Crepe Myrtle Pty Ltd (ACN 110 345 492) v Rural Security Holdings Pty Ltd

Adjournment of the hearing date 6The basis of the application for the adjournment of today's hearing is the ill health of Mr Lazar. Mr Lazar (or his secretary) sent an email describing these illnesses as follows: "I have, over the past few months, have been suffering from a variety of illnesses that have seen me go into hospital repeatedly. These illnesses have had a major impact on my work and have resulted in me not being able to attend the office or attend to work that was required to be done. I have a variety of medical documentation to evidence my numerous illnesses. My stays in hospital include, but are not limited to, Royal North Shore on four occasions, St Andrew [sic] as late as last week. My illnesses, which relate to issues with my red blood cells, pneumothorax/consolidation, which is a precondition of adrenal cancer. I also suffer breathing issues which require me to have a major operation in two weeks' time with Dr Paul Gerarchi FRACS ENT and facial surgeon. I, due to my condition, was unable to give instructions to the previous law firm acting, Cambridge Law. They withdraw [sic] from acting because of this failure to provide them with instructions. Further, the staff member that was assisting me with this matter is no longer employed and we are having difficulty compiling the documents that she was working on. Rural Security wish to prosecute this matter and require the hearing to be vacated in order to allow a sufficient time to instruct a new law firm. Regards, Ian Lazar FGAA, DipDT, MAICD (Sydney) Director Structured Mortgage Securities." 7There then follows a corporate profile website and LinkedIn address. 8No objection was taken by the plaintiff to the appearance of Mr Reynolds on behalf of the defendant, although he is not legally qualified. Mr Reynolds tells me, from the bar table, that he has never seen anyone as sick as Mr Lazar, and that his inability to carry out his daily activities is immediately apparent and a matter of concern to the shareholders. A picture has been painted of Mr Lazar as a man in the poorest of health, who was rushed to hospital as recently as last Wednesday, and who has been unable for this reason to give instructions in relation to the conduct of this litigation. Mr Reynolds also tells the court that, because of Mr Lazar's ill health, he first knew of this litigation only two weeks ago. 9The first problem is that no attempt was made, even by Mr Reynolds during the two weeks that he has been on notice about these proceedings, to contact the plaintiff's legal representatives or the Court to advise of these difficulties. Nor did he notify the court. The email, sent at 5.02pm last night, did not reach this Court for the simple reason that it was sent to the wrong court. I understand Mr Reynolds endeavoured to telephone the Court registry but, since it appears he rang outside hours, I do not know what sort of response he received or, indeed, if he even rang this Court, bearing in mind that Mr Lazar's email is addressed to the Supreme Court. Let us assume that he telephoned this Court last night at 4.53; however, that would not have been sufficient time for this Court to do anything in relation to a hearing at 10 o'clock today. 10It is always very difficult for the court to know what to do when a person suffers from illness which prevents attendance in court. Had there been affidavits filed in accordance with the timetable, there would have been little difficulty in some form of vacation of a hearing date or at least some sort of arrangement for the taking of evidence in such a way as to ensure that Mr Lazar's health was not compromised. 11However, this application to vacate the hearing date is not only brought extremely late, but it is brought against a pattern of total non-compliance with all of the orders for the serving of affidavit material, in circumstances where the plaintiff has been diligent, not only in writing to the defendant/cross-claimant about the outstanding steps, but in bringing these to the Court. 12Mr Craney tells me that on two occasions guillotine orders have been sought from the Judicial Registrar, by reason of the failure of the defendant/cross-claimant to comply with timetables. I note in the affidavit of Mr Hargraves (at paragraph 6) a reference to his first affidavit of 18 March 2013 concerning failures of the defendant/cross-claimant to comply with directions of Judicial Registrar Smith and his request for a guillotine order on 19 March, which request was opposed by the plaintiff's legal representatives and refused by the Judicial Registrar. 13It is also set out, at paragraph 8 of this affidavit of 26 July, that when the matter was next before the court the plaintiff's solicitor sought a second guillotine order, with a view to "forcing" the defendant/crossclaimant to comply with the Court's directions which are to this day the subject of non-compliance. He went on, to point out (in paragraph 9) that the plaintiff had complied with all directions, and that the plaintiff's sole occasion of late compliance occurred by reason of delay by the defendant/crossclaimant. 14An additional basis upon which the application for adjournment is challenged is the scanty nature of the explanatory information and, in particular, its inconsistency with certain documents in the public eye. These documents consist of a series of press releases put out by a company with which Mr Lazar is involved. 15The first of these is dated Monday 25 November 2013 and is headed "AFR - Chatswood Bus And Train Interchange Sale Stalled By Lender Caveats". The text is as follows: "The $80 million Chatswood bus and interchange in New South Wales remains on the market, but its mortgagee-in-possession vendor is up for yet another round of court action. Sydney businessman and distressed mortgage lender Ian Lazar through the company Commercial Mortgage Trade has today lodged caveats over the assets held by the Commonwealth Bank. However, the sale of the asset has been a frustrating one for receivers after a series of protracted court cases between a numbers of developers of the site. The latest civil dispute has arisen between Tripod Funds Management and Chinese based company and borrower Changzhou Hope Offices Equipment Ltd Co and its Guarantor Mr Zhuang Zhongyi. Mr Zhongyi and his company entered into a mortgage agreement with Tripod, they induced us to fund the transaction and in turn we ceased dealing with other parties on the asset and threw away $3 million in fees and lost interest earnings to our underwriters, at the 11th hour they pulled out and have now exchanged contracts with the bank' said Mr. Lazar. We are now owed in excess of $3 million and we will upload the sale until we are paid, a criminal complaint is also imminent in respect of the actions of the guarantor' said Mr Lazar." 16This article was posted on the web by a Ms Michelle Faure who, I understand, is an employee of the defendant/cross-claimant. It goes on to talk about the retail precinct being boosted by the recently opened Chatswood to Epping Rail Link. 17The next news item is dated Wednesday 25 December 2013 and is headed "Commercial Mortgage Trade Christmas Party". This sets out that: "Commercial Mortgage Trade Christmas party was one of the biggest celebrations of the year which took place at Trademark Hotel and it was quite the star-studded event with appearances from Tamara Jaber, Prinnie Stevens and Sarah De Bono Australian singer-songwriter and pianist." 18I understand Ms Jaber is the former associate of a Mr Kyle Sandilands and that the other persons named are performers. 19Underneath this article is a series of pictures. The first shows Mr Shane Reynolds, who is in court today, with Mr Ian Lazar and a Ms Angeline Aamariah, who I understand is Mr Lazar's fiancée. The second shows Mr Lazar with a Mr Shraga Gold, an "International Protective Agent & Recovery" employee. 20There are other pictures on the website, which the solicitor for the plaintiff states are still there today, showing Mr Lazar. One of those pictures shows Ms Michelle Faure, who is described as "Head of Credit, Tripod Funds Management & Meridien Securities Limited." She is pictured with Mr Shane Reynolds. Other pictures show Mr Reynolds with Mr Lazar, upon whose lap Ms Aamariah is sitting, Prinnie Stevens (who is identified as being a performer from "The Voice") with Ms Aamariah, Ms Aamariah with Mr Reynolds, and so on. 21I have been informed from the bar table, by Mr Reynolds, that this was in fact a small party with about 15 persons present. Whether it was large or small makes no difference. What the photographs show is that Mr Lazar was there and that he appeared to be able to participate in the events of the evening. 22The next entry in the bundle of documents tendered by the plaintiff and marked exhibit A is a document posted by Michelle Faure on Sunday 12 January 2014 headed "Commercial Mortgage Targets Growth in International Assets in Hong Kong and Mainland China". There is a photograph which is difficult to see in the exhibit, but which is rather clearer on the internet version. This text states as follows: "Ian Lazar of Commercial Mortgage has sought to take advantage of its international mortgage resolution and advisory business by opening an office in Hong Kong, as a result, Sino-foreign joint ventures are likely to take place in 2014 where Commercial Mortgage will takeover a pool of distressed mortgage securities. The latest venture is important in a market where local banks dominate distribution and overseas brands have penetrated the local market with limited success. The company's recent venture lays the foundation for offering differentiated and higher-value services, such as wealth management. Establishing an authorised fund in Hong Kong can be a complex process, which requires a good understanding of local regulations, accounting and disclosure requirements and tax efficiency, for Commercial Mortgage[sic] its recent discussions represent an opportunity to access one of the most promising markets for growth in assets worldwide. Commercial Mortgage will circulate a media release in the coming weeks." 23I note in relation to this press release that I have been informed by Mr Reynolds that there is in fact no Hong Kong office, and that this media release was put into the public arena by Ms Tracey McMullen whose services have since been dispensed with. I understand that a request has been made for this item to be taken down from the Internet. Accordingly, the degree of weight to which I give this document will be limited. It is clearly a matter where, if false information about this company has been put onto the net and in fact it has not activities in China, then I need to exercise caution. 24The next document is headed, Monday 20 January 2014. No such objections relate to this publication, the contents of which are agreed to be correct. It states: "Echelon majority shareholders appoint Ian Lazar to manage litigation (3.5 million dollar litigation)." 25The article is illustrated with a picture of a judge's gavel and a set of scales, of the "stock photo" variety, and states: "Gold Coast Echelon Property Management has appointed alternate Director Ian Lazar to manage and litigate company debt owed to the group in relation to shareholder disputes. Mr. Lazar has successfully litigated a series of complex civil disputes. He was involved in winding up the failed Gold Coast group City Pacific's then $800 million mortgage fund and was instrumental in a three year Federal and Supreme Court Action to successfully wind-up EquitiTrust Limited and ultimately led to the Supreme Court action by ASIC which now sees the protection of the remainder of the unit holders monies for distribution this year and the bankrupting of founder Mark Mcivor for $150 million dollars. For more information, visit: HTTP://www.echalonfund.com.au/blog/majority-shareholder-appoint-new-director-to-manage-litigation-35m-litigation/52." 26There appears to be a follow-up to this on Sunday 26 January "Echelon Claims Create Curious Trail of Crumbs", from the Gold Coast Bulletin. While my associate was printing copies of the original document of 20 March for the parties, this article has come out of the website as well. However, it is has not been read or commented upon by the parties, so I do not propose to consider it in my summary of events. 27These newspaper articles, or publicity press releases, or whatever they may be, paint a picture of Mr Lazar as being able to attend at least some business functions over the past few months. What, however, is the position in relation to the solicitors who have been acting on his behalf? It is sometimes the case that there are problems with solicitors carrying out their clients' instructions, and the court is again very conscious of the fact that the need for all issues to be litigated properly. The court might be sympathetic had there been some form of wrongful conduct or failure to comply that should be sheeted home to the solicitors and not to the client. 28In the present circumstances, however, this is not the case. Cambridge Law filed a notice of intention to file notice of ceasing to act in this Court on 2 September 2013, some months after the hearing date had been set down. The contents of that notice, addressed correctly to both parties, clearly state that 28 days from the date of service of that notice, a notice of ceasing to act would be filed and advising the defendant/cross-claimant that it must file in the registry and serve on the plaintiff a notice stating the name and address of a solicitor who is to act or, if they do not have a solicitor, a notice stating their address for service of documents. Until that notice is filed and served, any document may be served on the defendant/cross-claimant by leaving it or posting it to an address at 123 Clarence Street, Sydney. A notice of ceasing to act was duly filed on 4 November 2013, the contents of which state that a notice of intention to file and serve this notice had been served on the defendant/cross-claimant on 20 September 2013 and providing the residential or business address of the defendant last known to the former legal representative. 29This means that the defendant/cross-claimant has been on notice since 2 September that the solicitors they had retained proposed to cease to act. The explanation given both by Mr Reynolds and by Mr Lazar in the email which is exhibit A, is that Mr Lazar was unable to give instructions to Cambridge Law and that they withdrew because of failure to provide them with instructions. 30The additional complaint is made that the staff member who was assisting Mr Lazar was no longer employed, but I apprehend that this was an event which occurred just before Christmas 2013. That does not explain the prior delay, and goes only a short way to explaining any delay since. 31There is a clear pattern here of a solicitor for the defendant giving ample notice to his client of the intention to cease acting, in circumstances where Mr Lazar and the defendant/cross-claimant are not merely experienced in business but also, judging by the contents of the material I have set out above, well experienced in the conduct of litigation.

The plaintiff's submissions 32To summarise, the basis upon which the application is opposed is as follows: (a)These proceedings have been on foot for two years and are set down for hearing today; (b)The plaintiff has made repeated attempts to ensure that the plaintiff complies with the timetables including the seeking of guillotine orders, regularly run correspondence, and raising the matter with the Court on at least three occasions. This is not a case where there can be any criticism of the plaintiff for delay (see Hoser v Harcher [1999] NSWSC 1060). This is a defendant who has taken every step that is necessary including the bringing of this application by way of a notice of motion which was not "snapped on" as an ambush tactic on the day of the hearing, or the week before the hearing, but filed on 2 January 2014 which has given the defendant/cross-claimant nearly a month to determine what steps to take.In addition, the affidavit in support served upon the defendant/cross-claimant contained all of the correspondence to date, much of which had also been attached to the affidavit of 23 July. This paints a very clear picture of the history of the case and in particular the repeated failure of the defendant/cross-claimant to file the affidavits containing the necessary evidence in these proceedings. (c)This is a case where there has not only been a total failure to put on any affidavit evidence at all, but also a failure to comply with the steps necessary for a mediation. Looking at the correspondence from Palmers dated 21 November 2013, a settlement conference was listed for 29 November 2013. They wrote directly to the defendant/cross-claimant saying that the plaintiff proposed to ask the Court to vacate the settlement conference, taking into account the failure to comply with previous directions as to the filing of service of evidence.The importance of mediation as a tool for case management and for promoting a speedy and efficient settlement of litigation cannot be sufficiently strongly stated. The consequences of failing to participate in mediation, even in a hearing which is otherwise properly contested, are explained by Kirby J in Patten v Moffat [1999] NSWSC 1322.Circumstances in which a party not only fails to file affidavit material but to participate in a mediation are matters for concern, as is the failure to respond to any of the correspondence which correspondence was an invitation to the defendant/cross-claimant to explain any difficulties. All that it needed was one letter saying that Mr Lazar was ill or having problems. Instead of which, the plaintiff was simply left in the dark as to what was to happen to the litigation. (d)Mr Craney also draws to my attention the contents of the press release material and, while I treat this material with caution, it does not paint a picture of Mr Lazar as being unable to attend to litigation. (e)The final matter relied upon by Mr Craney is the very late notice of the application for adjournment in circumstances where the defendant had been served with the notice of motion for summary judgment almost a month ago. Whether Mr Reynolds had been given a copy of that document or not by his employer. At the time a request for an adjournment was emailed to Mr Craney, had had already left his office in Forbes and was on the road to Sydney. Having left Forbes at 1pm, he was in Katoomba at the time the documents came through. 33Mr Craney was not the only person inconvenienced by this late notice. Two persons who are directors of the plaintiff are in court. They, like their solicitor, have travelled down from Forbes. I apprehend that they had a similar degree of notice of this application, namely, very little notice at all. The Court certainly had no notice in that the email in question was sent to the wrong court. 34I note the comments of the High Court in Aon Risk Services Australia Ltd v Australian National University (2009) 239 CLR 175 to the impact upon court management and resources of last minute adjournments of this kind. 35Mr Craney apologised for saying so, but submitted that this degree of delay, especially in light of all of the circumstances above, was "just not acceptable". These were matters which, had they been addressed even a week ago, could have saved his clients not only the time it has taken and the trouble and the cost of preparing for the hearing today, but also the emotional input that all litigants have in litigation, namely the expectation that they will show up on the day of the hearing and that the matter will be dealt with, rather than adjourned to another day. 36I have inquired from Mr Reynolds as to what is to happen in relation to costs of his application for adjournment were to be made and I note the telephone message which is part of exhibit A, this being a telephone call to Mr Craney's office that the defendant/cross-claimant was prepared to consider the issue of costs on the basis that the parties "can work out any cost issue". However, adjournments cannot be purchased by the payment of costs in circumstances where the cost is not only a monetary one for the parties but a burden on the processes of the Court and a concern to the fair administration of justice. 37As s 56 Civil Procedure Act 2005 (NSW) sets out, the overriding purpose of the Act is to facilitate the just, quick and cheap resolution of the real issues in the proceedings. Section 56(3) provides: "A party to civil proceedings is under a duty to assist the Court to further the overriding purpose and, to that effect, to participate in the processes of the Court and to comply with directions and orders of the Court. (4) Each of the following persons must not, by their conduct, cause a party to civil proceedings to put in breach of a duty identified in subs (3); (a) Any solicitor or barrister representing a party in the proceedings. (b) Any person with a relevant interest in the proceedings commenced by the party." 38A person with a relevant interest in civil proceedings is defined in para 56(6), and that would clearly extend to Mr Lazar. Section 58 provides that when the court is asked to adjourn proceedings (s 58(a)(ii)) the Court must have regard to the dictates of justice. Looking at the checklist set out in s 58(2)(b), it is clear that there would be real difficulties for the defendant, given the circumstances of its history of non-compliance, and where such an application is brought so late in obtaining an adjournment. 39Section 59 makes it clear that the practice and procedure of the Court should be implemented with the object of eliminating any undue lapse of time between the commencement of proceedings and their final determination, beyond that reasonably required for interlocutory proceedings. Section 60 takes into account the proportionality of costs in this regard. 40What these sections are aimed at is to ensure that when an application for adjournment of proceedings is brought pursuant to s 66, the Court must have regard to these considerations and take into account the ordinary rule where proceedings have been regularly fixed for hearing with due notice to the affected parties, they should commence on the appointed date and continue until their completion. 41Some of the grounds upon which applications for adjournment are commonly brought have been adverted to here. There has been a withdrawal of legal representatives. However, the kind of late withdrawal of legal representatives that would warrant the adjournment of a hearing simply is not the case here. I note in particular that an adjournment may be refused where the purpose of the adjournment is to obtain additional evidence that should have been obtained earlier (Watson v Watson (1968) 70 SR NSW 203 at 206). 42This would leave the defendant with no evidence whatsoever on either the claim or cross-claim, which essentially means I should proceed to grant the application for judgment by the plaintiffs, although that really is an exceptional order made only in the clearest of cases. However, this is a case where there has been total failure to comply at a time when the defendant/cross claimant, not just Mr Lazar, had solicitors on the record and, what is more, the defendant/cross-claimant instructed those solicitors to oppose guillotine orders sought by the plaintiff. 43No claim is made by either side in relation to issues of prejudice beyond the usual prejudice that pertains where a party is shut out from the right to prosecute the case. Bearing in mind the basis upon which there is a defence to these proceedings, I can see little merit in such arguments here in any event. 44In Aon Risk Services Australia Ltd v Australian National University, supra, at [100]-[102], the High Court said as follows: "[100] The views expressed by Lord Griffiths in Ketteman v Hansel Properties Ltd, that justice cannot always be measured in money and that a judge is entitled to weigh in the balance the strain the litigation imposes upon litigants, are also now generally accepted. In Bomanite Pty Ltd v Slatex Corp Aust French J said of Bowen LJ's statements in Cropper v Smith: ... That may well have been so at one time, but it is no longer true today ... Non-compensable inconvenience and stress on individuals are significant elements of modern litigation. Costs recoverable even on an indemnity basis will not compensate for time lost and duplication incurred where litigation is delayed or corrective orders necessary. [101] In Ketteman Lord Griffiths recognised, as did the plurality in J L Holdings, that personal litigants are likely to feel the strain more than business corporations or commercial persons. So much may be accepted. But it should not be thought that corporations are not subject to pressures imposed by litigation. A corporation in the position of a defendant may be required to carry a contingent liability in its books of account for some years, with consequent effects upon its ability to plan financially, depending upon the magnitude of the claim. Its resources may be diverted to deal with the litigation. And, whilst corporations have no feelings, their employees and officers who may be crucial witnesses, have to bear the strain of impending litigation and the disappointment when it is not brought to an end. The stated object in the Court Procedures Rules, of minimising delay, may be taken to recognise the ill-effects of delay upon the parties to proceedings and that such effects will extend to other litigants who are also seeking a resolution in their proceedings. [102] The objectives stated in r 21 do not require that every application for amendment should be refused because it involves the waste of some costs and some degree of delay, as it inevitably will. Factors such as the nature and importance of the amendment to the party applying cannot be overlooked. Whilst r 21 assumes some ill-effects will flow from the fact of a delay, that will not prevent the parties dealing with its particular effects in their case in more detail. It is the extent of the delay and the costs associated with it, together with the prejudice which might reasonably be assumed to follow and that which is shown, which are to be weighed against the grant of permission to a party to alter its case. Much may depend upon the point the litigation has reached relative to a trial when the application to amend is made. There may be cases where it may properly be concluded that a party has had sufficient opportunity to plead their case and that it is too late for a further amendment, having regard to the other party and other litigants awaiting trial dates. Rule 21 makes it plain that the extent and the effect of delay and costs are to be regarded as important considerations in the exercise of the court's discretion. Invariably the exercise of that discretion will require an explanation to be given where there is delay in applying for amendment." 45Another difficulty with the need for an adequate explanation is that I am told from the bar table information about which I would have expected to see documentation of a compelling nature from unimpeachable sources, such as a hospital or a medical practitioner, and also that I would have expected it to have been provided earlier than the morning of the hearing. It is a basic courtesy, not only to one's opponent, but to the Court for such matters to be notified in a proper way. 46Taking all of the above into account, the application for adjournment is refused.

The plaintiff/cross-defendant's application 47This brings me to the question of what orders should be made. The orders sought in the notice of motion seeks judgment on the claim but I apprehend from what Mr Craney says, the orders sought are that the defence be struck out and judgment for $185,000 and for judgment on the crossclaim. 48There being no evidence filed in relation to the crossclaim and no attempt to file any such evidence this morning, for the same reasons as set out above concerning the refusal of leave to amend, I am of the view that both orders sought by the plaintiff/cross-defendant should be made.

Orders 49Accordingly, the orders I make are as follows: (1)Defendant/cross-claimant's application to adjourn the hearing today refused. (2)The defendant's defence filed on 4 June 2012 is struck out and dismissed. (3)Judgment for the plaintiff in the sum of $185,000 plus interest pursuant to s 100 Civil Procedure Act 2005 (NSW) in the sum of $30,829.75, totaling $215,829.75. (4)The first cross-claim filed on 27 November 2012 is struck out and dismissed and judgment entered in favour of the cross-defendant. (5)The defendant/cross-claimant pay the plaintiff/cross-defendant's costs of these proceedings including the costs of the notice of motion of 2 January 2014. (6)Notice of motion otherwise dismissed.

DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 08 April 2014