Australian Securities Commission v MacLeod

[1994] FCA 901

901 q t

JUDGMENT No. .....-........ l - . .

CATCHWORDS

PRACTICE AND PROCBDURE - Where final judgment sought against respondent pursuant to 0 10 r 7, applicant must support motion for judgment with material in legally admissible form

sufficient to prove: Court's jurisdiction, circumstances

justifying grant of discretionary remedy and facts necessary to prove entitlement to re1 ief claimed under judgment applied for.

orwratione - S 1323

rt of A - Act 1976 - s 4

Pedetal - 0 l r 4, 0 4 rr 1 and 6, 0 10, 0 10 r 1, 0 l0 r 1(2), 0 10 r 7, 0 10 r 7(l)(b), 0 11 r 13, 0 11 r 23, 0 14 r 9(3), 0 15 r 16, 0 16 r 9, 0 19 rr l(2) and 2(1), O 3 3 r 2 , O 3 3 r 3

-V	(1990) 27 F.C.R.
388 Considered

S Ptv. L& v m 0 Ptv. LtdL (1992) 36 F.C.R.

&-v	of	Rev-	(1890) 25 Q.B.D. 65
Referred to

v ppie (1951) 84 C.L.R. 362 Referred to

Pearce v Butfon (1986) 8 P.C.R. 408 Referred to

v m (1888) 58 L.T. 710 Referred to

v loo I n d u a t r i e e P t v . L t d . (1986) 66

-

A.L.R. 537 Referred to

m v	[l8921 2 Ch. 135 Considered
Brisbane

U THE COURT OF A U S T W ) No. QG 3011 of 1992

DIS- 1

- 1

I N THE MATTER OF ROBERT JAMES MACLEOD AND OTHERS

Applicant

-

F i r s t Respondent

A.C.N. 001506332

Second Respondent

STUD-

A.C.N. 051750442

Third Respondent

S PTY. m

A.C.N. 055168128

Fourth Respondent

PTY. LTe,

A.C.N. 055168155

F i f t h Respondent

Drummond J

10 November, 1994

Brisbane

1. The matter is adjourned t o Tuesday, 22 November,

   1994 a t 9.00 a.m.

R)TE:	Settlement and  e n t r y of orders is d e a l t with i n
Order 36 of t h e - .

OF AUSTRALIB ) No. QG 3011 of 1992

)

1

IN THE MATTER OF ROBERT JAMES MACLEOD AND OTHERS

Applicant

-

First Respondent

A.C.N. 001506332

Second Respondent

A.C.N. 051750442

Third Respondent

A.C.N. 055168128

Fourth Respondent

- A.C.N. 055168155

Fifth Respondent

!22UJll:	Drummond J
RkfiQ:	10 November, 1994
Z h Q :	Brisbane

This is an application by the applicant in the

proceedings for judgment in the action pursuant to 0. 10, r.

7(l)(b) the pederal Court against all respondents.

A defence has been filed by all the respondents, but they have failed to comply with a direction given pursuant to

0. 10, r. 1 that required them to file and serve further

particulars of this defence by 20 October, 1993. A direction to furnish these particulars was first given in May 1993. This direction was by consent and fixed a date for "the respondentsm to file and serve the particulars. Subsequently, objection was taken by the respondents to providing some of the particulars and then, by a series of directions, the last being made on 15 September, 1993, time for providing the other particulars was repeatedly extended, the last date so fixea being 20 October, 1993.

What purported to be a response by the reapondents to this direction was filed and served on 21 October, 1993. The respondents' solicitor who appeared before me had only just been retained. His is the third firm of solicitors which the respondents have engaged, in turn, in these proceedings. He conceded that there was a failure by the respondents to

comply with the direction in question insofar as the demands	in paragraphs 7, 9(b) to (e), 10(b) to (d), ll(b) to (e),
13(a), 14 and 16(b) to (d) of the request for particulars had not been answered. He submitted, however, that, in relation to almost all of these demands, the applicant knew or had the means, in the form of documents in its possession, of ascertaining the facts and this was a discretionary consideration against granting the judgment sought. However, the allegations in the defence in respect of which particulars
were directed include assertions that the admitted use by the first respondent of the second respondent's funds was a use he was entitled to make: the respondents were here required to identify, by appropriate particulars, the basis of this entitlement. Other demands require the reepondents to identify arrangements whereunder they allege that the second respondent in fact received investment moneys from others while denying the applicant's allegations that the second respondent issued certain invitations to the public to invest moneys with that respondent. The applicant does not acknowledge that it has readily available to it the information sought by the particulars and, in any event, in the circumtances of this case, it is I think important for the respondents to make clear in the respects required by the particulars they have been directed to provide, what their position is.
In my view, the history of things leading up to the direction of 15 September, 1993 suggests that the respondents
applicant to get the matter ready for trial. They, and more have no intention of co-operating with the Court and the
particularly the first respondent, who is the person who controlled each of the corporate respondents until the applicant intervened and had receivers appointed pursuant to S. 1323 the wrati-, have been playing for time. The inference that the respondents have no interest in coming to trial is reinforced by the last minute retainer of yet another firm of solicitors and, more significantly, by the fact that the first respondent, using a false name, left the country on 20 August, 1993 by a subterfuge and without going through Department of Immigration departure checks. The evidence shows that on 4 November, 1993, he entered the United States on his own passport, which he kept, despite the order made in these proceedings on 29 June, 1992 requiring him to deliver it up to the Court. At an early stage of the proceedings, he falsely told the Court that he did not have this passport. There was good reason for his clandestine departure: on 11 )larch, 1993 I ordered that he be jailed for a total of six months for contempt of orders made in these same proceedings. The judgment of the Pull Court dismissing his appeal against theae sentences was delivered on 13 August, 1993. A warrant for his arrest has been issued. Apart from the one submission I have referred to, his solicitor conceded that he could not identify anything at all in the first respondent's conduct which would entitle him to the favourable exercise of the discretion to keep his defence alive. There is nothing in the material before me that gives any of the other respondents any
activities of the first and second respondents. such claim either. The particulars sought relate only to the
The particulars directed to be given are of allegations made in the defence by all respondents. The consent direction of 28 May, 1993 and all subsequent directions required all respondents to provide the particulars. On the allegations in the statement of claim, the first respondent controls each of the other four respondents; while the main case made out in the statement of claim is in respect of the conduct of the first, second and third respondents, it is alleged in the alternative that all four corporate respondents have breached various provisions of
the m (New South Walesl Codg, the -ratLoneI& and
the s t i e s fndurtries lNew South Wales) CO& in respect of the film investment business carried on by the first respondent by means of the corporate respondents.
The applicant is entitled to judgment against all the respondents pursuant to the rule.
The applicant's next submission is that it is unnecessary for the applicant to put before the Court evidence proving the facts necessary to make out each of the causes of action sued upon. The matter is complex and voluninous evidence will be necessary if the applicant has to do this. In the expectation that its eubmission here would be rejected, the applicant filed material sufficient to prove its case
against each respondent.

Order 10, rule 7 provides:

(1) Where a party fails to comply with an order of the Court directing that party to take a step in the proceeding, any other party may move the Court on notice -

(a)	.. .
(b)	if the party in default is a respondent - for judgment or an order against him; or

(C) ..."

The expression "judgment" in this rule does not have
the meaning given to that term by S. 4 the Federal Court of
Act 1976 because it is used in the rule to
distinguish judicial determinations in the form of judgments
from orders, i.e., other judicial determinations. The term
"judgment' in its technical sense means a decision that

concludes an action while an order is any other judicial

. .

determination. ! m & K v u

(1890) 25 Q.B.D. 465 at 466; PpLe V m (1951) 84 C.L.R. 362
at 372.

This rule (and other Federal Court rules which permit the making of the same orders where a respondent is in default in complying with other procedural requirements, e.g., 0. 11, r. 23; 0. 15, r. 16 and 0. 16, r. 9) differs from provisions found in the rules of other Courts which are derived from the post-Judicature Act rules of the English High

plaintiff's claim was for a liquidated demand, the rules of	Court. In certain classes of action, e.g., where the
other Courts allowed the plaintiff to enter judgment by the ministerial act of a court official and without the intervention of the Court; but the general rule empowered the entry of such judgment in default as the plaintiff appeared entitled to on his statement of claim. Initially there was some uncertainty as to whether on an application under English
0. 27, r. 11 (the rule permitting judgment in default of
defence), proof of the facts alleged in the statement of claim was required. It appears that late in the 1 8 8 0 ~ ~ a meeting of the judges resolved that on such an application, the Court should not receive evidence but should give judgment on the statement of claim alone: see v (1888) 58 L.T. 710. Prom this time, it was firmly established that on a motion for judgment in default, the plaintiff was not required (or entitled) to produce any evidence in support of the
allegations in the statement of claim. See v Thomaa
[l8921 2 Ch. 135, where Bowen LJ identified the justification for the practice: the defendant's failure to plead amount,d to an admission of the facts in the statement of claim. The English practice thus proceeded on the basis that evidence was required on a motion for judgment in default of defence, but that that evidence was to be found, and found only, in the defendant's admission of the facts alleged in the statement of claim constituted by his failure to plead to them.

In m Ptv. Ltd. v IAdv-

(1990) 27 P.C.R. 388, it was said by Wilcox and Gummow JJ at

394 and 395: 

"... this Court has a system of case management

which is different from the procedures adopted in any of the Divisions of the High Court of

Judicature. . . .

. . . Prom that circumstance we extract two

propositions. First, the fundamental differences in procedure render inapplicable most, if not all, of the principles evolved by the English courts in relation to their own procedures. Secondly, the existence of a case management system within this

Court is the backdrop against which the relevant rules must be considered and applied."

Their Honours went on to observe that 0. 10 was the foundation of the Court's case management system.

It is clear from the rule itself that an application
under 0. 10, r. 7(l)(b) must be made in accordance with 0. 19,

i.e., by a motion "supported by affidavit setting forth the

facts relied upon" - r. l(2) - served on the respondent - r.

2(1). Order 19, rule 1(2), in requiring proof by affidavit "setting forth the facts relied upon", suggests that, where judgment is sought pursuant to 0. 10, r. 7, the facts to be net forth in the applicant's affidavit include those relied upon ar showing that it is entitled to judgment. It is difficult to see how, in the circumstances of this case, the applicant can complete its entitlement to judgment in the proceedings without putting sufficient evidence before the Court to make out each element in each of the causes of action it sues upon: it is not possible to infer in the face of the	denials in the defence that the respondents' conduct is such	as to amount to admissions of the untried facts alleged
against them. Most of the allegations in the applicant's statement of claim thus have no status other than that, viz., as mere allegations. Of course, insofar as some of these allegations are admitted in the respondents' pleading, then they constitute evidence upon which the applicant can rely in support of the present application.
Order 10, rule 7 is available to authorise the giving of judgment terminating the proceedings wherever a party has failed to comply with a direction requiring the party to take a step in the proceeding. It is apparent from
0 . 10, r. l(2) that judgment can be sought under r. 7 in an
extremely wide range of circumstances; such judgment can be sought, provided a direction has been given and default has
been made in complying with it, at any stage of the
proceedings, i.e., from any time after the commencement of the proceedings, in accordance with 0. 4, rr. 1 and 6, to a time when pleadings are closed, aiscovery and inspection is complete and witness statements have been exchanged. Although juriadiction to give judgment under r. 7 can thus be enlivened at any stage of the proceedings before the trial caplmences, by default in complying with a direction, whether the juriadiction will be exercised in a given caae will of course depend upon a range of other considerations. But if there is clear evidence of a determination on the part of a respondent at any stage of the proceedings not to co-operate in getting
the matter ready for trial, then it may well be appropriate to terninate the proceedings by judgment under the rule.
In Hv D i s u t o r s Ptv. Ltd. v Q&f@ Ptv. LtdL (1992) 36 F.C.R. 578, the Court held that 0. 11, r. 13, which deems an allegation of fact made by a party in his pleading to be admitted by the opposite party unless it is traversed by that party in his own pleading, has no application in a case where no defence has been filed or served. Gray J, at 588, said:

" . . . There is no equivalent in 0 10, r 7, or in 0

11, r 23, to the m r d s 'such judgment shall be given as, upon the writ or statement of claim, the Court or a Judge shall consider the plaintiff to be entitled to'. The procedures in this Court differ from those in courts whose rules were based on the English rules of court. There are no provisions in this Court for the automatic entry of judgment in default of appearance. . . . There is no provision for the automatic entry of judgment in default of delivery of a defence. Pleadings are filed as well as served. Order 10 of the Rules provides for directions hearings. The practice of the court is that the interlocutory stages of proceedings are conducted according to directions given at one or more directions hearings. If an occasion arises for a party to move for judgment under 0 10, r 7, or 0 11, r 23, 0 19, rr 1 and 2 require that the motion

be by notice and be supported by an affidavit,

setting forth the facts relied upon. This Court is a court of limited jurisdiction. No judgment can be given unless the Court is satisfied that it has jurisdiction. At the very least, an affidavit supporting a motion for judgment, where no defence has been filed and served, would need to provide evidence on which the court could be so satisfied. I M inclined to the view that affidavit evidence proving the facts necessary to entitle the party moving the court to judgment would also be necessary."

I respectfully agree with his Honour's obiter
remarks. Where final judgment is sought following default by

the defendant in compliance with a direction or some other

procedural step, there being no specific rule that enables the	applicant to enter up judgment without coming before the
Court, the applicant must prove his entitlement to the judgment claimed by evidence sufficient to prove, among other things, the facts upon which his cause of action is based. As I have said, the original English rule dealing with the obtaining of judgment in default of defence proceeded on the assumption that evidence was required to prove the plaintiff's
entitlement to the judgment, but that this requirement was
satisfied by the admission by the defendant of the facts alleged in the statement of claim constituted by his failure to plead to them.
In my opinion, where final judgment is sought against a respondent pursuant to 0. 10, r. 7(l)(b) on the ground that he is in default in complying with directions given under the order, the applicant must support its motion for judgment with material in legally admissible form sufficient to prove not only that the Court has jurisdiction in the matter and that the circumstances are such as to justify the grant of this discretionary remedy, but also all the facts necessary to prove its entitlement to the relief claimed under the judgment applied for. An application for "judgment", rather than for "an ordern, pursuant to 0. 10, r.
7	( l) (b) is an application for final rather than interlocutory
relief. It is therefore a proceeding which constitutes a "trialn within the meaning of that term in 0. 1, r. 4. It follows that all facts must be proved by direct, as opposed to hearsay, evidence, since 0. 33, r. 2 has no application to Such a proceeding. See m r e a Ptv, LtdL v W a t e m Industries
Ptv. L & ' (1986) 66 A.L.R. 537 at 539.
I recognise that in theory to so hold means that a recalcitrant respondent will be able to put an applicant for judgment to proof by appearing on the application and cross- examining, after notice has been given requiring the attendance of the applicant's witnesses; such a proceeding

could become very protracted indeed. But, as with all procedures enabling a party to bring an action to an end summarily, judgment can only properly be applied for under the rule in a clear case. In such a case, it will generally be fairly plain whether the respondent who wants to cross-examine all and sundry i8 engaging in delaying tactics: the Court has power to deal with that. For example, under 0. 14, r. 9(3), the Court has power to allow an applicant to rely on an affidavit even though the deponent has not attended for cross- examination despite appropriate notice and, notwithstanding the generally restrictive approach the Court has taken to 0. 33, r. 3, as to which see pearce v Button (1986) 8 P.C.R. 408, it will often be appropriate on such an application for judgment to exercise in favour of the applicant the dispenming power conferred on the Court by 0. 33, r. 3.

The applicant has filed material sufficient to
entitle it to final judgment in the action even though I have

ruled that it must prove all the material facts necessary to

establish that entitlement.

The applicant must bring into Court a draft of the judgment which it seeks. It seems to me appropriate for final orders to be made at least in terms of paragraphs 1, ZA, 3A, 4 and 4A of the amended application filed 11 March, 1993. The applicant is also entitled to an order against the respondents for the payment of its costs of and incidental to the proceedings. I do not know whether the receivers wish to

apply for an order in relation to their remuneration or whether they are content to allow that to await the finalisation of their receivership.

I certify that this page and the preceding

12 pages are a true copy of the

reasons for judgment herein of the

Honourable Hr. Justice Drumnond.

Associate:

M%

Date:	10 November, 1994
Counsel for the applicant:	E.M. O'Reilly
Solicitors for the applicant:	Australian Securities Commission
Solicitors for the respondents:	Corrs Chambers Westgarth
Date of Hearing:	6 December, 1993