Thunder Studios Inc (California) v Kazal

Charif's submissions 28 Charif argued that, accepting that he had not complied with order 4, he needed to obtain relief in order to have his defence reinstated. He contended, correctly, that the Court not only had power under r 1.39, but also had an implied power to extend time in order to avoid injustice. He accepted that case management principles were significant in determining interlocutory applications of the type he now makes and the seriousness of his default, but his counsel urged that Charif had not disregarded the importance of the Court's order. He noted that substantial work had been done between 18 August 2017 and the provision of the draft and, as it turned out, final, version of his answers on 15 September 2017, for the purpose of avoiding the consequence of the self-executing order. 29 Charif submitted, as Mr Mitry had said in his affidavits, that Mr Mitry had intended to raise the consequences of the self-executing order the next time the proceeding came back to Court but that, for various reasons, not necessarily under the control of any of the parties, it had not been possible for the proceeding to be listed until 4 December 2017. He argued that it was only late in the afternoon of 1 December 2017, when Kate Sambrook, one of the solicitors for Thunder Studios and Mr David, filed and served her affidavit, that the applicants had given any indication as to their position. 30 Charif acknowledged that the history concerning his answers to interrogatories extended back to about December 2016, when the discussions as to which ones he should answer commenced, and that he had defaulted on two earlier occasions in complying with orders for them to be answered. His counsel argued that, "whilst this is regrettable, it is clear he has endeavoured to assist the applicants and the Court". Charif pointed to the obvious prejudice that he would suffer if time were not extended for him to comply with the order to file the verified answers by 15 September 2017, namely, that the case against him would proceed without him having any defence. He submitted that he had substantially complied with order 4 by serving the draft answers on 15 September 2017 and later verifying those very answers in identical terms six days later. He argued that he had not deliberately sought to evade or ignore order 4 but that his predicament had arisen from a number of factors, by reason of which it would be unjust to leave him in the position where his defence remained struck out. He sought to distinguish other cases in which the Court had dealt with defaults by parties or applications by them for amendments to pleadings after previous histories of default or omission in their litigation. He argued that the applicants' earlier defaults in this proceeding was one factor that should be weighed in the balance to determine where the interests of justice lay on the present application. 31 Charif contended that, in order to preserve public confidence in the administration of justice, it was necessary that there be a hearing on the merits of his defence to the claims made by Thunder Studios and Mr David. He argued that he had given a sufficient explanation for his default. He submitted that it was almost certain that there would be a further procedural burden for all parties and the Court, because Charif would have to seek leave to file and serve an amended defence, and, therefore, there would be another interlocutory application. Charif argued that there had been no appreciable prejudice occasioned to the applicants by his most recent default, since the draft answers served, albeit an hour after the time specified in order 4, on 15 September 2017, were in identical terms to the verified answers that were served later. He argued that his communications with his solicitors indicated he was conscious of the need to comply with the order to file and serve his verified answers by 15 September 2017, that he had wanted his solicitors to do so and that, when he had left Australia earlier in September 2017, he expected to have been in a position where he would have been able to comply with the Court's order.

Consideration 32 A crucial question underpinning Charif's application for an extension of time to 22 September 2017 in which to file his verified answers to the five interrogatories that had to be filed by 15 September 2017, is whether he has established that the Court should act to relieve him against injustice. In FAI General Insurance Company Limited v Southern Cross Exploration NL (1988) 165 CLR 268 at 283, Wilson J, with whom Brennan, Deane and Dawson JJ agreed, said of the power to extend time to comply with a self-executing order after the date for compliance had passed: It is a remedial provision which confers on a court a broad power to relieve against injustice. The discretion so conferred is not readily to be limited by judicial fiat. The fact that it manifestly is a power to be exercised with caution and, in the case of conditional orders, with due regard to the public policy centred in the finality of litigation does not warrant an arbitrary limitation of the power itself, not expressed in the words of the rule, so as to deny its capacity to apply to circumstances such as those which are to be found in the present case. It would be wrong to so read the rule as to deny to a court power to prevent injustice in circumstances where the party subject to a conditional order ought to be excused from non-compliance. (emphasis added) 33 In that case, the party in default had failed to provide security for costs within the time ordered but it provided that security late. Here, the injustice of which Charif complains is that by force of orders 4 and 5 made on 7 September 2017, reflecting the rulings I had made on 18 August 2017, his defence has been struck out. Those orders, as made on 7 September 2017, reflected what I required the parties to prepare as orders to give effect to my intention as expressed in the hearing on 18 August 2017 and of which Charif was aware from that date because Mr Mitry had emailed him to that effect. Thus, from 18 August 2017 Charif personally was aware that, if he failed to file and serve verified answers to the five interrogatories by 15 September 2017, his defence would be struck out. 34 Despite that knowledge, the evidence of Charif and Mr Mitry established that Charif made no attempt to comply with the requirement in order 4 that his answers be verified and filed by 15 September 2017. In order to verify his answers, Charif had to swear them before an Australian lawyer with a current practicing certificate or, because he was in New York, a notary public or Australian consular officer or person authorised to take oaths in that jurisdiction: see s 45(2) of the Federal Court Act; see too: STX Pan Ocean Co Ltd v Bowen Basin Coal Group Pty Ltd (2010) 188 FCR 528. He knew that when he was in New York on 14, and the early hours of 15, September 2017 New York time, it would be the afternoon of 15 September 2017 in Sydney. He knew that if he failed to verify his answers in accordance with order 4, the very consequence from which he now seeks relief and seeks to characterise as an "injustice" to him would occur automatically. He acted on 14 and 15 September 2016 in the context where he had breached two earlier orders to file verified answers to the interrogatories, on each occasion filing his answers substantially later than the time limited in each order and, at least in the case of the verified answers due to be filed on 21 July 2017, in breach of his obligation to answer interrogatory 44 in compliance the requirements identified in Palmer 5 NSWLR 727. 35 Charif's evidence explaining his breach of order 4 was simply that, although he knew of the order to verify and file the answers by 15 September 2017, on that day: I was still in the United States … out of the country and unavailable to verify the Answers. (emphasis added) 36 That evidence was not correct. He would have been able to verify the answers, had he made arrangements in New York to do so. He chose not to make any arrangements there either in advance of the time specified in order 4 or later. It is not an explanation of his default for him to assert that, by the time he and his lawyers finalised the drafting of his answers, it was in the early morning, around 2.00am, in New York, which he knew was about 4.00pm on 15 September 2017 in Sydney. Both Charif and his lawyers knew that his answers had to be verified and filed by that time. First, they did not seek an extension before 15 September 2017, despite their awareness of the consequence of non-compliance under order 5, and the difficulties that his conduct in being in New York on 14 and 15 September 2017 caused (the reason for which he did explain) in having his answers verified while he was there, particularly having regard to the then state of preparation of his draft answers. Secondly, Charif made no attempt to verify his answers subsequently while in New York. As his evidence made clear, he never intended to do so because, in his words, he was "out of the country and unavailable to verify the Answers". 37 He chose to be out of the country and his "unavailability" consisted in his failure to arrange to be with someone before whom he could verify his answers in New York, before the expiry of the time in order 4. He did not make arrangements to attend upon such a person then, or even after the expiry of the time in order 4. Indeed, he chose to wait, as I infer he always intended, until it suited him to verify his answers after his subsequent return to Australia, when he would no longer be "unavailable". In fact, he only did so, again for reasons he did not explain, two days after his return on 19 September 2017. 38 So the question that arises is: what is the injustice against which Charif is seeking relief? In my opinion, it is the consequence of his deliberate, unexplained and conscious choice to be "unavailable" in New York as a result of which he made no arrangements to comply for the third time with an order that he file and serve verified answers to the interrogatories on or before the date ordered by the Court, in this instance, 15 September 2017. 39 I am unable to see, in those circumstances, why the orders of 7 September 2017, or their operation, have created injustice to Charif. No doubt the consequence of his wilful and deliberate flouting of the Court's orders is harsh on him in this litigation, for he has presently lost his defence to the current statement of claim. But he lost that defence because he did not intend to, and did not, comply with the order to verify his answers until it suited him on his subsequent return to Australia. Nothing prevented him from putting himself into the position to verify his answers with, if need be, his own amendments to the draft he then had in New York during 14 or early on 15 September 2017 New York time, or seeking to do so, after receiving the final version, later during the day on 15 September 2017 after, perhaps, the time had passed in Sydney and then returning the verified answers promptly. 40 While he might still have been in breach (because of the time difference in filing and serving his answers), had he taken the latter course he would at least have been able to demonstrate that he was trying his best to comply while counsel was redrafting his answers here on 14 and 15 September 2017. The looming non-compliance did not spur Charif or his lawyers into seeking an extension of time, bringing his problem to the Court or to the attention of Thunder Studios or Mr David prior to order 5 taking effect. Nor did he explain why he chose to be in New York and so to disable himself from being in a position to comply, if the difficulty for him were his inability to arrange for someone before whom he could swear his answers so that he could file and serve verified answers as order 4 required. 41 Charif took this course, conscious of orders 4 and 5 and the consequences to him of failing to comply with order 4. His solicitor had warned him that there was a guillotine order. He acted in circumstances where, on two previous occasions, he had not complied with orders within time and, when he did, filed answers that were not proper answers to the interrogatories themselves. 42 I do not see how there is injustice to Charif, in those circumstances, in allowing order 5 to operate as he knew, from 18 August 2017, it would operate if he failed to obey order 4 in accordance with its terms on or before 4.00pm on 15 September 2017. 43 Rule 1.39 is remedial in character, and, of course, it is discretionary. In Lodestar Anstalt v Campari Australia LLC (No 2) [2016] FCAFC 118 at [27], Allsop CJ, Greenwood, Besanko, Nicholas and Katzman JJ said of a rule analogous to r 1.39, in a passage that Rares, Flick and Bromwich JJ endorsed in Sydney Equine Coaches Pty Ltd v Gorst [2017] FCAFC 34 at [21]: the power to make an order inconsistent with the Rules should be exercised for proper reasons which will generally only arise in exceptional circumstances. 44 Here, Charif does not seek to invoke the power under r 1.39 to make an order inconsistent with a rule but rather to vary the time for compliance with an existing order. The onus is on a party in his position to show a reason or reasons to depart, or except him, from the consequence prescribed in order 5 of striking out his defence because of his breach of order 4. 45 As Charif argued, Thunder Studios and Mr David do not suggest that, in this particular situation, the late filing, by six days, of verified answers has caused any particular prejudice to them in itself. But, when the applicants' solicitors asked Charif's solicitors, on 12 October 2017, for an explanation of his delay and for evidence that he was overseas when the default occurred, it took over seven weeks for Charif's solicitors to respond. There is no explanation for that delay, beyond Mr Mitry saying he intended to raise the issue of seeking a remedy for the operation of order 5, as he did, when the proceeding was next in Court. Mr Mitry perceived that because of events beyond the parties' control, including the closure of the Law Courts Building for about two and a half weeks due to a flooding from a burst water main, the first opportunity for him to do so was on 4 December 2017, when Charif filed his interlocutory application in Court, but without any prior notice. 46 At the conclusion of the interlocutory hearing on 4 December 2017, I raised my concerns with counsel for Charif about the gaps in the evidence he had led, including the absence of any evidence about any steps that had been taken to arrange for Charif to verify his answers in New York at any time while he was there, knowing, as he did, of the self-executing order for the striking out of the defence if he did not comply with order 4 in time. I indicated that, on the material then before me, I was not minded to grant Charif relief but wished him to have the opportunity to provide any further evidence by 6 December 2017, so that I could consider it today. Charif left Australia for overseas on 6 December 2017 without providing any further evidence, although Mr Mitry did. 47 In the circumstances, I find that Charif made no arrangements or inquiries while he was in New York about how he could verify his answers while he was there (even after the time in order 4 had expired) and he did not intend to do so until it suited him after his return to Australia: Kuhl v Zurich Financial Services Australia Ltd (2011) 243 CLR 361 at 384-385 [62]-[64] per Heydon, Crennan and Bell JJ. 48 In Aon Risk Services Australia Limited v Australian National University (2009) 239 CLR 175 at 217-218 [112]-[114], Gummow, Hayne, Crennan, Kiefel and Bell JJ discussed the principles applicable to the operation of legislative provisions such as Pt VB of the Federal Court Act. They said that (239 CLR at 217 [113]): In the past it has been left largely to the parties to prepare for trial and to seek the court's assistance as required. Those times are long gone. The allocation of power, between litigants and the courts arises from tradition and from principle and policy [Jolowicz, On Civil Procedure (2000), p 79]. It is recognised by the courts that the resolution of disputes serves the public as a whole, not merely the parties to the proceedings. (emphasis added) 49 Their Honours held that an analogue of Pt VB recognised that delay and costs were undesirable and that delay had deleterious effects, not only upon the parties to the proceedings but to other litigants in the timely and just resolution of all proceedings before the Court. Their Honours said that the earlier assumption that costs would always be a sufficient compensation for the prejudice caused by, in that case, an amendment to pleadings, was not reflected in provisions such as Pt VB. They said in relation to an application to amend, but in terms that equally apply to a case such as the present (239 CLR at 215 [103]): Generally speaking, where a discretion is sought to be exercised in favour of one party, and to the disadvantage of another, an explanation will be called for. The importance attached by [the analogue to Pt VB] to the factor of delay will require that, in most cases where it is present, a party should explain it. Not only will they need to show that their application is brought in good faith, but they will also need to bring the circumstances giving rise to the amendment to the court's attention, so that they may be weighed against the effects of any delay and the objectives of the Rules. (emphasis added) 50 In Expense Reduction Analysts Group Pty Ltd v Armstrong Strategic Management and Marketing Pty Limited (2013) 250 CLR 303 at 321 [51], French CJ, Kiefel, Bell, Gageler and Keane JJ said that: Speed and efficiency, in the sense of minimum delay and expense, are essential to a just resolution of proceedings. The achievement of a just but timely and cost-effective resolution of a dispute has effects not only upon the parties to the dispute but upon the court and other litigants. The decision in Aon Risk Services Australia Ltd v Australian National University was concerned with the Court Procedures Rules 2006 (ACT) as they applied to amendments to pleadings. However, the decision confirmed as correct an approach to interlocutory proceedings which has regard to the wider objects of the administration of justice. (emphasis added) 51 Their Honours went on to say that the evident intention and expectation of an analogue of Pt VB, and in particular s 37M, is that the Court use its broad powers to facilitate the overarching purpose of the civil practice and procedure provisions in the Federal Court Act (and its analogues) and added (250 CLR at 232 [56]-[57]): Parties continue to have the right to bring, pursue and defend proceedings in the court, but the conduct of those proceedings is firmly in the hands of the court. It is the duty of the parties and their lawyers to assist the court in furthering the overriding purpose. That purpose may require a more robust and proactive approach on the part of the courts. … the powers of the court are not at large and are not to be exercised according to a judge's individualistic idea of what is fair in a given circumstance. Rather, the dictates of justice referred to in s 58 require that in determining what directions or orders to make in the conduct of the proceedings, regard is to be had in the first place to how the overriding purpose of the CPA can be furthered, together with other relevant matters, including those referred to in s 58(2). The focus is upon facilitating a just, quick and cheap resolution of the real issues in the proceedings, although not at all costs. The terms of the CPA assume that its purpose, to a large extent, will coincide with the dictates of justice. (emphasis added) 52 In Tamaya Resources Ltd (in liq) v Deloitte Touche Tohmatsu (a firm) (2016) 332 ALR 199 at 226 [154]-[156], Gilmour, Perram and Beach JJ discussed the nature of the explanation to be given where a party seeks the exercise of a discretionary power to make an order that would affect the way in which a case is managed. They noted that the nature of the explanation will depend on the circumstances of the case and said: It must be borne in mind that the explanation required is that of the moving party, not merely their solicitor or counsel. The client may very well know of matters relevant to the explanation for delay which are not known by the lawyers. Evidence as to the explanation for delay will often be given by an applicant's solicitor from their own knowledge but that may, in some cases, not be sufficient. (emphasis added) 53 In this case, Charif has chosen not to give any explanation as to why he was in New York or why he could not find, and had not arranged, someone before whom he could swear his answers within the time limited by order 4 or later on 15 September or at any time before 21 September 2017. Accepting that his counsel and solicitors were taking longer than anticipated to finalise the draft answers, Charif was aware of that problem on 14 September 2017 while in New York and of its consequences if order 5 came into effect. There is no evidence that, as the deadline approached in the week of 11-15 September 2017, he raised any concern about possible default. Rather, as he said, he was in the United States and "unavailable" to verify his answers. 54 One factor relevant to the exercise of the discretion in this case is the need to have due regard to public policy of finality in litigation brought about by a self-executing order: FAI General 165 CLR at 283. Another factor is that Charif ought give an explanation why he ought be excused from his non-compliance. 55 Here, Charif has failed to comply on not just this particular occasion with the order to verify his answers by a particular time. He failed to do so twice before, first, on 30 May 2017 and, secondly, on 21 July 2017. Thus, the verified answers that he should have filed and served on 30 May 2017 were not verified, filed and served until 21 September 2017. That was his third successive breach of orders to do so, but on this occasion he defaulted conscious that the consequence was that his defence would be struck out. Therefore, this proceeding has been delayed nearly four months from 30 May 2017 in its progress because of his defaults. 56 Moreover, from the time of his default on 15 September 2017, Charif made no application to remedy his situation until he filed the interlocutory application in Court on 4 December 2017, without giving any prior notice that he was going to do so. He had left unanswered, for seven weeks, the reasonable request of the applicants' solicitor for an explanation of his delay and evidence that he had in fact been overseas and where he was. 57 I am of opinion that these are not the acts of a party seeking to fulfil his obligations under ss 37M and 37N to act in a way that is consistent with the overarching purpose of facilitating the just resolution of this proceeding according to law as quickly, inexpensively and efficiently as possible. To the contrary, Charif's conduct bespeaks an attitude conducive to inefficiency, delay and expense. I have now had to consider on three occasions the consequences of Charif's breaches of orders that he give proper verified answers within the time fixed in each order. His breaches of those orders have used considerable time in and out of Court, not only for Thunder Studios and Mr David, but also for the Court itself. I had to read a deal of material that the parties had filed in advance in preparation for each hearing and then hear each of the three different applications arising by reason of Charif's defaults in answering his interrogatories. The original order of 19 May 2017 had been the subject of discussion and negotiation between the parties for months beforehand. 58 Delays and breaches of orders such as those for answering the interrogatories necessarily have impacts on the conduct of other proceedings in the Court. That is because the need to deal with the breaches occupies the time of a judge in order to resolve the issues according to law. Moreover, the parties and the docket judge must prepare for the hearing of those questions in an adequate way. Such applications to the Court also occasion, as is obvious, substantial expense for not only the party in default but also that party's opponents in the case. 59 When I offered Charif the opportunity to supplement what I saw as being deficiencies in his case, Charif chose, once again, not to devote his attention to explaining to the Court and the applicants why he had not been able to deal with matters in New York, but instead left for overseas. That was indicative of his lack of commitment to his duty to comply with his obligations under s 37N. 60 In Sandbach v Commissioner of Taxation [2017] FCA 526 at [13], Perram J observed that such defaults cost money to meet. His Honour described the conduct of the applicant in that case as a failure repeatedly and insouciantly to comply with orders made by the Court more or less since he had commenced that proceeding. No doubt Mr Sandbach's failings extended over a more protracted time than, relevantly, Charif's three breaches of orders to file proper verified answers to interrogatories. But Charif's conduct, before and after his default, in respect of complying with order 4 by 15 September 2017, after his two earlier breaches of orders to answer interrogatories, has left me with the impression that he is not willing or prepared to obey the orders of the Court in accordance with their terms. 61 While this proceeding has not yet been fixed for hearing, Charif's conduct effectively has resulted in the proceeding being delayed for some months during the course of this year and with the loss of substantial time this week (over a day and a half of hearings) in dealing with this application seeking to cure his default. Senior counsel for Thunder Studios and Mr David accepted that the consequence of shutting Charif out from having a defence in the proceeding is harsh, as indeed it is. 62 For these reasons, Charif has not discharged his onus to demonstrate why the discretion in r 1.39, to prevent an injustice, should be exercised to extend the time for him to comply with order 4 so that his defence will not remain struck out.

Conclusion 63 I am not satisfied that Charif has explained why he failed to comply with what he appreciated fully at the time was his third opportunity to give verified answers to interrogatories. For reasons that he has chosen not to explain at all, he was out of the jurisdiction and in a place where it was difficult for him to achieve compliance. But he knew of those difficulties (or their potential to arise because of his choice to be out of Australia) and he knew what needed to be done to comply. I am not satisfied that Charif has shown any injustice to him or any other basis for me to extend the time for his compliance with order 4. His interlocutory application must be dismissed with costs. I certify that the preceding sixty-three (63) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Rares.