FEDERAL COURT OF AUSTRALIA
Heng V (Australia) Pty Ltd v Wang [2009] FCA 922
Trade Practices Act 1974 (Cth), ss 52, 75B
Federal Magistrates Court Rules 2001 (Cth), rr 13.03, 13.03A, 13.03B, Pt 14
House v The King (1936) 55 CLR 499 applied
Freeman v Rabinov [1981] VR 539 not followed
State of Queensland v JL Holdings Pty Ltd (1997) 141 ALR 353 not followed
Aon Risk Services Australia Limited v Australian National University [2009] HCA 27 followed
HENG V (AUSTRALIA) PTY LTD (ACN 101 665 785) and TIANFU LI v QI WANG
VID 304 of 2008
GRAY J
20 AUGUST 2009
MELBOURNE
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IN THE FEDERAL COURT OF AUSTRALIA |
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VICTORIA DISTRICT REGISTRY |
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general division |
VID 304 of 2008 |
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ON APPEAL FROM THE FEDERAL MAGISTRATES COURT OF AUSTRALIA |
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HENG V (AUSTRALIA) PTY LTD (ACN 101 665 785) First Appellant
TIANFU LI Second Appellant
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AND: |
QI WANG Respondent
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JUDGE: |
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DATE OF ORDER: |
20 AUGUST 2009 |
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WHERE MADE: |
MELBOURNE |
THE COURT ORDERS THAT:
1. The appeals be dismissed.
2. The appellants pay the respondent’s costs of the appeals.
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.
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IN THE FEDERAL COURT OF AUSTRALIA |
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VICTORIA DISTRICT REGISTRY |
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GENERAL DIVISION |
VID 304 of 2008 |
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ON APPEAL FROM THE FEDERAL MAGISTRATES COURT OF AUSTRALIA |
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BETWEEN: |
HENG V (AUSTRALIA) PTY LTD (ACN 101 665 785) First Appellant
TIANFU LI Second Appellant
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AND: |
QI WANG Respondent
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JUDGE: |
GRAY J |
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DATE: |
20 AUGUST 2009 |
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PLACE: |
MELBOURNE |
REASONS FOR JUDGMENT
The nature and history of the proceeding
1 These appeals result from a judgment given as a result of default in compliance with orders made by the Federal Magistrates Court of Australia in a proceeding before it. Following repeated failure by the appellants to comply with orders requiring them to make discovery of documents, the learned federal magistrate ordered that the appellants’ defence be struck out. On the following day, the matter proceeded on an undefended basis, and the federal magistrate gave judgment against the appellants, in favour of the respondent to this appeal. The appellants contend that his Honour should not have placed them in a position in which they are subject to a judgment for a substantial sum of money, without having had the opportunity to have the issues in the proceeding tried. The appeals raise questions of principle relating to the application of sanctions, such as refusing to allow a party to defend a proceeding, consequent upon default by that party in compliance with orders of the court.
2 On 21 June 2007, the respondent, Ms Wang, filed in the Federal Magistrates Court an application and statement of claim, naming the first appellant, Heng V (Australia) Co Pty Ltd (ACN 101 665 785) (“Heng V”), as first respondent and Duff T Lee, also known as Tian-Fu Li (“Mr Lee”), as second respondent. Against Heng V, Ms Wang alleged contravention of s 52 of the Trade Practices Act 1974 (Cth) (“the Trade Practices Act”) by reason of false representations, alleged to have induced Ms Wang to become involved in a business arrangement with Heng V, and to pay over a large sum of money. Mr Lee was sued pursuant to s 75B of the Trade Practices Act, on the basis that he was involved in the contravention. Ms Wang claimed repayment of the sum of $245,000, together with substantial sums by way of interest on that sum. Alternatively, she claimed damages.
3 On 25 July 2007, the federal magistrate conducted a directions hearing, at which his Honour laid down a timetable for pleadings and other interlocutory steps. His Honour made orders requiring each party to file and serve a list of discoverable documents by 24 October 2007, and to complete inspection of discovered documents by 31 October 2007. His Honour also fixed the proceeding for trial, to begin on 10 December 2007.
4 On 6 December 2007, the federal magistrate made further orders. His Honour vacated the trial date for 10 December 2007 and refixed it for 14 April 2008. On 5 March 2008, there was another directions hearing. On that occasion, his Honour made a specific order in relation to discovery of documents in the following terms:
The [appellants] by 19 March 2008 provide copies, or allow inspection by the [respondent] who may then copy the documents set out in paragraph 9 of Mr Lim’s Affidavit sworn 18 February 2008 (save for those set out in paragraphs 9(a) and 9(b)). In the event those documents are unable to be produced, or do not exist, the [appellants] on Affidavit must give explanation of their inability to produce the same.
It is apparent that this order was not complied with. On 1 April 2008, the federal magistrate again held a directions hearing and made the following orders:
1. The [appellant] comply with the Court’s order of 5 March 2008 by 4.00pm on 8 April 2008.
2. In the event the [appellant] fails to comply with order 1 above, the [appellant]’s defence shall be struck out and the matter shall proceed on 14 April 2008 as undefended.
5 On 14 April 2008, the federal magistrate ordered that “The [appellant]’s response, defence and cross claim are struck out.” His Honour also adjourned the proceeding to 15 April 2008. On the latter date, his Honour dealt with the proceeding as undefended. He received an affidavit sworn by Ms Wang, and found that there was evidence establishing each of the elements of the cause of action in the statement of claim. His Honour declared that an agreement entered into between the parties was void from its inception, and ordered that Heng V and Mr Lee pay Ms Wang $245,000, together with statutory interest on specified amounts of that total sum from specified dates, and the costs of the proceeding.
6 On 6 May 2008, Heng V and Mr Lee filed in this Court a notice of appeal, purporting to be an appeal from the orders made on 1 April, 14 April and 15 April 2008. At the initial directions hearing, I raised the question whether leave to appeal from the orders of 1 April 2008 and 14 April 2008 was necessary, as those were clearly interlocutory judgments. I gave directions for the filing of: an application for an enlargement of the time to apply for leave to appeal from the judgment of 14 April 2008; an application for leave to appeal from that judgment; any affidavit in support of those applications; a notice of appeal from the judgment of 14 April 2008; and an amended notice of appeal from the judgment of 15 April 2008. On 30 June 2008, I extended the time for leave to appeal from the judgments of 1 April and 14 April 2008 to 8 May 2008 and 26 June 2008 respectively. I granted leave to appeal from the judgments of 1 April 2008 and 14 April 2008. I directed that the appellants file and serve a notice of appeal relating to the judgment of 1 April 2008 and that their draft notice of appeal filed on 26 June 2008 stand as their notice of appeal from the judgment of 14 April 2008. It was apparent that the correctness of the final judgment of 15 April 2008 was so bound up with the previous orders that leave ought to be granted, so that all questions could be before the Court on the hearing of the appeal. On 26 June 2008, the appellants filed an amended notice of appeal from the judgment of 15 April 2008. They did not file an amended notice of appeal from the orders of 1 April 2008.
The evidence before the federal magistrate
7 At the directions hearing on 25 July 2007, Mr Lee is recorded as appearing, with the assistance of an interpreter, for himself and for Heng V. By the time the orders were made on 5 March 2008, the appellants were represented by solicitors. On 1 April 2008, and again on 14 April 2008, Mr Lee appeared without legal representation.
8 On 1 April 2008, the federal magistrate had before him an affidavit of Ms Wang’s solicitor, Mr Lim, concerning the failure of the appellants to make discovery of documents. In the affidavit, Mr Lim recounted that an appointment was made with the appellants’ then solicitor, Yong Peng, at Mr Peng’s office, at 10.00 am on 19 March 2008, to inspect documents. The affidavit then proceeded as follows:
7. On the 19 March 2008 at about 10.10 am I attended at the offices of the [appellant]s’ Solicitors where I met Yong Peng and [Mr Lee]. Shortly after that Yong Peng left us and went into his room to attend to his other clients.
8. [Mr Lee] told me in a very angry tone that he had taken more than 2 weeks to gather all the documents this Honourable Court had ordered to be discovered by the [appellants] and he had spent no less than $3,000 to do that.
9. I am not sure what [MrLee] had brought that day. He merely told me that he had brought with him more than 10,000 pages of documents not arranged properly and I would need to search for what I wanted to inspect and copy.
10. [MrLee] told me that if I wanted to inspect the documents discovered by the [appellants], I or [MsWang] had to pay him $3,000 otherwise he would refuse inspection by me.
11. I told [MrLee] that I was there to carry out an inspection ordered by this Honourable Court and there is no order for [MsWang] to pay the [appellants] $3,000 or any amount before inspection could be carried out by [MsWang]. To this [MrLee] said he could not be bothered what the Court ordered. If [MsWang] or I refused to pay him $3,000 he would not permit inspection.
12. I then called Yong Peng who was in another room attending to his other clients when I had the above conversation with [Mr Lee]. I told Yong Peng what happened and what [MrLee] said to me.
13. Yong Peng explained to [MrLee] that the Court had made the order and he had to allow me to inspect the documents without payment of any amount of money.
14. [MrLee] refused to follow the advice of Yong Peng and told him to go back into his room as it did not concern him. He insisted that if I refused to pay the $3,000 he demanded he would not allow me to inspect the documents he had allegedly brought to Yong Peng’s offices that day.
15. I told him that I would not pay him any money for the inspection and I would not advise [MsWang] to pay either. I told him in the presence of Yong Peng that I was not there to argue with him and if he refused to allow me to inspect the documents that day I will leave.
16. I told them that if I leave without inspecting the documents I will be compelled to inform this Honourbale [sic] Court of his demand of $3000 and refusal to allow inspection if payment is not made.
17. [MrLee] said he could be bothered even if I inform this Honourable Court of his demand for payment and refusal to allow inspection without payment of $3,000.
9 At no time did the appellants take issue with the evidence contained in this part of the affidavit. On 1 April 2008, Mr Lee indicated to the court that he needed to instruct new lawyers and needed the assistance of an interpreter. After the federal magistrate had made the orders on that day, his Honour endeavoured to explain the effect of them to Mr Lee. He informed Mr Lee that he would receive an order in the mail on the following day, and should see a solicitor straight away. Mr Lee protested that he would need to discover about 70,000 pages and, to do this, needed two persons working for two months. He insisted that he could not do this. The federal magistrate explained that it was necessary for Mr Lee to allow access to those documents that had been listed.
10 Notwithstanding that the appellants had no legal representation on and after 1 April 2008, two affidavits were sworn and filed by Mr Lee, one on 7 April 2008 and the other on 9 April 2008. Each of these affidavits was expressed in English, with no indication in the jurat clause of the involvement of any interpreter. The affidavits are substantially in the form required of such documents when filed in a court. They are expressed in numbered paragraphs. In para 7 of the affidavit of 7 April 2008, Mr Lee took the point that one class of documents of which Ms Wang’s solicitor sought discovery was “Group Certificates”, but that “Group Certificates” had been replaced by “‘PAYG’ (payment summary-individual non-business)” some five years earlier, following tax reform in Australia. He also indicated that the appellants had not completed balance sheets and profit and loss statements for the financial years ended 30 June 2006 and 30 June 2007 and that, as the appellants did not purchase and import any equipment, they did not have and could not produce packing lists, bills of lading and tax invoices. In para 8 of the affidavit, Mr Lee stated that most of the documents requested by Ms Wang were unable to be produced for inspection by the applicant because:
1) There are about 60,000 pages of the documents requested by [MsWang] in hand.
2) There are about 4,500 pages of the documents requested by [MsWang] in computer.
3) We need to employ at least one professional person to copy, print and arrange these documents requested by [MsWang].
4) We need to spend at least 20 weeks to photocopy 60,000 pages of the documents in hand.
5) We need to spend at least 6 weeks to print 4,500 pages of the documents from computer.
6) We need to spend at least 5 weeks to photocopy 4,500 pages of the above-stated printed documents.
7) We need to spend at least 4 weeks to arrange the above-stated 70,000 pages of the documents requested by [MsWang].
11 In para 9 of the affidavit, Mr Lee asked that the hearing scheduled for 14 April 2008 should be put off for at least five or six months, until October 2008 or thereafter.
12 In the affidavit of 9 April 2008, Mr Lee said that, on 27 March 2008, Mr Peng had ceased to act for Heng V. Exhibited to the affidavit were a notice that the solicitors had ceased to act for both appellants and a letter addressed to Mr Lee, stating:
It is our understanding that you will appear yourself for the hearing on 2 April 2008 [sic] at 9:30 am and please make sure to make arrangement [sic] with the Court for an interpreter. We will forward to you our final account earlier [sic] next week.
13 Also exhibited to the affidavit of 9 April 2008 was a letter dated 30 March 2008 from Mr Lee to the registrar of the Federal Magistrates Court. This letter advised that Mr Peng had ceased to act for Mr Lee and that Mr Peng intended to file a notice to that effect on 28 March 2008. The letter continued:
Therefore, it is impossible for us to look for and engage a new lawyer to act for our Company in this case within only a day.
Secondly, we have not received any letters from [MsWang] and her lawyer. Therefore, we can not [sic] attend the Hearing on 1st April 2008.
Therefore, we are herewith applying to the Court:
A. the Date of this Hearing should be put off until or after 11th April 2008, because we need at least 10 working days to look for a new lawyer and prepare the documents for the Hearing.
B. Could you please supply the language services and arrange an English-Mandarin Chinese interpreter at the Hearing.
14
The affidavit of 9 April 2008 continued:
6. Since December 2007, my sister, Ms. Xiao-Hong LI of Beijing, P. R. China, many times called and wrote the letters to me, which said that our parent had entered in the hospital with some serious heart-attack and other serious diseases and they had hoped me [sic] return to the family and visit them in the hospital of Beijing as very early as possible. Shown to me are the copies of three letters faxed to myself dated the 20 December 2007, the 15 January 2008, and the 12 February 2008 marked as Exhibit “FL-3”.
7. On the 7 April 2008, in the night I received the international call from my sister, Ms. Xiao-Hong LI of Beijing, China, and she told me that our father will be dying in the hospital and let me [sic] immediately return to the family for a final seeing to our father.
8. My father is over 90 years old and I have not seen him and my mother being in the hospital for about 7 years since 2002, and therefore I am now arranging my visa for Immigration Department and international air affair [sic] to China for the final visit to them.
9. I can not [sic] attend the Final Hearing dated the 14 April 2008 for 5 days due to not having a lawyer acting for our Company and due to visiting my parent in the hospital overseas.
10. I ask for the Orders of putting off the Final Hearing till /or after October 2008 in the Application in a Case filed on behalf of the [appellants].
15 There was also an affidavit sworn by Mr Lim on 12 April 2008. This affidavit detailed an attempt by him to inspect the appellants’ documents on 8 April 2008. The affidavit included a complaint that documents that were produced were not arranged as requested and as ordered by the court. It alleged that Mr Lee said that:
he would not do that as it will be very time consuming and expensive for him to do that. He said that I will have to plough through the documents he had brought that day if [MsWang] wanted to inspect them.
This affidavit also contained a list of classes of documents that the appellants had not produced for inspection on 8 April 2008. It said that the documents that were produced were not arranged in chronological order, or according to subject matter, and the appellants had not made arrangements for a photocopier to be available at the motel at which inspection took place.
16 On 14 April 2008, the federal magistrate inquired of Mr Lee what he had done between 1 April and 14 April 2008 to get new solicitors. Through an interpreter, Mr Lee said that he had telephoned one solicitor, whose name he gave, but she said the time was too limited for her to read through so many documents. Mr Lee also said he told his previous solicitor to find another one for him, “but we didn’t have so much time so we couldn’t find me a new one.” The federal magistrate also asked Mr Lee some questions about the attempted inspections of documents. Mr Lee alleged that, on 19 March 2008, Ms Wang’s solicitor had been 38 minutes late, and that he had lied to the court in his affidavit about what time he arrived at Mr Peng’s office. The interpreter translated Mr Lee as saying:
We have already brought every documents [sic] required by [sic] they didn’t appear, so we could only take them away. We have carried out my computer three times back and forth on that day.
The federal magistrate also asked why the appellants were not ready to proceed with the case on that day. Mr Lee referred to the fact that his father was dying and that he had not seen him for seven years.
The federal magistrate’s reasons for judgment
17 In reasons for judgment delivered on 14 April 2008, the federal magistrate accepted that Mr Lee’s father’s illness had reached a critical point and that his sister had requested Mr Lee to go back to China. His Honour found on the affidavit material filed by Ms Wang’s solicitor that there had not been proper compliance with the orders for discovery. His Honour said:
On balance I am satisfied that the [appellant] has no satisfactory explanation for not having organised legal representation for today. I am unpersuaded by his evidence from the bar table he spoke to a lawyer on the phone and never bothered to follow up with seeking advice from another lawyer about today’s final hearing. I am unpersuaded that there is a reasonable excuse for the failure to comply with the previous orders made, and I am unpersuaded as to his explanation for those failures.
18 On 15 April 2008, his Honour also delivered reasons for judgment. After pointing out that he had struck out the defence on the previous day, the federal magistrate said:
In addition, I was unpersuaded to grant an adjournment sought by [MrLee] on his behalf and [Heng V]’s behalf to allow him to get legal assistance, because the circumstances of the matter are such that he has not persuaded me that when he had the opportunity to get further legal assistance he exercised a true endeavour to do so.
I was unpersuaded by the comments made by [MrLee] yesterday as to his due application to the proper defence of this claim, and accordingly I made the order yesterday striking out the response defence and cross-claim that he has lodged.
19 His Honour then proceeded to give reasons for his satisfaction of each element of Ms Wang’s claim, on the basis of an affidavit she had filed containing evidence about that claim.
The rules of the Federal Magistrates Court
20 Rule 13.03A of the Federal Magistrates Court Rules 2001 (Cth) (“the Federal Magistrates Court Rules”) provides as follows:
(1) For rule 13.03B, an applicant is in default if the applicant fails to:
(a) comply with an order of the Court in the proceeding; or
(b) file and serve a document required under these Rules; or
(c) produce a document as required by Part 14; or
(d) do any act required to be done by these Rules; or
(e) prosecute the proceeding with due diligence.
(2) For rule 13.03B, a respondent is in default if the respondent:
(a) has not satisfied the applicant’s claim; and
(b) fails to:
(i) give an address for service before the time for the respondent to give an address has expired; or
(ii) file a response before the time for the respondent to file a response has expired; or
(iii) comply with an order of the Court in the proceeding; or
(iv) file and serve a document required under these Rules; or
(v) produce a document as required by Part 14; or
(vi) do any act required to be done by these Rules; or
(vii) defend the proceeding with due diligence.
21 Rule 13.03B provides relevantly as follows:
(1) If an applicant is in default, the Court may order that:
(a) the proceeding be stayed or dismissed as to the whole or any part of the relief claimed by the applicant; or
(b) a step in the proceeding be taken within the time limited in the order; or
(c) if the applicant does not take a step in the time mentioned in paragraph (b) — the proceeding be stayed or dismissed, as to the whole or any part of the relief claimed by the applicant.
(2) If a respondent is in default, the Court may:
(a) order that a step in the proceeding be taken within the time limited in the order; or
(b) if the claim against the respondent is for a debt or liquidated damages — grant leave to the applicant to enter judgment against the respondent for:
(i) the debt or liquidated damages; and
(ii) if appropriate — costs; or
(c) if the proceeding was commenced by an application supported by a statement of claim or the Court has ordered that the proceeding continue on pleadings — give judgment against the respondent for the relief that:
(i) the applicant appears entitled to on the statement of claim; and
(ii) the Court is satisfied it has power to grant; or
(d) give judgment or make any other order against the respondent; or
(e) make an order mentioned in paragraph (b), (c) or (d) to take effect if the respondent does not take a step ordered by the Court in the proceeding in the time limited in the order.
...
(6) The Court may make an order of the kind mentioned in subrule (1), (2) or (4), or any other order, or may give any directions, and specify any consequences for non-compliance with the order, that the Court thinks just.
For the purposes of these provisions, r 13.03 provides that the word “applicant” includes a cross-claimant, the word “claim” includes a cross-claim, and the word “respondent” includes a cross-respondent. Part 14 of the Federal Magistrates Court Rules contains provisions relating to discovery of documents, including provisions for the making of orders requiring discovery of particular documents or classes of documents, and provisions for the inspection of documents.
The issues on the appeals
22 The notices of appeal filed in relation to the orders of 1 April, 14 April and 15 April 2008, raise various contentions. The appellants contended that they had complied substantially with the orders for inspection of documents made on 5 March 2008 and 1 April 2008. Alternatively, any non-compliance with the order of 5 March 2008 was insufficiently serious to require the making of a self-executing order on 1 April 2008, or the strike-out order of 14 April 2008. Alternatively, by the time the appeals were heard, the appellants would have complied with the orders and it was in the interests of justice that the appeals be allowed. Further, the orders of 1 April, 14 April and 15 April 2008 ought not to have been made without first giving the appellants an opportunity to be heard on the question whether those orders ought to be made, and the assistance of an interpreter.
23 Presumably in support of the contention that the appeals should be allowed because the orders in respect of discovery and inspection would have been complied with by the time the appeals were heard, the appellants filed in this Court a further list of documents, bearing the title of the proceeding in the Federal Magistrates Court. They also filed affidavit material about steps taken to make available for inspection discovered documents in the proceeding in the court at first instance. Ms Wang filed an affidavit contesting those steps.
24 Written submissions filed originally on behalf of the appellants tended to focus largely on what was said to be the self-executing nature of the order made on 1 April 2008, although it was conceded that the order did not provide for the entry of judgment on the default occurring, but simply for the striking out of the defence. It was contended that, if a self-executing order had been made in the “usual form” on 1 April 2008, it would have been possible for the appellants to comply with the order out of time, and to seek to extend the time for compliance even after judgment had been entered. It was contended that this Court undoubtedly had power to set aside the orders made on 1, 14 and 15 April on the grounds raised in the notices of appeal. Supplementary submissions were filed on behalf of the appellants, following a change of counsel. The contention was that the orders of 15 April 2008 were made because of non-compliance with the order for discovery, and because of the appellants not being ready to proceed with the trial of the proceeding. It was said that the appellants had complied substantially with the orders for discovery. To the extent they had not, it was because of their lack of representation and problems associated with obtaining it, and Mr Lee’s lack of understanding of English. Reference was also made to the application for adjournment, based on the serious illness of Mr Lee’s father in China.
25 It is abundantly clear that the order of 1 April 2008 was not a self-executing order. Paragraph 1 of that order required compliance with the order of 5 March 2008 by 8 April 2008. Paragraph 2 in effect amounted to a warning that, if there were to be a failure to comply, the court would take further action to strike out the defence of the appellants and to deal with the matter as an undefended matter. In other words, it was stated clearly that further steps would be taken in the event of non-compliance. This is not the form in which self-executing orders have been made in the past. If there were any doubt about the nature of the orders of 1 April 2008, it is clear that the federal magistrate did not treat them as self-executing orders on 14 April 2008. On that date, his Honour dealt with the question whether there had been compliance and made a specific order striking out the appellants’ response, defence and cross-claim (it is not clear that there was any cross-claim filed in the proceeding). Although the proceeding was thereby undefended, and it might have been open to his Honour to give judgment for Ms Wang on her statement of claim, his Honour very properly adjourned the hearing to the following day and gave judgment on the basis of evidence in Ms Wang’s affidavit.
26 In the course of the hearing of the appeal, I drew the attention of counsel for the appellants to the fact that the orders of 1 April and 14 April 2008 resulted from exercises of judicial discretion. An appeal from a judgment involving an exercise of judicial discretion is not to be resolved according to the manner in which the appeal court thinks that the discretion should have been exercised. As Dixon, Evatt and McTiernan JJ said in the well-known passage in House v The King (1936) 55 CLR 499 at 504-505:
The manner in which an appeal against an exercise of discretion should be determined is governed by established principles. It is not enough that the judges composing the appellate court consider that, if they had been in the position of the primary judge, they would have taken a different course. It must appear that some error has been made in exercising the discretion. If the judge acts upon a wrong principle, if he allows extraneous or irrelevant matters to guide or affect him, if he mistakes the facts, if he does not take into account some material consideration, then his determination should be reviewed and the appellate court may exercise its own discretion in substitution for his if it has the materials for doing so. It may not appear how the primary judge has reached the result embodied in his order, but, if upon the facts it is unreasonable or plainly unjust, the appellate court may infer that in some way there has been a failure properly to exercise the discretion which the law reposes in the court of first instance. In such a case, although the nature of the error may not be discoverable, the exercise of the discretion is reviewed on the ground that a substantial wrong has in fact occurred.
I invited counsel for the appellants to indicate on what wrong principle the federal magistrate had acted, what extraneous or irrelevant matters he had allowed to guide or affect him, what mistakes of fact he had made, or what material consideration he had failed to take into account. Counsel for the appellants contended that the federal magistrate had failed to give sufficient weight to the fact that Mr Lee was not fluent in English and did not have the benefit of an interpreter, to the fact that the appellants were without legal representation, and to the fact that Mr Lee’s father was seriously ill in China. Counsel for the appellants also contended that the federal magistrate had acted upon a wrong principle, by failing to apply the correct principle. The correct principle advanced was that a party should not be made to suffer a judgment for a large sum of money without being entitled to a trial and judgment on all of the issues in a proceeding to which that person is a party.
27 The principles enunciated in House as those upon which an appeal court approaches the exercise of discretion by the court appealed from do not speak of the weight to be given to various considerations. Those principles are concerned with whether or not the judge at first instance took into account irrelevant matters at all, or failed to take into account all material considerations. It is very clear from the reasons for judgment he gave on 14 and 15 April 2008 that the federal magistrate took into account the fact that the appellants were not legally represented and that Mr Lee’s father was seriously ill in China. As the transcript of what occurred on 14 April 2008 shows, his Honour was also concerned to ensure that Mr Lee understood what was going on, despite his lack of English. The case was stood down from 10.30 am until 2.15 pm because of the unavailability of an interpreter in the morning. In substance, the hearing on 14 April 2008 was conducted through an interpreter. Even on 1 April 2008, when no interpreter was present, the federal magistrate took pains to ensure that Mr Lee would understand the order that was made. His Honour stressed that Mr Lee should see a solicitor about the order.
28 If it were a matter of the weight to be attached to these considerations, there is much that could be said about the conclusion to which the federal magistrate should have come. In the first place, there is the account by Mr Lim of the attempted inspection of documents on 19 March 2008. This account was never refuted by Mr Lee, despite Mr Lee filing two subsequent affidavits. Even when he had an interpreter available to him, the only response Mr Lee made to this on 14 April 2008 was to allege that the solicitor had lied about the time that he had arrived at the offices of the appellants’ former solicitors, to carry out the inspection of documents. There was no attempt to counter Mr Lim’s allegation that Mr Lee had demanded the payment of $3,000 before he would comply with the court’s order. There was no attempt to refute the allegation that he had maintained this demand, despite the advice of his own solicitor that he was obliged to comply with the order and could not demand money before doing so.
29 When he appeared before the federal magistrate on 1 April 2008, Mr Lee did not attempt to explain why it was that the appellants’ former solicitors had ceased to act for them. No explanation for the fact that the appellants had become unrepresented was ever offered, to the Federal Magistrates Court or to this Court. On 14 April 2008, when he was asked about attempts he had made to obtain legal representation, Mr Lee made it clear that he had not made any serious attempt. He had telephoned one solicitor who refused to act, and requested his former solicitors to find a replacement. It is not surprising that the federal magistrate regarded this as a failure to take an opportunity given.
30 Further, Mr Lee’s affidavit of 7 April 2008 (the day before the new deadline for producing documents for inspection) demonstrated that Mr Lee had no intention of attempting to comply with the court’s order. Apart from taking the smart point about the abolition of group certificates, the affidavit set out a timetable that Mr Lee said was needed, in order to comply, and would justify adjourning the trial of the proceeding for a further six months or more. The timetable was an admission that the order of the Federal Magistrates Court with respect to inspection of documents had not been complied with. It was also a statement that Mr Lee had no intention of attempting to comply on 8 April.
31 In this context, the sudden reliance on the illness of Mr Lee’s father in China, the subject of the affidavit of 9 April 2008, could be seen as a desperate attempt to put off the inevitable. From the affidavit, it appeared that Mr Lee’s father had been seriously ill since December 2007. Although he claimed to have received a call from his sister, to tell him that their father was dying and that Mr Lee should return immediately, and that that information reached him on 7 April 2008, all that Mr Lee could say on 9 April was that he was arranging for a visa and for a flight to China.
32 This led him to advance two reasons for his alleged inability to attend the trial on 14 April. One was the lack of legal representation for the appellants and the other was the need to visit his father. Instead of seeking an adjournment for such time as would have enabled him to obtain legal representation and to visit his father, Mr Lee sought an adjournment of the trial for the same period as that requested in his affidavit of 7 April on other grounds. Notwithstanding the sworn statement that he would be unable to attend on 14 April, Mr Lee was present. His explanation that he was present out of respect for the court appears a little thin. Notwithstanding that the federal magistrate accepted that Mr Lee’s father was seriously ill in China, it is no surprise that his Honour did not grant an adjournment to enable Mr Lee to visit his father. In the light of Mr Lee’s obvious disdain for repeated orders in relation to discovery and inspection of documents, it is no surprise that the federal magistrate took a view adverse to the appellants as to whether they were making serious attempts to prepare for the trial of the proceeding. In relation to the lack of legal representation, it is no surprise that the federal magistrate took the view that Mr Lee had taken insufficient advantage of an opportunity the court had allowed him to comply with previous orders and to be ready to defend the proceeding at the trial. If it were a question of the weight to be given to the various factors on which the appellants relied, I should certainly not regard the federal magistrate as having failed to give them sufficient weight.
33 This leaves the question of principle on which counsel for the appellants relied. The principle that a party to a proceeding ought not to be subjected to a judgment for a large sum of money without a trial was said to be derived from the judgment of the Full Court of the Supreme Court of Victoria in Freeman v Rabinov [1981] VR 539. In that case, a judge managing cases had made a self-executing order dismissing a plaintiff’s claim and striking out his defence to a counterclaim of the defendant, unless the plaintiff filed and delivered a supplementary affidavit of documents by a specified time. The judgment of the Full Court was delivered by Lush J, with whom Murray and King JJ concurred. At 548, the Full Court held that:
if injustice in the result flows from the operation of an interlocutory order of a single judge, of the kind with which we are now concerned the Full Court may on appeal set aside or vary the order.
The injustice concerned was identified at 549-550. There, Lush J referred to the strength of the argument against the plaintiff, because of a series of defaults in making discovery and in other matters, and the gross inadequacy of discovery that had been made. His Honour said:
The argument was a strong one, and if the only result of the self-executing order had been to lead to the dismissal of the action for want of prosecution, there would have been little ground for interfering. The final position, however, is that the plaintiff is on risk of suffering a large judgment in damages without a trial, while in the end the defendant obtained the information which it needed, although still not in the proper form, about one month after it should have been delivered pursuant to the order of 28 February 1980. Mr. Merkel contended that that order had been properly made by the Judge in exercise of the disciplinary powers of the Court to compel compliance with its rules and orders, and to compel the taking of the necessary steps in the action with expedition. These matters may be accepted, but in the end the circumstance that the defendant stands at risk of sustaining a heavy judgment without a trial is in all the circumstances of this case decisive.
34 There can be no criticism of the Full Court in Freeman for identifying the injustice that occurred in the circumstances of that case. It is more difficult to argue, however, that the case gives rise to a principle that a party can never be subjected to a judgment for a large sum of money without a trial. The adoption of such a principle would amount to an invitation to litigants to disregard orders of the Court, knowing that they were immune from the entry of judgment in consequence of their defaults. Further, much has happened since Freeman was decided. There has been a considerable expansion in the adoption of the system of case-management by judges in Australia and in England. Particularly in this Court, and in the Federal Magistrates Court, management of cases from inception to resolution by an individual judge has become routine. Case-management principles are backed by the provisions of rules of court, such as those found in rr 13.03, 13.03A and 13.03B of the Federal Magistrates Court Rules. Such rules provide expressly for the very thing that occurred in this case, namely for the giving of judgment against a defaulting party without a trial, because of the default.
35 Such powers are not to be exercised lightly. A judgment for a large sum of money is a significant consequence to visit upon a defaulting party. In State of Queensland v JL Holdings Pty Ltd (1997) 141 ALR 353, the High Court allowed an appeal from a refusal to permit a late amendment of a defence. The refusal had been based on the fact that the amendment would jeopardise the dates fixed for the trial of the proceeding. At 356-357, Dawson, Gaudron and McHugh JJ referred to the earlier High Court judgment in Sali v SPC Ltd (1993) 116 ALR 625 and said:
Sali v SPC Ltd was a case concerning the refusal of an adjournment in relation to which the proper principles of case management may have a particular relevance. However, nothing in that case suggests that those principles might be employed, except perhaps in extreme circumstances, to shut a party out from litigating an issue which is fairly arguable. Case management is not an end in itself. It is an important and useful aid for ensuring the prompt and efficient disposal of litigation. But it ought always to be borne in mind, even in changing times, that the ultimate aim of a court is the attainment of justice and no principle of case management can be allowed to supplant that aim.
At 358, their Honours said:
Case management, involving as it does the efficiency of the procedures of the court, was in this case a relevant consideration. But it should not have been allowed to prevail over the injustice of shutting the applicants out from raising an arguable defence, thus precluding the determination of an issue between the parties. In taking an opposite view, the primary judge was, in our view, in error in the exercise of her discretion.
36 Recently, in Aon Risk Services Australia Limited v Australian National University [2009] HCA 27, the High Court revisited the question of late applications for amendment of pleadings, and the relevance to such applications of the powers and principles of case-management. The High Court reversed the order of the primary judge allowing the plaintiff to make substantial amendments to its claim at the start of the trial. At [92], Gummow, Hayne, Crennan, Kiefel and Bell JJ referred to the fact that case-management “is now an accepted aspect of the system of civil justice administered by courts in Australia.” At [98], their Honours said with reference to the rule of Court conferring case-management powers on the Supreme Court of the Australian Capital Territory:
Of course, a just resolution of proceedings remains the paramount purpose of r 21; but what is a “just resolution” is to be understood in light of the purposes and objectives stated. Speed and efficiency, in the sense of minimum delay and expense, are seen as essential to a just resolution of proceedings. This should not detract from a proper opportunity being given to the parties to plead their case, but it suggests that limits may be placed upon re-pleading, when delay and cost are taken into account. The Rule’s reference to the need to minimise costs implies that an order for costs may not always provide sufficient compensation and therefore achieve a just resolution. It cannot therefore be said that a just resolution requires that a party be permitted to raise any arguable case at any point in the proceedings, on payment of costs.
At [111], their Honours concluded:
An application for leave to amend a pleading should not be approached on the basis that a party is entitled to raise an arguable claim, subject to payment of costs by way of compensation. There is no such entitlement. All matters relevant to the exercise of the power to permit an amendment should be weighed. The fact of substantial delay and wasted costs, the concerns of case management, will assume importance on an application for leave to amend. Statements in JL Holdings which suggest only a limited application for case management do not rest upon a principle which has been carefully worked out in a significant succession of cases. On the contrary, the statements are not consonant with this Court’s earlier recognition of the effects of delay, not only upon the parties to the proceedings in question, but upon the court and other litigants. Such statements should not be applied in the future.
37 The present case is not one concerning a late application for amendment of pleadings. In many senses, it is more serious. It is a case of repeated refusals, not merely failures, to comply with orders of the court requiring the appellants to make discovery of documents and to allow Ms Wang’s solicitor to inspect their discovered documents. Mr Lee had persisted with a demand for payment as a pre-condition for providing inspection of documents, despite advice from his own solicitor that this was not a course open to him. Even in the face of deadlines specified by the federal magistrate for the performance of obligations under earlier orders, Mr Lee proposed leisurely timetables for the performance of those obligations and a further adjournment of the trial, which had already been adjourned once. The circumstances in which the appellants had ceased to be represented by their solicitor were never revealed, making it more difficult for them to rely on lack of representation as a factor justifying the adjournment of the trial. It is significant that, despite the lack of representation and Mr Lee’s difficulty with English, the two affidavits of 7 and 9 April demonstrated to the federal magistrate that Mr Lee had access to someone who was sufficiently fluent in English, and had sufficient understanding of the court processes, to produce affidavits in something close to the proper form. It would have been open to the federal magistrate to reach the conclusion that Mr Lee was attempting to postpone an inevitable judgment against the appellants on Ms Wang’s claim, and that the need to visit his father in China was raised as part of such an attempt. The fact that the federal magistrate was kinder to Mr Lee than he needed to be, by not making such a finding, should not lead to a successful appeal from the exercise of the federal magistrate’s discretion.
38 If the powers given by rules of court to give judgment against a defaulting party were never to be exercised, because of a supposed principle that judgment for a large sum of money should not be given without a trial, the grants of express powers by rules would be hollow. Case-management would be deprived of its only real sanction against a party who, while resisting a claim for a substantial sum of money, defaults persistently in complying with orders of a Court. The framers of rr 13.03A and 13.03B of the Federal Magistrates Court Rules cannot have intended that those rules should be subject to such a principle that would enable a party against whom a substantial monetary claim is made to defend that claim by failing persistently to take steps necessary to bring the claim on for trial. Any principle derived from Freeman is much more limited than that suggested by counsel for the appellants. Freeman is best regarded as turning on its particular circumstances, and as belonging to an era before the broad adoption of case-management principles. As the recent judgment in Aon shows, case-management principles have assumed a greater importance than they were thought to have had, even as recently as 1997, when JL Holdings was decided. It is clear from the second passage I have quoted from Aon in [36] above that the principle stated in JL Holdings should no longer be followed. If there remains a narrower principle derived from Freeman than that suggested by counsel for the appellants, such a principle could not be applicable in the present case. There is no injustice in judgment for a large sum of money against Heng V and Mr Lee, having regard to Mr Lee’s apparent determination not to comply with repeated orders requiring him to produce for inspection all of the appellants’ discoverable documents.
Conclusion
39 For these reasons, the appeals must be dismissed. Counsel for the appellants made no submission that the usual principle, that costs follow the event, should not be applied in the event that the appellants were unsuccessful. Applying that principle, the appellants should be ordered to pay Ms Wang’s costs of the appeals.
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I certify that the preceding thirty-nine (39) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Gray. |
Associate:
Dated: 20 August 2009
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Counsel for the Appellants: |
Mr CJ King |
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Solicitor for the Appellants: |
RP Hoban |
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Counsel for the Respondent: |
Mr M Harris |
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Solicitor for the Respondent: |
IMPEX Lawyers & Advisors |
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Date of Hearing: |
16 April 2009 |
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Date of Judgment: |
20 August 2009 |
