FEDERAL COURT OF AUSTRALIA

Slaven v Tisot [2018] FCA 1579

ORDERS

THE COURT ORDERS THAT:

1.    Pursuant to r 1.34 of the Federal Court Rules 2011 (Cth) dispensation is granted to the second defendant from compliance with r 4.01(2), such that the first defendant may appear in this matter on behalf of the second defendant.

2.    The interlocutory application dated 28 September 2018 otherwise be dismissed.

3.    The costs of the interlocutory application be the plaintiffs’ costs in the cause.

4.    The case management hearing scheduled for 6 November 2018 be vacated.

5.    The defendants are to file and serve any evidence on which they intend to rely by 16 November 2018.

6.    The plaintiffs are to file and serve any evidence in reply by 23 November 2018.

7.    The plaintiffs are to file and serve a paginated tender bundle by 23 November 2018.

8.    The plaintiffs are to file and serve an outline of written submissions not exceeding ten pages in length by 23 November 2018.

9.    The parties are to seek to agree and file a statement of facts and issues on or before 28 November 2018.

10.    Notice that any witness is required for cross-examination must be given by 28 November 2018.

11.    The defendants are to file and serve a written outline of submissions not exceeding ten pages in length by 30 November 2018.

12.    The parties are to file and serve a list of any objections to affidavit evidence by 30 November 2018 with a brief statement of the ground(s) of objection.

13.    Liberty to apply on the giving of 48 hours’ notice.

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

REASONS FOR JUDGMENT

GRIFFITHS J:

1    These proceedings were commenced on 7 September 2017. The first plaintiff, who is the liquidator of JT Electrical & Plumbing Pty Limited (in liq), claims that during the period 22 December 2014 and 11 September 2015 the Company incurred unsecured debts while it was insolvent. The debts amount to approximately $860,000. In brief, the first plaintiff claims that the first defendant, who was a director of the Company, was aware that there were reasonable grounds to suspect that the Company was insolvent and he failed to prevent the Company from incurring the debts. The first plaintiff alleges that the first defendant has breached his fiduciary duties to the Company, has failed to avoid conflicts of interest and has not discharged his duties with care and diligence in good faith and in the best interests of the Company and that he has improperly gained a personal advantage. The first plaintiff further alleges that the second, third, fourth, fifth and seventh defendants participated in the first defendant’s alleged breaches. The sixth defendant is the son of the first defendant and is a member and sole shareholder of the third and fourth defendants and the sole director of the fifth defendant.

2    On 7 December 2017, the Court made orders for the filing of evidence and for the matter to be referred to a docket judge to be listed for a one day hearing. The parties indicated at that time that they would be available for a hearing to be conducted on 11 May 2018.

3    On 8 May 2018, the first defendant filed an interlocutory application in which he sought dismissal of the entire claim. On 10 May 2018 the Court made orders for the filing of evidence in respect of that interlocutory application. The interlocutory application was listed to be heard on 7 August 2018.

4    On 20 July 2018, the interlocutory application filed on 8 May 2018 was dismissed. The Court made orders on that day which extended the time for the parties to file and serve evidence in respect of the substantive application. The substantive matter was listed for hearing in Canberra on 3 December 2018, with an estimate of no more than five days. The Court also ordered that if the second, third, fourth, fifth and seventh defendants wished to be represented at the hearing by a person other than a legal practitioner they should file and serve interlocutory applications and supporting affidavits on or before 28 September 2018. A further case management hearing was scheduled for 30 October 2018 and the parties were informed that consideration would then be given to them being directed to seek to agree a statement of facts and issues.

5    On 20 July 2018, the Court also dismissed another interlocutory application dated 6 July 2018 which had been filed by the first defendant. He sought to have the interlocutory application dated 8 May 2018 dismissed and time for the defendants to file and serve their evidence extended to 31 December 2018.

6    On 6 September 2018, the Court made orders by consent which vacated the case management hearing scheduled for 30 October 2018 and instead listed the matter for a case management hearing on 6 November 2018. The parties were again informed that consideration would then be given to them being directed to seek to agree a statement of facts and issues.

7    On 28 September 2018, the first defendant filed another interlocutory application in which he sought leave to represent the second defendant. The first defendant also sought a further extension of time for the filing of evidence and the possible agreement of a statement of facts and issues and asked that the matter be listed for hearing in Canberra in early March 2019 with an estimate of no more than five days.

8    No other defendant company has sought to be represented by a person other than a legal practitioner.

9    In support of the interlocutory application dated 28 September 2018, the first defendant relied upon two affidavits. The first was sworn by the first defendant personally and is dated 28 September 2018. The second affidavit, also dated 28 September 2018, was sworn by the first defendant in his capacity as director of the second defendant, BZ Constructions Pty Ltd. The affidavit was said to be an affidavit of BZ Constructions Pty Ltd.

10    In the first affidavit, Mr Tisot deposed that he and the sixth defendant had been unable to comply with the Court’s orders dated 20 July 2018 which required the defendants to file and serve any evidence on which they intended to rely by 28 September 2018. Mr Tisot deposed that although there had been “significant process”, more time was required to undertake the “considerable amount of work” remaining in analysing the evidence which had been filed on behalf of the plaintiffs on 5 and 13 June 2018 respectively and in collecting evidence in reply. He said that the plaintiffs had served documentation which totalled approximately 3,500 pages. He said that he needed to verify the contents of the Company books relied upon by the plaintiffs as evidence because there was an apparent size difference between the electronic file containing those books and the copies in Mr Tisot’s possession. He said that apart from the period July to September 2015, detailed reports could only accurately be produced from the copy of the Company books in Mr Tisot’s possession, as opposed to those provided by the plaintiffs.

11    Mr Tisot also deposed that “some third party sources of evidence have taken longer than expected to provide materials”, but he was confident that this would be resolved if time were extended.

12    He further deposed that he had been distracted by the fact that the plaintiffs had released two creditors’ reports subsequent to the March 2018 Court orders and that they contained various errors.

13    In addition, Mr Tisot deposed that the health of his son, the sixth defendant, had been “precarious” and that this had a serious impact on his productivity and the assistance he had been able to give to Mr Tisot in preparing the case. Mr Tisot also explained that from mid-2018 he had become the sole carer of his mother and this had also affected the time he had to prepare for the substantive hearing.

14    Mr Tisot asked the Court to extend the time for the filing of the defendants’ evidence to 30 November 2018 and that 25 January 2019 be set as the deadline for the plaintiffs to file and serve any evidence in reply.

15    Mr Tisot’s second affidavit dated 28 September 2018 is in support of that part of the interlocutory application dated 28 September 2018 in which the Court’s leave is sought for him to represent the second defendant. As noted above, this interlocutory application was filed not by the second defendant, but by Mr Tisot personally in his capacity as the first defendant. Mr Tisot deposed that because the claims made against the second defendant had also been made against him, he should be allowed to represent the second defendant and that this was unlikely to extend the hearing time. He added that, because he was representing himself in his capacity as the first defendant, the plaintiffs’ interests would not be prejudiced if he also represented the second defendant.

16    Submitting notices were filed by the second, third, fourth, fifth and seventh respondents.

17    The plaintiffs neither opposed, nor consented to, either limb of the interlocutory application.

Consideration and determination

18    The interlocutory application dated 28 September 2018 raises two central issues. First, whether the time for the filing of evidence should be extended and the hearing which is proposed to commence on 3 December 2018 be vacated with a view to the hearing commencing sometime in March 2019. Secondly, should leave be granted for the second defendant to be represented by Mr Tisot. I will address each of those matters in turn.

(a) Should the hearing be vacated and additional time be given for the filing of evidence?

19    Mr Tisot has not persuaded me that the hearing scheduled for 3 December 2018 should be vacated and replaced with a timetable which would see the hearing commence sometime in March 2019. As noted above, the proceeding has been on foot for some time. Moreover, as long ago as December last year, the parties were then agreed that the hearing could commence on 11 May 2018.

20    As noted above, the Court has previously dismissed an application by the first defendant to extend the time for the defendants to file and serve their evidence to 31 December 2018. On that day (20 July 2018), the matter was listed for hearing on 3 December 2018 and the time within which the defendants had to file their evidence was extended to 28 September 2018. The first defendant then left it to that day to file the current interlocutory application and the supporting affidavits.

21    I do not doubt the magnitude of the documentation which has been served on the defendants, none of whom are legally represented (while noting that only the first and sixth defendants are active parties). The first and sixth defendants have had since mid-June to analyse that material, which is more than 4 months. It is apparent from Mr Tisot’s affidavit that he already had in his possession copies of some Company books which he has used to assist him in that analysis. As the sole director of the Company, it can be assumed that Mr Tisot has a good familiarity with the Company’s records, including relevant invoices. Mr Tisot says that certain discrepancies and inconsistencies have emerged and that there are errors in the last two creditors’ reports, but I do not regard those matters as providing a sufficient basis for vacating the hearing date.

22    I have taken into account Mr Tisot’s evidence regarding his son’s health (which is unsupported by any independent medical evidence) and his responsibilities as the sole carer of his mother, but I do not consider that these matters outweigh the desirability of maintaining the current hearing date in order that the serious allegations made against the defendants be heard and determined so that there is finality. I have also taken into account the overarching purpose of civil litigation, as expressed in s 37M of the Federal Court of Australia Act 1976 (Cth).

23    I will, however, make certain adjustments to the timetable which will require the defendants to file and serve any evidence upon which they intend to rely by no later than 16 November 2018, which is approximately four weeks from now. It is assumed that the defendants have proceeded to prepare for the hearing in circumstances where the outcome of their interlocutory application dated 28 September 2018 was unknown. I will provide a short period for the plaintiffs to file any evidence in reply and also make a direction which aims to have the parties seek to agree a statement of facts and issues. I will also make directions for the filing and serving of brief outlines of written submissions and give other directions which are intended to have the hearing run smoothly from 3 December 2018.

(b) Should leave be granted for Mr Tisot to represent the second defendant?

24    The principles guiding the exercise of the discretion to waive compliance under r 1.34 of the Federal Court Rules 2011 (Cth) (2011 FCRs) so as to permit a company to be represented by a person other than a legal practitioner in spite of r 4.01(2) are well known. They are summarised in Enviro Pak Pty Ltd v New Horticulture Pty Ltd [2013] FCA 306 (Enviro Pak) at [16]-[18] per Griffiths J:

16.    … A leading case in this context is the decision of French J, when he was a member of this Court, in Termi-Mesh Australia Pty Limited v Josu Manufacturing Pty Limited [1999] FCA 1241 (‘Termi-Mesh’), where his Honour sets out various matters relevant to the exercise of the discretion under the earlier rules of the Court. His Honour made it clear that the policy of the rules is that ordinarily a corporation is required to be represented by a solicitor. His Honour then identified, in [13], various factors that may be relevant to determining whether that rule should effectively be waived in any particular case. Such relevant factors include the financial capacity or lack of capacity of the corporation and those standing behind it, the effect of diverting company resources to paying legal expenses, the nature of the company’s undertaking, its financial structure, its ability to retain and pay its staff and the identity and spread of its shareholders. His Honour added that the factual complexities of the case and the capacity of the proposed representative to conduct the proceedings are also relevant matters.

17.    An additional consideration which has some relevance to the circumstances here is his Honour’s acknowledgement in [14] of his reasons for judgment in Termi-Mesh, to the effect that a more liberal approach may be warranted in circumstances where the corporation seeking the dispensation is a respondent in proceedings and not the applicant.

18.    Another relevant authority which I have found helpful in considering this application is the decision of Murphy J in Deputy Commissioner of Taxation v Compumark Pty Ltd (2012) 292 ALR 83. After referring to and affirming the factors identified by French J in Termi-Mesh, Murphy J identified some other matters that might bear upon the question. Those matters are set out in [20] of his Honour’s judgment and are drawn from criteria identified by Forrest J in Worldwide Enterprises Pty Ltd v Silberman (2009) VSC 165 at 20. The factors identified are:

(a)    the manner in which the case has progressed to date;

(b)    the manner in which the case can proceed in the future without a solicitor;

(c)    the complexity of the issues involved in the case;

(d)    whether the lack of disciplinary measures in relation to the person seeking to represent the company will affect the administration of justice;

(e)    whether the case can be conducted in an orderly and responsible fashion without a solicitor;

(f)    whether there are financial considerations which would inhibit a company from obtaining legal representation;

(g)    the stage which the case has reached;

(h)    whether the defendant is likely to expend more funds in defending the claim absent a solicitor acting for the company; and

(i)    the effect, if any, on court resources and in particular on other litigants in the court list if the company were to appear without a solicitor.

25    Guided by these general principles, each case will ultimately turn upon its own particular facts. Factors which weigh in favour of granting the dispensation here include the following:

(a)    on 23 November 2017, the second defendant filed a submitting notice stating that it submitted to any order the Court may make in the proceeding and that it did not want to be heard on the question of costs. Necessarily, therefore, as matters stand at present, the second defendant’s role will be infinitesimal;

(b)    Mr Tisot is entitled to represent himself as the first defendant. Accordingly, he will participate in the proceeding personally irrespective of the outcome of the interlocutory application. As stated in Enviro Pak at [22], this is an important consideration which weakens the weight which might otherwise have been accorded to other relevant factors or considerations weighing against granting the dispensation;

(c)    based on the Court’s observations of Mr Tisot’s participation in case management hearings, although he is not legally qualified, he appears to have a sound understanding of the underlying factual matters which give rise to the proceedings and is capable of presenting an argument coherently and responsibly, noting also that Mr Tisot represented himself in proceedings in the Supreme Court of New South Wales in October 2015; and

(d)    finally, and significantly, there is the issue of the stage of the proceedings. If dispensation is not granted and the second defendant seeks to obtain legal representation at this point, even if it were able to do so, there inevitably would be a further potentially lengthy delay in bringing the matter to a substantive hearing. That is most undesirable even though the second defendant would be responsible for that state of affairs given the belated timing of the interlocutory application. I consider that the plaintiffs should not be subjected to any further delay in the conduct of the proceeding.

26    Accordingly, for these reasons, the Court will grant leave under r 1.34 of the 2011 FCRs and dispense with the requirement under r 4.01(2) that the second defendant be represented by a legal practitioner.

Conclusion

27    For the reasons given above, those parts of the interlocutory application which relate to the vacation of the hearing and related matters will be dismissed. Some adjustments will be made to the timetable with a view to the scheduled hearing commencing on 3 December 2018. The second defendant will have leave to be represented by Mr Tisot.

Associate:

Dated:    19 October 2018

SCHEDULE OF PARTIES