CATCHWORDS

PRACTICE & PROCEDURE - application to set aside judgment entered for failure to comply with direction - alleged irregularity in respect of service of motion to enter judgment - order, if asked, would have been made that service actually effected be sufficient - order made nunc pro tunc - whether condition could be imposed upon the granting of an order setting aside a judgment that an impecunious individual respondent provide security for costs.

Equus Investment Services Pty Ltd v. Pegasus Leasing Limited

  unreported, von Doussa J., 26 and 29 September 1994

Equus Investment Services Pty Ltd v. Pegasus Leasing Limited

  unreported, Burchett, O'Loughlin and Nicholson JJ., 11 May

  1995

DEPENDABLE DATABASE DATA PTY LIMITED v. ABI-AUSTRALIAN BUSINESS INFORMATION PTY LIMITED (IN LIQUIDATION) & ANOR

NG 115 of 1993

Burchett J.

Sydney

16 June 1995

IN THE FEDERAL COURT OF AUSTRALIA)

                                  )

NEW SOUTH WALES DISTRICT REGISTRY)    NG 115 of 1993

                                  )

GENERAL DIVISION                  )

           BETWEEN:     DEPENDABLE DATABASE DATA PTY LIMITED

                             Applicant

               AND:     ABI-AUSTRALIAN BUSINESS INFORMATION PTY LIMITED (IN LIQUIDATION)

                             First Respondent

                        GREGORY NEVILLE BULLARD

                             Second Respondent

CORAM: Burchett J.

PLACE: Sydney

DATE : 16 June 1995

                    REASONS FOR JUDGMENT

BURCHETT J.:

     In this matter, an order was made by Gummow J for the entry of judgment on the basis that there had been a failure to comply with orders of the Court directing the taking of a step, namely, the supply of certain particulars.  There had been repeated orders, and repeated failures.  The judgment that was entered involved the making of orders granting injunctive relief, a declaration and the directing of an inquiry as to damages.  No damages were then assessed, and before any steps had been taken to have an inquiry as to damages the present application was brought.

     This is an application, brought upon notice of motion, to set aside the judgment which his Honour had ordered be entered.  The proceeding in which the judgment was entered was a proceeding brought against two respondents, the first respondent, a corporation which is now in liquidation, and the second respondent, the applicant before me in the notice of motion, Mr Bullard, who was a director of the first respondent.  Indeed, on the evidence now put before me in cross-examination, it appears that he was the sole active director during the relevant period.  He was not, however, a shareholder.

     The proceeding was brought in respect of infringement of copyright, and also under s. 52 of the Trade Practices Act.  The infringement of copyright alleged related to the taking of a substantial part of a compilation - apparently of names and addresses compiled by the use of the telephone directory - having commercial value for the purposes of direct marketing.  The leading authority concerning the principles upon which a judge may enter a default judgment of the kind entered by Gummow J is, I think, Lenijamar Pty Ltd v. AGC (Advances) Ltd (1990) 98 ALR 200, in which the relevant law is particularly stated at 208-209.  It cannot be suggested that the case was not one entirely appropriate for the entry of judgment upon the principles there set out, and I did not understand the contrary to be argued.  However, it was argued that - by virtue of Order 19 rule 4 - the notice of motion was required to be served personally.  That rule provides:

    "Where notice of a motion is to be served on a person who has not entered an appearance the notice shall, unless the Court or a Judge otherwise orders, be served personally."

     The position here appears to have been that no formal document, entitled a "Notice of Appearance" or an "Appearance", was filed, although a formal defence was filed on 30 April 1993 by Messrs J.M. Smith and Emmerton, solicitors of Melbourne, that document being framed in terms which made it clear that it was filed on behalf of both respondents, and indeed being endorsed by Smith and Emerton as "solicitors for the respondents".  It is also clear that there were repeated appearances at directions hearings.  On 24 November 1993, a formal notice was filed by Messrs Smith and Emerton, that document being a "Notice of Solicitor Ceasing to Act".  It appears, on the face of that document, that it was intended to be served on the applicant, and also on the first respondent and second respondent.  In respect of the second respondent it nominated an address at 749 Heidelberg Road, Alphington, Victoria. 

     There had been a conversation - whether personal or by telephone - between Mr Bullard and the managing director of the applicant, on about 27 October 1993, in which Mr Bullard claims he said that the first respondent company was going into liquidation as it could no longer pay its debts, and then added: "I intend to leave Australia to take up a business opportunity in the USA." There followed a discussion as to whether the first respondent's business might be purchased by the applicant, in the course of which the managing director of
the applicant suggested a deal involving his company dropping its law suit in exchange for a particular asset of the first respondent.  Mr Bullard responded to this suggestion by saying: 

    "Forget it, no way, the lawsuit's over when ABI [that is the first respondent] goes into liquidation."

The managing director of the applicant replied:

    "That's not quite true."

     It is perfectly clear from this conversation - as recollected by the second respondent himself - that he was on notice of the intention of the applicant to attempt to continue the action, in some fashion, notwithstanding the liquidation.  However, he has sworn that he simply did not believe this, as he believed that the lawsuit would end on the first respondent's liquidation, in any event.  It is quite clear that he did not test that belief by obtaining any direct legal advice, since no lawyer, at least no lawyer who had been given any access to the documents in the case, could have suggested that to him.  He apparently formed the belief on some basis - possibly of things said to him by lawyers, but not in response to precise questions - and he appears to have been prepared to take the risk that his ill-informed opinion was correct. 

     Following the conversation to which I have referred, a memorandum was written by Mr Bullard dated 27 October 1993.  He sent it to the managing director of the applicant, putting in writing - amongst other things - the following:

    "I will be residing in the USA taking care of my business interests there."

The memorandum also said:

    "I will be putting ABI [that is, the first respondent] into voluntary liquidation this week so that I can concentrate full-time on my other commitments."

It included the statement:

    "I am heading back to the USA on Sunday."

It appears that Mr Bullard did leave for the United States, although he returned to Australia from time to time. 

     On Friday, 3 December 1993, service was effected by a process server of a notice of motion and supporting affidavit, seeking the summary judgment in respect of which the present application is now brought.  The affidavit of service showed that service was effected by delivery at the registered office of the first respondent, and also by delivery to the address at 749 Heidelberg Road, Alphington; and as well by delivering copies at Unit 3, No. 91 Nell Street, Greensborough, an address revealed by company searches for the second respondent as a company director of the first respondent, and also of another company.  The matter then came before Gummow J., and the orders in question were made. 

     In these circumstances, it is suggested on behalf of the second respondent that the notice of motion was required to be served personally, since, first, no formal document entitled an "Appearance" had ever been filed on his behalf, and secondly, once the notice of ceasing to act was filed there was, in fact, no appearance for him so far as the court was concerned.  It will be observed, however, that rule 4 of Order 19 permits a judge to order otherwise than that the motion be served personally.  I have been informed that it was made quite clear to Gummow J that the indication was the second respondent had left the country, and that service had not been effected personally.  Although he made no formal order under rule 4, it is submitted, on behalf of the applicant in the principal proceeding, that an implied order must have been made when he proceeded in that situation to make the orders which he made.  It seems to me that, whether that be so or not, it is clear on the material that had Gummow J. been specifically asked to make an order under rule 4, he would have done so.  There was simply no basis for declining to make such an order in all of the circumstances.  In that situation, it is a very unmeritorious point to suggest that the mere absence of the formality of an order, which must have been
made had there been a request for it, provides a ground for setting aside what was done.

     Certainly, there is no ground for holding what was done to be a nullity.  It is not that; it is an order of a superior court.  At most, the irregularity provides a ground for setting aside what was done.  Once the problem is seen in this light, it seems to me that the simple answer is that it would be wrong to set aside the orders in the circumstances.  I am invited to make an order nunc pro tunc in relation to the service of the notice of motion.  I do not think this is really necessary, since the orders made by his Honour are valid unless and until set aside.  However, per maiorem cautelam, I am prepared to, and do, make such an order.  I order that the method of service in fact adopted be taken nunc pro tunc to be satisfactory, and a sufficient compliance with the requirements of the rules. 

     That brings me to the more substantial matter argued, which was the question whether, in the exercise of my discretion, I ought now to set aside the orders so as to permit the matter to be defended.  The applicant in the motion claims to have an arguable defence on the basis that a compilation of the kind that I have already indicated is not capable of being the subject of copyright.  He relies on a decision of the Supreme Court of the United States in Feist Publications, Inc. v. Rural Telephone Service Company, Inc. (1991) 499 US 340 to this effect, and would wish to argue that, although there are significant differences between the position in the United States and here, in this particular respect that decision ought to be followed.  He also wishes to contend that he did not authorize the infringement by the respondent company of the copyright.  In that regard, he wishes to rely on his evidence that he was absent from the country for significant portions of the period during which the infringements are alleged to have occurred.  However, he has not provided in support of his application anything like specific evidence in denial of authorization.

     Mr Bullard has provided evidence that he was unaware of the motion for the orders which were made, and, as I have already said, that he believed the matter would not be proceeding.  However, as I have also said, he was warned that it would be proceeding.  Being warned, he had not taken steps, which I consider it would have been necessary for him to take to be able to say that he acted reasonably, to obtain appropriate legal advice as to whether his understanding was or was not correct.  After all, the matter must be viewed in the light of the fact that he personally had been joined in the proceedings as respondent; and it is difficult to understand how he could have thought that the liquidation of the company would necessarily bring to an end the claims made against himself personally.

     Notwithstanding the weakness of the evidence of a significant defence to the proceedings, and notwithstanding what I have just said about the question whether his conduct was reasonable, had I been persuaded that the inevitable prejudice to the applicant in the principal proceeding could be overcome, I would have been very inclined to take the view that the second respondent ought to be permitted a day in court, and ought not to be shut out from defending the case.  For this reason, I sought an indication as to whether he would submit to a condition, of any order made in his favour under the motion, that he provide security for the costs of the other side in the sum of $40,000, as well, of course, as paying the costs thrown away by reason of his default and of the present application.  It was made clear to me by his solicitor that it was simply not possible for him to provide, at the present time or in the reasonably near future, any more than $10,000.  In that situation, I consider that the prejudice to the applicant in the principal proceeding is insurmountable. 

     In a recent case in South Australia Equus Investment Services Pty Ltd v. Pegasus Leasing Limited (unreported, von Doussa J., 26 and 29 September 1994) von Doussa J took the view that an adjournment of the hearing of a substantial matter, which had been fixed for hearing, should not be granted except upon a term of the kind that I proposed here, and ultimately, upon submission to that term not being demonstrated - although it was initially offered - he refused the adjournment.  A Full Court upheld his decision: Equus Investment Services Pty Ltd v. Pegasus Leasing Limited (unreported, Burchett, O'Loughlin and Nicholson JJ., 11 May 1995).

     Neither in that case was von Doussa J., nor in this case am I, suggesting the making of an order for security for costs against an impecunious individual as an exercise of the court's discretion to require security for costs.  What his Honour did, and what I proposed, was rather to hold that, if the court is asked to exercise a discretion and grant an indulgence to a litigant, it may, depending on the circumstances, be appropriate to impose, as a condition, the giving of security for costs, insofar as the indulgence sought may otherwise impose significant hardship on another party.  It seems to me that, here, to grant the application sought by the notice of motion, without full security, would be to impose an obvious and severe hardship on the other side, by requiring the applicant in the principal proceeding to take the risk that, if it ultimately succeeds, the much increased costs will not be able to be recovered, or will not be able to be recovered on top of any damages which may be awarded.

     In these circumstances, the motion is refused with costs.

     I certify that this and the preceding nine (9) pages are a true copy of the Reasons for Judgment herein of his Honour Justice Burchett.

     Associate:

     Date:  28 June 1995

     Counsel for the Applicant             Mr R. Cobden

     (Respondent in the motion):

     Solicitors for the Applicant          Gilbert & Tobin

     (Respondent in the motion):

     Solicitor for the Second Respondent   Mr Hansen of (Applicant in the motion):           Harris & Company

     Date of hearing:                      15 June 1995