FEDERAL COURT OF AUSTRALIA

Sealed Air Australia Pty Limited v Aus-Lid Enterprises Pty Ltd [2018] FCA 716

ORDERS

THE COURT ORDERS THAT:

1.    There be default judgment against Aus-Lid Enterprises Pty Ltd with damages to be assessed and costs awarded at the trial of this matter.

2.    The cross-claim filed by Aus-Lid Enterprises Pty Ltd on 14 April 2015 be dismissed with costs, as assessed or agreed.

3.    Aus-Lid Enterprises Pty Ltd pay Sealed Air Australia Pty Limited’s costs of the interlocutory application date 26 April 2018, as assessed or agreed.

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

REASONS FOR JUDGMENT

KENNY J:

1    This is an interlocutory application by Sealed Air Australia Pty Limited (Sealed Air) for orders pursuant to r 5.23 of the Federal Court Rules 2011 (Cth) (the Rules) for judgment against Aus-Lid Enterprises Pty Ltd (Aus-Lid Enterprises) with damages to be assessed, as well as for dismissal of its cross-claim.

2    In support of its application, Sealed Air relied on an affidavit of Ms Claire Gitsham affirmed on 26 April 2018 and a further affidavit affirmed by her on 16 May 2018. Sealed Air filed written submissions in support of its application dated 17 May 2018. Ms Gitsham also affirmed an affidavit on 18 May 2018, on which the applicant relied.

3    At the hearing on 18 May 2018, Sealed Air was represented by counsel. There was no appearance for Aus-Lid Enterprises and it has filed no response to the applicant’s interlocutory application.

4    The third respondent, Mr Ashlyn de Souza, and the fourth respondent, Visy Packaging Pty Ltd (Visy), also appeared at the hearing of the application. Visy indicated that it neither supported nor opposed the application.

5    The substantive proceedings as regards Aus-Lid Enterprises relate to claims by Sealed Air against Aus-Lid Enterprises as the registered owner of the patent AU754978 for an invention entitled ‘Container Lid and implement’ (the Patent). So far as Aus-Lid Enterprises is concerned, the claims principally concern breach of a Patent Licence Agreement (PLA), although there are also claims for misleading or deceptive conduct and unconscionable conduct. Claims are also made in the proceeding against Auslid Operations Pty Ltd (ACN 123 957 531) (Auslid Operations), a company now in liquidation, as the exclusive licensee of the Patent; and Mr de Souza as the sole director of Auslid Operations (prior to its liquidation) and a director of Aus-Lid Enterprises when the proceedings were instituted. The proceedings also involve claims by Sealed Air against Visy.

6    I interpolate that at one stage the Court granted leave for Sealed Air to proceed against Auslid Operations, the company in liquidation, under s 471B of the Corporations Act 2001 (Cth) up to and including 20 October 2017: see Cryovac Australia Pty Ltd v Aus-Lid Enterprises Pty Ltd [2017] FCA 1027. Sealed Air has made no further application for leave to proceed against Auslid Operations.

Circumstances in which the application is made

7    The circumstances in which the present application is made are set out in Ms Gitsham’s affidavits. Briefly, the relevant circumstances are as follows.

8    On 17 February 2015 a notice of acting - appointment of lawyer was filed on behalf of the first, second and third respondents. On 14 April 2015 Aus-Lid Enterprises filed a joint defence (with the first and third respondents) and, on 15 April 2015, a statement of cross claim against Sealed Air, seeking damages for the loss it suffered through the lost opportunity of making and selling the patented lid to Dean Foods and other customers.

9    Aus-Lid Enterprises remained jointly represented by solicitors acting on behalf of the first to third respondents to the proceedings until 10 April 2017.

10    At all material times up to and including 10 April 2017 the directors of Aus-Lid Enterprises were:

(a)    Mr Vladimir Vaupotic;

(b)    Mr Robert Dalziel Herbert; and

(c)    Mr Ashlyn de Souza.

11    An ASIC Current and Historical Organisation Extract for Aus-Lid Enterprises dated 19 April 2018, which was annexed to Ms Gitsham’s affidavit of 26 April 2018, indicates that Mr de Souza is not registered with ASIC as a director of the company and has not been registered with ASIC as a director since 27 July 2017.

12    On 10 April 2017 the solicitors for the first, second and third respondents ceased to act.

13    On 20 July 2017 Maddocks, solicitors, filed a notice of acting - appointment of lawyer on behalf of Aus-Lid Enterprises.

14    On 26 October 2017 that firm filed a notice of ceasing to act on behalf of Aus-Lid Enterprises. The circumstances in which Maddocks filed that latter notice were set out in an affidavit dated 19 October 2017 of David Charles Newman, a solicitor and partner of Maddocks.

15    Since Aus-Lid Enterprises is a corporation, r 4.01(2) of the Rules prevents it from proceeding other than by a lawyer (unless the Court dispenses with this requirement under r 1.34 of the Rules). On 30 January 2018 the Court made an order dismissing Mr de Souza’s application that he be permitted to represent Aus-Lid Enterprises in these proceedings: see Sealed Air Australia Pty Limited v Aus-Lid Enterprises Pty Ltd [2018] FCA 31.

16    Aus-Lid Enterprises remains unrepresented in the proceedings. There is a trial listed to commence on 4 June 2018.

Is Aus-Lid Enterprises in default?

17    Rule 5.22 provides that a party is “in default” if it fails to, amongst other things, “prosecute or defend the proceeding with due diligence”.

18    Aus-Lid Enterprises has not been legally represented since 26 October 2017, when its former solicitors ceased to act. In an affidavit sworn on 25 October 2017 in support of his application for leave to appear for Aus-Lid Enterprises, Mr de Souza referred, amongst other things, to two letters from Aus-Lid Enterprises explaining why it was not legally represented, including a letter to this Court dated 16 October 2017 signed by Mr de Souza stating “the majority of the directors of [Aus-Lid Enterprises] recognize that they can no longer afford the expense of defending this action”. This is consistent with an email sent to the Court and copied to the parties from Mr David Hindle, of ASV Partners Pty Ltd, on 20 April 2018, stating that ASV Partners Pty Ltd acts as accountants for Aus-Lid Enterprises and Mr Herbert, and that Aus-Lid Enterprises “has not appointed Counsel for the hearing as it is not in a financial position to afford representation”.

19    On 16 April 2018, Mr de Souza sent an email to the applicant’s solicitors (copied to persons said to be the advisors to the other members of Aus-Lid Enterprises) informing them that representation in the proceedings remained unresolved “with a majority of the members not willing or able to fund the defence”. On the same day, the applicant’s solicitors wrote to the directors of Aus-Lid Enterprises and Mr de Souza putting them on notice that if a notice of acting was not filed on its behalf, then the applicant would take steps to obtain judgment in respect of the defence and/or seek dismissal of the cross-claim.

20    Aus-Lid Enterprises has not taken steps in respect of its cross-claim since at least 15 November 2016. Aus-Lid Enterprises has taken no step in the proceeding generally since it terminated the services of its former solicitors in October 2017.

21    The applicant’s solicitors have sent numerous letters, to little or no avail, to Aus-Lid Enterprises and its directors, Mr Herbert and Mr Vaupotic, with respect to the conduct of the proceedings.

22    Having regard to Ms Gitsham’s affidavits, especially her affidavit of 16 May 2018, I accept that Mr Vaupotic has indicated that he will not be taking any further steps in relation to the proceeding and that he considers that Mr Herbert has effective control of Aus-Lid Enterprises.

23    The applicant’s solicitors have not received any communication from Mr Herbert or his advisor, Mr Hindle, in relation to the ongoing conduct of the proceedings.

24    Having regard to paragraphs 8 and 9 of Ms Gitsham’s affidavit of 16 May 2018, as well as her affidavit of 18 May 2018, I am satisfied that Mr Vaupotic and Mr Herbert are not only aware of the proceeding, they are aware of the applicant’s present application. They did not attend the hearing on 18 May 2018, nor did a legal representative for Aus-Lid Enterprises.

25    Having regard to the foregoing, the Court is satisfied that Aus-Lid Enterprises has failed to defend the proceeding or prosecute its cross-claim with due diligence and is in default. The power to make orders on default is therefore enlivened.

Should the court make the orders sought?

26    Pursuant to r 5.23 the Court may make orders of the kind the applicant seeks. Rule 5.23 confers a broad discretion, however; and the giving of default judgment is a significant matter and it is generally accepted that there should be a serious default before the power should be exercised. The default here is of a serious kind.

27    Broadly speaking, there are three civil wrongs pleaded against Aus-Lid Enterprises. Each element of the relevant civil wrong has been properly and discretely pleaded. The requirement as to the sufficiency of the pleadings has been met: Macquarie Bank Ltd v Seagle [2005] FCA 1239; (2005) 146 FCR 400 at 406 [24]; see also Macquarie Bank Ltd v Seagle [2008] FCA 1417; (2008) 79 IPR 72 at 76 [20].

28    First, there is breach of contract. At [12] of the Sealed Air’s Third Further Amended Statement of Claim, it is alleged that Aus-Lid Enterprises and Auslid Operations each breached the terms of the PLA. The particulars to this pleading mostly refer to the alleged conduct of Mr de Souza. Second, there is a claim of misleading or deceptive conduct by each of Mr de Souza, Aus-Lid Enterprises and Auslid Operations: see [14]-[17] and [29(a)]. The particulars to [17] of this pleading repeat the particulars to [12]. Third, there is a claim of unconscionable conduct by Aus-Lid Enterprises and Auslid Operations: see [25] and [29(a)], which incorporates the pleading of offending conduct in [12] and misleading or deceptive conduct in [17].

29    An applicant for default judgment need go no further than the face of the statement of claim to determine whether the relief sought is made out: see Geneva Laboratories Limited v Prestige Premium Deals Pty Ltd (No 4) [2016] FCA 867; (2016) 120 IPR 133 (Geneva Laboratories) at [61]; Australian Competition and Consumer Commission v Dataline.Net.Au Pty Ltd (ACN 075 400 529) [2006] FCA 1427; (2006) 236 ALR 665 at 677 [45], citing in support Arthur v Vaupotic Investments Pty Ltd [2005] FCA 433 and Luna Park Sydney Pty Ltd (ACN 102 907 184) v Bose [2006] FCA 94 at [20] (Luna Park); see also Speedo Holdings B.V. v Evans (No 2) [2011] FCA 1227 at [23] and the cases there cited.

30    It seems that, as Bromwich J stated in Geneva Laboratories at [67]:

There is nothing in the terms of the definition of default in r 5.22, nor in the terms of the power to grant default judgment in r 5.23(2)(c), to preclude default judgment when a defence has been filed.

Moreover, in Luna Park, Jacobson J ordered the entry of default judgment for want of diligence in defending the case, notwithstanding a defence had been filed some time before.

31    The failure of Aus-Lid Enterprises to take any steps to pursue its defence since October 2017 is clear. So too is its failure to prosecute its cross-claim since at least 15 November 2016. I infer from its failure to take any steps in the proceeding notwithstanding that Aus-Lid Enterprises, through its directors, are on notice that a trial is imminent reflects an inability or unwillingness to co-operate with the Court and the other parties in having the matters that concern it ready for trial, in an acceptable way: see Lenijamar Pty Ltd v AGC (Advances) Ltd (1990) 27 FCR 388 at 396.

32    The applicant submitted that the failure of Aus-Lid Enterprises to obtain legal representation to defend the proceeding or prosecute its cross-claim would be likely to occasion disruption and delay in the conduct of the trial. It may readily be accepted that, if the cross-claim remains on foot with a non-participating Aus-Lid Enterprises, it will prove a distraction, cause delay and increase costs.

33    Ultimately, I have reached the same conclusion regarding Aus-Lid Enterprises’ presence as a nominally-defended respondent to the applicant’s claims, with no more than a filed defence in the proceeding. It is on account of this defence alone that the issue of repudiation remains live in the proceeding.

34    Mr de Souza stated that he wanted to cross-examine a prospective witness, presumably one he anticipated the applicant would call, on this issue of repudiation. The only cause of action pleaded against Mr de Souza is, however, misleading or deceptive conduct: see Third Further Amended Statement of Claim, [14]-[21], as well as related pleadings in [23] and [24]. Breach of contract was not alleged against him but only against Aus-Lid Enterprises and Auslid Operations. The first, second and third respondents’ joint defence pleaded repudiation only in response to the breach of contract alleged against Aus-Lid Enterprises and Auslid Operations. This particular pleading did not involve Mr de Souza at all, as is confirmed by reference to those parts of the defence responding to [14]-[21] and [23]-[24] of the Third Further Amended Statement of Claim relating to Mr de Souza. In this circumstance, it is difficult to see that Mr de Souza could have a legitimate basis for the cross-examination he envisaged.

35    In all the circumstances, I am satisfied that the continued nominal but non-co-operating presence of Aus-Lid Enterprises in these proceedings has the capacity to unduly prolong the trial and add to the other parties’ costs, in circumstances where Aus-Lid Enterprises has indicated a lack of ability or inclination to co-operate with the Court in bringing this matter to trial in a timely way.

36    For the reasons stated, I would grant the relief the applicant seeks by its interlocutory application.

Associate:

Dated:    21 May 2018

SCHEDULE OF PARTIES