Federal Court of Australia

Martin v Twin Creeks Golf & Country Club Ltd [2021] FCA 1499

ORDERS

THE COURT ORDERS THAT:

1.    The respondents are granted leave to withdraw the admissions in their defence filed on 5 March 2020, the subject of this application.

2.    The respondents are granted leave to file an amended defence in the terms sought as represented by the document provided to the applicant on 28 May 2021.

3.    Leave to file the cross-claim dated 14 July 2021 is refused.

4.    The respondents are to pay the applicant’s cost of these applications, to be agreed or assessed.

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

REASONS FOR JUDGMENT

ABRAHAM J:

1    This is an application by the respondents variously to withdraw admissions made in the defence filed on 5 March 2020, to otherwise amend other aspects of the defence filed, and for leave to file a cross-claim out of time.

2    For the reasons below, leave is granted to the respondents to withdraw the admissions in their defence filed on 5 March 2020, the subject of this application. The respondents are also granted leave to file an amended defence in the terms sought as represented by the document provided to the applicant on 28 May 2021. An extension of time in which to file a cross-claim is refused.

Background

3    This matter has an unfortunate history to date.

4    The applicant commenced these proceedings on 27 November 2019, seeking declarations, compensation and the imposition of pecuniary penalties against his former employer, Twin Creeks Golf & Country Club Ltd (the first respondent), and Mr Zhao Qing Jiang (the second respondent), a director of the first respondent.

5    On 5 March 2020, the respondents filed their defence in these proceedings (Original Defence).

6    On 4 June 2020, the parties attended a court-ordered mediation, which was unsuccessful.

7    On 14 April 2021, in accordance with orders made on 25 March 2021 at a case management hearing, the respondents served on the applicant a proposed amended defence dated 15 April 2021 (Proposed Amended Defence), which has not been filed. Rather, on 28 May 2021, the respondents served on the applicant a further proposed amended defence (Further Proposed Amended Defence). It is the Further Proposed Amended Defence to which this application relates. The respondents’ undated submissions regarding their application for leave to amend their defence were filed on 25 June 2021. The applicant’s submissions on the same question were filed on 7 July 2021. The applicant has also filed two affidavits of his solicitor, Luke David Maroney, affirmed on 6 July 2021 (First Maroney Affidavit) and 4 August 2021 (Second Maroney Affidavit).

8    That application was listed for hearing on 15 July 2021. However, on that day, the hearing was adjourned to allow the respondents to file an application seeking leave to file a cross-claim, which they had foreshadowed in their Further Proposed Amended Defence.

9    In accordance with orders made that day, the respondents have now filed: an interlocutory application for leave to file a cross-claim dated 14 July 2021 (Leave Application); a notice of cross-claim dated 14 July 2021; a statement of cross-claim dated 14 July 2021 (Proposed Cross-Claim); and an affidavit of Robert Frohlich, the respondents’ solicitor, affirmed 14 July 2021 (Frohlich Affidavit). On 23 July 2021, the respondents filed an affidavit of David Chen affirmed the same day (Chen Affidavit). Mr Chen is the managing director of the first respondent.

Material relied on

10    Each of the affidavits referred to above were read in respect to both applications.

Leave to amend defence and withdraw admissions

11    The Further Proposed Amended Defence seeks to withdraw admissions made in the Original Defence, although additional amendments are also sought to be made.

12    In summary, the respondents submitted that, by reference to the statement of claim (SOC), the clear and distinct admissions were: [4], [32], [39(c)], [44], [46(a)], and [56] to [59], and that paragraphs [4], [46(a)] and [56] to [59] are contrary to fact. In relation to [5] to [14], those paragraphs were not traversed and for the abundance of caution, those paragraphs are now denied. In relation to [25], it was admitted but pleaded out by way of further defence. In relation to [27] and [31], they were mistakes and the admissions are contrary to fact, or were made inadvertently or without due consideration. In relation to [33], the pleading is ambiguous and calls for additional pleadings, and the admission was either a mistake or overlooked and is contrary to fact, or made inadvertently or without due consideration. Various other explanations are proffered in the written submissions as to the basis and need for the amendments.

13    The respondents submitted that at the time of filing the Original Defence they were not in a position to ascertain the nature and extent of the alleged fraud, which it contends underlies its actions in these proceedings. It was submitted that certain information did not come to light until late 2020 as a result of a police investigation, and an internal review conducted for them by third-party consultants.

14    The respondents outlined what they said was the chronology of relevant events.

15    The respondents submitted that they raised in a case management hearing their need to file an application for leave to withdraw the admissions and to file an amended defence in March 2021, although it was accepted that the need to do so had been flagged with the applicant in July 2020. It was submitted that given the evolving nature of the investigations (police and internal), time taken for experts to be briefed and the late briefing of counsel, it is not surprising or unexpected that an amended defence would be necessary to ensure the respondents have a fair trial. The only identifiable detriment is the costs thrown away as a result of the applicant drafting his requests for further and better particulars in relation to the first proposed amended defence. The applicant has not acted to his detriment on reliance of the Original Defence. The respondents submitted that the proceedings are still in the pleading stage, and that the pleadings have not closed. It was submitted in that circumstance that leave to amend the defence generally was not required, although accepting leave is required to withdrawn an admission. The respondents submitted that if they were not permitted to withdraw the admissions, it would be a denial of procedural fairness.

16    The applicant opposes the application to withdraw admissions and the grant of the necessary leave required to amend the respondents’ Original Defence. To the extent that the respondents seek leave to amend the Original Defence beyond withdrawing admissions, the respondents have not properly addressed the Court on those amendments. It submitted that to the extent that leave is granted, it should only be granted on the making of a costs order that the respondents (or their solicitors) pay the applicant’s costs thrown away by reason of that amendment.

17    It submitted that the Original Defence was prepared by, and with the advice of, the respondents’ solicitor. A certificate was signed by the solicitor to the effect that there was a proper basis for each of the admissions contained in the Original Defence. In those circumstances, a court would not ordinarily allow the admission to be withdrawn, citing Singtel Optus Pty Ltd v Almad Pty Ltd [2013] NSWSC 1098 (Singtel) at [20]; Drabsch v Switzerland General Insurance Co Ltd [1999] NSWSC 1030 (Drabsch) at [21(c)]

18    The applicant submitted that the Court would require a good reason as to why the admission should be allowed to be withdrawn, no explanation has been provided, and the assertions made in the respondents’ written submissions are entirely without an evidentiary basis. The applicant submitted that the Frohlich Affidavit and Chen Affidavit, read by the respondents, do not provide a proper explanation. The applicant addressed the contents of the affidavits to illustrate that submission. He submitted that there is no evidence that admissions were made either inadvertently, without due consideration or by mistake, or any other of the proffered explanations. The applicant noted the nature of the admissions, being matters directly in the respondents’ knowledge. The applicant also noted the delay in bringing the application being over a year since filing of the defence. The applicant submitted that, contrary to the respondents’ submission, there would be no denial of procedural fairness if leave were refused.

Consideration

19    The relevant principles for withdrawal of an admission are well established, see for example: Selvaratnam v St George – A Division of Westpac Banking Corporation (No 2) [2021] FCA 486; Maile v Rafiq [2005] NSWCA 410; Singtel at [18]-[22]; and Drabsch. It is unnecessary to recite those principles in detail. Suffice to say for present purposes, a number of matters have been pointed to as relevant considerations. First, where there was a clear and distinct admission which was accepted and acted upon, the Court should not freely grant an application for leave to withdraw it. Second, although each matter requires consideration on its merits and individual facts, nonetheless there should be good reason offered why an admission should be allowed to be withdrawn. Third, an admission made after full consideration and advice, and a proper opportunity to reflect, would not ordinarily be permitted to be withdrawn. Finally, admissions contrary to fact, or made inadvertently or without due consideration, should generally be permitted to be withdrawn unless the other party has somehow changed its position in reliance on the admission. That said, these matters are discretionary, and relevant considerations are not confined to those referred to above.

20    An explanation of the circumstances in which the withdrawal is sought will ordinarily call for evidence: Tamaya Resources Ltd (in liq) v Deloitte Touche Tohmatsu (a firm) [2016] FCAFC 2; (2016) 332 ALR 199 at [154]-[156], with what is necessary being dependent on the facts of the particular case.

21    Before applying those principles to the circumstances of this case, it is appropriate to recall that the Further Proposed Amended Defence contains proposed amendments that are broader than the withdrawal of admissions. The respondents have not properly addressed those matters.

22    Contrary to the respondents’ contention, the pleadings have closed: Federal Court Rules 2011 (Cth) (the Rules) r 16.12. The last-fixed time under the Rules for the filing of a defence, reply or other pleading is the time at which pleadings close. The applicant’s reply was filed on 28 April 2020, in accordance with an extension of time agreed by the parties following the orders made on 10 February 2020. Although the respondents foreshadowed a cross-claim (noting this in their Further Proposed Amended Defence which was provided to the applicant in May 2021), the time for filing of a cross-claim is the same as the time for filing a defence: r 15.04, which has plainly passed. The respondents accepted that the cross-claim was not filed in accordance with the Rules.

23    Although the respondents appear to rely on the matter coming within r 16.51(4) as a basis for not requiring leave, being in relation to “a fact or matter that has occurred or arisen since the proceeding started,” they have not provided an evidential basis in support of that proposition. Indeed, it appears to be inconsistent with aspects of their submissions advanced on the application for leave to withdraw admissions, being that matters were pleaded by mistake, inadvertence or without due consideration.

24    Turning to the withdrawal of admissions.

25    At the time this matter was originally listed for hearing on 15 July 2021, the respondents had not filed any evidence in support of their application to withdraw the admissions (or otherwise amend the defence) to explain the position they were in. That said, on the evening before the hearing the respondents did file some documents (which appeared to relate to the Proposed Cross-Claim), although by the time of the hearing they had not served those documents on the applicant. Since that time, the affidavits of Mr Frohlich and Mr Chen have been filed and read, which are said to be relevant to this application and the application for leave to file the Proposed Cross-Claim (considered below). Given the content of the affidavits, it is unclear how some of that evidence bears upon the matters on which leave is sought.

26    Mr Chen, who is the managing director of the first respondent, deposes generally as to the impacts of Covid-19 on the first respondent’s business which include, for example, reductions in administrative staff, lost revenue, communications with members and that they sought JobKeeper. Nothing in that affidavit addresses how any of those impacts explains the basis of any amendment to the defence, or any delay in making the application.

27    Mr Frohlich’s affidavit, on its face, explains the reasons for the late filing of the cross-claim, although it appeared also to be relied on in relation to this application. Much of the content appears irrelevant to either issue. Mr Frohlich does depose that when the defence was filed that the respondents did not know the extent of the employment fraud and “due to the embargo were unable to reveal details”. This “embargo” is unclear. The extent of the reference to it in the Frohlich Affidavit is an email dated 23 October 2019, which says “it is of the NSW Police Force belief that all records of information are subject to an embargoed [sic] and are not to be disseminated to any other person or organisation whilst this matter is under investigation”. The respondents did not clearly articulate the scope of the embargo or its duration. The respondents at times submitted it related to “material that was found through the investigation”. During submissions the respondents’ counsel said the embargo was to exist until after the finalisation of the criminal proceedings and it is still ongoing and in force. It is unclear how filing a required pleading, based on the respondents’ information, could be prevented from occurring. Indeed, it is unclear how doing so would even come within the terms of the purported embargo. The respondents accepted that some, although not all of their documents, could have been used in the defence and any cross-claim. Indeed, despite the embargo being purportedly still in effect, it has not prevented these amendments being made to the defence or, as referred to below, the cross-claim now being filed. For example, the respondents submitted that they were not aware of the employment contract except from the police investigation. If the embargo had the effect the respondents contended, it is not apparent why they are able to rely on this information now. It raises questions as to the relevance of the embargo at all, to the basis of any delay. The respondents never applied for a stay of this matter, which might have been expected if the respondents were in fact prevented by the supposed embargo from properly defending the case put against them.

28    Before leaving the affidavits relied on by the respondents, I note also that although the Proposed Cross-Claim describes a chronology of events, and includes assertions as to the respondents’ conduct in investigating this matter internally (for example a decision was made to pause the internal investigation), Mr Frohlich’s affidavit does not address those matters.

29    More significantly, although the respondents’ submission refers to some paragraphs of the defence being made inadvertently, without due consideration or by mistake, or any other of the proffered explanations, the affidavits do not address these topics. Nor do the affidavits provide a basis as to why the other amendments are sought to be made. During the hearing, the respondents accepted that was so. If the positions now advanced by the respondents are correct, such evidence would be readily available. The significance of such evidence to this application is self-evident. It would be apparent to the respondents, being aware of the relevant authorities which discuss the principles which apply to an application of this nature.

30    Nonetheless, despite that, and the fact there has been significant delay in making this application, I am satisfied that leave should be granted to withdraw the admissions, as sought in this application.

31    Some of the admissions are arguably contrary to evidence which is to be relied on in the respondents’ case. Appreciating that mistakes do occur, given the nature of the admissions, that that occurred in this case is a matter of concern. As required, it had been certified by the respondents’ solicitor that there was a proper basis for the pleadings in the defence filed on the basis of the factual and legal material. That certification is significant, and ought to be able to be relied on by the Court and the opposing party in the preparation and conduct of the proceedings. It is no light matter to certify a document satisfies the necessary requirements. It is a matter that should be attended to diligently.

32    I do not accept the respondents’ submission that given the evolving nature of the matter, including the police and internal investigations, the time taken for experts to be briefed and the late briefing of counsel, it is not unexpected that an amended defence is necessary, provides any excuse. Some of the admissions sought to be withdrawn are fundamental, such as whether the first respondent was the applicant’s employer, a matter which is plainly within the respondents’ direct knowledge. These proceedings had been commenced and it was incumbent on the respondents to conduct the proceedings, inter alia, in light of ss 37M and 37N of the Federal Court of Australia Act 1976 (Cth) (FCA Act). When it became apparent that amendments were needed, steps ought to have been taken to advance that process in a timely fashion.

33    That said, although the proceedings have been on foot for some time, it has not yet advanced to the stage of the filing of evidence, although it has been delayed since March 2021, because of the respondents’ conduct. I note that curiously the respondents appear to treat the fact that it notified the applicant in July 2020 of the need to amend the defence as somehow mitigating the delay when it does not, but rather highlights their inaction in failing to progress the matter.

34    No doubt the withdrawal of the admission will result in additional issues which the applicant will necessarily be required to address. Aside from the obvious, that matters are now in issue which were not previously, no specific or additional prejudice or detriment has been identified by the applicant. Some of the additional amendments (not the traversal of the admissions) provided additional information, some of which had been sought by the applicant in requests for particulars.

35    Given the timing of the application, I also grant leave to amend the defence to include matters not previously pleaded. This provides the applicant with a better understanding of the case it has to meet. I will address the issue of costs after considering the cross-claim.

Leave to file a cross-claim

36    The respondents (cross-claimants) seek an extension of time under r 15.05 in which to file a cross-claim.

37    The respondents accept that leave under r 15.05 is required to file the Proposed Cross-Claim, noting that the cross-claim was not filed in accordance with r 15.04.

38    The respondents claim the discretionary factors weigh in favour of granting the extension. It is contended that the cross-claim is relevant to the matters in issue by the pleadings to date. It submitted that the cross-claim does not significantly travel beyond the formulation of the Further Proposed Amended Defence and that it arises out of substantially the same facts as the existing proceeding. The cross-claim raises an arguable claim in that the applicant (cross-respondent), engaged in two types of fraud (described as the unauthorised transactions fraud and the employment contracts fraud) during his employment. The cross-claim seeks relief for loss and damage suffered as a result of the fraud.

39    It was submitted that much of the delay was due to external factors not manageable or controllable by the cross-claimants. These matters are discussed above at [25]-[27]. Evidence of those external factors was deposed to in the Chen Affidavit and Frohlich Affidavit. In addition to the matters already described above (including the embargo and impacts of Covid-19), the respondents relied on the following factors: (1) mediation, which consumed much of 2020 and coincided with the Covid-19 lock down/disruption; and (2) that the employment contracts fraud was not apparent at the time the defence was filed on 5 March 2020 (and due to the embargo, the respondents were unable to reveal details).

40    It was submitted that the guiding consideration is determining that course which would best enable the controversy and all matters sought to be put in controversy, to be determined on the merits so that the entirety of the controversy between the parties can be quelled as an exercise of judicial power. The Proposed Cross-Claim has not been raised on the cusp of trial or at the commencement or in the course of the trial. The hearing is likely to be in 2022. There is time available to enable the cross-claim to be filed and served and directions to be made which would enable all of the issues in the controversy to be properly addressed.

41    It was submitted that if an extension is not given, and the cross-claimants are denied the opportunity to file their cross-claim, they will pursue their claim against the cross-respondent in separate proceedings. That outcome would not be desirable for a number of reasons, including the need to avoid a multiplicity of proceedings and the risk of inconsistent findings.

42    The applicant opposes the application for two primary reasons: first, the delay in bringing the cross-claim has not been sufficiently explained; and second, the Proposed Cross-Claim is hopelessly deficient in the manner in which it is pleaded.

43    As to delay, insofar as the Proposed Cross-Claim relates to the unauthorised transactions fraud, the respondents’ position is that they were aware of this at the time they filed their defence, on 5 March 2020. The respondents contend to have held that knowledge as early as July 2019. The decision not to file the Proposed Cross-Claim, insofar as it relates to this aspect, at the time of the Original Defence, or at an earlier point in time, is not explained by the alleged “embargo”. The respondents point to the fact that they had disclosed that matter to the applicant, and they included reference to that matter in further and better particulars to the Original Defence. In relation to the employment contracts fraud, the respondents’ reliance on an alleged “embargo” also does not assist. As early as 22 March 2021, the respondents’ solicitor had been aware of precisely the charges laid against the applicant. The respondents’ solicitor had also been in possession of the facts alleged by the police as they were framed when charges were laid on or around 24 September 2020. Those issues were mentioned in the Proposed Amended Defence and the Further Proposed Amended Defence. The Leave Application was not filed until three months after the Proposed Amended Defence was served on the applicant. The respondents’ evidence does not address when they became aware of the employment contracts fraud. The respondents took no steps to preserve their position as it relates to the alleged “embargo”.

44    The applicant submitted that there is limited explanation provided as to why a cross-claim (relating to at least the unauthorised transactions fraud) could not have been filed at the time set by the Rules, which fell before the first set of restrictions on gathering and movement related to the Covid-19 pandemic in New South Wales were enacted on 16 March 2020, and before the mediation in the matter. Reliance on the Covid-19 pandemic, the mediation of the matter and availability of internal resources of the first respondent cannot truly have impacted on the respondents’ ability to file the cross-claim in time (at least insofar as the unauthorised transactions fraud relates). The applicant noted that the unauthorised transactions fraud appears to constitute the bulk of the damages sought to be recovered on the cross-claim. The evidence does not disclose any difficulty he had in instructing the respondents’ solicitor or any difficulty receiving instructions from the respondents. It was submitted that there is no good reason that the Proposed Cross-Claim could not have been filed within time.

45    It was submitted that the Proposed Cross-Claim is hopelessly deficient in many respects. These include that it is not clear what cause of action the respondents are pursuing, nor how this Court has jurisdiction to hear that cause of action (whatever it may be). It is also unclear what, if any, claim is made by the second respondent in his capacity as second cross-claimant in the Proposed Cross-Claim. In addition, many paragraphs (which were identified in the submissions) do not comply with the various requirements of r 16.02 of the Rules and further particulars will be required (at least) in relation to a number of identified paragraphs of the Proposed Cross-Claim. The Proposed Cross-Claim fails to comply with r 16.42 of the Rules insofar as that rule applies to [27] and a number of identified particulars to that paragraph. Lastly, a number of the paragraphs of the Proposed Cross-Claim are liable to be struck out pursuant to r 16.21 of the Rules and the Proposed Cross-Claim fails to plead specifically the conduct of the applicant upon which relief is sought. It was submitted that resolution of these issues through interlocutory proceedings is likely to add significant time and cost to the resolution of the proceedings, which have already been before the Court for more than 18 months. This is an outcome contrary to the objects of s 37M of the FCA Act. In the course of usual litigation, the applicant would likely be able to recover a portion of his costs of ventilating the above issues, but the ability to do so here would be circumscribed because s 570 of the Fair Work Act 2009 (Cth) (FW Act) applies to the proceedings: Melbourne Stadiums Ltd v Sautner [2015] FCAFC 20; (2015) 229 FCR 221 at [156]-[157]. These circumstances have the potential to create an unfair strategic advantage for the respondents in their conduct of the litigation. Prejudice to the applicant will arise as a result.

Consideration

46    Rule 15.04 of the Rules requires a party to file and serve any cross-claim on the date that its defence is due. Rule 15.05 of the Rules provides that a respondent who wants to file a notice of cross-claim, but has not complied with r 15.04, must apply for leave. The leave application must be accompanied by an affidavit which states the nature of the cross-claim and its relationship with the subject matter of the proceeding and why the notice of cross-claim was not filed in accordance with r 15.04. In Rush v Nationwide News Pty Ltd (No 2) [2018] FCA 550; (2018) 359 ALR 564, Wigney J at [87] summarised the relevant principles as follows:

The principles that are applicable to the grant of leave to file a cross-claim out of time are relevantly the same as those that apply in the case of applications for leave to amend. Relevant considerations include: whether the subject matter of the claim fell within the Court’s jurisdiction; the extent of the delay; whether an acceptable explanation has been provided for the delay; any prejudice to the other party or parties occasioned by the delay; the merits or strength of the proposed cross-claim; the degree of connection between the proposed cross-claim and the subject matter of the principal proceedings; and the desirability that all disputed matters between the parties connected with the subject matter of the proceedings be dealt with in the main trial: Trade Practices Commission v Allied Mills Industries Pty Ltd [1980] FCA 131; (1980) 33 ALR 127 at 129, 133, 134; Hunter Valley Developments Pty Ltd v Cohen (1984) 3 FCR 344 at 348–9; Sunbeam Corporation Ltd v Breville Pty Ltd [2007] FCA 496; Lendlease Project Management and Construction (Australia) Pty Ltd v Construction, Forestry Mining and Energy Union (No 3) [2011] FCA 912 at [18]; Tada Constructions Corporation Pty Ltd v JP Dixon Real Estate Pty Ltd (No 3) [2012] FCA 329.

47    In the circumstances of this case, I am not satisfied that leave should be granted to file the cross-claim.

48    First, no acceptable explanation has been provided as to why the cross-claim was not filed until this time. This application for leave was filed more than a year after any cross-claim was required to be filed. The Original Defence was filed in March 2020, and the cross-claim in July 2021. It is readily apparent from the evidence relied on by the respondents that they were aware of the substantial proportion of the cross-claim, being the unauthorised transactions fraud, for very many months. It was the basis on which the respondents say the applicant’s employment was terminated. It is unclear why on the evidence the matter was not attended to promptly. Certainly, the matters such as the embargo, on the evidence provided, for the reasons previously given, do not provide a proper explanation. That the respondents may know more now on which they wish to rely, or that counsel was only briefed in May 2021, or that it was not until counsel was briefed that it was apparent that a cross-claim should be filed, does not provide a proper basis.

49    Second, on the face of the Proposed Cross-Claim, there are obvious deficiencies, or issues as to the sufficiency of the pleading. Although not commenting on all the criticisms raised by the applicant, there is plainly force in at least some of that criticism. The respondents correctly submitted that this was not a strike out application, however, the state of the pleadings is plainly a relevant matter to consider when assessing whether leave should be granted.

50    The respondents in the Proposed Cross-Claim have not identified the claim, or pleaded facts which must be proved to establish the claim. In submissions, the respondents were not able to identify the legal basis of the claims made, or the legal elements of any such claim. It was submitted that it was a “general law” claim of fraud. In the absence of a claim being properly pleaded, the issue of jurisdiction of this Court to hear the matter is necessarily raised. The respondents were not able to articulate the basis of jurisdiction but submitted that the Court has jurisdiction because the issues arise in an employment context and that attracts the jurisdiction of this Court.

51    The pleadings appear, at least in part, to be a narrative of the chronology of events as to the investigation in this matter, which would have no relevance to establishing any claim. It includes irrelevant material. For example, the “embargo” is pleaded. The pleadings include such matters as the applicant being charged with a criminal offence. It is entirely unclear how that is relevant to the proof of any cross-claim. The respondents submitted in arguendo that the fact the applicant has been charged was relevant to proving the claim. It also pleads that the respondents became aware of certain facts at a particular point of time, or as a result of a particular process. It at times pleads evidence, and not material facts, with it being unclear as to what the material fact could be. The applicant submitted that the particulars to [27] appeared to be material facts, but if so there are deficiencies in aspects thereof. At one level it may be said that irrelevant material in the pleading does not result in the pleading being deficient. However, this is reflective of the respondents’ approach to the Proposed Cross-Claim which does not address the material facts necessary to be proved. It reflects a failure of the respondents to direct attention to a consideration of what must be established, to prove the cross-claim.

52    Irrespective of whether the applicant is correct in submitting that the Proposed Cross-Claim would be liable to be struck out, noting it needed a wholesale rewrite, at the very least there would likely be, as the applicant submitted, requests for further and better particulars and a strike out application in relation to substantial parts of the cross-claim. As a consequence, if leave is granted it would inevitably lead to further delay of these already delayed proceedings. The respondents accepted that was not a desired outcome.

53    Although the respondents were on notice of the criticisms to the pleadings made by the applicant, there was no attempt to address that prior to the hearing. That said, the respondents repeatedly submitted that there was nothing wrong with the pleadings and the applicant is on notice of their case.

54    In those circumstances, it would be inappropriate to grant leave to file a cross-claim which is deficient.

55    Third, the matters relied on which relate to the applicant’s employment claims are referred to in the Further Proposed Amended Defence, and therefore the respondents are not prejudiced in the conduct of these proceedings.

Costs

56    The applicant submitted that if leave were granted to withdraw the admissions, amend the defence and/or file the cross-claim, then costs should be awarded. Acknowledging that s 570 of the FW Act circumscribed costs in this jurisdiction, it submitted that s 570(2)(b) is satisfied. That is, the Court should order costs on the basis that the respondents’ unreasonable act or omission caused the applicant to incur costs.

57    In that context, the applicant notes the delay in bringing the application and the paucity of explanation provided for the delay. It has been a year since the respondents filed the Original Defence. The proposal to amend the defence came only after the applicant sought that the matter be set down for the filing of evidence and a final hearing. The respondents took no proactive steps to approach the applicant or the Court to remedy any deficiency in their defence at any earlier point, despite being on notice of the alleged change in circumstances since “late 2020”. In relation to the cross-claim, the applicant notes that the respondents have had knowledge of the unauthorised transactions fraud at all relevant times but have delayed in taking any action for over 18 months.

58    This delay was further exacerbated by the hearing of this application, originally listed for July 2021, being adjourned on the day of the hearing as the respondents had just filed but not served on the applicant an affidavit and cross-claim.

59    The applicant submitted that if I am not satisfied in relation to s 570, costs should be awarded against the solicitor, pursuant to s 43 of the FCA Act.

60    The applicant also claims costs in respect to the cross-claim, relying on essentially the same matters. The applicant added that despite apparently having knowledge at all relevant times of the unauthorised transactions fraud, which he contends amounts to over 85% of the value of the Proposed Cross-Claim, the respondents have sat on their hands for over 18 months before determining to take any action on it. The Leave Application is, in those circumstances, unreasonable.

61    Save for responding to questions in oral submissions, the respondents did not address the issue of costs squarely raised by the applicant. Ultimately, the respondents submitted that a costs order ought not to be made because their conduct in relation to each of the applications was not unreasonable.

Consideration

62    As the applicant correctly submitted, an amendment of the pleadings at this stage of the proceedings and leave to file a cross-claim are indulgences of the Court, which usually would result in a costs order in favour of the opposing party, which in this instance would be an order that the respondents pay the applicant’s costs thrown away as a result: Richmond v Ora Gold Limited [2020] FCA 70 at [49].

63    However, as the applicant acknowledged, in the circumstances of this case the Court’s power to order costs under s 43 of the FCA Act is circumscribed by s 570 of the FW Act. No costs order can be made unless one or more of the exceptions provided for in s 570(2) are established. Even if one or more of the exceptions are established, the power to order costs remains in the Court’s discretion: Ashby v Slipper (No 2) [2014] FCAFC 67; (2014) 314 ALR 84 at [7].

64    The applicant relies on s 570(2)(b), which applies when the Court is satisfied that a party’s unreasonable act or omission caused the other party to incur costs. Whether that is satisfied depends on the facts of the particular case. The fact that a party has conducted the litigation inefficiently will be relevant to, but not conclusive of, the party having acted unreasonably in the relevant sense: Tsilibakis v Transfield Services (Australia) Pty Ltd (No 2) [2015] FCA 1048 (Tsilibakis) at [8], citing Construction, Forestry, Mining and Energy Union v Clarke [2008] FCAFC 143; (2008) 170 FCR 574 (Clarke) at [29]-[30]. A party’s failure to comply with the duties imposed by s 37N of the FCA Act is also a relevant consideration: Tsilibakis at [8], citing Specsavers Pty Ltd v The Optical Superstore Pty Ltd [2012] FCAFC 183; (2012) 208 FCR 78 at [57]-[58].

65    I am mindful of the purpose behind s 570: Tsilibakis at [7], Ryan v Primesafe Pty Ltd [2015] FCA 8; (2015) 323 ALR 107 at [64], and that a Court should be careful not to exercise the discretion with too much haste, given that such haste may discourage parties with genuine grievances, for fear of an adverse costs order, from pursuing litigation under the FW Act, in the manner which they deem best: Clarke at [29].

66    Accepting that there was a mediation conducted in 2020, and accepting also that there was a police investigation and the applicant was charged with offences in September 2020, nonetheless there has been a delay in bringing these applications. The respondents are represented. The defence was filed in March 2020. On the respondents’ case, they were aware of the need to amend their defence, from mid-2020. No application was made and nor was the Court notified. The issue was only raised with the Court after the applicant had the matter called on for a case management hearing in March 2021 to request orders be made for the filing of evidence. The respondents opposed that course and appeared to suggest, without any application for a stay, that the matter should be adjourned pending the outcome of the criminal proceedings because, inter alia, they would be in a better position to decide what evidence was necessary. It was only the applicant’s request for a timetable which led to the respondents raising the need to amend their defence. A timetable was set accordingly, although not complied with by the respondents. The Further Proposed Amended Defence was not served until late May 2021, it being the second attempt at amending the defence.

67    No evidence was presented initially in support of this application, with evidence only being filed after the hearing of the matter was adjourned in July 2021. The evidence filed does not address the relevant issues, or provide a proper explanation for the delay. Moreover, the matters on which the admissions are now to be withdrawn are, or should be, within the respondents’ direct knowledge (for example, whether they employed the applicant, and the length of his employment).

68    Even when the Further Proposed Amended Defence was filed, the respondents did not file the cross-claim. An initial attempt by the respondents to suggest that this had not been done because there was no order to do so, ignores that it is for the respondents to make an application for leave given it was substantially out of time.

69    The respondents conduct in respect to the Further Proposed Amended Defence is not in isolation, with the delay in filing the cross-claim also delaying the hearing of this matter. The conduct in not filing and serving the applicant with the affidavit and cross-claim before the hearing on 15 July 2021, resulted in that hearing being adjourned. No proper explanation has been provided for these delays.

70    The respondents were on notice of the applicant’s criticisms of their approach to these applications, including there being no evidentiary basis to support the application for leave to amend the defence. Yet even though affidavits were filed, they do not address, or properly address, the relevant issues at hand. When that issue was again raised by the applicant in his submissions in respect to the cross-claim, the issue was not further addressed by the respondents.

71    The applicant has been put to avoidable expense in relation to these applications because of the unreasonable conduct of the respondents. I am satisfied that s 570(2)(b) is established in respect to the application to amend the defence. I note that there may be an issue as to whether the application to extend time to file a cross-claim of this nature falls within the restriction imposed by s 570, but if it does apply, it is also established in that regard. If it does not, costs would have been ordered in any event, in respect to the cross-claim. In all the circumstances, I am satisfied that costs should be awarded.

Conclusion

72    For the reasons above, I grant leave to the respondents to amend their Original Defence and withdraw admissions in the terms sought. However, I am not satisfied that leave should be granted to the respondents to file and serve their Proposed Cross-Claim. The respondents are to pay the applicant’s costs of these applications, to be agreed or assessed.

Associate:

Dated:    30 November 2021