Federal Court of Australia

Davies v Stewart [2024] FCA 249

ORDERS

THE COURT ORDERS THAT:

1.    Pursuant to s 16(1)(a) of the Administrative Decisions (Judicial Review) Act 1977 (Cth), the decision of the respondent notified in his letter of 20 June 2023 to the applicants is set aside with effect from the date of this order.

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

REASONS FOR JUDGMENT

BANKS-SMITH J:

1    This is an application by Mr Davies, purportedly in his own right and on behalf of Triclops Technologies Pty Ltd, for review of a decision of a Registrar of this Court to refuse to accept certain documents for filing. The Registrar has filed a submitting notice.

2    Rule 2.26 of the Federal Court Rules 2011 (Cth) provides as follows:

Refusal to accept document for filing - abuse of process or frivolous or vexatious documents

A Registrar may refuse to accept a document (including a document that would, if accepted, become an originating application) if the Registrar is satisfied that the document is an abuse of the process of the Court or is frivolous or vexatious:

(a)    on the face of the document; or

(b)    by reference to any documents already filed or submitted for filing with the document.

3    The decision to refuse to accept documents for filing is of an administrative character and susceptible to review pursuant to s 5(1) of the Administrative Decisions (Judicial Review) Act 1977 (Cth) (ADJR Act): see Satchithanantham v National Australia Bank Limited [2010] FCAFC 47 at [49] (Marshall, Cowdroy and Buchanan JJ); and Nyoni v Murphy [2018] FCAFC 75; (2018) 261 FCR 164 at [32]-[37] (Barker, Banks-Smith and Colvin JJ).

Leave refused for Triclops to proceed without legal representation

4    As a preliminary matter, contrary to r 4.01(2) of the Rules, Triclops is not represented by a lawyer.

5    Although the Court has a discretion, which does not require exceptional or special circumstances in order to be enlivened, the ordinary rule is that a company is to be represented by a lawyer. A departure from that ordinary rule requires the Court to be satisfied that there is a reason for so doing. I was not satisfied in this case that there was a reason for doing so and I refused leave to Triclops to appear otherwise than with legal representation. I did so taking into account that I had concerns as to the capacity of Mr Davies to properly conduct legal proceedings on its behalf; the manner in which the application and supporting documents had been prepared; and the unlikelihood that any proceedings could progress without legal representation: see generally Termi-Mesh Australia Pty Ltd v Josu Manufacturing Pty Ltd [1999] FCA 1241 at [12]-[14].

6    Accordingly, I will proceed on the basis that only Mr Davies pursues this application.

Underlying proceedings

7    By way of background, Mr Davies and Triclops were the unsuccessful applicants in Davies v Lazer Safe Pty Ltd [2018] FCA 702 (McKerracher J) delivered 18 May 2018. Their appeal from the orders made by the primary judge was also unsuccessful: Davies v Lazer Safe Pty Ltd [2019] FCAFC 65 (Greenwood, White and Burley JJ) delivered 26 April 2019.

8    The proceedings relate to alleged patent infringements. At the relevant time Mr Davies and Triclops were the owner and licensee respectively of a particular patent. The decisions culminated in findings that the respondent, Lazer Safe Pty Ltd, did not by its products infringe the asserted patent.

Originating application alleging fraud

9    By originating application submitted for filing on 19 June 2023, and accompanied by a purported statement of claim (56pp) and affidavit (758pp), the applicants seek orders to 'vary' the judgment in both decisions, although they state that they would consider the option of 'entirely replacing' the judgments. They seek a declaration that a director of Lazer Safe, who was not a party to the previous proceedings, 'directly engaged in actual fraud' in those proceedings. They also seek a declaration that Lazer Safe participated in the fraud. They seek some 12 other orders which in effect replace findings of the Court made in the proceedings, and seek royalties, exemplary damages and a range of other relief.

10    The application is said to be brought pursuant to r 39.05 of the Rules 'and/or the inherent equity jurisdiction of the Federal Court of Australia per [s] 5(2) of the Federal Court of Australia Act 1976 (Cth)'.

Proceedings to set aside judgment on the basis of fraud

11    Rule 39.05(b) provides that the Federal Court may set aside or vary any judgment or order after it has been entered if it was 'obtained by fraud'.

12    More generally, the Court retains the equitable jurisdiction to set aside a perfected judgment outside a statutory appeal where there has been actual fraud. The scope of this power was the subject of the High Court's decision in Clone Pty Ltd v Players Pty Ltd (In Liquidation) (Receivers & Managers Appointed) [2018] HCA 12; (2018) 264 CLR 165. As the High Court confirmed, a party that wishes to impeach a judgment on the ground of fraud may institute independent proceedings for that purpose.

13    The decision in Commissioner of Taxation v Rawson Finances Pty Ltd [2023] FCA 617 (Perry J) is an example of such a proceeding. The following summary of the principles can be extracted from her Honour's reasons at [57]-[78]:

(a)    it is generally appropriate for a party wishing to impeach a judgment on the ground of fraud to institute independent proceedings for that purpose (Clone at [32]);

(b)    an action to set aside an earlier judgement for fraud is not a procedural application but a cause of action;

(c)    the power to set aside a judgment on the ground of fraud requires actual fraud, reflecting the public interest in the finality of litigation;

(d)    the fraud must be actual positive fraud, a meditated and intentional contrivance to keep the parties and the Court in ignorance of the real facts of the case and obtaining the orders by that contrivance (Clone at [55], [69], approving relevantly Patch v Ward (1867) LR 3 Ch App 203 at 212-213);

(e)    serious malpractice by a party's lawyers would not suffice, and nor would accident, surprise, mistake or a lack of frankness alone (Clone at [55], [57]);

(f)    as the essence of the action is fraud, it 'must be pleaded distinctly and with particularity and clearly proved' (Krakowski v Eurolynx Properties Ltd (1995) 183 CLR 563 at 573; Clone at [62]; and r 16.42 of the Rules);

(g)    where a condition of mind such as a fraudulent intention is alleged as part of the fraud, this must also be properly particularised (r 16.43 of the Rules); and

(h)    to the extent decisions such as Spalla v St George Motor Finance Ltd (No 5) [2004] FCA 1262 at [61] and Monroe Schneider Associates (Inc) v No 1 Raberem Pty Ltd (No 2) (1992) 37 FCR 234 suggested that there was a requirement that the evidence relied upon to set aside an earlier decision for fraud could not have been discovered by the time of the trial with reasonable diligence, they are to be read subject to Clone (at [63]-[68]) and do not represent the current position of the authorities.

14    I would add to her Honour's references to Clone the following paragraph from the High Court's reasons, as it highlights the significance of the issue:

[63]    The second ground of appeal raised the issue of whether there is a further precondition requiring an applicant who seeks to set aside a judgment for fraud to establish that reasonable diligence was taken prior to the judgment to discover the fraud. Such a requirement is not present in other areas of the law concerned with fraud. As Brennan J said in Gould v Vaggelas [(1984) 157 CLR 215 at 252], '[a] knave does not escape liability because he is dealing with a fool'. The effect of such a requirement would be that a judgment might be set aside for a less serious, but well concealed, fraud but the judgment could never be set aside for an extremely serious but brazen fraud that could reasonably have been detected.

The other documents - statement of claim and affidavit

15    Mr Davies purported to file a statement of claim with the originating application. Rule 8.05 requires a statement of claim to accompany an originating application. He also purported to file an affidavit which he said 'explains' the statement of claim.

16    The references from Rawson Finances to the need to plead fraud allegations with particularity and the requirements of r 16.42 and r 16.43 are particularly relevant in this regard.

Registrar's decision

17    The Registrar refused to accept the documents for filing, providing reasons to Mr Davies by letter dated 20 June 2023 which relevantly state as follows (without editing):

Reasons for refusing documents for filing:

Rule 2.26 of the Federal Court Rules 20211 (Cth) (Rules) states:

A Registrar may refuse to accept a document (including a document that would, if accepted, become an originating application) if the Registrar is satisfied that the document is an abuse of the process of the Court or is frivolous or vexatious:

(a)    on the face of the document; or

(b)    by reference to any documents already filed or submitted for filing with the document.

The term 'abuse of process' includes an application which has no prospects of success and is doomed to fail.

The Documents seek relief by way of r 39.05 of the Rules in respect of decisions of the Federal Court in proceedings WAD670/2015 and WAD251/2018. The former was concluded in June of 2018, whilst the latter, an appeal from the former, was concluded in December of 2019. It is unclear from the Documents which sub-r is relied upon, however I have presumed given repeated references to 'fraud' throughout the Documents that it is sub-r 39.05(b). An applicant making such an application has a high threshold to overcome. As set out by Kenny J in Wu v Avin Operations Pty Ltd (No 2) [2006] FCA 792 at [24], 'there must be sufficient evidence of the facts that establish the alleged fraudulent conduct and the part played by the party having the benefit the order' and 'the evidence of the fraud must be evidence that was not available and could not have been discovered with reasonable and proper diligence before the order under challenge was made.'

From review of the evidentiary material in the Documents in light of the comments set out above, I do not consider that the material discloses on its face a properly brought application under r 39.05(b) and, if accepted, I consider that it has no prospects of success and would be doomed to fail. Accordingly, I consider the Documents to be an abuse of process and frivolous or vexatious.

For the above reasons, I refuse to accept the documents pursuant to r 2.26 of the Rules.

Review from decision to refuse filing

18    Section 5 of the ADJR Act sets out the grounds on which a person who is aggrieved by a decision to which that Act applies may apply to the Court for an order of review. It relevantly provides:

Applications for review of decisions

(1)    A person who is aggrieved by a decision to which this Act applies that is made after the commencement of this Act may apply to the Federal Court or the Federal Circuit and Family Court of Australia (Division 2) for an order of review in respect of the decision on any one or more of the following grounds:

(a)    that a breach of the rules of natural justice occurred in connection with the making of the decision;

(b)    that procedures that were required by law to be observed in connection with the making of the decision were not observed;

(c)    that the person who purported to make the decision did not have jurisdiction to make the decision;

(d)    that the decision was not authorized by the enactment in pursuance of which it was purported to be made;

(e)    that the making of the decision was an improper exercise of the power conferred by the enactment in pursuance of which it was purported to be made;

(f)    that the decision involved an error of law, whether or not the error appears on the record of the decision;

(g)    that the decision was induced or affected by fraud;

(h)    that there was no evidence or other material to justify the making of the decision;

(j)    that the decision was otherwise contrary to law.

(2)    The reference in paragraph (1)(e) to an improper exercise of a power shall be construed as including a reference to:

(a)    taking an irrelevant consideration into account in the exercise of a power;

(b)    failing to take a relevant consideration into account in the exercise of a power

…

19    During the hearing I invited Mr Davies to identify the paragraphs of s 5(1) of the ADJR Act upon which he sought to rely. He referred to s 5(1)(a), (e), (f), (h) and (j).

The applicant's submissions

20    Mr Davies submitted that the Registrar failed to take into account that his claim was not limited to a claim under r 39.05(b), and wrongly applied Wu v Avin Operations Pty Ltd (No 2) [2006] FCA 792 at [24] without regard to Clone.

21    The relevant paragraph in Wu v Avin states (at [24]):

Thirdly, although Mr Armitage sought also to rely on O 35 r 7(2)(b), he has not adduced sufficient evidence to make out a case that the order was obtained by fraud. Plainly, any allegation of fraud is extremely serious. Before an order can be set aside on the ground of fraud, there must be sufficient evidence of the facts that establish the alleged fraudulent conduct and the part played by the party having the benefit the order. The fraudulent conduct must be 'directly material' to the order and the evidence of the fraud must be evidence that was not available and could not have been discovered with reasonable and proper diligence before the order under challenge was made: see Monroe Schneider Associates (Inc) v No 1 Raberem Pty Ltd (No 2) (1992) 37 FCR 234 at 242. Mr Armitage's affidavit of 16 May 2006 did not satisfy these requirements. Accordingly, it is not open to him to rely on O 35 r 7(2)(b).

22    I agree that the Registrar has confined his reasons to consideration of r 39.05(b) and, by reference only to Wu v Avin, and based on the limited reasons given, has not properly taken into account either the fact that Mr Davies also brought his claim as a separate proceeding in equity or the relevance in that regard of the decision in Clone, as explained in Rawson Finances.

23    In my view the Registrar made an error of law in treating a diligence factor as a precondition - that is, that 'the evidence of the fraud must be evidence that was not available and could not have been discovered with reasonable and proper diligence before the order under challenge was made'. There might be occasions when a registrar has regard to this as one of a number of factors, so that one might say with confidence that their approach to this factor has not influenced an outcome that they would have come to in any event. There is also potential for diligence to remain relevant as a discretionary factor. But the difficulty in this case is that the appropriately short reasons reveal a cumulative approach - that is, that the Registrar proceeded on the basis that there was a mandatory diligence requirement that needed to be satisfied and revealed by the pleadings, in addition to other matters to which he referred. So, in considering for the purpose of r 2.26 whether the documents were an abuse of process or frivolous and vexatious, the Registrar expressly took the diligence factor into account as a necessary factor. Having regard to Clone, as explained in Rawson Finances, in my view this constitutes an error of law within the purview of s 5(1)(f) and it is not necessary to consider the other provisions of s 5(1) relied upon by Mr Davies further.

24    There may well be other bases upon which the filing of these documents might properly have been refused. But the appropriate course is that the Registrar's decision be set aside.

25    Mr Davies relevantly seeks a number of orders. The orders that the court might make on such an application are the subject of s 16 of the ADJR Act. Relevantly, s 16(1)(a) permits the Court to make an order setting aside the decision of the Registrar. Mr Davies also seeks an order reversing the Registrar's decision and directing that the documents be accepted for filing. It is not appropriate to make such an order: see SZVCP v Cho [2017] FCA 310; (2017) 250 FCR 225 at [46]; Reaper v Luxton [2017] FCA 949 at [37]; and Frigger v Trott [2021] FCA 18 at [42]. As explained in analogous circumstances in Frigger v Trott, the Court has determined that the decision will be set aside; it has not determined that the decision is incorrect, and has not decided that the documents should be accepted for filing.

26    As I have said, the order that is appropriate in this case is an order setting the Registrar's decision aside. As I discussed with Mr Davies during the hearing, if I decided to set aside the decision, it would then be for Mr Davies to lodge the documents again, if he wishes, and for a Registrar of this Court to consider afresh whether to accept them for filing.

Associate:

Dated:    15 March 2024