Holden Ltd v Avantek Corporation Pty Ltd

IN THE SUPREME COURT OF VICTORIA	Not Restricted
AT MELBOURNE COMMERCIAL AND EQUITY DIVISION INTELLECTUAL PROPERTY LIST

No. 7411 of 2001

HOLDEN LTD	Plaintiff
v
AVANTEK CORPORATION PTY LTD AND OTHERS	Defendants

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JUDGE:	HARPER J
WHERE HELD:	MELBOURNE
DATE OF HEARING:	19 JUNE 2003
DATE OF JUDGMENT:	19 JUNE 2003
CASE MAY BE CITED AS:	HOLDEN LTD v AVANTEK CORPORATION PTY LTD & ORS
MEDIUM NEUTRAL CITATION:	[2003] VSC 238

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PRACTICE AND PROCEDURE – Failure by first defendant to comply with order for payment of costs – Self-executing orders – History of dilatory behaviour by first defendant – Prejudice – Effect on conduct of case by other defendants.

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APPEARANCES:	Counsel	Solicitors
For the Plaintiff	Mr G. McGowan	Phillips Ormonde & Fitzpatrick
For the Defendants	Mr M. Lipshutz	Cohen Woolf & Weinberg
HIS HONOUR:

This proceeding commenced with the issue of a writ by the plaintiff Holden Ltd on 3 September 2001. By its statement of claim, the plaintiff alleged against the then only defendant Avantek Corporation Pty Ltd that the plaintiff was at all material times and remained at the time of the issue of the writ, the owner and holder of monopoly rights in Australian Registered Designs, numbers 142687 and 142688. These were alleged registrations of designs in respect of vehicle wheels. It further alleges that each was registered on 16 January 2001 and at all material times thereafter were valid and subsisting designs.
The plaintiff further alleged that from a date presently unknown but at least from about 16 January 2001, the then only defendant (to whom I will refer as "the first defendant") infringed the plaintiff's monopoly rights in the designs. As a result the plaintiff claimed it had suffered and was continuing to suffer loss and damage; and, further, that the defendant has made profits in relation to and as a result of the infringements. In its prayer for relief, the plaintiff claimed injunctions restraining the defendant from manufacturing, importing for sale or use, selling, offering or keeping for sale or hiring, or offering, or keeping for sale or hire vehicle wheels in respect to which the designs applied.
The plaintiff further claimed an injunction restraining the defendants from aiding, abetting, counselling, procuring or inducing any acts which would infringe the injunctions which it sought in the earlier paragraphs of its prayer for relief.
The first defendant filed and served a defence and counterclaim dated 23 October 2001. In that pleading it admitted that it had, without the licence or authority of the plaintiff, imported into Australia for sale or for use for the purpose of trade or business the vehicles to which the designs had been applied. It also admitted selling or offering or keeping for sale those wheels and in particular it admitted offering wheels model 129 and model 143 to a Mr Craig Douglas.
It is fair, I think to say, that otherwise the first defendant denied the allegations in the statement of claim save for formal allegations, and counterclaimed on the basis that the design was in each case neither new nor novel at the date of the application for its registration in Australia. The first defendant alleged that the design was used before the date of registration in each case, and that the plaintiff was not entitled to apply for such registration.
Accordingly the first defendant alleged by its counterclaim that the designs were wrongly entered on and wrongly remained on the Register of Designs and that such registration was calculated to mislead or deceive or was likely to mislead or deceive the public into the false belief that the person named in the application for registration was the author of the designs and that the plaintiff was the assignee of that author and that the designs were new, novel or original. A cause of action pursuant to s.52 of the Trades Practices Act was also pleaded.
From 4 October 2002, I made orders joining a Mr Johnny Hanafi as second defendant to the proceeding and a Mr Dominic Prinzi as third defendant. At the same time I gave leave to the plaintiff to file and serve an amended statement of claim in the form of a draft which was then before me.
Following the making of those orders, the second and third defendants filed a defence to the amended statement of claim. By those defences each defendant made certain formal admissions and also admitted, as had the first defendant before them, the importation and sale of the relevant wheels without the licence or authority of the plaintiff.
Further, each of the second and third defendants denied the validity or subsistence of the registration of the designs and relied upon the allegations set out in the relevant portions of the first defendant's counterclaim, namely paragraphs 9 to 15 of that pleading, in support of the denial. Otherwise, the allegations in the amended statement of claim were in each case denied.
The lines of dispute are thus by the pleadings as I have set them out delineated with some clarity. Since then, however, the proceeding has run into a number of problems. On 5 April 2002, I had ordered that the parties, which of course then consisted only of the plaintiff and the first defendant, make discovery by categories of documents and file and serve certain affidavit evidence by certain times as set out in those orders. They were not obeyed insofar as they applied to the first defendant.
As a result of that admitted disobedience, the matter came before me on 26 July 2002. On that occasion, counsel for the first defendant accepted that his client had been dilatory. To quote counsel: "Whilst it's difficult for me to contend that my client's behavior has not been dilatory to date, nonetheless I do not agree that there is any indication that my client is unable to comply with the orders."
Those submissions were made in relation to an application by the plaintiff for self- executing orders on the basis that it was now July and the orders made in April had not been complied with. I said, in giving my ruling on the plaintiff's application, the following:
"In my opinion, this is a case in which self-executing orders are warranted. A number of appearances have been made before on a number of directions hearings since the first such hearing was heard on 4 December 2001. I think it is now time that the parties, but particularly the defendant, became serious about taking those steps which are necessary to be taken before the matter can move towards trial. Those steps include the making available of relevant documents for inspection by the plaintiff and the filing and serving of the affidavit material upon which the defendant will seek to rely at trial.
The evidence before me indicates that despite a large number of approaches by the plaintiff to the defendant seeking compliance with orders previously made, the defendant has been unresponsive. Not only that, but no explanation has been given by the defendant for its failure to respond appropriately to both the orders of the court and the requests of the plaintiff.
In the light of the defendant's failure to explain its position, it seems to me that I have little alternative but to assume that the defendant has been, at the very least, inexcusably dilatory if not contumacious. In those circumstances I think that self-executing orders are appropriate."
Accordingly, on 26 July 2002 I ordered that unless the defendant complied with the orders of 5 April by (a) producing on or before 10 a.m. on 16 August 2002 to the solicitor for the plaintiff for inspection the documents listed in the defendant's affidavit of documents and in respect of which no privilege is claimed, and (b) filing and serving on or before 4 p.m. on 23 August 2002 the affidavit evidence upon which the defendant intends to rely at trial in chief in respect of it's counterclaim, the defence and counterclaim served by the defendant on 23 October 2001 shall be struck out. I made further ancillary orders.
The matter then came back before me on 15 August 2002. On that occasion counsel for the first defendant informed me that his instructing solicitors had spoken to Mr Hanafi, who was then taken to be the person responsible for the relevant affairs of the first defendant, and impressed upon Mr Hanafi the seriousness of the position with regards to the self-executing orders and impressed upon him the consequences of failing to comply.
Counsel also told me that he had conferred with Mr Hanafi on the afternoon before, that is, on 14 August, and had in turn impressed upon Mr Hanafi the gravity of the situation and indicated to him that, at the time of the making of the orders in April, I - that is the judge - had indicated that if Mr Hanafi or the first defendant was going to be unable to comply with time limits, then an opportunity to seek an extension must be taken before the time limit expired.
It was also put to me on that occasion by counsel for the first defendant that Mr Hanafi had made an appointment to see counsel the day before but had failed to attend. No explanation for that failure was offered.
In response to the submissions of both sides made to me on 15 August, I, in my subsequent ruling, said the following. I opened my remarks with a reference to a draft affidavit which was then before me:
"In the draft affidavit Mr Lipshutz says that he has attempted to obtain instructions from his client. Accepting that this statement will be the subject of a sworn affidavit in due course, nonetheless there is no detail given of the attempts. I am not able to say whether the attempts were substantial or whether they were cursory.
In my opinion, evidence of this kind in the circumstances presently before me is quite unsatisfactory. Where a party has by it failure to obey the orders of the court placed itself in a position where self- executing orders are made and where it sought to extend the time within which the orders are to operate, it is incumbent upon the application seeking an extension of time to provide the court with full information about the steps which have been taken to ensure, so far as practicable, that compliance will follow.
The criticism just made of Mr Lipshutz's evidence about his attempts to obtain instructions applies equally to the reference in the draft material to the position of Mr Hanafi, who is a principal of the defendant. The draft document states that the defendant intends to file affidavits from persons in Japan, Korea and the United States. It goes on to say that the 'relevant person' has been located in Korea and arrangements to take detailed instructions from that person are underway, but that no persons in either Japan or the United States have yet been identified, let alone contacted.
Not only is there nothing in the draft material to enable me to judge whether or not the attempts to make contact have been substantial or otherwise, but in my opinion, even if the matters to which I have personally referred were in evidence, they would not be sufficient properly to support an application for an extension of time."
In those exchanges it seems to me that the first defendant was made fully aware of the need to obey court orders, particularly where they were of a self-executing kind. Nonetheless, problems continue.
The plaintiff's dissatisfaction with the state of affairs which obtained in April this year resulted in its issue of a summons on 23 April. By that summons the plaintiff sought, amongst other orders, an order in the alternative to orders that the counterclaim be dismissed and the defence of the first defendant be struck out, orders that those steps be taken unless the first defendant pay the costs as taxed pursuant to an order made on 20 March 2003. The plaintiff sought that the order incorporate the date 7 May 2003 as the date by which compliance was required if the counterclaim was not to be dismissed and the defence not to be struck out. I acceded to the plaintiff application. On 2 May 2003 I ordered amongst other things that: "Unless by 4 p.m. on 21 May 2003 the first defendant pays to the plaintiff the costs as taxed by Master Bruce on 20 March 2003, namely the sum of $10,508.14, then (a) the counterclaim shall stand dismissed; (b) the defence of the first defendant shall stand struck out, and (c) paragraph 6 of the defence of the second and third defendants shall stand struck out insofar as it refers to paragraphs 9 to 15 inclusive of the counterclaim."
In coming to the conclusion that those orders should be made I said during the course of the proceedings on 2 May the following:
"I do propose to make a self-executing order. I think that Monday 19th might be a little too soon as a date on which the self-executing order should take effect if it is not obeyed. This is so not so much because of any anticipated difficulty in paying the amount. I have the evidence of the director of the first defendant himself" - that I interpolate was a reference to Mr Hanafi – "to the effect that the bill shall be paid on the day after he arrives back in Australia. But I am concerned that if anything should go wrong the defendant should be entitled to come back to the court before the time expires. It seems to me that it would be very difficult for Mr Hanafi to appear in court or to instruct his legal advisers to appear in court on the Monday if he only returns to Australia on the Saturday."
I interpolate again to say that I was informed that Mr Hanafi would be returning to
Australia on Saturday 17 May and would be in a position to pay by Monday 19 May.
I will continue with the quotation:
"Accordingly I think Wednesday is an appropriate day to fix for the expiration of the self-executing order because if by some presently unforeseen circumstance the first defendant cannot pay then it will be in a position to come back to court."
I then later said the following:
"The first defendant has a history of disobedience to court orders. It is true, as Mr Lipshutz has said of more recent times, the conduct of the defendant's case has been in accordance with the rules and I take that into account. But it does seem to me that given the earlier difficulties which the court and more particularly the plaintiff experienced in having orders obeyed, and given the fact that Mr Hanafi was apparently in Indonesia for several weeks during which he failed to respond to messages left by Mr Lipshutz, the first defendant has exhibited once again the kind of behaviour which the court ought not tolerate."
Again, it seems to me that the point was made clearly to the first defendant that great care was required to be taken by it to ensure that compliance with the orders of the court was maintained. The matter came back to me on 4 June 2003. I was then informed that the self-executing orders made on 2 May had not been obeyed. I was also told something of the circumstances which obtained on 21 May when an attempt was made to comply with the earlier orders. In short I was then informed that Mr Hanafi had not returned to Australia as he anticipated on Saturday 17 May but had remained abroad. He had then from abroad made arrangements for the third defendant to obtain funds with which to meet the cost order that was the subject of the self-executing order of 2 May.
Despite Mr Prinzi's efforts to execute the arrangements agreed between him and Mr Hanafi, the moneys were not delivered to the plaintiff's solicitor by 4 p.m. as the order stipulated. They did however arrive there shortly after, 34 minutes late. The partial explanation was that a courier had been engaged at about three o'clock on the afternoon of 21 May on the basis that the courier would effect the delivery of the funds in question within the hour. For reasons which I accept have not been explained to the solicitors for the defendants, the courier failed to deliver the funds in question within the hour and hence the late arrival of those funds.
By 4 pm the self-executing order had of course taken effect. That did not mean that, as at one time in the past, the judge making the order was functus officio. It is now made clear by Rule 24.06 of the rules of the Supreme Court that the court may set aside an order including an order made within the inherent jurisdiction of the court and may set aside a judgment entered or given upon the failure of a party to do any act or take any step which, by order, the party is required to do.
Accordingly, Mr Lipshutz who appeared on 4 June for the first defendant informed me that he wished to have me exercise the powers given by that rule. It seemed to me however, that I ought not to accede to such a request without there being a summons, seeking appropriate relief, then before me. No such summons had by 4 June been issued.
Such a summons has now been issued and it is upon that summons in part that I am now asked to come to a conclusion about the fate of the self-executing order. The first defendant's summons seeks in effect that either the time within which the self- executing order be obeyed be extended to 5 p.m. on 21 May or in the alternative, that other relief be granted, the effect of which would be to negate the first defendant's disobedience to the self-executing order.
At the same time I also have before me a summons issued on 23 April 2003 and adjourned to today, that summons having been issued by the plaintiff. I will deal with both the plaintiff's summons of 22 April and the first defendant's summons of 18 June. That summons, that is the first defendant summons, is supported by a number of affidavits: one of them is not in proper form, although a faxed copy which appears to have been sworn before a representative of the Australian Embassy in Jakarta has been tendered without objection and I propose to rely upon it.
It is an affidavit, which, assuming it has been properly sworn, was sworn by the second defendant, Johnny Hanafi. In it he swears that he sold his interest in the first defendant in late 2001 and acquired its wheel business. In consideration of that transaction, he, the second defendant, agreed that he would carry the burden and benefit of this proceeding. He also swears that to the best of his knowledge and belief the first defendant no longer trades.
By paragraph 9 of Mr Hanafi's affidavit, he says that on the 30th April 2003 he received a facsimile from his solicitors advising him that a summons had been issued seeking payment of the outstanding costs of the order of Master Bruce. On 2 May 2003, Mr Hanafi swears, he forwarded by email, to his solicitor, information that he could not be in Australia as he was still in Indonesia, but anticipated that he would be returning on 17 May and able to settle the account by 18 May. I have already referred to some of the circumstances surrounding those dates.
Mr Hanafi proceeds to state in his affidavit that he had anticipated that the transaction with which he was engaged overseas, would have been finalised by early to mid-May and that he would subsequently have been in a position not only to have received substantial payment as a result of the transaction in question, but also to return to Australia and meet the requirements of the self- executing order.
Mr Hanafi accepts that he was not able to and did not return to Australia on 17 May and did not pay the relevant amount to the solicitors for the plaintiff by 4 p.m. on 21 May. He does however, recount the circumstances of his attempt to make such payment. He is substantially corroborated by an affidavit sworn by the third defendant, Mr Prinzi.
It appears from that material that on the evening or certainly late in the afternoon of 20 May, Mr Hanafi contacted Mr Prinzi by telephone and obtained Mr Prinzi's agreement to attempt to raise the $10,508 concerned through the good offices of Mr Prinzi's de facto spouse. The attempt was to an extent successful in that a bank cheque for the requisite amount was delivered to the defendant solicitor's office at about 3 p.m. on 21 May; but for the reason which I have already recounted, thereafter failed to meet the deadline of 4 p.m.

In relation to that, Mr Hanafi says in his affidavit the following:
"I respectfully regret that the circumstances of the proceedings to date have been such that the defendants have been tardy in complying with orders of this honourable court. In particular, I say that I initially instructed Clayton Utz to act on my behalf. I was extremely dissatisfied with the way in which the proceedings were conducted and the exorbitant cost I was being charged without having received details of those charges. I am currently in dispute with Clayton Utz and as a result of the dispute, Clayton Utz have retained their file in the proceedings including significant documents which I required for the conduct of the defence. I subsequently engaged my current solicitors, but I was unable to provide them with proper or detailed instructions as I did not have documents in connection therewith."
I omit certain sentences and continue:
"My obligations to both my family and my creditors is such that rather than seeking the protection of the Bankruptcy Act, I have prosecuted my business interests. I have as a result often been out of contact with my solicitors. Indeed, I have only this day returned from China and contacted my solicitors on my return, as a result of there being numerous messages from them. I apologise to this honourable court for my tardiness."
That then is the general background to the present applications.
On the one hand, it is submitted by Mr Lipshutz on behalf of the first defendant that the plaintiff has suffered no prejudice by the delay but that the defendants or at least the second and third defendants would suffer such prejudice. As I understand Mr Lipshutz, he conceded, in the end, that given that the first defendant no longer trades it might be difficult at the moment to show any prejudice to the first defendant. I did not discuss with Mr Lipshutz the possibility that the first defendant might trade in the future. But in any event, I have no evidence to suggest that such a prospect is likely.
On the facts before me I think I have to conclude that were the self-executing orders to remain in effect, the first defendant would not suffer any prejudice. On the other hand, as Mr Lipshutz submitted, the two individual defendants would suffer the prejudice which would follow from their association with a company which was not only no longer trading, but which had a judgment entered against it.
In addition, the conduct by the remaining defendants of their defence were the first defendant to be the subject of judgment, would be prejudiced. Mr Lipshutz impressed upon me the fact that the failure to meet the deadline of 4 p.m. was minor in the sense that the relevant moneys arrived by bank cheque, only 34 minutes after the deadline. I accept that that in fact is the case and, indeed as I understand it, the plaintiff does not seek to put any different version of the facts before me. Mr Lipshutz also pointed to the advantages in the future conduct of the proceeding, were the first defendant to remain a party.
Mr McGowan for the plaintiff challenged the proposition that any advantage would be obtained in the conduct of the proceedings were the first defendant to remain a party but accepted that the plaintiff would not suffer any prejudice were the self- executing orders to be set aside. Indeed, Mr McGowan fairly conceded that the only advantage that would flow to the plaintiff from the continuation of the self-executing orders would be that the plaintiff would at least have the benefit that only two parties remained in the proceeding.
In the end it seemed to me that the balance of justice lies almost equally between the one course of action and the other. This indeed is one of those troubling cases that are difficult to resolve, although they are before the court only because one or other of the parties - in this case the first defendant – has, in my view at least, failed to take appropriate steps to meet its obligations to the court and to the plaintiff.
The cause of the failure of the first defendant to meet the deadline of 4 p.m. can be ascribed to different sources and I accept, in general, what Mr Lipshutz has put before me in that regard.
In the end, however, it seems to me that the ultimate responsibility for the failure of the moneys to reach the plaintiff within the time must be accepted by the first defendant because it was its agent, Mr Hanafi, who failed to take appropriate steps to ensure that the moneys were delivered to the appropriate persons in ample time to enable them to meet the deadline.
Mr Hanafi gives no adequate explanation, it seems to me, for that failure. He does say he was out of contact with his solicitors for some time while travelling abroad. He does not say that he was unable to contact them himself; rather his evidence seems to me to be that messages left for him by his solicitors were not received by him by reason of the exigencies of travel.
That does not, it seems to me, excuse his failure to take appropriate steps to ascertain the position in relation to the self-executing order and take steps before he did to ensure that the order was obeyed. I accept that given Mr Hanafi's straitened financial circumstances he would have been inclined to leave to the last moment a decision to seek funds from Mr Prinzi or some other source in order to meet the relevant debt.
Humans naturally do not like to go to others seeking financial accommodation by reason of their own straitened circumstances where such an approach would constitute the seeking of a favour from the person so approached. I accept that Mr Hanafi found himself in a position where in order to raise the necessary funds he had to seek the co-operation and indeed the financial support of an acquaintance and that might not have been psychologically easy for him to do.
Nevertheless, as he himself says, these proceedings are important to him and to the first defendant. That being the case it is incumbent upon him it seems to me to ensure that the orders of the court are obeyed. That is particularly so given the past history of this matter. In that regard I reiterate without repeating the exchanges between the court and counsel during the course of the numerous directions hearings which this proceeding has already entailed.With those considerations in mind it seems to me that provided appropriate orders can be made safeguarding the position of Mr Prinzi in particular and to a lesser extent Mr Hanafi, as individual defendants, I ought not to interfere with the operation of the self-executing order. I am however concerned particularly with Mr Prinzi. It would be most unfortunate were an individual, who is not said to be responsible for any of the current difficulties, to be prejudiced by reason of those difficulties.
Unless I can shape orders which will protect Mr Prinzi's position I am of the view that in the overall interests of justice I ought not to accede to the plaintiff's application, that the self-executing orders remain in place.

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[2003] VSC 238

19 June 2003