Fresh Start Equity Pty Ltd (in liq) v Bignold

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FEDERAL COURT OF AUSTRALIA

Fresh Start Equity Pty Ltd (in liq) v Bignold [2023] FCA 297

File number: QUD 237 of 2022
Judgment of: DERRINGTON J
Date of judgment: 24 March 2023
Catchwords: PRACTICE – judgment by default – non-compliance with court orders – evidence that respondent not prepared to be involved in litigation
Legislation:

Corporations Act 2001 (Cth)

Federal Court of Australia Act 1976 (Cth)

Federal Court Rules 2011 (Cth)
Cases cited:

Chamberlain Group Inc v Giant Alarm System Co Ltd (No 2) [2019] FCA 1606

Michell v Cvetkovic [2022] FCA 1295
Division: General Division
Registry: Queensland
National Practice Area: Commercial and Corporations
Sub-area: Corporations and Corporate Insolvency
Number of paragraphs: 41
Date of hearing: 24 March 2023
Counsel for the Applicants: Mr M Ziebell
Solicitor for the Applicants: Mills Oakley
Counsel for the Respondent: The Respondent did not appear

ORDERS

QUD 237 of 2022
BETWEEN:

STEVEN NEVILLE STAATZ AS LIQUIDATOR OF FRESH START EQUITY PTY LTD (IN LIQUIDATION) ACN 621 953 384

First Applicant

FRESH START EQUITY PTY LTD (IN LIQUIDATION) ACN 621 953 384

Second Applicant
AND:

JULIAN JOSEPH BIGNOLD

Respondent

ORDER MADE BY:

DERRINGTON J

DATE OF ORDER:

24 MARCH 2023

THE COURT ORDERS THAT:

1.Pursuant to r 5.23(2)(c) of the Federal Court Rules 2011 (Cth) and s 588M of the Corporations Act 2001 (Cth), the respondent pay to the first applicant the sum of $1,375,500.67.

2.Pursuant to s 51A of the Federal Court of Australia Act 1976 (Cth), the respondent pay to the first applicant interest on the amount in paragraph 1 from the date the first applicant was appointed as liquidator of the second applicant in the amount of $57,087.05 as calculated in accordance with the attached Annexure A.

3.The respondent pay the applicants’ costs of the proceedings.

Note:   Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

ANNEXURE A

INTEREST CALCULATIONS ON $1,375,500.67

Calculated in accordance with paragraph 2.2 of the Interest on Judgments Practice Note (GPN-INT)

Period Days Rate (pa) Amount
12 July 2022 –
31 December 2022 		173 5.35% $34,879.31
1 January 2023 –
24 March 2023 		83 7.10% $22,207.74
TOTAL: $ 57,087.05

REASONS FOR JUDGMENT

DERRINGTON J:

  1. The application before the Court today is for default judgment pursuant to r 5.23(2)(c) of the Federal Court Rules 2011 (Cth) (Federal Court Rules) against the respondent, Mr Julian Joseph Bignold.  These proceedings have had a not insignificant history, punctuated by Mr Bignold’s omission to comply with orders of the Court or the Registrar.  In addition, his conduct in the proceedings is indicative of an intention by him not to engage properly in litigation. 

  2. The proceedings were commenced by Fresh Start Equity Pty Ltd (in liq) (Fresh Start Equity) and its liquidator, Mr Steven Staatz, on 11 July 2022 by an Originating Application.  The claim seeks, in substance, to recover the loss suffered by Fresh Start Equity as a result of Mr Bignold causing it to continue to trade whilst it was insolvent. 

  3. On…

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Details
Case
[2023] FCA 297
Decision Date

CaseChat Overview and Summary

Fresh Start Equity Pty Ltd, through its liquidator, sought a default judgment against Mr Bignold. The dispute involved a claim for debts allegedly owed by Mr Bignold to Fresh Start Equity Pty Ltd, which was in liquidation. The matter was heard in the Federal Court of Australia. The primary issue before the court was whether the respondent, Mr Bignold, had failed to comply with court orders and whether his actions demonstrated a lack of willingness to engage in the litigation process, thereby justifying the grant of a default judgment.

The court considered the principles for granting a default judgment, particularly focusing on the respondent's non-compliance with court orders and his apparent unwillingness to participate in the proceedings. The respondent had communicated his inability to attend the hearing due to illness, but provided no supporting evidence. The court determined that this communication, while indicating a stated unwillingness to engage, did not necessarily prove his inability to do so. The principles articulated in previous cases emphasise that the discretion to grant a default judgment must be exercised cautiously and requires the court to be satisfied that the applicant is entitled to the relief claimed on the face of the statement of claim. Given that the respondent had not engaged with the proceedings and provided no counter-evidence to rebut the allegations in the statement of claim, the court found that the respondent's actions justified the grant of a default judgment.

Accordingly, the court ordered that Mr Bignold pay the specified sum to the liquidator, along with interest and costs of the proceedings.

Orders

Orders of the court

1. Pursuant to r 5.23(2)(c) of the Federal Court Rules 2011 (Cth) and s 588M of the Corporations Act 2001 (Cth), the respondent pay to the first applicant the sum of $1,375,500.67.

2. Pursuant to s 51A of the Federal Court of Australia Act 1976 (Cth), the respondent pay to the first applicant interest on the amount in paragraph 1 from the date the first applicant was appointed as liquidator of the second applicant in the amount of $57,087.05 as calculated in accordance with the attached Annexure A.

3. The respondent pay the applicants’ costs of the proceedings.

Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

ANNEXURE A

INTEREST CALCULATIONS ON $1,375,500.67

Calculated in accordance with paragraph 2.2 of the Interest on Judgments Practice Note (GPN-INT)

Period

Days

Rate (pa)

Amount

12 July 2022 –

31 December 2022

173

5.35%

$34,879.31

1 January 2023 –

24 March 2023

83

7.10%

$22,207.74

TOTAL:

$ 57,087.05

Background

Background to the litigation

Full text does not contain this section.

Evidence

Evidence Before The Court

Full text does not contain this section.

Decision

Reasons for decision

On 17 March 2023, the applicants filed an Amended Statement of Claim. It made only minor amendments to the original pleading, including changing the date of Fresh Start Equity’s alleged insolvency from 30 April 2018 to 31 August 2018. The effect of that change is that two debts which were previously claimed by the liquidator are no longer available. In other words, it has reduced the scope of the claim. The claim for default judgment In the material filed today by the solicitors for the liquidator, it is very properly identified that Mr Bignold has indicated by email that he will not be attending today’s hearing. His email simply states: I am unable to attend due to illness. No specifics are given and no evidence of his alleged ill health is provided. I take that email to be evidence of the fact that Mr Bignold has said that he is ill, but not evidence that he is in fact ill. Rule 5.23 Rule 5.23 of the Federal Court Rules states as follows: 5.23 Orders on default(1)If an applicant is in default, a respondent may apply to the Court for an order that:(a) a step in the proceeding be taken within a specified time; or(b)the proceeding be stayed or dismissed for the whole or any part of the relief claimed by the applicant:(i) immediately; or(ii) on conditions specified in the order.(2) If a respondent is in default, an applicant may apply to the Court for:(a)an order that a step in the proceeding be taken within a specified time; or(b)if the claim against the respondent is for a debt or liquidated damages—an order giving judgment against the respondent for:(i) the debt or liquidated damages; and(ii)if appropriate, interest and costs in a sum fixed by the Court or to be taxed; or(c)if the proceeding was started by an originating application supported by a statement of claim or an alternative accompanying document referred to in rule 8.05, or if the Court has ordered that the proceeding continue on pleadings—an order giving judgment against the respondent for the relief claimed in the statement of claim or alternative accompanying document to which the Court is satisfied that the applicant is entitled; or(d)an order giving judgment against the respondent for damages to be assessed, or any other order; or(e)an order mentioned in paragraph (b), (c) or (d) to take effect if the respondent does not take a step ordered by the Court in the proceeding in the time specified in the order.Note 1: The Court may make any order that the Court considers appropriate in the interests of justice—see rule 1.32.Note 2: An order or judgment under this Division may be set aside or varied. The principles on which default judgment will be granted were recently referred to by McEvoy J in Michell v Cvetkovic [2022] FCA 1295 at [17] – [19]. His Honour identified that those principles were authoritatively essayed by Yates J in Chamberlain Group Inc v Giant Alarm System Co Ltd (No 2) [2019] FCA 1606 at [13] – [14] as follows:[13]The power to give judgment against a defaulting party is undoubtedly discretionary. The discretion must be exercised cautiously. Where the defaulting party is a respondent to a pleaded claim, the giving of judgment for final relief on the application will deliver complete success to the applicant without investigation of the merits of the pleaded claim: ACOHS Pty Ltd v Ucorp Pty Ltd [2009] FCA 577 at [27]. There is no requirement that the act or acts of default be intentional or amount to contumelious conduct. There is no requirement that the act or acts of default result in inordinate or inexcusable delay. That said, such features, if present, will be relevant to the exercise of the Court’s discretion. So too will conduct that persuades the Court that the defaulting party is manifesting an inability or unwillingness to cooperate with the Court and the other party or parties to the proceeding.[14]Rule 5.23(2)(c) requires the Court to be satisfied that the applicant is entitled to the relief claimed in the statement of claim. This requirement has been interpreted as meaning that the Court must be satisfied that ‘on the face of the statement of claim’ the applicant is entitled to the relief that is claimed. It is not a requirement that the applicant prove its claim by way of evidence. Put another way, the facts alleged in the statement of claim are taken to have been admitted: Australian Competition and Consumer Commission v Dataline.Net.Au Pty Ltd [2007] FCAFC 146; 161 FCR 513 at [42]. If, on inspection of the statement of claim, the Court is satisfied that the applicant would be entitled to the relief sought then this requirement of r 5.23(2)(c) will be met: CNIP Pty Ltd v Chan & Naylor Norwest Pty Ltd (No 2) [2011] FCA 1170 at [18] - [19]; Speedo Holdings B.V. v Evans (No 2) [2011] FCA 1227 at [23]. The Court may permit further evidence to be adduced, but not evidence that would alter the pleaded case: Australian Competition and Consumer Commission v Dataline.Net.Au Pty Ltd [2006] FCA 1427; 236 ALR 665 at [45], [48] - [50]; United Broadcasting International Pty Ltd v Turkplus Pty Ltd (No 2) [2010] FCA 1413 at [42] - [44]; Australian Competition and Consumer Commission v Yellow Page Marketing BV (No 2) [2011] FCA 352; 195 FCR 1 at [62] - [63]. (Emphasis added).

Ratio Decidendi

Legal Principle Established

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