FEDERAL COURT OF AUSTRALIA

Checked-Out Pty Ltd v Eagle Eye Inspections Pty Ltd [2002] FCA 1002

CHECKED-OUT PTY LTD v EAGLE EYE INSPECTIONS PTY LTD

N169 OF 1999

EMMETT J

2 AUGUST 2002

SYDNEY

THE COURT ORDERS THAT:

1.         leave is granted to the applicant to carry on the proceeding without a solicitor for the purposes of resisting the notices of motion of the twelfth respondent, dated 12 November 2001; the sixth to eleventh respondents dated 4 December 2001; and the first to fifth respondents dated 4 December 2001 (“the dismissal motions”);

2.         leave is granted for the applicant to be represented on the hearing of the dismissal motions by Mr Philip Hardcastle;

3.         the notice of motion dated 24 July 2002 be otherwise dismissed; and

4.         the applicant pay the respondents' costs of the hearing of the notice of motion dated 24 July 2002.

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

REASONS FOR JUDGMENT

1                     The applicant, by notice of motion filed on 24 July 2002, seeks orders as follows:

1.         That the Court gives leave for Philip Julian Hardcastle to act for the applicant.

2.         The applicant's address for service be permitted to be the home address of Anna Wilczak, currently 3/27 Norman Street, Fairy Meadow, 2159.

3.         Any further or other orders of the Court deems fit.

I permitted Mr Hardcastle to appear on behalf of the applicant on the hearing of the motion.  I have treated the motion, in the absence of any other submission, as one for leave under Order 4 rule 14(2) of the Federal Court Rules (“Order 4 rule 14(2)”).  Order 4 rule 14(2) provides as follows:

“Except as provided by or under any Act, a Corporation may not, without the leave of the Court, commence or carry on any proceeding otherwise than by a solicitor.”

2                     The applicant was represented by a solicitor until the end of 2001 when the solicitor then on the record withdrew.  Thereafter Mr Hardcastle has appeared on behalf of the applicant in interlocutory applications and directions hearings.

3                     On 21 September 2001, I made orders for the provision of security by the applicant.  In the course of my reasons for making those orders I outlined the nature of the proceedings.  The applicant claims that Mr Hardcastle conceived and developed the method of providing and formatting building inspection reports and related documents that were used in connection with conveyancing transactions.  The concept was that the applicant would provide a report of an inspection of a building that was the subject of a contract for sale.

4                     The applicant asserts that the concept used computer programs and application software written and developed by Mr Hardcastle that facilitated the rapid, efficient and economical production of reports and related documents according to a standard format.  The applicant also asserts that the concept utilised a marketing strategy devised by Mr Hardcastle that concentrated on promoting the applicant’s services to firms of solicitors and conveyancers.

5                     The applicant alleges that the first respondent, through the second to fifth respondents, infringed the applicant's copyright and that it has taken the benefit of confidential information of the applicant provided to it by those respondents.  Those respondents have admitted breach of the fiduciary duty that they owed to the applicant, it being common ground that certain of them were employees of the applicant, and that, in that capacity, they engaged in business on behalf of the applicant with the sixth to the twelfth respondents (the “solicitor respondents”).

6                     The solicitor respondents are partners in firms of solicitors who had dealings with the applicant and subsequently with the first respondent in relation to the provision of services consisting of building reports.  The applicant asserts that the first respondent provided reports to solicitors, including the solicitor respondents, in a form that bears considerable similarity to the form of reports being provided by the applicant.

7                     In my reasons of 21 September 2001, I outlined some of the history of the proceeding.  It is clear enough from what I have said already that the case involves matters of some complexity of fact and of law.  Mr Hardcastle, on behalf of the applicant, contended that leave should be given for him to represent the applicant because he is competent and because there is no conflict of interest.  That, of course, is not the basis for granting the dispensation contemplated by Order 4 rule 14(2).

8                     The accessibility of the Courts to any citizen is fundamental to the system of justice in any common law jurisdiction such as Australia.  That ready accessibility should also be available to juristic persons such as corporations.  However it has for long been regarded as appropriate that, where a trader decides to use a corporate form in which to carry on his business, for the advantages that flow from those arrangements, accessibility to the courts should be made conditional that the corporation be represented by a qualified legal practitioner. 

9                     That is not to say that, in an appropriate case, leave would be given for a corporation to be represented by someone other than a legally qualified practitioner.  However, the task of persuading the Court that there is good reason for granting dispensation is imposed upon an applicant (see Molnar Engineering Pty Ltd v Burns 3 FCR 68 at 75).  However, the approach evidenced by Order 4 rule 14(2) may be characterised as being more flexible than that to be found in the rules of the English High Court and those jurisdictions in Australia whose rules are formulated in accordance with the rules of the English High Court.

10                  The considerations that should be taken into account in deciding whether or not to exercise the discretion in favour of a corporation are such things as financial incapacity, and the financial difficulties that might be created by the diversion, to the paying of legal expenses, of funds that might otherwise be available to meet the other commitments of a corporation.  A fortiori, where the corporation has no funds at all, that is a relevant consideration.

11                  It is also a relevant factor that the proceedings in question involve complex and difficult questions of fact and law and that those matters will be seriously put in issue by the respondent.  Mr Hardcastle is not qualified as a legal practitioner.  He has had some experience in the conduct of litigation personally and it is fair to say that he is an articulate person.  However, it is also apparent that he lacks the experience that would be necessary for the litigation involving the issues that I have briefly described.

12                  It is apparent from what I have said that Mr Hardcastle will be an essential witness for the applicant and it is apparent from the way in which the case has been conducted to date that the whole, or at least significant parts, of the evidence of Mr Hardcastle will be challenged and put in issue.

13                  It would be very difficult for the Court to manage a trial without the assistance of any counsel representing the applicant other than Mr Hardcastle, who himself would be a principal witness for the applicant.  The presentation and management of the litigation would be practically unworkable and would be substantially protracted without the assistance of solicitors and counsel (see Simto Resources v Normandy Capital 10 ACSR 776 at 782-783).

14                  The evidence as to the financial position of the applicant and Mr Hardcastle is unsatisfactory, as is the evidence as to the financial position of Ms Wilczak, who is now the only director and shareholder of the applicant.  The evidence before me on the earlier occasion indicated that the applicant does not presently have funds that would enable it to conduct the litigation without support from Mr Hardcastle and Ms Wilczak, or from some other outside source.  On the other hand, as I indicated in my earlier reasons of August 1999, Ms Wilczak deposited the sum of $270,000 into a bank account of the applicant by way of unsecured loan.

15                  As I indicated earlier, the conduct of this proceeding has been delayed significantly to date by pleading deficiencies no doubt arising out of the inexperience and lack of expertise of Mr Hardcastle as a person who is not legally trained.  During those delays, funds that were available to the applicant have been expended in ways that I described in my earlier reasons.  Those funds could have been made available for legal expenses for the conduct of the proceeding.  Mr Hardcastle, however, preferred as I said, to pursue his activities as an inventor, thereby using up funds that might have been available for the use of this proceeding.  I do not know whether it would be possible for the applicant to borrow money in order to conduct the proceeding.

16                  In the course of argument, Mr Hardcastle indicated that he would propose to retain counsel to appear for the applicant during the time that he was being cross-examined.  That indicates two things, first, a lack of comprehension, on the part of Mr Hardcastle, of what would be required: the impracticality of having counsel appear while one witness was being examined is obvious.  It would be necessary for any assistance to be given by such counsel that he or she be retained well in advance to understand all of the issues and the evidence.

17                  Secondly, it indicates that Mr Hardcastle has in mind some other possible source of funds.  In the absence of evidence as to the inquiries that have been made to obtain legal assistance and the possible access to borrowing by the applicant, I do not consider that an appropriate case has been established for the grant of general leave under Order 4 rule 14(2).

18                  Another consideration that has been raised concerns the access that might be necessary to confidential discovered documents of the first to the fifth respondents.  When the applicant was being represented by a solicitor, there was an exchange of correspondence with the solicitors for the first to the fifth respondents in which it was acknowledged on behalf of the applicant that relevant computer records and computer data were the subject of confidentiality, which needed to be safeguarded.

19                  The solicitor then acting for the applicant indicated that it would be necessary for such material to be examined by expert witnesses.  No expert evidence has been filed on behalf of the applicant.  However, Mr Hardcastle has made clear that if he were to represent the applicant it would be necessary for him to have access to the material produced by the first to the fifth respondents on discovery.  He has proffered an undertaking on behalf of himself and Ms Wilczak not to use any confidential information for any purpose other than the litigation and that they would not carry out any business in the building inspection industry.

20                  The state of the evidence concerning the confidential material is not particularly satisfactory.  However, in the exchange of correspondence it appears to have been acknowledged, unequivocally, by the solicitor then acting for the applicant, that there was confidential material and that detriment was possible to the first to the fifth respondents by access being given to Mr Hardcastle.  That is a factor that should be taken into account.  I do not regard it as being critical and, by itself, probably would not have tipped the balance.  It is, however, a consideration that is relevant.

21                  There are, also before me, motions by all of the respondents for summary dismissal of the proceeding.  Those motions are still to be heard.  I consider that, in the light of the material to which I have referred, it is not appropriate to accede to any application for general leave under Order 4 rule 14(2).  On the other hand, it could involve a miscarriage of justice if the applicant were deprived of the opportunity of being represented by Mr Hardcastle on the hearing of the summary dismissal applications.

22                  I therefore propose to give leave for the applicant to carry on the proceeding otherwise than by a solicitor for the purpose of hearing and determination of the three notices of motion filed on 21 November, 5 December and 7 December 2001.  However, I propose that the motion be otherwise dismissed.  I should say that that determination would not necessarily preclude any subsequent application that might reasonably by brought on behalf of the applicant at some time in the future.  That is not an invitation to make any further application simply because this one has failed.

23                  But, if circumstances change in the future, it could be appropriate for the matter to be revisited.  That, of course, would depend upon the outcome of the motions for summary dismissal.  The question would only be relevant if those motions fail.  It should be understood that, in making any comments about that, I am not intending to express any view as to the likely outcome of those motions.

Associate:

Dated:  9 August 2002