Deruniec v McDonald
[2018] FCA 843
•25 May 2018
FEDERAL COURT OF AUSTRALIA
Deruniec v McDonald [2018] FCA 843
File number(s): QUD 207 of 2018 Judge(s): GREENWOOD J Date of judgment: 25 May 2018 Catchwords: PRACTICE AND PROCEDURE – consideration of an application to dismiss the proceeding pursuant to rule 16.21 of the Federal Court Rules 2011 (Cth) Legislation: Personal Property Securities Act 2009 (Cth), ss 181 and 182
Federal Court Rules 2011 (Cth), r 16.21
Date of hearing: 25 May 2018 Date of last submissions: 25 May 2018 Registry: Queensland Division: General Division National Practice Area: Commercial and Corporations Sub-area: Corporations and Corporate Insolvency Category: Catchwords Number of paragraphs: 19 Solicitor for the Applicants: The First Applicant appeared in person Solicitor for the Respondents: Delaneys Lawyers ORDERS
QUD 207 of 2018 BETWEEN: DAMIEN DERUNIEC
First Applicant
USBE.CO PTY LTD
Second Applicant
AND: BRONWYN MCDONALD NEE RICHIE FAMA
First RespondentLOVE NOTES PTY LTD
Second Respondent
THE TRUSTEE FOR LOVE NOTES TRUST
Third Respondent
JUDGE:
GREENWOOD J
DATE OF ORDER:
25 MAY 2018
THE COURT ORDERS THAT:
1.The originating application and statement of claim filed 6 April 2018 are dismissed.
2.The applicants pay the respondents’ costs of and incidental to the application.
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
EX TEMPORE REASONS FOR JUDGMENT
GREENWOOD J:
The proceedings before the Court today involve an interlocutory application made by the respondents to the principal proceeding, Ms Bronwyn McDonald, Love Notes Pty Ltd and the Trustee for the Love Notes Trust. The interlocutory application seeks an order that the originating application and supporting statement of claim be dismissed or struck out on a number of grounds. The grounds agitated are that the application and statement of claim are frivolous and vexatious; ambiguous; likely to cause embarrassment and delay in the proceedings; fail to disclose reasonable grounds and a statutory basis for the orders sought; and, the proceeding is an abuse of process. That is the scope of the application that is made today.
The originating application commencing QUD 207 of 2018 was filed on 6 April 2018. It is supported by a statement of claim also filed on 6 April 2018. The applicants in the principal proceeding are Mr Damien Deruniec and USBE.co Pty Ltd. The principal proceeding came on for directions before the Court recently and an email was received by the Court from Mr Deruniec’s father. In that email, the first applicant’s father advised the Court that Mr Deruniec was incarcerated in a particular facility and would not be able to attend the directions hearing. A request was made that the matter be adjourned. The matter was a directions hearing only and it was appropriate to review the matter and make decisions about what should happen with the matter having regard to the nature of the originating application, the statement of claim and the circumstances relevant to the matter generally.
The Court formed the view that it was appropriate to adjourn the matter until today to be heard and determined on the question of whether the originating application should be struck out and also to provide Mr Deruniec with an opportunity to say some things about the interlocutory application from his present place of incarceration.
Originally, the Court intended to undertake this process through a video‑link. However, unfortunately, the images through the video‑link have not been able to be established due to incompatible systems. Nevertheless, there is a very clear audio‑link and some discussion has taken place, as reflected in the transcript, between the Court and Mr Deruniec, and, of course, the parties through the medium of the link. I should note that Mr Deruniec has made submissions that due to the difficulties of his incarceration he requests that the interlocutory application to strike out the originating application be adjourned to enable him to obtain legal advice.
I understand, of course, and appreciate that a person who is suffering incarceration has certain limitations upon their capacity to respond to various things. However, the request that is made of the Court by Mr Deruniec is that the interlocutory application be adjourned until a date sometime after 18 August 2018. Since the matter was filed on 6 April 2018, that request amounts to an invitation to put the matter off for about four and a half months to enable Mr Deruniec to obtain legal advice about the issues on the interlocutory application. The proceedings, of course, are his own proceedings in any event and they have a certain history about them. The respondents say that the originating proceedings are brought for an ulterior purpose and represent an abuse.
For the moment, what I propose to do is examine the originating application and the statement of claim and determine whether or not it is of such a character that it should be struck out or dismissed in the exercise of the Court’s discretion. In deciding that question, I am not so much influenced by the notions that there may be ulterior purposes in the filing of this application. I should note that the respondents assert, of course, that Mr Deruniec has commenced these proceedings in order to frustrate some administrative proceedings in relation to particular security interests registered pursuant to the provisions of the Personal Property Securities Act 2009 (Cth) (the “Act”).
I will return to that matter in a moment. However, I do not approach the question of whether this proceeding should be struck out on the basis of forming a view or making a finding that the proceeding is brought for some ulterior purpose. I simply propose to address the question of the competency of the proceeding itself.
The background to it briefly is that a dispute has arisen between the first applicant, in particular, and the first respondent, in particular, and also the second respondent as to the validity of security interests claimed by Mr Deruniec and an entity called USBE.co Pty Ltd, concerning assets of the respondents.
Applications have been made to amend the Security Interest Register maintained under the Act and a proceeding has been invoked under the provisions of the Act (in particular, s 181 of the Act) to consider, administratively, the resolution of claims to amend the registrations which have been obtained by Mr Deruniec and USBE.co Pty Ltd. There are five of them in issue. The clear statutory purpose of the administrative process is to provide an efficient, expedient and quick way, administratively, of seeking to resolve contested claims of that kind.
Mr Deruniec brings these proceedings seeking to invoke the jurisdiction of the Federal Court under the Act, and brings the proceeding under s 182 of the Act. Mr Deruniec, of course, is entitled to bring a proceeding in respect of a matter arising under the Act. However, the real question is whether the proceeding, as framed, has any serious prospect whatsoever of being successful.
One can imagine that a proceeding might be commenced in which a claimant who has a security interest (or asserts that he has a security interest) would bring a proceeding in which a claim is made to establish the key facts which demonstrate that such a security interest was obtained, how it was obtained, when it was obtained, what the relevant documents supporting it would be, and all of the relevant circumstances which demonstrate that there are five valid security interests under the Act. The result of that sequence of considerations would be, no doubt, a claim for relief in the form of something in the nature of a declaration that the applicant holds a security interest and validly holds that interest for the purposes of the Act.
The application which was filed does not do any of those things. In fact, by para 3 of the application, the applicants say that they make the application as an alternative to the administrative process under the Act. That, by itself, might be a truism in the sense that the legal proceedings might well be an alternative in the sense that a party is entitled to come to court, and once they do so, the administrative proceeding is suspended, by operation of the Act, until the determination of the issues before the court going to the determination of the claims for a security interest.
However, the real difficulty here is that there is no indication in any of the court documents of the basis for the claim. The statement of claim in the proceeding is very short. It does not identify any of the facts which would go to show whether it is true (or not) that the applicants hold a security interest under the Act. There is, no doubt, in my view, that this proceeding, as it is framed, has no prospect of success, and more than that, the proceeding, as it is framed, is not capable of being the foundation, really, of a proper proceeding because it does not allege any of the material facts which would show whether the applicants have a security interest, and thus, in the prosecution and formulation (and answering) of the case, it is undoubtedly likely to cause prejudice and delay in the technical sense that those terms are used.
More fundamentally though, not only does the proceeding not disclose a reasonable or arguable cause of action, but no cause of action is made good on the face of the pleading at all. The general approach to a pleading, of course, in our system, is that the document needs to set up and recite the foundation material facts which if made good at a hearing, would entitle the applicants to the relief they claim in the proceeding. But this statement of claim does not indicate any foundation for the material facts, nor does it claim the relief or orders which would flow, logically, from having established those facts.
Irrespective of any question about motives for commencing the proceeding, or any of the historical events which have occurred between Ms McDonald and Mr Deruniec over time, this proceeding has, very plainly in my view, no prospect whatsoever of being successful. It would need to be thoroughly and totally abandoned and amended and recrafted. The Court simply cannot allow a commercial proceeding of this kind to “sit around” for four and a half months. The only course open, really, is to strike the proceeding out.
If Mr Deruniec and his entity seek legal advice and, as a result, they are able to formulate a claim which measures up and identifies and properly pleads factual matters, a question would then arise about whether a properly formulated proceeding could then be commenced. If and when that occurs, it will occur. However, for present purposes, this proceeding, as it is framed, is so lacking in any form of regularity or comprehension that it cannot possibly succeed and must not be allowed to stand as it is. The second aspect of the matter, I suppose, is that one should bear in mind in the exercise of the discretion on these things that there is an administrative process already underway under the Act. There is an alternative administrative process available to the applicants to participate in a mediation, or at least the administrative process contemplated by the Act, in which they could seek to establish that the security interests are validly registered and that they are based upon the proper matters which would attract such an interest. So, in the face of such an administrative process, it seems to me that the proper course is that there ought not to be allowed a long delay which would frustrate the administrative process in favour of a court process which, as it stands at the moment, is simply not competent in the technical sense in which lawyers use terms like prejudice, embarrassment and delay.
Therefore, it follows necessarily that the proceeding must be dismissed.
The applicants ask for a further order which is designed to effectively declare that the security interests are not validly held. It is not appropriate to make that order, first, because it is not sought in the application, and second, making such an order requires the Court to form a view on the merits about those matters. The present interlocutory application is not an application for summary judgment. It is an application to “strike out”. The authorities make it clear that it is not appropriate to make orders which go to the merits of the matter on a strike‑out application.
So, the orders of the Court today must be that the originating application and the statement of claim be dismissed with an order that the applicant pay the costs of and incidental to the originating application, that is, the costs of and incidental to the proceeding.
I certify that the preceding nineteen (19) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Greenwood. Associate:
Dated: 25 May 2018
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