Heng V (Australia) Pty Ltd v Wang [2009] FCA 922 | Case summary

The issues on the appeals 22 The notices of appeal filed in relation to the orders of 1 April, 14 April and 15 April 2008, raise various contentions. The appellants contended that they had complied substantially with the orders for inspection of documents made on 5 March 2008 and 1 April 2008. Alternatively, any non-compliance with the order of 5 March 2008 was insufficiently serious to require the making of a self-executing order on 1 April 2008, or the strike-out order of 14 April 2008. Alternatively, by the time the appeals were heard, the appellants would have complied with the orders and it was in the interests of justice that the appeals be allowed. Further, the orders of 1 April, 14 April and 15 April 2008 ought not to have been made without first giving the appellants an opportunity to be heard on the question whether those orders ought to be made, and the assistance of an interpreter. 23 Presumably in support of the contention that the appeals should be allowed because the orders in respect of discovery and inspection would have been complied with by the time the appeals were heard, the appellants filed in this Court a further list of documents, bearing the title of the proceeding in the Federal Magistrates Court. They also filed affidavit material about steps taken to make available for inspection discovered documents in the proceeding in the court at first instance. Ms Wang filed an affidavit contesting those steps. 24 Written submissions filed originally on behalf of the appellants tended to focus largely on what was said to be the self-executing nature of the order made on 1 April 2008, although it was conceded that the order did not provide for the entry of judgment on the default occurring, but simply for the striking out of the defence. It was contended that, if a self-executing order had been made in the "usual form" on 1 April 2008, it would have been possible for the appellants to comply with the order out of time, and to seek to extend the time for compliance even after judgment had been entered. It was contended that this Court undoubtedly had power to set aside the orders made on 1, 14 and 15 April on the grounds raised in the notices of appeal. Supplementary submissions were filed on behalf of the appellants, following a change of counsel. The contention was that the orders of 15 April 2008 were made because of non-compliance with the order for discovery, and because of the appellants not being ready to proceed with the trial of the proceeding. It was said that the appellants had complied substantially with the orders for discovery. To the extent they had not, it was because of their lack of representation and problems associated with obtaining it, and Mr Lee's lack of understanding of English. Reference was also made to the application for adjournment, based on the serious illness of Mr Lee's father in China. 25 It is abundantly clear that the order of 1 April 2008 was not a self-executing order. Paragraph 1 of that order required compliance with the order of 5 March 2008 by 8 April 2008. Paragraph 2 in effect amounted to a warning that, if there were to be a failure to comply, the court would take further action to strike out the defence of the appellants and to deal with the matter as an undefended matter. In other words, it was stated clearly that further steps would be taken in the event of non-compliance. This is not the form in which self-executing orders have been made in the past. If there were any doubt about the nature of the orders of 1 April 2008, it is clear that the federal magistrate did not treat them as self-executing orders on 14 April 2008. On that date, his Honour dealt with the question whether there had been compliance and made a specific order striking out the appellants' response, defence and cross-claim (it is not clear that there was any cross-claim filed in the proceeding). Although the proceeding was thereby undefended, and it might have been open to his Honour to give judgment for Ms Wang on her statement of claim, his Honour very properly adjourned the hearing to the following day and gave judgment on the basis of evidence in Ms Wang's affidavit. 26 In the course of the hearing of the appeal, I drew the attention of counsel for the appellants to the fact that the orders of 1 April and 14 April 2008 resulted from exercises of judicial discretion. An appeal from a judgment involving an exercise of judicial discretion is not to be resolved according to the manner in which the appeal court thinks that the discretion should have been exercised. As Dixon, Evatt and McTiernan JJ said in the well-known passage in House v The King (1936) 55 CLR 499 at 504-505: The manner in which an appeal against an exercise of discretion should be determined is governed by established principles. It is not enough that the judges composing the appellate court consider that, if they had been in the position of the primary judge, they would have taken a different course. It must appear that some error has been made in exercising the discretion. If the judge acts upon a wrong principle, if he allows extraneous or irrelevant matters to guide or affect him, if he mistakes the facts, if he does not take into account some material consideration, then his determination should be reviewed and the appellate court may exercise its own discretion in substitution for his if it has the materials for doing so. It may not appear how the primary judge has reached the result embodied in his order, but, if upon the facts it is unreasonable or plainly unjust, the appellate court may infer that in some way there has been a failure properly to exercise the discretion which the law reposes in the court of first instance. In such a case, although the nature of the error may not be discoverable, the exercise of the discretion is reviewed on the ground that a substantial wrong has in fact occurred. I invited counsel for the appellants to indicate on what wrong principle the federal magistrate had acted, what extraneous or irrelevant matters he had allowed to guide or affect him, what mistakes of fact he had made, or what material consideration he had failed to take into account. Counsel for the appellants contended that the federal magistrate had failed to give sufficient weight to the fact that Mr Lee was not fluent in English and did not have the benefit of an interpreter, to the fact that the appellants were without legal representation, and to the fact that Mr Lee's father was seriously ill in China. Counsel for the appellants also contended that the federal magistrate had acted upon a wrong principle, by failing to apply the correct principle. The correct principle advanced was that a party should not be made to suffer a judgment for a large sum of money without being entitled to a trial and judgment on all of the issues in a proceeding to which that person is a party. 27 The principles enunciated in House as those upon which an appeal court approaches the exercise of discretion by the court appealed from do not speak of the weight to be given to various considerations. Those principles are concerned with whether or not the judge at first instance took into account irrelevant matters at all, or failed to take into account all material considerations. It is very clear from the reasons for judgment he gave on 14 and 15 April 2008 that the federal magistrate took into account the fact that the appellants were not legally represented and that Mr Lee's father was seriously ill in China. As the transcript of what occurred on 14 April 2008 shows, his Honour was also concerned to ensure that Mr Lee understood what was going on, despite his lack of English. The case was stood down from 10.30 am until 2.15 pm because of the unavailability of an interpreter in the morning. In substance, the hearing on 14 April 2008 was conducted through an interpreter. Even on 1 April 2008, when no interpreter was present, the federal magistrate took pains to ensure that Mr Lee would understand the order that was made. His Honour stressed that Mr Lee should see a solicitor about the order. 28 If it were a matter of the weight to be attached to these considerations, there is much that could be said about the conclusion to which the federal magistrate should have come. In the first place, there is the account by Mr Lim of the attempted inspection of documents on 19 March 2008. This account was never refuted by Mr Lee, despite Mr Lee filing two subsequent affidavits. Even when he had an interpreter available to him, the only response Mr Lee made to this on 14 April 2008 was to allege that the solicitor had lied about the time that he had arrived at the offices of the appellants' former solicitors, to carry out the inspection of documents. There was no attempt to counter Mr Lim's allegation that Mr Lee had demanded the payment of $3,000 before he would comply with the court's order. There was no attempt to refute the allegation that he had maintained this demand, despite the advice of his own solicitor that he was obliged to comply with the order and could not demand money before doing so. 29 When he appeared before the federal magistrate on 1 April 2008, Mr Lee did not attempt to explain why it was that the appellants' former solicitors had ceased to act for them. No explanation for the fact that the appellants had become unrepresented was ever offered, to the Federal Magistrates Court or to this Court. On 14 April 2008, when he was asked about attempts he had made to obtain legal representation, Mr Lee made it clear that he had not made any serious attempt. He had telephoned one solicitor who refused to act, and requested his former solicitors to find a replacement. It is not surprising that the federal magistrate regarded this as a failure to take an opportunity given. 30 Further, Mr Lee's affidavit of 7 April 2008 (the day before the new deadline for producing documents for inspection) demonstrated that Mr Lee had no intention of attempting to comply with the court's order. Apart from taking the smart point about the abolition of group certificates, the affidavit set out a timetable that Mr Lee said was needed, in order to comply, and would justify adjourning the trial of the proceeding for a further six months or more. The timetable was an admission that the order of the Federal Magistrates Court with respect to inspection of documents had not been complied with. It was also a statement that Mr Lee had no intention of attempting to comply on 8 April. 31 In this context, the sudden reliance on the illness of Mr Lee's father in China, the subject of the affidavit of 9 April 2008, could be seen as a desperate attempt to put off the inevitable. From the affidavit, it appeared that Mr Lee's father had been seriously ill since December 2007. Although he claimed to have received a call from his sister, to tell him that their father was dying and that Mr Lee should return immediately, and that that information reached him on 7 April 2008, all that Mr Lee could say on 9 April was that he was arranging for a visa and for a flight to China. 32 This led him to advance two reasons for his alleged inability to attend the trial on 14 April. One was the lack of legal representation for the appellants and the other was the need to visit his father. Instead of seeking an adjournment for such time as would have enabled him to obtain legal representation and to visit his father, Mr Lee sought an adjournment of the trial for the same period as that requested in his affidavit of 7 April on other grounds. Notwithstanding the sworn statement that he would be unable to attend on 14 April, Mr Lee was present. His explanation that he was present out of respect for the court appears a little thin. Notwithstanding that the federal magistrate accepted that Mr Lee's father was seriously ill in China, it is no surprise that his Honour did not grant an adjournment to enable Mr Lee to visit his father. In the light of Mr Lee's obvious disdain for repeated orders in relation to discovery and inspection of documents, it is no surprise that the federal magistrate took a view adverse to the appellants as to whether they were making serious attempts to prepare for the trial of the proceeding. In relation to the lack of legal representation, it is no surprise that the federal magistrate took the view that Mr Lee had taken insufficient advantage of an opportunity the court had allowed him to comply with previous orders and to be ready to defend the proceeding at the trial. If it were a question of the weight to be given to the various factors on which the appellants relied, I should certainly not regard the federal magistrate as having failed to give them sufficient weight. 33 This leaves the question of principle on which counsel for the appellants relied. The principle that a party to a proceeding ought not to be subjected to a judgment for a large sum of money without a trial was said to be derived from the judgment of the Full Court of the Supreme Court of Victoria in Freeman v Rabinov [1981] VR 539. In that case, a judge managing cases had made a self-executing order dismissing a plaintiff's claim and striking out his defence to a counterclaim of the defendant, unless the plaintiff filed and delivered a supplementary affidavit of documents by a specified time. The judgment of the Full Court was delivered by Lush J, with whom Murray and King JJ concurred. At 548, the Full Court held that: if injustice in the result flows from the operation of an interlocutory order of a single judge, of the kind with which we are now concerned the Full Court may on appeal set aside or vary the order. The injustice concerned was identified at 549-550. There, Lush J referred to the strength of the argument against the plaintiff, because of a series of defaults in making discovery and in other matters, and the gross inadequacy of discovery that had been made. His Honour said: The argument was a strong one, and if the only result of the self-executing order had been to lead to the dismissal of the action for want of prosecution, there would have been little ground for interfering. The final position, however, is that the plaintiff is on risk of suffering a large judgment in damages without a trial, while in the end the defendant obtained the information which it needed, although still not in the proper form, about one month after it should have been delivered pursuant to the order of 28 February 1980. Mr. Merkel contended that that order had been properly made by the Judge in exercise of the disciplinary powers of the Court to compel compliance with its rules and orders, and to compel the taking of the necessary steps in the action with expedition. These matters may be accepted, but in the end the circumstance that the defendant stands at risk of sustaining a heavy judgment without a trial is in all the circumstances of this case decisive. 34 There can be no criticism of the Full Court in Freeman for identifying the injustice that occurred in the circumstances of that case. It is more difficult to argue, however, that the case gives rise to a principle that a party can never be subjected to a judgment for a large sum of money without a trial. The adoption of such a principle would amount to an invitation to litigants to disregard orders of the Court, knowing that they were immune from the entry of judgment in consequence of their defaults. Further, much has happened since Freeman was decided. There has been a considerable expansion in the adoption of the system of case-management by judges in Australia and in England. Particularly in this Court, and in the Federal Magistrates Court, management of cases from inception to resolution by an individual judge has become routine. Case-management principles are backed by the provisions of rules of court, such as those found in rr 13.03, 13.03A and 13.03B of the Federal Magistrates Court Rules. Such rules provide expressly for the very thing that occurred in this case, namely for the giving of judgment against a defaulting party without a trial, because of the default. 35 Such powers are not to be exercised lightly. A judgment for a large sum of money is a significant consequence to visit upon a defaulting party. In State of Queensland v JL Holdings Pty Ltd (1997) 141 ALR 353, the High Court allowed an appeal from a refusal to permit a late amendment of a defence. The refusal had been based on the fact that the amendment would jeopardise the dates fixed for the trial of the proceeding. At 356-357, Dawson, Gaudron and McHugh JJ referred to the earlier High Court judgment in Sali v SPC Ltd (1993) 116 ALR 625 and said: Sali v SPC Ltd was a case concerning the refusal of an adjournment in relation to which the proper principles of case management may have a particular relevance. However, nothing in that case suggests that those principles might be employed, except perhaps in extreme circumstances, to shut a party out from litigating an issue which is fairly arguable. Case management is not an end in itself. It is an important and useful aid for ensuring the prompt and efficient disposal of litigation. But it ought always to be borne in mind, even in changing times, that the ultimate aim of a court is the attainment of justice and no principle of case management can be allowed to supplant that aim. At 358, their Honours said: Case management, involving as it does the efficiency of the procedures of the court, was in this case a relevant consideration. But it should not have been allowed to prevail over the injustice of shutting the applicants out from raising an arguable defence, thus precluding the determination of an issue between the parties. In taking an opposite view, the primary judge was, in our view, in error in the exercise of her discretion. 36 Recently, in Aon Risk Services Australia Limited v Australian National University [2009] HCA 27, the High Court revisited the question of late applications for amendment of pleadings, and the relevance to such applications of the powers and principles of case-management. The High Court reversed the order of the primary judge allowing the plaintiff to make substantial amendments to its claim at the start of the trial. At [92], Gummow, Hayne, Crennan, Kiefel and Bell JJ referred to the fact that case-management "is now an accepted aspect of the system of civil justice administered by courts in Australia." At [98], their Honours said with reference to the rule of Court conferring case-management powers on the Supreme Court of the Australian Capital Territory: Of course, a just resolution of proceedings remains the paramount purpose of r 21; but what is a "just resolution" is to be understood in light of the purposes and objectives stated. Speed and efficiency, in the sense of minimum delay and expense, are seen as essential to a just resolution of proceedings. This should not detract from a proper opportunity being given to the parties to plead their case, but it suggests that limits may be placed upon re-pleading, when delay and cost are taken into account. The Rule's reference to the need to minimise costs implies that an order for costs may not always provide sufficient compensation and therefore achieve a just resolution. It cannot therefore be said that a just resolution requires that a party be permitted to raise any arguable case at any point in the proceedings, on payment of costs. At [111], their Honours concluded: An application for leave to amend a pleading should not be approached on the basis that a party is entitled to raise an arguable claim, subject to payment of costs by way of compensation. There is no such entitlement. All matters relevant to the exercise of the power to permit an amendment should be weighed. The fact of substantial delay and wasted costs, the concerns of case management, will assume importance on an application for leave to amend. Statements in JL Holdings which suggest only a limited application for case management do not rest upon a principle which has been carefully worked out in a significant succession of cases. On the contrary, the statements are not consonant with this Court's earlier recognition of the effects of delay, not only upon the parties to the proceedings in question, but upon the court and other litigants. Such statements should not be applied in the future. 37 The present case is not one concerning a late application for amendment of pleadings. In many senses, it is more serious. It is a case of repeated refusals, not merely failures, to comply with orders of the court requiring the appellants to make discovery of documents and to allow Ms Wang's solicitor to inspect their discovered documents. Mr Lee had persisted with a demand for payment as a pre-condition for providing inspection of documents, despite advice from his own solicitor that this was not a course open to him. Even in the face of deadlines specified by the federal magistrate for the performance of obligations under earlier orders, Mr Lee proposed leisurely timetables for the performance of those obligations and a further adjournment of the trial, which had already been adjourned once. The circumstances in which the appellants had ceased to be represented by their solicitor were never revealed, making it more difficult for them to rely on lack of representation as a factor justifying the adjournment of the trial. It is significant that, despite the lack of representation and Mr Lee's difficulty with English, the two affidavits of 7 and 9 April demonstrated to the federal magistrate that Mr Lee had access to someone who was sufficiently fluent in English, and had sufficient understanding of the court processes, to produce affidavits in something close to the proper form. It would have been open to the federal magistrate to reach the conclusion that Mr Lee was attempting to postpone an inevitable judgment against the appellants on Ms Wang's claim, and that the need to visit his father in China was raised as part of such an attempt. The fact that the federal magistrate was kinder to Mr Lee than he needed to be, by not making such a finding, should not lead to a successful appeal from the exercise of the federal magistrate's discretion. 38 If the powers given by rules of court to give judgment against a defaulting party were never to be exercised, because of a supposed principle that judgment for a large sum of money should not be given without a trial, the grants of express powers by rules would be hollow. Case-management would be deprived of its only real sanction against a party who, while resisting a claim for a substantial sum of money, defaults persistently in complying with orders of a Court. The framers of rr 13.03A and 13.03B of the Federal Magistrates Court Rules cannot have intended that those rules should be subject to such a principle that would enable a party against whom a substantial monetary claim is made to defend that claim by failing persistently to take steps necessary to bring the claim on for trial. Any principle derived from Freeman is much more limited than that suggested by counsel for the appellants. Freeman is best regarded as turning on its particular circumstances, and as belonging to an era before the broad adoption of case-management principles. As the recent judgment in Aon shows, case-management principles have assumed a greater importance than they were thought to have had, even as recently as 1997, when JL Holdings was decided. It is clear from the second passage I have quoted from Aon in [36] above that the principle stated in JL Holdings should no longer be followed. If there remains a narrower principle derived from Freeman than that suggested by counsel for the appellants, such a principle could not be applicable in the present case. There is no injustice in judgment for a large sum of money against Heng V and Mr Lee, having regard to Mr Lee's apparent determination not to comply with repeated orders requiring him to produce for inspection all of the appellants' discoverable documents.

Heng V (Australia) Pty Ltd v Wang

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