Cre8tions Pty Ltd v Varsity Developments Pty Ltd

1. This proceeding be dismissed.
2. Cre8tions Pty Ltd pay Varsity Developments Pty Ltd and Mr Gregory Scott Alder's costs of and incidental to this proceeding, including all reserved costs on an indemnity basis, such costs to be agreed or taxed.
3. Upon the respondents providing evidence to ABKJ Lawyers of the quantification of the costs ordered under Order 2 above, ABKJ Lawyers is to pay so much of the sum of $25,000 held in its trust account pursuant to Order 4(a) of the orders dated 9 June 2015 to the trust account of the solicitors for the respondents as is required to meet the respondents' costs order. In the event that the sum of $25,000 exceeds the respondents' costs order, ABKJ Lawyers may release the balance of that sum to Cre8tions Pty Ltd. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

REEVES J: 1 Cre8tions Pty Ltd is the applicant in this proceeding. By application filed 9 May 2017, Varsity Developments Pty Ltd and Mr Gregory Scott Alder, the respondents (who I will hereafter refer to jointly as Varsity Developments), have sought to have this proceeding dismissed under r 19.01(1)(c), or r 35.32 of the Federal Court Rules 2011 (Cth) (the Rules) on the ground that Cre8tions has failed to comply with certain orders of this Court. Neither of the rules which Varsity Developments has identified applies in the circumstances of this matter. That is so because no self-executing order has been made under r 19.01(1)(c); and r 35.32 only applies to appeal proceedings. This proceeding is not an appeal. 2 However, bearing in mind the overarching purpose of practice and procedure set out in Part VB of the Federal Court of Australia Act 1976 (Cth) to conduct proceedings justly, quickly, inexpensively and as efficiently as possible (s 37M(1)), rather than requiring Varsity Developments to make a fresh application under the correct rule, namely r 5.23, and thereby incur further delay and costs, I will, in the circumstances, treat this application as one made under that rule. 3 Dealing with the application on that footing, first, based on the supporting affidavits filed by Varsity Developments, I am satisfied that Cre8tions has been duly served with the application and been notified of the adjourned hearing date of 18 May 2017. I am fortified in the latter conclusion because, on 15 May 2017, Cre8tions' director, Mr Warren Brockwell, forwarded an email to my associate in which he stated "I am advised by the Respondent's solicitors that this matter has been adjourned for further hearing before the Court on the 18th May 2017." 4 Next, I find, based on the evidence in Varsity Developments' supporting affidavits that Cre8tions has failed to comply with at least the following orders of this Court: (a) Order 4(b) of 9 June 2015 requiring it to pay $25,000 by way of security for costs no later than three months before the date fixed for trial; (b) Order 7 of 9 June 2015 requiring it to file an application for discovery by the close of business on Friday, 31 July 2015; (c) various trial programming orders (Orders 3, 6, 13, 16 and 20) of 26 July 2016 made to achieve a trial of this proceeding in late 2016; and (d) Order 3(a) of 22 February 2017 (replacing (a) above) requiring it to provide $45,000 by way of security for costs by 22 March 2017. 5 Each of the above failures constitutes a default under r 5.22(b) of the Rules. I am therefore satisfied that Varsity Developments is entitled to an order that the whole of this proceeding be dismissed under r 5.23(b). 6 In addition to seeking the dismissal of the proceeding, Varsity Developments has sought an order for indemnity costs against Cre8tions under r 40.02 of the Rules. It is well-established that "some special or unusual feature" must exist to justify such an order: see, for example, TSG Franchise Management Pty Ltd v Cigarette & Gift Warehouse (Franchising) Pty Ltd (No 3) [2016] FCA 828 at [7] per Davies J. 7 It is difficult to discern from Varsity Developments' lengthy written submissions in support of this application precisely what special or unusual feature of this case is relied upon. It appears to be the repeated failure of Cre8tions to comply with Court orders thereby causing three sets of trial dates to be vacated, together with pursuing a case which is "utterly hopeless". Fortunately, I do not consider it is necessary to delve into the pleadings in this matter to attempt to ascertain whether the latter proposition is valid. That is so because, as I have stated above, I am satisfied that there have been repeated failures by Cre8tions to comply with orders of this Court. Moreover, those failures have, among other things, caused three separate sets of trial dates to be vacated in this proceeding. That conduct has undoubtedly caused Varsity Developments to incur significant additional costs in its conduct of this proceeding. In my view, that conduct so deviates from the norm expected of a party before this Court that it justifies my making the indemnity costs order Varsity Developments has sought. 8 Finally, Varsity Developments has sought two further orders. They are: (a) Any further proceeding that the applicant may wish to bring, relying upon the same or substantially the same causes of action or relief, is stayed pursuant to r 39.03 of the Federal Court Rules 2011 (Cth), until the costs of these proceedings have been paid in full. (b) The security for costs that the applicant paid into the trust account of ABKJ Lawyers in the sum of $25,000, pursuant to Order 4(a) of the orders made 9 June 2015, be immediately released and paid to the respondents. 9 As to the first order above, r 39.03(2) provides: If: (a) a proceeding has been dismissed in whole or in part; and (b) the Court has ordered the applicant to pay another party's (the second party's) costs; the second party may apply to the Court for an order staying any further proceedings brought by the applicant against the second party on the same or substantially the same cause of action or relief, until the costs have been paid. 10 It can be seen that there are three prerequisites for the operation of this rule: a proceeding has been dismissed; the Court has ordered the applicant to pay another party's costs; and further proceedings have been brought by the applicant against that party on the same, or substantially the same, cause of action or relief, while the costs order remains unpaid. In this matter, the first two prerequisites will have been met once the orders I have described above are made. However, the third has not. That is so because Cre8tions has not yet brought any further proceeding against Varsity Developments. Put differently, I do not consider the Rule operates if such a proceeding is a future possibility. It is, in my view, only intended to operate to stay existing proceedings. It follows that Varsity Developments is not entitled to this order. This will not prevent it obtaining such an order if, in the future, Cre8tions brings proceedings against it on the same, or substantially the same, cause of action or relief and, at that time some, or all, of Varsity Developments' costs of this proceeding remain unpaid. 11 As to the second order above, in the circumstances, I consider Varsity Developments is entitled to an order in substantially that form. However, I do not consider that order should apply immediately. Rather, the order should only require that payment to be made once Varsity Developments has quantified its costs of this proceeding, either by agreement or taxation, and those costs are equal to, or exceed, the sum of $25,000. This qualification is necessary, in my view, to prevent Varsity Developments receiving an unjustified windfall in the event that its costs are less than $25,000. Further, if Varsity Developments' total costs do not equal, or exceed, that sum, then Cre8tions' lawyers should be entitled to pay the balance to its client. I certify that the preceding eleven (11) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Reeves.