Fairfield Pastoral Holdings Pty Ltd v Ridge Estate Pty Ltd

Relevant principles 105 The entry of a judgment by default is a serious matter, with the consequence that the Court exercises the discretionary power under r 5.23 with caution: Chamberlain Group Inc v Giant Alarm System Co Ltd [2019] FCA 1606 at [13]. One of the reasons for the Court's caution is that a default judgment in favour of an applicant means that it has at least partial success in the proceedings without having to prove by evidence its entitlement to the claimed relief: Australian Competition and Consumer Commission v Dataline.Net.Au Pty Ltd [2006] FCA 1427; (2006) 235 ALR 665 at [48]; Australian Competition and Consumer Commission v Dataline.Net.Au Pty Ltd [2007] FCAFC 146, (2007) 161 FCR 513 at [42]. Another reason for the Court's caution has been said to be the difficulty for a party in disturbing on appeal the entry of a judgment by default: Akibou Yacouba v Eurocars (Wholesale) Pty Ltd [2020] FCA 317 at [37]. However, this is a feature of most judgments involving the exercise of a discretion. Generally, the power is exercised only in clear cases of serious default: ACOHS Pty Ltd v Ucorp Pty Ltd [2009] FCA 577 at [27]. 106 Nevertheless, the principles stated by Wilcox and Gummow JJ in Lenijamar Pty Ltd v AGC (Advances) Ltd (1990) 27 FCR 388 at 396 in respect of the predecessor of r 5.23 remain pertinent: The discretion conferred by O 10 r 7 is unconfined, except for the condition of non-compliance with a direction … [T]wo 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. 107 These principles were applied in respect of r 5.23 by the Full Court in Professional Administration Service Centres Pty Limited v Commissioner of Taxation [2012] FCAFC 180; (2012) 295 ALR 52 at [35]. They mean that evidence of persistent non-compliance or inordinate delay by a party is relevant to the exercise of the discretion under r 5.23: Black & Decker (Australasia) Pty Ltd v GMCA Pty Ltd [2007] FCA 1623 at [5]; Chamberlain v Giant Alarm at [13]-[14]; and Derrimut Health & Fitness Pty Ltd v Revival 24:7 Gym Pty Ltd (No 2) [2020] FCA 1581 at [53].

The respondents' cross-claim 108 In order to provide the basis for some of the applicants' submissions, it is necessary to note some elements of the cross-claim brought by the respondents. 109 The second statement of cross-claim (the 2SCC) is the current iteration of the cross-claim. The claims made in it include: (a) a claim by Ridge Estate and Steven for damages in respect of an alleged breach of contract by FPH constituted by its failure to perform its obligations under a "Services Agreement" which had required that FPH pay to Ridge Estate a total of $30,000 per month, in consideration of its performance of specified services. The same claim is, in effect, made against Mr Hamilton on the basis of his alleged failure to procure FPH to make the payments. Ridge Estate and Steven claim "an amount to be quantified following disclosure in this action". The claim is made in [8]-[13] of the 2SCC; (b) a claim that Steven "and his interests" have suffered loss and damage indirectly from the breach of a joint venture agreement (JVA) constituted by Mr Hamilton's failure to provide funds by which FPH could settle on investment properties located by Steven. The respondents pleaded that particulars of the loss and damage would be provided "following disclosure and the provision of an expert report". This claim is made in [14]-[16] of the 2SCC; (c) a claim by Steven against Mr Hamilton for damages pursuant to s 236 of the Australian Consumer Law contained in Sch 2 to the Competition and Consumer Act 2010 (Cth) by reason of his alleged misleading or deceptive conduct in making a representation that, in the event that Steven could identify suitable investment properties, Mr Hamilton would provide and raise funds for the acquisition and development of those properties. Steven repeated the pleas in [15] and [16] of the 2SCC, including the claim that particulars would be provided following discovery and the provision of an expert report. This claim is made in [17]-[21] of the 2SCC; and (d) a claim by Steven and Ridge Estate for reimbursement of costs said to have been incurred by Steven in the maintenance and upkeep of six vehicles alleged to have been provided for his use in undertaking the JVA and the Service Agreement. The respondents plead that the amount of this claim would "be quantified following disclosure in this action". This claim is made in [30]-[33] of the 2SCC. 110 For reasons which will become apparent, it is not necessary presently to note the remaining claims in the 2SCC.

The basis of the applicants' application 111 The applicants rely on both a failure by the respondents to make discovery in accordance with the orders of the Court and a failure by them to defend the applicants' claim, and to prosecute their own cross-claim, with reasonable diligence. At the hearing on 23 February 2021, counsel confirmed that, as their interlocutory application suggested, the applicants were seeking, primarily, dismissal of the whole of the cross-claim. Default judgment on their own claim was sought as a secondary matter. Counsel also acknowledged that, as a matter of practicality, the applicants did not need discovery from the respondents in order to make out their own claim, but did of course wish to have that discovery in order to assess the defences which may be raised by the respondents. 112 At the time the applicants filed their application, the respondents had not, other than in a nominal way to be noted shortly, made any discovery. By the time of the hearing on 23 February 2021, they had made some discovery but not in a satisfactory manner. The applicants then focused on the inadequacy of the respondents' discovery.

A chronology of the Court's orders and of the respondents' conduct 113 Before turning to the evidence upon which the applicants rely for the defaults they allege, it is appropriate to identify the orders made by the Court with respect to discovery and a chronology of relevant events: 20 March 2020: The Court ordered the parties to give standard discovery in accordance with the FCR on or before 19 June 2020. 25 June 2020: At the case management hearing (CMH) that day, the Court was told that the parties were pursuing informal settlement discussions which were to take place over the next two weeks. By consent, the Court extended the time within which both parties were to give standard discovery from 19 June 2020 to 3 August 2020. 21 August 2020: At the CMH that day, the Court noted that neither the applicants nor the respondents had complied with the order for the making of discovery, but that the applicants had provided a list of documents to the respondents on 20 August 2020. The respondents sought an extension of time to 21 September 2020 within which to make discovery but indicated that they would provide an initial tranche of discovery by 28 August 2020. The Court extended the time within which the respondents were to complete their discovery to 21 September 2020. When seeking the additional time, Mr Rowley (a member of the firm of solicitors then acting for the respondents) said: "Your Honour, if I could have three weeks to complete that task I would undertake to complete that within that time." Mr Rowley also told the Court that there was no impediment to the respondents providing discovery in tranches. 3 September 2020: The respondents' solicitors provided to the applicants' solicitors a list of documents in the form of an unsworn affidavit of Steven. The list contained only one entry, namely, "Bundle of emails extracted from the email account "steven@fairfield.com.au and produced electronically by way of - PST File". In the email accompanying the unsworn list the respondents' solicitors stated "we will serve you with a sworn copy as soon as possible". By email on 4 September 2020, the applicants' solicitors requested that a copy of the PST file referred to in the unsworn list be placed in the Microsoft Onedrive folder which they had created. 4 September 2020: At the CMH that day, the Court was told that the respondents had made an initial tranche of discovery. In relation to the balance of the discovery, Mr Rowley said: "We are on track, and there are some 12,000 documents that are the subject of review at the moment that are email communications, some of which are unfortunately duplicates of documents that have already been disclosed in the first tranche, but assured of that your Honour is that we are on track." The Court was not asked to extend further the time within which the respondents were to complete their discovery. Instead, the Court noted that the respondents anticipated completing their discovery by 21 September 2020. The Court also made trial programming steps for a trial to commence on 31 May 2021. These were premised, amongst other things, on discovery having been completed by 21 September 2020. 9 November 2020: Both a CMH and the applicants' judicial sale application were listed for hearing. At the CMH, the Court was told that the respondents had still not completed their discovery. In particular it was told that the respondents had not: (a) provided to the applicants a sworn copy of the unsworn list of documents which had been provided on 3 September 2020; (b) produced for inspection the documents in the PST file in Part 1 of that list; and (c) reviewed the documents in the PST file for possible claims of privilege. Counsel for the applicants informed the Court that their solicitor had made numerous requests to the respondents' solicitors for the list of documents to be sworn and for the emails contained in a PST file to be produced. The respondents' counsel confirmed the correctness of the statements made by counsel for the applicants in this respect. The Court noted that the non-compliance by the respondents with their discovery obligations may mean that extensions of time for the trial preparation steps, set out in the Court's orders of 4 September 2020, would be required. The Court ordered the respondents to: (a) file and serve by 20 November 2020 the affidavit which, by itself, or in conjunction with earlier filed affidavits, completed the respondents' discovery of documents in the proceedings; and (b) produce to the applicants' solicitors by 20 November 2020 the bundle of emails extracted from the email account "Steven@fairfield.com.au" produced electronically by way of PST file. 2 December 2020: Counsel previously instructed for the respondents appeared as a matter courtesy to inform the Court that the former solicitors had terminated the respondents' retainer of them on 24 November 2020. Steven appeared in person. Counsel for the applicants informed the Court that there had not been compliance with the order made on 9 November 2020 requiring the respondents to produce by 20 November 2020 the bundle of emails extracted from email account "steven@fairfield.com.au". Counsel previously retained by the respondents informed the Court that a number of "significant steps" had been taken by his instructors in the period before 20 November 2020 with a view to finalising discovery; that his instructors had sought instructions from the respondents so as to enable them to finalise discovery; and that they have been unable to obtain sufficient instructions for that purpose. While the Court reminded Steven of the necessity for parties in litigation to comply with Court orders and, particularly in this case, the orders in respect of discovery, the Court did not that day make any further orders concerning discovery. 22 December 2020: At the CMH this day, each of the individual respondents attended in person. The Court listed both the judicial sale and the default judgment applications for hearing on 5 February 2021. It also ordered that any affidavits to be relied upon by the respondents in respect of either the judicial sale or default judgment applications be filed and served by 15 January 2021. The Court did not make any further orders with respect to the respondents' discovery. 25 January 2021: By an emailed letter this day addressed to the respondents (who were then without legal representation), the applicants' solicitors invited them to make discovery "as a matter of urgency and prior to the hearing on 5 February 2021". The solicitors went on to say that if satisfied that the respondents had complied with their obligations, they would propose a revised timetable for trial preparation. They also provided the respondents with references to the provisions in the FCR setting out the obligations in relation to standard discovery. 5 February 2021: The Court adjourned the hearing of the judicial sale and default judgment applications to 23 February 2021 and extended the time within which the respondents were to file and serve any further affidavits to be relied upon either in respect of the judicial or the default judgment applications to 15 February 2021. The Court also put in place a revised timetable of steps to be taken in trial preparation. The Court extended the time within which the respondents were to give standard discovery to 4 pm on 15 February 2021.

114 Counsel for the respondents at the hearing on 23 February 2021 accepted that it is the respondents personally who are responsible for the non-compliance with the Court's orders concerning discovery, and that no criticism was made of the conduct of their former solicitors in this respect. 115 The effect of the orders reviewed above is that, after several extensions of time, the respondents had until 4 pm on 15 February 2021 to complete their discovery of documents in the proceedings. 116 On 14 February 2021, the respondents (by their new solicitors, Hume Taylor & Co) filed an affidavit of Steven verifying two lists of documents. The first list comprised 71 separate documents. The second was a list of 12,961 separate documents described by Steven as "documents exported from certain email accounts and by way of PST file". Hume Taylor & Co provided the applicants' solicitors with a USB containing the discovered documents on 16 February 2021. 117 In an affidavit made on 19 February 2021, the applicants' solicitor deposed that, on the basis of an incomplete review of the 12,961 discovered documents: (a) a significant portion could not be regarded as either directly or indirectly relevant to an issue in the proceedings; and (b) another significant portion appear to be computer generated front sheets or descriptions of a document but without the actual document. 118 By way of illustration of these complaints, the applicants' solicitor deposed that, of the first 1,000 emails contained in the respondents' second list, 436 were relevant, 564 were irrelevant and 78 had no content, being "just a document coversheet". He also deposed that, of the last 1,192 emails in the second list, 20 were relevant, 5 were irrelevant and 1,167 had no content but were just a "document coversheet". 119 The respondents did not contest these matters. In fact, by an affidavit made on 21 February 2021, the respondents' solicitor deposed that, having recently taken over the matter from the respondents' previous solicitors, he had not had sufficient time in which to provide discovery in proper form. In that circumstance, he had used a list prepared by the respondents' previous solicitors, and then added further documents to it. The solicitor then deposed: [15] I regret, and apologise to the Court, that the respondents' discovery as it currently stands is imperfect. It is not to the standard that I would ordinarily complete discovery, however, it is my belief that, based on the time available and the scope of my retainer, a genuine and diligent effort was made to make discovery as well as could be achieved in the circumstances. [16] Having seen the volume of emails in Schedule 2 to the respondents' List of Documents, if a thorough item-by-item review of the emails and amendment of Schedule 2 was required, I expect it would take at least 4 weeks to achieve to a reasonable standard. 120 As is apparent, the solicitor recognised in these paragraphs that there were inadequacies in the respondents' discovery and estimated that it would take at least four weeks for him to achieve discovery "to a reasonable standard". I add that I do not make any criticism of the respondents' solicitor - it is plain that he was operating under difficulties. It seems that those difficulties are almost wholly of the respondents' own making.

The applicants' submissions 121 The applicants relied upon the failure by the respondents to make discovery by 15 February 2021 in the manner contemplated by the Court's orders. They also submitted that the respondents' failure to comply with the Court's orders made on 20 March 2020, 25 June 2020, 21 August 2020, 9 November 2020 and 22 December 2020 constituted a failure by them to prosecute their defence to the claim, and to prosecute their own counterclaim, with due diligence. In my view, the non-compliance with the orders of 20 March and 25 June 2020 should be disregarded for present purposes, as the applicants were also in breach of those orders. The early orders are, however, relevant to the time which the respondents have had to comply with the orders. 122 The applicants submitted that, even now, after the various extensions of time granted to the respondents, they have still not made discovery in accordance with the FCR as contemplated by the Court's orders. The elements of the applicants' submission were: (a) the respondents were ordered to give standard discovery. In accordance with r 20.14 of the FCR, this meant that they were to give discovery of only those documents which are "directly relevant" to the issues raised on the pleadings, within the meaning of that expression in r 20.14(1)(a); (b) the respondents had provided a unsworn list of documents on 3 September 2020 which contained only the single entry set out above; (c) the respondents did not provide the documents in the unsworn list until 16 February 2021, and did not provide any further discovery until 14 February 2021 when they filed the two lists referred to above. The applicants noted that the first list comprised, in the main, documents which have been exhibited to affidavits previously sworn in the proceedings, and so were not additional to those already disclosed. They submitted, for the reasons given earlier, that the second list comprises substantial numbers of documents which, on any reasonable view, do not have even indirect relevance to an issue in the proceedings, indicating thereby a lack of attention to the giving of proper discovery. Instead, the respondents have provided documents without any discrimination, thereby creating a circumstance in which it should be concluded that they have not provided discovery as required by the Court's orders and, furthermore, have engaged in conduct which is oppressive of the applicants; (d) the respondents have not discovered documents to support the losses said to provide the basis for the claims for damages in the respondents' 2SCC; (e) the further four weeks identified by the respondents' solicitor as the time required for the making of discovery to a reasonable standard leaves insufficient time for the provision of particulars, and for the preparation, in the usual way, of the evidence to be presented at trial; and (f) at the very least, the respondents' own claim which depends on them making discovery should be dismissed, as they have not provided discovery to support those claims.

The respondents' submissions 123 Counsel for the respondents referred to the following matters: (a) the applicants themselves had been in breach of the orders made on 20 March and 25 June 2020; (b) the applicants themselves had "dumped" a large number of emails on the respondents. I understood, however, counsel not to persist with that submission in the light of a further affidavit from the applicants' solicitor in which he deposed to having made discovery of selected documents from a large volume of emails but to having also provided the larger number to the respondents' former solicitors at their request so that they could check, if they wished, the appropriateness of the applicants' selection. It was this second provision of documents which counsel had, without knowledge of the circumstances of its provision, characterised as "the dump"; (c) the respondents are taking steps to remedy the defaults in their discovery obligations; and (d) the grant of judgment for default for the "large array" of relief sought by the applicants as well as the summary dismissal of the cross-claim would be "manifestly harsh and contrary to the interests of justice", given that it would shut the respondents out from the opportunity to test the applicants' claims, and to pursue their own, at the trial. 124 Counsel did not dispute the applicants' criticism about the discovery of the documents in the second list filed on 14 February 2021. He seemed to accept that that manner of discovery was not compliant with the Court's Rules or with the Court's orders and would require the applicants' solicitor to engage in a substantial amount of unnecessary work. Counsel also did not contest the applicants' submission that the respondents had not discovered documents supporting the losses said to provide the basis for the claims for damages in the respondents' 2SCC. It is understandable, at least to an extent, that counsel was not able to contest these matters given the recency of the discovery provided by the respondents and the recency of the time at which both he and Hume Taylor & Co had been instructed. This is a circumstance of the respondents' own making. 125 As counsel for the respondents noted, one would expect ordinarily that, to support the claims for damages in the 2SCC, the respondents would discover documents evidencing the transactions upon which it is said that Mr Hamilton failed to provide the funds for settlement, documents evidencing the income or profits said to be lost, and documents from the respondents themselves or from third parties which may support the assumptions upon which an accounting expert may be asked to express an opinion as to the extent of the claimed loss. Counsel submitted that some documents of these kinds would not necessarily be documents which the respondents would have in their own possession but would have to be the subject of applications for third party discovery or subpoena. 126 While acknowledging the inadequacies in the respondents' discovery, counsel was not able to identify how the pre-trial steps necessary for the pursuit of the damages claims in the 2SCC could be accommodated within the revised trial program fixed on 5 February 2021. He submitted nevertheless that there was no evidence of "irremediable prejudice" to the applicants arising from the respondents' delays. The submission in short was that the detriments resulting from a further compression of the trial programming orders were not sufficient to warrant the dismissal altogether of the respondents' 2SCC, let alone entering judgment by default for the applicants on their claim.

Consideration 127 I accept that the respondents have provided some discovery of documents said to evidence transactions which Steven alleges could not be completed by reason of the alleged breaches of contract by Mr Hamilton. Counsel was not able, however, to contest the applicants' submissions that the respondents have not discovered documents said to evidence or support the losses alleged to have resulted from the non-completion of the contracts said to have been negotiated by Steven. It is stark that, even now, the respondents have not obtained, so as to be able to discover, documents of this kind. Further, and independently of those matters, the respondents should have been able to discover, but have not, documents concerning the claim for reimbursement of motor vehicle and maintenance costs, and at least some documents supporting the losses said to have been suffered by Steven resulting from the misleading or deceptive conduct which is alleged. Documents of this kind, if they exist, should be in Steven's own control, and able readily to be discovered. 128 Naturally, in cases of default, the Court looks to evidence of attempts made by the party in default to remedy the situation and to prosecute the matter diligently thereafter. In this case, the respondents have not engendered confidence about these matters. I refer in particular to the statement of the respondents' solicitors that it would take approximately four weeks to get the discovery to a reasonable standard. Moreover, since the Court reserved its decision on 23 February 2021, the respondents' solicitors have filed a notice of ceasing to act and new solicitors do not seem to have been appointed. 129 I am not satisfied that it would be appropriate at this stage to dismiss altogether the respondents' cross-claim or to enter judgment in default for the applicants on their claim. As to the latter, I note the frank concession of counsel for the applicants that they do not need the discovery from the respondents in order to prosecute their own claims. 130 However, I am persuaded by the applicants' submissions that the damages claims contained in the respondents' 2SCC should be dismissed pursuant to r 5.23(1)(b) of the FCR. The parties are now only a little over two months away from the listed trial and the respondents have been in breach of the orders concerning discovery over an extended period. They have not provided proper discovery as required by the Court's orders and have not provided evidence of taking even basic steps towards the preparation of their monetary claims. Contrary to the submissions of counsel for the respondents, I consider it reasonable to conclude that the respondents' non-compliance with the discovery orders has had the effect that the pre-trial steps necessary for the pursuit of those claims cannot be completed in time for the trial to commence on 31 May 2021, let alone in a manner which is fair to the applicants. That is to say, there is insufficient time now in which the respondents may provide the discovery necessary to support their own monetary claims, provide the particulars which they foreshadowed in the 2SCC, provide the necessary expert reports so as to allow the applicants an adequate opportunity to prepare their defence to those claims including, possibly, obtaining answering expert reports. 131 In refusing at this stage the remainder of the applicants' application for the entry of judgment by default, I have proceeded on my present understanding that the respondents' default will not prejudice in a material way the applicants' ability to prosecute their own claims or to defend the non-monetary claims of the respondents. On that understanding, I have thought it appropriate to proceed, as the authorities indicate is appropriate, cautiously and with regard to the potential harsh consequence of the entry of a judgment in default. 132 The extra work which the manner in which the respondents have provided the discovery on 15 and 16 February 2021 has caused the applicant can be reflected, if appropriate, in an order for costs. 133 Accordingly, I will make orders pursuant to r 5.23 of the FCR dismissing the claims made in [8]-[13], [14]-[16], [17]-[21] and [30]-[33] of the 2SCC. The remaining aspects of the applicants' interlocutory application of 17 December 2020 are dismissed.

Conclusion 134 For the reasons given above, the applicants' application for judicial sale succeeds. Their application for judgment by default succeeds in part. I certify that the preceding one hundred and thirty-four (134) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice White.

SCHEDULE OF PARTIES SAD 312 of 2018 Respondents Fourth Respondent: BRENDA LYNN VAN NIEKERK Cross-Claimants Second Cross-Claimant: STEVEN VAN NIEKERK Cross-Respondents Second Cross-Respondent ANDREW HAMILTON Third Cross-Respondent FAIRFIELD PASTORAL HOLDINGS NO 1 PTY LTD ACN 600 365 544