Westall Wholesale Fruit & Vegetables Pty Ltd (In Liquidation) v Mountakis

DAVIES J: 1 These proceedings were commenced by the applicants on 2 November 2020 and subsequently listed for a first case management hearing on 11 December 2020. At the time of the first case management hearing, the originating process documents had not been served on the respondents due to difficulties in effecting personal service. The Court made substituted service orders and listed the proceeding for a further case management hearing on 5 February 2021 at 9.30 am. The respondents were served with the originating process documents in accordance with the Court's orders. 2 The applicants have applied for default judgment against the respondents pursuant to r 5.23(2)(c) of the Federal Court Rules 2011 (Cth) (the Rules) which provides: If the respondent is in default, an applicant may apply to the Court for: … (c) if the proceeding was started by an originating application supported by a statement of claim or an alternative accompanying document referred to in r 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; 3 Rule 5.22 of the Rules specifies when a party is in default: A party is in default if the party fails to: (a) do an act required to be done, or to do an act in the time required, by these Rules; or (b) comply with an order of the Court; or (c) attend a hearing in the proceeding; or (d) prosecute or defend the proceeding with due diligence. 4 The applicants rely on the failure of the respondents to attend at the case management hearing on 5 February 2021. The relevant legal principles to apply in an application pursuant to r 5.23(2)(c) of the Rules were conveniently set out in a recent decision of Yates J in Chamberlain Group, Inc v Giant Alarm System Co, Ltd (No 2) [2019] FCA 1606 at [13]-[14]: 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. R 5.23(2)(c) requires the Court to be satisfied that the applicant is entitled to the relief claimed in the statement of claim. This requirement has been interpreted as meaning that the Court must be satisfied that "on the face of the statement of claim" the applicant is entitled to the relief that is claimed. It is not a requirement that the applicant prove its claim by way of evidence. Put another way, the facts alleged in the statement of claim are taken to have been admitted: Australian Competition and Consumer Commission v Dataline.Net.Au Pty Ltd [2007] FCAFC 146; 161 FCR 513 at [42]. If, on inspection of the statement of claim, the Court is satisfied that the applicant would be entitled to the relief sought then this requirement of r 5.23(2)(c) will be met: CNIP Pty Ltd v Chan & Naylor Norwest Pty Ltd (No 2) [2011] FCA 1170 at [18] - [19]; Speedo Holdings B.V. v Evans (No 2) [2011] FCA 1227 at [23]. The Court may permit further evidence to be adduced, but not evidence that would alter the pleaded case: Australian Competition and Consumer Commission v Dataline.Net.Au Pty Ltd [2006] FCA 1427; 236 ALR 665 at [45], [48] - [50]; United Broadcasting International Pty Ltd v Turkplus Pty Ltd (No 2) [2010] FCA 1413 at [42] - [44]; Australian Competition and Consumer Commission v Yellow Page Marketing BV (No 2) [2011] FCA 352; 195 FCR 1 at [62] - [63]. 5 I am satisfied that judgment in default should be entered against the respondents. First, I am satisfied on the basis of the affidavits of service that the respondents have been served with the originating process documents. Secondly, the documents served on the respondents included the order of the Court made on 11 December 2020 adjourning the proceeding to a further case management hearing on 5 February 2021 at 9.30 am. The respondents have not filed a notice of appearance, they did not appear at the case management hearing and did not provide a reason to the Court as to why they would not be in attendance. The respondents, by their defaults, have not prosecuted their defence and have indicated that they do not intend to participate in the proceedings or cooperate with the conduct of the proceeding. In the circumstances, I am satisfied that this is an occasion where it is appropriate for the Court to consider exercising its power under r 5.23(2)(c) to give judgment against the respondents. Thirdly, I am satisfied on the face of the statement of claim and the affidavit of Gess Michael Rambaldi sworn 29 October 2020 (also served on the respondents) that the applicants are entitled to the relief claimed against the respondents. 6 The second applicants are the liquidators of Westall Wholesale Food and Vegetables Pty Ltd (in liquidation) (the Company) and have sued the respondents for recovery of monies on a number of causes of action arising out of the liquidation of the Company. 7 As against the first respondent, it is alleged that she was, at all material times, the sole director, shareholder and secretary of the Company. It is also alleged that the Company was insolvent from at least 1 September 2017. The causes of action upon which the first respondent is sued are: (a) a claim that the first respondent received various payments of money from the Company between 25 February 2019 and 13 March 2019 totalling $31,126, which were uncommercial transactions of the Company pursuant to s 588FB of the Corporations Act 2001 (Cth) (the Act), insolvent transactions of the Company pursuant to s 588FC of the Act and unreasonable director related transactions of the Company pursuant to s 588FDA(1) of the Act and accordingly voidable against the Company pursuant to s 588FE(2), (3), (4) and (6A) of the Act. (b) a claim of breach of loan agreement, alleging that financial statements of the Company for the financial year ending 30 June 2018 disclose that the first respondent has an outstanding beneficiary loan account, resulting in an amount owing to the Company by the first respondent in the amount of $111,475, which the first respondent has failed to repay; (c) a claim of misappropriation of $11,125 from the sale proceeds of a Holden motor vehicle previously owned by the Company; (d) a claim for insolvent trading, alleging that between the date of insolvency and the date of appointment of the liquidators, the first respondent caused the Company to incur debts in the aggregate sum of $193,184.62, for which the applicants can obtain relief pursuant to s 588M(2) of the Act. 8 As against the second respondent, who is the spouse of the first respondent, it is alleged that the he entered into an agreement to purchase a motor vehicle from the Company for $10,500 and that the agreement was a voidable transaction for the purposes of s 588FDA(1)(b) of the Act and voidable pursuant to s 588FE(6A) of the Act. Alternatively, it is alleged that the second respondent is in breach of the agreement, for non-payment of the consideration for the transfer of the vehicle and as a result of the breach, the Company has suffered loss and damage in the amount of $10,500. I certify that the preceding eight (8) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Davies.