Wu v Avin Operations Pty Ltd (No 2)

Case [2006] FCA 792

FEDERAL COURT OF AUSTRALIA

Wu v Avin Operations Pty Ltd (No 2) [2006] FCA 792

PRACTICE AND PROCEDURE – application to set aside interlocutory orders – orders set aside where the party against whom orders made did not personally attend the final stage of hearing of interlocutory application and deposes that unaware that his solicitor would seek leave to withdraw – fresh orders for indemnity costs in the amount previously taxed - not payable forthwith – litigant’s responsibility to take steps to ensure kept informed of progress of litigation – impecuniosity and ill health insufficient excuses for failure to discharge such responsibility

Federal Court of Australia Act 1976 (Cth), s 43
Federal Court Rules 1979, O 3 r 3 , O 14 r 8, O 35 r 7 & 8, O 35A r 2(2)(h), O 62 r 45(3) & (6)

Wu v Avin Operations Pty Ltd [2006] FCA 36 discussed
Australian Finance Group Ltd v Accent Financial Group Pty Ltd [2005] FCA 66 referred to
Australian Competition and Consumer Commission v Black on White Pty Ltd [2004] FCA 363 referred to
Microsoft Corporation v Crosslink Marketing Group [2005] FCA 1817 referred to
Hall v Nominal Defendant (1966) 117 CLR 423 referred to
Monroe Schneider Associates (Inc) v No 1 Raberem Pty Ltd (No 2) (1992) 37 FCR 234 referred to
Wati v Minister for Immigration and Multicultural Affairs (1997) 78 FCR 543 referred to
KM & A Chadwick Pty Ltd v Yeung (“KM & A Chadwick”) [1995] FCA 354 referred to
Colgate-Palmolive Companyv Cussons Pty Limited (1993) 46 FCR 225 cited
Ruddock v Vadarlis (2001) 115 FCR 229 referred to
Tetijo Holdings Ltd v Keeprite Australia Pty Ltd (Fed C of A, French J, WAG 55 of 1988, 3 May 1991, unreported) referred to
Ugly Tribe Co Pty Ltd v Sikola [2001] VSC 189 referred to
Rosniak v Government Insurance Office (1997) 41 NSWLR 608 referred to
Bhagat v Global Custodians Ltd [2002] FCA 223 referred to
Selliah v Minister for Immigration and Multicultural and Indigenous Affairs [1998] FCA 469 referred to
McKellar v Container Terminal Management Services Ltd [1999] FCA 1639 referred to
Life Airbag Company of Australia Pty Ltd v Life Airbag Company (New Zealand) Ltd [1998] FCA 545 referred to
Courtney v Medtel Pty Ltd(No 3) [2004] FCA 347 referred to

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

VID 327 of 2003

KENNY J
27 JUNE 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

BARRIE 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:

27 JUNE 2006

WHERE MADE:

MELBOURNE

THE COURT ORDERS THAT:

1.The orders in…

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Wu v Avin Operations Pty Ltd (No 2) [2006] FCA 792
Case
[2006] FCA 792
Decision Date

CaseChat Overview and Summary

In Wu v Avin Operations Pty Ltd (No 2), Barry Armitage sought to appeal against the interlocutory orders made by the Court on 3 February 2006. The orders were made following a motion for default judgment by the applicant, Ms Wu, who claimed that the respondents had substantially delayed the proceedings and failed to comply with the Court's orders. The appeal was based on the ground that Mr Armitage and the other respondents had been denied natural justice as their legal representative was allowed to withdraw without them being given the opportunity to be heard. The Court had to determine whether the orders made in the absence of Mr Armitage were interlocutory and whether they could be set aside under Order 35 rule 7(2) of the Federal Court Rules 1979.

The Court found that the orders made on 3 February 2006 were interlocutory in nature as they did not conclude the rights of the parties inter se. Furthermore, Mr Armitage was absent from part of the hearing of Ms Wu's motion when his solicitor successfully obtained leave to withdraw. Therefore, the Court accepted that Mr Armitage could call in aid Order 35 rule 7(2)(a) and (c). However, the Court found that Mr Armitage did not provide sufficient evidence to establish fraud as required by Order 35 rule 7(2)(b). The Court held that the jurisdiction to set aside orders made after they have been entered is exceptional, and it is not open to Mr Armitage to rely on Order 35 rule 7(2)(b).

The Court set aside the orders in paragraphs [2] and [3] of the orders made on 3 February 2006 and made alternative orders, including that the first and second respondents pay the applicant's costs of the motion on an indemnity basis, and that the second respondent pay the applicant's costs of the respondent's motion. The Court also ordered that certain paragraphs of Mr Armitage's affidavit be struck out unless Mr Armitage made an application for leave to file and serve an amended defence and/or cross claim within 28 days.

Orders

Orders of the court

1. The orders in paragraphs [2] and [3] of the orders made in this proceeding on 3 February 2006 be set aside and in lieu thereof order:

(a) On a date to be fixed after judgment in this proceeding, the first and second respondents pay the applicant’s costs of and incidental to the motion, notice of which was filed on 4 August 2004, as previously taxed on an indemnity basis, in the amount of $26,666.02.

(b) Subject to paragraphs (c) and (d) below, the taxation that has been had under Order 62 of the Federal Court Rules (“the Rules”) stand as the taxation, on an indemnity basis, of the applicant’s costs of the motion, notice of which was filed on 4 August 2004.

(c) Pursuant to O 3 r 3 of the Rules, the time referred to in O 62 r 45(3) be extended to a date to be fixed after judgment in the proceeding.

(d) Pursuant to O 62 r 45(6) and O 35 r 8, there be no interest calculated on the award of costs from 4 May 2006 until a date to be fixed after judgment in the proceeding.

2. The second respondent pay the applicant’s costs of the respondent’s motion, notice of which was filed on 16 May 2006.

3. In accordance with these reasons, paragraphs 63, 64, 65, 103-106 and 128-135 of the affidavit of Barry Armitage filed on 16 May 2006 be struck out unless within 28 days the second respondent makes an application for leave to file and serve an amended defence and/or cross claim.

Background

Background to the litigation

At the hearing of the motion on 15 June 2006, Mr Armitage directed his challenge to paragraphs [2] and [3] of these orders. In support of his motion, Mr Armitage relied on his affidavit sworn on 16 May 2006 (which referred to his earlier affidavits, the affidavits of the third and fourth respondents and Ms Saldaneri). After the hearing, he filed a further affidavit sworn on 20 June 2006, and written submissions, both of which were filed pursuant to orders made on 15 June 2006. In opposition to the motion, the applicant relied on the affidavits of Anna Maria Krycer affirmed on 30 May 2006 and 9 June 2006, the affidavit of Ayten Demirovski affirmed on 30 May 2006, and on written submissions filed before and (pursuant to order) after the hearing. RELEVANT BACKGROUND The orders of 3 February 2006 were made following the hearing, on various dates, of the applicant’s motion for default judgment. The applicant’s motion was based on what she claimed was a substantial history of delay by the first and second respondents. Mr Armitage sought to appeal against the 3 February 2006 orders by way of a notice of appeal filed on 24 February 2006. His notice of appeal included the following ground of appeal (among others):“That the Appellant (Respondents) herein [sic] have been denied natural justice in that – (a)their legal representative was allowed to withdraw from the proceedings without them being given the opportunity to be heard(b) they were not afforded an opportunity to be heard by the court following the withdrawal (without notice to them) of their legal representation.”At a directions hearing on 22 March 2006 before Ryan J, the respondent to the appeal (the applicant in the substantive proceeding) noted that Mr Armitage required leave to appeal and an extension of time. His Honour made orders adjourning the date for settling the index until the Court dealt with any application for leave to appeal and, subsequently, he adjourned Mr Armitage’s application for an extension of time, indicating that he considered that it might be appropriate for Mr Armitage to make an application in this proceeding pursuant to O 35 r 7 of the Federal Court Rules 1979 (“the Rules”). Mr Armitage’s motion was filed following this indication.THE REASONS FOR THE ORDERS OF 3 FEBRUARY 2006 On 3 February 2006, I delivered reasons for judgment concerning the applicant’s motion for default judgment and made the orders that Mr Armitage now seeks to have set aside: see Wu v Avin Operations Pty Ltd [2006] FCA 36 (“Wu”). In Wu, I considered (at [6]-[25]) the extensive history of delay and non-compliance with the Court’s orders by the first and second respondents. I found (at [52]-[53]) that the first and second respondents had failed to defend the proceeding with due diligence and were in default for the purposes of O 35A r 2(2)(h) of the Rules. My reasons for judgment record that:· The applicant (hereafter referred to as Ms Wu) was required to bring an application to the Court for an order for substituted service as regards Mr Armitage ([7]-[8]).· Ms Wu applied twice by motion for orders that the respondents, including Mr Armitage, provide their lists of documents and the respondents, including Mr Armitage, breached orders of 8 October 2003 and 16 December 2003 for the provision of these lists ([10]-[13]). From September 2003 until 14 April 2004, Mr Armitage and the other respondents retained a solicitor (Mr Joseph Guss) ([8] and [15]). · Mr Armitage failed to make documents available for inspection, despite orders by the Court on 8 October 2003, 16 December 2003 and 9 June 2004 ([10]-[17]). Following an order for further discovery on 4 March 2004, Mr Armitage filed an affidavit stating that the first respondent’s accounts and statutory records were “mistakenly removed by a waste paper removalist with various other papers and records” and that he was unable to locate his file in respect of Ms Wu’s application for an Australian visa and her alleged investment in the first respondent ([14]). · After 14 April 2004, Ms Wu’s solicitor’s attempted to contact the respondents, including Mr Armitage directly. By a letter dated 21 April 2004, Mr Armitage informed Ms Wu’s solicitors that he was “unable to facilitate” the inspection of the discovered documents because they were “located at the office of Joseph Guss” ([15]).· On the first occasion when Ms Wu’s motion for default judgment came on for hearing, counsel appeared for Mr Armitage. Counsel advised that she was instructed by solicitors who expected to act in the matter. This expectation was not fulfilled ([17]). · On the second occasion when Ms Wu’s motion for default judgment came on for hearing, different counsel appeared for Mr Armitage. Counsel advised that he was instructed by solicitors, who subsequently advised the Court that they were no longer retained to act for Mr Armitage (or any other respondent) in the proceeding ([19]).· Although it was made clear in court on 13 October 2004 that it was open to the respondents to serve a subpoena on their previous solicitor (Mr Guss) to produce the discovered documents to the Court the respondents did not take steps to do this until 3 December 2004 ([19] and [21]).· On 3 December 2004, George Liberogiannis and Associates went on record as solicitor for the Armitages, including Barry Armitage. Mr Liberogiannis did not, however, appear on the return of the subpoena. The subpoena was not discharged against Mr Guss until 16 February 2005 ([21]-[22]).· At the adjourned hearing of the motion for default judgment on 27 April 2005, Mr Liberogiannis sought leave to withdraw as the solicitor on the record. His evidence was that Barry Armitage and his son had failed to keep appointments with counsel and to provide him with instructions for the conduct of the matter, notwithstanding his numerous calls to their cell phones and place of residence. His firm filed a notice of ceasing to act for Barry Armitage and his son on 28 April 2005 ([24]).

Evidence

Evidence Before The Court

I ultimately held (at [60]) that Mr Armitage and the first respondent should pay costs on an indemnity basis because they had repeatedly failed to comply with the orders of this Court; and Ms Wu’s motion for default judgment was precipitated by these recurring breaches. Further, I noted that their conduct had delayed the hearing of the motion and increased the costs associated with it. In this regard, I referred to the last minute and short-term retainer of legal representatives, the failure to take steps promptly to have a subpoena issued to Mr Guss, and the failure to cooperate with their own legal advisers or to attend court. SUBMISSIONS AND EVIDENCE Mr Armitage’s earlier affidavits, the affidavits of the third and fourth respondents and Ms Saldaneri are mentioned in Wu at [27] and [31]. Mr Armitage’s lengthy affidavit of 16 May 2006 deposes to matters of fact. It also contains what are in truth submissions on his motion. For present purposes, it is sufficient to note that Mr Armitage claimed (amongst other things):· Mr Armitage was unable to collect his documents relating to this matter from previously retained counsel (Mr Dennis Baker) until 4 May 2006. He had not previously seen some of these documents. · Prior to the hearing on 27 April 2005, Mr Armitage had no knowledge of the affidavit of Anna Maria Krycer of 12 April 2005; that Mr Lieberogiannis intended to seek leave to withdraw from the proceeding; and that he would be unrepresented at that hearing. He claimed that he was denied an opportunity to respond to Ms Krycer’s affidavit and Mr Lieberogiannis’ evidence.· After receiving a copy of the 27 April 2005 order (granting leave to Mr Lieberogiannis to cease to act) Mr Armitage asked Registry “what was happening with the proceedings” and was told that “no other date had been appointed, and that it appeared that there was no further action or procedure contemplated”. He returned to the Registry on two further occasions. He assumed the action was not proceeding.· When the respondents retained Mr Guss, they gave Mr Guss all relevant documents and did not retain any copies. In early April 2004, there was a dispute between Mr Guss and Mr Armitage (and other respondents), as a consequence of which Mr Guss ceased to act for them. Mr Guss claimed a lien over the respondents’ documents. Mr Armitage photocopied the documents on the Court file.· After Mr Guss ceased to act, the respondents decided to draft instructions, affidavits and other documents needed in the proceeding and to engage counsel “to finalise documents and make any necessary Court appearances”. Ultimately, a barrister’s clerk “agreed to arrange for solicitors (not then known to the Respondents) to provide the ‘Back Sheets’ required to brief counsel”. Mr Armitage added:“In practice, the arrangement … did not provide a proper level of legal services and … Mr Baker agreed to provide a ‘budget-type’ representation for the Respondents.”· Mr Liberogiannis agreed to act as solicitor on the record, “with the Respondents providing all secretarial-type support, full written instructions, and the like”. Mr Baker agreed to supervise the work and retain the documents relevant to the proceeding. Mr Baker therefore held all relevant documents and the respondents retained no copies.· Mr Armitage and his son (the third respondent) attended Mr Baker’s chambers frequently, “often on two occasions a week”. Mr Armitage deposed:“In the period leading up to 27 April 2005 I was aware that the matter was to come back before the Court fairly soon, but I was not aware of the nature of the anticipated proceedings.”· Mr Armitage and his son were unable to keep an arrangement to meet Mr Baker on 22 April 2005 and left a message that they would attend on 26 April 2005. They did not attend Mr Baker’s chambers on 26 April 2005 because their car “broke down in the countryside” and they did not contact Mr Baker because “we were in an area of poor mobile telephone reception”.· Mr Armitage did not find out about the 27 April hearing until after the scheduled time of the hearing. He added that “[w]e immediately tried to contact Mr Baker and he told us we should speak to Mr Liberogiannis”. · Mr Armitage and his son made unsuccessful attempts to contact Mr Liberogiannis, whom he ultimately met “by chance” early this year. · Hereafter, the respondents intended to act on their own behalf and “to retain full control and ensure that all matters requiring attention are dealt with promptly”.· Mr Armitage had severe health problems and associated difficulties, including inability to give “sustained personal attention to … this litigation”.· Mr Armitage resigned as director of the first respondent because it could be insolvent.· Mr Armitage did not intentionally avoid service of the documents initiating this proceeding.· Mr Armitage did not attend court because of his health, the fact he had legal representation, and because Ms Wu, through her solicitors, had threatened him.· Mr Armitage did not become aware of Ms Wu’s desire to inspect the discovered documents until he received a letter dated 20 April 2004 from her solicitors. He responded the next day. · Mr Armitage did not become aware until late November or early December 2004 that the Court had indicated that it would give leave to issue a subpoena to Mr Guss to obtain the documents for Ms Wu’s inspection. He claimed that Mr Guss still held relevant documents.· Mr Armitage did not know that Mr Liberogiannis had failed to attend on the return of the subpoena. He did not knowingly breach any order of the Court. He “should not be held responsible for … delays … during the time” when Mr Guss and Mr Liberogiannis acted for him.

Decision

Reasons for decision

KENNY J

Full text does not contain this section.

Ratio Decidendi

Legal Principle Established

Established by: KENNY J

In written and oral submissions, counsel for Ms Wu argued that, pursuant to O 14, r 8 of the Rules, paragraphs 63, 64, 103-106 and 128-135 of Mr Armitage’s affidavit of 16 May 2006 should be struck out or taken off the file, on the ground that they were scandalous. CONSIDERATION Order 35 rule 7(2) provides that:“The Court, where it is not exercising its appellate or related jurisdiction under Division 2 of Part III of the Act, may if it thinks fit vary or set aside a judgment or order after the order has been entered where –(a)the order has been made in the absence of a party, whether or not the absent party is in default of appearance or otherwise in default and whether or not the absent party had notice of the motion for the order;(b)the order was obtained by fraud;(c)the order is interlocutory;(d)the order is an injunction or for the appointment of a receiver;(e)the order does not reflect the intention of the Court; or(f)the party in whose favour the order was made consents.” First, I accept that the orders made on 3 February 2006 were interlocutory in nature. “[A]n order made in the course of an action or suit which does not conclude the rights of the parties inter se, although it may, of course conclude the fate of the particular application in which it is made, is interlocutory only”: Hall v Nominal Defendant (1966) 117 CLR 423 at 440 per Taylor J. It is open to Mr Armitage to call in aid O 35 r 7(2)(c). Secondly, I accept that Mr Armitage was not in court when the relevant orders were made on 3 February 2006 and that he was absent from a part of the hearing of Ms Wu’s motion. That is, Mr Armitage was represented by his counsel at the hearing of the motion on 23 August and 13 October 2004, but was effectively unrepresented at the hearing on 27 April 2005, when his solicitor successfully obtained leave to withdraw. Accordingly, it is open to Mr Armitage to call in aid O 35 r 7(2)(a). Thirdly, although Mr Armitage sought also to rely on O 35 r 7(2)(b), he has not adduced sufficient evidence to make out a case that the order was obtained by fraud. Plainly, any allegation of fraud is extremely serious. Before an order can be set aside on the ground of fraud, there must be sufficient evidence of the facts that establish the alleged fraudulent conduct and the part played by the party having the benefit the order. The fraudulent conduct must be “directly material” to the order and the evidence of the fraud must be evidence that was not available and could not have been discovered with reasonable and proper diligence before the order under challenge was made: see Monroe Schneider Associates (Inc) v No 1 Raberem Pty Ltd (No 2) (1992) 37 FCR 234 at 242. Mr Armitage’s affidavit of 16 May 2006 did not satisfy these requirements. Accordingly, it is not open to him to rely on O 35 r 7(2)(b). Some care must be taken in dealing with the authorities that concern the setting aside of judgment or orders. The force of judicial observations in this area depends on the circumstances in which application to set aside is made, including whether the judgment or order has been entered or is final or interlocutory. For present purposes, it suffices to refer to the observations of the Full Court in Wati v Minister for Immigration and Multicultural Affairs (1997) 78 FCR 543 at 552 that the jurisdiction to set aside orders made after they have been entered is “exceptional”: see also Black on White at [14]-[16].