FEDERAL COURT OF AUSTRALIA

Advance Detail Joinery Pty Limited v Burton [2013] FCA 686

THE COURT ORDERS THAT:

1.    The whole of this proceeding be dismissed.

2.    The respondent pay the applicant’s costs of and incidental to this proceeding.

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

THE COURT ORDERS THAT:

1.    Judgment be entered in favour of the plaintiff against the defendant in the amount of $812,536.99.

2.    The defendant pay the plaintiff’s costs of and incidental to this proceeding on an indemnity basis.

THE COURT NOTES THAT:

The plaintiff by its legal representative undertakes to the Court:

(a)    To submit to such order (if any) as the Court may consider to be just for the payment of compensation, to be assessed by the Court or as it may direct, to any person, whether or not a party, adversely affected by the operation of the interlocutory order set out in par 3 below or any continuation (with or without variation) thereof; and

(b)    To pay the compensation referred to in (a) to the person there referred to.

UPON THE BASIS OF THE SAID UNDERTAKINGS, THE COURT ALSO ORDERS THAT:

3.    Until further order, the defendant by herself, her servants and agents and otherwise howsoever, be restrained from selling, transferring, encumbering or otherwise dealing with the property known as 2628 Sutton Road, Sutton, in the State of New South Wales, being Lot 30 in Deposited Plan 879704 Folio Identifier 30/879704 (the Property), or with her interest in the Property.

4.    It shall not be a breach of Order 3 above for the registered proprietors of the Property to take steps to advertise the Property for sale provided that, in the event that an offer to purchase the Property is received by those registered proprietors or by an agent on their behalf, the fact of that offer and the terms of that offer are conveyed in writing to the solicitors for the plaintiff as soon as is practicable after the said offer is received and in any event within 24 hours of its receipt.

5.    Both parties have liberty to apply in relation to the injunction in par 3 above on 24 hours’ notice or on such shorter notice as a judge might allow.

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

REASONS FOR JUDGMENT

1    On 27 March 2013, the applicant, Advance Detail Joinery Pty Limited (Advance), filed an Urgent Application Before Start of Proceeding (ACD 29 of 2013) (the injunction proceeding).

2    In the injunction proceeding, Advance sought an urgent ex parte freezing order against Sharolyn Rose Burton (Mrs Burton) and an ancillary order requiring Mrs Burton to make disclosure of her assets. Of immediate concern to Advance was the possibility that Mrs Burton and the other co-owners of the property known as “2628 Sutton Road, Sutton, NSW” being Lot 30 in Deposited Plan 879704 Folio Identifier 30/879704 (the Sutton property) would enter into a contract for the sale of that property thereby possibly putting the Sutton property beyond the reach of Advance should it ultimately succeed in its claims against Mrs Burton. Advance had obtained evidence that the Sutton property was on the market.

3    On 28 March 2013, I granted an interlocutory injunction restraining Mrs Burton from dealing with her interest in the Sutton property up to and including 3 April 2013. That injunction was subsequently continued on a number of occasions. On the second occasion when the injunction proceeding was before the Court, the terms of the injunction granted on 28 March 2013 were varied in order to allow the owners of the Sutton property to take steps to sell that property. However, the injunction continues to prevent those owners from selling, transferring or encumbering the Sutton property. On 6 June 2013, which was the last occasion when the injunction proceeding was listed before me, I continued the injunction up to and including the delivery of judgment in respect of the application made by Advance for default judgment in the substantive proceeding (described below) or until earlier order.

4    The parties have endeavoured to agree upon a solution that would satisfy the claims made by Advance. Unfortunately, no settlement has been reached.

5    On 1 May 2013, Advance commenced a second proceeding against Mrs Burton (ACD 33 of 2013) (the substantive proceeding). The substantive proceeding was commenced by the filing of an Originating Process and a Statement of Claim. In the substantive proceeding, Advance has brought forward its substantive claims against Mrs Burton. She is the only defendant in that proceeding.

6    Advance says that, for over 30 years, Mrs Burton was a trusted employee who acted as bookkeeper and office administrator in its cabinet making and joinery business. Advance says that, in the period from early February 2006 to December 2012, Mrs Burton stole a total of $536,997.03 from Advance. It claims that amount plus interest and investigation costs (including charges made by its banker for assisting it to uncover and establish the fraud).

7    Mrs Burton has not filed a Defence in the substantive proceeding. She is in default of her obligation to do so. She did not attend Court on 6 June 2013 when the matter was listed before me nor was she represented on that occasion. On 11 June 2013, after the first directions hearing, Mrs Burton’s husband, Philip John Burton (Mr Burton), purported to file a Notice of Address for Service in the substantive proceeding.

8    By Interlocutory Application filed in Court in the substantive proceeding on 6 June 2013, Advance claimed the following relief:

1.    Pursuant to rule 5.23(2)(c) of the Federal Court Rules 2011 an order for judgment against the Respondent for the relief claimed in the Statement of Claim dated 1 May 2013 and filed in his Honourable Court on 1 May 2013.

2.    In the alternative, pursuant to rule 5.23(2)(a) an order the Respondent file and serve a Defence to the Statement of Claim by 4.30pm on 13 June 2013,

3.    If order 2 is made and the Respondent does not file and serve a Defence in accordance with order 2, pursuant to rule 5.21(d) an order for judgment against the Respondent for the relief claimed in the Statement of Claim dated 1 May 2013 and filed in this Honourable Court on 1 May 2013 be entered after 4.30pm on 13 June 2013,

9    On 6 June 2013, I granted leave to Advance to amend its Statement of Claim in such manner as it may be advised. On 11 June 2013, pursuant to that leave, Advance filed an Amended Statement of Claim (ASC). Although Advance did not seek to amend and has not amended its Interlocutory Application to take account of the ASC, it is obviously its intention to seek to procure judgment by default against Mrs Burton in respect of the principal claims and causes of action pleaded in the ASC. I will proceed upon that basis. I note that the ASC, a copy of the orders which I made on 6 June 2013 and all affidavits in support of Advance’s default judgment application have been served upon Mrs Burton and upon Mr Burton.

10    On 6 June 2013, I also ordered each party to file a written submission in relation to Advance’s application for judgment by default and ordered that, after the expiration of that timetable (ie after 28 June 2013), Advance’s application be determined on the papers.

11    Advance filed a written submission on 26 June 2013. Although Mrs Burton sought and was granted an extension of time up to 1 July 2013 for the filing of a written submission in answer to Advance’s submission, she has not filed any written submission. The only document which she filed was a submission “… by way of clarification …” (viz the document headed “Respondent’s Submission” filed on 2 July 2013). The only matter of present relevance dealt with in that document concerns the filing of evidence on behalf of Mrs Burton. In that document, Mr Burton, on behalf of Mrs Burton, said:

Our reading of this was that we were only required to respond IF we had evidence to offer that we wished to rely on. Not having evidence to offer at that time we were not aware there was an obligation to respond, even if that were a Nil Response.

12    No submission seeking to oppose default judgment has been made by or on behalf of Mrs Burton. This is not surprising as, when the injunction proceeding was first returned before the Court on 3 April 2013, Mr Burton informed the Court (at T 4, ll 7–10):

We are not disputing the fact that my wife has done wrong. We’re not disputing that there is an amount to be paid, I guess we’re not comfortable yet to assign ourselves to a set figure. But rather we would like to get into a settlement negotiation.

13    These Reasons for Judgment determine the application made by Advance in the substantive proceeding for judgment by default. If judgment is ordered, it will be necessary to continue the temporary relief granted in the injunction proceeding.

The Claims made by Advance in the ASC

14    In the ASC, after reciting that Mrs Burton had been employed by Advance between 1980 and 17 December 2012 as bookkeeper and office administrator, Advance pleads the following:

4.    On and from at least 1 January 2000 the defendant participated in the making of decisions that affected a substantial part of the Business in that she processed incoming invoices and prioritised those invoices for payment by drawing cheques and representing [sic] those cheques, often in inchoate form, to directors of the Company for signature, representing to those directors that she would then make arrangement for payment by the Company of the corresponding invoice.

5.    On and from at least 1 January 2000 the defendant had the capacity to affect significantly the Company’s financial standing.

6.    On and from at least 1 January 2000 the defendant was a person in accordance with who’s [sic] instructions or wishes the directors of the Company were accustomed to act in relation to the payment of the debts and outgoings of the Business and the order and priority of such payments.

7.    In the premises the defendant was, on and from at least 1 January 2000, an officer of the Company as defined in the Corporations Act 2001 (Cth).

15    Advance then alleges that Mrs Burton owed to it:

(a)    A duty to act in good faith and in the best interests of Advance and for a proper purpose (s 181(1) of the Corporations Act 2001 (Cth) (the Corporations Act) and the general law);

(b)    A duty not to use her position as an officer and employee of Advance to gain an advantage for herself or anyone else (s 182(1)(a) of the Corporations Act and the general law);

(c)    A duty not to cause detriment to Advance (s 182(1)(b) of the Corporations Act and the general law);

(d)    A duty not to use information obtained in the course of her employment by Advance or her position as an officer and employee of Advance to gain an advantage for herself or anyone else (s 183(1)(a) of the Corporations Act and the general law);

(e)    A duty not to use information obtained in the course of her employment by Advance or her position as an officer and employee of Advance to cause detriment to Advance (s 183(1)(b) of the Corporations Act and the general law); and

(f)    During the course of her employment, a duty to act honestly, with fidelity and in good faith in the best interests of her employer.

(As to which see pars 8 to 13 of the ASC).

16    Advance then pleads:

14.    From time to time on numerous occasions during the course of her employment, which occasions the plaintiff cannot fully particularise until after discovery and further enquiry, the defendant dishonestly abstracted monies in the course of her employment, which monies were the property of the plaintiff and ought to have been paid to or to the benefit of the plaintiff and she applied those monies to her own use and benefit.

Particulars

a.    The sum of at least $536,997.03 calculated in accordance with the spreadsheet attached and marked with the letter “A”.

b.    The defendant created numerous false invoices and accounts and falsely filled in cheques to create the illusion that they were for payment of those invoices or accounts before inveigling directors of the Company to sign those cheques and then diverting payment to her own account or in favour of third parties to her benefit.

17    There is no spreadsheet attached to the ASC. However, there is a spreadsheet attached to the original Statement of Claim filed on 1 May 2013 and marked with the letter “A”. In that spreadsheet, Advance has listed details of 164 cheque payments made from Advance’s bank account in the period between 2 February 2006 and 17 December 2012 which it contends were payments made to or for the benefit of Mrs Burton or her husband or both of them. The total of the payments listed in that spreadsheet is $536,997.03. That figure corresponds to the figure specified in the particulars provided in respect of par 14 of the ASC. It is obvious that Advance relies upon the spreadsheet attached to its original Statement of Claim even though it failed to attach that document to the ASC. I will proceed upon that basis. Mrs Burton has not taken any point about the failure on the part of Advance to attach Annexure “A” to the ASC.

18    At par 15 of the ASC, Advance alleges that Mrs Burton breached all of the duties specified at [15] above.

19    At par 16 of the ASC, Advance claims that it has suffered loss and damage “… in the sum of at least $812,536.99 calculated in accordance with the spreadsheet attached and marked with the letter “A””. In the spreadsheet attached to its original Statement of Claim, that figure is made up of the following amounts:

20    In the ASC, Advance claims by way of relief:

1.    An enquiry and full account of the monies abstracted from and the damage occasioned to the plaintiff in consequence of the defendant’s dishonest and fraudulent conduct.

2.    Judgment against the defendant in the sum established following the enquiry and account sought in prayer for relief (1).

3.    In the alternative, judgment against the defendant for $812,536.99, comprising:

a.    the amount of $536,997.03; plus

b.    interest in the sum of $322,926.96; plus

c.    bank charges in the sum of $6,310.00; less

d.    the sum of $53,697.00 paid by the defendant on 11 January 2013.

4.    In the alternative, damages to be assessed.

5.    In the further alternative, equitable compensation.

6.    In the further alternative, compensation pursuant to Section 1317HA of the Corporations Act 2001 (Cth).

7.    Interest upon the monies abstracted by the defendant from the date of abstraction calculated cumulatively until judgment.

8.    Interest.

9.    Costs on an indemnity basis.

10.    In the alternative, costs.

21    Prayers for relief 1, 2 and 4–10 were all made in Advance’s Originating Process. Prayer for relief 3 was added when the Statement of Claim was amended by the filing of the ASC.

Consideration

22    The substantive proceeding was commenced on 1 May 2013. The Originating Process and original Statement of Claim were both served upon Mrs Burton on 2 May 2013 at the offices of the firm of solicitors which were then representing her in the injunction proceeding. Under the Federal Court Rules 2011 (FCR), Mrs Burton was obliged to file her Defence within 28 days after service of the Statement of Claim (r 16.32 FCR). In this case, Mrs Burton was obliged to file her Defence to the Statement of Claim by 30 May 2013. As mentioned at [7] above, Mrs Burton has not filed any Defence.

23    On 11 June 2013, Advance amended its Statement of Claim pursuant to the leave which I granted on 6 June 2013. The ASC was served on 12 June 2013.

24    On 26 June 2013, Advance filed a written submission in support of its application for default judgment in the substantive proceeding. That submission was served on 27 June 2013. Mrs Burton has not filed any written submission or any evidence in opposition to default judgment.

25    Rule 5.01 FCR provides that a party, or the party’s lawyer, must attend at Court on the return date fixed in the Originating Application. The return date of Advance’s Originating Process in the substantive proceeding was 6 June 2013. Neither Mrs Burton nor any lawyer representing her attended at Court on that occasion.

26    Rule 5.02 FCR provides that a respondent who has been served with an Originating Application must file a Notice of Address for Service, in accordance with Form 10 of the Federal Court forms, before the return date fixed in the Originating Application. Mrs Burton did not comply with r 5.02.

27    Rules 5.01, 5.02 and 16.32 apply to the substantive proceeding notwithstanding that it is an application brought under the Corporations Act (see r 1.3 of the Federal Court (Corporations) Rules 2000 (Cth)).

28    It follows from the matters referred to at [22]–[27] above that Mrs Burton is “in default” within the meaning of that expression in r 5.22 FCR with the consequence that r 5.23 FCR is engaged. Rule 5.23 FCR is in the following terms:

5.23    Orders on default

(1)    If an applicant is in default, a respondent may apply to the Court for an order that:

(a)    a step in the proceeding be taken within a specified time; or

(b)    the proceeding be stayed or dismissed for the whole or any part of the relief claimed by the applicant:

(i)    immediately; or

(ii)    on conditions specified in the order.

(2)    If a respondent is in default, an applicant may apply to the Court for:

(a)    an order that a step in the proceeding be taken within a specified time; or

(b)    if the claim against the respondent is for a debt or liquidated damages—an order giving judgment against the respondent for:

(i)    the debt or liquidated damages; and

(ii)    if appropriate, interest and costs in a sum fixed by the Court or to be taxed; or

(c)    if the proceeding was started by an originating application supported by a statement of claim, or if the Court has ordered that the proceeding continue on pleadings—an order giving judgment against the respondent for the relief claimed in the statement of claim to which the Court is satisfied that the applicant is entitled; or

(d)    an order giving judgment against the respondent for damages to be assessed, or any other order; or

(e)    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 specified in the order.

Note 1:    The Court may make any order that the Court considers appropriate in the interests of justice—see rule 1.32.

Note 2:    An order or judgment under this Division may be set aside or varied.

29    In its written submission, Advance claims judgment in the amount of $812,536.99 and an order for indemnity costs. These claims reflect the relief sought in pars 3, 7 and 9 of the prayers for relief contained in the ASC. These claims are made in the alternative to all other claims made in the ASC. Therefore, Advance has opted for judgment in a specific sum (viz $812,536.99) and indemnity costs in full and final satisfaction of all claims made by it in the ASC.

30    In Engineered Thermal Systems Pty Limited v Salmon, In the Matter of Salmon & Speck Pty Ltd (In Liq) [2012] FCA 1159, at [36] and [37], I said:

36    In Speedo Holdings B.V. v Evans (No 2) [2011] FCA 1227, Flick J discussed the correct interpretation of r 5.23(2)(c) of the general rules at [15]–[26] in his Honour’s Reasons for Judgment. At those paragraphs, his Honour collected the more important relevant authorities and summarised the appropriate principles. These principles may be further summarised as follows:

(a)    The power afforded to the Court is discretionary. The discretion should generally be exercised with caution (at [20]–[21]);

(b)    The discretionary power to enter a judgment by default is enlivened when an applicant makes application to the Court for an appropriate order. In the absence of such an application, the power cannot be invoked (at [22]);

(c)    There is a difference in the terms by which the limits of the power conferred by former O 35A r 3(2)(c) are expressed and the wording of the current r 5.23(2)(c). Notwithstanding that difference in language, the requirement imposed is not that an applicant prove by way of evidence the claim which is sought to be advanced. The requirement is that the Court needs to be satisfied on the face of the Statement of Claim that the applicant is entitled to the relief claimed. The facts as alleged in the Statement of Claim are deemed to have been admitted by the respondent who is in default (at [23]);

(d)    In order to be satisfied that an applicant is entitled to the relief claimed in the Statement of Claim, the Court needs to be satisfied that each element of the relevant civil wrong involved is properly and discretely pleaded in the Statement of Claim (at [24]); and

(e)    In addition to the facts alleged in the Statement of Claim, the Court may permit recourse to limited further evidence. But it may not admit evidence which would alter the case as pleaded (at [25]).

37    Flick J also referred to the discussion of the evolution of this particular rule undertaken by Kiefel J in Australian Competition and Consumer Commission v Dataline.Net.Au Pty Ltd (2006) 236 ALR 665 at [45]–[50] (pp 677–679).

31    These principles were also applied by Katzmann J in Cafe2U Pty Ltd v Bishambu Pty Ltd [2013] FCA 191. At [15]–[18], her Honour observed that, although it was not essential, in an appropriate case, an applicant for default judgment may call evidence in support of its application. Such evidence must not alter the pleaded case or be inconsistent with that case.

32    In the present case, Advance also reads and relies upon all of the affidavits filed in the injunction proceeding and all of the affidavits filed in the substantive proceeding in support of its application for judgment by default.

33    I am satisfied that each element of the civil wrongs relied upon by Advance is properly and discretely pleaded in the ASC.

34    In addition, Advance has proven that, on 17 December 2012, Mrs Burton admitted to Mr Domenico Morabito, a director of Advance, and others, that she had stolen moneys from Advance although she did not make any clear admission as to the quantum of those moneys or the period of time during which the fraudulent transactions were carried out by her.

35    Advance has listed in the spreadsheet which is Annexure “A” to the original Statement of Claim all of the cheque payments which it contends constitute the moneys stolen by Mrs Burton in the period from 2 February 2006 to mid-December 2012. In the same spreadsheet, it has set out its claims for interest and other charges. I have described these additional claims at [19] above.

36    Mrs Burton has taken no steps whatsoever to challenge any of Advance’s claims.

37    I am satisfied that, pursuant to r 5.23(2)(c) FCR, Advance is entitled to the relief which it has claimed in its written submission filed on 26 June 2013.

38    Before leaving the matter, I should add that I propose to continue the present interlocutory injunction on a temporary basis in aid of Advance’s right to enforce the judgment and order for costs which I will order today (see Stewart Chartering Ltd v C & O Managements SA [1980] 1 All ER 718; [1980] 1 WLR 460; Orwell Steel (Erection & Fabrication) Ltd v Asphalt & Tarmac (UK) Ltd [1985] 3 All ER 747; [1984] 1 WLR 1097; Distributori Automatici Italia SpA v Holford General Trading Co [1985] 3 All ER 750; [1985] 1 WLR 1066; Ling v Enrobook Pty Ltd (1997) 74 FCR 19 at 29; and Pelechowski v Registrar, Court of Appeal (NSW) (1999) 198 CLR 435 at 452 [52] per Gaudron, Gummow and Callinan JJ; at 459 [76] per McHugh J; and at 482 [142] per Kirby J). In order to protect the owners of the Sutton property against the possibility that that injunction should not have been continued, I will require Advance to give the usual undertaking as to damages.

39    There will be orders accordingly.

Associate:

Dated:    12 July 2013