Flashback Holdings Pty Limited v Showtime DVD Holdings Pty Ltd

Judgment (13 paragraphs)

[1]

REASONS FOR JUDGMENT 1 The first applicant ("Flashback") seeks to enter judgment against the first respondent ("Showtime") and the third respondent ("Mr Leslie"). It says that they have failed to comply with an order made by this Court which, in the event of a default, was expressed to result in the automatic striking out of their defences and the entry of judgment against them. There is no dispute about the effect of the order if it has not been complied with; the sole issue is whether Flashback is correct in its claim that there was no compliance. 2 It is necessary to say something of the circumstances which have brought the parties to this point. 3 On 13 March 2009 I made orders to effectuate the preparation of this matter for hearing. One of those orders required Showtime and Mr Leslie to give discovery by 18 March 2009, that is, within five days. The circumstances which led to the making of that order are set out in Flashback Holdings Pty Limited v Showtime DVD Holdings Pty Ltd (No 3) [2009] FCA 308 at [9]. It suffices for present purposes to note that Showtime was in breach of prior discovery orders made last year in circumstances where no real explanation was proffered for that failure. 4 At the time that this matter was canvassed before me on 11 March 2009 Flashback sought to strike out the defences of Showtime and Mr Leslie on a number of grounds which included their failure to provide discovery. At that time I declined the invitation to impose such a drastic remedy. However, having regard to the circumstances then obtaining I ordered discovery to be provided within a further period of five days and, additionally, I made the following order: That in the event of default of [the discovery order] by either the first or third respondent without further order strike out the first and third respondents' defences and enter judgment for the applicant against the first and third respondents.

[2]

8 Attention is to be focussed, therefore, on the question of whether the list of documents in form and substance complied with the discovery order. A minor failure to comply would not mean that the order was not substantially obeyed. A more difficult question is whether a finding of substantial non-compliance with such an order can be averted by demonstrating that the non-compliance was blameless or beyond the control of the party in breach. However, to embrace the view that a party does not breach an order of a court because of innocent mistake or supervening interference would result in court orders being, in effect, defeasible depending upon the individual circumstances faced by those who found themselves confronted with them. Such a view is likely to promote uncertainty and to detract from the need for parties to understand their responsibility to ensure that orders are obeyed. 9 This is not to deny the role that innocent mistake or supervening impossibility may have in an application to vary interlocutory orders, even retrospectively. It is instead merely to confine debate about the capacity of parties to obey orders to proceedings and applications in which the formation of those orders, rather than their interpretation, is at play. There may be cases - the present is not one - where the form of an order uses language which expressly incorporates the capacity of a party to obey it. In such cases, of course, innocence will have its part to play in an assessment of whether an order has been complied with. 10 I turn then to an assessment of the quality of Showtime's and Mr Leslie's compliance with the discovery order. Order 15 r 2(3) of the Federal Court Rules requires a party to discover documents upon which it relies. I find it impossible to resist the proposition that each of the documents in WL-1 to WL-28 is such a document; the fact that they form part of Mr Leslie's evidence shows that Showtime and Mr Leslie relied upon them. An unavoidable corollary is that they were discoverable. The same may be said of the document AC-1. 11 It is, I think, necessary to reflect on the significance of these documents. It can, in this case at least, be gauged three ways. First, the fact that Mr Leslie felt moved to annex them to his affidavit signals the presence, not of trivial and uninteresting documents but, rather, of documents regarded by Mr Leslie at least as being of sufficient importance to be put in evidence in an attempt to make good Showtime's and his defences. Secondly, two of the documents are explicitly referred to in the defences and amended defences - a proposition again inconsistent with their triviality. These were emails dated 4 June 2008 in paragraph 14 (paragraph 21 of the amended defences) and an email dated 30 October 2007 in paragraph 16 (paragraph 23 of the amended defences). 12 Thirdly, an examination of the documents showed that they are directed to making good Showtime's defence. These matters compel, I think, the conclusion that there has been a substantial non-compliance with the discovery order. 13 It was submitted that I should not reach that conclusion for a number of reasons. First, Mr Leslie swore an affidavit in which he sought to explain the circumstances in which the non-compliance occurred. The relevant paragraphs were in the following form: 5. At the date when I made my affidavit in relation to the First Respondent's List of Documents, I believed that I did not have any further documents relevant to the proceedings which required to be discovered as I had besides the documents enumerated in the List of Documents disclosed other documents to the Applicant during the course of these proceedings.

14 Mr Ellicott, who appeared for Flashback, objected to those paragraphs but I admitted them. He also indicated that he wished to cross-examine Mr Leslie. The reasons for that may be readily discerned from the fact that at least two of the documents which Mr Leslie says he only discovered after 19 March 2009 are referred to in his defence which was prepared in the previous year. Mr Leslie was not available for cross-examination but, the matter being interlocutory, I permitted the use of the affidavit in any event. 15 In the view I take of the law Mr Leslie's explanation as to how the substantial non-compliance came to pass is irrelevant. It may, of course, have had some relevance if an application had been made to discharge the self-executing order but no such application was made. However, even if Mr Leslie's explanation were relevant, I would not accept it. Where much of the material relied upon in his affidavit was not discovered and where two of the freshly located documents are referred to in the defence which substantially antedates that very act of location, I would require a good deal more persuasion than Mr Leslie's affidavit is unfortunately capable of providing. Mr Leslie's solicitor submitted to me that what Mr Leslie meant by his evidence was in effect a reference to various information technology issues which had arisen. There was, however, no such evidence before me as his solicitor conceded. If Showtime and Mr Leslie were to make good their innocence it was necessary for them to show their hand fully. That has not been done. Nor is it the case that no opportunity to deal with the matter has been provided. Flashback's application has been before the Court on three occasions and adjourned twice. 16 Secondly, it was submitted that Showtime and Mr Leslie had prepared the case for trial and put their evidence on. Since the matter is fixed for hearing on 1 to 3 June 2009 a trial on the merits should be permitted to take place. The preference for cases to be decided on their merits and not by the operation of procedural rules ought readily to be accepted. However, the difficulty is that in the present case the only question is whether there has been substantial compliance with the discovery order. The fact that the respondents are ready for trial simply does not engage with that question. It is, accordingly, irrelevant. That is not to say that those matters might not have been germane to an application to vary the original orders; no such application was however made. 17 In those circumstances, Flashback's claim that the self-executing order has taken effect must be acceded to. The effect of that order is that Showtime's and Mr Leslie's defences have been struck out and judgment has been entered against them. There is no need for me to make any further order to that effect; that order was made on 13 March 2009. It is convenient, however, to direct the Registrar to enter a minute of order recording the fact that their defences have been struck out and judgment entered. 18 Flashback asked, and the second respondent agreed, that if judgment were entered against Showtime and Mr Leslie then the proceeding against the second respondent should be discontinued. It is appropriate to take that course. 19 That leaves the question of the assessment of damages or account of profits still at large, together with the question of costs, both of the argument which has resulted in these reasons and, more generally, of the proceedings. I will list the matter for directions with a view to charting its procedural future on Tuesday 19 May 2009. In the meantime I vacate the trial. Any applications which are to be made should be served well in advance of that date. 20 At the end of the hearing, Mr Chelvathurai applied for an adjournment so he could seek representation by counsel. The matter had already been adjourned twice, the evidence was complete and submissions had been made. The heel of the hunt is not generally the appropriate time to seek the assistance of counsel. It is not clear what counsel would have said, why counsel was not brought into the matter at an earlier stage or how the prejudice to Flashback represented by the worthless nature of any costs order made in its favour might have been cured. The last matter is to be particularly emphasised where Showtime has previously suggested its own insolvency: Flashback Holdings Pty Limited v Showtime DVD Holdings Pty Ltd (No 3) [2009] FCA 308 at [8]. In that circumstance, I decline to grant any further adjournment. 21 I make orders accordingly. I certify that the preceding twenty one (21) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Perram.

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