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[2019] FCA 2108
Federal Court of Australia
2019-11-27
Steward J
Original judgment source is linked above.
Number of paragraphs: 29
Counsel for the First, Second, Third, Fifth, Sixth, Seventh, Eighth and Ninth Applicants in proceeding VID 929 of 2018: The Applicants did not appear
Counsel for the Fourth Applicant in proceeding VID 929 of 2018 and the Fourth Respondent in proceeding VID 1146 of 2018: Mr B Parker
Solicitor for the Fourth Applicant in proceeding VID 929 of 2018 and the Fourth Respondent in proceeding VID 1146 of 2018: Domantay Legal
Counsel for the First and Second Respondents in proceeding VID 929 of 2018: Mr N Terziovski
Counsel for the Third, Fourth, Fifth, Sixth, Seventh, Eighth and Ninth Respondents in proceeding VID 929 of 2018 and the Applicants in proceeding VID 1146 of 2018: Mr S Woolley
Solicitor for the Third, Fourth, Fifth, Sixth, Seventh, Eighth and Ninth Respondents in proceeding VID 929 of 2018 and the Applicants in proceeding VID 1146 of 2018: SLF Lawyers
Counsel for the First, Second, Third, Fifth, Sixth, Seventh, Eighth and Ninth Respondents in proceeding VID 1146 of 2018: The Respondents did not appear
BETWEEN: GALAXING PTY LTD (ACN 161 086 988) First Applicant
TOUCHSTONE CORPORATE HOLDINGS PTY LTD Second Applicant
YINGHUA GU (and others named in the Schedule) Third Applicant
AND: NIKOLA TERZIOVSKI First Respondent
NICHOLAS JAMES LAWYERS PTY LTD (ACN 601 167 220) Second Respondent
NORTH EAST DEVELOPMENT GROUP PTY LTD (ACN 617 291 639) (and others named in the Schedule) Third Respondent
JUDGE: STEWARD J DATE OF ORDER: 27 NOVEMBER 2019
BETWEEN: NORTH EAST DEVELOPMENT GROUP PTY LTD (ACN 617 291 639) First Applicant
RAGE TRADING PTY LTD (ACN 137 170 088) (and others named in the Schedule) Third Applicant
AND: GALAXING PTY LTD (ACN 161 086 988) First Respondent
JINYANG YU Second Respondent YINGHUA GU (and others named in the Schedule) Third Respondent
JUDGE: STEWARD J DATE OF ORDER: 27 NOVEMBER 2019
STEWARD J: 1 In two proceedings before me the parties dispute whether certain sales of shares in a publicly listed company called PLC Financial Solutions Limited ("PLC") has taken place. The first proceeding was commenced by nine applicants principally against a solicitor (Mr Terziovski) and his law firm seeking freezing orders to prevent the disbursement of $860,000 by the solicitor out of one of his trust accounts (the "first proceeding"). Those applicants, for convenience, I shall call the "Purchasing Parties". The second proceeding was commenced by seven applicants against the Purchasing Parties seeking to be paid the $860,000 (the "second proceeding"). Those applicants, for convenience, I shall call the "Selling Parties". The Selling Parties allege, and the Purchasing Parties deny, that there has been a sale of PLC shares by the Selling Parties to the Purchasing Parties for $860,000. In 2018, the money was paid into Court. Each of the Selling Parties and the Purchasing Parties seek to get that money. I note that the Selling Parties are also respondents to the first proceeding. 2 On 27 November 2019, I summarily dismissed the first proceeding. I also gave summary judgment in the second proceeding against the Purchasing Parties, save that in the case of the fourth respondent, Mr Tang, the order requiring the payment of his share of the $860,000 was deferred for 14 days to enable him to make an application to set this default judgment aside. I shall return to explain the position of Mr Tang. What follows are my short reasons concerning both proceedings.
Procedural History 3 The procedural history in this matter is long and unsatisfactory. The first proceeding commenced when the Purchasing Parties sought ex parte freezing orders over the solicitor's trust account. They did so in reliance upon an affidavit affirmed by a Mr Oliver Roths, who deposed that he was a "corporate advisor" and "representative" of the Purchasing Parties. That affidavit had been filed by solicitors, namely the Sydney Office of Piper Alderman. In general terms, in that affidavit Mr Roths deposed that as part of the potential sale of shares in PLC, monies had been deposited in a trust account of Mr Terziovski. The monies, he said, were only to be distributed to the Selling Parties upon completion of the sales. This, he said, had never taken place. There was a threat, he believed, that the solicitor was going to distribute the monies to the Selling Parties in any event. 4 I make no finding about the accuracy of Mr Roths' affidavit. I observe, however, that: (a) he did not at that time disclose that his former name was "Oliver Banovec" and that he had in the past been prosecuted by the Australian Securities and Investment Commission and, as a result, had served time in gaol; and (b) he never at any stage disclosed that he was in fact gaoled for seven years for, inter alia, fraud and two counts of perjury: Banovec v. R [2012] NSWCCA 137. 5 I would not have made freezing orders on an ex parte basis on the word of a man who had a conviction for perjury. This should have been disclosed to me at the hearing of the ex parte application. The failure to do so was a serious breach of the duty of candour owed to the Court: Walter Rau Neusser Oel Und Fett AG v. Cross Pacific Trading Ltd [2005] FCA 955 at [38], [47]-[48] Allsop J. (as his Honour then was). I make no finding, for the moment, that Piper Alderman knew about the conviction. I also make no finding that Counsel who appeared for the Purchasing Parties at the hearing of the application for freezing orders had any such knowledge. I am certain that if he did he would have disclosed the foregoing matters to me. 6 In August 2018, the solicitor paid the $860,000 into Court. As a result, the freezing orders, by their terms, ceased to have any further effect. I also rejected an interlocutory application made by the Purchasing Parties to have the monies paid to them. That was because I was satisfied that a real dispute existed as to whether there had been any sale of the PLC shares. 7 In September 2018, the Selling Parties commenced their application for specific performance of what they alleged were contracts for the sale of their PLC shares to the Purchasing Parties, for declarations that they were entitled to the funds held by the Court, and for payment of those monies, in various amounts, to each Selling Party. 8 On 2 February 2019, both proceedings were listed by me for a three-day trial commencing on Monday 14 October 2019. 9 Immediately before the commencement of that trial Piper Alderman ceased to act for the Purchasing Parties and the Court received an email directly from one of those parties claiming that the proceedings had been settled. That party stated that the Purchasing Parties intended to bring an application "to enforce the settlement" and sought, in the meantime, an adjournment of the trial. The email was read out to the parties at the start of the hearing on 14 October 2019. I was informed that the Purchasing Parties were going to retain a new solicitor and new Counsel. In those circumstances I adjourned the hearing of the trial for one week. 10 At the adjourned hearing of the trial on 21 October 2019, the Purchasing Parties were represented by a different solicitor and barrister, namely HWL Ebsworth Lawyers and by Mr McKillop of Counsel. He sought another adjournment of the trial to give the Purchasing Parties time to file an application to enforce the alleged settlement agreement. It would appear that the extent of the retainer of HWL Ebsworth Lawyers and Mr McKillop was limited to securing this adjournment. After some debate, it appeared to me to be appropriate to give one further short adjournment to facilitate the making of the application. However, I ordered the Purchasing Parties to pay the costs thrown away incurred by the Selling Parties and by Mr Terziovski and his firm. The orders I made included a timetable for the Purchasing Parties to file their application, for the Selling Parties to file any defence, and for the exchange of written submissions. The trial was adjourned to 27 November 2019. 11 In the first proceeding the following order was also made: The applicants pay the first and second respondents' costs thrown away by reason of the adjournment ordered on 14 October 2019 and today's vacation of the trial fixed at $8,250 to be paid on or before 27 November 2019. 12 In the second proceeding the following order was also made: The respondents pay the applicants' costs thrown away by reason of the vacation of the trial fixed at $5,100 to be paid on or before 27 November 2019. 13 The Purchasing Parties did none of the things they were ordered to do. They did not make their application. They did not file written submissions. They did not pay the costs thrown away as required. 14 On 21 November 2019, Mr Dickson Ting of Domantay Legal Pty Ltd sent an email to the Court on behalf of Mr Tang, the fourth applicant in the first proceeding and the fourth respondent in the second proceeding. It asserted that Mr Tang had only recently discovered that he was a named party in each proceeding and that he had never given Piper Alderman instructions to act on his behalf. Mr Ting sought a further adjournment of the trial on the basis that Mr Tang was not ready to proceed. 15 On 26 November 2019, Mr Ting on behalf of Mr Tang, filed a "Notice of acting - change of Lawyer" and an interlocutory application seeking an adjournment of the trial as well as the payment of the costs from a non-party, namely Piper Alderman. This was supported by an affidavit of Mr Tang who does not speak, read or write in English. The affidavit contained a certification from an interpreter that confirmed that its contents had been interpreted into Mandarin and the oath then administered. The affidavit confirmed that Mr Tang had never been a client of Piper Alderman.
The Hearing on 27 November 2019 16 At the hearing held on 27 November 2019, Mr Tang was represented by Mr Parker of Counsel. A Mr Wang, company director, sought to appear on behalf of Galaxing Pty Ltd ("Galaxing"), one of the Purchasing Parties. It was explained to him that he needed to make an application, supported by an affidavit, seeking leave to represent that company. No other Purchasing Party appeared and no lawyer or lawyers appeared on their behalf. Mr Woolley of Counsel appeared for the Selling Parties. Mr Terziovski appeared on behalf of himself. 17 Mr Woolley, to his credit, said that he could not dispute the contents of Mr Tang's affidavit. He also accepted that the trial of the second proceeding could not fairly commence against Mr Tang. Mr Terziovski agreed.
Second proceeding - application for summary judgment against the Purchasing Parties 18 Mr Woolley nonetheless sought summary judgment against the Purchasing Parties, including Mr Tang. In his particular case, Mr Woolley made what were practically two concessions. He announced that he had instructions that his clients would not oppose any application made by Mr Tang to have any summary judgment pronounced against him set aside. Mr Woolley also said that any order requiring the payment of Mr Tang's share of the $860,000 (being $150,000) to the Selling Parties be deferred for 14 days. The effect of these concessions was to give Mr Tang's new legal team time to prepare for any application to set aside this judgment and then, once set aside, any hearing of the first and second proceedings as between the Selling Parties and Mr Tang. The concessions did not extend to the other Purchasing Parties. There is an expectation (at least in relation to Galaxing) that they may also seek to have this judgment set aside, once they have secured representation or otherwise organised themselves. Whether any other Purchasing Party, such as Galaxing, will be successful in having the judgment entered against them set aside is a matter which would need to be determined following the making of any such application by those parties. 19 Mr Woolley, for the purpose of his summary judgment application, read and relied upon an affidavit of Mr Harry Fung affirmed on 24 June 2019. Mr Fung is a non-executive director of PLC. He negotiated with Mr Roths on behalf of the Selling Parties. He deposed to the execution of 11 Standard Share Transfer Forms by the Selling Parties and the Purchasing Parties. He exhibited to his affidavit those forms and each was ostensibly signed by the Selling Parties and Purchasing Parties. Mr Fung gave evidence that the transfer of shares in PLC, being a listed company, was facilitated and settled using the Clearing House Electronic Subregister System or "CHESS". He exhibited to his affidavit two PLC "Net Movement Report[s]" for 16 May 2018 and 18 May 2018. These state on their face that the relevant "operator" was "CHESS". These show a reduction in the number of shares in PLC owned by the Selling Parties and a corresponding increase in the number of PLC shares owned by the Purchasing Parties. The quantum of shares traded appeared to match the amounts set out in the Standard Share Transfer Forms. Mr Fung also deposed to the receipt by Mr Terziovski's firm of the consideration for the sale of the PLC Shares as set out in each of the Transfers. The trust account receipts were also in evidence and they record the receipt of this consideration from the Purchasing Parties. 20 Mr Woolley sought summary judgment against the Purchasing Parties, save for Mr Tang, for being in default of appearance. Other than Mr Tang, no Purchasing Party appeared at the hearing before me (set down as the trial) on 27 November 2019 (Mr Wang could not represent Galaxing). In the case of Mr Tang, Mr Woolley submitted that he was in default of the order made by this Court on 21 October 2019 that the Purchasing Parties were required to pay costs to the Selling Parties in the sum of $5,100. Mr Parker did not dispute that Mr Tang was in default of that order. 21 It is well established that the power to enter default judgment pursuant to r 5.23 of the Federal Court Rules 2011 (Cth) (the "Rules") involves the application of a discretion by this Court, which should be exercised cautiously. It requires the Court to be satisfied that on the face of the statement of claim an applicant is entitled to the relief sought. Each element of the relevant claim must be properly and discretely pleaded, but need not be proven. In Chamberlain Group, Inc v. Giant Alarm System Co, Ltd (No 2) [2019] FCA 1606, Yates J. helpfully set out the relevant principles concerning an application made under r 5.23(2)(c) (at [13]-[14]): The power to give judgment against a defaulting party is undoubtedly discretionary. The discretion must be exercised cautiously. Where the defaulting party is a respondent to a pleaded claim, the giving of judgment for final relief on the application will deliver complete success to the applicant without investigation of the merits of the pleaded claim: ACOHS Pty Ltd v Ucorp Pty Ltd [2009] FCA 577 at [27]. There is no requirement that the act or acts of default be intentional or amount to contumelious conduct. There is no requirement that the act or acts of default result in inordinate or inexcusable delay. That said, such features, if present, will be relevant to the exercise of the Court's discretion. So too will conduct that persuades the Court that the defaulting party is manifesting an inability or unwillingness to cooperate with the Court and the other party or parties to the proceeding. Rule 5.23(2)(c) requires the Court to be satisfied that the applicant is entitled to the relief claimed in the statement of claim. This requirement has been interpreted as meaning that the Court must be satisfied that "on the face of the statement of claim" the applicant is entitled to the relief that is claimed. It is not a requirement that the applicant prove its claim by way of evidence. Put another way, the facts alleged in the statement of claim are taken to have been admitted: Australian Competition and Consumer Commission v Dataline.Net.Au Pty Ltd [2007] FCAFC 146; 161 FCR 513 at [42]. If, on inspection of the statement of claim, the Court is satisfied that the applicant would be entitled to the relief sought then this requirement of r 5.23(2)(c) will be met: CNIP Pty Ltd v Chan & Naylor Norwest Pty Ltd (No 2) [2011] FCA 1170 at [18]-[19]; Speedo Holdings B.V. v Evans (No 2) [2011] FCA 1227 at [23]. The Court may permit further evidence to be adduced, but not evidence that would alter the pleaded case: Australian Competition and Consumer Commission v Dataline.Net.Au Pty Ltd [2006] FCA 1427; 236 ALR 665 at [45], [48]-[50]; United Broadcasting International Pty Ltd v Turkplus Pty Ltd (No 2) [2010] FCA 1413 at [42]-[44]; Australian Competition and Consumer Commission v Yellow Page Marketing BV (No 2) [2011] FCA 352; 195 FCR 1 at [62]-[63]. 22 I am satisfied here that the Selling Parties are entitled to the relief sought in the second proceeding. It is justified by their pleaded case. It is also justified by the evidence to which Mr Woolley took the Court. That evidence sufficiently persuades me, for the purposes of the application for judgment in default, that ownership of the PLC shares was transferred to the Purchasing Parties and that the Selling Parties are entitled to the $860,000. As I anticipate, at least with respect to Mr Tang, that there may be an application to have this judgment set aside, I will make no more specific findings. 23 I am also satisfied that the history of non-compliance on the part of the Purchasing Parties justified the entry of judgment in favour of the Selling Parties. The trial in this matter has been adjourned two times. On the first occasion, the Court was told that the Purchasing Parties were going to instruct a particular named solicitor and barrister. This did not happen. Instead, different Counsel appeared with a very limited retainer instructed by a different firm of solicitors. The application to enforce the alleged settlement was never made. Orders made by the Court setting down a timetable for steps to be completed in November 2019 were not complied with. This included for the payment of costs thrown away by reason of the adjournment sought by the Purchasing Parties. No explanation for that non-compliance has been forthcoming. At the trial set down on 27 November 2019, only Mr Tang appeared before me. No explanation was ever given for why the other Purchasing Parties had failed to appear at all. Mr Wang sought to appear for Galaxing but had not sought leave to do so.
First proceeding - application for summary dismissal 24 I make very similar observations about the first proceeding in which the respondents sought summary dismissal pursuant to r 5.23(1)(b) of the Rules. The Purchasing Parties were again in default. In these circumstances, the Court has the power to order that "the proceeding be stayed or dismissed for the whole or any part of the relief claimed by the applicant". In Simjanovska v. Segal [2018] FCA 12, Perry J. said at [24]: The power to make an order summarily dismissing a proceeding because of an applicant's default should be exercised cautiously: Lawson v NSW Minister for Land and Water Conservation [2007] FCA 8 at [22]; Dauguet v Centrelink [2015] FCA 395 at [135]. The Court must balance the desirability of the expeditious conduct of litigation, particularly in a Court committed to a case management system, and the desirability of litigants, having a proper opportunity to present their cases: Wu v Avin Operations Pty Ltd [2006] FCA 36 at [51]. See also Professional Administration Service Centres Pty Ltd v. Commissioner of Taxation [2012] FCAFC 180; (2012) 295 ALR 52 at [37]-[44] per Edmonds, McKerracher and Nicholas JJ. 25 Having regard to these principles, in my view, the respondents are entitled to summary dismissal of the first proceeding because of the continuing and various defaults of the Purchasing Parties set out above. The burden of the proceeding on the respondents should not persist in circumstances where the Purchasing Parties have not prosecuted their claim with due diligence. I add that Mr Terziovski, as the solicitor who had originally held the $860,000 on trust, has been subject to considerable inconvenience by reason of the proceeding. He has no personal interest in the substantive issue as to who should be paid that money.
Mr Tang's position 26 It follows from the foregoing that I did not agree to vacate the trial date as requested by Mr Parker on behalf of Mr Tang. Upon the making of the two concessions by Mr Woolley, which effectively preserved Mr Tang's position, it appeared to me that Mr Parker did not press his interlocutory application for an adjournment.
Costs 27 I have reserved the issue of costs to be determined at a separate hearing. That is because, amongst other reasons, Mr Tang sought an order of costs from a non-party, namely Piper Alderman. 28 Since the hearing on 27 November 2019, Galaxing, Mr Tang, Mr Terziovski and his law firm, and the Selling Parties have filed separate interlocutory applications to pursue costs against Piper Alderman. In my view, having regard to the history of this matter, I consider that it is important for that firm to have the opportunity to be heard by this Court, if it wishes to do so. The allegation made by Mr Tang that he was never a client of that firm, in circumstances in which he was named an applicant in Court proceedings commenced by Piper Alderman, is very serious. That firm should have the chance to explain what has occurred.
Conclusion 29 For the foregoing reasons, the first proceeding was summarily dismissed and summary judgment was entered in the second proceeding for the Selling Parties, save that in the case of Mr Tang the payment of his share of the $860,000 (namely $150,000) was deferred for 14 days (subject to any further order of the Court). On 3 December 2019, consent orders were made to release that sum of $150,000 to the Selling Parties. I certify that the preceding twenty-nine (29) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Steward.
SCHEDULE OF PARTIES VID 929 of 2018 Applicants Fourth Applicant: GUOHUA TANG Fifth Applicant: XINWEN XIE Sixth Applicant: JINYANG YU Seventh Applicant: DUCHESS NADINE MARANDO ATF SIENNA PEARL MARANDO Eighth Applicant: IZABELA KWOKA ATF DOMINIC OLIVER KWOKA Ninth Applicant: IZABELA KWOKA ATF JULIET MARIA KWOKA Respondents Fourth Respondent: ZAKI ALAJAJI Fifth Respondent: RAGE TRADING PTY LTD (ACN 137 170 088) Sixth Respondent: PENSKI PTY LTD (ACN 167 328 261) Seventh Respondent: BUBBLY WATER PTY LTD (ACN 617 552 075) Eighth Respondent: PICKLE PANTS PTY LTD (ACN 621 713 666) Ninth Respondent: H2H HOLDINGS PTY LTD (ACN 613 740 051) VID 1146 of 2018 Applicants Fourth Applicant: PENSKI PTY LTD (ACN 167 328 261) Fifth Applicant: BUBBLY WATER PTY LTD (ACN 617 552 075) Sixth Applicant: PICKLE PANTS PTY LTD (ACN 621 713 666) Seventh Applicant: H2H HOLDINGS PTY LTD (ACN 613 740 051) Respondents Fourth Respondent: GUOHUA TANG Fifth Respondent IZABELA KWOKA ATF DOMINIC OLIVER KWOKA Sixth Respondent IZABELA KWOKA ATF JULIET MARIA KWOKA Seventh Respondent XINWEN XIE Eighth Respondent TOUCHSTONE CORPORATE HOLDINGS PTY LIMITED Ninth Respondent DUCHESS NADINE MARANDO ATF SIENNA PEARL MARANDO
Galaxing Pty Ltd
Terziovski