Vacuum Oil Pty Ltd v Stockdale

The applicant, while agreeing that the Court has an unfettered discretion, submits that it is necessary for the respondents to demonstrate that some useful purpose would be served by setting aside the judgment and to explain how it came about that the respondents found themselves with a summary judgment against them: Vacuum Oil Pty Co Ltd v Stockdale (1942) 42 SR 239 at 243 per Jordan CJ. However, in that case the defendant had failed to disclose any defence on the merits and this was emphasised in the judgment. It was considered that no useful purpose would be served by setting aside the judgment. The default of the solicitor is a relevant but not a determinative consideration. Parties to litigation have a responsibility to take steps to ensure that they are informed of the progress of the litigation by their legal advisers and as to the steps which periodically need to be taken. If this is not done, then the case management system in place in this Court will simply not be able to operate in any effective way. In this matter I am satisfied that the failure by the respondents' solicitor to comply was of an exceptional nature and that if the respondents can establish that there are some reasonable grounds to support their defence, they should be allowed to file defences provided that the applicant is not unduly prejudiced. Since the matter was before Sackville J, two relevant new matters have been raised. The first is that the respondents have filed evidence in the proceedings which indicates that there is a triable issue in this matter. The second matter is the question of the clear conflict of interest which exists as between the respondents in respect of the defences foreshadowed in the affidavit material. The position appears to be that some of the respondents, because of this conflict of interest, were not in a position to be represented by legal representatives who were able to adequately conduct their cases in their individual and divergent interests. The material presently before me indicates that the conflict of interest between the respondents arises in relation to the Yeung and Wong respondents on the one hand and the interests of the Stafford respondents on the other. Although the delays and non-compliance by those acting for the respondents have been extreme in the present case, in view of the above considerations, I do not consider that the respondents should be shut out from having an opportunity to advance their defences. It is, of course, of great importance that litigation must be conducted efficiently and expeditiously, particularly having regard to the public interest in ensuring that cases come on for hearing with the minimum delay and that cases of other parties should not be displaced from the Court's list because of neglect or delay in the conduct of preceding cases. This is especially so where the court is committed to a case management system, such as exists in this Court. See Lenijamar Pty Limited v AGC (Advances) Ltd (1990) 27 FCR 388 (FCA/FC) at 395. Against this however, there is the strong reluctance of courts to prevent litigants having a proper opportunity to present their cases. See Fancourt v Mercantile Credits Pty Ltd (1983) 48 ALR 1 at 10; Rushcutters Investments Pty Ltd v Grellman (unreported, NSWCA, 17 June 1987); Byron v Southern Star Group Pty Ltd (1995) 13 ACLC 301 at 302-303 and 310-312; Singh v Varinder Kaur (1985) 61 ALR 720; Silverton Ltd v Harvey [1975] 1 NSWLR 659 at 665. In many instances, the inevitable detriment suffered by the applicant who has the benefit of a summary judgment can be mitigated to some extent by an order as to costs. There must inevitably be some hardship or inconvenience to a successful litigant in having a summary judgment set aside. There is a tension between the expeditious handling of litigation in the public interest and the obligation of the Court to ensure that litigants have a full opportunity to present a case where there is a real dispute.

The Defences Essentially, the Stafford respondents contend that they were not involved in the management or financing of Stafford Mining Pty Limited ("the Company"), and that it was left to the Yeung and Wong respondents' interests who were perceived by them to be the bankers of the Company's operations. It is said that there was no participation in the affairs of the Company by the Stafford respondents after about January 1990. The debts in question were incurred between February and April 1991. Both the Stafford respondents were originally welders by trade, but it is fair to say that they had some years of business experience in family enterprises and quarrying activities. In relation to financial matters, they deferred to Mr Wong, who was understood by them to be a trained accountant, and to Mr Eric Yeung, who was understood by them to be an "international businessman", who provided the finance for the Company ventures. By July 1991 relations between the two groups of respondents had deteriorated to the extent that the Stafford respondents "locked out" the Company and impounded all the plant and machinery at the working site. The basic case of the Stafford respondents is that they were not informed of, nor privy to, the dealings of the Company between February to July 1991, nor had they been involved in the activities of the Company for some considerable time before that, in the order of approximately twelve months. The Yeung and Wong respondents' case on the material before me is that at all material times the Yeungs were investors of financial substance. Reference was made to the purchase by them of the Manly Pacific Hotel for $33 million in 1987 and a subsequent expenditure within the following year on development of that hotel in the order of $2 million. There is reference to the formation of a consortium with the Yeungs to acquire an interest in a quarry from the Staffords for about $1.5 million. Investments were made by the Yeung family in the acquisition and operation of concrete batching plants and soil and sand distribution yards. The amounts invested were in the order of $3 million. It seems that the cash flow came from associates or members of the Yeung family overseas. Mr Joseph Wong's defence is that he had no reason to believe that funding by the Yeungs would discontinue. During approximately January to April 1991, Valerica Pty Ltd ("Valerica"), a company owned by the Yeung family, paid an amount of $195,000 in relation to the group's activities and in that period there was a debt due from another company to the Company in the order of $300,000 but this does not appear to have been paid.

Valerica in January 1991 "injected" an amount in the order of $5.5 million into the group of companies to purchase sand and soil yards and concrete batching plants and to generally support the group which included the Company. The respondent Wong says that he had every reason to expect that further funds would be forthcoming from the Yeung interests to meet outstanding debts and he points to the large investments made by the Yeung family in the group over the years. It appears that funds continued to flow to the Company during the first half of 1991 and even after that time. The defence of Mrs Anna Yeung is that she was not involved in the daily management of the group, but was a nominal director only. The finance for the group came from Hong Kong. At all material times the details of the Company's affairs were left to Mr Wong. Mrs Yeung says that she was not aware of any financial difficulties experienced by the Company in the payment of its debts, nor was she aware of its financial position. Mr Eric Yeung is a director of what might broadly be called the "Yeung Group of Companies" in Australia. He supervised investment of funds on behalf of his family in Australia and would report back to them from time to time. The family were long-term investors and committed generally long-term support to undertakings in which investments were made. He says that he believed that his family at all times had sufficient resources to participate in further investments and injections of funds into the group activities. Mr Yeung was not actively involved in the day to day management of the Company. He became aware of certain aspects of the Company's financial dealings when he received reports from Mr Wong. During the period March, April, May 1991, he was never asked for funds to pay any debts due to the creditor, the applicant in these proceedings. Nor was he informed in March and April 1991 that the Company would purchase fuel from the applicant or of any difficulties associated with such purchases. He was, however, aware that the Company required fuel to continue its operations. In July 1991, as mentioned above, the Stafford family evicted the Company from the quarry site. At that time the Yeung family faced the dilemma as to whether they should further support the joint arrangement or cease to inject further funds into the Company. The Yeung family paid certain debts owing after that date but the funding appears to have tapered off substantially after July 1991. In February through April 1991 Mr Eric Yeung was not aware of any difficulties experienced by the Company in relation to payment of its debts and was not aware of its financial position. He was never informed that it had insufficient funds. Mr Eric Walsh, the sixth respondent, said that he filled the role as company director only on one occasion and believed that his responsibilities ceased at that time. He was not involved in the conduct of the Company's business and was unaware of the Company's financial position in the relevant period. He was aware that the Yeung family endorsed Mr Eric Yeung's projects in Australia and believed that they had sufficient funds to provide such endorsement. He believed that the Company would be supported at all times by the Yeung family. More particularly, in February to April 1991, he was not aware of any difficulties experienced by the Company in relation to the payment of its debts nor was he aware of its financial position. He was never informed that the Company had insufficient funds to pay its debts as they fell due, but always believed that sufficient funds would be provided. In relation to the summary judgment the "explanations" for the delays are quite unsatisfactory. However, the evidence before me discloses that there is an arguable case. Mr Brabazon, for the applicant, has contended that where an application is made to set aside a summary judgment, the standards attained must be shown to be more than to simply demonstrate an arguable case. He submits that there must be evidence in the present circumstances to demonstrate a prima facie case. I do not accept this submission. In Byron (supra) at 310-312, Priestley JA referred to "an arguable defence" and to whether the evidence "could, arguably, support a finding"; Kirby P at 303 referred to "an arguable issue". In my view the relevant touchstone is whether there is an arguable case or question raised by the person seeking to set aside the judgment. It is of course also relevant to consider whether there has been an adequate explanation made as to the circumstances which led to the summary judgment. In the present matter I am satisfied that an arguable case has been shown, but the explanations for the delays have been quite unsatisfactory. The applicant in the main proceedings submitted that, should they succeed on this application, the respondents should be put on terms that before they are allowed to put on their defence, they should either give security to cover the amount awarded in the judgment set aside, or alternatively, should provide security for costs. I do not think that these orders are appropriate. There is no evidence that any of the six individual respondents will be unable to meet any judgment or that they cannot bear any costs which may be awarded. Nor is there any evidence as to the quantum of the applicant's likely costs. Nor is there any evidence that the respondents intend to dispose of their assets and abscond so as to deprive the applicant of the fruits of its judgment if it is ultimately successful. Having regard to the foregoing I consider the appropriate course in this matter is to order that the orders made by Sackville J in this matter be set aside and that the respondents be given leave to enter defences within ten days from today. As to costs, I direct that the respondents pay such of the applicant's costs in the main proceeding, on a full indemnity basis, as have been thrown away in relation to the entry of summary judgment by Sackville J, and those which were related to the application to set aside the orders made by his Honour. I give the applicant leave to tax such costs forthwith and to pursue enforcement of the costs order immediately after taxation. The above orders in relation to costs are not to displace any orders previously made against the former solicitor for the respondents. I certify that this and the preceding thirteen (13) pages are a true copy of the Reasons for Judgment herein of his Honour Justice Tamberlin. Associate: Date: 2 June 1995

Counsel for Applicant: Mr M L Brabazon Solicitors for Applicant: Wilkinson, Throsby & Edwards Counsel for First, Second, Third and Sixth Respondents: Mr J R Dupree Solicitors for First, Second, Third and Sixth Respondents: A J Law & Co Counsel for Fourth and Fifth Respondents: Mr J T Johnson Solicitors for Fourth and Fifth Respondents: Ross Koffel Solicitors Date of Hearing: 25 and 30 May 1995 Date Judgment Delivered: 2 June 1995