FEDERAL COURT OF AUSTRALIA

Labocus Precious Metals Pty Ltd v Thomas

[2008] FCA 1910

LABOCUS PRECIOUS METALS PTY LTD ACN 113 939 629 and MICHAEL LOCH MCGURK v HUGH CHARLES THOMAS, MILTON ALEXANDER NAYLOR and GLEN ELLWYN NAYLOR

NSD 1125 of 2007

RARES J

2 DECEMBER 2008

SYDNEY

THE COURT ORDERS THAT:

1.                  Orders 1-10 inclusive and Order 12 made on 6 November 2008 be vacated.

2.                  The money held in Court and lodged by the first respondent on 5 September 2008 in the sum of $80,000.00, together with any interest thereon, be paid out of Court forthwith to the first respondent.

3.                  Order that the Notice of Motion filed by the applicants on 15 October 2008 be dismissed.

4.                  The applicants pay the first respondent’s costs for the period from 15 October 2008 to 2 December 2008 inclusive (including the first respondent’s costs of the applicants’ motion filed on 15 October 2008) on an indemnity basis, that is on the basis that the first respondent be indemnified in respect of all costs incurred by the first respondent except insofar as they are of an unreasonable amount or were unreasonably incurred.

Note:    Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.
The text of entered orders can be located using eSearch on the Court’s website.

REASONS FOR JUDGMENT

(REVISED FROM THE TRANSCRIPT)

1                     This matter was re-listed today on the first respondent’s application.  It first came before me on 15 October 2008 as duty judge.  On that occasion, the applicants had sought to move to set aside orders made by Branson J requiring payment out of court of $80,000, pursuant to leave reserved by her Honour.  That sum had been withheld by the applicants and paid into court on 5 September 2008 at the time of settlement of their purchase of real property from the first respondent who was a trustee of a bankrupt estate.

2                     On 9 September 2008, Branson J had ordered that the applicants file and serve, within seven days, a document stating how the sum of $80,000 paid to the Court was arrived at together with a claim by which they intended be paid out of that sum and any other claim of any nature that they advanced in the proceedings. 

3                     The applicants did not comply with her Honour’s order.  Subsequently, the matter came before her Honour on 9 October 2008.  She vacated her orders made on 9 September 2008 and ordered that the $80,000 in court, be paid out, together with interest, to the trustee and that the applicants pay the trustee’s costs, from and including 9 September 2008, on an indemnity basis.  However, her Honour reserved leave to the applicants, up to and including 15 October 2008, to apply to a duty judge, to set aside or vary those orders. 

4                     When the matter came before me on 15 October, the applicants were then represented by senior counsel.  They filed an affidavit of Michael McGurk, the second applicant, sworn on that day, in which he sought to explain a number of difficulties that he had experienced in providing an explanation for the withholding of the money from the amount due on settlement.  In essence, Mr McGurk’s affidavit asserted that the trustee had not provided vacant possession, in accordance with the contract for sale.  The contract contained a clause that limited the trustee’s obligation to provide vacant possession in a particular way.  That limitation gave rise to a question of the proper construction of the contract for sale. 

5                     I was persuaded that that question of construction was one which was appropriate to set down for hearing, because it would enable the court to determine whether or not the $80,000, or any part of it, properly had been withheld from the trustee.  After a number of directions hearings, on 17 October 2008 I reinstated the orders made by Branson J on 9 September 2008.  I extended to 31 October 2008 the time for compliance with the order of 9 September 2008 that required the applicants to identify the basis on which the $80,000 had been withheld and I ordered it that in default of compliance, the registrar pay the moneys out of court. 

6                     The applicants did not comply with those orders and the matter came before me, again, on 6 November 2008.  Then, I gave further directions, after discussions with the parties.  These required the applicants to supply to the trustee, by 4.00pm on 24 November 2008, a schedule containing particulars nominating what chattels, plant, machinery and/or livestock had been deposited or moved on to the land, between 7 February 2008 and 4 September 2008, and had continued to remain on the land.  The schedule also had to provide details of which of the nominated items were alleged by the applicants to be items that the trustee should have removed before settlement under the disputed condition in the contract and the costs of removal.  Next, I directed the trustee to provide a schedule in response, on or before 28 November 2008, agreeing or disagreeing, with the applicants’ schedule and in the case of disagreement, identifying each item and the different cost of removal.

7                     I ordered that expert removalists of the parties confer about any disputed costs of removal and prepare a joint report by 12 December 2008, identifying costs, which after their conference they agreed upon, and any costs on which they disagreed, with short reasons from each of them as to the bases of any disagreement.  That was so as to enable the parties to have resolved whatever might be the areas in dispute, at minimum cost.  This would also enable the court to give judgment for a sum certain, in the event that the applicants’ construction argument succeeded, wholly or partly.  I ordered that the proceedings be set down for hearing, on 13 March 2009, and made directions as to service of evidence.

8                     Once again, the applicants defaulted in providing any particulars of their claims by 24 November 2008.  On 27 November 2008, the trustee’s solicitors sought to have the matter re-listed by reason of the default.  Yesterday, Mr Webeck, the solicitor for the trustee, swore an affidavit identifying his attempts to elicit from the respondents, some form of compliance with the court’s orders.  Sensibly, Mr Webeck had sought co-operation of the applicants to enable the trustee’s removal expert to be afforded an opportunity to inspect the land, as soon as possible so that the experts could confer.  He wrote to the applicants’ solicitors on 7 November and, again, on 21 November but received no reply. 

9                     On 24 November, the applicants’ solicitors wrote back saying, boldly, that they were not in a position to supply the schedule.  The letter continued:

“We expect a difficulty in this regard and we will let you know in the next few days what we propose.

We were instructed that your client’s consultant is not permitted to go on the land without our client’s representative being present;  therefore your consultant should not go on the land tomorrow.  In relation to access in future, this may be arranged by appointment.”

10                  Unsurprisingly, the trustee’s solicitors were disappointed by that response but cancelled the arrangements for their removalist to attend at the land.  On 26 November, the trustee’s solicitors wrote again, asking what was to be done about compliance with the Court’s orders and, requested the applicants, who were in default, immediately to arrange for the re-listing of the matter.  Again, nothing was done by the applicants.  Hence, Mr Webeck’s request to re-list the matter on 27 November. 

11                  This morning, the solicitor for the applicants informed me that they wished for the matter to be adjourned for a week, because the applicants were in the process of negotiating a sale, which might bear on the resolution of the matter.  I inquired how such a sale could possibly bear on the question of whether or not the applicants were entitled to withhold $80,000 from the sum paid on the settlement of the purchase of land by then from the trustee in September this year.  The solicitor for the applicants informed me that if a sale were achieved, that might help resolve the matter.

12                  In my opinion, that assertion provided no basis whatsoever for concluding that there was any justification for the applicants to have withheld the $80,000.  The applicants have had a history of non-compliance with the Court’s orders, which extends well beyond the time in which I have been managing these proceedings.  The earlier defaults of the applicants are summarised in annexure H to the affidavit of Mr Webeck, in which he notes that, in December 2007, Allsop J had advised them that the Court was not to be trifled with.  In my opinion, the applicants have had indulgence enough. 

13                  I had been persuaded to set aside Branson J’s orders of 9 September 2008, on the basis that there appeared to be a bona fide dispute.  However, I am satisfied that the absence of any attempt by the applicants to comply with the subsequent directions made by her Honour on 9 September 2008 or those subsequently made by me, and the assertion today that the matter might be resolved if the applicants can arrange a sale of the land, demonstrate that there is no bona fide basis upon which the applicants contend that the $80,000, justifiably, could have been withheld.  But even if I am wrong about that, I am satisfied that the applicants are in default, for the purposes of O 35A r 3(1).  In my opinion, the time has come for these proceedings to be concluded. 

14                  The applicants have shown a contumacious disregard for the orders of the court.  Knowing they were in default, they have chosen not to put on any evidence to justify their default with my orders of 6 November 2008.  They did not seek to have the matter re-listed in order that directions could be made for the further conduct of the proceedings, among other things, so as to maintain the hearing date.  Given that one of the critical issues was the presence on the land, of particular chattels, plant, machinery and livestock, the longer the delay in identifying what those items were, the harder it would be for the trustee to deal with any allegation that he had somehow breached the contractual requirements for the qualified vacant possession of the land. 

15                  The applicants’ attempt to prevent any inspection remains unexplained.  The applicants had ample notice that the matter would be re-listed today, but have chosen to provide no evidence to explain their continuing default.  They merely have sought, without evidence, a further adjournment based on a prospect that the proceedings may be resolved if they can arrange a sale of the land.  That prospect demonstrates nothing about the substance of their claim.

16                  In my opinion, the $80,000, together with interest, currently held in court, should be paid out to the trustee, as he seeks. 

17                  I am of opinion that the orders which I made on 6 November 2008 have now no utility.  This is because I am not satisfied that there is any bona fide dispute which the applicants seek to bring before the court.  I will vacate those orders.  Having regard to the nature of the applicants’ default, which, as I have said, I regard as being evidence that they have no bona fide dispute, it seems to me that the trustee is entitled to have his costs paid on an indemnity basis, from 15 October to date.  The processes of the Court have not been used for a proper purpose and the further adjournment, which is being sought today, is not one which reflects any bona fides on the part of the applicants.

Associate:

Dated:         15 December 2008