Consideration
40 Relevantly, s 37M of the Federal Court Act provides that the overarching purpose of the civil practice and procedure provisions in the Rules and the Act is to facilitate the just resolution of disputes according to law as quickly, inexpensively and efficiently as possible. That includes the objectives of the just determination of all proceedings before the Court, the efficient use of the judicial and administrative resources available for the purposes of the Court, the efficient disposal of the Court's overall workload and of all proceedings in a timely manner, and the resolution of disputes at a cost proportional to the importance or the complexity of the matters in dispute.
41 Correspondingly, s 37N creates a duty on each of the parties and their lawyers to conduct proceedings in a way consistent with the overarching purpose. Accordingly, s 37P(5) and (6) provide that, if a party fails to comply with a direction given by the Court about matters of practice and procedure, the Court may make such other order or directions as it thinks appropriate, including dismissing the proceeding in whole or part, striking out any part of a party's claim or defence, disallowing or rejecting evidence, and ordering costs.
42 Although the dictionary to the Rules defines an "applicant" as meaning a party other than a cross-claimant claiming relief, r 15.10 provides that, to the extent applicable and not inconsistent with Pt 15, the parties have to conduct a cross-claim in the same way as the principal proceeding, and that the Rules apply to a cross-claimant in the same way as they apply to the principal proceeding. Thus, for the purposes of giving effect to r 15.10, a cross-claimant is to be treated as an applicant and a cross-respondent as a respondent. In addition, r 1.40 provides that the Court, at any stage of the proceedings, can exercise a power mentioned in the Rules on its own initiative, or on the application of a party.
43 Rule 5.23 deals with orders that can be made on default of a party and provides:
5.23 Orders on default
(1) If an applicant is in default, a respondent may apply to the Court for an order that:
(a) a step in the proceeding be taken within a specified time; or
(b) the proceeding be stayed or dismissed for the whole or any part of the relief claimed by the applicant:
(i) immediately; or
(ii) on conditions specified in the order.
(2) If a respondent is in default, an applicant may apply to the Court for:
(a) an order that a step in the proceeding be taken within a specified time; or
(b) if the claim against the respondent is for a debt or liquidated damages - an order giving judgment against the respondent for:
(i) the debt or liquidated damages; and
(ii) if appropriate, interest and costs in a sum fixed by the Court or to be taxed; or
(c) if the proceeding was started by an originating application supported by a statement of claim or an alternative accompanying document referred to in rule 8.05, or if the Court has ordered that the proceeding continue on pleadings - an order giving judgment against the respondent for the relief claimed in the statement of claim or alternative accompanying document to which the Court is satisfied that the applicant is entitled; or
(d) an order giving judgment against the respondent for damages to be assessed, or any other order; or
(e) an order mentioned in paragraph (b), (c) or (d) to take effect if the respondent does not take a step ordered by the Court in the proceeding in the time specified in the order.
Note 1: The Court may make any order that the Court considers appropriate in the interests of justice - see rule 1.32.
Note 2: An order or judgment under this Division may be set aside or varied.
44 In Aon Risk Services Australia Ltd v Australian National University (2009) 239 CLR 175 at 214-218 [100]-[114], Gummow, Hayne, Crennan, Kiefel and Bell JJ discussed the principles upon which courts should deal with applications to amend in accordance with statutory requirements such as are now found in Pt VB of the Federal Court Act. They said that the objectives such as those in Pt VB do not require that every application for amendment should be refused simply because it involves the waste of some costs or some degree of delay as, inevitably, it will. But, they said, factors such as the nature and importance of an amendment to the party have to be weighed against the consequences of the grant, and that, in respect of r 21, which is an analogue of s 37M (239 CLR at 215 [102]-[103]):
There may be cases where it may properly be concluded that a party has had sufficient opportunity to plead their case and that it is too late for a further amendment, having regard to the other party and other litigants awaiting trial dates. Rule 21 makes it plain that the extent and the effect of delay and costs are to be regarded as important considerations in the exercise of the court's discretion. Invariably the exercise of that discretion will require an explanation to be given where there is delay in applying for amendment.
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 r 21 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)
45 Their Honours said (239 CLR at 217 [111]-[113]):
An application for leave to amend a pleading should not be approached on the basis that a party is entitled to raise an arguable claim, subject to payment of costs by way of compensation. There is no such entitlement. All matters relevant to the exercise of the power to permit amendment should be weighed. The fact of substantial delay and wasted costs, the concerns of case management, will assume importance on an application for leave to amend.
A party has the right to bring proceedings. Parties have choices as to what claims are to be made and how they are to be framed. But limits will be placed upon their ability to effect changes to their pleadings, particularly if litigation is advanced. That is why, in seeking the just resolution of the dispute, reference is made to parties having a sufficient opportunity to identify the issues they seek to agitate.
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 (House v The King (1936) 55 CLR 499 at 505 per Dixon, Evatt and McTiernan JJ). 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)
46 What their Honours said in relation to applications to amend is also applicable to other aspects of case management and exercises of discretion in dealing with matters of practice and procedure. In Expense Reduction Analysts Group Pty Ltd v Armstrong Strategic Management and Marketing Pty Limited (2013) 250 CLR 303 at 323-324 [56]-[59] French CJ, Kiefel, Bell, Gageler and Keane JJ held that provisions such as Pt VB have the evident intention and expectation that the Court will use the broad powers conferred in such provisions to facilitate the overarching purpose relevantly, here, as specified in s 37M. They said (Expense Reduction 250 CLR at 323 [56]-[57]):
Parties continue to have the right to bring, pursue and defend proceedings in the Court, but the conduct of the 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)
47 An important factor in Aon 239 CLR 175 was the need to abandon the trial date were the amendment granted. That consideration does not apply here. Nonetheless, as Expense Reduction 250 CLR 303 showed, the overarching purpose has a general relevance to the exercise of discretions in case management.
48 In Tamaya Resources Ltd (in liq) v Deloitte Touche Tohmatsu (2016) 332 ALR 199 at 226 [154]-[156], Gilmour, Perram and Beach JJ discussed the nature of the explanation that a party may need to give to the Court when seeking the exercise of a discretion. They said:
Just what explanation is called for will necessarily depend upon the particular case. The explanation will be given by, or on behalf of, the moving party. Affidavit evidence may or may not be necessary. In Cement Australia, for example, as the explanation was that the error was one of judgment by senior counsel for the ACCC, a statement by him from the bar table, to which no objection was taken, was accepted by the Court as sufficient.
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)
49 Importantly, as Lord Halisham of St Marylebone LC said in R v Lawrence (Stephen) [1982] AC 510 at 517B:
Where there is delay, the whole quality of justice deteriorates. Our system depends on the recollection of witnesses conveyed to a jury by oral testimony. As the months pass, this recollection necessarily dims…
50 While his Lordship spoke in relation to a criminal trial on indictment, his speech is no less apposite in civil litigation, albeit that ordinarily there is a six-year limitation period. In the usual course of a proceeding, the Court and the parties to it will act with some promptitude to progress the matter to a final hearing that will determine the dispute. The criterion of a just resolution of the dispute in s 37M involves having regard to whether or not a party has had sufficient opportunity to do so.
51 The power to give default judgment under r 5.23 is discretionary. The Court needs to be satisfied that each element of the relevant civil wrong is properly and discretely pleaded in the statement of claim: Speedo Holdings BV v Evans (No 2) [2011] FCA 1227 at [24]. Importantly, r 5.23 does not require proof of the claim by evidence but requires only that, on the face of the statement of claim, there is a claim for the relief sought and that the claim falls within the Court's jurisdiction. I explained the principles in Searson v Salmon [2014] FCA 748 at [6]-[9] (and see too Yeo v Damos Earthmoving Pty Ltd; in the matter of Broadbeach Developments Pty Ltd (in liq) [2011] FCA 1129 at [9] per Gordon J) as follow:
A plaintiff or applicant who seeks relief in proceedings started by an originating application supported by a statement of claim is entitled upon a default by a defendant or respondent, under r 5.23, to seek judgment based on the statement of claim without needing to rely on evidence supporting that claim. The Court may give judgment in the party's favour provided that the pleading, on its face, makes that claim and the claim falls within the jurisdiction of the Court: Australian Competition and Consumer Commission v dataline.net.au Pty Ltd (2006) 236 ALR 665 at 677-678 [45] per Kiefel J; Yeo v Damos Earthmoving Pty Ltd; in the matter of Beachwood Developments Pty Ltd (in liq) [2011] FCA 1129 at [9] per Gordon J; Sanko Steamship Co Ltd v Australia Gloria Energy Group Pty Ltd [2012] FCA 798 at [6] per myself.
However, as Kiefel J noted in Dataline 236 ALR at 678-679 [49]-[51], the Court could permit the applicant to lead some evidence in relation to the relief sought. That is because r 5.23 operates on the premise that the defaulting party has admitted the facts of the claims as pleaded and the Court then considers whether those facts establish an entitlement to the relief claimed. Her Honour held that the analogue of the rule required that the face of the statement of claim must show a right to some form of relief (236 ALR at 679-680 [53]).
Kiefel J held that the matters alleged in the statement of claim must permit the conclusion that some relief may be granted, even if its grant were subject to other considerations. Such a conclusion is at least possible in cases where a declaration and an injunction are sought. An applicant may establish some right or legal interest or legal conclusion capable of resolving a controversy that might properly be expressed in the form of a declaration or establish the infringement of a right or a standard set by a statute.
Subject to considerations that might weigh against the grant of relief of those kinds, the applicant may be said to have an "entitlement". It does not have to be absolute for the purposes of the rule, which is discretionary in nature in any event. Her Honour suggested that, in an appropriate case, such as one brought by a regulator in respect of protecting the public interest, the court might make a qualified declaration, notwithstanding the traditional restraint exercised by courts in making binding declarations without having held a contested hearing of the disputed facts (236 ALR at 680-681 [54]-[59]). She suggested that, in a default judgment context, such declarations might be prefaced by a statement (236 ALR at 681 [59]):
"Upon admissions which [the respondent in question] is taken to have made, consequent upon non-compliance with orders of the court."
Moreover, the mere fact that new counsel has found a new point is not, of itself, necessarily sufficient to support an amendment: WGKS v Minister for Immigration, Citizenship, Migrant Services and Multicultural Affairs [2021] FCAFC 10 at [20], per Rares, Moshinksy and Stewart JJ.
52 In my opinion, Mr Nurse's evidence fails to give any substantive information about the activities that the respondents undertook between receiving the applicants' outlines of evidence on 12 October 2020 until Mr O'Neill conducted interviews on 20 April 2021, over six months later. This is particularly significant in light of the fact that, on 3 February 2021, I had required the respondents explain why they needed a total of what (if granted) would be six months from receipt of the applicants' outlines to 2 April 2021.
53 Mr Nurse's evidence is, of course, not the evidence of his clients. The current cross-claim seeks judgment for over $4.5 million. There is no evidence that his clients were doing anything at all to seek promptly, let alone diligently, to progress to resolution their claims for millions of dollars.
54 Mr Nurse's suggestion that there may have been relevance or admissibility issues with matters set out in the applicants' outlines of evidence provides no basis for the delay in the respondents providing their own outlines. Mr Nurse's evidence was opaque in asserting that some "related tasks" affected the respondents' conduct of the proceedings "which would not be appropriate to raise in a public forum".
55 Moreover, there is no explanation of which witnesses suffered any illness, as asserted in Mr Francis' email of 4 February 2021, over what period the illnesses occurred, and when the witnesses were again ready to participate in the preparation of their evidence. Nor is there any evidence about what issues there were with insurance cover and when they were resolved, and how those issues may have impacted on the respondents' conduct of the proceedings to date. The email acknowledged that Mr O'Neill had been engaged, but there is no explanation as to why he was not involved in interviewing witnesses prior to 20 April 2021, nearly three weeks after the outlines were due to be served. I do not accept Mr Nurse's evidence that, until February 2021, "it was not possible to substantially progress the required outlines of evidence". There is just no substantive evidence as to what, if any, the difficulties were, how long they persisted and when they were resolved. Moreover, his evidence fails to give any proper explanation as to what happened in the meantime.
56 Likewise, the respondents did nothing in April 2021 to bring the matter back to the Court to enable orders to be made when Mr McDougall sought, over the course of about three weeks, to urge that sensible course upon the respondents. On the evidence that the respondents have chosen to give, all that happened was that, on 20 April 2021, they caused Mr O'Neill to be able to confer with three witnesses apparently for the first time. Again, there is no further explanation as to why matters could not have been progressed since then, why those witnesses' outlines have been not been finalised or served (now one month later), other than a reference to the fact that, during the interviews on 20 April 2021, they had raised new claims. Those new claims were based on the respondents seeking to recover loss or damage under the guarantees and for further alleged breaches by Mr Watt of his duties as a director of Summit and RX Holdings. In effect, the new allegations are that Mr Watt, in breach of those directors' duties, caused the group of pharmacies that he had negotiated to bring into the franchising arrangements, to leave the respondents' franchising operations, inducing them to breach their contracts. As counsel for the respondents properly conceded, those matters all would have been known to the respondents from, at least, the inception of the litigation. That being the case, some explanation was called for as to why the previous solicitors did not raise that claim and why it had taken until over a year after the engagement of Logie-Smith Lanyon for these matters to come to light.
57 The inference presented on the evidence (or its absence) is that the respondents were not really actively progressing their defence and cross-claim or seeking to advance the serious issues that their existing pleadings agitated, including claims for the recovery of over $4.5 million. Any party who seeks genuinely to recover millions of dollars, even with the dramatic effects of the pandemic that the whole community has experienced over 2020, is not likely to sit on their hands for the length of time that has expired here without some reason or explanation.
58 In my opinion, the respondents' default is egregious and unexplained. Their conduct indicates an unwillingness to comply with the Court's orders in a timely or appropriate way so as to achieve the overarching purpose, as was their duty under s 37N of the Federal Court Act. Having required an explanation for the default on 3 February 2021, I received one in the email of 4 February 2021 as the basis for making consent orders that gave the respondents the extension they sought to 2 April 2021.
59 I am comfortably satisfied that the respondents have had every proper opportunity in which to put their evidence on in a timely way and to advance their case. I reject the respondents' argument that no further delay will be caused if they are allowed the extension of time and amendment that they seek. If I were to grant the amendment to the cross-claim, new parties would be brought into the proceeding who are not already joined. No doubt each of them will have their own defence and possible cross-claim to make, which will further protract and delay the proceeding from being heard. The extension of time that I granted at the beginning of this year again delayed the time at which this proceeding would be ready to be heard. The ability of parties to recall accurately what occurred in the past is obviously continuing to be impacted by the delays and, if the respondents are allowed to amend the cross-claim, they will expand the scope of the proceeding, albeit that I accept that some of it will be narrowed in relation in the Australia Capital Territory franchises.
60 There must come a point when a party's default, unexplained as it is in this case by any proper or adequate evidence, will attract the consequences that s 37P(5) and (6) contemplate. In my opinion, it is not in the interests of justice to grant, first, an extension of time in which the respondents can serve their outlines of evidence or, secondly, leave to amend the cross-claim. It is clear that the respondents are not prosecuting the proceeding in an appropriately diligent way.
61 For these reasons, I will order that the defence and cross-claim be struck out, and that the cross-claim be dismissed. I will also order that the interlocutory application filed on 14 May 2021 be dismissed. The parties should have an opportunity to address on whether or not, based on the case pleaded in the statement of claim and the absence of a defence, the applicants are entitled to any of the relief which they seek or to judgment and, if so, in what amount. I will order that the respondents pay the applicants and cross-respondents' costs of the interlocutory application. I will reserve the costs of the proceeding.