Lake Dartmouth Corporation Pty Ltd v Capital Management Pty Ltd

[1992] FCA 385

JUDGMENT No. 35.s .... 1 ........ .... 92

IN THE FEDERAL COURT OF AUSTRALIA)

NEW SOUTH WALES DISTRICT REGISTRY) No G 286 of 1991

GENERAL DIVISION ) No G 512 of 1991

BETWEEN L A K E D A R T M O U T H

CORPORATION PTY LIMITED
First applicant
CHRISTOPHER WINGFIELD MAY
Second applicant
RAYMOND HENRY AITKEN
Third applicant
GILBERT MAXWELL RINTOUL
Fourth applicant
NEIL THOMAS BIRD

Fifth applicant

AND CAPITAL MANAGEMENT PTY

LIMITED

First respondent

AND NATIONAL MUTUAL ROYAL

BANK LIMITED

Second respondent

AND ST GEORGE COMMERCIAL

CREDIT CORPORATION

Corporation Limited (St George) was named as plaintiff and	South Wales. In that Court St George Commercial Credit
Gilbert Maxwell Rintoul, Raymond Henry Aitken, Neil Thomas Bird and Christopher Wingfield May (the individual applicants) were named as defendants. The matter was commenced by chamber summons filed on 20 May 1991 seeking judgment in favour of St George for a fraction over $10 million.
On 4 June 1991, an application and statement of claim was filed in this Court by or on behalf of three of the individual applicants (Neil Thomas Bird was omitted) and Lake Dartmouth Corporation Pty Limited (the first applicant).
On 12 July 1991 the Supreme Court cross-vested or transferred its proceedings to this Court. They were subsequently consolidated with the proceedings commenced in this Court and a number of procedural directions were given to avoid the filing of unnecessary or duplicating documentation. Consequently, the matter before this Court now effectively consists of an application for relief in this Court by the first applicant and the individual applicants against Capital
Management Pty Ltd (Capital), National Mutual Royal Bank Limited (Royal Bank) and St George. St George's claim in the
Supreme Court became in effect a cross-claim with which the applicants have joined issue by their statement of claim.
The pleadings are unsatisfactory in a number of respects. It has never been entirely clear who the applicants are. As late as 14 February 1992, when a third amended statement of claim was filed, there were only three named applicants. The first applicant seems to have dropped off in some way. I was told at one stage that the company had gone into liquidation and that the liquidator was considering his position in relation to this litigation. That is the last I have been told and as far as I am aware no notice of discontinuance has been filed. One of the four individuals, Neil Thomas Bird, who seems to have been in and out of the litigation at different times, does not now appear at all. This would be of little practical significance itself except as an indication of the haphazard way in which the applicants have conducted this litigation thus far.
Since the filing of the original statement of claim on behalf of the applicants, there have been three attempts to amend the statement of claim. Except for the last, each in turn has been the subject of attack by the respondents by way of motions to strike it out on the ground, inter alia, that no cause of action was demonstrated. The Court has been, as it turns out, unjustifiably generous to the applicants in this
either suspended or forgotten about in an effort to permit the regard because a number of orders made from time to time were
applicants to file a statement of claim which could be litigated in the Court. As the statement of claim was effectively going to be the defence to the claim lodged in the Supreme Court it was important that it provide an adequate basis for the conduct of this consolidated litigation as a properly contested case.
Again, the substance not the form was important. It became even more important when the third respondent filed a notice of motion on 20 September 1991 seeking, inter alia, summary judgment on the cross-vested proceedings from the Supreme Court. It is worth noting that by that time the amount owed to St George had, according to St George, grown to something in excess of $12.5 million.
On 16 October 1991 the present applicants, which by then had been extended to include Mr Bird, filed a defence to the cross-vested proceedings. Amongst a number of things in that defence that would be worthy of comment in other circumstances, the most important for present purposes was that a number of particulars were left unsupplied with the comment that particulars would be provided subsequent to discovery. That of course meant that discovery became of particular significance in the case - more so than it might have been in other circumstances. In this regard, I note that on 11 July 1991 discovery was ordered by consent to be given
been no discovery on behalf of the applicants. Hence, by 2 September 1991. As at today I am informed that there has
important items of the defence filed on 16 October 1991 to the cross-vested proceedings remain unsupplied.
The case itself goes back a long time. It seems that in about August 1988, St George advanced to the first applicant the sum of $6.5 million to assist that company to develop a resort at a place called Lake Dartmouth in Victoria. The loan was later increased. The individual applicants were directors and shareholders of the first applicant and they guaranteed the loan. Little or nothing has been repaid and the action brought in the cross-vested proceedings was for the repayment of the debt.
On 20 September 1991 an affidavit on behalf of St George by its credit manager was filed, presumably in support of the motion filed on that day. This affidavit set out in some detail the history of the matter, the way in which the dispute had arisen, and the basis upon which the claim for summary judgment in the cross-vested proceedings was put.
On 14 October 1991, Christopher Wingfield May, one of the individual applicants, filed an affidavit in reply. This provided more background history to the matter, and some explanation of some of the matters raised in the affidavit filed by St George. However, its substantive paragraphs expressed personal views about aspects of the applicants'
were appointed managers of the project at an early stage. dealings with St George as well as with Capital who apparently
The motion for summary judgment was continually adjourned until today, awaiting a satisfactory version of the statement of claim. As a consequence, these affidavits were not read until today. Had it been necessary to litigate any aspect of the motion other than the application for summary judgment, there can be no doubt that the affidavit of Mr May would have been subject to strenuous objection as to a number of its clauses, because the form in which it appears is quite inadequate. If I ignore the form and go to the substance, assuming that it would be possible to prove by admissible evidence all the matters of fact that the affidavit contains, it falls short of providing anything other than pinpricks in the substance of the case which St George is seeking to have determined in the Court.
It will have emerged from what I have been saying that the basic case before the Court is that involving St George. Capital, and Royal Bank which did not come into the picture until considerably later, were in substance side-players to the major dispute with St George. However, it must be said that Capital was promoted into greater prominence by the applicants' attempts to produce a statement of claim that would raise true issues and provide a basis for a serious and contested case.
were given. The orders for discovery made in the previous While these attempts were being undertaken, various directions July and certain other orders made at that time were suspended, and additional orders were made which were designed
to try to get the case ready for hearing. On 17 February 1992
further orders were made for discovery and inspection, and for the filing of signed statements to represent the evidence-in- chief of the witnesses to be called by both sides.
Not only has discovery and inspection not taken place pursuant to those directions but it was necessary to extend the time for them to 24 April 1992 in order to meet difficulties which the applicants, then represented by solicitors and counsel, brought to the Court's attention. No such list of discoverable documents has been filed. There is no explanation given for its non-filing except that counsel has appeared today for the former solicitor for the applicants and in his absence, the solicitor has appeared himself, to explain that the applicants are short of the necessary funds to carry on the litigation.
The Court would ordinarily be sympathetic to parties who are having difficulty funding litigation. It is well known that court cases today are monstrously expensive and the Courts cannot, funded as they are by public funds, be open merely to litigants who are financially substantial. In particular, having regard to these respondents and their associate companies, it would be unthinkable that the Court would allow
the individual applicants who are without anything like the same capital backing, to be deprived of an opportunity of
contesting a piece of litigation merely on the grounds that they did not have adequate funds. It cannot be the position that by stringing out litigation or making it difficult, respondents of a substantial size can oppress or squeeze impecunious applicants out of their cases.
However, this is not such a case. The applicants have already funded the litigation for almost a year and all that has happened in that period of time, so far as the record shows, is that the pleadings are closed. Even that statement has to be made with some degree of reservation because it is still not certain that the applicants' third amended statement of claim is beyond attack in a substantive way. As the particulars of the defence to the cross-vested proceeding are dependent on discovery and discovery has not been given, it is not possible to know whether that defence may yet be the subject of a successful motion to strike it out. Hence the pleadings are only complete in form. I have yet to deal with the long outstanding invitation to review their substance.
Furthermore, the applicants were directed on 17 February 1992 to file by 30 March the signed statements of the witnesses upon whom they expected to rely. Like the direction as to discovery, that date was also extended to 24 April. Again, if the applicants were in financial difficulty, a problem of
understood. However, it is stretching patience beyond a complying with orders for putting on complex evidence could be
reasonable limit to suggest that the individual applicants who have been parties to these proceedings since their initiation in the Supreme Court, would not have made statements to their solicitor by now. It is hard to accept that they could not have provided signed statements of the evidence which they themselves would expect to give in the litigation. Indeed, as I pointed out earlier, Mr May provided a reasonably particular affidavit as far back as October 1991 which, with some amendments to put it into appropriate form, could easily have formed the basis of his statement in these proceedings.
Moreover, the applicants' defence filed to these cross-vested proceedings is an unusual but creditable form of attempting to identify the specific issues that were to be raised in the litigation. It would not have been difficult to produce from the substance of that defence a statement by the individual applicants of their evidence-in-chief in the proceedings. Furthermore, the preparation by the applicants of a list of the documents they hold could not, in the particular circumstances of this case, be a particularly complex task. At any rate, there is certainly no evidence presented to me suggesting that it would be complex.
Hence, lack of funds does not seem to me to be a justifiable reason for further delaying the disposal of these proceedings. It seems that much of the applicants1 available funds up to
claim that should have been done properly in the first now has been spent on multiple efforts to draft a statement of
instance. If discovery and the statements had been completed, there would have been a basis for proceeding at least to a consideration of the substance of the case because the individual applicants would have made efforts to underwrite the bond fides and genuineness of their case.

FEDERAL COURT OF LIMITED

AUSTMLM

Third respondent

EX TEMPORE JUDGMENT

EINFELD J SYDNEY 27 APRIL 1992

This litigation actually commenced as matter number 50319 of

1991 in the Commercial Division of the Supreme Court of New

- l0 -

That brings me to the last directions hearing on 15 April

1992, just 12 days ago. On that occasion, the Court was met

with what purported to be a notice of ceasing to act filed by the solicitor for the applicants. The document itself and the fact that it was filed alone demonstrated a manifest non- compliance with order 45 rule 7 which sets out the procedure which must be followed when a solicitor ceases to act in a matter. As I pointed out on that day, this was not merely a matter of form. It was a continuing failure on the applicants' side of the record to manifest a serious approach to the conduct of litigation on which the Court and the respondents had already spent a considerable amount of time. Not only had an earlier hearing been undertaken to consider a motion to strike out one of the earlier versions of the statement of claim; the applicants knew generally that the Court had made available a special amount of time to supervise the management of this litigation and to accommodate the periodic difficulties they claimed from time to time.

As it turns out, virtually all that time has been wasted.	This is not simply a matter of sensitivity for the Court or
for any particular judge; it constitutes a complete disregard of the public interest and a misuse of Court time and facilities made available by the taxpayer for these litigants in priority to others with worthy cases being delayed as a result.
Orders were made on 15 April which were designed primarily to ensure that there was compliance with order 45 rule 7. The most important part of that rule not complied with previously was the notification to the Court that sub-rule (2) had been complied with. That requires that a solicitor must serve on his former client the notice of his intention to cease to act. In turn, that failure was important not only because there was an adjourned application for summary judgment on the cross- vested proceedings fixed for hearing, but because all respondents were indicating that they were now anxious to have summary dismissal of the proceedings commenced against them in the Federal Court. It was impossible for the Court to know whether the individual applicants had been advised that their solicitor had ceased to act, and what their intentions were in this connection.
Even to this day, I am only aware that the applicants were given notice of the orders and observations which I made on 15 April and of the fact that their solicitor was no longer
want to do in the proceedings, why the discovery order made in acting for them. I still have no idea what the applicants
July last year, and in February and in April this year, has not been complied with, and why statements of the individual applicants have not been filed in compliance with the orders made in February. All I know, by way of hearsay from the former solicitor for the applicants, is that they have in his opinion a "genuine desire to see these proceedings brought to a finality".
There is therefore before the Court today St George's motion of 20 September 1991 seeking summary judgment on the cross- vested proceedings. The affidavit of Warwick Francis Lyons, St George's credit officer, and the affidavit of Mr May, to both of which I referred earlier, were read in support of the motion.
St George has filed today a notice of motion seeking the dismissal of the applicants' proceedings in the Federal Court under order 10 rule 7 or order 15 rule 16. That motion is supported by two affidavits. The first is that of Samantha Doreen Meers dated 27 April 1992 relating to service and some other matters. The second, also dated 27 April 1992, is an up-to-date affidavit of debt of Mr Lyons. The debt is now stated to be just over $14,250,000.
There is also before the Court a notice of motion by Capital seeking dismissal of the proceedings under the same rules. This is supported by an affidavit of Leo Kevin Andronis, the
history of the matter. There is also an affidavit relating to solicitor handling this matter, which sets out the recent
service of Emma Jane Curtis, who is employed by the same firm.
There has also been made from the bar table on behalf of the Royal Bank, a motion for dismissal of the Federal Court proceedings. An order is sought under order 19 subrule (2)(d) dispensing with the need for the filing of a written notice of motion and affidavit. All respondents seek costs.
In my opinion, there have been demonstrated so many defaults on behalf of the applicants as to lead to the conclusion that they have neither been accidental, unavoidable nor caused by lack of funds. I can see no innocent or explicable ground for the applicants' many defaults in this case.
Order 10 rule 7(1) provides:

Where a p a r t y f a i l s t o comply w i t h an o r d e r o f the

C o u r t d i r e c t i n g t h a t p a r t y t o t a k e a s t e p i n the

p r o c e e d i n g ,	a n y other	p a r t y	may move	the	C o u r t	on
notice:

a ) i f the p a r t y i n d e f a u l t i s an a p p l i c a n t - for

a n o r d e r t h a t the p r o c e e d i n g be s t a y e d or

d i s m i s s e d a s t o the whole or a n y p a r t o f the

rel ief c l a i m e d by h i m i n the p r o c e e d i n g ;

b ) i f the p a r t y i n d e f a u l t i s a r e s p o n d e n t - for

judgment or an o r d e r a g a i n s t h im; or

c) for a n o r d e r t h a t the s t e p i n the p r o c e e d i n g be

t a k e n w i t h i n the t i m e l i m i t e d i n t h a t o r d e r .

The parties in default, in the ways I have demonstrated, are the applicants. Thus the respondents are entitled under order

applicants' claim. In the cross-vested proceedings, the	10 rule 7(l)(a) to apply for an order for the dismissal of the
parties in default are the defendants, in which case St George is entitled to apply for judgment against them in those proceedings.
Order 15 rule 16(1) is in virtually identical terms:

Where a party does not file or serve a list of documents or affidavit or other document or does not produce any document as required by or under this Order, any other party may move the Court on notice:

(a)	if the party in default is an applicant - for an order that the proceeding be stayed or dismissed as to the whole or any part of the relief claimed by him in the proceeding;
(b)	if the party in default is a respondent - for judgment or an order against him; or
(c)	for an order that such document, affidavit or list of documents be filed, served or produced within the time limited in the order.

Indeed, it is not entirely clear why the two rules exist. Order 15 only relates to discovery but order 10 is wide enough to do the same. In any case, these applicants are in default in discovery, both in the proceedings originally commenced in the Federal Court and in the cross-vested proceedings where the completion of the pleadings is dependent upon discovery.

I have read the third amended statement of claim. This is

because I have wanted to satisfy myself that the case sought

either hopeless or unlikely to be able to be successfully	to be brought by or on behalf of the applicants is in fact
litigated. That document is extremely complex and verbose. My first impression was that if it took that much pleading, it would be an impossible case to prove. I must confess that I can see very little progress having been made from the first statement of claim nearly a year ago to today. The cases against the respective respondents are somewhat better delineated but I still have difficulty in understanding precisely what the applicants are saying and how they would be
likely to get relief. In particular I have difficulty in understanding how the third amended statement of claim would represent a defence to the summons in the cross-vested proceeding.
As the applicants have not favoured the Court with their attendance today, notwithstanding their certain knowledge that the question of default judgment or dismissal of their proceedings or both were going to be dealt with today, I see no reason why I should attempt to extract from the third amended statement of claim any type of positive basis for the applicants to succeed in this litigation. Taking into consideration not merely whether the statement of claim might survive in some form as a pleading, but whether it would be likely to lead to the relief sought in the amended application, I believe that in the exercise of my discretion, I should proceed to entertain the dismissal and summary judgment motions forthwith.
applicants have had now a number of indulgences by the Court I can find no basis at all for denying the orders sought. The
to get their case into order. They have had ample notice and more than ample fair treatment in terms of time. All that has happened is that the debt has increased, the costs for the respondents have increased significantly, and the Court has spent a considerable amount of time on the litigation. At best there is a marginal or arguable pleading, and no indication that the applicants are likely to do better in terms of their attention to the case if the matter is adjourned again.
I therefore dismiss the whole of the applicant's claims for relief in the proceedings. I order judgment in favour of St George Commercial Credit Corporation in the cross-vested proceedings, which in this Court are now numbered G512 of 1991, in the sum of $14,271,679.84, plus interest accruing at the rate of 19.75 per cent until payment.
I order that the applicants pay the respondents' costs of the
proceedings, which in the case of Capital and St George which gave written notice, will include the costs of the motions for summary dismissal.
On the question, adjourned from 15 April, of possible contempt of previous Court orders, I have read the affidavit sworn by the former solicitor for the applicants of 22 April 1992. Although there are a number of unsatisfactory features in the history of the matter and in the explanations given in that
affidavit, I have decided to take no further action against
any other person as a result of the failure to comply with previous Court orders and with order 45 rule 7.

I certify :,Set this ?nd t?e

r Rcrsws for Jrrd$mz$?t herein oi h:s Honour 3	1 preced,?? p- rc r are r	Jssuce	Eln:e!;l	3
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li k Dated 27 9.72