FEDERAL COURT OF AUSTRALIA

Felson v Commissioner of Taxation (No 2) [2013] FCA 239

THE COURT ORDERS THAT:

1.    Pursuant to r 5.23(1)(b), the proceedings be dismissed by reason of the applicant’s default with respect to an order of the Court, namely that the applicant failed to file evidence in accordance with the order of Justice Jacobson made 1 November 2012.

2.    The applicant pay the respondents’ costs of the proceeding, including reserved costs.

Note:    Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

REASONS FOR JUDGMENT

1     On 14 February 2013, I made orders dismissing an interlocutory application filed by the applicant, Mr Nicholas Felson (formerly known as Nikytas Nicholas Petroulias). The application brought by Mr Felson sought a stay of proceedings. Mr Felson was present in court to argue the application.

2    The application was made in circumstances in which Mr Felson was in default in compliance with an order which I made on 1 November 2012, that he file and serve the affidavit evidence on which he relies in the proceeding.

3    On 14 February 2013, Mr Hmelnitsky, counsel for the respondents, foreshadowed an application to dismiss the proceeding in the event that Mr Felson did not cure the default.

4    Significantly, in the application which I heard in February, Mr Felson did not apply to vary the order requiring him to file his evidence by 7 February. Moreover, it was evident in my reasons for judgment delivered on the last occasion that Mr Felson did not offer to the Court any adequate explanation for his failure to comply with the order made on 1 November 2012.

5    On 25 February 2013, the respondents filed an interlocutory application seeking orders pursuant to r 5.23(1)(b) that the proceedings be dismissed by reason of Mr Felson’s default in complying with an order of the Court, namely, that he failed to file his evidence in accordance with my order, made on 1 November 2012. The interlocutory application filed by the respondents was the application which counsel foreshadowed quite clearly during the hearing on 14 February.

6    The application is supported by an affidavit of Mr Stephen Vorreiter, sworn on 25 February 2013. The interlocutory application and affidavit were both served on Mr Felson by email on 26 February 2013.

7    I am satisfied that Mr Felson was served with both of those documents. The email address to which the interlocutory application and affidavit were sent corresponds with the email address stated in the third amended statement of claim filed by Mr Felson on 8 November 2012. I am also told that this is the email address with which the Commissioner has corresponded with Mr Felson for some time.

8    Notwithstanding the fact that I listed the matter, on the last occasion, for the return of any application today, Mr Felson is not present. He was not here when the matter was called, and over half an hour later, there is no appearance from him. In those circumstances, I propose to deal with the matter in his absence.

9    Rule 5.23(1)(b) provides that if an applicant is in default, a respondent may apply to the Court for an order that the proceeding be stayed or dismissed immediately. An applicant is in default by reason of the terms of rule 5.22, where, inter alia, (b) the party fails to comply with an order of the Court, or (d) fails to prosecute the proceeding with due diligence.

10    It is plain that Mr Felson is in default within the meaning of r 5.22, by reason of his failure to comply with my order made on 1 November 2012. He was in default when the matter was before me in February, and he remains in default. He is not here today to explain the reason for the default, or to seek any other order.

11    Mr Hmelnitsky has referred me to a decision of a Full Court of this Court in Lenijamar Pty Ltd v AGC (Advances) Limited (1990) 27 FCR 388, in which the power now contained in rule 5.23 was considered in the context of the rules as they then stood. The rule was then found in O 10, r 7, and was in similar terms to the terms of the existing rules.

12    Of course, the decision of the Full Court is not one which strictly controls the outcome of the present application, but it is a very useful guide in the exercise of the power which I am asked to exercise today. Wilcox and Gummow JJ observed at page 395 that the rules must be considered in light of the existence of a case management system within the Court.

13    Their Honours observed that it is the backdrop against which the relevant rules must be considered and applied. They went on to observe that the Court seeks, by the case management system, to minimise the delays in the conduct of litigation by issuing procedural directions to the parties, which they are expected to observe. Moreover, in return for this the Court does its best to provide to the parties an early hearing date.

14    The approach to the exercise of the power as explained by their Honours at pages 395 tand 396 seems to me to be one which is helpful in the approach which I must take to today’s application. Their Honours point out that there is no requirement of intentional default or contumelious conduct, although the attitude of the applicant to the default and the Court’s judgment as to whether or not the applicant genuinely wishes the matter to go to trial within a reasonable period will usually be important factors.

15    Wilcox and Gummow JJ endeavoured to define the situations for the exercise of the power by reference to two possible categories, but what is important is, as their Honours said in relation to the old rule, the discretion to exercise the power is unconfined except for the condition of non-compliance with a direction. This is such a case.

16    The two situations to which their Honours referred were:

1.    cases in which the history of non-compliance by an applicant is such as to indicate an inability or unwillingness to cooperate with the Court and the other party or parties in having the matter ready for trial within an acceptable period; and

2.    cases, whatever the applicant’s state of mind of resources, in which the non-compliance is continuing and occasioning unnecessary expense or delay to the respondent.

17    The distinction between these two situations, it seems to me, may be quite fine and it is unnecessary to determine into which of the two categories the present application falls. On either approach, the present matter is one in which plainly there is non-compliance with the order which I made on 1 November and there is also a history of non-compliance which is continuing and which is at the very least occasioning unnecessary delay expense or other prejudice.

18    The history of the matter to which I referred in my earlier judgment also suggests the possibility of the matter coming within the first of the two categories identified by Wilcox and Gummow JJ, but it is unnecessary to refer further to that.

19    It seems to me that in the present case, as was submitted by counsel for the respondents, there are four matters which I should take into account in exercising the power which I propose to do.

20    The first matter is the existence of default in compliance with my order of 1 November 2012. As I have already said, that default existed when the matter was before me on 14 February 2013 and no satisfactory explanation was given on that occasion. Furthermore, the default continues without any explanation and, as I have already said, there was no attempt on the last occasion to seek any variation of that order.

21    I think it is appropriate in considering the existence of the present default to take into account some of the material that was before me on the last occasion. Even if I were to give the most favourable view possible on that material, I would have to come to the conclusion that there is nonetheless no satisfactory explanation for the existence of the default.

22    That was the view I came to on the last occasion when considering that there was no basis for a stay and it seems to me that there is no basis for approaching the matter in any other way than that the orders of the Court must be complied with.

23    The second matter to take into account is that the allegations made in the statement of claim are very serious. The claims against the Commissioner and the individual officers of the Department include allegations of misfeasance in public office and other matters as mentioned in [6] of my previous judgment. The four planks of the claim made by Mr Felson were also summarised by Reeves J in Petroulias v Commissioner of Taxation (No 2) [2012] FCA 950 at [13]. Quite apart from the position of the Commissioner, it is plain that the serious allegations made against the officers of the Department ought to be able to be determined as quickly as the nature of the case allows.

24    If the applicant is in default in compliance with an order of the Court necessary for the proper case management of the proceeding and, therefore, necessary for its early determination, that is an important consideration in exercising the power to dismiss the proceeding summarily under rule 5.23(1)(b).

25    The third matter to be taken into account is the seriousness of the default. The default, it seems to me, is serious for a number of reasons. First, at the risk of repetition, the default existed on the last occasion, and it continues. I am also entitled, in the exercise of the discretion, to take into account the history of the proceedings.

26    The proceedings have a most tortured history, as is explained in the judgments of Reeves J, to which I referred in my earlier judgment. Perhaps even more importantly, Mr Felson tendered evidence before me on the last occasion which demonstrated that he obtained legal advice in relation to the present proceedings 10 years ago, and that he then obtained what I described as an advice which amounted to an advice on evidence from senior counsel.

27    It then took some seven years for Mr Felson to commence the proceedings, and he has pleaded and re-pleaded the claim on a large number of occasions in that period. On each occasion that the matter came before Reeves J, there were serious issues of failure, on the part of Mr Felson, to comply with the timetable.

28    On 23 February 2012, that is to say, over a year ago, Mr Felson faced an application by the Commissioner for summary dismissal. His Honour, at [23], referred to the authorities which make it clear that the Court should be slow to dismiss proceedings under r 5.23 if there exists a genuine cause of action which a litigant wishes to litigate. His Honour pointed out that there had been two previous statements of claim in the matter, which were seriously defective, but his Honour was nonetheless prepared to give Mr Felson one last chance to properly plead his case.

29    His Honour observed, at [26], that while there was no doubt that Mr Felson’s default or failure to comply with his Honour’s order of 18 July 2011 was deliberate and continuing, he did not consider that he should dismiss the proceeding at that stage. Instead, his Honour exercised his discretion to give Mr Felson one last chance to properly plead his cause of action.

30    Mr Felson was, therefore, well on notice of the need to comply with Court orders, and of the risk of dismissal if he failed to do so. He did file a statement of claim on the last day ordered by his Honour, namely, 30 April 2012. But he was on notice then, and was, quite clearly, put on notice on 14 February 2013, of the respondents’ proposed application, if he failed to comply yet again with the timetable.

31    The fourth matter is one which has some relationship to the matters that I have referred to under the third heading. The fourth matter is the history of past defaults. I have given less weight to the history of past defaults than to the present default, but it seems to me to be significant that the matter is one in which there has been a continuing failure to comply with Court orders.

32    As Mr Hmelnitsky submitted, the proceedings have stumbled along for years without any suggestion of any real attempt by Mr Felson to bring the matter to a final hearing. He has known for many years that he needs to put on evidence in support of the serious allegations which he makes.

33    The essential allegations contained in the most recent iteration of the statement of claim are essentially the same as those which he made when he instituted the proceeding nearly three years ago. The observations that I have made in relation to the four matters relied upon by counsel indicate that the case is one which the Court’s judgment as to whether or not the applicant genuinely wishes the matter to go to trial within a reasonable period must be answered in the negative.

34    In particular, on the last occasion, Mr Felson’s own application demonstrated that he did not wish to bring the matter to hearing. Instead, he sought a stay, and he did so, notwithstanding the fact that an earlier application before Reeves J to the same effect had been dismissed.

35    It seems to me that, in the circumstances of the present case, I can infer that Mr Felson does not genuinely wish the matter to go to trial within a reasonable period, and that he wishes to drag the proceedings on indefinitely. That is not consistent with the proper approach to litigation which has been highlighted in recent years in cases such as Lenijamar, and also by the High Court in Aon Risk Services Australia Ltd v Australian National University (2009) 239 CLR 175.

36    This is not really a case in which there is failure to comply with the order that I made, but a case in which it appears that Mr Felson has failed to prosecute or defend the proceeding with due diligence. His absence today, even allowing for the difficulties which he urged upon me on the last occasion, demonstrate, in my opinion, his attitude to this proceeding and to the Court.

37    Accordingly, I propose to make an order, as sought by the respondents in their interlocutory application, dismissing the proceeding under rule 5.23(1)(b).

38    The respondents also seek costs of the interlocutory application, and costs of the proceeding. Mr Felson was informed of this in an email dated 1 March 2013. In my opinion, it is appropriate to exercise my discretion to order Mr Felson to pay the costs of the interlocutory application and to pay the costs of the proceeding, including reserved costs.

Associate:

Dated:    15 March 2013