Agnish Pty Limited v Folio Invest Pty Limited

GRIFFITHS J: 1 The third respondent seeks an adjournment of the hearing of the substantive matter. 2 The proceedings were commenced by the filing of an originating application and statement of claim on 12 June 2018. In brief, the applicant seeks damages for the loss or damage suffered by it consequential upon an unsuccessful investment it made in a real property development located at Austral (Austral Project). The applicant alleges that the third respondent made representations to it that the investment would be incredibly secure, was significantly de-risked with a clear exit strategy, that the respondents were very capable and that the applicant would achieve a 40 percent return on the investment. The applicant also alleges that the third respondent, acting on behalf of the second respondent company, represented to the applicant that the second respondent had an ability to guarantee a 30 percent annual return to investors, it had a proven system that enabled it to make that promise, that it would generate a profit on the Austral Project of $18.5m, that the second respondent was willing to offer security over assets in the form of developments which had an equity position of approximately $40m and that a third party had a net asset position of approximately $40m. 3 The applicant contends that, relying upon these representations, it entered into a loan agreement under which it advanced $0.5m to developers for the Austral Project. 4 The applicant submits that on 27 May 2019, the second respondent was deregistered and, on 18 August 2019, the first respondent was deregistered. The applicant has not received the loan sum or any investment returns. 5 The applicant's claims of misleading or deceptive conduct are made under s 18 of Sch 2 of the Competition and Consumer Act 2010 (Cth), s 12DA(1) of the Australian Securities and Investments Commission Act 2001 (Cth) and s 1051H of the Corporations Act 2001 (Cth). 6 The third respondent appears to reside in Sierra Leone. On 11 December 2018, the Court granted leave to serve the originating documents on the third respondent in Sierra Leone (see Agnish Pty Limited v Folio Invest Pty Limited [2018] FCA 1992). 7 On 2 July 2019, the Court made orders for deemed service and substituted service (see Agnish Pty Limited v Folio Invest Pty Limited (No 2) [2019] FCA 1041). 8 On 2 July 2019, the Court made orders requiring the third respondent by 7 August 2019, to file and serve a notice of address for service, a defence to the statement of claim and any affidavit evidence on which he intended to rely. Orders were also made that day for the filing of submissions and the matter was listed for hearing on 8 October 2019. 9 On 19 September 2019, the third respondent filed his defence (which was well out of time). The defence simply stated that the third respondent maintained that there was no pleading against him personally in any of the paragraphs of the statement of claim. 10 The orders dated 2 July 2019 required the applicant to file and serve an outline of submissions four weeks before the hearing date and for the respondents to file an outline of submissions two weeks before the hearing date. 11 On 1 October 2019, the Registry sent an email to the parties noting that there had been non-compliance with the timetabling orders dated 2 July 2019. The third respondent stated in his email in response that he was no longer a resident of Australia, that both the first and second respondents have been deregistered and that he had delayed filing his defence while he awaited a response from the applicant answering his request that it identify the specific allegations made against him personally. He also mentioned that he had not received a copy of the applicant's outline of submissions. He said that the applicant had informed him on the evening of Monday 30 September 2019 that it was endeavouring to provide its submissions during the course of the forthcoming week, but this had not occurred as at Wednesday, 2 October 2019. The third respondent asked for the hearing to be vacated because he was unrepresented and the applicant's delay in filing its submissions. The third respondent asked that the matter be adjourned to a date "not long before Christmas" because he lived in Africa and he wanted to coordinate the hearing with a planned trip to Australia to visit his family for Christmas. 12 The applicant subsequently emailed the Registry and apologised for the delay in filing and serving its submissions, which was expected to occur "shortly". The applicant denied that there were no specific allegations pleaded against the third respondent and it drew attention to the lateness of the filing of his defence and non-compliance with other orders made by the Court. The applicant sought to maintain the scheduled hearing date. 13 The parties were informed that the applicant's request for an adjournment would be considered at the commencement of the hearing today. 14 The applicant finally filed its outline of submissions at 5:15pm on Friday, 4 October 2019. Monday, 7 October 2019 was a public holiday in New South Wales. Accordingly, the applicant's delay left the third respondent with very little time to absorb and respond to those submissions. 15 The submissions outlined the applicant's case against the third respondent (who was the sole director of the first and second respondents). The applicant stated that it did not intend to prosecute its claims against the other two respondents because they were now deregistered. The applicant sought default judgment against the third respondent for failing properly to file his defence; alternatively, that the defence be struck out and, further in the alternative, that judgment should be awarded against the third respondent on the basis of his admission of the allegations in the statement of claim.

Determination 16 In light of the circumstances outlined above, I have no hesitation in finding that the hearing should be adjourned as requested by the third respondent. The second and third respondents filed their defences on 29 October 2018. On 10 May 2019, the third respondent filed a short affidavit in response to the applicant's case. In brief, he said that the investment was in the nature of an unsecured loan and that the investor, whom he claimed was a sophisticated investor, was aware that a 40 percent per annum return contained an element of risk. He deposed that the Austral Project failed when the mortgagee failed to advance funds and that no profit had been made on the sale of the relevant properties. He stated that "the developer still intends on repaying the loan". 17 Although the third respondent was almost six weeks late in filing his defence, the applicant must have known the broad outline of the respondents' case, having regard to the defences which were filed and the third respondent's affidavit filed on 10 May 2019. The applicant did not file its outline of submissions until 5:15pm on the last business day before the hearing. No explanation has been provided to the Court for this lateness. 18 I accept the third respondent's submission that he has had inadequate time to respond. He says that he wishes to obtain legal advice on some aspects of the applicant's written outline. The proceeding cannot proceed as scheduled, largely because of the applicant's delay. Although the third respondent was late in filing his defence, the applicant is primarily responsible for the present state of affairs. 19 Today's hearing will be adjourned until Monday, 23 December 2019 at 10:15 am. The third respondent is to file and serve an outline of submissions in response, not exceeding 10 pages in length, by 20 November 2019. The applicant is to file and serve any reply, not exceeding 5 pages in length, by 13 December 2019. 20 The costs thrown away by the adjournment will be the third respondent's costs in the cause. I certify that the preceding twenty (20) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Griffiths.