Cash Bazaar Pty Ltd v RAA Consults Pty Ltd

1. Orders 1 and 2 made by the Court in this proceeding on 19 March 2019 be set aside, and in lieu thereof, the applicants' proceeding against the sixth respondent is dismissed with no order as to costs. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

STEWARD J.: 1 On 15 May 2020, I published my reasons in Cash Bazaar Pty Ltd v. RAA Consults Pty Ltd (No. 2) [2020] FCA 636 ("Cash Bazaar No. 2") following the trial of this matter in December 2019. I ultimately dismissed the applicants' case against the first, second, third, fourth, seventh and eighth respondents. Proceedings against the fifth respondent ceased before trial upon a settlement being reached between him and the applicants. I had earlier entered default judgment against the sixth named respondent ("Mr. Roberts"): Cash Bazaar Pty Ltd v. RAA Consults Pty Ltd [2019] FCA 450. Mr. Roberts made no appearance, and did not otherwise participate in any way, at the subsequent trial. Nonetheless, because of the findings I had made in my judgment against the other respondents in Cash Bazaar No. 2, I raised in that judgment the possibility of a need to revisit the default judgment against Mr. Roberts. At [295] I said: The issue is whether it is appropriate for the interlocutory judgment to stand now that I have heard all of the evidence and legal argument and made findings about the involvement of Mr. Roberts. I have made a number of findings of fact and law which potentially undermine the integrity of that judgment. For example, the applicants pleaded that Mr. Roberts made the Capital Gain Representation. However, since the giving of the default judgment, I have found that no RMF agreements were ever validly entered into. As a result, Cash Bazaar never held an asset whose value could ever grow. I have also in this judgment placed no reliance on the evidence of Mr. Dang because of the text message he sent (described above). I did not know about that text message at the time of giving default judgment. Nor was I then aware of the inconsistencies between the earlier emails sent by Mr. Roberts and the subsequent RMF Booklet and the terms of the 10 purported RMF agreements signed by Mr. Patel. 2 I gave the parties leave to file submissions concerning the position of Mr. Roberts within 21 days of making my orders in Cash Bazaar No. 2. I did not expect the respondents to furnish the Court with any material. They had no interest in the default judgment. However, I did expect the applicants to file submissions. It was in their interest to do so. But they filed nothing. 3 For the reasons which follow, and adopting the terminology of Cash Bazaar No. 2, the default judgment entered against Mr. Roberts should be set aside and the proceeding against him dismissed with no order as to costs. 4 In Cash Bazaar No. 2, I explained the Court's jurisdiction to set aside judgment entered in default (in this case of the filing of a defence). At [293]-[294] I said: The judgment entered against Mr. Roberts was interlocutory in nature. I have the power to set it aside. Rule 39.05 of the Federal Court Rules 2011 (Cth.) relevantly provides: The Court may vary or set aside a judgment or order after it has been entered if: ... (c) it is interlocutory; ... As Besanko J. observed in Keynes v. Rural Directions Pty Ltd (No 4) [2011] FCA 304, in considering an application to set aside a judgment made pursuant to s. 31A of the Federal Court of Australia Act 1976 (Cth.), the finality of litigation is important. It means that the jurisdiction to set aside an interlocutory judgment should be "exercised with great caution". Besanko J. referred to the following passage from the judgment of Toohey, Gaudron, McHugh, Gummow and Kirby JJ. in De L v. Director-General, NSW Department of Community Services [No 2] (1997) 190 C.L.R. 207 at 215: The power of this Court to reopen its judgments or orders is not in doubt. The Court may do so if it is convinced that, in its earlier consideration of the point, it has proceeded 'on a misapprehension as to the facts or the law', where 'there is some matter calling for review' or where 'the interests of justice so require'. It has been said repeatedly that a heavy burden is cast upon the applicant for reopening to show that such an exceptional course is required 'without fault on his part', ie without the attribution of neglect or default to the party seeking reopening. By such expressions of the power to reopen final orders, courts seek to recognise competing objectives of the law. On the one hand, there is the principle of finality of litigation which reinforces the respect that should be shown to orders, final on their face, addressed to the world at large and upon which conduct may be ordered reliant upon their binding authority. On the other hand, courts recognise that accidents and oversights can sometimes occur which, unrepaired, will occasion an injustice. In the case of a final court of appeal, such as this Court, that injustice may be irremediable, unless the Court itself, acting promptly, is persuaded to reopen its orders so as to afford relief in the exceptional circumstances of the case. 5 The applicants had pleaded that Mr. Roberts had made the Guaranteed Income Representation and the Capital Gain Representation (both terms defined in Cash Bazaar No. 2) both personally and on behalf of Express Australia. Those allegations were particularised by reference first to a meeting held at a café between Messrs. Patel and Roberts in August 2015, at which it was alleged that Mr. Roberts told Mr. Patel that if he invested in RMFs he would receive a guaranteed payment of $270 per week for each RMF in a "passive" role. I described that meeting in Cash Bazaar No. 2 at [50]-[51]. This representation was said to have been, in substance, repeated in subsequent email exchanges sent between Messrs. Patel and Roberts. I described these emails in Cash Bazaar No. 2 at [52]-[55]. 6 In relation to the Capital Gain Representation, the applicants pleaded that this representation had been made by Mr. Roberts at the same August 2015 meeting described above. 7 I made the following finding about these allegations at [56], which I reproduce for convenience: Whatever Messrs. Roberts and Patel thought a "passive role" might have entailed, I find that it was not Express Australia's position that Mr. Patel could just "sit back and do nothing" (to use the words of Mr. Patel). And that is so, notwithstanding the language used by Mr. Roberts in his emails to Mr. Patel, including the statements "[r]egional masters ... just sit back and receive returns" and "Express takes care of all sales". I accept that this was how the investment was initially "sold" to Mr. Patel. However, I find that this was not the arrangement in fact finally offered to Mr. Patel and which he accepted. In that respect, I note that Mr. Roberts was never called to give evidence by Mr. Patel. I also note that Mr. Roberts seemed to have had only a limited initial role of introducing Mr. Patel to Express Australia and to the concept of RMFs. Thereafter, he dropped out of the picture. Instead, Mr. Patel's negotiations were principally undertaken with Mr. Arcon (and Scutts Senior to a lesser extent). 8 It is unnecessary for me to set out why I dismissed the case concerning the Guaranteed Income Representation and the Capital Gain Representation in Cash Bazaar No. 2. Assuming that Mr. Patel's evidence about the August 2015 café meeting is accurate, and having regard to the content of the emails I have referred to, what Mr. Roberts said to Mr. Patel about earning guaranteed income was subsumed by the contents of the RMF Booklet and by what was said subsequently at the Loganholme meeting held in late 2015 with Scutts Senior and Mr. Arcon, and the negotiations held thereafter with Mr. Arcon. In Cash Bazaar No. 2, I found that the statements made about earning guaranteed income were offers to include such a guarantee in the agreements to be documented between the parties. Such offers did not amount to misleading and deceptive conduct as alleged by the applicants. 9 In relation to the Capital Gain Representation, the only representation said to have been made by Mr. Roberts relating to this issue was the statement in Mr. Patel's first affidavit that at the August 2015 café meeting Mr. Roberts said words to the effect of "the value of the RMFs keeps going up each year and you will be able to sell your RMFs at any point during the term and by doing so you would recover your capital and significant profits." I will assume that this was said. However, as explained at [248]-[250] in Cash Bazaar No. 2, such highly generalised protestations are unlikely to constitute misleading and deceptive conduct. No reasonable person would rely upon them in the absence of something more detailed in nature. 10 In any event, as I also explained at [252] in Cash Bazaar No. 2, the Capital Gain Representation could not have caused any actionable loss or damage. The first applicant never obtained any legal rights which could grow in value over time. There was nothing it could sell to secure any capital gain. 11 For these reasons, the default judgment against Mr. Roberts was entered upon a misapprehension as to the facts. It follows that my default judgment against Mr. Roberts should be set aside and the proceeding against him be dismissed. I certify that the preceding eleven (11) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Steward.