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 Company v 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

THE COURT ORDERS THAT:

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.

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

REASONS FOR JUDGMENT

1                     By a notice of motion dated 16 May 2006, Mr Barry Armitage applies to set aside certain orders made in this proceeding on 3 February 2006.  The orders made on 3 February 2006 were as follows:

“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 applicant’s 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.”

2                     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

3                     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. 

4                     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

5                     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”). 

6                     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]).

7                     Notwithstanding this, for the reasons stated in Wu at [54] and following, I declined to make orders in terms of the motion for default judgment.  At [54]-[55], I said:

“I would not order that judgment be entered without more because, following the return of the subpoena directed to Mr Guss, there remains no continuing and unexplained default on the respondents’ part.  If Barry Armitage’s evidence is accepted, there is nothing more the respondents can do to facilitate inspection of documents.  Although Mr Guss did not produce all of the documents the subject of the subpoena, Barry Armitage has affirmed that the remaining documents remain in Mr Guss’ custody.  Ultimately, the credibility (or lack thereof) of Barry Armitage’s claims regarding these and like matters will be an issue for trial: see Australian Finance Group Ltd v Accent Financial Group Pty Ltd [2005] FCA 66 at [33] per Nicholson J.  Whether he is believed or not is likely to have other consequences for this litigation.

I note too that there may be circumstances that partly explain the delays.  These circumstances include the ill health of Barry Armitage and of a family member and the disturbance caused by changes in legal representation.  Moreover, although the respondents have needed repeated prompting by Ms Wu’s solicitor, they have filed their defence, various affidavits responding to Ms Wu’s claims and lists of discoverable documents.  They have mostly participated in court hearings and they were represented at the mediation by their solicitor.  Barry Armitage ultimately took steps to have a subpoena issued to Mr Guss, in order that Ms Wu have access to the first and second respondents’ discovered documents.”

8                     I indicated that, having regard to these matters and the nature of the case, including the respondents’ defence and supporting affidavits, the respondents should have a chance to defend themselves and that any prejudice to Ms Wu could be met by an appropriate costs order, subject to an entitlement to enter judgment in the event of non-compliance with it.

9                     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

10                  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.

11                  In addition, Mr Armitage challenged the reliability of the evidence of Ms Xia but it is unnecessary to provide the details of that challenge here.  He also expanded on his claim that the initiating application and statement of claim in the proceeding were “based on a serious fraud and constitutes an abuse of the processes of this … Court”.  He asserted that Ms Wu had made fraudulent claims in relation to her migration objective and investment claims.  He responded to Ms Wu’s claims against him at some length and alleged that her former and present solicitors had acted improperly in various ways.  It is unnecessary to set out the details of these various allegations here. 

12                  In his affidavit of 16 May 2006, Mr Armitage further contended that the costs order of 3 February 2006 was unjust.  This was because the primary matter in dispute had been the production of documents, over which he had no control.  Also, so he said, Ms Wu’s claims were fraudulent and, if he were required to meet the costs order before the determination of the proceeding, he would be prevented from defending himself.  Mr Armitage specifically noted that paragraphs 36 and 38 of the statement of claim alleged that he acted dishonesty. 

13                  At the hearing of the motion, Mr Armitage said that he was unable to meet the costs order.  He subsequently supported this claim by his affidavit filed on 20 June 2006, which attached what he described as “a true and complete statement of [his] means”.  According to this statement, Mr Armitage is in receipt of a disability support pension and has no property that would enable him to meet the costs order of 3 February 2006.

14                  Also at the hearing, Mr Armitage denied that his allegations of fraud against Ms Wu and her solicitors were scandalous and foreshadowed that he would seek to amend his pleadings or issue a cross claim.  Mr Armitage said that he did not received the notice of hearing concerning the delivery of judgment, which was sent registered mail by the Court, until 15 – 30 minutes after judgment had been delivered.  Mr Armitage also said that he spoke to my associate subsequently and that my associate said that a copy of the judgment would be posted to him.  The Court file indicates that this was done although Mr Armitage said that he never received a copy of the judgment from my Chambers.  Mr Armitage said he subsequently asked for a copy of the judgment at the Court Registry but that the copy given him had a part of each page missing.  He had to ask the Registry for another copy.  He attributed the fact that he did not receive the copy sent by the Court to the fact that he changed his residence about this time.  Mr Armitage said that he should not be held accountable for his solicitors’ dilatory conduct because he did not know the lawyers well and he was not “getting the priority service that may have been required”.  In any event, he had a reasonable expectation that his lawyers would do the right thing by him.  He thought it unfair that Mr Liberogiannis had withdrawn as he did.  In reply, Mr Armitage stated that until he read the judgment he “thought everything was under control and being handled adequately”.

15                  In written submissions filed after the hearing, Mr Armitage submitted that the evidence that Mr Liberogiannis gave at the hearing on 27 April 2005 was “inaccurate misleading and incomplete at least insofar as it relates to the extent of conference contact” between him and Mr Armitage and his son.  Mr Armitage said:

“Mr Liberogiannis made no contact with me prior to 27 April 2005 that would lead me to believe that he had any intention of withdrawing from the proceedings on that date.”

Mr Armitage submitted that no costs order should be made until all issues were determined at trial.

16                  In her affidavit of 9 June 2006, Ms Krycer stated that a registrar conducted a hearing for the taxation of the costs of Ms Wu’s motion on 21 March 2006 and that, at the hearing, Mr Armitage appeared and objected to the bill of costs.  Ms Krycer said that, after Mr Armitage served a list of objections, there was a further hearing, which she and Mr Armitage attended, and the registrar had taxed the costs.  She said that Mr Armitage filed a notice of motion and a statement of objections for reconsideration on 13 April 2006.  The registrar gave his decision and reasons on reconsideration on 4 May 2006. Ms Krycer said that a certificate of cost was served on Mr Armitage by letter dated 31 May 2006.  Ms Krycer also gave evidence concerning Mr Armitage’s notice of appeal and related matters.

17                  Counsel for Ms Wu opposed Mr Armitage’s motion, noting that Mr Armitage was represented by counsel on the hearing of Ms Wu’s motion on two occasions when the motion was part heard.  It was only on the third and final occasion, when the hearing of the motion was completed, that Mr Armitage’s solicitor obtained leave to withdraw.  Counsel submitted that the relevant principles were contained in Australian Competition and Consumer Commission v Black on White Pty Ltd [2004] FCA 363 (“Black on White”) and Microsoft Corporation v Crosslink Marketing Group [2005] FCA 1817 at [21].  He argued that there were no exceptional circumstances in this case that would justify setting aside the orders in question.  In this regard, he pointed out that Mr Armitage was heard, through his counsel, on the motion on two occasions and the affidavit material on which he relied was before the Court.  The fact that his solicitor “went off the record” on 27 April 2005 “did not make any difference to the Orders”.  Further, counsel submitted that, having regard to the contents of Mr Armitage’s affidavit of 16 May 2006, it is not reasonably probable that he would have obtained orders other than the orders made on 3 February 2006 had that affidavit been before the Court.  Finally, Mr Armitage’s affidavit did not, so counsel submitted, establish fraudulent conduct and satisfy the requisite tests for setting aside on the ground of fraud. 

18                  In oral submissions, counsel contended that Mr Armitage essentially sought to blame his solicitors and that this was no answer to the orders made.  Further, counsel submitted that Mr Armitage had not adequately explained why he was not present at the hearing on 27 April 2005.  Counsel submitted that his explanation was implausible and that the Court should so hold, having regard to Mr Armitage’s affidavit of 16 May 2006.  Counsel further submitted that it would be unfair if Ms Wu were to lose the benefit of the order because she had taken “significant steps … since 3 February 2006 to have the costs taxed”.  Counsel argued too that Ms Wu should not lose the benefit of a self-executing order because it has been and continues to be “enormously difficult for [her] to progress this matter”.  Counsel said that Ms Wu’s hardship was especially relevant “in circumstances where Mr Armitage now represents himself and incurs no costs while [she] continues to do so”. 

19                  In written submissions dated 21 June 2006, Ms Wu submitted that the evidence of Mr Liberogiannis showed his communication, and attempted communication, with Mr Armitage and his son.  The submissions noted that Mr Liberogiannis gave evidence that he had gone to the residence of Mr Armitage, which was also his address for service at the relevant time; and that, at that residence, Mr Liberogiannis spoke to someone but she denied any knowledge of Mr Armitage and his son.  The submissions also noted that Mr Liberogiannis said that he made six attempts to speak by telephone with Mr Armitage between 21 and 27 April 2005.   Ms Wu contended that the delay and non-compliance with orders on the respondents’ part had “very significantly increased the costs” of her motion.

20                  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

21                  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.”

22                  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).

23                  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).

24                  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).

25                  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].

26                  In substance, Mr Armitage’s case is that he was not heard on 27 April 2005 for no fault on his part, because (1) he did not know that his solicitor was intending to seek leave to withdraw and that he would be unrepresented at the hearing; (2) he did not know the precise nature of Ms Wu’s motion, partly because he did not know the contents of Ms Krycer’s affidavit of 12 April 2005; and (3) having regard to the circumstances of the case including the nature and effect of the orders under challenge, the justice of the case demands that the orders be set aside. 

27                  As I have said, Mr Armitage was represented by counsel on earlier hearing of Ms Wu’s motion on 23 August and 13 October 2004.  It was only at the hearing of 27 April 2005 that counsel did not appear for him.  The uncontradicted evidence of Mr Liberogiannis established that, in the days immediately prior to 27 April 2005, Mr Liberogiannis had made many attempts to contact Mr Armitage for instructions and that he had not been able to do so.  Mr Liberogiannnis did not say that he had done more than leave messages, via mobile phone numbers, stating he was intending to seek leave to withdraw.  Mr Armitage has given sworn evidence that he did not know that this was his solicitor’s intention.  He has also given evidence that he and his son had retained counsel generally to appear on their behalf in court. 

28                  Mr Armitage conceded that he knew that a hearing was likely “fairly soon”; that is around the 27 April date.  Further, Mr Armitage’s evidence was to the effect that he met frequently with counsel retained to run his defence to Ms Wu’s action but that he did not meet with him in the days immediately prior to 27 April 2005.  Notwithstanding that his explanation about his failure to meet with his lawyers prior to the hearing was less than satisfactory, I accept that he did not in fact attend any conference with counsel in the days immediately anterior to the 27 April hearing; and nor did he consult his solicitor.  It may be said that, having regard to his failure to meet with his lawyers around this time, Mr Armitage should have realised that they would be unable to represent him in court.  However, Mr Armitage was not the subject of cross examination and his evidence was uncontradicted.  On the evidence before me, I accept that Mr Armitage did not in fact know that Mr Liberogiannis would seek leave to withdraw and that he would be unrepresented on 27 April 2005.  Further, I accept that he did not read the affidavit of Ms Krycer of 12 April 2005, as he claims.  Amongst other things, this affidavit dealt with procedural events in the proceeding from February 2005 and Ms Wu’s proposed costs application against Mr Armitage and his son. 

29                  There are four other matters that militate in favour of the application that Mr Armitage now makes.  They are as follows:

(a)    The costs order that Mr Armitage seeks to have set aside was itself exceptional:  it was for taxed indemnity costs payable forthwith, with a self-executing component in the event of default; 

(b)   Ms Wu’s claims against Mr Armitage are serious claims, including allegations of fraud;

(c)    Mr Armitage deposes that he has not the financial means to meet indemnity costs and, by virtue of the order of 3 February 2006, he will be denied the opportunity to defend himself if he does not meet it; and

(d)   Mr Armitage has filed a defence that, on its face and having regard to the affidavit material filed by him, is arguable.

30                  Ms Wu’s central claims are that she lent the sum of $334,000 to the first respondent and has not been repaid; and that Mr Armitage made false representations to her about the first respondent and himself, by reason of which she has suffered loss and damage.  Mr Armitage has admitted that he negotiated with Ms Wu, assisted by Ms Minnie Xia, concerning a proposal to invest some $175,000.  According to the defence, the terms of Ms Wu’s loan included she had 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.  He has denied the false representations as alleged by her and claimed that communications with Ms Wu were entirely through Ms Xia, who advised Mr Armitage that they had arranged to take all documents to a Chinese speaking lawyer in Melbourne and that they had visited this lawyer.  Further, in his affidavits, including his affidavit of 16 May 2006, Mr Armitage has denied the claims made by Ms Wu and contested the filed affaidavits of Ms Wu and Ms Xia. 

31                  While financial hardship is not of itself a weighty factor, courts are generally reluctant to preclude litigants from having a proper opportunity to present their cases:  see, for example, Fancourt v Mercantile Credits Ltd (1983) 154 CLR 87 at 99; and Webster v Lampard (1993) 177 CLR 598.   I would be reluctant by my orders effectively to prevent Mr Armitage from advancing his defence, especially where he was absent from the court at the final stages of the hearing before the orders were made. 

32                  There are, plainly enough, numerous matters that militate against Mr Armitage’s application to set aside the orders of 3 February 2006.  They are as follows:

(a)    Mr Armitage was represented on the two prior hearings of Ms Wu’s motion and the matter of costs was referred to at these hearings;

(b)   Mr Armitage’s explanation for his failure to consult with his lawyers in the days immediately prior to the hearing was unsatisfactory, especially as he conceded he knew there was to be a forthcoming hearing and he said that he maintained frequent contact with his counsel; 

(c)    Mr Armitage has not denied knowledge of Ms Wu’s motion or any affidavits relied on by Ms Wu in support of her motion other than Ms Krycer’s affidavit of 12 April 2005;

(d)   Mr Armitage had in fact filed affidavits in opposition to Ms Wu’s motion;

(e)    Mr Armitage has conducted his case, both through his lawyers and in his own right, in a way that has made it very difficult for Ms Wu to progress her case and has increased her costs; and

(f)     Mr Armitage has failed to defend the proceeding, including the motion, with due diligence.

33                  There is no doubt that Mr Armitage has, by his conduct either in his own right or through his solicitors, compounded Ms Wu’s difficulty in pursuing this litigation efficiently.  In so doing he has added to her costs burden.  As I have already said, through their lawyers, Mr Armitage and the first respondent repeatedly failed to comply with the orders of this Court; and Ms Wu’s motion was precipitated by these recurring breaches.   Further, costs were unnecessarily incurred by Ms Wu because these respondents failed, whether through their then legal advisers or otherwise, to take steps promptly to have a subpoena issued to Mr Guss. 

34                  Mr Armitage stated on oath that the respondents made the arrangements that led to the retainer of legal representatives, who knew little or nothing of their case and took little or no responsibility for its ongoing conduct.  This impeded the proper conduct of the litigation, as Mr Armitage apparently concedes.   Parties to litigation such as Mr Armitage are obliged to take steps to keep themselves informed of the conduct of the litigation by their appointed legal representatives.  They cannot escape their responsibility as parties with respect to the conduct of the litigation by hiding behind a poorly instructed lawyer retained briefly or at the last minute.  Nor can they excuse themselves by relying on a series of “unfortunate events”, as Mr Armitage sought to do.   If it were otherwise, case management would prove virtually impossible: compare KM & A Chadwick Pty Ltd v Yeung [1995] FCA 354 (“KM & A Chadwick”) at [15] per Tamberlin J. 

35                  Ms Wu has, moreover, proceeded to the taxation contemplated by the orders in question, as indeed she was entitled to do.  In so doing she has incurred further costs.  In this regard, I note, however, that Mr Armitage has been most assiduous in contesting the taxation.  His notice of appeal, which was filed on 24 February 2006, preceded the taxation hearings.

36                  I am satisfied, however, that, taken as a whole, the circumstances are such as to justify me setting aside pars [2] and [3] the orders made on 3 February 2006: compare KM & A Chadwick. 

37                  I would set aside par [3] of my orders principally because it was made in Mr Armitage’s absence from the final stages of the hearing of Ms Wu’s motion and costs application and will apparently operate to prevent Mr Armitage, who swears that he is impecunious, from advancing his defence.  Having regard to the serious nature of some of the claims made against him and to the fact that he has apparently an arguable defence, it would not be in the interests of justice to make an order with such a result.  That Ms Wu will suffer some inconvenience or hardship as a result is unavoidable.  It is impossible to reconcile Ms Wu’s interest in having the benefit of the orders previously with Mr Armitage’s interest in having an opportunity to advance his defence. 

38                  For essentially the same reasons, I would also set aside par [2] of the 3 February orders.  For the reasons set out below, I would order instead that, after judgment in this proceeding, Mr Armitage pay, on an indemnity basis, costs in the amount of $26,666.02 in respect of Ms Wu’s motion.  Further, I would order that Mr Armitage pay Ms Wu’s costs of his motion.  As will be seen below, although Mr Armitage has been partially successful in his motion, the need for such a motion arose from his failure to keep himself informed of the conduct of the proceeding on his behalf.

39                  Mr Armitage has submitted that he ought not be ordered to pay the costs of Ms Wu’s motion on an indemnity basis, principally because until he received my reasons for judgment in February this year, he was not aware that he had breached orders and been dilatory in the conduct of his case. 

40                  It may be recalled that Ms Wu established that her motion for default judgment had been properly brought and 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.  Ms Wu did not receive the relief she sought in her motion because, in the time that had elapsed since she first brought her motion, the respondents had either remedied their defaults or explained why they could not do so.  Ms Wu is, however, to be regarded as having succeeded in substance because the defaults were not remedied until she brought her motion.

41                  The power of the Court to make an order for costs derives from s 43 of the Federal Court of Australia Act 1976 (Cth).  Costs ordinarily follow the event and are awarded on a party-party basis, unless there are particular or special circumstances which warrant the Court departing from this practice and making some other order: see Colgate-Palmolive Company v Cussons Pty Limited (1993) 46 FCR 225 (“Colgate-Palmolive”) at 232-233 per Sheppard J and Ruddock v Vadarlis (2001) 115 FCR 229 at 234 per Black CJ and French J.   Since Ms Wu was in substance successful, she was and remains entitled to an order for costs.  She continues to submit that an indemnity costs order is appropriate.

42                  Whilst the Court has power to make an order for costs on an indemnity basis, the question is whether the Court should so exercise its discretion in the particular case.  A court may award indemnity costs in respect of misconduct which causes loss of time to the Court and to other parties:  Tetijo Holdings Ltd v Keeprite Australia Pty Ltd (Fed C of A, French J, WAG 55 of 1988, 3 May 1991, unreported) referred to with approval in Colgate-Palmolive at 233; Ugly Tribe Co Pty Ltd v Sikola [2001] VSC 189 at [7] per Harper J.  As Mason P, with whom Meagher and Clarke JJA agreed, said in Rosniak v Government Insurance Office (1997) 41 NSWLR 608 at 616, “the court requires some evidence of unreasonable conduct, albeit that it need not rise as high as vexation” before departing from the usual party and party costs order.  The procedural history provides sufficient evidence of unreasonable conduct on the part of Mr Armitage, through his legal representatives or personally, to continue to justify an indemnity costs order on Ms Wu’s motion. 

43                  In my reasons of 3 February 2006, I found that not only had Ms Wu properly brought her motion but also that by their conduct (e.g., the last minute and short-term retainer of legal representatives, the failure to take steps promptly to have a subpoena issued to Mr Guss, the failure to cooperate with their own legal advisers and/or to attend court) the first and second respondents had delayed the hearing of the motion and increased the costs associated with it.  Mr Armitage did not dispute that his case had been run in an unsatisfactory manner.  He conceded that the respondents’ arrangements for legal representation had hindered the progress of the litigation, which included the motion.   

44                  Mr Armitage blamed his lawyers, his lack of financial means and his ill health.  As I have said, however, a party is responsible for taking steps to ensure that he is kept informed of what is done, or not done, in his name in the course of litigation.  Lack of finance does not diminish this particular responsibility.  Mr Armitage’s ill health may have made his task more difficult but, in the course of this year, Mr Armitage has shown that he is well able to represent his interests in the court system.  Further, Mr Armitage is not acting alone.  The third respondent, who is his son, has, on Mr Armitage’s own account, been assisting him in the conduct of the case. 

45                  Mr Armitage is now an unrepresented litigant and has been so since Mr Liberoginnias ceased to represent him on 27 April 2005.  Prior to that date, he had legal representation.  Like many unrepresented litigants, he is impecunious.  Generally speaking, courts are more reluctant to make orders for indemnity costs against litigants in person than against legally represented litigants, although, in an appropriate case, they will make such an order: see Bhagat v Global Custodians Ltd [2002] FCA 223 at [57] and [60] per O’Loughlin, Whitlam and Marshall JJ.  Further, impecuniosity is generally not a sufficient reason to deprive a party otherwise entitled to a costs order of the benefit of such an order:  compare Selliah v Minister for Immigration and Multicultural and Indigenous Affairs [1998] FCA 469 per Nicholson J.

46                  It is plain enough that the conduct of the litigation by Mr Armitage and those representing him in relation to the motion has been most unsatisfactory and increased Ms Wu’s costs with regard to it.   This justifies an award of indemnity costs on the motion in Ms Wu’s favour; and no countervailing reason has been shown for not making such an order.

47                  Order 62 rule 3(2) permits the Court to order that costs be paid forthwith notwithstanding that the proceeding has not concluded.  Weinberg J reviewed the authorities in McKellar v Container Terminal Management Services Ltd [1999] FCA 1639, concluding at [38] that “[t]he discretion which is vested in the Court to order that a party’s costs be taxed and paid forthwith should be exercised only where the interests of justice in the particular case require that there be a departure from the general practice”.   See also Life Airbag Company of Australia Pty Ltd v Life Airbag Company (New Zealand) Ltd [1998] FCA 545 per Branson J.   In Courtney v Medtel Pty Ltd (No 3) [2004] FCA 347 at [21], Sackville J said that that “[i]t appears to be broadly accepted that some reason must be shown to depart from what Lehane J in Vasyli described as the ‘clear practice of the Court’”.  At [22] his Honour referred to the variety of circumstances that had thus far been regarded as justifying departure from the general rule.

48                  The interests of justice must of course depend on the circumstances of each case. Prior to 3 February 2006, the history of this motion apparently demonstrated a course of conduct on Mr Armitage’s part deliberately designed to impede the progress of the litigation.  I refer, amongst other things, to legal advisers that were poorly instructed and retained only briefly, the history of the subpoena to Mr Guss, and the failures by Mr Armitage or his representatives to appear as required.  This led me to depart from the usual position.  By his affidavit of 16 May 2006, Mr Armitage has sought to explain these matters.  Whilst his explanations are not entirely satisfactory, for present purposes, I do not find that his conduct was deliberately obstructive.  Further, if required to pay indemnity costs forthwith, his evidence is that he may lose the chance to present his defence to the serious allegations made against him.  Further, the present case is not complex and, despite its unfortunate history, might be brought on for hearing reasonably speedily.  I would not therefore order that Mr Armitage pay the indemnity costs “forthwith”.

49                  Ms Wu has, however, proceeded to have the costs referrable to her motion taxed, as she was entitled to do under my order of 3 February 2006.  She has expended time, effort and money in so doing.  Since I would make an order for indemnity costs in her favour, she should not lose the benefit of this entirely.  I would therefore order indemnity costs in her favour in the sum of $26,666.02.  This was the amount fixed as her indemnity costs under a certificate of taxation of 4 May 2006 that issued after her solicitors prepared a bill of costs and proceeded to taxation pursuant to paragraph [1] of the orders of 3 February 2006.  I would also order that the taxation that has been had under Order 62 of the Rules stand as the taxation of Ms Wu’s indemnity costs under the costs orders that I propose to make in respect of her motion.  Pursuant to O 3 r 3 of the Rules, I would, however, order that the time referred to in O 62 r 45(3) be extended to a date to be fixed after the determination of the proceeding.  Further, I would order that, 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 the determination of the proceeding.

50                  The parties did not seek to distinguish the second respondent’s position from that of the first respondent, which was unrepresented at the hearing of this motion. 

51                  As indicated above, counsel for Ms Wu argued that, pursuant to O 14 r 8 of the Rules, certain paragraphs 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.   These paragraphs allege serious improprieties against Ms Wu and her solicitors, past and present.  These allegations are not reflected in the current pleadings and are, for this reason, irrelevant to the case as it presently stands.

52                  I would order that paragraphs 63, 65, 103-106 and 128-135, as well as that part of paragraph 64 that refers to threats and intimidation, in the affidavit of Mr Armitage of 16 May 2006 be struck out unless Mr Armitage seeks leave, within 28 days, to file and serve an amended defence and/or cross claim to reflect the allegations in his affidavit.

Associate:

Dated:              27 June 2006