CTHFCA

Adam P. Brown Male Fashions Pty Ltd v Philip Morris Inc

[1995] FCA 566

Federal Court of Australia|1994-10-21|Before: Adam P, Levine J, Whitlam JJ, Wilcox J, Davies J

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At a glance

Source facts

Court

Federal Court of Australia

Decision date

1994-10-21

Before

Adam P, Levine J, Whitlam JJ, Wilcox J, Davies J

Source

Original judgment source is linked above.

Judgment (20 paragraphs)

[1]

CATCHWORDS JUDGMENTS AND ORDERS - conditional order for summary dismissal of proceedings - power to dismiss proceedings - O 10 r 7 Federal Court Rules - conditional upon failure of party to comply with an order of the court directing the party to take a step in the proceedings - delay so great that wrong to vary orders - action of applicant demonstrated a lack of genuine intention to bring matter to trial BANKRUPTCY - Bankruptcy Act 1966, ss 60(4), 116(2)(g) - bankrupt may continue an action commenced before becoming bankrupt in respect of personal injury or wrong only - defamation claim for special damage caused to business or professional practice may only be prosecuted by trustee DEFAMATION - dishonouring of a cheque - defamation requires publication - no extrinsic facts pleaded - importance of words endorsed on cheque - applicant adequately to specify statement alleged to have been made about him PRACTICE AND PROCEDURE - interlocutory orders and requirement of leave to appeal - review of decision as to practice and procedure - whether decision erred in principle and worked a "substantial injustice" to one of the parties - error in exercise of discretion - fact that defamation action could be continued in applicant's own name was a material consideration not taken into account Bankruptcy Act 1966, ss 60(4), 116(2)(g) Federal Court Rules, O 10 r 7, O 32 r 2 Practice and Procedure Adam P. Brown Male Fashions Pty Ltd v Philip Morris Inc (1981) 148 CLR 170 Carr v Finance Corporation of Australia Ltd (No1) (1981) 147 CLR 246 Computer Edge Pty Ltd v Apple Computer Inc (1984) 54 ALR 767 Re Jokai Tea Holdings Ltd [1992] 1 WLR 1196 Lenijamar Pty Ltd v AGC (Advances) Ltd (1990) 27 FCR 388 Defamation Drummoyne Municipal Council v Australian Broadcasting Corporation (1990) 21 NSWLR 135 Raafbye Corporation Pty Ltd and ors v Westpac Banking Corporation Ltd (Levine J, Supreme Court of NSW, 21 October 1994, unreported) Bankruptcy Fuller v Beach Petroleum NL (1993) 43 FCR 60 Holmes v Goodyear Tyre & Rubber Co (Aust) Ltd (1984) 73 FLR 88 MICHAEL VINCENT BOURKE, L&M HOLDINGS PTY LTD, LRA RESTAURANTS PTY LTD, HUNTER DEVELOPMENT CO PTY LTD, EMAS PTY LTD, BONOTO PTY LTD, KRYS PROPERTIES PTY LTD, AVITO PTY LTD and TERENCE MARCELLIN BOURKE v STATE BANK OF NEW SOUTH WALES Beaumont, Einfeld and Whitlam JJ Sydney 4 August 1995

[5]

By that date sequestration orders had been made against the estates of Mr Bourke and Terence Bourke. Mr Bourke again appeared for the applicants. However, since an appeal had been lodged against the sequestration orders, Wilcox J fixed a further directions hearing for 12 May 1992. On that date Wilcox J gave directions that (1) a further directions hearing be fixed for 26 June 1992, (2) any motion by the bank for orders that the proceeding be dismissed for want of prosecution or that the applicants provide security for costs, be fixed for that date, (3) any notice of such motion be filed and served by 15 June 1992, together with affidavits in support, and (4) any affidavits for the applicants be filed and served by 22 June 1992. Mr Bourke appeared for the applicants at this hearing. The bank did file on 15 June 1992 notice of such a motion and an affidavit in support. The applicants filed no affidavits. However, at the next directions hearing and on a further six occasions the hearing of the bank's motion was adjourned by Wilcox J in order to await the determination of the appeal against the sequestration orders. Mr Bourke appeared for the applicants at each adjournment. On 8 December 1993 the appeal against the sequestration orders was dismissed: Bourke v Beneficial Finance Corporation Limited (1993) 47 FCR 264. At a hearing on 10 December 1993 Wilcox J gave directions with respect to the giving of evidence at the trial of the proceeding. Mr Bourke appeared for the applicants. An order was made that the evidence of witnesses in chief be given by affidavit subject to their attendance for cross-examination. A timetable was fixed, including a direction that affidavits for the applicants be filed and served by 11 February 1994. The applicants failed to comply with that order, and the bank applied, pursuant to liberty reserved, to have the proceeding re-listed. Mr Bourke then filed five affidavits. On 2 March 1994 the matter was listed before Wilcox J. Mr Bourke appeared for the applicants. His Honour made orders that the applicants have leave to amend their statement of claim by filing and serving a fresh document not later than 14 March 1994 and that they file and serve any further affidavits upon which they intended to rely by 14 March 1994. The other steps in the timetable fixed on 10 December 1993 were vacated. The bank's motion was adjourned for hearing on 30 March 1994 and directions were given as to the filing of affidavits in relation to that motion. Subsequently, on 7 March 1994, Mr Bourke filed one further affidavit of a witness to be relied upon at trial. The hearing date of 30 March 1994 fixed for the bank's motion was vacated. A further directions hearing was then held before Wilcox J on 29 April 1994. This time Mr J.T. Svehla of counsel appeared for the applicants. An order was made that any amended statement of claim be filed and served by 27 May 1994. His Honour gave detailed directions with respect to the bank's motion, which he fixed for hearing on 15 June 1994. Any affidavits for the applicants in respect of the motion were to be filed and served by 27 May 1994. In addition, the solicitors for the applicants were to file and serve by 27 May 1994 a letter from the trustee of the estates of Mr Bourke and Terence Bourke indicating what course he proposed to take in connection with the matter. Any affidavits in reply for the bank were to be filed and served by 3 June 1994.

[7]

Summary Dismissal without a Hearing on the Merits On Wednesday 15 June 1994 the bank's motion came on for hearing before Wilcox J. At the commencement of the hearing Mr Svehla announced his appearance for the corporate applicants only. Later in the morning he explained that he was not appearing for Mr Bourke or Terence Bourke "today" because the evidence indicated that the trustee of their estates was "deemed to have made an election not to continue with proceedings". Mr Svehla said "just given that fact alone, I am not in a position and my instructing solicitor is not in a position to appear for the Bourkes personally". Mr Bourke and his brother were not present in the courtroom. There was accordingly no appearance for these parties on the hearing of the motion. Counsel for the bank read the affidavit of a solicitor employed by the bank. Amongst other things, this evidence showed that, as long ago as 7 December 1990, the bank had invited the applicants to amend their statement of claim in the light of the High Court's order affirming the decision of Wilcox J to strike out several paragraphs. It also showed that on 16 March 1992 the bank had given notice of the proceeding to the Bourkes' trustee who had made no election under s 60(2) of the Bankruptcy Act. Mr Svehla adduced no evidence. He did say that "last Thursday" he had settled an amended statement of claim and affidavits to be made by Mr Bourke and Terence Bourke. He also said that "those documents were forwarded to the clients on Thursday", but that the affidavits had not been sworn and his instructing solicitor had not received instructions to file the amended pleading. In relation to the application for security for costs, Mr Svehla conceded that the corporate applicants would be unable to pay an order for costs made against them. Nor did he contend that the amount of $40,000 requested by the bank was unwarranted. Wilcox J then made the following orders: "1. Order that the proceedings stand dismissed unless not later than Friday 1 July 1994 the applicant companies: (a) file and serve an amended statement of claim; (b) file and serve all affidavits on which they propose to rely at the trial in respect of issues of liability; (c) provide security in the sum of $40,000 either by cash deposit with the Registrar or by payment into a bank account under the joint control of the solicitors for the applicant companies and the respondent or such other form as the solicitor for the respondent may agree in writing. 2. Order that the proceedings insofar as they are brought in the names of Michael Vincent Bourke and Terence Bourke be dismissed forthwith.

[9]

Application to Vary Conditional Order for Summary Dismissal Late on the afternoon of Friday 1 July 1994 Davies J heard an ex parte application by the corporate applicants. They sought a stay of the self-executing order made by Wilcox J which was about to come into operation that day. Mr Svehla again appeared. He filed in court notice of a motion to vary that order, which Davies J then suspended until 5pm on 8 July 1994. Mr Svehla was also prepared to file in court the corporate applicants' amended statement of claim and an affidavit of Mr Bourke sworn 1 July 1994. Davies J noted this fact. The motion to vary was heard by Davies J on 7 July 1994. It sought to extend the time for filing and serving the corporate applicants' affidavits on liability to 2 September 1994 and also to alter the time and manner of giving security for costs. In support of the motion Mr Svehla filed and read the affidavit of Mr Bourke sworn 1 July 1994, two affidavits of John Winter and an affidavit of Mr Bourke's wife. This evidence was admitted over objection by counsel for the bank, who cross-examined Mr Winter but otherwise adduced no evidence. Much of the evidence was relevant to the security for costs aspect of the motion. In the light of the reasons given by Davies J for refusing the motion, that evidence need not be summarized. The only evidence touching on the applicants' past defaults was given by Mr Winter. He was a consultant on waste water treatment and was to provide the security for cost moneys out of his consulting fees. He had been a director of the corporate applicants since 16 January 1993. Mr Winter apparently attended, together with Mr Bourke, at the hearing on 15 June 1994, but they did not arrive until just before 11am as Wilcox J was pronouncing his orders. He said that prior to that date Mr Bourke had been authorized to represent the corporate applicants in the proceeding, but that he had since taken over its complete care and control. No costs had, however, yet been paid to the companies' solicitors who were owed, as at 22 June 1994, just under $10,000. Annexed to one of Mr Winter's affidavits were medical certificates that Mr Bourke was unfit for his usual work from 12 June 1994 to 17 June 1994 inclusive and from 1 July 1994 until 8 July 1994. It emerged in cross-examination that Mr Winter was not aware that the applicants had failed to comply with the directions of Wilcox J with respect to filing and serving their affidavits for the hearing on 15 June 1994. As we have already mentioned, the corporate applicants' motion was refused. After setting out the history of the matter, Davies J said: " By 1 July, the applicants were in the position to file an amended statement of claim and an affidavit by Mr Bourke but the other affidavits upon which the applicants intended to rely at the trial had not been prepared. I am now informed by Mr Svehla that there will be a large number of people in the Maitland area to interview, that these people have not been interviewed and that several months will be required for the preparation of affidavits. That really means that the preparation of the case is at a very early stage. Relevant witnesses have not been interviewed. The security for costs is not a matter which would trouble me very much if that were the only problem. Mr Winter, who is the director of some of the applicant companies, has deposed that he can raise $10,000 within 7 days and can pay a further $5000 a month until the $40,000 is paid off. I would see no reason not to make some appropriate order with respect to security for costs. I think that this is a minor matter in the case.

[16]

The limitation period for the causes of action pleaded in paragraph 28 had obviously expired when Wilcox J made his order on 15 June 1994. The position in relation to the cause of action pleaded in paragraph 54 does not appear from the facts alleged. However, let it be assumed in Mr Bourke's favour that the time within which that claim might be brought had also expired. Then, in respect of all these causes of action, if Wilcox J's discretion miscarried, his decision would work a "substantial injustice": Adam P. Brown Male Fashions Pty Ltd v Philip Morris Inc (1981) 148 CLR 170 at 177. Accordingly, it is desirable to consider first, on Mr Bourke's appeal, whether his Honour's discretion miscarried. When dismissing the proceeding insofar as it was brought in the names of the Bourkes, Wilcox J did not advert to the defamation claims. The affidavit in support of the bank's motion did show that the questions of law involved in the proceeding included the circumstances in which the dishonouring of a cheque constitutes defamation. But counsel for the bank (who also appeared below) concedes that the question whether Mr Bourke's defamation actions might be continued in his own name was not mentioned in submissions. (Indeed, as appears from Mr Svehla's announcement of the reason for the altered basis of his appearance on 15 June 1994, the view appears to have been taken by Mr Bourke's legal advisers that their retainer to act in any way for him in the proceeding had been withdrawn by operation of the Bankruptcy Act.) Section 60 of the Bankruptcy Act relevantly provides: "(2) An action commenced by a person who subsequently becomes a bankrupt is, upon his becoming a bankrupt, stayed until the trustee makes election, in writing, to prosecute or discontinue the action. (3) If the trustee does not make such an election within 28 days after notice of the action is served upon him by a defendant or other party to the action, he shall be deemed to have abandoned the action. (4) Notwithstanding anything contained in this section, a bankrupt may continue, in his own name, an action commenced by him before he became a bankrupt in respect of: (a) any personal injury or wrong done to the bankrupt, his spouse or a member of his family; or (b) the death of his spouse or of a member of his family. ... (5) In this section, "action" means any civil proceeding, whether at law or in equity."

[17]

Wilcox J plainly had regard to s 60 (2) and (3) in adjourning in 1992 and 1993 the bank's motion pending the disposition of the appeals against the sequestration orders and also in framing on 29 April 1994 the specific direction about the trustee. But the language of the order actually made suggests two things: first, that it was designed to protect the position of the trustee (bearing in mind that the applicants' solicitors had not filed a letter from him in compliance with the direction given on 29 April 1994); and, secondly, no separate attention was paid to the position of Mr Bourke, whose defamation actions could only be continued (at least to the extent that he did not claim special damages) in his own name by virtue of s 60(4). It must be concluded that his Honour overlooked the possible effect of s 60(4) on the defamation actions. It might have been different if Mr Bourke had not been absent from the hearing, especially if he had been represented. The question whether Mr Bourke's defamation claims might be continued in his own name was a material consideration which, since his Honour gave no reasons for his orders, appears not to have been taken into account. Accordingly, there was an error in the exercise of the discretion, which now may be exercised afresh by this Full Court. Mr Bourke submits that his actions should not be summarily dismissed because his conduct cannot be classified as contumelious. He extracts this test from the judgment of Sir Nicolas Browne-Wilkinson V-C in Re Jokai Tea Holdings Ltd [1992] 1 WLR 1196 at 1202-1203. That case was concerned with an application for leave to amend a defence in circumstances where the defendants had failed to comply with an earlier peremptory order of the court. Nonetheless, his Lordship relied upon English authorities which Wilcox and Gummow JJ have said "afford little assistance" in relation to the summary dismissal of proceedings in this Court: Lenijamar Pty Ltd v AGC (Advances) Ltd (1990) 27 FCR 388 at 394. The power to dismiss the proceeding is conferred by O 10 r 7 of the Federal Court Rules. The scope of that power and the principles applicable to its exercise were expounded in Lenijamar by Wilcox and Gummow JJ (at 395-397):

[18]

" It is to be noted that the power given by this rule 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. There is no requirement of intentional default or contumelious conduct, although 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 will usually be important factors in weighing the proper exercise of the discretion conferred by the rule. There is no requirement of "inordinate and inexcusable delay" on the part of the applicant or the applicant's lawyers, although any such delay is likely to be a significant matter. There is no requirement of prejudice to the respondent, although the existence of prejudice is also likely to be significant. And it must be remembered that, in almost every case, delay adversely affects the quality of the trial and is an additional burden upon the parties. ... The discretion conferred by O 10, r 7 is unconfined, except for the condition of non-compliance with a direction. As it is impossible to foresee all of the circumstances under which the rule might be sought to be used, it is undesirable to make any exhaustive statement of the circumstances under which the power granted by the rule will appropriately be exercised. We will not attempt to do so. But two situations are obvious candidates for the exercise of the power: cases in which the history of non-compliance by an applicant is such as to indicate an inability or unwillingness to co-operate with the Court and the other party or parties in having the matter ready for trial within an acceptable period and cases - whatever the applicant's state of mind or resources - in which the non-compliance is continuing and occasioning unnecessary delay, expense or other prejudice to the respondent. Although the history of the matter will always be relevant, it is more likely to be decisive in the first of these two situations. Even though the most recent non-compliance may be minor, the cumulative effect of an applicant's defaults may be such as to satisfy the judge that the applicant is either subjectively unwilling to co-operate or, for some reason, is unable to do so. Such a conclusion would not readily be reached; but, where it was, fairness to the respondent would normally require the summary dismissal of the proceeding. In the second of the two situations we postulate, a significant continuing default, it does not really matter whether there have been earlier omissions to comply with the Court's directions. Ex hypothesi the default is continuing and is imposing an unacceptable burden on the respondent. But the continuance of the non-compliance is of the essence of this situation. If, when the Court looks at the matter, the direction has already been complied with, the defaulting applicant may be ordered to pay any wasted costs; but it would be difficult to justify the dismissal of the proceeding solely because of that default."

[19]

In the present case the first thing to be noticed is that the pleading of the defamation counts was seriously defective. Defamation requires publication. Here none was alleged. There was no indication of when, to whom or how publication was made. Nor was there any allegation as to the words published. In the case of cheques, any words endorsed on them may assume exquisite importance: see, for example, Raafbye Corporation Pty Ltd and ors v Westpac Banking Corporation Ltd (Levine J, Supreme Court of New South Wales, 21 October 1994, unreported). It may also be fairly guessed that the count in paragraph 28 of the statement of claim would need to have been pleaded by Mr Bourke as a true innuendo. This would have required the pleading of extrinsic facts. Ordinary principles of pleading also require a plaintiff adequately to specify the statement which he says was made about him: Drummoyne Municipal Council v Australian Broadcasting Corporation (1990) 21 NSWLR 135 per Gleeson CJ at 136-137. Only when the defamatory meanings upon which a plaintiff relies have been specified can a defendant have a fair opportunity to defend the action. In the case of a bank there may well, of course, be defences of qualified privilege available. There is an additional complication, which we touched on earlier in the context of the material considerations for Wilcox J. Mr Bourke is entitled to continue in his own name under s 60(4) of the Bankruptcy Act that part of his defamation actions in which he claims damage for injury to his credit, character and reputation. However, insofar as the actions may relate to injury caused to his business or professional practice, such a claim may only be prosecuted by his trustee: see Holmes v Goodyear Tyre & Rubber Co (Aust) Ltd (1984) 73 FLR 88. The bank adduced no evidence of prejudice suffered in its ability to defend Mr Bourke's defamation claims. It could hardly do so on the present state of the pleadings. However, the discussion above should be sufficient to indicate the impossible situation in which the bank would have been placed had it been required to defend defamation counts based on unknown facts antedating 1988 where the relevant imputations had not yet been alleged. Mr Bourke had declined to amend the statement of claim since the bank first invited him to do so three and half years earlier on 7 December 1990. If he had always intended to pursue his defamation actions, the proper pleading of such claims did not need to abide the outcome of his appeal against the sequestration order. Any costs incurred by him need not have been wasted. By 11 February 1994 the applicants were in default. They had failed to file any evidence for trial. It could not be gainsaid that Mr Bourke had exhibited in his carriage of the proceeding on behalf of the applicants to that point an unwillingness or inability to get it ready for an early trial. Subsequently he twice failed to avail himself of leave to amend the statement of claim. It should be noted that on 1 July 1994 Mr Svehla sought to file in court an amended statement of claim solely on behalf of the corporate applicants. Further, the affidavit of Mr Bourke sworn 1 July 1994 was subsequently filed as evidence of the facts on which the corporate applicants' claim was based. The pleading of the defamation actions was, as has been pointed out, defective. Twice Mr Bourke had been given leave to amend the statement of claim. His failure to do so occurred against the background of his continuing non-compliance with orders to file his evidence. Had he filed all his evidence on the defamation actions, it might have been possible to argue that the bank's preparation of its defence had not been impeded. But, taken with the opaque and uninformative pleading, this default must be found to manifest a lack of genuine intention to bring the defamation actions on for trial. The conclusions we have reached fit both of the situations postulated by Wilcox and Gummow JJ for the exercise of the Court's power and require that Mr Bourke's defamation actions be summarily dismissed. It is not altogether clear from their notice of appeal whether Mr Bourke and his brother also purport to appeal on behalf of the corporate applicants from the self-executing order of Wilcox J. If they do, such an appeal is incompetent. Leave to appeal has not been granted, and notice of a motion applying for such leave has not been filed. Appeal from Davies J Leave to appeal from the order of Davies J is also required. No application for leave has been made. Since the appeal was heard as if such an application was being heard concurrently, it may be said that, in our view, the decision of Davies J to refuse the corporate applicants' motion was appropriate in the circumstances for the reasons given by his Honour. The appeal is, however, incompetent.

Adam P. Brown Male Fashions Pty Ltd v Philip Morris Inc - [1995] FCA 566 - FCA 1994 case summary — Zoe