FEDERAL COURT OF AUSTRALIA

Van Der Velde v Ng (No. 2) [2009] FCA 538

CORPORATIONS – consideration of an application to strike out a proceeding on the ground of a failure to prosecute the proceeding in the context of a series of orders made by the Court – consideration of an application for leave to deliver a Further Amended Statement of Claim – consideration of the limitation period for the purposes of s 588FF(3) of the Corporations Act 2001 (Cth)

PRACTICE AND PROCEDURE – consideration of an application to strike out a proceeding and an application for leave to deliver an Further Amended Statement of Claim

Corporations Act 2001 (Cth), Division 2 of Pt 5.7B, ss 588FF(1), 588FF(3)

Van Der Velde v Ng  [2009] FCA 529 – cited and quoted

Lenijamar Pty Ltd v AGC (Advances) Limited (1990) 27 FCR 388 - cited

Welsh v Digilin Pty Ltd (2008) FCAFC 149; (2008) 250 ALR 13 – cited

Spotwire Pty Ltd v Visa International Service Association Inc. [2003] FCA 762 - cited

SmithKline Beecham (Australia) Pty Ltd v Chipman [2002] FCA 674 - cited

Douglas v Tickner (1994) 49 FCR 507 - cited

Orchard v Comrie (1998) 80 IR 76 - cited

Global Brand Marketing Inc. v Cube Footwear Pty Ltd [2005] FCA 479) - cited

TERRY VAN DER VELDE AND DAVID STIMPSON and RIBY PTY LTD (ACN 081 153 219) IN LIQUIDATION AS TRUSTEE FOR THE JADE TRUST v KYM HON YOKE NG, THE OFFICIAL TRUSTEE AS TRUSTEE OF THE PROPERTY OF ROSS HASTINGS (A BANKRUPT) and RAMS MORTGAGE CORPORATION LIMITED ABN 48 065 912 932

QUD405 of 2007

GREENWOOD J

22 MAY 2009

BRISBANE

UPON THE UNDERTAKING OF Mr Peter Vincent Mills, Solicitor and Partner of the firm Mills Oakley, Solicitors for the first and second applicants in the proceeding, given to the Court, to conduct and prosecute this proceeding with all due diligence subject to any decision of the liquidator to discontinue the proceeding,

THE COURT ORDERS THAT:

1.         The Notice of Motion filed by the applicants on 11 May 2009, the Notice of Motion filed by the third respondent on 15 May 2009 and the Notice of Motion filed by leave on 21 May 2009 by the first respondent, are adjourned. 

2.         The applicants shall pay the respondents’ costs of and incidental to the adjournment of each Notice of Motion referred to in Order 1 on a solicitor client basis. 

3.         Pursuant to Order 62, rule 9, Mr Peter Vincent Mills in his capacity as a Partner of the firm Mills Oakley Lawyers of Level 2, 217 George Street, Brisbane shall re‑pay to the applicants the costs the subject of Order 2 of these orders.  

4.         By 4.00pm on 22 June 2009, the applicants shall file in the Court and serve on the respondents an affidavit sworn by either Mr David Stimpson or Mr Terry Van Der Velde exhibiting an amended statement of claim described as a Second Further Amended Statement of Claim, settled by counsel. 

5.         The proceeding shall be listed for directions at 9.30am on 29 June 2009. 

6.         Within 14 days of the making of these orders, the applicants shall file an affidavit sworn by either Mr Van Der Velde or Mr Stimpson by which the deponent on behalf of the liquidator advises the court that the liquidator will prosecute this proceeding commenced on behalf of the liquidator by Mills Oakley Lawyers, with all due diligence, subject to any advice the liquidator may receive to discontinue the proceeding.

7.         The first respondent is given leave to file the Notice of Motion made returnable at 9.30am on 21 May 2009 which was heard and determined together with the applicants’ Notice of Motion filed on 11 May 2009 and the Notice of Motion of the third respondent filed on 15 May 2009.

8.         The costs the subject of order 2 shall, pursuant to Order 62, rule 3 of the Federal Court Rules, be paid forthwith, notwithstanding that the proceeding is not concluded.

9.         The parties have liberty to apply on three days notice. 

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

1                          This matter was listed for directions yesterday morning.  Two Notices of Motion were made returnable at the directions hearing.  By the first Notice of Motion filed on 11 May 2009, the applicants sought leave to file and serve a Further Amended Statement of Claim in the proceeding.  By the second Notice of Motion filed on 15 May 2009, the third respondent sought an order that the proceeding be dismissed; and that the applicants pay the third respondents’ costs of and incidental to the proceeding on a solicitor and own client basis, or alternatively on a party and party basis.  The first respondent was given leave to file a notice of motion returnable together with the other notices of motion, by which an order was sought that the proceeding be dismissed. 

2                          Each application was heard together.  On the hearing of each motion, the applicants, by counsel, sought an adjournment of each motion to enable the applicants to file a further amended statement of claim. 

3                          It is true to say that the conduct of the matter by the applicants has, since its inception, reflected a systemic failure to prosecute the proceeding in a way which comes to grips with the obligation of the applicants to plead in a disciplined and clear way a statement of claim which formulates a recognisable cause of action or the various causes of action upon which the applicants seek to rely. 

4                          When the matter came before the Court on the last occasion on 15 April 2009 an order was made unopposed that the Further Amended Statement of Claim delivered at that point of the proceeding be struck out.  The Court further ordered, unopposed, that the applicants file and serve any notice of motion for leave to re‑plead the causes of action, by 11 May 2009.  A number of orders were also made in relation to the disposition of costs arising out of various earlier notices of motion filed and agitated by particular parties.  I will not repeat the content of those orders in these reasons.  The orders are set out together with the reasons in support of those orders in Van Der Velde v Ng [2009] FCA 529.  That judgment was delivered ex tempore on 15 April 2009.  In the course of those reasons I made these observations:

13.       In relation to the first matter concerning the general conduct of the proceedings, there is an area for some, I have to say, considerable degree of criticism.  Without going to the total detailed chronology of the matter, it is fair to say that Dowsett J some considerable time ago, expressed very clear concerns about the formulation of the statement of claim as originally filed, in the sense that it contained very many allegations of mixed questions of fact and law and the pleading failed to set out in a coherent and clear sequence the precise formulation of the facts relied upon by the applicants, leading to the relief that ought to be ordered by the court arising out of those facts.  That is to say, the causes of action, both statutory and otherwise, were not plainly and clearly formulated. 

14.       It is not uncommon, of course, in litigation for pleadings to be amended and the court recognises that as instructions are more clearly formulated and fresh matters arise it may be necessary to make amendments to a pleading.  However, in this particular case the difficulty seems to me to be that there was no real focus on the imperative of reducing the statement of claim to a concise and plainly coherent document in the way Dowsett J had described.  I should add that orders were made on 19 December 2008 and on 16 February 2009 in relation to this very question of the need to amend the statement of claim and, of course, those orders provide for a timeframe within which those amendments were to be made.  Those orders were made with the support of the applicants.  Unfortunately, those orders were not satisfied and a document was ultimately filed which was an amended statement of claim followed by a further amended statement of claim.

15.       On one of the occasions when the matter was before the court previously, I think on 16 February 2009, I made some observations in reasonably precise terms, I thought, that the statement of claim lacked the rigour and discipline and coherence that is required of a pleading according to the rules of this Court and I suggested to the applicants’ advisers that it would be useful to formulate the pleading in a way which addressed the chronology of events dispersed throughout the existing amended pleading and reduced the material facts to the truly material facts properly particularised in a sequence which makes it plain that those facts, if proved, would give rise to the relief sought. 

5                          Against the background of the history of the failure to formulate a coherent pleading, the Court made the orders striking out the Further Amended Statement of Claim and imposing a discipline upon the applicants’ legal adviser to file any notice of motion for leave to re‑plead by 11 May 2009.  The notice of motion for leave to re‑plead was filed on 11 May 2009 but not served on the parties to the proceeding until 20 May 2009.  The application for leave is not supported by any affidavit from the solicitor for the applicants annexing a proposed further amended statement of claim.  I will not describe each new proposed pleading by iterations of the word “further” in each case. 

6                          On the hearing of the motion, the applicants were represented by Mr Whitten of counsel.  Mr Whitten sought and obtained leave to read and file an affidavit from the solicitor for the applicants, Mr Peter Vincent Mills, sworn 20 May 2009.  In that affidavit, Mr Mills explains that he is a partner in the firm representing the applicants.  He says that the reasons for the failure by the applicants to file and serve a proper application supported by an affidavit exhibiting a proposed draft further amended statement of claim is the burden of his work obligations rather than any default on the part of the applicant parties to the proceeding.  He says that due to those obligations, he has not been able to attend to prosecuting the proceeding since 15 April 2009.  That circumstance also explains the late service of the Notice of Motion by which leave is sought.  Mr Mills says by his affidavit that he provides an undertaking to the Court and the parties that the proceeding will be prosecuted “as far as it is within my power to do so, with due diligence”.  Mr Mills says that he has engaged Mr Whitten and has briefed counsel with certain material.  Counsel has been requested to draw an amended, that is, a new statement of claim as a matter of urgency.  Mr Whitten advises the Court that he was retained yesterday and having regard to his Court commitments it will not be possible for him to turn his mind, consider the issues and formulate a proposed amended statement of claim, immediately.  Not unreasonably in that sense, Mr Whitten seeks a period until 22 June 2009 as a date by which these things might be done.  In real effect, the proceeding will start again from 22 June 2009. 

7                          The application is resisted by the third respondent.  The first respondent adopts the submissions of the third respondent. 

8                          The third respondent says that the failures on the part of the applicants to prosecute the proceeding, call for, according to established principle, the exercise of the discretion in making an order that the proceeding be dismissed.  The proceeding has, it is said, been characterised by a continuous and enduring failure to prosecute the proceeding.  The pleading is criticised not simply on the footing that it fails to contain content a respondent would prefer to see pleaded.  It is said to be embarrassing in the well understood sense of that term in that it simply cannot stand, metaphorically, on its own two feet in any of the various forms in which it has been presented. 

9                          Mr Whitten will now reformulate the pleading. 

10                        Nevertheless, the first and third respondents press examination of the chronology of events as revealing such a profound failure to address issues and comply with Court orders that the proper exercise of the discretion requires the dismissal of the proceeding.  For example, the matter was reviewed before Dowsett J on 4 February 2008 with strong criticism of the pleading and a commitment was given by the applicants to re‑plead the Statement of Claim.  The applicants filed a Notice of Motion for summary determination of the proceeding on 28 November 2008.  The application was served late.  Orders were made on 19 December 2008 to progress the matter to trial within an urgent time frame.  The applicants were required by those orders to file and serve a further amended statement of claim.  They did not do so.  The applicants did not provide discovery by 30 January 2009.  Letters to the applicants’ solicitor of 30 January 2009 and 10 February 2009 did not attract a response.  The matter was listed before me on 16 February 2009.  Delays in prosecution of the proceeding on the part of the applicants were apparent.  The applicants were required to deliver an amended application and a further amended statement of claim by 25 February 2009.  An amended application and a further amended statement of claim were filed on 10 March 2009.  On 12 March 2009, the applicants were ordered to deliver a second further amended statement of claim by 26 March 2009.  They did not do so.  Calls made to the legal adviser to the applicants were apparently not returned.  Other applications were made to secure compliance with orders on the part of the applicants and the matter came before the Court again on 15 April 2009 when the orders previously mentioned were made.  Since 15 April 2009, the applicants have failed to advance the matter as described and explained by Mr Mills in his affidavit.  It is also important to remember that in this chronology the Court was strongly encouraged by the applicants to isolate dates when the matter might be dealt with as soon as reasonably possible. 

11                        The principles which govern the question of whether the Court ought to dismiss a proceeding under Order 35A, rule 3(1) are well understood (Lenijamar Pty Ltd v AGC (Advances) Limited (1990) 27 FCR 388 at 394 to 397 per Wilcox and Gummow JJ, with Pincus J electing, in separate reasons at pp 402 and 403, to put the circumstances influencing the exercise of the discretion on a broader footing; Welsh v Digilin Pty Ltd (2008) FCAFC 149:  (2008) 250 ALR 13 at [11] – [14] per Tamberlin, Greenwood and Collier JJ).  The history of non‑compliance on the part of an applicant party in a way that indicates an inability or unwillingness to cooperate with the Court or discharge obligations to the Court, provides a basis for dismissing the proceeding. 

12                        However, there are a number of factors which are influential in refusing the application to dismiss this proceeding and they are these.  First, the conduct which has given rise to the difficulty the Court confronts and that of the parties of being presented, by the applicants, with statements of claim which truly obfuscate the claims made against the respondents, is conduct on the part of the legal adviser to the applicants.  The applicants, of course, are bound by that conduct in an inter‑parties sense and so far as that conduct reflects a failure to discharge obligations to the Court, it is a failure of the applicants.  Nevertheless, the source of the difficulty lies with the legal adviser. 

13                        Secondly, the fundament of the claim sought to be advanced in the proceeding is this.  The first applicant is Mr Terry Van Der Velde and Mr David Stimpson.  They are the liquidators of a company called Riby Pty Ltd (“Riby”).  The winding‑up order appointing them was made on 24 April 2006.  The liquidators contend that the sole director of Riby, within the relation‑back period as that term is understood for the purposes of the Corporations Act 2001 (Cth) (“the Corporations Act”), caused the company to transfer particular land at an undervalue to the director’s former wife, the first respondent.  The liquidators contend that the transaction falls within Division 2 of Pt 5.7B of the Corporations Act.  The liquidator says that relief in respect of that transaction is available at the suit of the liquidator pursuant to s 588FF(1) of the Corporations Act.  Other causes of action based upon breaches of duty under the Corporations Act on the part of the director and breaches of fiduciary duty by that director are captured within the pleading.  However, the central matter is the challenge by the liquidator to what is contended to be a voidable transaction. 

14                        It is common ground that by s 588FF(3) of the Corporations Act, the application the liquidator would seek to bring under s 588FF(1) would be unable to be brought if the proceeding is dismissed.  In other words, the right to bring the proceeding would be statute barred. 

15                        Thirdly, counsel for the third respondent, supported by the first respondent, accepts that he is not able to put a proposition to the Court that having regard to the versions of the statement of claim which he has seen, a reader is not able to discern within the matrix of fact and law assembled in the document, a real question to be tried.  As to that consideration see Spotwire Pty Ltd v Visa International Service Association Inc. [2003] FCA 762 at [10]; SmithKline Beecham (Australia) Pty Ltd v Chipman [2002] FCA 674; Douglas v Tickner (1994) 49 FCR 507; Orchard v Comrie (1998) 80 IR 76 and Global Brand Marketing Inc. v Cube Footwear Pty Ltd [2005] FCA 479). 

16                        Fourthly, the failure on the part of the applicants to prosecute the proceeding might well be addressed by recognising that Mr Whitten will now draw a pleading; Mr Van Der Velde and Mr Stimpson might be called upon to swear and file an affidavit by which they undertake to prosecute the proceeding expeditiously subject to any advice they might obtain to discontinue the proceeding; and the costs incurred by the second and third respondents in dealing with these applications might be the subject of an order in their favour on a solicitor client basis.  Fifthly, the interests of the creditors of the insolvent administration of Reby must be kept in mind.

17                        Since the pleading reflects a question to be determined of whether a voidable transaction, for the purposes of the Corporations Act occurred, which might properly give rise to an application for relevant relief and that application would be unable to be brought before the Court should the proceeding be dismissed, it seems to me that the discretion ought to be exercised so as to refuse the dismissal of the proceeding.  Other orders which will do justice between the parties can be made and ought therefore to be made. 

18                        It seems to me that the appropriate course is this.  The Notices of Motion ought to be adjourned.  The applicants ought to be ordered to pay the costs of the respondents of and incidental to the adjournment of the motions on a solicitor client basis.  Those costs ought to be paid forthwith. An order ought to be made that those costs be re‑paid by Mr Peter Vincent Mills, the solicitor for the applicants, in his capacity as a Partner of Mills Oakley, the solicitors on the record for the applicants.  As to the time frame with which things must be done, the applicants shall be ordered to file in the Court and serve upon the respondents by 4.00pm, 22 June 2009 an affidavit sworn by Mr David Stimpson or alternatively Mr Terry Van Der Velde exhibiting an amended statement of claim in the proceeding described as a Second Further Amended Statement of Claim, settled by counsel.  The application will then be listed for review at 9.30am on 29 June 2009. 

19                        The first and third respondents have urged the Court to make orders which require an amended pleading to be filed by a certain date with the result that upon a failure to file the pleading, a self‑executing order would take effect dismissing the proceeding.  I am not persuaded that a so‑called “guillotine order” is appropriate.  If there is a further failure to comply with orders of the Court, the question of dismissal of the proceeding ought to be the subject of judicial discretion. I propose to further order that an affidavit be filed within 14 days sworn by either Mr Van Der Velde or Mr Stimpson by which the liquidator tells the Court that the liquidator will prosecute with all due diligence the proceeding commenced on behalf of the liquidator by Mills Oakley Lawyers, subject to any advice the liquidator may receive, to discontinue the proceeding. 

Associate:

Dated:         22 May 2009