Lansell Enterprises Pty Ltd v Kleenmaid Pty Ltd

[2006] FCA 1701

FEDERAL COURT OF AUSTRALIA

Lansell Enterprises Pty Ltd v Kleenmaid Pty Ltd [2006] FCA 1701

LANSELL ENTERPRISES PTY LTD (ACN 105 770 992) v KLEENMAID PTY LTD (ACN 001 905 808) and KLEENMAID PTY LTD (ACN 001 905 808) v LANSELL ENTERPRISES PTY LTD (ACN 105 770 992) AND JOHN ROBERT GORDON
VID 106 OF 2005

YOUNG J
27 OCTOBER 2006
MELBOURNE

IN THE FEDERAL COURT OF AUSTRALIA
VICTORIA DISTRICT REGISTRY	VID 106 OF 2005

BETWEEN:

LANSELL ENTERPRISES PTY LTD (ACN 105 770 992)
Applicant

AND:

KLEENMAID PTY LTD (ACN 001 905 808)
Respondent

KLEENMAID PTY LTD (ACN 001 905 808)
Cross-Claimant

LANSELL ENTERPRISES PTY LTD (ACN 105 770 992)
First Cross-Respondent

JOHN ROBERT GORDON
Second Cross-Respondent

JUDGE:	YOUNG J
DATE OF ORDER:	27 OCTOBER 2006
WHERE MADE:	MELBOURNE

THE COURT ORDERS THAT:

1.The respondent/cross-claimant comply with paragraphs 2 and 3 of the order of 8 September 2006 by 4.00 pm on 10 November 2006, failing which:

(a)     the respondent/cross-claimant’s defence and counterclaim be struck out and judgment entered for the applicant/cross-respondents;

(b)     the respondent/cross-claimant pay the costs of the proceeding of the applicant/cross-respondents.

2.The respondent/cross-claimant file and serve by 10 November 2006 an affidavit which verifies the respondent/cross-claimant’s full and complete compliance with paragraphs 2 and 3 of the order of the Court of 8 September 2006.

3.The applicant notify the respondent/cross-claimant’s solicitors in writing of any deficiencies in the documents provided yesterday by the respondent/cross-claimant by way of further discovery pursuant to paragraphs 2 and 3 of the order of the Court of 8 September 2006 by 4.00pm on 3 November 2006.

4.The respondent/cross-claimant provide the applicant/first cross-respondent with any electronic copies of the documents and/or classes of documents (as originally maintained) referred to in the orders of 10 February 2006, 6 June 2006 and 8 September 2006.

5.The respondent / cross-claimant file and serve a supplementary list of documents by 10 November 2006, discovering all documents relating to sales made by the respondent’s Camberwell store in the period July 2004 to February 2005.

6.On or before 4:00pm on 27 November 2006, the parties file and serve any affidavits in reply and any expert reports upon which they intend to rely.

7.On or before 4:00 pm on 20 December 2006, the parties file and serve any expert reports in reply upon which they intend to rely.

8.On or before 4:00pm on 19 January 2007, the parties file and serve any objections as to the admissibility of any affidavit material.

9.On or before 4:00pm on 27 January 2007, the parties file and exchange their responses to any such objections.

10.On or before 4:00pm on 2 February 2007, the applicant/cross-respondent and second cross-respondent file and serve an outline of contentions of fact and law.

11.On or before 4:00 pm on 14 February 2007, the respondent/cross-applicant file and serve an outline of contentions of fact and law.

12.The applicant/first cross-respondent and the second cross-respondent, in consultation with the respondent/cross-applicant, compile an indexed and paginated Court Book containing current pleadings and particulars, affidavits and a copy of documents that any party will seek to tender at the hearing.  Two copies of the Court Book are to be filed no later than 21 days prior to the hearing.

13.The parties file and exchange chronologies no later than 7 days prior to the hearing.

14.Pursuant to Order 62 rule 3(2), the respondent/cross-claimant pay the costs of the applicant/cross-respondents of and incidental to the hearings of 17 March 2006, 6 June 2006, 8 September 2006 and this day, on an indemnity basis, and such costs be taxed forthwith and paid within seven days after taxation.

15.The directions hearing in this matter be adjourned to Friday, 23 February 2007 at 9.30am.

Note:    Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

IN THE FEDERAL COURT OF AUSTRALIA
VICTORIA DISTRICT REGISTRY	VID 106 OF 2005

BETWEEN:

LANSELL ENTERPRISES PTY LTD (ACN 105 770 992)
Applicant

AND:

KLEENMAID PTY LTD (ACN 001 905 808)
Respondent

KLEENMAID PTY LTD (ACN 001 905 808)
Cross-Claimant

LANSELL ENTERPRISES PTY LTD (ACN 105 770 992)
First Cross-Respondent

JOHN ROBERT GORDON
Second Cross-Respondent

JUDGE:	YOUNG J
DATE:	27 OCTOBER 2006
PLACE:	MELBOURNE

REASONS FOR JUDGMENT

1. I have before me an application that seeks orders arising from the respondent’s non-compliance with its discovery obligations.  The application seeks an order that the respondent complete its discovery by 4.00pm on 10 November 2006, failing which the respondent’s defence and counter-claim be struck out and the respondent pay the costs of the proceeding.    In addition, the application seeks an order that the respondent pay the costs of the applicant of and incidental to the hearings in this Court on 17 March 2006, 6 June 2006, 8 September 2006 and today, on an indemnity basis, and that such costs be taxed forthwith pursuant to O 62 r 3(2) of the Federal Court Rules and paid within seven days after taxation.  Orders in this form are opposed by the respondent, but there was no dispute that the respondent was in breach of the Court’s earlier orders requiring it to make discovery. 

   THE RESPONDENT’S NON-COMPLIANCE WITH COURT ORDERS

2. On 10 February 2006, after a lengthy hearing concerning discovery, I ordered that the respondent provide further and better discovery, and file a further supplementary list of documents by 15 March 2006 discovering, inter alia, documents relating to the profitability of the other franchisees and the respondent’s company stores from January 2000 to 30 June 2004.  This order was not complied with. 

3. At a further directions hearing on 6 June 2006, I made further orders concerning discovery because of this non-compliance.  In particular, I ordered that the respondent file and serve a supplementary list of documents by 6 June 2006 discovering, inter alia, all profit and loss statements for all of its franchisees and company stores from January 2000 to 30 June 2004.  Again, this order was not complied with. 

4. On 8 September 2006, I further extended the time for discovery by the respondent and ordered that it file and serve a supplementary list of documents by 29 September 2006 discovering, inter alia, all profit and loss statements and the balance sheets for all of its franchisees and company stores from January 2000 to 30 June 2004. 

5. Both the order of 8 September 2006 and the order of 6 June 2006 required the respondent to provide electronic copies of the documents required to be discovered. 

6. The order of 8 September 2006 requiring discovery by 29 September 2006 was again not complied with.  At the hearing on 8 September 2006, I indicated that if the order was not complied with, I would contemplate making a self-executing order in the event of further non-compliance, or entertaining an application for the dismissal of the respondent’s case.

7. Counsel for both parties informed me from the bar table that, late yesterday, a large number of documents were provided by email by the respondent’s solicitors to the applicant’s solicitors.  The email included documents of the kind that I had ordered be discovered by 29 September 2006 and by the previous dates I have mentioned. 

8. The solicitors for the applicant have not had any reasonable opportunity of carrying out a close inspection of the documents.  Their preliminary investigation reveals that the documents do include financial records, however some of the documents have been provided in PDF format rather than the original electronic format, which may have been Excel or some similar program.  Mr Lewis, counsel for the respondent, accepted that under the orders I have previously made, the original electronic form of the documents is required to be produced, not the electronic form after its conversion into PDF format.

9. The respondent has not provided any affidavit to the Court explaining the circumstances which led to the non-compliance with the Court’s orders concerning discovery.  I infer from the volume of documents that were said to be emailed late yesterday that the extent of the non-compliance was very substantial.  Having regard to the past history of this matter, I consider that it is appropriate to make a self-executing order so as to ensure that the respondent completely and fully satisfies its discovery obligations and, moreover, verifies that it has done so on oath. 

10. Before I turn to the detail of the orders I propose, I wish to make it very plain that the Court considers that the repeated non-compliance by the respondent with the orders of this Court amounts to a contumelious disregard of the authority of this Court.  The respondent seems to have taken the attitude that it can disregard the Court’s orders with impunity and without any explanation in proper form.  Its conduct amounts to a flouting of the Court’s orders.  I made it very clear on earlier occasions that further non-compliance would result in action being taken by the Court, yet that non-compliance occurred without explanation.

11. The respondent’s conduct clearly, in my view, attracts the authority of the Court to make a self-executing order concerning discovery, and to make an order for indemnity costs and other orders concerning the payment of costs under O 62 r 3. 

12. The ordinary rule as to costs is that the Court orders costs on a party to party basis.  In order to depart from that usual practice and to warrant an award of costs on an indemnity basis, there must be some special or unusual feature in the case to justify that departure.

13. The cases identify various circumstances that warrant an imposition of indemnity cost, including unreasonable and high-handed conduct on the part of a party, contumelious disregard of the orders of the Court, multiple occasions of non-compliance with the orders of the Court - particularly where the non-compliance is not explained by affidavit evidence - and conduct that inflicts unnecessary costs and loss of time on the other party to a litigation, and causes dislocation to the processes of the Court: see, eg, Fountain Selected Meats (Sales) Pty Ltd v International Produce Merchants Pty Ltd (1988) 81 ALR 397, and Colgate Palmolive Company v Cussons Pty Ltd (1993) 46 FCR 225.

14. The Court’s jurisdiction to make an order under O 62 r 3 that costs be taxed forthwith and paid upon completion of the taxation is attracted.  This case falls squarely within the principles articulated by Kenny J in Eunson v Beaulieu United Ltd (2002) 190 ALR 110. In my opinion, the circumstances of the non-compliances in this case support an order of the kind sought by the applicant under O 62 r 3(2) and, moreover, such orders are required by the interests of the administration of justice in this case.

15. In this case there have been multiple instances of non-compliance.  None have been satisfactorily explained.  The respondent has been on notice that any further non-compliance would attract severe orders from the Court.  The respondent’s conduct has severely prejudiced the position of the applicant.  It had reason to expect that the discovery issues having been resolved by the hearing in February 2006, this action might have been set down for hearing and determination before the end of this year.  That possibility has completely disappeared by virtue of the respondent’s non-compliance with the Court’s orders.  That non-compliance has necessitated additional directions hearings and has caused substantial delays in the progress of the case, including delays in the preparation of expert evidence of a financial nature: see also All Services Australia Proprietary Limited v Telstra Corporation Limited (2001) 71 ALR 330 at 333 per Kiefel J.

16. For those reasons, I will make orders of the kind and substantially in the terms sought by the applicant.

    ORDERS

17. I will make orders giving effect to my ruling and further directions in this matter, by way of amendment to the minutes of orders provided to me by the applicant.  

18. The further directions include an order that the directions hearing be adjourned to 23 February 2007 at 9.30 am.  I will not make a further order that the parties be at liberty to apply for further directions.  If there is an absolute need for this matter to be raised again with the Court, the parties can, in accordance with the practices of this Court, make an application by arrangement with the judge’s associate or the Registry.  I do not expect or wish to see any further disputation in this matter, particularly not of the kind that has occupied the Court for much of this year.

I certify that the preceding eighteen (18) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Young.

Associate:

Dated:        6 December 2006

Counsel for the Applicant:	P Neskovcin
Solicitor for the Applicant:	B2B Lawyers
Counsel for the Respondent:	J Lewis
Solicitor for the Respondent:	Dibbs Abbott Stillman
Date of Hearing:	27 October 2006
Date of Judgment:	27 October 2006