was her husband. It was further pleaded that, either in their capacities as trustees for the H & P Annamalay Family Trust or in their personal capacities, they owned and operated a confectionery making business trading as The Fresh Fudge Factory ("the business").
5 It was alleged that in order to induce the respondents to buy into the business or to purchase shares in the company representations were made to the respondents in relation to the income producing capacity and profitability and value of that company. It is not necessary for me to go into detail at this stage, although I do touch upon the representations later in these reasons.
6 The pleading relevantly goes on to allege that induced by the representations the respondents concurred in the incorporation of the company as the joint venture vehicle in which shares were allotted to the second respondent and the first appellant. The sum of $100,000 was paid by way of consideration.
(Page 4)
7 It is said, in that pleading, that the representations were false and that the business was not worth the asking price and had not made the income represented. It was also said that there was no reasonable basis for making the representations as to the future profitability of the company. The claim alleges that this conduct on the part of the appellants was in breach of the Fair Trading Act1987, alternatively was fraudulent, or alternatively was a breach of collateral warranty.
8 By an amended defence and counterclaim dated 15 September 2006 the appellants, apart from pleading matters of limitation, denied the allegations in the statement of claim and went on to say that if the representations were made they were future matters and opinions not capable at law of constituting negligent or fraudulent misrepresentation.
9 The appellants pleading went on to set up agreements called the first agreement and second agreement. The first agreement is alleged in par 6 to have been made between the appellants as trustees for the H & P Annamalay Family Trust and the respondents as trustees for the Ng Investment Trust, Soon Peng Tan and Kim Kiok Yap as trustees for the Tan & Yap Investment Trust and the company.
10 The pleading then sets out what are said to be the oral terms of the agreement which included that the respondents (inter alios) would work for the company in the fudge business. Implied terms were pleaded in relation to the manner of carrying out that duty (par 6.3) and essentially to the effect that the respondents and others would at all times use their best endeavours to properly manage and carry on the fudge business for the benefit of the company and act in its interests and to provide information and to account.
11 It was pleaded that on 18 July 2001 the company was incorporated as a proprietary company limited by shares under the Corporations Act2001.
12 It was further alleged that on or before 10 December 2001, by agreement of all the parties to the first agreement, the first agreement was rescinded and a second agreement was made partly oral, partly implied and partly in writing dated 10 December 2001.
13 It is said that the oral terms of that second agreement provided for the respondents to commence work in the fudge business immediately, that the appellants and respondents would each work an equal amount of time for the company in the fudge business on a rostered basis and share equally the takings after payment of expenses. Relevantly it was also said that there were implied terms of this second agreement (par 13.3) in
(Page 5)
- similar, if not the same, terms as those set out in par 6.3 in relation to the first agreement.
14 It was also alleged that the first respondent owed duties as a director of the company by reason of the Corporations Act 2001.
15 The pleading sets out a further oral agreement which relevantly was that from 1 January 2003 the respondents would work 14 days and the appellants would work seven days on a roster to be agreed and that the remuneration from the company and the business be paid in a ratio of 2:1 in favour of the respondents.
16 It is alleged by the appellants that the respondents breached the terms of the second agreement in that they did not properly manage or carry on the business or act in the best interest of the company nor did they provide information nor account for goods used in the business or for all moneys received or expended in the business.
17 It was also alleged that the first respondent breached his duties as a director of the company.
18 The business was situated at Sorrento Quay and it was alleged that in July 2003 the Quay was substantially damaged by fire and the shop was storm damaged and by reason of the combined effect of the fire, storm damage and the conduct of the respondents, the turnover of the business decreased to a level where the company was not generating sufficient income to pay its debts and it ceased trading on or about 31 October 2003.
19 The appellants claimed damages for the value of the business and other losses and personal injury, details of which I need not go into.
The history of the proceedings
20 The action was commenced by writ on 31 December 2003 and on 25 March 2004 judgment was entered against the appellants in default of defence. On 23 April 2004 that judgment was set aside and on that date the defendants filed a defence and counterclaim.
21 On 1 June 2006 the respondents were given leave to amend their statement of claim in accordance with the minute dated May 2006 to which I have referred. On 15 September 2006 the defendants filed and served the amended defence and counterclaim, again, to which I have referred.
(Page 6)
22 The respondents sought further and better particulars of the amended defence and counterclaim by way of a request filed on 28 September 2006. That request dealt with and sought particulars of the allegations of breaches of the terms of the second agreement referred to in the amended defence and counterclaim. It also dealt with and sought particulars of the allegation of breach of duty on the part of the first respondent as a director of the company and, inter alia, going to the counterclaim for damages and other relief.
23 On 4 December 2006 Registrar Kingsley made an order in the following terms:
"The defendants to respond to the plaintiff's request for further and better particulars dated 28 September 2006 on or before 19 December 2006."
24 Thereafter there was correspondence or communication between the solicitors for the parties with a view to the appellants' re-amending the defence and counterclaim to include the particulars that were being sought and seeking time in which to do so. I will come to the correspondence where it is necessary to do so in due course. However, all that is necessary for me to deal with at this stage is that on 2 February 2007 the respondents by Chamber summons applied for a springing order in relation to the order made by Registrar Kingsley on 4 December 2006. In that summons the respondents sought an order that unless within 7 days of the date of the order the appellants complied with the orders made by Registrar Kingsley the amended defence and counterclaim dated 15 September 2006 be struck out and judgment be entered for the respondents with damages to be assessed. That application was accompanied by a certificate of conferral dated 2 February 2007 which set out the history leading up to the making of the application.
25 By a memorandum of consent dated 15 February 2007 the parties consented to an order on the respondents' summons dated 2 February 2007 but providing for 14 days for compliance with the order of Registrar Kingsley as opposed to the seven days sought in the summons. Pursuant to that consent a conditional order for judgment was made on 21 February 2007. That order was served upon the appellants' solicitors on 8 March 2007.
26 By summons dated 30 March 2007 the respondents sought judgment pursuant to the conditional order for judgment.
(Page 7)
27 By summons 10 April 2007 the appellants sought an order that the conditional order for judgment be set aside. The summons was amended to seek, in the alternative, an extension of time for providing a response to the request for further and better particulars.
28 That application was heard by the Deputy Registrar on 15 June 2007. He dismissed the application and judgment in accordance with the conditional order followed.
29 Notice of Appeal dated 18 June 2007 against the decision of the Deputy Registrar was filed in which it is sought to set aside the orders made by the Deputy Registrar and judgment entered pursuant to the conditional order for judgment. The appellants seek a further seven days in which to respond to the respondents' request for further and better particulars dated 28 September 2006. The Notice of Appeal provides for the costs of the appeal to be paid by the appellants in any event.
The appellants' argument
30 The appellants' application is supported by an affidavit sworn by the appellants' solicitor, Dara Singh ("D Singh"), on 2 August 2007. In addition the appellants seek to rely upon a joint affidavit made by them and sworn on 18 July 2007.
31 In relation to both of those affidavits the respondents have filed schedules of objections. I do not propose to deal with those objections at this juncture because of the ultimate disposal of this appeal it is not necessary for me to do so.
32 It is appropriate to deal with the joint affidavit of the appellants first. What comes out of that affidavit is that the appellants had received a copy of the plaintiffs' request for further and better particulars. They had been advised by their solicitors that some paragraphs of the amended defence and counterclaim should be struck out and that counsel's view was that the pleading should be amended and that further and better particulars of par 20 of the then existing defence and counterclaim ought to be provided to the plaintiffs (respondents).
33 The appellants deposed that they were not made aware of the order to provide further and better particulars on 4 December 2006 and accordingly did not intend to breach that order. They deposed that they left the matter in the hands of their solicitors and as to how it should be dealt with was left to their discretion. Their understanding was that their
(Page 8)
- solicitors would respond to the request for particulars in such manner as they deemed fit.
34 The appellants further depose that in January 2007 they were provided with a proposed re-amended defence and counterclaim which had been sent to the respondents' solicitors. They said that they thought that the proposed amendment took care of and responded to the respondents' request for further and better particulars and to their objections to the previous pleading. They were not asked for any further instructions.
35 They say that there were not aware of any objections to that proposed re-amended defence and counterclaim or that the Court had made the conditional order for judgment on 15 February 2007. They believed that all interlocutory issues had been dealt with. They were not aware that the amended defence and counterclaim would be struck out if their solicitors failed to respond to the request for further and better particulars.
36 They deposed that at no time did they ever intend to deliberately breach the order of the Court made on 15 February 2007 and deposed that they had a good defence to the respondents' claim and a valid counterclaim.
37 The affidavit of D Singh, after dealing with some of the history of the matter, deposes that he felt that the proposed re-amended defence and counterclaim responded to the respondents' objections to the amended defence and counterclaim and the request for further and better particulars.
38 As to the springing order, he confirmed that he attended on 15 February 2007 and consented to the springing order and for compliance within 14 days. He said that he consented because he believed that:
"4.3 (a) in the light of the Plaintiff's objections to the relevance of Sections 180, 181 and 182 of the Corporations Act, I had to reconsider the Amended Defence and Counterclaim.
(b) that an amendment to the Amended Defence and Counterclaim could answer all of the objections of the Plaintiffs and, at the same time, render a specific response to their Request for Further and Better Particulars unnecessary."
(Page 9)
39 At par 4.4 he deposed that after the springing order was made he reconsidered the respondents' request for further and better particulars in the light of the proposed re-amended defence and counterclaim so as to draft the relevant document in response.
40 At par 4.5 he noted that as a result of his reconsideration various matters but including, relevantly, that the request for further and better particulars had been made some two years and five months after the original defence and counterclaim had been filed in April 2004. He took the view that the plaintiffs were "improperly" requesting further and better particulars of the original defence and counterclaim "consequent upon the opportunity apparently provided to them by the amended defence and counterclaim". He referred to a decision of Dow Corning Australia Pty Ltd v Dirys [2001] WASCA 361 which he said did not assist the respondents and that they were not entitled to re-open a request for particulars of pleadings which have not been amended.
41 At par 4.6 he said that he had taken the view that he should re-consider the following:
"(a) perhaps I may have been generous in consenting to the springing order;
(b) that it was both proper and valid for me to take steps to stop the Plaintiffs progressing with what I thought would be ongoing interlocutory applications in relation to the pleadings;
(c) that the order made by Registrar Kingsley on 4 December 2006 was for the Defendants to provide a "response" to the Plaintiffs' Request for Further and Better Particulars dated 28 September 2006;
(d) the said order made by Registrar Kingsley was not inconsistent with a response stating that the Request for Further and Better Particulars was out of time and contrary to Order 20(13)(6) of the Rules of the Supreme Court;
(e) I considered that what was required was a "response" and the order was not specifically requiring the Defendants to "answer" the Further and Better Particulars (and I consider that if
- answers to the particulars were to be provided, that may well grant to the Plaintiffs the further opportunity to continue to challenge the pleadings);
- (f) as the Request for Further and Better Particulars dated 28 September 2006 related to paragraphs of the original Defence and Counterclaim which was served in April 2004, it was long out of time and the Defendants ought not provide answers to the Request unless specifically ordered by the Court and if so the Defendants should seek a suitable costs order in their favour for payment of all costs thrown away by reason of the late request for particulars, such costs to be payable on an immediate basis."
42 In that affidavit he said that he sent a letter to the plaintiffs' solicitors dated 1 March 2007. That letter was annexed and relevantly is in the following terms:
"The Defendants' response to the Plaintiffs' Request for Further and Better Particulars dated 28 September 2006 is that the Defendant has no legal obligation to respond to the said request as it is made out of time contrary to Order 29 Rule 11(6) of the Rules of the Supreme Court (sic).
Further the Defendants reserve their right to raise objections to the content of the Request if an application is taken out to seek leave to apply for particulars out of time."
43 D Singh deposed (par 4.8) that he had made an error in relation to the relevant order of the Supreme Court and that where he said "the Defendant has no legal obligation to respond to the said request" he meant to say "that the Defendant has no legal obligation to provide answers to the said request".
44 He deposed that he believed that that letter of 1 March 2007 contained an accurate recital of the defendants' (appellants) strict legal rights on which they were entitled to rely. He also said that he believed that the continuous request for further and better particulars was an unfair and unnecessary tactic on the part of the plaintiff and that that strategy should be brought to a conclusion sooner rather than later. If answered,
(Page 11)
- he said, the particulars were likely to raise further unwarranted objections to the pleadings.
45 Mr S Singh for the appellants rightly conceded at the outset that the responsibility for the striking out of the defence and counterclaim having occurred rested squarely with the appellants' solicitors and that a costs order might resolve the issues on the appeal.
46 Mr S Singh argued that the affidavit of D Singh showed that his views as to how he should respond to what was clearly a springing order obtained by consent should be described as inadequate and a misjudgement and "quite silly".
47 Nevertheless it was argued that D Singh's conduct was not contumelious. It was argued that whilst he was wrong, he was not dishonest and insolent.
48 Consistent with the concession made by counsel that the problems in this matter arise from the fault of the solicitor, counsel argued that the appellants themselves were not to blame and that the sins of the solicitor should not be visited upon them.
49 Having classified the actions of the solicitor as inadequate, a misjudgement or silly, counsel went on to analyse those actions. Counsel noted that D Singh had made his own decision, as expressed in his letter of 1 March 2007, of how to deal with the orders that had been made. It will be noted that according to his affidavit Mr D Singh deposed that he considered that what was required was a response which was not specifically requiring the appellants (defendants) to answer the request for further and better particulars. Counsel agreed that D Singh's approach to the word "respond" was untenable. To use the words of counsel:
"When one responds, one substantively responds, one actually answers the further and better particulars or the interrogatories or objects to them."
50 Counsel for the appellants then considered questions of prejudice to the parties. An affidavit in opposition to the appeal had been sworn by the first respondent on 16 August 2007. That affidavit dealt with a number of matters that, relevantly, touch on the respondents' migration to Australia and the requirements for obtaining permanent residency including having an interest in a business. The deponent went on to note that the respondents had invested most of their life savings to acquire a one-half share in the company which was incorporated to own and conduct the
(Page 12)
- business. The affidavit then went on to deal with matters of finance in relation to the running of the business and its income. The affidavit also noted, in brief form, the chronology in relation to the action.
51 On the question of prejudice, in par 24 of that affidavit the deponent deposed that the significant delay had caused the respondents' severe and prolonged stress and anxiety. It noted that not only had they lost most of their life savings, they had also had to endure much more stress and anxiety than they would have had to endure had the appellants not allowed default judgment to be entered against them and had they responded to the request for particulars within the times ordered by the Court.
52 Counsel for the appellants classified that prejudice as a non-specific general prejudice. Counsel also argued that not all of the delay in this action could be attributed to the appellants. Relying upon what was said in Tipperary Developments Pty Ltd v State of Western Australia [2004] WASCA 15, counsel argued that "a general prejudice caused by delay is not a matter of overwhelming significance".
53 As against that counsel for the appellants argued that there was overwhelming prejudice to the appellants if they were shut out from litigating this matter. He acknowledged that they may well have a remedy against their solicitors but that would place the appellants in a position of entering into a second litigation. However, he did acknowledge that this was not a case where there might be some issue between the appellants and their solicitors as to whether or not the solicitors have deprived them of a cause of action.
54 The appellants argued that the justice of the case requires that the appeal be allowed. In that regard reliance was placed upon what was said in Cropper v Smith (1884) 26 Ch D 700, namely, that the object of the courts is to decide the rights of the parties and not to punish them for mistakes they may make in the conduct of the cases by dealing otherwise and in accordance with their rights and Walthamstow Pty Ltd v Giovinazzo [2003] WASC 249 where Master Newnes (as he then was) said that the touchstone must always be what will best serve the interests of justice.
55 It was argued by counsel that given that the actions of the solicitor were not contumelious the appeal should be allowed. Later, in the argument, counsel dealt with the merits of the defence and counterclaim which I will come to when dealing with the arguments of the respondents.
(Page 13)
The respondents' arguments
56 Counsel for the respondents noted three specific areas which required attention for the purpose of deciding a matter such as the present. The first is that there was no adequate explanation for what had occurred in the disregarding of court orders; the second is that there is no seriously arguable defence on the materials before the Court; and the third that there is a real prejudice to the respondents occasioned as a result of the delays in this matter.
57 Counsel argued that it is the aggregation of those matters which militates against the granting of, as counsel described it, an extraordinary indulgence sought by the appellants.
58 Counsel for the respondents initially sought to deal with the question of the appellants' prejudice on a simple basis. He noted that the action was for misleading or deceptive conduct inducing the entry into the transaction pursuant to which the respondents (plaintiffs) purchased the shares in the company. He noted that the defence was a denial of the misleading or deceptive conduct. He referred to the transactions set out in the defence and counterclaim and argued that the breaches there alleged against the respondents in relation to the management of the company and the like were breaches of duties owed to the company which, if true, caused the loss or damage to the company. He said that the cause of action belonged to the company and not to the appellants and so the appellants themselves are not prejudiced by the defence and counterclaim being struck out. I will come later to deal with some more detail in relation to the propositions advanced in the defence.
59 Counsel for the respondents argued that the action of D Singh was indeed contumelious. He describes that solicitor as, notwithstanding the consent order leading to the springing order to compel provision of the particulars, then deciding to take the law into his own hands.
60 He noted the history of the matter which was one of the appellants not providing particulars but indicating that the appellants would provide an amended defence and counterclaim which would incorporate particulars. Within that background there was delay which led to the respondents' solicitors advising that failing provision of those particulars a springing order would be sought. The response from the appellants' solicitors was that the appellants proposed to file an amended pleading in lieu of a response for particulars.
(Page 14)
61 Such an amended pleading in the form of a minute was provided on 18 January 2007 and counsel argued that whilst there was some attempt to provide some particulars other particulars which had been sought were not provided. That became the subject of complaint from the respondents' solicitors culminating in a response on 23 January 2007 in which the respondents' solicitors warned the appellants' solicitors that application would be made without further notice for a springing order to compel provision of the particulars in accordance with the order of Registrar Kingsley made on 4 December 2006.
62 Counsel argued that it is the attitude taken by the solicitor for the appellants which demonstrated a refusal to comply with the order that had been made.
63 Notwithstanding the correspondence that had been entered into, in the letter of 1 March 2007 the appellants' solicitors said that the appellants (defendants) had no legal obligation to respond to the said request as it was made out of time.
64 A response was made by the respondents' solicitors on 6 March 2006 which pointed out that the appellants had consented to the order that had been made and that the letter of 1 March 2007 was not a response as ordered to be provided by the Registrar and agreed to be provided by the appellants in correspondence and as contemplated in the springing order.
65 Notwithstanding that letter, by further letter from the appellants' solicitors dated 7 March 2007, the appellants continued to assert that they had complied with the order made on 15 February 2007 by providing a response.
66 Counsel for the respondents then turned to the affidavit sworn by D Singh on 10 April 2007 in support of the application before the Deputy Registrar to set aside the conditional judgment. He argued that that affidavit demonstrates two things; firstly, that there never really was an intent to provide the further and better particulars and, secondly, it is particularly relevant not by reference to what it says but what it does not say before the Deputy Registrar at that time and which was now sought to be articulated in support of the appeal. On that point counsel noted that there is no hint of any of the present matters relied upon in support of the appeal in the affidavit in support of the application to set aside the conditional judgment used before the Deputy Registrar.
67 That affidavit, after dealing with the history of this part of the litigation deposed that the respondents had disregarded the response in the
(Page 15)
- letter of 1 March 2007 and proceeded to extract a conditional order for judgment; that the respondents' solicitors had put their own interpretation on the consent orders that had been made and noted that the respondents' solicitors had failed to respond to a letter of 7 March 2007 from the appellants' solicitors. That letter stated that the relevant order did not say that the appellants must "provide answers to the request", merely to respond. The letter suggested that the appellants had responded by the letter of 1 March 2007. The letter went on to say that if the respondents considered they were entitled to judgment, they were put on notice that that would be set aside as irregular and improperly obtained. The affidavit then went on to note the objection to the extraction of the judgment as the defendants had complied with the order made on 15 February 2007 by providing a response to the plaintiffs' request for further and better particulars.
68 Counsel argued that that demonstrates a clear intention not to comply with the original order. However, it was argued that the tone of the subsequent affidavit, that is to say the affidavit of D Singh sworn on 2 August 2007, raises for the first time, as counsel put it, "some sort of contrition or alleged misunderstanding which isn't evident in this (earlier) affidavit which, in my respectful submission, is tailored to deal with the reasoning of the Deputy Registrar when the Deputy Registrar did not extend the time for compliance".
69 It is important to note at this stage that the Deputy Registrar took the view that the appellants were "thumbing their nose" at orders of the Court. He also found that the appellants were a party to or knew about what was happening. He also noted that there was nothing before him to indicate what had transpired between the solicitor and the client which led to the then current outcome and inferred from the fact that the solicitor appeared on that day that there was not a conflict between the solicitor and the client. He was not prepared to categorise the appellants as innocent in the matter.
70 Counsel argued that if the appellants were not to provide the further and better particulars sought, it was important that any amendment to their pleading should properly particularise the claim that was being made and which was the purpose of the request for particulars.
71 Counsel then went to par 4.4 and par 4.5 of the affidavit of D Singh sworn on 2 August 2007. Those are the paragraphs in which D Singh deposes that he reconsidered the request and as a result of that reconsideration noted a number of matters. One of those matters that
(Page 16)
- D Singh alluded to was his belief that the request for particulars was out of time. Even if that was so, counsel argues that by consenting to the orders D Singh had waived any argument in that regard. I am prepared to accept that argument and I will not revisit that again in these reasons.
72 Counsel then noted that within par 4.5 and par 4.6 of that affidavit is the view that D Singh had taken of the way in which the respondents were dealing with this case and the possibility of further opportunity on the part of the respondents to continue to challenge the pleadings. He said that that clearly demonstrated an attitude by the solicitor not to comply with the order but to "take the law into his own hands". The attitude of the appellants' solicitors was further notable by the fact that there was not a proper explanation given to the Deputy Registrar consistent with the explanation now given for why the conditional order for judgment ought to be set aside. Further, it was pointed out that the solicitor waited until the last day of the springing order to send the letter of 1 March 2007 having already managed to secure, by way of agreement, an extension of the period from seven to 14 days before the order was made.
73 Counsel categorised D Singh's approach, namely to try not to encourage interlocutory applications as a contempt for the Court process in the light of the orders that had been made. He described the actions of D Singh as an "obstinate resistance" to the order.
74 As to the position of the appellants themselves, counsel for the respondent noted that the solicitors were their agent and they were bound by their solicitor's conduct. In any event it was argued, on the issue of prejudice, that there was no evidence before the Court that the appellants would have acted any differently had they been told of their solicitor's views or indeed of the springing order and its consequences. It was pointed out that the appellants were aware of the request for further and better particulars and aware of the fact that further and better particulars ought to be provided to the plaintiffs. Objection was taken to the affidavit of the appellants in which they argued that it was reasonable for them to conclude that everything that was required of them had been complied with by them. Whilst it is objectionable in that form, looking at it charitably, it could be read as the appellants thinking that they had done everything that was required of them.
75 Accordingly, counsel argues that there is no adequate explanation for what had occurred in the context of the disregarding of the Court orders.
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76 Moving to the second area which counsel identified as requiring consideration in this appeal, namely whether there is a seriously arguable defence, counsel turned to the mere assertion by the appellants in their affidavit that they believed that they did have a good defence. He pointed out that there were no facts deposed to to lead to that belief.
77 As opposed to that he referred to the affidavit of the first respondent sworn 16 August 2007 in opposition to the appeal. In that affidavit Mr Ng referred to the representations that were alleged to have been made and which formed the subject matter of the allegations in the statement of claim. To that affidavit Mr Ng annexed, as annexure "NYN 1", a document which he said was provided to the respondents in May 2001 and which is headed "The Fresh Fudge Factory". Counsel pointed out that under Business Plan 1 on that document it was said that one outlet would sell about 100 kilograms of fudge per week, yielding a gross profit of $124,800 per annum.
78 As against that counsel referred to an affidavit sworn by the first appellant on 6 April 2004 in support of the appellants' then application to set aside the default judgment. Annexed to that affidavit, as annexure "HA 10", were a number of financial statements for the years 1997 to 2002. It is not necessary for me to go through those in detail save to note that the income of the H & P Annamalay Family Trust which operated the business at that time was:
(a) in 1997 - $51,065.63;
(b) in 1998 - $58,098.00;
(c) in 1999 - $64,695.00; and
(d) in 2000 - $50,229.00.
79 Counsel pointed out that none of those figures were anywhere near the figure of $124,800 per annum represented and there was no explanation in relation to that.
80 Further on the question of whether or not there is an arguable defence counsel argued that whatever the claim may be, it is a cause of action that belongs to the company and should be brought by the company and not the current appellants; Johnson v Gore Wood & Co (A Firm) [2002] 2 AC 1 and Thomas v D'Arcy (2005) 52 ACSR 609.
81 Counsel for the respondents also noted that it appeared to be suggested in the defence that the respondents had contributed to the misfortune of the company by a number of omissions. However, he
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- argued that the real question was the cause of the loss or damage particularly where a plaintiff had been mislead into a business venture and then subsequently conducted the business in a way which was not in accordance with sound business practice. In this regard he relied upon the decision of Steytler J (as he then was) in Gardner Corp Pty Ltd v Zed Bears Pty Ltd [2003] WASC 13 in which his Honour noted that:
"It is irrelevant for the purposes of s 82 of the Act (Trade Practices Act) that an applicant's conduct was a cause of its loss unless the Court can find that the loss is divisible into parts and that the respondent's conduct did not cause one or more of those parts."
83 In response to this argument counsel for the respondents referred to the affidavit of D Singh sworn 2 August 2007 which has annexure "DS 12" being the further proposed re-amended defence and counterclaim which was "meant to address both the plaintiff's objections in relation to the amended defence and counterclaim and also the request for further and better particulars of the amended defence and counterclaim". Counsel noted that par 6.3 which had previously contained the implied terms of the first agreement, which preceded the formation of the company, were deleted from the claim. Accordingly, as counsel argues, it is difficult to see how these implied terms, assuming they exist, are retained to support the claim that there were "external contractual duties owed between the parties".
84 Further in answer to the appellants' submissions, counsel for the respondents noted that even if there were some shareholder type agreements between the parties those agreements themselves were induced by the misleading and deceptive conduct. It was argued that this trade practices type claim is a complete answer to the counterclaim. It
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- was argued that in effect it is a "no transaction case" whereby the plaintiffs are to be restored to the position they would have been in had the misleading or deceptive conduct not occurred. By that it is said the plaintiffs would not have entered into the arena at all.
85 It is further to be noted that the implied terms that are retained in that re-amended defence and counterclaim are to be found at par 13.3 and appear to be for the benefit of the company in any event.
86 On the issue of the interests of justice, and linked with that prejudice, counsel noted that the respondents deposed to severe and prolonged stress and anxiety. They were migrants who had lost most of their life savings and now have to endure the costs associated with the litigation. They are in a position of hardship. Further, counsel argued that prejudice is normally inferred by the courts simply by reason of delays which have been occasioned, in this case by the appellants.
The legal principles
87 It is trite that even though judgment has been entered upon proof of default following a springing order, an extension of time to comply with the order may be granted: FAI General Insurance Co Ltd v Southern Cross Exploration NL (1988) 165 CLR 268. The real question that arises is as to in what circumstances the Court's discretion will be exercised so to do.
88 In "Civil Procedure Western Australia", Seaman at [43.0.19], the learned authors note that the cases dealing with the exercise of the discretion must be approached with caution because the discretion must now be exercised in the light of the principles and objects of positive case flow management contained within the rules. It is there noted that in the interests of justice it cannot be proper for a plaintiff pursing an action which has merit simply to disregard orders of the court and expect to be indulged. It is fundamental, in the interest of justice, that the parties comply with orders and if plaintiffs wish to pursue actions which have merit they must do so expeditiously and must comply with orders of the Court when they are made: Chesson v Green [2002] WASCA 67. The same can equally be said of defendants in respect of an arguable defence or counterclaim which may have merits.
89 The applicable principles were, with respect, clearly set out by Master Newnes (as he then was) in MTQ Holdings Pty Ltd v Lynch [2007] WASC 49 there the learned Master set out the fundamental and starting principle, namely that peremptory orders are made to be
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- obeyed and generally only made when the party in default has already failed to comply with the rules of court and with an order of the Court. He noted what was said in High Tech Information Systems Limited v Coventry City Council [1997] 1 WLR 1666:
"An 'unless order' is by its nature intended to mark the end of the line for a party who has failed to comply with it and any previous orders of the Court".
"You just thumb your nose at the Court's order and then come along and seek an indulgence. Why should I grant that?"
Later he said:
"I am not prepared to run civil litigation on the basis that lawyers for parties comply with orders if and when it suits them, and that message has to be sent clearly, and if that is sent by way of entering a judgment against the clients of the lawyers of those parties, then so be it."
91 Whilst recognising that these are comments made by the learned Chief Justice during the course of an exchange with counsel and do not carry the same force as ratio in a considered judgment, they nevertheless express very clearly the fundamental principle referred to by Master Newnes set out above.
92 In his decision the learned Master dealt with the need to exercise the power to set aside the judgment cautiously and noted the judgment in the Court of Appeal in Re; Jokai Tea Holdings [1992] 1 WLR 1196 and in particular the judgment of the Vice-Chancellor. When speaking of the penalty for disobeying an order he noted (at 1202):
"Orders of the court must be obeyed and that a litigant who deliberately and without proper excuse disobeys such an order is not allowed to proceed. The rationale of such penalty being that it is contumelious to flout the orders of the court, if a party can explain convincingly that outside circumstances account for the failure to obey the peremptory order and there was no
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- deliberate flouting of the court's order, his conduct is not contumelious and therefore the consequences of contumelary do not flow."
93 The learned Master in considering Jokai noted that it was clear that a party seeking to avoid a springing order must establish both that there was not an intention to flout the order and that the failure to comply with it was due to circumstances outside the parties control.
94 The learned Master further noted that a failure to comply with the springing order is an egregious breach. A springing order is intended to be the last opportunity offered to a party to put its case in order. He also noted that a relevant consideration was whether the defaulting party has a reasonably arguable case on the merits.
95 With respect, the learned Master's distillation of the principles would appear to be a fair and accurate statement.
96 In Magenta Nominees Pty Ltd v Bonini [1999] WASCA 249 Wallwork J noted at [57]:
"… 'contumelious disregard' raises different considerations to those where there is a genuine misunderstanding, or perhaps an inadequacy in the handling of the matter by the solicitors."
97 In Osgood v Wham [2007] WASCA 178 at [77] the Court noted:
"Contumelious conduct occurs when there has been an intentional or deliberate flouting of the court's order without explanation" -
- and further noted (citations omitted) contumacy was defined as "wilful and obstinate resistance or disobedience to authority" and that the "adjective 'contumelious' conveys the sense of insolent, dishonest or opprobrious behaviour".
98 In Jokai the judgment of the Vice-Chancellor contains the conjunctive "and" when considering the exercise of the discretion, that is to say where a party can explain convincingly that outside circumstances account for the failure to obey the peremptory order and there was no deliberate flouting of the Court's order. In Chesson v Green [2002] WASCA 67 the Full Court noted, with approval, what was said in Jokai and in particular at [12] dealt with that conjunction of circumstances relevant to the exercise of the discretion.
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99 In that case the Court also noted that delay causes general prejudice to an opponent even if no specific prejudice is demonstrated and in that case (at [30]) the prejudice attendant upon the extension of time would involve the further costs incurred which the party would have to meet.
100 There was some discussion during the course of the hearing of the current appeal of the perceived tension between, on the one hand, it being fundamental to the interests of justice that the parties comply with court orders and, on the other hand, that it is just as fundamental to the interests of justice that a meritorious claim (or defence) should be brought on for trial. Be that as it may, it seems to me that there is not necessarily a tension between those two fundamental issues. They run parallel. They are both matters to which the court must have regard. No matter how meritorious a claim is, at the end of the day it is in interests of justice that parties do adhere to the rules which govern the way in which cases are to be brought and the orders made by the Court. As was noted by the Chief Justice in Kellogg Brown & Root(supra), the courts cannot run civil litigation on the basis that lawyers for parties comply with orders if and when it suits them.
Application of the principles to the present case
101 The appellants argued that there is a satisfactory explanation for the appellants' non-compliance with the orders. If that were the case the appellants, relying upon what was said in Osgood v Wham (supra), claim to be entitled to the exercise of the discretion in their favour. However, in Osgood v Wham theCourtnoted that that delay in that case, or part thereof, arose by reason of the party awaiting a report. In that case, in reference to awaiting the deliberations of the Legal Aid Commission, the Court said:
"It is an entirely different context, however, when counsel is waiting, as in the instant case, for third parties, over whom he may have little influence, to do things such as provide expert reports necessary for the further prosecution of the claim regularly instituted within time."
102 Counsel for the respondents argued that that was not the position in the present case. He argued that there were no extraneous circumstances. Counsel for the appellants suggested in reply that the actions by the appellants' solicitors may be classified as extraneous circumstances. With respect I do not agree. If that were the case, then extraneous circumstances would be found in almost all of the cases involving a failure to comply with a springing order. Even if that were not the case, I
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- accept the argument of the respondents that the solicitor is the agent for his client and the client is bound by the actions of the solicitor. On that basis the actions of the solicitor could not be considered to be an extraneous circumstance.
103 Given the conjunctive approach in Jokai, that should be sufficient to deal with the matter. However, it is necessary for me to deal with some of the other aspects relating to this matter. The other part of the conjunctive approach in Jokai is whether or not a party can demonstrate that there was no intention to ignore or flout the order concerned.
104 During the course of the hearing I indicated that I did not accept D Singh's interpretation of the word used by Registrar Kingsley in his order, namely "respond", and, as I have noted, counsel for the appellants readily accepted that that argument was untenable. It seems to me quite clear that the order required the appellants to provide answers to the request.
105 In considering the explanations given by D Singh in his affidavit I have come to the conclusion that he did intend to ignore the order that had been made. This is apparent when considering his "re-consideration" of the request for further and better particulars. He formed a view (wrongly I may say) that the request was out of time and as a result the respondents were not entitled to raise the request. Nevertheless he was very conscious that an order for particulars had been made and according to him he had intended to provide those particulars, albeit by way of a further re-amended defence and counterclaim. Not only was he aware of the order that had been made, he then re-considered his position in consenting to the springing order. He describes himself as being generous in so consenting. He then formed the view that he ought to stop the plaintiffs progressing with an interlocutory application and that according to him a sufficient response was to refuse to provide the particulars.
106 All of that demonstrates to me that even if categorised as "inadequate", "a misjudgement" or "quite silly" it does not detract from the fact that D Singh decided not to comply with the order. That is not a genuine misunderstanding or an inadequacy in the handling of the matter by the solicitor (Magenta Nominees Pty Ltd v Bonini) or inadvertence (MTQ Holdings);it is more in the nature of a "wilful and obstinate resistance or disobedience to authority".
107 Whilst it may be a case of closing the stable door after the horse has bolted, if D Singh had considered himself to be over-generous and
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- genuinely believed that the respondents were not entitled to request particulars at that late stage, the appropriate course would have been to apply accordingly. All of the material now before me should have been put before the Deputy Registrar but it was not. What came before the Deputy Registrar was an application after the order had sprung to set aside the judgment or to extend the time for compliance therewith. It is true that the argument that the request was out of time was advanced before the Deputy Registrar, but, in my opinion, it was advanced too late for the reasons noted by the Deputy Registrar.
108 The Deputy Registrar found that the letter of 1 March 2007 was contumelious and that the appellants (defendants) had taken upon themselves the view that they were not required to comply with the order and would not do so. As the Registrar put it, the appellants had thumbed their noses at the provisions of the order which had been made; with respect I agree.
109 When considering the interests of justice I do have regard to whether or not an arguable case has been made out. Where a party is seeking to avoid a judgment, in this case on a springing order, it is not sufficient merely to point to the terms of the pleading intended to be used by that party. There needs to be something more in the way of proof of the facts relied upon so as to excite the discretion of the Court. In the current case the respondents have put up evidence which supports or appears to support the claim that misrepresentations were made leading to their inducement to acquire an interest in the business. Indeed much of the material which supports that position comes from the first appellants' own affidavit sworn on 6 April 2004 in support of the then application to set aside the default judgment. There is no explanation for the disparity between those accounts which are there referred to and the business plan annexed to the affidavit of Mr Ng sworn in opposition to the appeal.
110 In the end there is absolutely no evidence before the Court to support that the appellants have an arguable defence and counterclaim herein.
111 Whilst there may be some argument for saying that there might be some obligations between the parties individually outside those owed to the company, again there is no evidence to support the same.
112 Further, there is nothing before me either in the way of evidence or argument to overcome the compelling argument made by counsel for the respondents that on the face of it, on the evidence that is before the Court, this is a no transaction case. If the plaintiffs' case is made out, and I
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- repeat there is no cogent evidence by way of a defence to that case, then anything that followed the misrepresentation would not, absent any evidence or proper explanation, result in any liability on the part of the respondents to the current appellants.
113 Accordingly, I am not satisfied that the appellants have made out a good and arguable defence or counterclaim.
114 Finally, in relation to the issue of the interests of justice I am satisfied that whatever the outcome of this appeal there will be some prejudice to the losing party. I accept the argument that to some extent the prejudice to the respondents is a general prejudice. The fact that the respondents have lost their life savings arises out of the matters said to constitute the cause of action rather than the delay.
115 So far as the appellants are concerned there is clearly prejudice to the appellants in the sense that the appellants have lost the opportunity to argue their case. However, as I have noted there is very little before me to suggest that the defence and counterclaim that they wish to mount has any real merit. If that is the case, then it is difficult to see where the prejudice lies in not being allowed to continue to litigate an unmeritorious claim. Further, in any event, the appellants' solicitors have accepted responsibility for the current position. Without having to decide that matter, if there was some merit in the defence and counterclaim, the way forward would be open for the appellants to take appropriate action against their solicitors.
Conclusion
116 For the reasons I have expressed I am of the view that the order of the Deputy Registrar, in dismissing the appellants' summons to set aside the conditional order for judgment or to extend the time to comply therewith, was entirely appropriate and I would dismiss the appeal.
117 I will hear the parties on the appropriate orders and as to costs.
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