FEDERAL COURT OF AUSTRALIA

Australian Communications and Media Authority v Red Telecom Pty Ltd [2020] FCA 996

ORDERS

THE COURT ORDERS THAT:

1.    The applicant’s interlocutory application filed on 7 July 2020 is allowed in part, namely to the extent that self-executing orders have been made as set out in paragraphs 2 and 3 below.

2.    Order 3 of the orders made on 10 June 2020 is varied so as to require that the first and second respondents:

(a)    on before 5pm on Friday 10 July 2020, provide answers to the particulars sought at paragraphs 8 and 9 of the letter dated 4 June 2020 from the solicitors for the applicant;

(b)    on or before 5pm on Tuesday 21 July 2020, provide answers to the remaining particulars sought in the letter dated 4 June 2020 from the solicitors for the applicant.

3.    If the first and second respondents fail to comply with orders 2(a) or order 2(b) above, then in accordance with rule 5.21(d) of the Federal Court Rules 2011 judgment in respect of liability issues only with respect to KJ Real Estate and Ms Diana Canepa be entered for the applicant against them.

4.    To the extent that the interlocutory application dated 7 July 2020 seeks an order for indemnity costs, the application is reserved.

5.    The application is listed for a case management hearing and, if an oral hearing is required the hearing of the application for indemnity costs, at 9:30am on Thursday 23 July 2020.

THE COURT NOTES THAT:

6.    The respondents are to use their best endeavours to respond to all particulars by 5pm on 17 July 2020.

7.    When reasons are published for the orders 1, 2 and 3 above, timetabling orders will be made for the filing of further evidence and submissions on the issue of indemnity costs.

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

ORDERS

THE COURT ORDERS THAT:

1.    On or before 12pm on 16 July 2020, the applicant is to file the submission dated 8 July 2020 relied on in support of its interlocutory application and emailed to Justice Perry’s chambers on 9 July 2020.

2.    On or before 12pm on 22 July 2020, the respondents are to file and serve any application to vary the consent orders made on 10 June 2020 so as to extend the time within which the first respondent is to make payments to any of the beneficiaries of the TIO determinations the subject of the consent orders, together with any further evidence in support of that application.

3.    The orders made on 9 July 2020 are varied so as to list the matter for case management only at 9:30am on 23 July 2020.

THE COURT NOTES THAT:

4.    On 14 July 2020, the respondents filed an affidavit sworn by the second respondent in which an application of the kind referred to in order 2 above was foreshadowed.

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

REASONS FOR JUDGMENT

PERRY J:

1.    INTRODUCTION

1    Australian Communications and Media Authority (ACMA) instituted these proceedings on 20 December 2019 by an originating application together with a statement of claim. ACMA seeks declarations that Red Telecom Pty Ltd (Red Telecom) has contravened s 101(1) of the Telecommunications Act 1997 (Cth) (Telco Act). Specifically, ACMA alleges that Red Telecom failed to comply with the Telecommunications Industry Ombudsman (TIO) scheme pursuant to s 132 of the Telecommunications (Consumer Protection and Service Standards Act 1999 (Cth) (TCPSS Act) and related instruments in failing to comply with seven separate determinations by the TIO (the TIO determinations) in favour of various consumers. ACMA also claims a declaration that the second respondent, Mr Nicholas Kontaxis, was directly or indirectly knowingly concerned in, or party to, and aided and abetted, Red Telecom’s contravening conduct. The relief sought by ACMA includes an order pursuant to s 564(2) of the Telco Act that Red Telecom pay the monies owing under the TIO determinations to the consumers in question and that both respondents pay pecuniary penalties pursuant to s 570 of the Telco Act. A joint defence was filed by the first and second respondents on 29 May 2020.

2    On 10 June 2020, the Court declared by consent that Red Telecom, by failing to comply with five of the TIO determinations, on each occasion contravened s 101(1) of the Telco Act and ordered that Red Telecom pay on or before 10 July 2020, the amounts owing to the consumers who were the beneficiaries of those determinations. However, Red Telecom continues to dispute the TIO determinations in favour of two consumers, KJ Real Estate Pty Ltd (KJ Real Estate) and Ms Diana Canepa, in the sum of $1,012.34 and $5,895.60 respectively. The question of pecuniary penalties against both respondents also remains in dispute.

3    By a letter dated 4 June 2020, the solicitors for ACMA sought particulars at paragraphs 8 and 9 of Red Telecom’s defence insofar as it related to these consumers, as well as particulars of Mr Kontaxis’ defence.

4    By an interlocutory application filed on 7 July 2020, ACMA sought default orders pursuant to Rule 5.23(2)(c) of the Federal Court Rules 2011 (FCR). The default relied upon was the failure by Red Telecom to comply with order 3 of the consent orders made on 10 June 2020 (Order 3), namely, that:

On or before 4pm on Wednesday 24 June 2020, Red Telecom respond to the request for particulars of its defence made on 4 June 2020.

5    The orders sought on the basis of deemed admissions by reason of the default are as follows:

(1)    declarations that Red Telecom has failed to comply with determinations of the TIO, namely:

(a)    TIO determination 2017/07/17568 dated 4 April 2019 that Red Telecom credit $1012.34 within five working days of KJ Real Estate’s acceptance of the determination (which occurred on 4 April 2019) in respect of a complaint lodged with the TIO by KJ Real Estate; and

(b)    TIO Determination 2018/08/01018 dated 21 June 2019 that Red Telecom pay, within 10 working days of Ms Canepa’s acceptance of the determination (which occurred on 21 June 2019), an amount of $5,895.60 in respect of a complaint lodged with the TIO by a customer, Ms Canepa;

           and has thereby on each occasion contravened s 101(1) of the Telco Act.

(2)    performance injunctions under s 564(2) of the Telecommunications Act 1997 (Cth) for payment of amounts due under the TIO determinations to KJ Real Estate Pty Ltd and Ms Canepa.

6    Declaratory relief is also sought as to the termination of the commercial relationship between KJ Real Estate and Red Telecom and to the effect that the application of a credit in the sum of $1,012.34 to an account created by Red Telecom in KJ Real Estate’s name was not authorised.

7    At the hearing of the interlocutory application on 9 July 2020, I made orders with respect to the interlocutory application as follows:

1.    The applicant’s interlocutory application filed on 7 July 2020 is allowed in part, namely to the extent that self-executing orders have been made as set out in paragraphs 2 and 3 below.

2.    Order 3 of the orders made on 10 June 2020 is varied so as to require that the first and second respondents:

a.    on or before 5pm on Friday 10 July 2020, provide answers to the particulars sought at paragraphs 8 and 9 of the letter dated 4 June 2020 from the solicitors for the applicant;

b.    on or before 5pm on Tuesday 21 July 2020, provide answers to the remaining particulars sought in the letter dated 4 June 2020 from the solicitors for the applicant.

3.    If the first and second respondents fail to comply with order 2(a) or order 2(b) above, then in accordance with rule 5.21(d) of the Federal Court Rules 2011 judgment in respect of liabilities only with respect to KJ Real Estate and Ms Diana Canepa be entered for the applicant against them.

(emphasis in the original)

8    The reference at paragraph 1 of these orders to the interlocutory application having been allowed in part was intended to reflect the fact that, while the interlocutory application did not specifically seek self-executing orders, the making of such orders in lieu of default judgment was suggested by ACMA in the alternative following discussions in arguendo (T16.34-36). Furthermore, under FCR rule 1.32, the Court may make such other orders as it thinks fit in the interests of justice: see also the notation to FCR r 5.23(2).

9    I set out below my reasons for making these orders. Among other things, I considered that orders in these terms:

(1)    afforded an appropriate means of addressing the valid concerns raised by ACMA as to non-compliance by the respondents with Order 3, on the one hand; and

(2)    afforded the respondents a last opportunity for compliance in circumstances where at the hearing the respondents for the first time gave a short timeframe within which they would comply with the request for particulars, on the other hand.

2.    EVIDENCE

10    ACMA relied upon the affidavit of Adam Ian Zwi, solicitor, affirmed on 7 July 2020 in support of the application for default judgment. The respondents did not take issue with any of the facts alleged in Mr Zwi’s affidavit, stating that “there is no material in the affidavit which is incorrect” (T2.35). Nor, despite being offered the opportunity to file evidence in opposition to the interlocutory application, did the respondents wish to do so (T2.34-35).

3.    RELEVANT PRINCIPLES

11    Rule 5.23(2) relevantly provides that:

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

…

(c)    if the proceeding was started by an originating application supported by a statement of claim … – 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

...

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.

12    Rule 5.22 sets out the circumstances in which a party is in default, namely:

A party is in default if the party fails to:

(a)    do an act required to be done, or to do an act in the time required, by these Rules; or

(b)     comply with an order of the Court; or

(c)     attend a hearing in the proceeding; or

(d)     prosecute or defend the proceeding with due diligence.

13    Thus, as ACMA submitted:

Default orders need not be applied to circumstances where there is a failure to file a defence, but have been applied in numerous circumstances of default.

The “formal trigger of application for default judgment under r 5.23(2)(c) in reliance on r 5.22 requires no more than any of a failure to do an act…, a failure to comply with an order, a failure to attend a hearing, or a failure to prosecute or defend with due diligence”: Geneva Laboratories Ltd v Prestige Premium Deals Pty Ltd (No 4) [2016] FCA 867 (Geneva Laboratories) at [50]. The power is “conditioned on one circumstance only: the failure of a party to comply with an order of the Court directing that party to take a step in the proceeding: Lenijamar Pty Ltd v AGC (Advances) Limited (1990) 27 FCR 388 (Lenijamar) at 395 (Wilcox and Gummow JJ).

(Applicants submissions dated 8 July 2020 (AS) at [5]-[6])

14    As to the exercise of discretion under r 5.23, by analogy I recently held in Commonwealth of Australia v Harrison [2019] FCA 937 with respect to the question of whether judgment in default should be entered against an applicant:

22. … even where the elements of the cause of action have been properly and discretely pleaded and the cause of action would entitle the applicant to relief, the Court has a discretion as to whether to grant the relief claimed by way of a default judgment under r 5.23(2): Speedo Holdings at [20] (Flick J); Hipages at [19] and [25]. In this regard, there are no requirements of intentional default or contumelious conduct, inordinate or inexcusable delay, or prejudice to the respondent although these factors, if present, are likely to be significant: Lenijamar Pty Ltd v AGC (Advances) Limited (1990) 27 FCR 388 at 395-396 (Wilcox and Gummow JJ). Furthermore, as the Commonwealth points out, the discretion must be exercised with caution, given the serious implications which the giving of a judgment in default may have for a respondent: Speedo Holdings at [20] (Flick J); Hipages at [25].

23. While it would be undesirable to endeavour to set out an exhaustive list of the circumstances in which the power to give judgment in default might appropriately be exercised, the Full Court set out a non-exhaustive list of relevant considerations bearing upon the exercise of discretion to dismiss an applicant’s claim under r 5.23(1)(a) in Professional Administration Service Centres Pty Ltd v Commissioner of Taxation [2012] FCAFC 180; (2012) 295 ALR 52 (PAS Centres) at [44]. Those considerations, falling “[u]nder the umbrella of [the] overriding consideration” as to whether injustice would flow from the orders, were as follows:

(i)    the nature of the default involved;

(ii)    the duration of the default and whether it is continuing;

(iii)    the circumstances in which the orders, in respect of which default has occurred, were made including whether the orders made accorded with the practice of the court in making orders of that kind;

(iv)    the circumstances which occurred between the time of making the orders and the order for the dismissal of the proceeding, including whether any attempt was made by the defaulting party to amend or set aside the orders to accommodate or deal with these intervening circumstances;

(v)    whether the continuing default is occasioning unnecessary delay, expense or other prejudice or unacceptable burden on the respondent;

(vi)    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;

(vii)    the stage that the proceeding has reached – whether they have only recently been commenced; whether it has been commenced for some time but not advanced due, in whole or in part, to the default; or whether the proceeding is in an advanced state ready or nearly ready for hearing;

(viii)    the likely disruption to hearing dates or, if not fixed, to setting the matter down for hearing at an early date;

(ix)    the consequences to the applicant of dismissing the proceeding.

(emphasis added)

4.    REASONS FOR ORDERS MADE ON THE INTERLOCUTORY APPLICATION

15    ACMA submitted that it is in the interests of the third parties to receive the amounts to which they are entitled under the two remaining TIO Determinations as soon as possible, particularly given the first respondent’s default and the delay to date. ACMA also submitted that it is appropriate to grant the declaratory relief contemporaneously because the proceeding involves matters in the public interest: Australian Competition and Consumer Commission v Dataline [2006] FCA 1427; (2006) 236 ALR 665 at [58]-[59]. ACMA emphasised that this was not the first occasion on which the respondents had failed to comply with Court orders and this was the second occasion on which the applicant had sought interlocutory relief of the kind now sought.

16    The respondents on the other hand submitted that the default was relatively minor, they had advised ACMA’s solicitors by email on 29 June 2020 that “we expect to have response to you shortly” (exhibit AIZ-12 to the Zwi affidavit), and no prejudice would be suffered by ACMA by the short delay given that the matter was not then listed until 22 July 2020 for case management. In their submission, the application for judgment in default was premature and a disproportionate response.

17    First, I do not accept the respondent’s characterisation of the default as relatively minor. The defence is plainly deficient in that it fails to identify the material facts which constitute the basis on which liability is denied with respect to KJ Real Estate and Ms Canepa and on which Mr Kontaxis denies responsibility: cf FCR r 16.02(d). The defence relevantly asserts only conclusions in respect of these matters. Specifically:

(1)    while the respondents say that the payment referred to in the TIO Determination 4 with respect to KJ Real Estate has been made (defence at [27]), no further details are given including when the alleged payment was said to have been made and the means by which it was allegedly made;

(2)    while Red Telecom pleads that it has not defaulted on the liability to pay monies to Ms Canepa under the TIO Determination 6 because that determination was allegedly contingent on the equipment being returned by Ms Canepa which she did not do, counsel for the respondents admitted that Mr Zwi’s affidavit is correct despite Mr Zwi deposing to Ms Canepa having returned the equipment in question via Australia Post on 22 June 2019 and attaching evidence of the same (defence at [38]-[39]; Zwi affidavit at [5]-[7] and annexures AIZ-10 and AIZ-11); and

(3)    Mr Kontaxis denies that he was responsible for the day-to-day management of Red Telecom simply on the basis that “there were other [unidentified] managers and staff at Red Telecom responsible for day-to-day management” (defence at [4](c)).

18    The fact that the applicant seeks to ascertain this information by way of a request for “particulars” cannot alter the fact that these omissions from the defence are of material facts. It also follows that these omissions leave the applicant without fair notice of the respondents’ defence, despite the defence having been filed on 29 May 2020 and the letter seeking “particulars” having been sent on 4 June 2020.

19    Moreover, in the absence of a defence identifying the material facts referred to at (1) and (2) above, no adequate justification has yet been pleaded for the continued denial of payment of the monies in question to KJ Real Estate and Ms Canepa. It follows that little, if any, weight can be given to the submission by the respondents that “the breach of the direction is not the cause of those persons having been kept out of their money, if that’s an accurate way of describing it. There’s still a fact in issue in contest …” (T8.42-44). As it currently stands, the defence does not adequately or fairly disclose the “fact[s] in issue”.

20    Secondly, as ACMA submits, the statutory scheme together with the respondents’ admissions highlight the limited nature of any possible defence. In particular:

(1)    Section 101(1) of the Telco Act provides that a service provider is required to comply with the “service provider rules” set out in schedule 2 to the Telco Act (see the definition of “service provider rules” in s 98(1), Telco Act). Red Telecom has admitted that it is a “service provider” within the meaning of s 86 of the Telco Act (defence at [3]).

(2)    It is mandatory for “eligible carriage service providers” to enter into the TIO Scheme under s 128(1) of the TCPSS Act. Red Telecom has admitted that it is an “eligible carriage service provider” within the meaning of s 127 of the TCPSS Act (defence at [3].

(3)    Section 132 of the TCPSS Act provides that a carriage service provider who is a member of the TIO Scheme must comply with the Scheme which is operated by the Telecommunications Industry Ombudsman Limited (TIO Ltd). TIO Ltd in turn is governed by the TIO Constitution and Terms of Reference (TOR).

(4)    Compliance with TIO decisions are mandatory upon the consumer accepting the TIO decision (cl 3.14, TOR). Each member agrees to be bound by the TOR (cl 17.2(a), Constitution). Red Telecom has admitted that it has been a member of the TIO Scheme since August 2013 and of the TIO Ltd, and that it is bound by the TIO Constitution and TOR (defence at [3]).

21    Thirdly, the respondent’s legal representatives very properly did not seek to resile from their and the respondents’ obligation to comply with Order 3, and accepted that “it is not in any way appropriate that that order has not been complied with” (T12.1-5). However, it remains the case that no explanation has been given for the respondents’ failure to comply with Order 3 despite the order having been made by consent at a time when the respondents were already in possession of the letter requesting particulars.

22    Furthermore, the respondents did not at any time apply to vary Order 3. Nor did the respondents initiate correspondence with ACMA regarding the delay in providing particulars. The respondents advised that they expected to respond shortly only on 29 June 2020 in response to an email from ACMA’s solicitors on 25 June 2020 drawing their attention to the default and asking that the respondents advise their position by 5pm on 25 June. In this regard, I note that ACMA’s solicitors replied to the respondents’ email also on 29 June 2020 reserving ACMA’s rights in respect of the breach of the orders, and advising among other things that:

… you did not advise of the delay, or seek an extension of the order requiring your client to respond to our client’s request for particulars (Order) once you were aware that your client was going to again be in breach. We further note that you do not advise when your client proposes to comply with the Order and nor do you advise a reason for your client’s continued breach of the Order. Accordingly our client has no basis to assess the reasonableness of the non-compliance or whether there is any basis for consenting to an extension to the Order. In the circumstances it does not consent to any extension of the Order.

(annexure AIZ-12, Zwi affidavit at p. 49)

23    Each of these factors weighs in favour of the orders sought by ACMA under FCR r 5.23(1). In addition I have taken into account that, as the email quoted above states, this is not the first occasion on which the respondents have been in breach of Court orders without seeking an extension of time prior to the breach. Given that on that earlier occasion the respondents put forward detailed evidence to explain the breach in response to ACMA’s then application for self-executing orders, I have given this consideration little weight save in one respect, namely: the circumstances in which the second occasion of non-compliance has come before the Court raise a concern about what appears to be a relaxed approach to compliance with Court orders so far exhibited by the respondents. In this regard, it should be emphasised that parties must comply with Court orders. Court orders are not guidelines and the failure to comply with them may result in orders of the kind sought by the applicant here. In emphasising these points, it should also be said that where parties are concerned that they may not be able to comply with a Court order, they should alert the other side in advance of the default and if need be apply to vary the order. Among other things, the Court appreciates that the current pandemic has posed particular difficulties and pressures upon parties and their legal representatives.

24    On the other hand, in line with the principles earlier set out, the power to award judgment in default must be exercised with caution given the seriousness of the consequences for the respondents. In this regard, I have given particular weight to following factors.

(1)    While the amounts allegedly owing under the two TIO determinations are small, the default judgment application also seeks declarations of contraventions with respect to those determinations, and consequences may flow with respect to the issue of pecuniary penalties in due course.

(2)    The respondents advised at the hearing that they would provide the particulars in response to paragraphs 8 and 9 of the request for particulars (being the particulars relating to the TIO determinations in favour of KJ Real Estate and Ms Canepa) by 5pm the following day (T10.42-45). While this is the first time at which the respondents communicated a specific time by which the particulars would be provided following their default, they had earlier in correspondence advised ACMA that they “expect[ed]” that the particulars would be provided “shortly” (as I have earlier explained). Furthermore, while the respondents’ solicitor indicated that he could not guarantee that answers would be given to the other particulars sought by Friday 10 July 2020, he also indicated that he believed that an order that they be provided by 21 July 2020 was realistic (given that he was away in the intervening week). The short timeframe proposed, in particular with respect to particulars 8 and 9, was a significant factor in my reaching the view that it would be unduly harsh to deny the respondents a further opportunity to answer the request for particulars.

(3)    Furthermore, it is true to say (as the respondents submitted) that the issues as to liability have been significantly narrowed between the parties, with all but two of the contraventions admitted.

25    In addition, I took into account the relatively early stage of the proceeding and that no date for the final hearing of the issues as to liability or penalty has yet been set.

26    In these circumstances, I considered that it would be unfair and premature to proceed immediately to default judgment in favour of ACMA with respect to the claims relating to KJ Real Estate and Ms Canepa. Rather, the legitimate concerns raised by ACMA could be met by the making of self-executing orders in the event that the respondents failed to comply with the revised timetable for the provision of particulars which they accepted was realistic. The interlocutory application was therefore allowed to this extent.

5.    COSTS AND OTHER MATTERS

27    In its interlocutory application, ACMA also sought orders that Red Telecom pay its costs of that application as agreed or taxed on an indemnity basis. This aspect of the interlocutory application filed on 7 July 2020 was reserved. Initially I considered that if an oral hearing was required, that could proceed on 23 July 2020 and I would therefore make orders setting a timetable for the filing of evidence and submissions on the application for indemnity costs when I delivered my reasons for the orders made on 9 July 2020. However, in the interim, the respondents filed an affidavit sworn by Mr Nicholas Kontaxis on 14 July 2020 foreshadowing an application to amend the consent orders made on 10 June 2020. The foreshadowed application was for a variation to the consent orders so as to extend the time within which Red Telecom is to make the payments to a number of the beneficiaries of the TIO determinations the subject of those consent orders. In those circumstances, I have amended the orders made on 9 July 2020 so as to list the matter for case management only on 23 July 2020 and to require the respondents to file and serve any application of the kind foreshadowed in Mr Kontaxis’ most recent affidavit on or before midday on 22 July 2020, together with any further evidence in support of that application. In this regard, I note that the application for indemnity costs, if pressed, is not urgent and timetabling orders with respect to that application can be set at a later date.

Associate:

Dated: 15 July 2020