Pieman Resources Pty Ltd v Monks

Introduction 1 These are the amended and revised reasons for judgment given on 30 January 2025, in respect of the plaintiffs' application for default judgment against the defendants. Whilst these reasons refine and develop those delivered ex tempore, the substance of what was said on 30 January has not been changed nor has any other material change been made: Minister for Immigration, Citizenship, Migrant Services and Multicultural Affairs v AAM17 (2021) 272 CLR 329, 344 - 345 [30] - [31]; see also Spencer v Bamber [2012] NSWCA 274, [137]. 2 By an application filed on 17 December 2024, the plaintiffs seek judgment in default pursuant to r 5.23(2) of the Federal Court Rules 2011 (Cth) (the Rules), consequent upon the defendants' failure to comply with certain programming orders made by this Court; in particular, orders relating to the defendants' obligation to provide further and better particulars of their defence and to provide documents pursuant to a notice to produce issued under r 20.31 of the Rules. Quite properly, it was accepted by Mr Stewart, who represented the defendants, that default had occurred. 3 The relief sought was confined to the money claims made in the statement of claim, but, as indicated by Mr Brennan for the plaintiffs, no judgment was sought in respect of parts K and L of the pleading, which, for the purposes of this application, have been abandoned. Mr Brennan also very properly identified that, due to an arithmetical error in the pleading, the sum claimed on the application was lower than the amount pleaded.

The background and incidents of default 4 The defendants failed to comply with a number of the Court's orders made in the course of the litigation. In order to appreciate their significance, it is important that some context be given. 5 The plaintiffs commenced the action on 18 July 2024, seeking damages from the defendants for breaches of their duties as directors of the plaintiffs. Those duties were identified as being, variously, director's duties, fiduciary duties and statutory duties, the latter being those imposed by ss 180 - 182 of the Corporations Act 2001 (Cth). 6 In broad terms, the allegations concerned the defendants' alleged misapplication of company funds for their own purposes and benefit. 7 In the course of the hearing, Mr Stewart quite properly acknowledged, as indeed was the case, that the statement of claim filed in the proceedings articulates good causes of action in a number of respects, such that, if the allegations in the statement of claim were in fact made out, the plaintiffs would be entitled to judgment. Be that as it may, there was no admission that the plaintiffs were entitled to judgment. 8 On 15 August 2024, the defendants consented to an order that they file and serve their defence by 29 August 2024. That did not occur. 9 Substantial correspondence ensued between the parties, culminating in the defendants consenting to orders that, should they fail to file a defence by 12 September 2024, the plaintiffs "may apply for default judgment". 10 On 12 September 2024, the defendants filed a defence. 11 On 25 September 2024, the plaintiffs responded by filing, pursuant to r 20.31 of the Rules, a notice requiring production of certain documents to which reference was made in the defence. 12 The plaintiffs also sent to the defendants' solicitors on 25 September a request for further and better particulars of the defence. The defendants were required to provide the particulars by 9 October 2024 at the latest. 13 The defendants did not produce the documents sought by the notice to produce. Nor did they attempt to comply with r 20.31(2) of the Rules, which relevantly provides: 20.31 Notice to produce document in pleading or affidavit … (2) The second party must, within 4 days after being served with the notice to produce, serve the first party with a notice: (a) stating: (i) a time, within 7 days after service of the notice, when the document may be inspected; and (ii) a place where the document may be inspected; or (b) stating: (i) that the document is not in the second party's control; and (ii) to the best of the second party's knowledge - where the document is and in whose control it is; or (c) claiming that the document is privileged and stating the grounds of the privilege. The documents were not claimed to be privileged. 14 The defendants also failed to provide the particulars sought vis-Ă -vis several allegations in the defence. 15 On 10 October 2024, this Court made consent orders in relation to compliance with both the request for further and better particulars and the notice to produce. They were in the following terms: 1. The defendants to file and serve any response to the request for further and better particulars dated 25 September 2024 by 4:00 pm on 18 October 2024. 2. The defendants to respond to the notice to produce dated 25 September 2024 by 4:00 pm on 18 October 2024. 16 The defendants did not comply with the first of those orders. Whilst they did respond to the notice to produce by 18 October 2024, it is fair to observe that that response lacked the requisite level of detail: see r 20.31(2) of the Rules: and was not relied upon by any party as evidence of compliance with the second of the orders. 17 On 25 October 2024, the defendants' solicitors wrote to the plaintiffs to express an intention to amend their defence. No formal application to do so was filed with the Court, and the matter seems to have pretermitted at some point during the defendants change in legal representation in early November 2024. 18 The matter came back before the Court on 3 December 2024. At issue at that hearing was the defendants' non-compliance with the orders made on 10 October 2024. 19 Mr Stewart appeared for the defendants, though he had only taken over conduct of the matter on behalf of the defendants on or about 12 November 2024. 20 In the course of the hearing on 3 December 2024, the defendants' outstanding obligations in relation to the production of documents and the provision of particulars were identified to Mr Stewart, who indicated that he had an arrangement in place to finalize the performance of those obligations that day. The following appears from the transcript: HIS HONOUR: Well, given that there's been no formal application made, I suppose I shouldn't give judgment. But there's an outstanding request for further and better particulars that your clients consented to provide by 25 September 2024. What about that, is that - - - MR STEWART: And that's something that I will be finalising today with my clients. HIS HONOUR: So you will comply with those by the - you will comply with orders 1 and 2 by the 10th - by 13 December? MR STEWART: Yes, your Honour. 21 Assessed objectively, those comments reasonably suggest that, at the time Mr Stewart said what he did, there were arrangements in place for him to meet with his clients that day for the purposes of complying with the orders. Mr Stewart's answers in cross-examination at the hearing seeking default judgment revealed that that was not the case. This is very unfortunate. 22 Whilst that assessment may be quibbled with, what cannot be disputed is the fact Mr Stewart assured the Court his clients would comply with any further orders made. In his own words: MR STEWART: Your Honour, I've only just come onto - on record, about two and a half weeks ago. I'm progressing the matter. Orders will be complied with. A number of other applications I've been corresponding with my friend. It's not a straightforward matter. And like I said, we don't gavel with costs for the delay in having to appear today. But the matter should be in the course in the usual way. 23 Given such assurances and acknowledgment of the consequences of the defendants' non-compliance, orders were made at the hearing on 3 December 2024 extending the time for compliance with the orders of 10 October 2024. Order 1 of the orders made that day was: 1. Time for the defendants to comply with Orders 1 and 2 of the Orders made on 10 October 2024 be extended to 13 December 2024. 24 The question of costs of the hearing of 3 December 2024 was also dealt with on that day. Whilst it was accepted that the defendants should pay the plaintiffs' costs, an application was made that they be taxed and paid forthwith. That application was acceded to and brief reasons were given. They included the following: HIS HONOUR: There's nothing you need to say. In relation to the cost, here the issue is one of deleteriousness by the defendants. I hasten to mention that that does not reflect on the defendant's current solicitors, who have only recently been briefed, but the defendants have failed in a contumacious way to comply with orders of the court. Not only that, but consent orders, orders which they had agreed to, rather than were imposed upon them. It's not likely that this matter will end anywhere soon. There's no way in which the plaintiff should bear the cost of this, the cost referred to in paragraph 3. So they ought be paid by the defendants to the plaintiffs. And given that resolution of the matter seems to be a long way off, which is one of the bases for ordering costs being paid forthwith, if that is appropriate, as is the fact that this is, as I say, contumelious or contumacious delay, one can only - there's no explanation for it either. That's another good reason for why they should be paid forthwith. There's very little the court can do to hurry parties along, but orders of this nature are one of them, and it should be exercised in this case. So I will make order number 3. 25 The identification of the defendants' conduct constituting contumelious or contumacious delay is serious indeed. It suggests most strongly that the parties whom are subject of the criticism are not complying with the obligations of litigants in this Court under ss 37M and 37N of the Federal Court of Australia Act 1976 (Cth) (Federal Court Act), and, in particular, not complying with the obligation of clients and solicitors to ensure that matters are dealt with expeditiously, amongst other things. That was certainly true on that occasion and, one would have thought, it would have been a strong warning to any party that further delay in compliance with the Court's orders would not be countenanced. 26 In any event, Order 1 of that day was not complied with. The defendants did not provide the further and better particulars required by 13 December 2024, nor did they adequately respond to the notice to produce. 27 The consequence of that was that on 17 December 2024, the plaintiffs filed this application for a default judgment.

What the defendants did between 3 and 13 December 2024 28 It is unfortunate, that in response to the application, the defendants failed to identify any substantive basis for their non-compliance with the Court's orders, both of 10 October 2024, and as extended by the orders of 3 December 2024. 29 The affidavit of Mr Stewart of 29 January 2025 tends to skirt around the issue. In it, he did not make any mention of a meeting with his clients on 3 December 2024, as he had suggested to the Court that he was going to have. Instead, he notes that he sent an email on 4 December 2024 to his clients about the matter. He does not annex that email to his affidavit. He says that it was directed to requiring his clients to provide him with the necessary information to enable him to respond to or comply with the orders of the Court. 30 Mr Stewart suggests that no response to his email was forthcoming, because his affidavit then says that, on 13 December 2024, he sent a further request to his clients, asking them to comply with his request for information so that he could comply with the orders of the Court. If that is the order of things, it shows that any attempt to comply with the Court's orders of 3 December were derisory, to say the least. 31 It is bordering on bizarre that when a party is told that their non-compliance with previous orders during the proceedings is contumelious and contumacious, that they will not then seek to promptly attend to the Court's further order. This is particularly so when the party acknowledges the gravity of the non-compliance and assures the Court that any further orders will be attended to as a matter of priority. Though Mr Stewart gave evidence that when he sent the second email to his clients on 13 December 2024, he believed he could still comply with the orders. I find that to be aspirational, at best. 32 It should be mentioned that Mr Stewart indicated in his affidavit that he underwent a medical procedure in the week of 2 December 2024. The effect of that evidence was not made clear, and he does not claim that it prevented compliance with the orders in any way. Indeed, it is axiomatic that it didn't have that effect because, as Mr Stewart indicated, as far as he was concerned, it was his clients who were causative of any delay, having not responded to his request for material on 4 December. In this case, the occurrence of the medical procedure is irrelevant. 33 Mr Stewart further claimed that the issues involved in the response to the request for particulars were difficult and complex, such that he needed the assistance of counsel. If that was so, it would have been obvious from the pleadings, and did not require reference to anything said by his clients to cause him to reach that conclusion. Nevertheless, all of that remains opaque and the Court is left with very sparse evidence about what occurred. 34 The conclusion that one is left with is that no real attempt was made to comply with the Court's order, despite the events of 3 December 2024. The intended effect of whatever was done was unexplained. That is, there was no explanation as to what was sought to be achieved in relation to complying with the Court's orders, by the steps which were actually taken.

What the defendants did after 13 December 2024 35 In his affidavit, Mr Stewart gives some further evidence of an attempt by him to brief counsel on 18 December 2024, and thereafter. He claimed that after he realised the difficulties involved in drafting a response, he attempted to brief counsel but was unsuccessful in either briefing them or having them perform the work required. It must be kept squarely in mind that these events occurred after the date for compliance with the orders had passed. 36 Indeed, there was a startling absence of evidence to the effect that, subsequent to 13 December 2024, the defendants made any serious attempt to overcome their non-compliance with the Court's orders. There was no application to the Court for an extension of time. Nor was such a request made to the plaintiffs. This failure to take any steps to ameliorate the non-compliance is simply left unexplained. 37 Whilst it is not necessary to decide, all this gives rise to an appearance that the defendants may be deliberately delaying the proceedings. No finding to that effect needs to be made, but the persistent unexplained delays and non-compliance which has occurred does tend to suggest it. 38 That unfortunate history of the defendants' delay identifies both that there has been consequential non-compliance with the Court's orders, which includes non-performance of the obligation to provide particulars. That is sufficient for the purposes of the plaintiffs' application and the triggering of the Court's discretion.

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.