FEDERAL COURT OF AUSTRALIA

Tenement Administration Services Pty Ltd v Hodson [2013] FCA 610

THE COURT ORDERS THAT:

1.    The interlocutory application filed on 25 February 2013 be dismissed.

2.    The costs of the respondents of and incidental to the interlocutory application filed on 25 February 2013 be paid by the applicant’s solicitors on an indemnity basis.

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

REASONS FOR JUDGMENT

1    On 25 February 2013 the applicant to the substantive proceedings filed the interlocutory application presently before the Court. The applicant seeks an order to vary self-executing orders of the Court dated 6 February 2013, as a result of which the originating application dated 14 December 2011 was dismissed. Effectively, success of the applicant in respect of this interlocutory application would reinstate the substantive proceedings.

2    Of particular note in relation to this matter is that the orders of 6 February 2013, which were in the nature of “guillotine” orders in the event of non-compliance, were made by the Court following circumstances where not only had the applicant’s solicitor informed the Court that they were orders to which all parties consented, but the orders in draft were presented to the Court by the applicant’s solicitor on that basis.

3    The question for consideration for the Court is whether the Court should exercise its discretion to vary the Orders of 6 February 2013, as sought by the applicant.

Background

4    It is useful to set out, in some detail, the background to the current application.

5    The applicant is a company engaged in the business of mineral land administration. It has offices throughout Australia although the largest proportion of its work occurs in Queensland and Western Australia. The applicant’s managing director is Ms Jay Evans-Wheeler, who on 26 February 2013 swore an affidavit in support of the interlocutory application.

6    The first respondent, Ms Hodson, is a former employee of the applicant. The applicant claims that Ms Hodson used the applicant’s confidential information, including client information, rates of charges and precedent documents, to establish the business now operated by the second respondent in competition with the applicant. The applicant further claims that the respondents used the applicant’s equipment to promote the second respondent’s business while Ms Hodson was still employed by the applicant.

7    The applicant filed an originating application in this proceeding on 14 December 2011. In summary, the applicant sought a permanent injunction restraining the respondents from divulging or making use in any way of confidential information of the applicant, in addition to interlocutory restraining orders. By consent on 16 February 2012 I subsequently made interlocutory orders restraining Ms Hodson and the other respondents from, inter alia, performing work in the nature of services supplied by the applicant, or making use of confidential information of the applicant.

8    Subsequently on 4 July 2012, by consent I made the following timetabling orders:

1.    The parties make any request for further and better particulars by 4.00 pm on 19 July 2012.

2.    The parties respond to any request for further and better particulars by 4.00 pm on 16 August 2012.

3.    The applicant file any Amended Statement of Claim by 4.00 pm on 6 September 2012.

4.    …

5.    …

6.    Each party file a notice of discovery identifying the categories of documents sought from an opposing party on or before 4.00 pm on 11 October 2012.

7.    Each party file a list of documents to be discovered on or before 4.00 pm on 1 November 2012.

8.    Each party provide inspection of its discovered documents by 4.00 pm on 29 November 2012.

9.    …

9    The respondents filed a request for further and better particulars on 19 July 2012, and a notice for discovery on 12 October 2012.

10    In his affidavit sworn 22 February 2013, the applicant’s solicitor Mr Conradie deposed that he only became aware on 7 August 2012 that the request for further and better particulars had been filed and emailed to him by the respondents’ solicitor Mr Deighton.

11    In her affidavit sworn 26 February 2013 Ms Evans-Wheeler deposed that Mr Conradie repeatedly assured her that he was progressing the matter. However Mr Conradie conceded in his own affidavit sworn 22 February 2013 that he did not progress the matters the subject of the orders of 4 July 2012.

12    On 15 November 2012 Deputy District Register Belcher wrote to Mr Conradie noting that the applicant had not appeared to take any steps in the proceeding since the orders of 4 July 2012 were made (annexure EC-1 attached to the affidavit of Mr Erich Conradie sworn 22 February 2013). DDR Belcher also wrote:

Please note that parties are expected to comply with orders of the Court and that failure to do so may result in sanctions, including adverse costs orders, or, in exceptional cases, recourse to other remedies such as the summary disposal of the application. It is unacceptable for a party to simply ignore the orders of the Court or to fail to take steps to remedy any breach of those orders. An applicant, in particular, is expected to prosecute their case with appropriate diligence.

13    Mr Conradie responded to DDR Belcher in a letter dated 26 November 2012, acknowledging that the letter was provided outside the period in which DDR Belcher had requested a response (annexure EC-2 to the affidavit of Mr Erich Conradie sworn 22 February 2013). Mr Conradie stated, in summary, that:

    The applicant had not responded to the defendant’s request for further and better particulars, but proposed to do so by 30 November 2012.

    It was unlikely that the applicant would require its statement of claim to be further amended.

    The applicant did seek to have the defendants discover documents.

    The applicant proposed to remedy its breach of Order 7 of 4 July 2012 and file a list of discovered documents by no later than 4.00 pm on 7 December 2012.

    The applicant proposed that each party provide inspection of its discovered documents by 4.00 pm on 11 January 2013, “in light of the dates mentioned above, the upcoming Christmas holidays and the fact that this matter is listed for Directions again on Wednesday, 6 February 2011”.

14    On 31 December 2013, DDR Belcher wrote to Mr Conradie for a second time (annexure EC-3 to the affidavit of Mr Erich Conradie sworn 22 February 2013). In summary, DDR Belcher:

    Requested the applicant to confirm that it had responded to the respondent’s request for further and better particulars dated 4 July 2012 by 30 November 2012.

    Stated that the leave granted to the applicant to file an amended statement of claim had expired, and that the applicant would be unable to amend its statement of claim without further order of the Court.

    Stated that despite the applicant’s indication that it still wished to pursue discovery, no document had been filed in furtherance of that pursuit. DDR Belcher stated: “The applicant’s long delay in taking advantage of the discovery order by the Court needs to be considered in combination with the discretionary nature of that order. Consequently it is difficult to see that the applicant would now be permitted to seek discovery without the sanction of a further order of the Court”.

    Noted that the applicant had failed to remedy its breach of Order 7, despite Mr Conradie’s earlier assurance that the applicant would do so by 7 December 2012.

    Reiterated his warning about compliance with orders being compulsory and the adverse consequences that could follow for parties who failed to comply. DDR Belcher also stated that:

In this case there is a lengthy and ongoing failure by the applicant to satisfactorily progress its case. Its failure to comply with court orders has continued despite the Court’s concern about this being raised in my earlier letter. No explanation for the delay has been provided.

    Stated that the applicant would need to be in a position to explain its failure to comply with the court’s orders at the next directions hearing on 6 February 2013.

15    Mr Conradie deposed in his affidavit sworn 22 February 2013 that he did not respond to DDR Belcher’s letter because he believed he would be able to agree on a new timetable with the respondents at the directions hearing scheduled for 6 February 2013.

16    I note that Ms Evans-Wheeler is herself a solicitor. It appears that she attended Mr Conradie’s offices for 10 days in January 2013 to assist in the preparation of the notice of discovery and list of documents for the applicant.

17    On 5 February 2013, Mr Deighton on behalf of the respondents emailed a letter to Mr Conradie, proposing draft orders for the Court’s consideration at the directions hearing on 6 February 2013.

18    Mr Conradie responded to the email on the morning of 6 February 2013, attaching an amended version of the order proposed by the respondents. In his email Mr Conradie stated:

I got rid of all the steps associated with an amended claim as my instructions are that course will not be explored any further. I have also brought most of the dates forward as my client’s documents are ready for inspection.

19    On 6 February 2013 the matter was listed for further directions before me. At that hearing the following exchange occurred (transcript 6 February 2013 p 2 ll 18-33):

MR CONRADIE: Your Honour, orders were previously agreed upon and made. Those orders were not adhered to, and I’m - - -

HER HONOUR: That’s unfortunate.

MR CONRADIE: That is unfortunate, and I offer my apologies. Inroads, substantial work has been done and my learned friend and I have agreed on orders that I intend to hand up to your Honour. It contains some checks and balances. Should the applicant not adhere to these orders, the applicant’s proceedings will be dismissed, which is a serious - - -

HER HONOUR: Consequence.

MR CONRADIE: Well, it’s a serious penalty. In addition, the applicant agrees to pay the respondents’ costs of the proceedings today on the standard basis or as agreed.

20    On that date I made the following orders which were agreed between the parties:

1.    The applicant respond to the respondents’ request for particulars dated 19 July 2012 by no later than 12 February 2013.

2.    The applicant file and serve a list of documents to be discovered by 12 February 2013.

3.    The applicant file and serve a notice of discovery identifying the categories of documents sought from the respondents by 12 February 2013.

4.    The applicant provide inspection of its discovered documents on or before 19 February 2013.

5.    …

6.    …

7.    If the applicant fails to comply with any of order 1, 2, 3 and 4, the proceeding be dismissed and the applicant pay the respondents’ costs of the proceedings on a standard basis.

8.    Liberty to apply on three days’ written notice.

9.    …

10.    …

11.    …

12.    …

13.    The applicant pay the respondents’ costs of and associated with this directions hearing on the standard basis or as agreed.

21    These orders included all of the orders agreed between the parties in the terms emailed that morning by Mr Conradie, including Order 7, in addition to additional orders relating to mediation which are not material in the current circumstances.

22    It is not in dispute that Order 7, the self-executing order, was made by consent of the parties so far as the Court and the respondents were aware.

23    Subsequently however, Mr Conradie has deposed that he agreed to the self-executing orders without informing Ms Evans-Wheeler of their nature, and that he only informed Ms Evans-Wheeler of the nature of the orders after they had been made.

Failure to comply with self-executing order

24    In purported compliance with Order 1 of 6 February 2013, Mr Conradie sent an email to Mr Deighton responding to the respondents’ request for further and better particulars at 12.16 am on 13 February 2013. He deposed in his affidavit sworn 22 February 2013 that he had had a particularly busy day on 12 February 2013 and that preparation of the reply took him longer than he had expected. The applicant does not dispute that, as a result, it failed to comply with Order 1 of 6 February 2013.

25    On 13 February 2013 Mr Conradie sent an email to the solicitor for the respondents (and copied to the Court), noting the applicant’s failure to comply with Order 1 of 6 February 2013.

26    In a letter dated 15 February 2013 DDR Belcher wrote to Mr Conradie, stating (in summary) that:

    As a consequence of the operation of Order 7, this matter stood dismissed, with the applicant liable to pay the respondents’ costs of the proceedings.

    The applicant could apply to the Court for an order revoking or varying the orders made on 6 February 2013.

27    Ms Evans-Wheeler deposed in her affidavit sworn 26 February 2013 that she did not become aware that the matter had been dismissed until 18 February 2013, and that she also understood that Mr Conradie would agree to consent orders with Mr Deighton to reinstate the matter. This optimism was, however, misplaced, as the respondents did not consent to vary the Orders of 6 February 2013.

28    On 25 February 2013, the applicant filed this interlocutory application seeking the following Order:

    Order 1 of the Orders dated 6 February 2013 be varied to read: “The applicant respond to the respondents’ request for further and better particulars dated 19 July 2012 by no later than 13 February 2013”.

29    In summary, the applicant wishes the court to vary orders, which orders were proposed and consented to by the parties, to avoid the impact of the self-executing order and reinstate the proceedings.

Submissions of the parties

30    In summary, the applicant submits that:

    The non-compliance was wholly caused by representative error. Although the orders were made by the consent of the parties so far as the Court was aware, the applicant’s solicitors agreed to the orders, including an adverse cost order, without obtaining instructions from the applicant. Mr Conradie gives evidence to that effect.

    While there was a 7 month delay in complying with the orders of 4 July 2012, any prejudice suffered by the respondents was intended to be corrected by Order 13 of the Orders of 6 February 2013 requiring the applicant to pay the costs of the respondents incurred at the directions hearing.

    The applicant did not seriously breach the Orders of 6 February 2013 in that the length of delay in compliance with Order 1 was 16 minutes.

    Any prejudice caused to the respondents by the default is minimised by the agreement of the applicant’s solicitors to pay the respondents’ costs of and incidental to this interlocutory application on an indemnity basis. There is no serious suggestion by the respondents that they will suffer prejudice should the Court grant the interlocutory relief sought.

    In contrast, the applicant will suffer considerable prejudice by having to pay the respondents’ costs of the proceedings on a standard basis in accordance with Order 7 of the Orders, as well as duplicating costs by commencing a new proceeding from scratch.

    The Court should not lightly deny a party a trial for failure to meet procedural requirements. It would not be just to deprive the applicant of the opportunity to have its case determined on its merits.

    The significance that the respondents now place on the injunction in paragraph 3 of the consent orders dated 16 February 2012 should be viewed in the context of respondents’ amended defence filed 2 April 2013. In paragraph 7 of the amended defence the respondents appear to deny not only that the information is confidential, but also that they are in possession of it.

31    The respondents submit that the Court should not use its discretion to amend the Orders of 6 February 2013 because:

    The applicant agreed to the guillotine order which they are now seeking to vary.

    The applicant’s non-compliance with the Order of 6 February 2013 is indicative of a broader history of non-compliance. For example, the respondents first requested further and better particulars of the statement of claim on 19 July 2012, but did not receive these particulars until 13 February 2013.

    The applicant has failed to conduct the proceeding in a way consistent with the overarching purpose of the Federal Court of Australia Act.

    The respondents have incurred significant expense in defending the proceeding, and have had to act to ensure that the matter was progressed.

    The Court has also had to be engaged to ensure that the applicant progressed its own proceeding.

    The consequences of the actions of the applicant’s solicitor should be borne by the applicant, which will have its own rights against the solicitor.

    A substantive part of the claim by the applicant is for a permanent injunction restraining the respondents from dealing with information that is alleged to be confidential. The applicant achieved a beneficial practical result on 16 February 2012 when the respondents agreed to be restrained from divulging or making use of the confidential information until the trial or further order.

    Delays in compliance with Court orders have clearly suited the applicant in light of the restraining orders which were in place. In their amended defence, the respondents admit that they have the information, but they deny that the information should be categorised as confidential.

    Dismissal of this proceeding will not prevent the applicant from commencing a fresh proceeding against the respondents as the applicant’s claim is not statute barred.

32    Mr Fraser declined to cross-examine Mr Conradie and Ms Evans-Wheeler, despite both being present and available in Court (transcript p 14 ll 37-40).

33    It was common ground between the parties that the following issues identified by French J in Goodwill Group Pty Ltd v Pongrass Associates Pty Ltd [2002] FCA 1203 at [106] are relevant to – but not determinative of – the Court’s decision to exercise its discretion to vary Order 7 in this case:

    the seriousness of the non-compliance;

    the reason for the non-compliance;

    the history of delay or breach of orders in the past on the part of the applicant;

    any prejudice to the applicant arising from the dismissal of the proceedings;

    any prejudice to the respondents from permitting the proceedings to continue; and

    the authority of the Court.

(cf Goodwill Group Pty Ltd v Pongrass Associates Pty Ltd [2003] FCAFC 51 at [25], [33]).

34    The Court’s discretion should also be exercised in light of s 37M and s 37N of the Federal Court of Australia Act 1976 (Cth) (the Act), which describe the overarching purpose of the civil practice and procedure provisions as facilitating the just resolution of disputes according to law and as quickly, inexpensively and efficiently as possible, and require the parties to act in accordance with that purpose.

Consideration

35    The Orders of 6 February 2013 have not been entered. In the circumstances it is not in dispute that the Court has discretion to vary those Orders pursuant to r 39.04 of the Federal Court Rules 2011 (Cth).

36    A self-executing order resulting in dismissal of proceedings is an order of utmost seriousness. In particular, courts have recognised that such orders can be varied in the interests of justice. So, for example, in FAI General Insurance Co Ltd v Southern Cross Exploration NL (1988) 165 CLR 268, the High Court considered the power of courts to extend time for compliance with a self-executing order notwithstanding that the time had passed for compliance, so as to relieve against injustice (Wilson J at 283-284, Brennan, Deane and Dawson JJ agreeing).

37    In this case an order varying the date for compliance with Order 7 by one day would have had no apparent impact on the timetable established by those orders. The solicitor for the applicant has given evidence to the effect that, in agreeing with the Orders of 6 February 2013, he acted without instructions. The dismissal of the proceedings for want of compliance by the applicant with a timetabling order is not a step to be taken lightly. It might also be said that an order in the terms currently sought by the applicant is reflective of the flexibility of the Court to administer its own proceedings.

38    In my view, however, there are compelling reasons why in this case the Court should refuse to make an order in the terms sought by the applicant.

39    First, draft orders – including a self-executing order – were advanced to the Court by the applicant as orders to which both parties agreed. It is clear from the transcript of 6 February 2013 that the solicitor for the applicant was fully cognisant of the seriousness of consequences which could flow from failure to comply with the orders proposed. Ms Evans-Wheeler has given evidence that in fact the applicant was not aware of the agreement of its solicitor to those orders, an issue to which I will shortly turn. However this was not apparent to either the respondent, or the Court. It is also clear, as I note later in this judgment, that the applicant was subsequently informed of the self-executing order and the consequences of non-compliance. In the circumstances, it is scarcely open to the applicant to complain of the consequences of a breach of those orders, or claim injustice when those consequences ensue.

40    Second, as was noted by the High Court in Aon Risk Services Australia Limited v Australian National University (2009) 239 CLR 175 at [5], [24], [30], [35], it is important that parties to litigation, and the general public, have confidence in orders made by the Court. It is also important that there be confidence in the preparedness of the Court to insist on compliance with those orders when necessary. To vary self-executing orders in these circumstances would constitute a cavalier approach to orders made by the Court, of which all parties were aware, and which were presented as consent orders.

41    Third, while dismissal of proceedings for want of compliance with a timetabling order is drastic, it is also not appropriate to simply vary consent orders having that result because the solicitor of the applicant was busy on the relevant date and could not organise himself to comply. No reason has been advanced by the applicant for the failure to comply with Order 7 other than laches.

42    Fourth, as is clear from both the transcript of 6 February 2013 and the history of this matter, the applicant (through its solicitor) has taken a casual approach to the necessity of timely compliance with timetabling orders of the Court. Indeed, it appears that this laxity was a key reason for the self-executing order to which the applicant agreed. The requirement imposed upon the Court by s 37M of the Act, and the corresponding duty imposed upon the parties by s 37N, to ensure that a proceeding is resolved according to law and as quickly, inexpensively and efficiently as possible, are not hollow obligations.

43    Fifth, the applicant submits that while Mr Conradie may have represented to the Court that the Orders of 6 February 2013 were by consent, in fact Mr Conradie had no such instructions as at 6 February 2013. The applicant also submits that the fault in failing to comply with Order 7 lay squarely with Mr Conradie, and the Court ought not, in effect, punish the applicant for the failure of its lawyer.

44    As a general proposition the fault of a solicitor should not be visited on the client: Stollznow v Calvert [1980] 2 NSWLR 749, Andresakis v Alexus Holdings Pty Ltd (2006) 68 NSWLR 507. It is clear that, for example, an order made at a hearing against a party in the absence of its solicitor due to solicitor fault may breach a fundamental principle of natural justice and be liable to be set aside: Burgoine v Taylor (1878) 9 Ch D 1, R v Secretary of State for the Home Department; Ex parte Mehta [1975] 1 WLR 1087, Taylor v Taylor (1979) 143 CLR 1. I note that in Jess v Scott (1986) 12 FCR 187, in relation to whether an error by a solicitor as to the date of delivery of the judgment from which leave to appeal was sought constituted “special reasons” supporting the grant of leave, the Full Court of the Federal Court found that such an error did amount to “special reasons”, and ordered the respondents’ costs of the application be borne by the applicant’s solicitor personally. It is also clear that it is not an immediate answer to a party, which asks the Court to set aside an order made against it in its absence, that it has a remedy against its lawyer because of incompetence or some other reason: Jowett v Kelly [2008] NSWSC 1009.

45    In relation to these points I make the following observations.

46    This matter is not analogous to a case where an error is made by a solicitor in failing to attend a hearing, or misapprehending a certain date for compliance. There was no uncertainty in the minds of any party or their legal representatives concerning compliance in this case.

47    I note further that Order 13 of 6 February 2013 gave the parties liberty to apply on three days’ written notice, notwithstanding the self-executing order. Problems in meeting the timetable could have been earlier addressed by the applicant making such an application, particularly in light of the serious consequences arising from any failure to comply.

48    Ms Evans-Wheeler gives evidence in her affidavit of 26 February 2013 as to the engagement of Mr Conradie on or about 19 June 2012. It appears from her affidavit that during the second half of 2012 Ms Evans-Wheeler was frustrated in her dealings with Mr Conradie, in particular his apparent dilatoriness in compliance with orders of the Court, and that she was personally engaged in preparing court documents in January 2013. However:

    This evidence highlights the apparent and unfortunate facts that not only had Mr Conradie taken a potentially detrimental and casual approach to this litigation almost from the moment of his engagement by the applicant, but that the applicant – through Ms Evans-Wheeler – was aware that Mr Conradie had previously delayed complying with Court orders. I note that, for reasons outside her control, Ms Evans-Wheeler had already been required to change solicitors leading to the engagement of Mr Conradie, and that she would scarcely expect to change them again when Mr Conradie had assured her that he was dealing with her file. However in light of Mr Conradie’s previous delays in complying with Court orders, from the perspective of the applicant the risk that Mr Conradie would continue his conduct in breaching orders must have been reasonably high. (That is not to suggest in any way that the applicant endorsed or accepted the failure of its solicitor to comply with orders of the Court.)

    While Ms Evans-Wheeler deposed as to her distress at receiving the news from Mr Conradie on 7 February 2013 that the applicant was subject to a self-executing order of the Court, it also appears that at the time she was satisfied by Mr Conradie’s assurances that all would be well. To that extent, the Court is entitled to draw the inference that the applicant endorsed the actions of Mr Conradie in relation to the orders sought on 6 February 2013.

49    Indeed, from the perspective of the respondents, the continued engagement of Mr Conradie and his firm on the file meant that the applicant continued to endorse actions of Mr Conradie as its lawyer. There is no suggestion that the respondents were aware of Mr Conradie’s apparent lack of instructions to consent to a self-executing order. On the facts the respondents were entitled to believe that the applicant had consented to the timetabling and self-executing orders of 6 February 2013, and that it had agreed to any consequences flowing from any failure to comply.

50    To that extent, while I accept that the failure of the applicant to comply with Order 1 of 6 February 2013 was the fault of Mr Conradie, I am not persuaded that the interests of justice support an order setting aside the self-executing order made by the Court on 6 February 2013.

51    Sixth, while the applicant submits that costs are an adequate remedy to compensate the respondents for the applicant’s failure of compliance in these circumstances, I am not persuaded that this is the case. The failure of the applicant to comply with a self-executing order means that the respondents are now free from an application against them. I note that two of the respondents are individuals. They have been the subject of restraining orders since 16 February 2013, which restraints have now ceased. Dismissal of the present substantive application as a result of a self-executing order following a breach of a timetabling order is a very serious issue – however to reinstate that application in these circumstances is also a matter of the utmost seriousness, and will result in prejudice to the respondents. I consider that this is a matter relevant to the exercise of the Court’s discretion to make the orders sought by the applicant.

52    Finally, at the hearing the respondents did not dispute that the applicant would be entitled to commence fresh proceedings against them in these circumstances. No serious issue was raised that the applicant was in any way barred from doing so. In my view, this is also a matter relevant to the exercise of the Court’s discretion in this case.

Conclusion

53    The interlocutory application should be dismissed.

54    Order 7 of 6 February 2013 directed the applicant to pay the costs of the respondents on a standard basis. In relation to costs specifically incurred in relation to this interlocutory application, the applicant concedes that the appropriate order is that the costs of the respondents of and incidental to this interlocutory application should be borne personally by the solicitors for the applicant on an indemnity basis. I agree that this order is appropriate.

Associate:

Dated:    19 June 2013