Wu v Avin Operations Pty Ltd

Case [2006] FCA 36

FEDERAL COURT OF AUSTRALIA

Wu v Avin Operations Pty Ltd (ACN 076 956 913) [2006] FCA 36

PRACTICE AND PROCEDURE – application for summary judgement – O 35A, Federal Court Rules – respondents in default for failure to defend the proceeding with due diligence – appropriate relief in the circumstances – indemnity costs

Federal Court Rules O 35A rr 2(2)(d) and (h), O 35A rr 3(2)(b) and (e)

Australian Securities Commission v Macleod (1994) 54 FCR 309 distinguished
Lenijamar Pty Ltd v AGC (Advances) Ltd (1990) 27 FCR 388 applied
Cadbury Schweppes Pty Ltd v Darrell Lea Chocolate Shops Pty Ltd [2004] FCA 1718 followed
KM & A Chadwick Pty Ltd v Yeung [1995] FCA 354 referred to
Australian Finance Group Ltd v Accent Financial Group Pty Ltd [2005] FCA 66 referred to
Arthur v Vaupotic Investments Pty Ltd [2005] FCA 433 followed
Australian Competition and Consumer Commission v 1 CellNet LLC [2005] FCA 856 followed
Australian Competition and Consumer Commission v Albert [2005] FCA 1311 followed
Deisel Spa v Hwang [2005] FCA 1619 followed

JUN XUE WU v AVIN OPERATIONS PTY LTD (ACN 076 956 913), BARRY ARMITAGE, CHRISTOPHER JAMES ARMITAGE, JOAN DOROTHY ARMITAGE AND ASIA PACIFIC COATING PTY LTD (ACN 089 840 728)

VID 372 OF 2003

KENNY J
3 FEBRUARY 2006
MELBOURNE


IN THE FEDERAL COURT OF AUSTRALIA

VICTORIA DISTRICT REGISTRY

VID 372 OF 2003

BETWEEN:

JUN XUE WU
APPLICANT

AND:

AVIN OPERATIONS PTY LTD (ACN 076 956 913)
FIRST RESPONDENT

BARRY ARMITAGE
SECOND RESPONDENT

CHRISTOPHER JAMES ARMITAGE
THIRD RESPONDENT

JOAN DOROTHY ARMITAGE
FOURTH RESPONDENT

ASIA PACIFIC COATING PTY LTD (ACN 089 840 728)
FIFTH RESPONDENT

JUDGE:

KENNY J

DATE OF ORDER:

3 FEBRUARY 2006

WHERE MADE:

MELBOURNE

THE COURT ORDERS THAT:

1.The applicant prepare a bill of costs in respect of the motion, notice of which was filed on 4 August 2004, and such bill of costs be taxed by Registrar Bardsley at 10.15 am on 13 February 2006.

2.The first and second respondents pay forthwith the applicants’ costs of and incidental to the motion, notice of which was filed on 4 August 2004, on an indemnity basis, to be taxed pursuant to paragraph 1 hereof.

3.If the first and second respondents do not pay the applicant’s taxed costs within 14 days from the date of service upon them of a certificate of taxation, then the applicant have leave to enter judgment against the first and second respondents for $334,000 and interest thereon.

4.The motion, notice of which was filed on 4 August 2004, be otherwise dismissed.

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 372 OF 2003

BETWEEN:

JUN XUE WU
APPLICANT

AND:

AVIN OPERATIONS PTY LTD (ACN 076 956 913)
FIRST RESPONDENT

BARRY ARMITAGE
SECOND RESPONDENT

CHRISTOPHER JAMES ARMITAGE
THIRD RESPONDENT

JOAN DOROTHY ARMITAGE
FOURTH RESPONDENT

ASIA PACIFIC COATING PTY LTD (ACN 089 840 728)
FIFTH RESPONDENT

JUDGE:

KENNY J

DATE:

3 FEBRUARY 2006

PLACE:

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Details
AGLC
Wu v Avin Operations Pty Ltd [2006] FCA 36
Case
[2006] FCA 36
Decision Date

CaseChat Overview and Summary

The applicant, Ms Wu, sought a summary judgment against the respondents in this proceeding, which concerned a claim for the recovery of an investment. The respondents were Avin Operations Pty Ltd and various individuals associated with the company. The legal issue before the court was whether the respondents were in default under Order 35A of the Federal Court Rules 2011, which allows the court to make an order against a respondent who fails to comply with a court order or to defend a proceeding with due diligence. The court considered whether the respondents had failed to comply with an order of the court in the proceeding or had failed to defend the proceeding with due diligence.

The court found that the respondents were in default under Order 35A because they had failed to comply with an order of the court to produce a list of documents. The court noted that the respondents had a history of delay and non-compliance with the court's orders, which had caused prejudice to the applicant. The court also found that the respondents had failed to defend the proceeding with due diligence because they had not taken steps to obtain legal representation or to engage with the applicant's solicitors. The court exercised its discretion to make an order against the respondents under Order 35A.

The court ordered that the applicant prepare a bill of costs in respect of the motion and that the respondents pay the applicant's costs on an indemnity basis. If the respondents did not pay the applicant's taxed costs within 14 days of receiving a certificate of taxation, the applicant had leave to enter judgment against the respondents for $334,000 and interest thereon. The court did not make a final determination on the merits of the applicant's claim but left that matter to be determined at a later date.

Orders

Orders of the court

1. The applicant prepare a bill of costs in respect of the motion, notice of which was filed on 4 August 2004, and such bill of costs be taxed by Registrar Bardsley at 10.15 am on 13 February 2006.

2. The first and second respondents pay forthwith the applicants’ costs of and incidental to the motion, notice of which was filed on 4 August 2004, on an indemnity basis, to be taxed pursuant to paragraph 1 hereof.

3. If the first and second respondents do not pay the applicant’s taxed costs within 14 days from the date of service upon them of a certificate of taxation, then the applicant have leave to enter judgment against the first and second respondents for $334,000 and interest thereon.

4.

Background

Background to the litigation

By their defence, the respondents state that the fifth respondent was wound up by order of the Supreme Court on 17 September 2003. Barry Armitage admits that, on or about 22 July 1997, he engaged in negotiations with Ms Wu, assisted by Ms Minnie Xia, concerning a proposal to invest some $175,000 in Avin. Avin and Barry, Christopher and Joan Armitage otherwise deny Ms Wu’s claims. They say that there were negotiations with a Mr Gu to invest a like amount in the company; and that Ms Wu and Mr Gu invested $325,082.07 in Avin pursuant to agreements made with them. They also say that this agreement gave Ms Wu the option of withdrawing her investment by giving 3 months’ notice at any time for up to 2 years from the date of her contribution and she did not exercise the option. They allege that the communications with Ms Wu were entirely through Ms Xia, who advised Barry Armitage that they had arranged to take all documents to a Chinese speaking lawyer in Melbourne and that they had visited this lawyer.relevant background Ms Wu’s application for judgment is based on a claim that there is a history of delay and non-compliance with the Court’s orders by Avin and Barry Armitage. Accordingly, the procedural background of this case is relevant to Ms Wu’s application. As already noted, Ms Wu filed her application and statement of claim on 9 May 2003. On 12 and 14 August 2003, she filed notices of motion seeking an order for substituted service of the originating process on Barry and Joan Armitage. On 12 August 2003, Ms Wu filed affidavits sworn by the process servers Michael Barnett, John Ioannou, Steve Vlachos, Fotios Karamouratidis and Raymond Smith. In these affidavits, the process servers claimed that, despite their best efforts, they were unable to serve these two respondents. Mr Vlachos affirmed that he was able to serve Christopher Armitage by placing a sealed copy of the application and statement of claim under the windscreen wiper of his vehicle while he was stopped at traffic lights. There were also other affidavits filed in support of the motion. On 20 August 2003, the Court made an order for substituted service. On 12 September 2003, all but Christopher Armitage filed a notice of appearance. Christopher Armitage filed a notice of conditional appearance (which was followed by a regular notice of appearance on 8 October 2003). Joseph Guss, solicitor, then represented the respondents. As indicated, on 17 September 2003, the fifth respondent was wound up by order of the Supreme Court of Victoria. This proceeding was stayed against it by virtue of s 471B of the Corporations Act 2000 (Cth). On 8 October 2003, the remaining respondents filed a defence. Also on that day, the parties, through their legal representatives, appeared before a Registrar of this Court for directions. The Registrar ordered that the parties exchange lists of discoverable documents by 10 November 2003; that inspection be completed by 24 November 2003; and that the matter be referred to mediation by 19 December 2003, with costs reserved. On 12 November 2003, Ms Wu filed her list of documents. The remaining respondents failed to comply with the Registrar’s orders relating to discovery.

Evidence

Evidence Before The Court

By a letter dated 18 January 2005, Ms Wu’s solicitors indicated that, at an adjourned hearing on 28 January 2005, they would seek an order that Barry Armitage pay her costs in an amount of over $9,000; and, in default of payment, that his defence be struck out. At the parties’ request, as already indicated, this hearing was subsequently adjourned to 27 April 2005, in order that matters arising under the subpoena could be concluded.the evidence Ms Wu relied on seven affidavits from her solicitor, Ms Anna Maria Krycer. They were affirmed at various stages of these proceedings. Ms Wu also relied upon an affidavit sworn by herself on 30 November 2004 and an affidavit from Ms Hairong Xia sworn on 26 November 2004. Ms Wu and Ms Xia’s affidavits support Ms Wu’s claims. It is unnecessary to set out their contents. The respondents relied on three affidavits of Barry Armitage, an affidavit of Christopher Armitage and an affidavit of Joan Armitage. The respondents also relied on two affidavits from their former solicitor, Mr George Liberogiannis and an affidavit of Avin’s former bookkeeper, Ms Helen Saldeneri. The affidavits of Christopher and Joan Armitage and Helen Saldeneri contest the claims made by Ms Wu against the respondents. It is also unnecessary to set out their contents.(a) Ms Krycer In essence, Ms Krycer’s affidavits review the procedural history discussed above and outline her efforts to inspect the respondents’ documents. She referred to extensive correspondence between her and Mr Guss and between her and Barry Armitage. This correspondence (exhibits to her affidavits) reveals a lengthy pattern of delay on the part of Mr Guss and the respondents. Ms Krycer’s evidence is that, on 21 November 2003 - that is, three days before the lists of documents were first due - Mr Guss informed her that the respondents were unable to complete the list of documents because Barry Armitage was still searching for documents. Later, after the respondents were ordered to produce their list of documents by 15 January 2004, Mr Guss told Ms Krycer that he had mistakenly thought that the list was due on 30 January 2004. As noted above, Avin and Barry Armitage produced their list of documents only after Ms Krycer filed a second notice of motion seeking production. Ms Krycer’s third to seventh affidavits outline her extended efforts to obtain inspection of Avin’s and Barry Armitage’s discovered documents. Ms Krycer sent numerous letters to Mr Guss seeking inspection. After Mr Guss filed his notice of ceasing to act on 14 April 2004, Ms Krycer contacted the respondents directly. As can be seen from the procedural history outlined above, her efforts were not successful, although Ms Krycer has now had access to some of these documents by way of the subpoena directed to Mr Guss. (b) Barry Armitage Barry Armitage’s first affidavit was filed on 23 August 2004 in defence of the notice of motion before the Court. He deposes to various personal matters which resulted in him having no knowledge of the notice of motion until 10 August 2004 (the motion being originally returnable on 11 August 2004) and no knowledge of the adjourned hearing date (29 August 2004) until 20 August 2004.

Decision

Reasons for decision

KENNY J

Full text does not contain this section.

Ratio Decidendi

Legal Principle Established

Established by: KENNY J

Further, counsel for the Armitages had submitted that the Rules required direct evidence of the facts alleged in the statement of claim before the court could dispose of the matter summarily. In all the circumstances, counsel had contended that this matter would be more appropriately dealt with by a “stringent costs order” at trial. consideration The motion before the Court originally sought orders pursuant to O 10 r 8. This rule was repealed with effect from 30 August 2004 by the Federal Court Amendment Rules (No 4) 2004 (Cth) and a new O 35A was introduced in its stead. Counsel for Ms Wu made it clear that she now relied on O 35A. Nothing turns on the reference in the motion to the former O 10 r 8. O 35A r 2(2) provides as follows:“(2) For this Order, a respondent is in default if the respondent has not satisfied the applicant’s claim and: …(d)the respondent fails to comply with an order of the Court in the proceeding; or…(f)the respondent fails to serve a list of documents or an affidavit or other document, or does not produce a document as required by Order 15; or(g)the respondent fails to do any act required to be done by these Rules; or(h)the respondent fails to defend the proceeding with due diligence.”Order 35A r 3(2) provides:“ (2) If a respondent is in default, the Court may: (a)order that a step in the proceeding be taken within the time limited in the order; or(b)if the claim against the respondent is for a debt or liquidated damages – grant leave to the applicant to enter judgment against the respondent for the debt or liquidated damages and, if appropriate:(i) costs:(A)in a sum fixed by the court; or(B)to be taxed; and(ii) interest; or (c)if the proceeding was commenced by an application supported by a statement of claim or the Court has ordered that the proceeding continue on the pleadings – give judgment against the respondent for the relief that:(i)the applicant appears entitled to on the statement of claim; and(ii)the Court is satisfied it has power to grant; or(d)give judgment or make any other order against the respondent; or(e)make an order specified in paragraph (b), (c) or (d) to take effect if the respondent does not take a step ordered by the Court in the proceeding in the time limited in the order.” Order 35A of the Rules collects together all the provisions relating to the Court’s procedures on default, including the former O 10 r 8. Order 10 r 8, which was introduced by the Federal Court Amendment Rules 2001 (No 3), elaborated on an existing power under Order 10 r 7. This rule provided that, if a party had failed to comply with an order of the Court directing the party to take a step in the proceeding, any other party could move the Court on notice for an order that the proceeding be stayed or dismissed as against an applicant in default, or for judgment or an order against a respondent in default. In Lenijamar Pty Ltd v AGC (Advances) Ltd (1990) 27 FCR 388 (“Lenijamar”), Wilcox and Gummow JJ considered the nature of the Court’s power when a party is in default. Although Lenijamar concerned the former O 10 r 7, certain of their Honours’ observations can be applied to O 35A: Cadbury Schweppes Pty Ltd v Darrell Lea Chocolate Shops Pty Ltd [2004] FCA 1718 (“Cadbury Schweppes”) at [22]-[23] per Ryan J. As with O 35A, the power given by the former O 10 r 7 is conditioned only upon the failure of the party to comply with an order of the Court directing that party to take a step in the proceeding. There is no requirement of intentional default or contumelious conduct, or of inordinate and inexcusable delay, or of prejudice to the other party: Lenijamar at 395-396. These are, however, usually important factors to be weighed in the exercise of the discretion. Further, the power conferred on the Court must be “administered sensibly and with an appreciation both of the fact that some delays are unavoidable, and unpredictable … and of the likely serious consequences to [the party in default]”: Lenijamar at 396.