K.M. & a Chadwick Pty Ltd v Yeung, E.T.M

[1995] FCA 62

NOT FOR DISTRIBUTION

FEDERAL COURT OF AUSTRALIA  )
NEW SOUTH WALES REGISTRY    )        No NG 3187 of 1994
GENERAL DIVISION           )

BETWEEN:

K.M. & A. CHADWICK PTY LIMITED

Applicant

AND:

ERIC TSUN MAN YEUNG and OTHERS

Respondents

SACKVILLE J.
SYDNEY
21 FEBRUARY, 1995

REASONS FOR JUDGMENT

HIS HONOUR:   In this matter the applicant, which appears by Mr Brabazon of counsel, applies by way of notice of motion for orders that the defence filed by the respondents be struck out and the judgment be entered to the applicant in the amount of $81,583.48 together with interest and costs. 

The proceedings were commenced by a statement of claim filed on behalf of the applicant on 9 May 1994. In that statement of claim it was alleged that the respondents were directors of the company known as Stafford Mining Pty Limited and that between February and April 1991 the company incurred debts to the applicant in the sum of $81,583.48 for petroleum and related products sold and delivered by the applicant. The applicant claims against the respondents for breach of s.592(1) of the Corporations Law.

The basis of the claim by the applicant is that, at the time when the debts were incurred, there were reasonable grounds to expect that the company would not be able to pay all its debts as and when they became due and, further, that there were reasonable grounds to expect that if the company incurred the debts it would not be able to pay all of its debts as and when they became due.  The statement of claim goes on to allege that on or about 25 February 1992 a receiver was appointed to the property of the company and that on 2 June 1992 the Supreme Court of New South Wales ordered that the company be wound up.

A defence was filed on behalf of the respondents on 30 August 1994. That defence denies or, alternatively, does not admit the allegations made in the statement of claim, save that it admits that the respondents have not paid the amount claimed. The respondents deny that the applicant is entitled to any relief claimed under section 592 of the Corporations Law. The defence also pleads that the respondents at all material times had reasonable grounds to expect that the company would be able to pay all debts incurred as they fell due including any debts incurred to the applicant. Furthermore, the defence pleads that any debts incurred, as set out in the statement of claim, were incurred without the express or implied authority or consent of three of the respondents.
The procedural history of this matter has not been a happy one.  For the purposes of today's application the following sequence of events is relevant. 

On 15 July 1994 the applicant served a notice of discovery upon the respondents on 13 September 1994 the respondents filed a notice of motion to set aside the notice of discovery.  On 7 October 1994 the respondents' notice of motion was dealt with by me.  I declined to make the orders sought by the respondents in respect of discovery.  Instead, I made orders directing the respondents to file and serve affidavits of discovery in response to the notices of discovery within 21 days from that date - that is, on or before 28 October 1994. 

On 18 November 1994 the matter returned to the court and the solicitor for the respondents appeared.  On that date I made a further order that the respondents should file and serve affidavits of discovery in response to the notices of discovery by 4 pm on Monday, 5 December 1994.

The transcript of the proceedings of 18 November 1994 indicates that it was made clear to the solicitor for the respondents, Mr Antoneas, that if there was further default in relation to the orders made, consequences might flow.  Mr Antoneas acknowledged that he understood the position.  However, Mr Antoneas indicated that there were reasons why he expected to be able to comply with the Court's order relating to discovery despite the fact that, as he asserted, some difficulties had been caused by the liquidator continuing to retain certain documents.

On 16 December 1994, when the matter again came before the court, Mr Antoneas again appeared and on this occasion an agent appeared on behalf of the applicant.  Consent orders were signed by both solicitors and orders were made in accordance with the short minutes of order signed by them.  Those orders were as follows: 

1. applicant to file and serve any expert reports upon which it relies by 31 January 1995;

2. respondents to file and serve their verified list of documents by 16 January 1995 and inspection to take place by 31 January 1995;

1. respondent to answer applicants request for further and better particulars by 16 January 1995;

1. respondent to file and serve any affidavits in reply by 21 February 1995; and

1. Matter stood over until 9.30 am on 21 February 1995.

The reference to the further and better particulars was to a letter which had been sent by the solicitors for the applicant to the solicitor for the respondents on 21 October 1994, seeking particulars of the defence.  The request asked each respondent to state each of the "reasonable grounds" which he or she had to expect that the company would be able to pay all debts incurred as they fell due and also asked at what time or times did that person have such a reasonable ground so to expect.  The particulars also sought details of any limitation of authority or other matter by reason of which it was alleged that any of the debts set out in the statement of claim were incurred without the express or implied authority of the first, third and sixth respondents. 

Mr Brabazon read an affidavit of Mr Shepherd, the solicitor for the applicant, which annexes a letter of 15 December 1994.  In that letter the solicitor for the respondents purported to give answers to the request for further and better particulars dated 21 October 1994.  It is clear that the further and better particulars purported to be provided were inadequate and not a genuine attempt to respond to the request.

On 24 January 1994, the solicitors for the applicant forwarded a letter to the solicitor for the respondents, the text of which was as follows:

We enclose, by way of service upon you, expert's report of Horwath & Horwath, Chartered Accountants.  Copies of the report have also been filed in Court.

Your letter of 15 December 1994 does not properly provide the further and better particulars requested by us in our letter of 29 October 1994.  Our client requires that you provide the full and proper particulars as requested within seven days of the date hereof.

We also note that we have not yet received from you verified list of documents in accordance with the Orders made on 16 December 1994 that you provide us with such lists by 16 January 1995.  Our client requires that we be provided with the lists within seven days of the date hereof.

Please note that in the event we do not receive either the further and better particulars or the verified list of documents within seven days of the date hereof, we are instructed to file a Notice of Motion seeking the striking out of your client's Defence and the entering of Judgment on the grounds of the non-compliance with the earlier Orders.  Such Notice of  Motion will be returnable on 21 February 1995 when the matter is next listed for mention."

There was no appearance on behalf of the respondents today despite the matter being called.  No satisfactory explanation has been given at any stage on behalf of the respondents as to the default that has occurred in relation to their failure to provide affidavits of discovery in accordance with the orders of the court.

Mr Brabazon bases his application upon the default by the respondents in providing affidavits of discovery.  For this purpose he draws my attention to Order 15, rule 16 of the Federal Court Rules.  That rule provides that where a party does not file or serve a list of documents or affidavit, or does not produce any document as required by or under Order 15, any other party may move the court on notice, if the party in default is a respondent, for judgment or an order against him.  Under Order 15, rule 16(2), the court may make that order or any other order or may give such directions and specify such consequences for non compliance for the order as the court thinks just.

Mr Brabazon also places reliance upon Order 10, rule 7.  That rule provides that, where a party fails to comply with an order of the court directing the party to take a step in the proceeding, the other party may move the court on notice, if the party in default is a respondent, for judgment or an order against him.  Under Order 10, rule 7(2), the court has a similar discretion as that conferred by Order 15, rule 16(2).

Although Mr Brabazon did not refer me to authorities, cases such as Lenijamar Pty Limited v AGC (Advances) Ltd (1990) 27 FCR 388 (FCA/FC), at 396, indicate that it is relevant to the exercise of power under Order 10, rule 7 that there has been a history of non compliance with court orders

"such as to indicate an inability or unwillingness to co-operate with the court and the other...parties in having the matter ready for trial within an acceptable period". 

It is also relevant to take into account the unnecessary delay and expense and prejudice that may be occasioned to the other party.

In this case I consider that the failure of the respondent to comply on several occasions with the court's orders relating to discovery together with the failure to provide, at any stage, an acceptable explanation for those breaches of the court's orders, provide a sufficient basis for concluding that the respondents are unable or unwilling to co-operate with the court or with the applicant in ensuring that the matter is ready for trial within an acceptable period.  The history of the matter also demonstrates, in my opinion, that there have been repeated delays involving additional expense in the conduct of the proceedings.  These conclusions are reinforced by the failure of the respondents to appear on the hearing of the applicant's motion.

I raised with Mr Brabazon one matter that was of concern to me. I noted that orders had been made by consent on 16 December 1994, after a history of default on the part of the respondents.  Mr Brabazon has submitted that it was not an inappropriate course for the applicant's representative to consent to a further period for compliance with the court's orders, where there was some basis for thinking that compliance might take place.  In any event, he argues that participation in the consent orders of 16 December 1994 is not to be taken as a waiver of whatever rights the applicant might have had in respect of the continuing breaches of the court's orders.

While I think that there may be circumstances in which consent to a revised timetable might detract from the entitlement of the party participating in the consent orders to complain of prior breaches, on balance I do not think that I should take that view in the present case.  The orders were made on the last day of term and provided for a relatively short period for compliance.

I have taken into account in the exercise of my discretion the
nominal response to the request for further and better particulars given on 15 December 1994 and the failure to provide any further particulars thereafter.  Again the respondents have not chosen to give any explanation for the default.    The conduct, on the face of it, suggests an unwillingness or inability to prepare the case for trial in a proper manner.

As I have remarked previously, the respondents' solicitor, although still the solicitor on the record, has not appeared today.

I should add that Mr Brabazon read an affidavit of service, sworn by Cameron Hassall.  It attested to service on the respondent's solicitor of a sealed copy of the notice of motion and affidavit of Mr Shepherd on 15 February 1995.  The respondents were thus on notice of today's proceedings, not merely by the letter of 24 January 1995, but by service of the notice of motion and supporting affidavit.

In all of the circumstances I think this is an appropriate case for making an order pursuant to Order 10, rule 7(2) in accordance with the order sought in the notice of motion.  That is to say, I consider that the defence filed by the respondents should be struck out and that judgment should be entered for the applicant in the amount of $81,583.48, subject to the question of interest.  I have taken into account the affidavit of Helen Chadwick sworn 10 November 1994 which verifies the quantum of the applicant's claim.  I also consider that the respondents should pay the applicant's costs.

Mr Brabazon has told me that he wishes to include interest in the amount of the judgment, but that it will be necessary for him to prepare written submissions on this issue.  I direct that those submissions should be filed with my Associate by 5 pm on 22 February 1995.  I stand the matter over until 9.30 am on 24 February 1995 when I shall deal with the question of interest.

I certify that this and the preceding 9 pages are a true copy of the Reasons for Judgment of the Honourable Justice Sackville.

Associate:

Dated: 22 February, 1995

Heard:21 February, 1995

Place:            Sydney

Decision:21 February, 1995

Appearances:      Mr Brabazon instructed by Wilkinson, Throsby & Edwards Solicitors, appeared for the Applicant.

There was no appearance for the Respondents.