FEDERAL COURT OF AUSTRALIA

Cytel Pty Ltd v Peoplebank Recruitment Pty Ltd [2006] FCA 985

PRACTICE AND PROCEDURE – corporate applicant – application for leave to carry on proceedings otherwise than by a solicitor – no sufficient reason why leave should be granted – leave refused

Federal Court Rules O 4 r 14

Australian Competition and Consumer Commission v Dataline.net.au Pty Ltd [2004] FCA 1361 cited

Molnar Engineering Pty Ltd v Burns (1984) 3 FCR 68 cited

Pacific Air Freighters (Qld) Pty Ltd v Toller (2000) 171 ALR 519 cited

Termi-Mesh Australia Pty Ltd v Josu Manufacturing Pty Ltd [1999] FCA 1241 cited

CYTEL PTY LTD (ACN 098 580 815) v PEOPLEBANK RECRUITMENT PTY LTD (formerly MASTECH ASIA PACIFIC PTY LTD and IGATE AUSTRALIA PTY LTD) (ACN 080 574 616)

NSD 2008 OF 2003

BENNETT J

3 AUGUST 2006

SYDNEY

THE COURT ORDERS THAT:

1.                  The application for leave to carry on the proceedings otherwise than by a solicitor is dismissed.

2.                  The applicant pay the respondent’s costs of the application.

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

REASONS FOR JUDGMENT

1                                             This dispute commenced in the Local Court, where Mastech Asia Pacific Pty Ltd (now Peoplebank Recruitment Pty Ltd) sought payment of fees from Cytel Pty Ltd. Cytel then commenced proceedings in this Court against Peoplebank alleging contraventions of the Trade Practices Act 1974 (Cth), breach of contract and damages. Cytel’s claim for damages exceeds $12 million.

2                                             Mr Shroff is the sole director and majority shareholder of Cytel. Cytel seeks leave for him to appear for the company. Leave is required before a corporation may commence or carry on any proceeding otherwise than by a solicitor (O 4 r 14(2) of the Federal Court Rules).

3                                             Hunt & Hunt represented Cytel in these proceedings until 3 May 2005. Mr Shroff appeared at three directions hearings thereafter without objection by Peoplebank. Turner Freeman filed an appearance for Cytel on 2 December 2005. Cytel has appeared before me by solicitors since then. The matter is now before the Court to consider a motion by Cytel for production of documents by Peoplebank on discovery. Cytel also seeks the issue of subpoenas for the production of documents. Turner Freeman filed a Notice of Ceasing to Act on 16 June 2006. There is no appearance by a solicitor for Cytel. Instead Mr Shroff, who had sent copious material to my chambers, is present with the intention of conducting the proceedings for Cytel.

4                                             Mr Shroff on behalf of Cytel indicates that Cytel did not appreciate that leave was required to carry on the proceedings otherwise than by a solicitor (despite being notified by Peoplebank’s solicitors that leave was required), or that its application for leave was opposed. Mr Shroff stated that Cytel was, however, ready to proceed with the application.

5                                             The basis of Cytel’s application is that Mr Shroff is familiar with the matter and prepared to argue the motion and address the issue of subpoenas. Cytel seeks leave for Mr Shroff to appear for it on the motion and throughout the proceedings generally.

6                                             The Court has a discretion to exercise in deciding whether to grant leave. It is to be exercised judicially, according to the requirements of justice and in favour of the company where sufficient reason is demonstrated (Molnar Engineering Pty Ltd v Burns (1984) 3 FCR 68 at 80 per Keely J).

7                                             From the evidence and submissions, the relevant factual matters are:

(1)               Mr Shroff is the sole director of Cytel and says that he has full authority from the company to appear on its behalf. Mr Shroff also says that Cytel is prepared to waive any prejudice caused by his appearance. There is no formal record of such a resolution. The shareholders of the company are Mr Shroff (over 50%) and 2 other persons. Mr Shroff declined to disclose if he holds his shares beneficially or on behalf of a trust.

(2)               Mr Shroff has no legal qualifications.

(3)               Mr Shroff claims some familiarity with court proceedings, based upon a number of cases with which he has been associated and has conducted in the Local Court. Of those cases, one is part-heard, after half a day of hearing. The rest settled, apparently without a hearing.

(4)               Mr Shroff asserts that he has knowledge of the matter and of the IT computer industry. He has no expertise as a computer programmer.

(5)               Mr Shroff is concerned at the delay to date and wishes no further delay.

(6)               Cytel’s claim includes a claim for damages including loss of opportunity which, Peoplebank asserts, raises complex questions of fact and law.

(7)               Mr Shroff asserts that the case is straightforward.

(8)               Cytel proposes a witness list of over 30 lay witnesses and 5 expert witnesses, although Mr Shroff now indicates that not all of those witnesses may be required.

(9)               There are outstanding issues of discovery. The discovery sought by Cytel is extensive. The list of the categories of documents was prepared by Cytel’s former solicitors and has been amended to delete or reduce the scope of a number of categories.

(10)           Mr Shroff says that the discovery sought has been informed by advice from Cytel’s experts.

(11)           Cytel also seeks to issue subpoenas to Peoplebank (and in its former names) and associated companies to produce extensive documentation. The request and the draft subpoenas were prepared by Cytel’s former solicitors and are said to relate to issues of liability and damages. Peoplebank opposes the issue of the subpoenas.

(12)           Peoplebank claims confidentiality over some of the documents sought on discovery. Cytel is in competition with Peoplebank as IT recruitment specialists in what is described as a highly competitive and specialised market. Objection is taken to Cytel or Mr Shroff seeing those documents, which include client lists and contact lists and client contract terms and conditions. No objection would be taken to legal advisers for Cytel having access.

(13)           Mr Shroff proposes to keep documents at his home and in a serviced office. He asserts that both are secure. Mr Shroff asserts that there is no problem with confidentiality because he will treat the documents as confidential within the home/office arrangement. That does not answer the confidentiality concerns of Peoplebank.

(14)           Cytel previously retained solicitors. Some fees to those solicitors remain unpaid.

(15)           There is no financial reason preventing Cytel from retaining lawyers. It chooses not to do so.

(16)           Despite directions to file its non-expert evidence, Cytel has filed no evidence to date.

8                                             It is quite apparent, from the matters put by Mr Shroff today and the material that he has sent to my chambers, that he has no understanding of court procedure or of evidence. I am firmly of the view that, if Mr Shroff were to represent Cytel, the time taken to deal with evidence and submissions would be greatly extended. It is also apparent that, despite Mr Shroff’s personal understanding of Cytel’s case and the fact that he intends to adduce evidence from experts, he would be unable adequately to deal with matters of expertise and legal submissions both in the questions of discovery and subpoenas now before the Court and in the substantive hearing which will follow. I am not satisfied that he would be able to present Cytel’s case to the Court in a way that focuses on critical issues. I am not satisfied that he could adequately represent Cytel’s interests in complex litigation in which substantial damages are in issue.

9                                             Further, Mr Schoff intends to be a witness in the proceeding. There are difficulties in his position as a witness and in presenting other evidence and making submissions (Australian Competition and Consumer Commission v Dataline.net.au Pty Ltd [2004] FCA 1361 at [3]). Although the position of advocate and witness is not of itself determinative (Pacific Air Freighters (Qld) Pty Ltd v Toller (2000) 171 ALR 519 at [7]) it may affect his ability to display the objectivity expected from a legal practitioner (Pacific Air at [11]).

10                                          There are no financial reasons for Cytel’s decision not to retain a solicitor. It chooses not to do so. If people choose to take advantage of the system of incorporation to carry on business, they suffer the consequence that the Court will ordinarily require a corporation to carry on proceedings by a solicitor on the record (Pacific Air at [2]). A more liberal approach may be taken where the company is a respondent rather than an applicant (Termi-Mesh Australia Pty Ltd v Josu Manufacturing Pty Ltd [1999] FCA 1241 at [14]) but that is not applicable to Cytel.

11                                          There is no suggestion that Cytel will be forced to abandon its claim or the motion now before the Court if leave is not given to Mr Shroff to represent Cytel.

12                                          Even assuming that Cytel has duly authorised Mr Shroff to conduct the proceedings on its behalf, Mr Shroff and Cytel have shown no sufficient reason to permit Cytel to continue the proceedings without qualified assistance (Molnar Engineering at 75 per Smithers J with whom Keely J agreed on this aspect at 80). The application by Cytel to conduct the proceedings otherwise than by a solicitor in relation to the motion, issue of subpoenas and in the substantive proceedings, should be refused.

Costs

13                                          Peoplebank seek the costs of the application for leave. Cytel opposes costs on the basis of the expectation that Mr Shroff was entitled to appear.

14                                          Peoplebank refer to correspondence in which its solicitors referred Cytel to O 9 r 1(3) of the Federal Court Rules (which is similar in terms to O 4 r 14(2) but provides that a corporation may not enter an appearance or defend any proceeding except by a solicitor) and asked Cytel to advise of its intention regarding representation. No response was received. That is not, however, the totality of notification to Cytel.

15                                          At the least, at a directions hearing on 18 October 2005 I told Mr Shroff that, if Cytel did not obtain legal representation, it would be necessary for Cytel to apply for leave for him to appear for the company. Mr Shroff assured the Court on that occasion that lawyers would be retained. It would appear from that transcript that this was not the first occasion that the need to obtain legal representation was raised. Solicitors appeared for Cytel on 6 December 2005.

16                                          It is appropriate that Cytel pay Peoplebank’s costs of the application for leave to appear. That does not extend to the costs of Cytel’s motion concerning discovery and its application for the issue of subpoenas, which had to be adjourned to enable this application for leave to appear to be heard.

Conclusion

17                                          The application by Cytel for leave to carry on the proceedings otherwise than by a solicitor is dismissed with costs.

Associate:

Dated: 3 August 2006