Su v Kamal (No 2)
[2022] ACTSC 239
•2 September 2022
SUPREME COURT OF THE AUSTRALIAN CAPITAL TERRITORY
Case Title: | Su v Kamal (No 2) |
Citation: | [2022] ACTSC 239 |
Hearing Dates: | 1 July, 5 July, 17 August and 1 September 2022 |
DecisionDate: | 2 September 2022 |
Before: | McCallum CJ |
Decision: | (1) Pursuant to rule 1404 of the Court Procedure Rules, dismiss the proceedings; (2) The plaintiff is to pay the sixth defendant’s costs; (3) Pursuant to rule 1616 of the Court Procedure Rules, the funds paid to the Court by the sixth defendant are to be paid out to the sixth defendant. (4) Stay the operation of Order 3 for 30 days. |
Catchwords: | CIVIL PROCEDURE — DISCOVERY — Whether plaintiff provided proper disclosure — Where Court previously found inadequate disclosure and ordered further disclosure — Repeated failure to comply with orders of the Court — Whether proceedings should accordingly be dismissed |
Legislation Cited: | Court Procedures Rules 2006 (ACT), rr 607(3), 1404, 1450, 1616 Court Procedures Act 2004 (ACT), s 5A |
Cases Cited: | Su v Kamal [2022] ACTSC 161 Bi v Mourad [2010] NSWCA 17 |
Parties: | Haiyong Su ( Plaintiff) Fadi Nihad Kamal ( First Defendant) Danny Noumeir (Second Defendant) Pepper Finance Corporation Limited (Third Defendant) Secure Funding Pty Ltd (Fourth Defendant) 5 Blackman Cres Macquarie Pty Ltd (Sixth Defendant) B & F O Z Investment Pty Ltd (Third Party) |
Representation: | Counsel N Li ( Plaintiff) S Barry ( Sixth Defendant) |
| Solicitors Yingke Law ( Plaintiff) CKB Associates Lawyers ( Sixth Defendant) | |
File Number: | SC 214 of 2020 |
McCALLUM CJ:
These are proceedings in debt commenced by the plaintiff in 2020. A number of defendants were initially joined but the sixth defendant is the only remaining defendant.
The statement of claim relies on the terms of a deed of loan which identifies the sixth defendant as one of the borrowers of the funds the subject of the loan. The sixth defendant does not dispute the fact that it is named as a borrower but defends the action on the basis that it is not liable for the funds advanced and interest that has accrued on that sum because the second defendant, who signed the loan agreement purportedly on behalf of the sixth defendant as its sole director, had no authority to bind it. The sixth defendant further contends that, had the plaintiff made the necessary inquiries, it would have been apparent that the second defendant had no authority to bind the sixth defendant. It may be seen from that summary that the knowledge of the plaintiff leading up to the execution of the loan is an issue in the proceedings, if not the central issue.
The plaintiff is a sole trader who provides mortgage services using funds loaned in his own private capacity. The loan the subject of his claim in these proceedings was a loan for a sum of $100,000 made on 8 May 2019. The loan deed specified that interest was to accrue at the rate of 24 per cent per annum, increasing to 36 per cent per annum in the event of default. However, as is commonly seen in transactions of this kind, those rather large interest rates were expressed in the slightly less alarming monthly rates of 2 per cent and 3 per cent respectively.
Following the commencement of proceedings in 2020 against the other borrowers and a guarantor named in the deed, together with various other parties, the proceedings did not progress with any great expedition. I have not retraced the entire history of what was happening before November 2021. By 10 November 2021, the proceedings had been distilled to a claim only against the sixth defendant. Properties ostensibly offered as security for the loan by then had been sold and an amount of some $480,000 paid into Court from the proceeds of those sales, to be held pending the determination of the proceedings.
On 14 February 2022, the solicitor for the sixth defendant served on the plaintiff a notice to disclose discoverable documents. In the face of an indication that the plaintiff would not comply with the notice, on 21 February 2022 the sixth defendant was granted leave by the Deputy Registrar to file an application in proceedings concerning the adequacy of the plaintiff's discovery.
The issues raised by those steps essentially concerned the plaintiff's unwillingness or inability to produce any documents created by him during his consideration of the loan application other than the final loan documents or other final iterations of the transaction as he contends it to be. That of course omits a body of material one would expect a lender ordinarily to hold and it happens to be the material essential to the sixth defendant's contention that the plaintiff, had he made the necessary inquiries, would have discovered the second defendant's lack of authority to bind the sixth defendant as a borrower.
The sixth defendant in due course filed an application in proceedings in accordance with the leave granted by the Deputy Registrar and that was returnable on 25 March 2022. The day before that hearing, on 24 March 2022, however, the plaintiff consented to comply with the notice to disclose discoverable documents. The proceedings were then stood over to 9 May 2022.
The plaintiff initially sought to comply with the disclosure notice by providing a letter to the solicitor for the sixth defendant. The period within which the plaintiff was permitted to comply with that notice expired on 21 April 2022. As has commonly occurred in these proceedings, it was only on that last date for compliance that Mr Barry received the letter to which I have referred. In that letter, the plaintiff's solicitor stated:
“We advise that our client seeks to rely on the solicitor’s files kept for this matter by Juris Cor Legal and our client did not keep and does not have access to those documents sought in the discoverable documents.”
It may be noted that the letter appears to contemplate the existence of a solicitor's file containing documents answering the description in the discovery notice. It may further be noted that the letter includes an express assertion that the plaintiff himself did not hold copies of those documents.
By letter dated 27 April 2022, the sixth defendant's solicitor, Mr Barry, provided a careful explanation of the inadequacies of that letter as a response to the discovery notice, not least among which was that the letter did not comply with express requirements of the rules. He noted that the plaintiff ought to have served a list of documents verified by him and attaching a solicitor's certificate of the advice as to the plaintiff's list of documents given by the solicitor; see r 607(3) of the Court Procedures Rules 2006 (ACT).
The letter also identified reasons why the solicitor’s file ought to have been included in the list in one way or another, that is, either as a document within the plaintiff's custody or power or a document no longer in his custody or power and, if the latter, an explanation as to why.
On two occasions after that when the proceedings came before the Court, the plaintiff failed to appear. That triggered an obligation on his part to show cause why the proceedings should not be dismissed, the Registrar having made a referral on that basis. The failure to appear was explained in an affidavit sworn by the solicitor and that explanation has previously been accepted by me as adequate. However, what happened in that intervening period, so it would seem, is that the solicitor lost sight of the need to respond to the substance of Mr Barry's letter of 27 April 2022.
When the proceedings ultimately came before me for the show cause hearing, the plaintiff's solicitor appeared to be under the misapprehension that the only issue for which he had to answer was his failure to appear, whereas Mr Barry was pressing for dismissal of the proceedings on the basis of what he contended to be inadequate compliance with the discovery notice.
That issue ultimately having been made clear to the plaintiff's solicitor, I heard an argument on 1 July 2022 as to the adequacy of the discovery. On 5 July 2022, I made the following orders, for the reasons published that day: see Su v Kamal [2022] ACTSC 161 at [28]:
“(1) That the plaintiff give further discovery in accordance with the previous order to comply with the notice to produce discoverable documents within 14 days;
(2) Stand the proceedings over before McCallum CJ on 26 July 2022 at 9am.
(3) Order the plaintiff to pay the sixth defendant’s costs of the matters determined today which include the costs of Mr Barry’s appearances on 9, 23 and 27 May, 23 June and 1 and 5 July 2022.”
In those reasons, I said at [27]:
“It is appropriate to emphasise the following matters. First, that the order today should be understood by the plaintiff to be very much a “last chance” kind of order. Secondly, that what is established on the evidence, at the very least, is that the discovery should have included reference to the solicitor’s file and also to the earlier loans to Mr Noumeir referred to in Mr Barry’s submissions in Court last week.”
My order permitting a further 14 days within which the plaintiff should give further discovery in accordance with the previous order to comply with the discovery notice expired on 19 July 2022. As noted by Mr Barry, subsequent evidence revealed that it was only on that day that the plaintiff sent authorities to his previous solicitors to release their files.
Most recently, the proceedings came before me yesterday for further argument as to whether the plaintiff had yet complied with the discovery notice. Mr Barry submitted that he has not and that the time has come, in accordance with the warning of my judgment of 5 July, for the proceedings to be dismissed for want of prosecution or failure to comply with directions of the Court.
Mr Li, who appears for the plaintiff, submitted conversely that there is no basis for the Court to conclude that the plaintiff has not done all he can to obtain the documents it was previously apprehended he might be able to obtain based on his dealings with the previous solicitors.
There are two firms of solicitors involved in the transaction and they are the firms I had in mind in [27] of the judgment set out above. First, Juris Cor acted for the plaintiff on the underlying loan transaction; secondly, Summer Legal acted for the plaintiff in his subsequent attempts to enforce the loan prior to the commencement of proceedings.
Mr Li has submitted that there is no basis for the Court to think that there has been inadequate discovery from documents held by Summer Legal, with whom the plaintiff is in dispute as to costs and who accordingly are exercising a solicitor's lien. In my view, that submission must be accepted. The documents if any held by Summer Legal would relate to the period after the loan agreement was entered into and could not therefore be apprehended to be likely to shed light on the information provided to the plaintiff in the period when he was negotiating the loan.
The position in relation to Juris Cor is more complex. It is clear enough from the loan documents themselves that that firm acted for the plaintiff on loan transaction. The plaintiff’s current solicitor, Mr Chen, swore an affidavit on 16 August 2022 in which he set out the attempts he had made to obtain further documents from those solicitors. Correspondence annexed to the affidavit reveals the following chronology.
First, as already indicated, on 19 July 2022, the date on which the plaintiff was supposed to comply with my previous order, the plaintiff's current solicitors sent Juris Cor an authority to release the file. There was no response to that correspondence and it was necessary for the plaintiff's solicitors to follow up Juris Cor.
A letter dated 26 July 2022 sets out Mr Chen's version of a conversation with a solicitor from Juris Cor in which they accepted that they had received the authority to release the file and that there was a file. However, Juris Cor said they would need time to retrieve it, that there was voluminous email correspondence, that the files had previously been released physically to the plaintiff upon the conclusion of the matters, and that Juris Cor would respond to a subpoena in order to obtain the file still evidently held by it so that they would be entitled to seek conduct money (possibly intended to be a reference to expenses rather than conduct money).
A further letter dated 26 July from Juris Cor confirmed that the previous solicitor who acted on the transaction, Ms Yin, had stated that the file, including the loan documents, had been provided to the plaintiff. The letter continued:
“The client does not dispute this and indeed has indicated over the phone that said documents were in turn provided to you. Your assertion that the client has never received or been handed the file either physically or electronically is incorrect and rejected.”
It may be noted that that explanation concerning the continuity of possession of the file, namely that it was provided by Juris Cor to the plaintiff and then provided by the plaintiff to his current solicitors, has nowhere been provided as it perhaps should have been (if it be correct) in either of the affidavits of discovery. Indeed, the first affidavit of discovery stated that the plaintiff had not held those documents at all.
Finally, returning to the correspondence with the law firm, the affidavit of Yin Chen, sworn 16 August 2022, annexes screenshots of emails sent by Juris Cor to the plaintiff containing a drop box of documents. In the correspondence with Juris Cor, the plaintiff's current solicitors attempted to ascertain whether those were the only documents provided to the plaintiff but the solicitor at Juris Cor chose not to respond to that request.
What is clear from those exchanges is that Juris Cor accepts that it still holds a copy of whatever was provided to the plaintiff, or at least a copy of its file and that it is prepared to provide that material but that it is not prepared to do so without a subpoena. The question accordingly arises whether a party should be expected, in circumstances where its former solicitor will not provide a copy of documents to which the party is entitled without a subpoena, that is a part of the obligation for discovery; that is, to issue the subpoena and obtain the documents in that way.
Mr Barry submitted that the upshot of the exchanges that have passed and the current state of the evidence is that the court should find Mr Su has not provided proper disclosure notwithstanding the last chance afforded to him by the Court's orders made on 5 July 2022.
In my view, in circumstances where it is clear enough that further documents probably exist and the only reason those searches have not been undertaken is for want of the issue of a subpoena, it must be concluded that the plaintiff has not taken all reasonable steps to obtain the documents. Even if that is wrong, it is clear that his affidavits of discovery have been inadequate in not revealing anything of the trail I have just described.
The rule invoked by Mr Barry for dismissal of the claim at this stage is r 1404 of the Court Procedures Rules 2006 (ACT). He also invokes rule 1450 but I do not think it is necessary to refer to that rule. Rule 1404 provides:
1404 Failure to comply with direction etc
(1) This rule applies if a party—
(a) after receiving notice of a directions or listing hearing, in a proceeding, does not attend the hearing; or
(b) fails to comply with a direction about the conduct of a proceeding.
(2) The court may do any of the following:
(a) give the further directions it considers appropriate;
(b) dismiss the application or proceeding;
(c) make an order for costs for or against a party;
(d) adjourn the application or hearing;
(e) make another order dealing with the proceeding it considers appropriate.
(3) Without limiting subrule (2), the court may consider, and give directions in relation to, the following matters at a directions hearing:
(a) requests for particulars;
(b) filing further pleadings;
(c) amending pleadings;
(d) challenges to any pleading;
(e) discovery, either in full or limited to particular issues;
(f) interrogatories;
(g) alternative dispute resolution, including mediation;
(h) statements of agreed facts;
(i) evidence by affidavit;
(j) service or exchange of expert reports.
Note The court has a general power to make directions about the conduct of a proceeding (see r 1401 (Directions generally)).
(4) The court may act under this rule on application by a party or on its own initiative.
Note Pt 6.2 (Applications in proceedings) applies to an application under this rule.
(5) In deciding whether to dismiss the application or proceeding, the court must have regard to the principle that the interests of justice are paramount.
The application of that rule must of course be undertaken in the context of the Court's obligations under section 5A of the Court Procedures Act 2004 (ACT) which provides:
5A Main purpose of civil procedure provisions
(1) The main purpose of the civil procedure provisions is to facilitate the just resolution of disputes—
(a) according to law; and
(b) as quickly, inexpensively and efficiently as possible.
(2) Without limiting subsection (1), the main purpose includes the following objectives:
(a) the just resolution of the real issues in civil proceedings;
(b) the efficient use of the judicial and administrative resources available for the purposes of the court;
(c) the efficient disposal of a court’s overall caseload;
(d) the timely disposal of civil proceedings;
(e) the resolution of disputes at a cost that is proportionate to the importance and complexity of the matters in dispute.
(3) The civil procedure provisions must be interpreted and applied, and any power or duty imposed by them (including the power to make rules) must be exercised or carried out, in the way that best promotes the main purpose.
(4) The parties to a civil proceeding must help the court to achieve the objectives.
(5) In this section:
civil procedure provisions means—
(a) the rules made under section 7, in their application to civil proceedings; and
(b) any provision of this Act in relation to the practice and procedure of a court in civil proceedings.
court includes a tribunal that is a prescribed tribunal under section 6.
It is now well understood that case management provisions of those kinds were intended to effect a wholesale change in the way in which litigation is to be conducted in Australia and the expectations of the court as to the cooperation of the parties in that undertaking. As long ago as 2010, the New South Wales Court of Appeal in Bi v Mourad [2010] NSWCA 17 explained why parties should expect that if they do not prosecute their claims with due expedition, or if they permit themselves repeatedly not to comply with orders of the court, proceedings may be dismissed. The proposition is perhaps best captured in the judgment of Young JA at [31] where his Honour said:
“It must also be remembered these days that ss 56 to 60 of the Civil Procedure Act 2005 set up a regime that requires the courts to turn away reluctant gladiators and to ensure that they either prosecute their claims in due time or get sent away from the court.”
Allsop P agreed with his Honour's remarks. Sackville AJA also made additional remarks with which Allsop P also agreed, emphasising the importance of a party prosecuting a claim with due expedition.
The difficulty in the present case, as I have said, is that the documents which the sixth defendant has taken every step to obtain are central to the question of the ostensible authority of the second defendant to bind it. Without even knowing what documents exist falling into that category, the sixth defendant is left to fight the case in effect with one arm tied behind its back.
A further consideration is, as submitted by Mr Barry, that the sixth defendant has had to take repeated efforts to bring the plaintiff even to compliance with the rules let alone taking the steps required to put the sixth defendant in a position to defend the proceedings.
I am of the view that the plaintiff has demonstrated himself to be a “reluctant gladiator”, to adopt the language of Young JA, and that the time has come to dismiss these proceedings for failure to comply with directions of the Court on repeated occasions, a failure which is now causing real prejudice to the sixth defendant.
For those reasons I make the following orders:
(1) Pursuant to rule 1404 of the Court Procedure Rules, dismiss the proceedings;
(2) The plaintiff is to pay the sixth defendant’s costs;
(3) Pursuant to rule 1616 of the Court Procedure Rules, the funds paid to the Court by the sixth defendant are to be paid out to the sixth defendant.
(4) Stay the operation of Order 3 for 30 days.
| I certify that the preceding thirty-seven [37] numbered paragraphs are a true copy of the Reasons for Judgment of her Honour Chief Justice McCallum Associate: Date: |
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