The exercise of the discretion to enter default judgment
39 The remaining question is whether the Court should, in the exercise of discretion, grant the relief sought.
40 The principles which guide the exercise of the discretion in the present case were identified comprehensively by Flick J in Speedo Holdings B.V. v Evans (No 2) [2011] FCA 1227 at [15] - [26]. Those principles were subsequently articulated in greater detail by Neskovcin J in Hugo Boss AG v Hardge [2024] FCA 1325 at [20], where her Honour said:
20. The principles applicable to the discretion to enter a default judgment are well established and may be summarised as follows:
(a) the power to give default judgment against a party under r 5.23(2) remains discretionary, and caution must be exercised when an applicant seeks orders against a defaulting respondent ...
(b) the discretionary power to enter a default judgment is enlivened when an applicant applies to the Court for such an order and where a respondent is in default ...
(c) for the purpose of r 5.23(2)(c), the Court needs to be "satisfied" on the face of the statement of claim that the applicant is entitled to the "relief" claimed and that the Court has jurisdiction to grant that relief. The facts as alleged in the statement of claim are deemed to have been admitted by the respondent ...
(d) in addition to the facts alleged in the statement of claim, the Court may permit recourse to further limited evidence but may not admit evidence that would alter the case as pleaded: Speedo at [26] (Flick J);
(e) to be satisfied that an applicant is "entitled to" the relief claimed, the Court must be satisfied that "each element of the relevant civil wrong involved is properly and discretely pleaded in the statement of claim ...
41 Similar statements of principle can be found in both Maylord Equity Management Pty Ltd v Parazelsus Ltd [2014] FCA 979 at [10] - [14] and Engineered Thermal Systems Pty Limited v Salmon, In the Matter of Salmon & Speck Pty Ltd (In Liq) [2012] FCA 1159 at [36].
42 Having regard to the present case, the following is apparent. First, the discretionary power in r 5.32(2) is enlivened by the defendants' failure to comply with the conditions imposed by order 1 of 3 December 2024 and the plaintiffs' interlocutory application of 17 December 2024 for default judgment in respect of that non-compliance. Second, there is little question that the plaintiff is "entitled" to the relief claimed for the purposes of r 5.23(2)(c). The allegations in the statement of claim are sufficient to support the causes of action on which the plaintiffs rely; so much was appropriately acknowledged by Mr Stewart in the course of the hearing.
43 The remaining question is whether, as a matter of discretion, the power to grant judgment should be exercised.
44 In this respect, the comments of Yates J in Chamberlain Group, Inc v Giant Alarm System Co, Ltd (No 2) [2019] FCA 1606 at [13] are instructive:
13 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.
45 So too are those of Wilcox and Gummow JJ in Lenijamar Pty Ltd v AGC (Advances) Limited (1990) 27 FCR 388 at 395 - 396 (Lenijamar). Therefore, whilst evidence of the contumacious and contumelious delay occasioned by the defendants' disregard for orders of this Court is of much significance, it is not decisive. Indeed, one must keep an eye finely attuned as to whether any injustice would flow from the granting of default judgment: Professional Administration Service Centres Pty Ltd v Commissioner of Taxation (2012) 295 ALR 52, 62 - 63 [43] - [44].
46 In that respect, one issue is whether there has now been compliance with the orders, albeit late. The defendants claimed that the required responses were provided in two letters sent on 29 January 2025, which were accompanied by the only document that they were able to produce in response to the notice. It is noted that the letters were sent on the day immediately prior to the hearing of the application for judgment.
47 Despite Mr Stewart's assertions that responding to the request for particulars required the assistance of counsel, it appears that no assistance was forthcoming, so he and his staff prepared the response instead. It may be that Mr Stewart has made a diligent attempt to the best of his ability to provide particulars, but it is apparent that they are inadequate in many respects. In particular, the defendants' case, as pleaded, turns in part on the existence of certain oral agreements of which particulars were sought. The particulars provided do not sufficiently respond to the request made and avoid the quintessential information about the content of the critical agreements. Other statements, said to be in response to requests for particulars, do not correlate to the requests at all, but appear to provide some narrative around the issue. As a general observation or finding, I agree with the submissions made by Mr Brennan for the plaintiffs that there has been no substantive response to the request for particulars. Whilst some responses were made, there was no real attempt to provide the information required.
48 The position regarding the defendants' compliance with the order requiring them to respond to the notice to produce is a little more difficult. A file note was provided with the letters of 29 January 2025 and the defendants assert that any other relevant documents are not available. For present purposes, there is no need to determine whether or not there has been compliance, albeit late, with the obligation to produce documents, though it is worthy of remark that there did not seem to be an attempt to respond to the notice to produce in accordance with the Rules.
49 In summary, the position is that there was a clear default in compliance with the Court's orders of 3 December 2024 without any adequate explanation, and the late attempt to perform the required obligations fell short of what was required.
50 It is said that the plaintiffs suffered no prejudice, and while Mr Brennan appropriately conceded that no specific prejudice was suffered, all parties necessarily suffer prejudice from delay in proceedings: Lenijamar, 396. They are kept out of their money if they are entitled to it and the litigation necessarily becomes more expensive. In addition, the Court's time and resources are diminished by reason of any delay in proceedings and non-compliance with orders: see Dye v Commonwealth Securities Limited [2010] FCA 720, [20] - [21].
51 In a similar vein, it should be observed that the conduct of the defendants in this case, if allowed to prevail by refusing to grant the relief sought, would seriously undermine ss 37M and 37N of the Federal Court Act. Those provisions exhort the parties and the courts to act as quickly, inexpensively and efficiently as possible, and that necessitates the efficient disposal of the Court's process and proceedings in a timely manner: see Fraser-Kirk v David Jones Limited (2010) 190 FCR 325, 332 - 333 [26]. The conduct of the defendants in this case is the antithesis of those obligations, and, were it to be excused, the Court might as well put ss 37M and 37N to one side. That I do not propose to do. Part VB of the Federal Court Act does not, and should not be seen to, contain empty rhetoric: Kumova v Davison (No 2) [2023] FCA 1, [86].
52 In this case, there is more than sufficient justification to warrant the exercise of discretion of the Court to grant judgment. The delay is, as was said on 3 December, contumacious and contumelious. That was compounded by further delay and non-compliance, despite assurances of immediate compliance. The lack of any evidential foundation supporting a justification for the further non-compliance and delay is remarkable and significant. So too is the absence of evidence that the defendants made any real attempt to observe the timeframes imposed by this Court; timeframes that were, it should be noted, amended and extended for their benefit. The fact there has been some late minor attempt to comply is relevant; however, when considered in the broader context, it is not sufficient to dissuade the exercise of the discretion in r 5.23(2) of the Rules in this case.
53 In those circumstances, the plaintiffs should have judgment on the claims which appear in the statement of claim to the extent now sought. Based on the allegations in the statement of claim, the plaintiffs are entitled to the following orders:
(1) Pursuant to r 5.23 of the Rules, judgment be entered against the first defendant in the amount of $2,358,695.75.
(2) The first defendant pay the plaintiffs' interest on the judgment amount referred to in paragraph 1, in the amount of $106,053.42.
(3) Pursuant to r 5.23 of the Rules, judgment be entered against the first and second defendants in the amount of $2,880,000.
(4) The first defendant and the second defendant pay the plaintiffs' interest on the judgment amount referred to in paragraph 3, in the amount of $129,492.69.
(5) The defendants pay the plaintiffs' costs of the proceeding on the standard basis, that as agreed or as taxed.
I certify that the preceding fifty-three (53) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Derrington.