National Builders Group IP Holdings v ACN 092 675 165 Pty Ltd

1 This application concerns the provisions of the Civil Procedure Act 2010 ('CPA') which govern the discovery obligations of parties to civil proceedings. At issue is the power of the Court under s 56(2) of the CPA to impose sanctions for failure to comply with those obligations.

2 On 19 June this year, Vickery J (sitting in the Commercial Court) made an order striking out the defence filed by the applicant ('Holdings') in answer to claims brought against it by the first respondent ('NBG'). His Honour declined to strike out the defence of the second defendant ('Mr Suckling'), who is not a party to this application. (We will refer to Holdings and Mr Suckling collectively as 'the defendants').

3 In his Honour's view, both defendants were guilty of:

persistent failure to comply with the orders for discovery in spite of generous periods allowed for compliance.

Unlike Mr Suckling, Holdings had provided no explanation for its delay in compliance.

4 Holdings has sought leave to appeal against his Honour's order, on the grounds that:

(a) his Honour erred by applying s 56 of the CPA in a way that interfered with its right to a fair trial;

(b) the exercise of the discretion conferred by s 56 miscarried, in that the strike out order was a disproportionate sanction; and

(c) it was unfair for Holdings to be denied the opportunity to litigate the central issue, concerning the ownership of intellectual property, while Mr Suckling was permitted to continue to conduct his defence and might succeed in defeating NBG's claims to ownership.

5 But for one matter, we would have refused leave to appeal. For reasons which follow, we consider that the decision to strike out the defence was within the scope of a sound exercise of the discretion conferred by s 56(2) of the CPA. Self-evidently, the effect of the order would be to deny Holdings a hearing, but the statutory language leaves no room for doubt that this is what the provision was intended to authorise the Court to do. Nor was the sanction disproportionate, given the persistent and unexplained non-compliance of Holdings with the orders for discovery.

6 As will appear, however, the order if allowed to stand would lead to the entry of judgment against Holdings on a basis which would be liable to be put in issue in the claim by NBG against Suckling. In addition to striking out Holdings' defence, his Honour ordered that NBG be at liberty to enter judgment against Holdings. When that is done, an order will be made declaring NBG the owner of the disputed intellectual property. Mr Suckling would, however, be entitled to litigate the question of ownership in the proceeding against him, and would be relying on the same factual and legal arguments as Holdings would have advanced had its defence not been struck out. For reasons set out below, the possibility of the Court's own declaration being contradicted in this way cannot be entertained.

7 For that reason alone, the order must be set aside. As we have said, his Honour's order was fully justified on the merits of the case before him. The severity of the consequence should serve as a salutary reminder to all civil litigants in this Court that judges will not hesitate to give full effect to the clear intention of Parliament as expressed in the CPA, by imposing severe sanctions in cases of serious non-compliance with discovery obligations.

8 Since May 2000, NBG has conducted a business which comprises:

(a) the creation of home designs and their sale to members of the general public ('the NBG plans');

(b) organising builders to construct homes according to its plans; and

(c) collecting licence fees for the use of its plans.

In the course of its business, NBG has also registered certain trademarks.

9 Mr Suckling was the sole director and shareholder of NBG. The company was placed into liquidation on 1 March 2012 and the second respondent ('the liquidator') appointed liquidator.

10 Holdings was incorporated in January 2009. In April 2009, Mr Suckling entered into a deed of assignment with Holdings, under which he purported to assign to Holdings (relevantly) the copyright in the NBG plans, which he claimed to own.

11 On the same day, NBG entered into a deed of assignment with Holdings, under which NBG assigned to Holdings the intellectual property in the NBG trademarks. Finally, Holdings entered into a deed of licence with NBG, under which Holdings licensed to NBG the intellectual property which had been assigned to it by Suckling and NBG respectively.

12 Thereafter, NBG continued to use the intellectual property, including the trademarks and the NBG plans, in operating the business until the liquidator was appointed. Following that appointment, Holdings sought to assert its right over the NBG plans and trademarks, which were being used by third parties pursuant to consents given to them by NBG before the liquidator was appointed.

13 On 29 August 2013, the liquidator instituted proceedings in the Supreme Court in the name of NBG, claiming that:

(a) NBG was the owner of the copyright in the NBG plans and of the trademarks, it being contended that the deeds of assignment and the deed of licence were ineffective or invalid; and

(b) by causing Holdings to enter into the deeds of assignment and the deed of licence, Mr Suckling had breached his statutory, common law and/or fiduciary duties to NBG.

(a) a declaration that it owns the intellectual property;

(b) orders restraining Mr Suckling and Holdings from further reproduction or exploitation of the NBG plans; and

(c) damages or other equitable compensation in relation to the infringing use of the intellectual property.

15 In its defence, Holdings claims that it owns all of the intellectual property. It maintains - as does Mr Suckling - that he owned the copyright in the NBG plans and validly assigned it to Holdings. Moreover, Holdings has counter-claimed against NBG, alleging that since the appointment of the liquidator NBG has used the intellectual property without being entitled to do so, thereby infringing the rights of Holdings under the Copyright Act 1968 (Cth) and the Trade Marks Act 1995 (Cth).

16 Vickery J made orders on 15 November 2013, requiring the parties to make discovery by agreed categories of documents by 20 December 2013. The proposed categories were set out in a letter from the solicitors for NBG and the liquidator ('the plaintiffs') to the defendants' solicitors dated 16 December 2013.

17 On 24 February 2014, the plaintiffs filed and served their affidavit of documents by reference to the proposed categories. On 3 March 2014, a self-executing order was made by consent in respect of the defendants' discovery. That order required the defendants to file and serve their affidavits of documents by 14 March 2014.

18 On 14 March 2014, the last date for compliance with the order, Holdings and Mr Suckling each filed and served an affidavit of documents. The plaintiffs then applied to the Court for an order that the defence and counter-claim be struck out, on the basis that the discovery of each of Holdings and Mr Suckling was incomplete and that neither had complied with the self-executing order made on 3 March 2014. His Honour made orders for the hearing of the application, including an order that the deponents of the affidavits of documents be examined in relation to their sufficiency.

19 On 24 October 2014, having heard Mr Suckling give evidence and be cross-examined, Vickery J delivered judgment in the plaintiffs' application.[1] His Honour concluded that the discovery by each defendant was 'significantly deficient by reference to categories of documents'. In his Honour's opinion, the deficiencies were of such a magnitude that neither affidavit constituted 'a good faith attempt to provide the information required by the order'.[2]

20 There was, however, a lack of clarity in the self-executing order made by consent on 3 March 2014. The order had not made clear that the affidavits of documents were required to comply with r 29.04 of the Supreme Court Rules. His Honour therefore concluded that:

it would be unjust to deprive the Defendants of the right to a trial on the merits of the proceeding, adjudged by reference to an obligation that was not clearly spelled out in the Order.[3]

21 He ordered that the self-executing order be set aside and, in its place, ordered as follows:

1. The Defendants file and serve their Affidavit of Documents prepared in accordance with r 29.04 of the Supreme Court (General Civil Procedure) Rules 2005 by reference to the categories identified in the letter from the Plaintiffs' solicitors dated 16 December 2013 and must do so by 4:00 pm on .................. 2014.
2. If any Defendant fails to comply with Order 1, then either or both of the Plaintiffs may apply to the Court on notice to the relevant Defendant for appropriate further orders pursuant to s 56 of the Civil Procedure Act 2010 as to discovery and costs, including but not limited to orders made pursuant to s 56(2) (c), (d), and (j) of the Act.[4]

22 It was subsequently agreed by the parties that discovery pursuant to the substituted order be made by 2 April 2015. That date was subsequently extended by agreement to 10 April 2015. When neither defendant had complied with the order by that extended date, the plaintiffs applied for judgment pursuant to the self-executing order.

23 The summons seeking judgment was returnable on 19 May 2015. The day before the application was to be heard - that is, 18 May 2015 - the defendants delivered what purported to be supplementary affidavits of documents. The plaintiffs not having had any reasonable opportunity to examine the supplementary affidavits for compliance with r 29.04, there was an inevitable adjournment, which caused further delay.

24 Subsequent endeavours by the plaintiffs to obtain inspection of the documents in the supplementary affidavits exposed further deficiencies in the defendants' discovery. In the ruling under challenge, his Honour said:

The court is particularly concerned by these matters and the conduct of the case so far advanced by the defendants, in relation to discovery. There has been a clear, long running and unacceptable delay. Court orders have been made but have not been complied with in relation to discovery with at least in one case no adequate explanation for such a delay. Thirdly, one has to look at the quality and the nature of the orders that were made here.

They were not simply directions for discovery made in the normal course. But they were self-executing orders which carried with them specified sanctions which were clearly set out. Yet, in spite of those orders having been made in those terms they were not complied with.

25 There was, however, a significant distinction between the defendants, in his Honour's view. Whereas Mr Suckling had provided 'some explanation' for the non- compliance, Holdings had provided no such explanation.

26 His Honour upheld the contention of the plaintiffs that Holdings had failed to discover:

documents said to be of relevance to the proceeding held by its former solicitors ... comprising the file maintained by that firm of solicitors relating to a deed which had been prepared by that firm. Although the executed copies of the deed have been discovered, prior drafts have not been discovered nor have instructions provided by [Holdings] as to its preparation been discovered. This is claimed to be relevant to an issue in the proceeding relating to an alleged transfer of property for nil consideration and the commercial purpose of this transaction.

27 His Honour was satisfied that Holdings was aware of 'the existence and potential relevance' of the solicitors' file. He noted that the supplementary affidavit filed by Holdings:

fails to state any reason for not searching for this file, in spite of a clear inference from the supplementary affidavit that it has not searched for this file by making enquiries from [the solicitors] as to the whereabouts and availability of the file.

satisfied to the requisite degree that there has been non-compliance with Rule 29.04 in relation to the supplementary affidavit of documents [which Holdings] has provided.

He then proceeded to make the orders presently under challenge.

29 Introducing the Civil Procedure Bill 2010, the Attorney-General said that the bill would

reform, modernise and unify the procedure for the conduct of civil litigation. Courts play an important role in adjudicating civil disputes and procedural rights and that role should, of course, continue. But as a public resource, courts must be used responsibly. Parties should not abuse their right of access to the courts by unnecessarily tying up court resources, thereby preventing others from accessing justice. A well-resourced litigant should not be able to use their power to play tactical games and draw out litigation until the other party is forced into an unfair settlement or withdraws.

This bill will curtail such behaviour and arm the courts with the power to prevent such conduct. Parties should be encouraged to resolve their disputes by agreement, and where they require court intervention, the bill will ensure they adhere to appropriate standards of conduct. The result will be a more accessible civil justice system for those parties who need adjudication by the courts.

Very few of the cases which are lodged with the courts proceed to a final hearing. Most cases settle or are withdrawn prior to trial. However, the process to achieve resolution of civil matters that are started in the courts, including the cases that are settled before trial, is often unduly long and costly. The current cost of litigation has reached a point where access to the civil courts is beyond the reach of most Victorians.

...

The bill recognises that the civil litigation system has become out of balance and is increasingly unable to achieve essential goals of accessibility, affordability, proportionality, timeliness and getting to the truth quickly and easily. This bill will make these goals once again more achievable.

...

Once proceedings have been initiated, the role of the overarching obligations is to continue to encourage the parties and their lawyers to use reasonable endeavours to achieve early resolution of cases by agreement or to narrow the issues in dispute except where justice or judicial determination is genuinely required.

The bill also provides clear legislative guidance to judges to proactively manage cases in a manner that will promote the overarching purpose - that is, the just, efficient, timely and cost-effective resolution of the real issues in dispute. This will empower them to give clear, effective directions in cases by requiring the parties to keep to the real issues in dispute. It should reduce the number of interlocutory applications in complex litigation and could be used, for example, to limit the time taken up in oral submissions.

At the core of these reforms is the concept of proportionality. Participants in litigation will be required to use reasonable endeavours to ensure that legal and other costs spent in the proceeding are reasonable and proportionate to the complexity or importance of the issues in dispute. The courts will also be required to deal with a civil proceeding in the same manner.

These provisions are designed to cure unnecessary expenditure on litigation and the inappropriate use of the courts as a public resource, a matter that has been highlighted in several recent decisions.[5]

30 The CPA defines its 'overarching purpose' in these terms:

Overarching purpose

7(1) The overarching purpose of this Act and the rules of court in relation to civil proceedings is to facilitate the just, efficient, timely and cost-effective resolution of the real issues in dispute.

Court's powers to further the overarching purpose

9(1) In making any order or giving any direction in a civil proceeding, a court shall further the overarching purpose by having regard to the following objects -

(a) the just determination of the civil proceeding;

(b) the public interest in the early settlement of disputes by agreement between parties;

(c) the efficient conduct of the business of the court;

(d) the efficient use of judicial and administrative resources;

(e) minimising any delay between the commencement of a civil proceeding and its listing for trial beyond that reasonably required for any interlocutory steps that are necessary for -

(i) the fair and just determination of the real issues in dispute; and

(ii) the preparation of the case for trial;

(f) the timely determination of the civil proceeding;

(g) dealing with a civil proceeding in a manner proportionate to -

(i) the complexity or importance of the issues in dispute; and

(ii) the amount in dispute.

(2) For the purposes of subsection (1), the court may have regard to the following matters -

(a) the extent to which the parties have complied with any mandatory or voluntary prelitigation processes;

(b) the extent to which the parties have used reasonable endeavours to resolve the dispute by agreement or to limit the issues in dispute;

(c) the degree of promptness with which the parties have conducted the proceeding, including the degree to which each party has been timely in undertaking interlocutory steps in relation to the proceeding;

(d) the degree to which any lack of promptness by a party in undertaking the proceeding has arisen from circumstances beyond the control of that party;

(e) the degree to which each person to whom the overarching obligations apply has complied with the overarching obligations in relation to the proceeding;

(f) any prejudice that may be suffered by a party as a consequence of any order proposed to be made or direction proposed to be given by the court;

(g) the public importance of the issues in dispute and the desirability of a judicial determination of those issues;

(h) the extent to which the parties have had the benefit of legal advice and representation.

31 In relation to discovery, the Attorney-General said:

The [Victorian Law Reform] Commission recommended reform of the procedure for the compulsory production of documents in civil proceedings. The discovery procedure is a critical element of fact-finding in litigation and has become a very contested and costly process.

The main concerns with discovery revolve around issues of expense, scale and delay, as well as abuse of discovery obligations. It is identified by stakeholders as the most expensive aspect of the civil justice system. For example, it was reported that in one Supreme Court case, a party spent $40 million on the discovery process alone, and that 120 legal professionals worked on the discovery process.

...

The bill implements the commission's recommendations with respect to case management reforms and sanctions for discovery abuse. As with the case management reforms, it clarifies that a court may make any order in relation to discovery that it considers necessary or appropriate, including limiting or expanding a party's obligation to make discovery.

Further, the bill clarifies that a court may make any order or give any directions it considers appropriate if the court finds that there has been:

a failure to comply with discovery obligations;

a failure to comply with any order or direction of the court in relation to discovery; or

conduct intended to delay, frustrate or avoid discovery of discoverable documents.[6]

32 The relevant provision of the CPA is s 56, which provides as follows:

(1) A court may make any order or give any direction it considers appropriate if the court finds that there has been -

(a) a failure to comply with discovery obligations; or

(b) a failure to comply with any order or direction of the court in relation to discovery; or

(c) conduct intended to delay, frustrate or avoid discovery of discoverable documents.

(2) Without limiting subsection (1), a court may make an order or give directions -

(a) that proceedings for contempt of court be initiated;

(b) adjourning the civil proceeding, with costs of that adjournment to be borne by the person responsible for the need to adjourn the proceeding;

(c) in respect of costs in the civil proceeding, including indemnity cost orders against any party or a legal practitioner who is responsible for, or who aids and abets, any conduct referred to in subsection (1);

(d) preventing a party from taking any step in the civil proceeding;

(e) prohibiting or limiting the use of documents in evidence;

(f) in respect of facts taken as established for the purposes of the civil proceeding;

(g) awarding compensation for financial or other loss arising out of any conduct referred to in subsection (1);

(h) in respect of any adverse inference arising from any conduct referred to in subsection (1);

(i) compelling any person to give evidence in connection with any conduct referred to in subsection (1), including by way of affidavit;

(j) dismissing any part of the claim or defence of a party who is responsible for any conduct referred to in subsection (1);

(k) in relation to the referral to an appropriate disciplinary authority for disciplinary action to be taken against any legal practitioner who is responsible for, or who aids and abets, any conduct referred to in subsection (1).

33 Both before the judge and on this application, counsel for Holdings relied on a statement by Millett J in Logicrose Ltd v South and Uniting Football Co Ltd[7] which this Court quoted in British American Tobacco Australia Services Ltd v Cowell.[8] The statement is in these terms:

Deliberate disobedience of a peremptory order for discovery is no doubt a contempt and, if proved in accordance with the criminal standard of proof, may, in theory at least, be visited with a fine or imprisonment. But to debar the offender from all further part in the proceedings and to give judgment against him accordingly is not an appropriate response by the Court to contempt.

It may, however, be an appropriate response to a failure to comply with the rules relating to discovery, even in the absence of a specific order of the Court, and so in the absence of any contempt, not because that conduct is deserving of punishment but because the failure has rendered it impossible to conduct a fair trial or would make any judgment in favour of the offender unsafe.

In my view a litigant is not to be deprived of his right to a proper trial as a penalty for his contempt or his defiance of the Court, but only if his conduct had amounted to an abuse of the process of the Court which would render any further proceedings unsatisfactory and prevent the Court from doing justice. Before the Court takes that serious step, it needs to be satisfied that there is a real risk of this happening.

34 The contention advanced on behalf of Holdings was that this should be regarded as an authoritative statement of the common law and that the principle here enunciated should be understood as governing the power of dismissal conferred on the Court by s 56(2)(j) of the CPA. That is, on the proper construction of that provision, the power to strike out a claim or defence was exercisable only where there was 'a real risk' that the defaulting conduct 'amounted to an abuse of process which would render any further proceedings unsatisfactory and prevent the Court from doing justice.

35 The judge gave the following reasons for rejecting the argument:

Although that is clearly a statement of the common law to the effect that there be made out an abuse of the process of the court which would render any further proceedings unsatisfactory, in the sense that the court, in light of the way in which discovery had been conducted could not do justice to the parties, that test in my view is overtaken by the provisions of the Civil Procedure Act which go beyond the common law position. The sanction provisions provided by s 56 of the Act in particular are designed to give discovery obligations a significant and unprecedented level of importance in their observance.

They are not to be confined, in my view, to the circumstance where there is a real risk of the conduct of the party in question amounts to an abuse of process of the court which would render the further conduct of the proceeding unsatisfactory and prevent the court from doing justice in a case. In this respect, the ordering of the sanction of awarding compensation for financial or other loss arising out of any conduct amounting to a failure to comply with discovery obligations or any order or direction in relation to discovery a case in point as exemplified by s 56(2(g).

A reference here is further made to the provisions of the Civil Procedure Act, namely referring to s 7 and s 8. The Court of Appeal in Yara Australia Pty Ltd & Ors v Oswald[9] took the opportunity to review the statutory regime and obligations imposed by the Civil Procedure Act. The Court of Appeal made observations of relevance in paragraphs 9 to 11. In Yara, the Court of Appeal summarised its analysis with the following observation:

'The Act prescribes the parties to a civil proceeding are under a strict, positive duty to ensure that they comply with each of the overarching obligations and the court is obliged to enforce these duties. The statutory sanctions provide a valuable tool for improving case management, reducing waste and delay and enhancing the accessibility and proportionality of civil litigation. Judicial officers must actively hold the parties to account.'

Discovery is of central importance in civil litigation in an adversarial common law system, as has been often recognised. In this case, there has been a persistent failure to comply with the orders for discovery in spite of generous periods allowed for compliance, as I have described. I am satisfied that in relation to the 2nd defendant [scil the first defendant, Holdings], there has been not only a failure to explain the delay in complying with the last orders by not going on to affidavits - going into not swearing to any explanation in an affidavit but further, there has been, as I have found, a failure on its part to comply with Rule 29.04 in any event in the supplementary affidavit of documents which it purported to file even late.

36 We respectfully agree with his Honour's analysis. There is no basis, in our view, for reading down the scope of the power conferred by s 56(2)(j) in the way contended for. On ordinary principles, the scope of the power is to be determined by examining the statutory language used, in the context of the Act as a whole and - in particular - of the overarching objectives.

37 The legislature has seen fit to treat default in discovery as warranting its own separate provision, containing its own wide range of available sanctions. As the Attorney-General pointed out, the CPA prescribes in s 56(1) three different circumstances in which the default powers are exercisable, namely where there has been:

(a) a failure to comply with discovery obligations;

(b) a failure to comply with any order or direction in relation to discovery; or

(c) conduct intended to delay, frustrate or avoid discovery of discoverable documents.

38 Had the legislature intended to confine the strike-out power to circumstances involving conduct properly to be characterised as an abuse of process, provision to that effect could readily have been made. The position is, however, quite to the contrary. The language of s 56(2)(j) makes unambiguously clear that the power which it confers is available in respect of 'any conduct referred to in sub-section (1)'. The only limitation on the exercise of the power is that it be exercised lawfully, that is, within the conventional limits governing the exercise of any judicial discretion.[10]

39 Counsel for Holdings also sought to invoke the principle of legality. The contention was that the power to dismiss a claim or defence for non-compliance with discovery obligations was an interference with the 'fundamental common law right' to a fair trial and that there was no indication, or no sufficient indication, in the legislation that Parliament had intended such an interference.[11]

40 There are several answers to this contention. First, the right to a hearing in civil proceedings has never been unqualified. As counsel properly conceded, the right to bring, or to defend, civil proceedings has always been governed by strict rules of procedure - established both at common law and by Rules of Court. The right to a hearing is conditional on compliance with those rules.

41 Secondly, the powers conferred by s 56(2) are but an extension of powers already available to the Court to deal with non-compliance with procedural obligations.[12] The change is one of degree, not of substance. Thirdly, and most importantly, Parliament's intention to impose strict discipline on the conduct of civil proceedings was made emphatically clear by the enactment of the CPA itself, and by the clear statements which it contains about the obligations of practitioners and parties. In short, the legislature could not have expressed more clearly its intention to improve the cost-efficiency of civil litigation and - to that end - to authorise sanctions for non-compliance, including the sanction of denying a party a hearing.

42 As to discovery, the Law Reform Commission said in its report:

The Commission remains of the view that tougher and broader sanctions for discovery abuse will encourage the parties and practitioners to take their discovery obligations seriously and assist to establish acceptable norms for the conduct of discovery. More clearly defined sanctions will also encourage parties to work towards the efficient resolution of discovery issues and discourage the use of discovery as an adversarial tool. The Commission has based its recommended provisions on the sanction provisions in the rules of court in other Australian and overseas jurisdictions.[13]

43 Finally, as counsel for the respondent pointed out, when enacting the CPA the Parliament had before it the Statement of Compatibility for the Bill, provided by the Attorney-General pursuant to s 28 of the Charter of Human Rights and Responsibilities Act 2006. In that statement, the Minister noted that the Bill:

expressly gives the Court powers to strongly sanction failure to comply with, or misuse of, the discovery process ... [14]

Was the sanction disproportionate to the non-compliance?

case management principles may bear upon the ultimate right to a full hearing, and that s 56 of the CPA creates a robust regime empowering a court to impose sanctions on parties for non-compliance founded on in conduct within the scope of s 56(1) ...

Nevertheless, it was submitted, the order striking out its defence was 'more severe than was necessary and proportionate'. The defaults did not justify the sanction.

45 The decision to dismiss the defence was said to be 'unreasonable or plainly unjust', within the meaning of that phrase as used in House.[15] In our view, this submission must be rejected. This is, of course, a challenge to the exercise of a judicial discretion, and a useful analogy may therefore be drawn with the well-developed jurisprudence regarding the exercise of the sentencing discretion. As the High Court has made clear, the 'unreasonable or plainly unjust' limb of the House test finds expression in the 'manifest excess' ground of appeal.[16] That ground will only succeed if it is shown that the sentencing decision was 'not reasonably open' to the judge in the circumstances of the case.[17]

46 In our respectful view, it was well open to his Honour to impose this severe sanction in the circumstances of the case. Having had the management of all of the pre-trial stages, and having heard evidence from Mr Suckling - in his personal capacity as a defendant and in his capacity as a director of Holdings - his Honour was well placed to assess the gravity and persistence of the non-compliance and the degree of culpability, and to determine the appropriate sanction.

47 As his Honour found, Holdings had - without explanation - failed to comply with two successive self-executing orders. His Honour was entitled to view such conduct as disqualifying Holdings from further defence of the claims against it.

48 It was submitted for Holdings that striking out the defence of only one of the two defendants created a risk of serious unfairness to Holdings. The scenario which would create the unfairness was described in these terms. As noted earlier, if the order made against Holdings stands, NBG will be able to enter judgment against Holdings and have orders made in its favour on all of the issues with respect to the ownership of the intellectual property. Mr Suckling would, however, be able to litigate those very same issues and might succeed in persuading the Court that NBG was not the owner of the intellectual property.

49 As noted earlier, NBG claims that it is the owner of the copyright in the NBG plans. It seeks a declaration accordingly. In their defence and counter-claim, Holdings and Mr Suckling deny that NBG owns the copyright. They allege that the copyright was originally owned by Mr Suckling. It is said that he created the plans not in his capacity as an employee of NBG but 'outside working hours and in his private capacity'. As the owner of the copyright in the plans, the defendants contend, Mr Suckling had the capacity to assign, and did assign, the copyright to Holdings, by the deed of assignment made in April 2009.

50 If the trial proceeds against Mr Suckling alone, as will be the case if the strike-out order stands, these questions of fact and law will have to be fully investigated. Plainly enough, that course of events would create the possibility that Mr Suckling would succeed in establishing that:

(a) he was the original owner of the copyright in the plans; and

51 Those findings would establish that Holdings was the owner of the copyright in the plans, and the action against Mr Suckling would fail. Obviously enough, they would directly contradict the declaration already made, to the effect that NBG was the owner of the copyright.

52 The submission for Holdings was that this demonstrated the unfairness of the strike out order. According to the argument, it would show that, had Holdings been able to defend NBG's claims against it, it would have done so successfully. This loss of a chance to run a (putatively) meritorious defence was said to constitute 'extreme prejudice' to Holdings. There would, moreover, be inconsistent findings.

53 The result may or may not be unfair to Holdings, but that is the consequence of its own conduct in the litigation. The position postulated by Holdings does, however, raise an important consideration about what remains of the litigation.

54 If the orders of Vickery J stood, NBG would be entitled to enter judgment, on those orders, for the relief claimed by it in its statement of claim against Holdings. That relief includes a declaration that NBG is the owner of the copyright in the plans, and an order, against Holdings, that it deliver up such plans that are in its possession.

55 On the other hand, it seems inevitable that Suckling will seek to continue to defend the claim against him by NBG on the ground (inter alia) that he, and not NBG, was the original owner of the copyright in the NBG plans, which he then assigned to Holdings. Thus, the ownership of the copyright in the plans will be litigated in the proceeding by Suckling in response to the claim by NBG against him. In that event, the Court would be required to rule on a question that was already the subject of a declaration made in favour of NBG and, potentially, to reach a conclusion that would contradict the declaration and the basis upon which it was made.

56 Indeed, if Suckling were to succeed in defending the claim against him, on the ground that he, and not NBG, was the original owner of the copyright in the plans, the Court would then be in the position of maintaining on its record a judgment - that NBG owned the copyright in the plans - which had subsequently been contradicted by a curial finding made by the same Court, on evidence, in NBG's related claim against Suckling.

57 In our view, such a position would be inimical to the proper and orderly administration of justice in this State.[18] The question whether the declaration entered in favour of NBG would stand against the world was raised in this case but was not addressed in detail. It is not appropriate, therefore, that we reach any concluded view in respect of it. Nevertheless, the existence of such a declaration on the Court's record would, as a matter of practicality, arm NBG with the apparent authority of this Court to assert ownership of the copyright as against other parties.

58 The matters to which we have just referred were not raised by the parties before the judge, and his Honour was not therefore required to consider or rule on those matters. Unsurprisingly, the plaintiffs argued before the judge that both defences should be struck out, while the defendants argued that neither should be struck out.

59 In the event, however, we think the unintended consequence of the order which we have described is of such significance, for the reasons we have given, that the order cannot be allowed to stand. We are conscious that the allowing of the appeal gives relief to Holdings in circumstances where, for the reasons we have given, the judge was justified in striking out its defence. But that result is unavoidable. So far as NBG is concerned, the reinstatement of Holdings as a defendant will add little or nothing to the length or complexity of the trial, as the intellectual property questions would have had to be litigated in any event in the proceeding against Mr Suckling.

[1] ACN 092675164 (in liquidation) v National Builders Group Pty Ltd [2014] VSC 530 ('Reasons').

[5] Victoria, Parliamentary Debates, Legislative Assembly, 24 June 2010, 2606 (Rob Hulls, Attorney-General).

[7] Unreported, Chancery Division, 5 February 1988.

[8] [2002] VSCA 197; (2002) 7 VR 524, 576 [150].

[9] [2013] VSCA 337.

[10] House v The King [1936] HCA 40; (1936) 55 CLR 499 ('House').

[11] Cf Director of Public Prosecutions v Galloway (a pseudonym) and Ors [2014] VSCA 272.

[12] See, for example Supreme Court (General Civil Procedure) Rules 2005 r 29.12.1.

[13] Victorian Law Reform Commission, Civil Justice Review, Report No 14 (2008) 473.

[14] Victoria, Parliamentary Debates, Legislative Assembly, 24 June 2010, 2604 (Rob Hulls, Attorney-General).

[15] [1936] HCA 40; (1936) 55 CLR 499, 504.

[16] Or, in the case of Crown appeals, the 'manifest inadequacy' ground: Hili v The Queen [2010] HCA 45; (2010) 242 CLR 520, 538 [58]; DPP v Karazisis [2010] VSCA 350; (2010) 31 VR 634, 662 [125]-[126]; Munda v Western Australia [2013] HCA 38; (2013) 249 CLR 600, 614 [35].

[17] Clarkson v The Queen (2011) 32 VR 361, 384 [89]; DPP v Karazisis [2010] VSCA 350; (2010) 31 VR 634, 662-3 [127].

[18] See Owenlaw Mortgage Managers Ltd v M K River Pty Ltd [2005] VSC 464 [25]; AVS Property Pty Ltd v Queensland - 1 Pty Ltd [2007] QSC 365 [53]; National Australia Bank Ltd v Strategic Brands Australia Pty Ltd [2012] NSWSC 682 [37].