OneSteel Manufacturing Pty Limited v The Comptroller-General of Customs

Federal Court of Australia|2017-08-18|Before: Rares J

Background 3 That history of non-appearance is despite Mr Routh having filed three affidavits and an interlocutory application in this proceeding. The interlocutory application dated 26 May 2017 that he filed on 30 May 2017 sought orders that: the Routh parties be able to serve a notice of address for service by 12 July 2017; the final hearing that had been listed on 1 June 2017, be adjourned to, and listed on, 19 July 2017; and the Court dispense with r 4.01(2) of the Federal Court Rules 2011 so as not to require the corporation, being Kyza Freight, to be represented by a lawyer. 4 Mr Routh filed an affidavit in support of the interlocutory application that he affirmed on 26 May 2017. He filed two further affidavits, one that he affirmed on 7 June 2017, that identified a purported claim for USD749,000, and the second, that he affirmed on 28 June 2017. The OneSteel parties today tendered his third affidavit, on the basis of a limitation under s 136 of the Evidence Act 1995 (Cth) that it be evidence of the assertions, but not evidence of the truth of those assertions, that he made in it. 5 Initially, on 24 May 2017, I stood the proceeding over to 1 June 2017, having directed that if the Routh parties opposed the final relief sought in the originating application, they had to file and serve a notice of address for service by no later than 30 May 2017. The purpose of the final hearing was to enable the OneSteel parties to apply for a declaration that OneSteel was the owner, and entitled to immediate possession, of the cargo. 6 In the event neither Kyza Freight nor Mr Routh appeared on 1 June 2017. On that occasion, I made orders that: by no later than 30 June 2017, first, Kyza Freight file and serve a notice of address for service in accordance with the Rules and, secondly, the Routh parties file and serve all evidence upon which they propose to rely in support of their interlocutory application and to oppose the grant of final relief sought in the originating application; the originating application and interlocutory application be stood over for further directions, and, if there be non-compliance with the above orders, final hearing, today; in any event, the OneSteel parties be granted leave to apply for the final hearing to be heard today, provided that they gave notice of that proposal to the Routh parties on or before 7 July 2017; and on or before 2 June 2017, the Routh parties be served with the orders. 7 In the event, as I have noted, Mr Routh filed the two affidavits of 7 and 28 June 2017. Those affidavits are not formally in evidence today (except to the limited extent of the latter), because no one has appeared on behalf of the Routh parties. In the event, the OneSteel parties applied, pursuant to the leave I granted on 1 June 2017, for this matter to be heard finally today. That is appropriate. 8 I recorded findings of fact giving rise to my decision to grant interlocutory relief in my first reasons, having only the OneSteel parties' unchallenged version of facts then before me, for the purpose of determining whether the OneSteel parties had established a prima facie case for interlocutory relief and that the balance of convenience favoured its grant: OneSteel [2017] FCA 828 at [28]-[30]. I am satisfied today, on a final basis, that the findings of fact that I made in determining that the OneSteel parties were entitled to the interlocutory relief that I granted are proved on the balance of probabilities to be facts entitling them to final relief to the same effect and to the declaration that OneSteel seeks. 9 For the reasons that I gave, OneSteel was, indisputably, the owner of the cargo and entitled to its immediate delivery at all relevant times. There is no evidence before me of any intelligible, let alone arguable, basis upon which Kyza Freight or Mr Routh had any rights in respect of the cargo. 10 Indeed, in his affidavit of 28 June 2017, Mr Routh made numerous inaccurate and unsustainable assertions, but provided no evidence at all that he or Kyza Freight had any legal, equitable or other arguable right or interest to or in any of the cargo, the subject of the proceeding, at any time. Among other matters, Mr Routh relied on the letter of credit, to which I referred (OneSteel [2017] FCA 828 at [8]), saying that it required an approval certificate "to be issued on the letterhead of the applicant". 11 Disingenuously, Mr Routh then proceeded to assert, throughout that affidavit, that "the applicant" had defaulted in providing such an "approval certificate" when the letter of credit made quite clear it used the nomenclature, "the applicant", as a reference to the person who had applied for the letter of credit. That person was Mercantile Credit Inc, a New York based company unrelated to OneSteel. Nowhere did OneSteel's name, or that of the deed administrators, appear in the letter of credit other than as persons to whom documents had to be given. Transparently, Mr Routh's allegation was without any plausible foundation. Mr Routh also asserted at pars 35, 36 and 37 that the letter of credit had expired on or around 27 April 2016 and that "[t]he shipping documents did not indicate the Applicant anywhere". That was neither here nor there in establishing any legal right or interest that the Routh parties could have had in, or in respect of, the cargo. He asserted that when Colman O'Loghlen telephoned him in early May 2017, in relation to Kyza Freight's competing import declarations (see OneSteel [2017] FCA 828 at [15]), Mr Routh told him that he: was going to exercise lien [sic] over the goods until the matter was cleared up. I also advised him that I was well aware that he [scil: OneSteel] had not supplied the required "Payment Guarantee". 12 As I have said, that was a disingenuous attempt to implicate the OneSteel parties as having obligations under the letter of credit when the applicant under that letter of credit, which was required to perform obligations under it by providing a "payment guarantee", whatever that might have been, was Mercantile Credit. On the evidence before me, it is plain that Mercantile Credit did not provide any such guarantee. 13 Mr Routh explained in his affidavit how he and Kyza Freight had interpolated themselves into the circumstances in which the cargo came to be the subject of the competing customs import declarations that one or both of the Routh parties lodged, to which I referred in my earlier judgment. In his affidavit, Mr Routh also said that, on 4 May 2017, he instructed his customs broker, Crystal Customs, to lodge the competing customs clearances as: our firm having [had] no other way to hold the shipment than to duplicate the customs clearances. It was a deliberate act. (emphasis added) 14 He reiterated that he had done a similar deliberate act again when, on 16 May 2017, he discovered that DSV Air and Sea, OneSteel's customs agent in Australia, had lodged the import declarations, to which I referred (OneSteel [2017] FCA 828 at [22]). He said that his firm also lodged an "underbond" movement for the entire shipment "to further our lien and ensure its security". He said again that he had deliberately lodged the competing import declarations. He referred to s 181 of the Customs Act that empowered the owner of goods to authorise a customs agent to act on the owner's behalf and later asserted that: There can be no argument that the Letter of Credit was defaulted due to the non-performance of the Applicant. 15 As I have said, there is nothing in Mr Routh's affidavit of 28 June 2017 that established that Kyza Freight or he or anyone else for whom Mr Routh purported to be acting, including Anchor Finance Group LLC or its principal, Mr Nasim Siddiqi, had any legal or equitable or other interest in the cargo at any time. 16 As Mr Routh's affidavit of 28 June 2017 made pellucid, he and Kyza Freight acted deliberately to interfere with the OneSteel parties' right to bring their cargo into Australia.

The Routh parties' conduct in the proceeding 17 In the course of the dispute between the parties, Mr Routh and Nicolaas van der Reyden, the solicitor for the OneSteel parties of Holman Fenwick Willan (subsequently named HFW Australia), engaged in correspondence. 18 On 18 May 2017, Mr van der Reyden wrote requiring Mr Routh to withdraw his competing import declarations. He noted that Mr Routh was attempting to sell the cargo, to which he had no title. He reminded Mr Routh that his actions amounted to tortious interference, and possibly an intention to defraud, and that any attempt he made to sell the cargo could amount to conversion and or fraud. The letter also informed Mr Routh that the OneSteel parties would hold the Routh parties personally responsible for any and all loss caused by his or their wrongful actions and that, if his firm did not receive written confirmation by 10.30am that day of the withdrawal of the customs entries, his firm would approach the Court for injunctive relief. 19 Once the proceeding was commenced, Mr Routh engaged further in correspondence. Initially he attempted to involve my associate who, on more than one occasion, informed him that it was not appropriate for Judges' chambers to be included in contentious correspondence. On 25 May 2017, my associate sent an email to the parties that included a direction to Mr Routh to cease sending such correspondence to my chambers, to which he immediately responded, in breach of the direction. 20 Later on 25 May 2017, Mr Routh included the duty Registrar in his emails instead of my associate, saying that he was seeking an adjournment and was now not seeking to comply with the orders that I had made the previous day that Kyza Freight and Mr Routh file and serve a notice of address for service. The duty Registrar had attached in his email of 25 May 2017 shortly before Mr Routh's response, the form of a notice of address for service, to assist Mr Routh. 21 On 30 May 2017, Mr Routh sent an email to counsel for the OneSteel parties, their solicitors, the Australian Government Solicitor, and the duty Registrar, purporting to have been written by him from Shenzhen. He said he had not had time to engage or nominate legal counsel for Kyza Freight and asked that the Court dispense with that requirement under r 1.34 of the Federal Court Rules. In that and numerous subsequent emails up to 7 July 2017, Mr Routh made, without any basis, scandalous allegations against Mr van der Reyden and or the OneSteel parties. 22 Later on 30 May 2017, he emailed Mr van der Reyden, and asserted that his lawyer did not wish to engage in this matter: until we have had a chance to meet and discuss. And sign the costs agreement. I [ ] thought you understood. The Courts may in your opinion be assisting us, yet seem to also be putting up a few hurdles that could be from you. 23 Earlier on 30 May 2017, at 8.59am, Mr Routh sent an email to the duty Registrar and recipients of his earlier emails, that claimed of the order requiring Kyza Freight to file an address for service: Due to the brashness of this order and my non-participation in Court, we are missing vital parts of this case that Judge Rares should be seeing to form his judgment. This shows that the applicants acted with premeditation and are highly illegal in their approach to ownership. They deliberately defaulted on a Letter of Credit, acted two and a half weeks prior to owning the goods. All of this will not be heard and a fair trial cannot be the outcome. 24 On 2 June 2017, Mr van der Reyden requested that Mr Routh cease sending further correspondence to counsel and direct any correspondence to his firm, as the solicitors on the record for the OneSteel parties. Mr Routh's response consisted of foul abuse. He subsequently continued with a stream of vitriol, unsubstantiated allegations, innuendo and threats, such as suggesting that a member of the Parliament would cause some action by "the ACCC guys if you prefer? Judges love it when they get in their courtroom". He asserted: I see allot [sic] of avoidable pain for your client, even if they win. That's due to a lawyer putting his ego and own worth first. You forget I am the honest one! 25 His scandalous assertions did not stop there but need not be repeated in these reasons. 26 On 7 July 2017, Mr Routh sent Mr van der Reyden a copy of his email to the member of Parliament to whom he had referred earlier, in which he asserted that he was updating him on "this OneSteel court case" and made yet further scandalous allegations saying: and the final hearing is on Thursday the 14th [sic] 2017. If you can arrange someone to be there for me, it would be appreciated.

Consideration 27 I have set out in a little, but not full, detail the scandalous and outrageous allegations that Mr Routh made in the course of his communications to demonstrate why it would have been entirely inappropriate to have granted Kyza Freight's application to appear through him without a lawyer. 28 One of the purposes of requiring corporations to appear by lawyers is to protect both the interests of justice and the other parties from having to deal with allegations that no lawyer acting within the rules of court or requirements of his or her professional duties could make, as Stein JA, with whom Mason P and Sheller JA agreed, explained in Damjanovic v Maley (2002) 55 NSWLR 149, particularly at 159-160 [61] and 162-164 [69]-[86]. Among other matters to which Stein JA referred, in a judgment with which I agree, his Honour said that lay advocates were unqualified, unaccredited and uninsured and placed a client at considerable risk. His Honour noted that an unqualified advocate may cause loss to a party, and a lay advocate did not owe the same duty to his or her client as does a lawyer, which provided protections for the system of justice that did not exist with a lay advocate. His Honour identified from the authorities that the guiding principle in the exercise of the discretion to permit a corporation or other person to be represented by someone who was not a lawyer, as opposed to an individual representing himself or herself personally, was the public interest in the attainment of the ends of justice. He quoted from what Gleeson CJ had said in a speech to the Supreme Court of Japan in January 2000, entitled Current Issues for the Australian Judiciary, namely: The adversary system assumes, in the interests of both justice and efficiency, that cases will be presented to courts by skilled professionals. To the extent to which that assumption breaks down, so does the system. 29 Likewise, in this Court, the power of the Court to dispense with the operation of r 4.01(2), pursuant to r 1.34, is to be exercised judicially according to the requirements of justice and in favour of a corporation only where there is sufficient reason: Molnar Engineering Pty Ltd v Burns (1984) 3 FCR 68 at 74 per Smithers J, Keely J agreeing at 80. 30 Since their Honours gave those reasons, Pt VB of the Federal Court of Australia Act 1976 (Cth) has come into operation. It provides that the Rules are subject to the overarching purpose of the civil practice and procedure provisions and any legislation with respect to the Court's practice and procedure, including Pt VB itself. The overarching purpose is to facilitate the just resolution of disputes, according to law, as quickly, inexpensively and efficiently as possible (s 37M(1)). The civil practice and procedure provisions (including all of the Rules) must be interpreted and applied, and any power that they confer must be exercised, in the way that best promotes the overarching purpose (s 37M(3)). Moreover, s 37N(1) of the Act imposes a duty on the parties to a civil proceeding to conduct the proceeding, "including negotiations for settlement of the dispute in which the proceeding relates", in a way that is consistent with the overarching purpose. 31 Powers such as r 1.34 must be exercised judicially, that is, not arbitrarily or capriciously. Their purpose, in a broad sense, is to relieve against injustice: Sydney Equine Coaches Pty Ltd v Gorst [2017] FCAFC 34 at [15]-[19] per Rares, Flick and Bromwich JJ. 32 In my opinion, Mr Routh has demonstrated in his scandalous and vexatious email correspondence that it would not be in the interests of justice to permit him to appear for Kyza Freight. Moreover, there was no evidence that Kyza Freight was impecunious or incapable of employing a lawyer, particularly in circumstances where it was making a claim in the order of AUD1 million for which I have been unable to ascertain any basis, in fact or law, having regard to all the material before me, including Mr Routh's affidavit of 28 June 2017.

Indemnity costs - consideration 33 The OneSteel parties have applied for an order that the Routh parties be made jointly and severally liable to pay costs of the proceeding on an indemnity basis. 34 Under s 37N(4) of the Federal Court Act, in exercising the discretion to award costs under s 43, I must take account of any failure of the Routh parties to comply with their duty to conduct the proceeding, including negotiations for settlement of the dispute to which it relates, in a way that is consistent with the overarching purpose. 35 In his well-known judgment dealing with the principles for awarding costs on an indemnity basis, Sheppard J said, in Colgate-Palmolive Company v Cussons Pty Ltd (1993) 46 FCR 225 at 233-234, that the power was a general and discretionary one. It is enlivened, including; … as and when the justice of the case might so require … [but that] there should be some special or unusual feature in the case to justify the Court in departing from the ordinary practice [of awarding costs on a party and party basis]. 36 His Honour gave instances where Courts have made an order for the payment of costs on an indemnity basis such as where a person makes allegations of fraud knowing them to be false, where irrelevant allegations of fraud are made, where there is evidence of particular misconduct that causes loss of time to the Court and to the other parties, where proceedings are commenced or continued for some ulterior motive or in wilful disregard of known facts or clearly established law, and where allegations which ought never to have been made or groundless contentions are made that cause the undue prolongation of the case. 37 This proceeding was only necessary because the Routh parties sought to assert an entitlement to the cargo by lodging customs import declarations that had no legal, equitable or other reasonable foundation. Mr Routh caused them to be made, as his own affidavit demonstrated, deliberately, in order to assert what he claimed was a "lien" over the cargo to which the Routh parties had no right of possession and in which they had no legal or equitable interest. 38 Once the proceeding had been commenced, Mr Routh engaged in a systematic and vexatious abuse of the Court's process. He habitually failed to comply with orders, engaged in inappropriate email correspondence with my chambers, then with officers of the Court, and with Mr van der Reyden and others. Mr Routh made unfounded, scandalous and unsubstantiated allegations on many occasions with no proper or intelligible foundation. Those allegations were of the most serious kind, including fraud, when, so far as it appears to me, there was not the slightest justification for any of his conduct. 39 Despite having filed an interlocutory application seeking dispensation with r 4.01 and asserting on a number of occasions that he had engaged lawyers, Mr Routh has never once appeared or offered the Court any assistance, despite being given every opportunity to advance his own case in person. Moreover, he appears to have sought to use his correspondence with a member of the Parliament as a means of obtaining some form of leverage to bring improper pressure to bear on the solicitors for, and the OneSteel parties, themselves. 40 That conduct was an abuse of process and did not comply with the Routh parties' personal duty under s 37N(1) to conduct the proceeding in a way that was consistent with the overarching purpose. Rather than seeking to advance the overarching purpose, on the evidence before me, Mr Routh and Kyza Freight have done nothing but seek to frustrate it, causing the time of the Court to be wasted and putting the OneSteel parties to significant and unnecessary expense. In addition, the Routh parties' conduct caused the OneSteel parties to incur significant storage charges for the cargo in bond because of the wrongful and baseless assertion of a right to lodge import declarations in respect of the cargo that led to the proceeding being commenced in the first place. 41 For these reasons, I am satisfied that I should make the orders sought by the OneSteel parties and dismiss the interlocutory application. The Routh parties must pay the OneSteel parties costs on an indemnity basis. I will grant leave to the OneSteel parties to file evidence in support of a lump sum costs order and grant the Routh parties an opportunity to file any evidence in opposition.

18 August 2017: The lump sum costs order 42 Pursuant to order 4 made on 13 July 2017, Mr van der Reyden filed and served an affidavit affirmed on 27 July 2017 seeking an award of $173,740.82 as costs on a lump sum and indemnity basis. The Routh parties filed and served written submissions on 10 August 2017 that sought to assert some entitlement to the cargo or damages but did not engage with anything to do with the assessment of costs claimed in Mr van der Reyden's 27 July 2017 affidavit. 43 In his 27 July 2017 affidavit, Mr van der Reyden explained the basis of the OneSteel parties' claim (excluding GST) as follows: (a) Court filing fees $ 9,995.00 (b) Company searches and other disbursements $ 289.32 (c) Solicitors' fees for his firm (HFW Australia) $117,444.00 (d) Senior and junior counsels' fees $ 46,012.50 Total $173,740.82 44 Mr van der Reyden, whose evidence I accept, said that the OneSteel parties' claim was limited to amounts that they were liable to pay for their costs and disbursements and that they were entitled to claim input tax credits in respect of any GST relevant to the sums claimed. He said that, in the calculation, he had charged for about 128 hours of the nearly 140 hours he had worked, a senior solicitor had charged for about 79 hours of the nearly 95 hours she had worked and a junior solicitor had charged 52 of about 67 hours she had worked. Mr van der Reyden said that senior counsel had charged for 43 hours work and junior counsel for about 72 hours work. 45 I am satisfied that it was necessary for the OneSteel parties' lawyers to engage in a considerable amount of work in preparing for the proceeding and each of the hearings in Court. The Routh parties' obstructive and vexatious conduct led to a deal of that work having to be undertaken. That included the need for the OneSteel parties to prepare for and attend the hearings on 1 June 2017 and 13 July 2017, which, with hindsight, would have been unnecessary, had they not been caused by the vexatious conduct of the Routh parties who failed to appear and never had any defence to the relief the OneSteel parties claimed in the proceeding. 46 The proceeding involved complex commercial issues that the OneSteel parties, in substance, had to present ex parte, due to the repeated and deliberate failure of the Routh parties to appear, and the Routh parties' attempts to throw dust in the eyes of the Court through their affidavits and submissions. 47 In approaching the quantification of a lump sum costs order, it is important to bear in mind that judges are not taxing officers. Where, as here, the party or parties who must pay the lump sum have had a proper opportunity to address any issues that arise in respect of the claimed sum, but say nothing relevant about any such issue, the Court can proceed on the basis of the unchallenged evidence in the exercise of its discretion in fixing an appropriate sum to award. I have had regard to the complexity of the proceeding, and the vexatious behaviour of the Routh parties that has caused the OneSteel parties to incur the whole of the costs of this proceeding without any proper basis. 48 I am satisfied that, in all the circumstances, it is appropriate to order that the Routh parties pay a lump sum of $170,000 in respect of the OneSteel parties' costs. I certify that the preceding forty-eight (48) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Rares.

Customs Act 1901(Cth)ss 71C, 181

RARES J: 1 Today (13 July 2017) is the final hearing of this proceeding. On 24 May 2017, I gave reasons for making interlocutory orders requiring the first respondent, the Comptroller-General of Customs, to do all things lawfully necessary to be done, including issuing an authority to deal under s 71C(4) of the Customs Act 1901 (Cth), so as to enable the applicants, OneSteel Manufacturing Pty Limited and its deed administrators (the OneSteel parties), to obtain the release from bond to OneSteel of a cargo of steel entered under seven import declarations: OneSteel Manufacturing Pty Limited v The Comptroller-General of Customs [2017] FCA 828. 2 I made those orders after hearing the OneSteel parties and the solicitor for the Comptroller-General, who at that stage substantively submitted and subsequently has submitted formally to any order of the Court, save as to costs. The second respondent, Kyza Freight Pty Limited, trading as China Sea Rates, and its director, Timothy Stephen Routh (the Routh parties), did not appear on that occasion or at any subsequent hearing, including today, after, again, being called outside the Court.

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