Federal Court of Australia

Modco Residential Pty Ltd (in liq) v Nextruss Steel Pty Ltd (No 2) [2026] FCA 283

ORDERS

THE COURT ORDERS THAT:

1.    The second, sixth and ninth defendants' application for summary dismissal is dismissed.

2.    The plaintiffs pay the costs of the second, sixth and ninth defendants of and incidental to the application on an indemnity basis, such costs to be taxed if not agreed.

3.    Pursuant to r 1.40 and r 28.02 of the Federal Court Rules 2011 (Cth), the proceeding be referred to mediation before a registrar of the Court, to be conducted on the earliest date suitable to the registrar and the parties.

4.    The matter be adjourned to a case management hearing at 9.30 am AWST on 9 April 2026.

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

REASONS FOR JUDGMENT

BANKS-SMITH J:

1    The three remaining active defendants in this proceeding (the second, sixth and ninth defendants) applied to have the actions against them summarily dismissed on the basis of the plaintiffs' default by failing to prosecute the proceeding.

2    The first plaintiff (formerly a residential building company) is in liquidation. The second plaintiffs are its liquidators. The plaintiffs brought 'mothership' proceedings against a number of entities that provide trade services, asserting relevantly that they had received voidable unfair preference payments.

3    The dismissal application was brought by the defendants only after a long period in which the solicitor for the plaintiffs failed to respond to communications, including emails and phone messages, and failed to take any steps to progress the litigation.

4    For the reasons summarised below, I decided at the hearing not to dismiss the action and instead to allow it to proceed, subject to a tight time frame for disclosure of documents and mediation, and with a further case management hearing programmed.

5    However, the conduct of the plaintiffs was such that it is appropriate that they pay the defendants' costs of the application on an indemnity basis.

6    The statement of claim was filed in December 2024. Defences were filed in February 2025. The plaintiffs filed replies to the respective defences in February 2025. The defendants then properly raised a procedural issue in that the plaintiffs had commenced the proceeding without obtaining appropriate joinder. The plaintiffs subsequently sought and were granted leave: Modco Residential Pty Ltd (in liq) v Nextruss Steel Pty Ltd [2025] FCA 518. No steps have been taken to progress the proceeding since the date of the joinder orders (19 May 2025).

7    On 12 December 2025 the solicitor for the defendants emailed the plaintiffs' solicitor on the record, using the email address provided and on the court record, expressing concern about the delay in prosecution of the claims and reserving the defendants' right to apply for dismissal of the proceedings.

8    That right arose under r 5.23(1)(b) of the Federal Court Rules 2011 (Cth), read with r 5.22(d) of the Rules. In summary, by those rules a failure to prosecute a claim with due diligence may found an application for orders on default, including dismissal: see generally Askari v Life Without Barriers [2022] FCA 1347 at [69]-[81] (O'Callaghan J), referring to the principles discussed in Lenijamar Pty Ltd v AGC (Advances) Ltd (1990) 27 FCR 388 at 395-397 (Wilcox and Gummow JJ).

9    Once the power to dismiss a proceeding is enlivened, the question is whether it is appropriate in all the circumstances to do so.

10    The plaintiffs' solicitor did not reply to the email of 12 December 2025.

11    The defendants' solicitor made further attempts to email the plaintiffs' solicitor and also left a telephone message on 28 January 2026 (with an identified receptionist) for her to call him. No response to the email or phone message was received.

12    Having had no response, on 30 January 2026 the defendants lodged the interlocutory application and supporting affidavit and emailed the plaintiffs' solicitor attaching the relevant documents, again using the email address on the court record.

13    After inquiries, the defendants' solicitor found a different email address for the plaintiffs' solicitor, and re-sent the court documents to that address on 6 February 2026.

14    During February 2026 both the defendants' solicitor and the Court wrote to the plaintiffs' solicitor by email to the various email addresses but received no response. Relevantly, the Court informed the parties of the hearing date of the interlocutory application (17 March 2026).

15    Having heard nothing, both the defendants' solicitor and the Court prepared for the hearing on the basis that there would be no appearance by the plaintiffs.

16    On 16 March 2026 the plaintiffs' solicitor filed what purported to be a notice of change of solicitor. In fact, the solicitor on the record remained the same but had changed firms, and updated address details were provided. The updated email address for the solicitor was the email address utilised by the defendants' solicitor and the Court from 6 February 2026 onwards.

17    The importance of the identification, role and duties of the solicitor on the record in any litigation was the subject of observations in QGC Pty Ltd v Bygrave [2010] FCA 659; (2010) 186 FCR 376 at [44]-[57] (Reeves J). The Rules, including r 11.09 which provides for the filing of a notice of change of address for service, serve an important purpose in ensuring that a solicitor on the record, that is, an individual responsible for the conduct of the proceeding, is readily identifiable and can be contacted.

18    On the day of the hearing, the plaintiffs' solicitor filed an affidavit which purported to address the delay in progressing the matter and the non-responsiveness to communications.

19    The content of the affidavit was general in its nature. It referred to a member of staff of Hall Chadwick with daily carriage of the matter having left the firm in mid-2025. The second plaintiffs are partners of Hall Chadwick. That evidence says nothing about why the second plaintiffs, being liquidators and officers of the Court, did not diligently re-allocate the matter or indeed seek to assume the carriage of it themselves. After all, the liquidators would be expected to remain responsible for decisions relating to the proceeding. It says nothing as to the lack of any step in the proceeding between mid-2025 and 17 March 2026.

20    The plaintiffs' solicitor also deposed to a 'sudden partnership split' in mid-October 2025 of the three partners of the law firm where she worked, which saw her leave and join with one of those partners. This led to disruptions including moving to new premises, and her previous email address being inactive 'by mid-December 2025'. I accept that this event may have caused some disruption, but I also assume that, as solicitors, the respective partners had contingencies in place to ensure their clients' interests were protected. Such contingencies presumably included the checking and forwarding of emails. Otherwise, it is hard to imagine how clients' interests were protected.

21    During the hearing I asked whether the plaintiffs' solicitor had received the phone message of 28 January 2026 to which the defendants' evidence referred. It was accepted that the message had been received.

22    It was also acknowledged that the plaintiffs' solicitor received the email from the defendants' solicitor of 6 February 2026.

23    The plaintiffs' solicitor in her evidence said that she rang the defendants' solicitor on 16 March 2026 (the eve of the hearing).

24    There was no evidence as to why no communication was made either with the defendants' solicitor or the Court between 28 January 2026 and 16 March 2026. In fairness to the plaintiffs' solicitor, she properly apologised to the defendants' solicitor and the Court in relation to the events I have described and acknowledged the position of the defendants.

25    However, it is against that backdrop that the defendants' solicitor pursued the summary dismissal application, filed evidence and prepared submissions in support.

26    In the plaintiffs' solicitor's affidavit and submissions, it was submitted that the defendants' application should be dismissed with costs. The affidavit annexed what purported to be a discovery schedule. The solicitor indicated that the matter would now be pursued appropriately and that orders should be made in relation to discovery and mediation.

27    In all of the circumstances, I have decided that the proceedings should not be summarily dismissed. I am of the view that the plaintiffs have failed to pursue the proceeding with due diligence, such that the threshold of r 5.22(d) has been met. However, the delay in progressing the proceeding, if one takes into account the period between rectifying the joinder issue and 16 March 2025, has been some 10 months, which is not inordinate in the scheme of things. Further, the cause for at least some of the delay appears to rest with the plaintiffs' solicitors, rather than the second plaintiffs. It would be unduly harsh in those circumstances to dismiss the proceeding without permitting the plaintiffs the opportunity to now move swiftly to litigate or resolve the matter. The plaintiffs and their lawyers have obligations under s 37N of the Federal Court of Australia Act 1976 (Cth) of which they are no doubt aware.

28    The course which is in the interests of justice in all the circumstances is to timetable the proceeding so that the parties confer about document disclosure, direct the matter be referred to mediation by a registrar of this Court, and bring the parties back for a further case management hearing in three weeks to ensure that positive steps have been undertaken by the plaintiffs. I note that the cumulative amount in issue is likely to be disproportionate to the costs of litigation to trial, but that is a matter that experienced litigators, such as the second plaintiffs, will no doubt take into account.

29    Although it follows that the defendants' application for summary dismissal is to be dismissed, the defendants should have their costs. They had little choice but to proceed in the manner in which they did. They have acted courteously and conscientiously. I raised during the hearing that in light of the lack of communication on the part of the plaintiffs and the absence of a fulsome explanation, I considered that it would be appropriate that indemnity costs be ordered. The plaintiffs' solicitor indicated that she was in the Court's hands in that regard, and relied on her submissions. I have had regard to those submissions and to all that was said during the course of the hearing. However, I am of the view that this is one of those occasions where unreasonable conduct on the part of the plaintiffs or their solicitors makes it appropriate that an indemnity costs order be made.

30    There will be orders accordingly.

Associate:

Dated:    18 March 2026