Wu v Avin Operations Pty Ltd (ACN 076 956 913) [2006] FCA 36 (3 February 2006)

PRACTICE AND PROCEDURE – application for summary judgement – O 35A, Federal Court Rules – respondents in default for failure to defend the proceeding with due diligence – appropriate relief in the circumstances – indemnity costs

Federal Court Rules O 35A rr 2(2)(d) and (h), O 35A rr 3(2)(b) and (e)

Australian Securities Commission v Macleod (1994) 54 FCR 309 distinguished
Lenijamar Pty Ltd v AGC (Advances) Ltd (1990) 27 FCR 388 applied
Cadbury Schweppes Pty Ltd v Darrell Lea Chocolate Shops Pty Ltd [2004] FCA 1718 followed
KM & A Chadwick Pty Ltd v Yeung [1995] FCA 354 referred to
Australian Finance Group Ltd v Accent Financial Group Pty Ltd [2005] FCA 66 referred to
Arthur v Vaupotic Investments Pty Ltd [2005] FCA 433 followed
Australian Competition and Consumer Commission v 1 CellNet LLC [2005] FCA 856 followed
Australian Competition and Consumer Commission v Albert [2005] FCA 1311 followed
Deisel Spa v Hwang [2005] FCA 1619 followed

JUN XUE WU v AVIN OPERATIONS PTY LTD (ACN 076 956 913), BARRY ARMITAGE, CHRISTOPHER JAMES ARMITAGE, JOAN DOROTHY ARMITAGE AND ASIA PACIFIC COATING PTY LTD (ACN 089 840 728)

VID 372 OF 2003

KENNY J
3 FEBRUARY 2006
MELBOURNE

IN THE FEDERAL COURT OF AUSTRALIA
VICTORIA DISTRICT REGISTRY	VID 372 OF 2003

BETWEEN:	JUN XUE WU APPLICANT
AND:	AVIN OPERATIONS PTY LTD (ACN 076 956 913) FIRST RESPONDENT BARRY ARMITAGE SECOND RESPONDENT CHRISTOPHER JAMES ARMITAGE THIRD RESPONDENT JOAN DOROTHY ARMITAGE FOURTH RESPONDENT ASIA PACIFIC COATING PTY LTD (ACN 089 840 728) FIFTH RESPONDENT
JUDGE:	KENNY J
DATE OF ORDER:	3 FEBRUARY 2006
WHERE MADE:	MELBOURNE

Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

IN THE FEDERAL COURT OF AUSTRALIA
VICTORIA DISTRICT REGISTRY	VID 372 OF 2003

BETWEEN:	JUN XUE WU APPLICANT
AND:	AVIN OPERATIONS PTY LTD (ACN 076 956 913) FIRST RESPONDENT BARRY ARMITAGE SECOND RESPONDENT CHRISTOPHER JAMES ARMITAGE THIRD RESPONDENT JOAN DOROTHY ARMITAGE FOURTH RESPONDENT ASIA PACIFIC COATING PTY LTD (ACN 089 840 728) FIFTH RESPONDENT

1 Before the Court is an application for summary judgment brought pursuant to the former O 10 r 8 of the Federal Court Rules 1979 (Cth) ("the Rules") against the first and second respondents. The applicant, Jun Xue Wu, made this application by a notice of motion filed on 4 August 2004, which was part-heard on various dates until 27 April 2005. By her motion, Ms Wu seeks:

The circumstances attending the motion have changed over time. For the following reasons, I would not make the orders in the terms sought in the applicant’s motion, although I would order that (1) the first and second respondents pay Ms Wu’s costs forthwith, on an indemnity basis, such costs to be taxed; (2) these respondents pay the taxed costs within 14 days from the service of a certificate of taxation; and (3) in default of such payment, Ms Wu have leave to enter judgment against them for $334,000 and interest thereon.

2 Ms Wu filed her application and statement of claim on 9 May 2003. By her statement of claim, she alleges, amongst other things, that the first to fifth respondents breached ss 51AA, 52 and 53 of the Trade Practices Act 1974 (Cth) ("the TPA") and ss 7, 9, 11 and 12 of the Fair Trading Act 1999 (Vic) ("the FTA"), or were knowingly concerned in such breaches. It is unnecessary to refer to the other causes of action that she asserts. She seeks declaratory relief and damages.

3 Her statement of claim makes the following factual allegations. She maintains that Barry Armitage (the second respondent) was the director of Avin Operations Pty Ltd ("Avin") (the first respondent), father to Christopher Armitage (the third respondent), husband to Joan Armitage (the fourth respondent) and a former director of Asia Pacific Coating Pty Ltd (the fifth respondent). She alleges that, on or about 22 July 1997, she conducted negotiations with Barry and Christopher Armitage concerning a proposed investment of $334,000 by her in Avin. She further alleges that the second and third respondents represented that, if she invested monies in Avin, then (1) she would become a "joint-owner" and "partner" in Avin; (2) she would be repaid the money at the end of a two-year period commencing 25 July 1997; (3) she would assume a management role in the day-to-day running of Avin’s business; (4) Avin was a successful company that would be able to repay the loan; (5) Barry Armitage was a registered migration agent and a lawyer skilled in migration matters; (6) Barry Armitage would be able to fill in the forms for permanent residence and Australian citizenship for her and act on her behalf in respect of these applications; and (7) upon investing the money and assuming a management role in the business, she would be eligible to obtain permanent resident status and Australian citizenship.

4 Ms Wu maintains that, pursuant to an agreement made on 25 July 1997 between her and Avin, she lent the sum of $334,000 to Avin. She says that the first and fifth respondents used the loan monies for their own purposes and that, despite her requests, she has not been repaid. She alleges that (1) none of the respondents intended that she would become a partner or co-owner, with a management role as represented; (2) Avin’s business was not profitable and the company was unable to repay the loan to her; (3) Barry Armitage was neither a registered migration agent nor a lawyer skilled in migration matters; (4) Barry Armitage did not assist her as he represented he would; and (5) she has not been granted permanent residence or Australian citizenship.

5 By their defence, the respondents state that the fifth respondent was wound up by order of the Supreme Court on 17 September 2003. Barry Armitage admits that, on or about 22 July 1997, he engaged in negotiations with Ms Wu, assisted by Ms Minnie Xia, concerning a proposal to invest some $175,000 in Avin. Avin and Barry, Christopher and Joan Armitage otherwise deny Ms Wu’s claims. They say that there were negotiations with a Mr Gu to invest a like amount in the company; and that Ms Wu and Mr Gu invested $325,082.07 in Avin pursuant to agreements made with them. They also say that this agreement gave Ms Wu the option of withdrawing her investment by giving 3 months’ notice at any time for up to 2 years from the date of her contribution and she did not exercise the option. They allege that the communications with Ms Wu were entirely through Ms Xia, who advised Barry Armitage that they had arranged to take all documents to a Chinese speaking lawyer in Melbourne and that they had visited this lawyer.

6 Ms Wu’s application for judgment is based on a claim that there is a history of delay and non-compliance with the Court’s orders by Avin and Barry Armitage. Accordingly, the procedural background of this case is relevant to Ms Wu’s application.

7 As already noted, Ms Wu filed her application and statement of claim on 9 May 2003. On 12 and 14 August 2003, she filed notices of motion seeking an order for substituted service of the originating process on Barry and Joan Armitage. On 12 August 2003, Ms Wu filed affidavits sworn by the process servers Michael Barnett, John Ioannou, Steve Vlachos, Fotios Karamouratidis and Raymond Smith. In these affidavits, the process servers claimed that, despite their best efforts, they were unable to serve these two respondents. Mr Vlachos affirmed that he was able to serve Christopher Armitage by placing a sealed copy of the application and statement of claim under the windscreen wiper of his vehicle while he was stopped at traffic lights. There were also other affidavits filed in support of the motion.

8 On 20 August 2003, the Court made an order for substituted service. On 12 September 2003, all but Christopher Armitage filed a notice of appearance. Christopher Armitage filed a notice of conditional appearance (which was followed by a regular notice of appearance on 8 October 2003). Joseph Guss, solicitor, then represented the respondents.

9 As indicated, on 17 September 2003, the fifth respondent was wound up by order of the Supreme Court of Victoria. This proceeding was stayed against it by virtue of s 471B of the Corporations Act 2000 (Cth).

10 On 8 October 2003, the remaining respondents filed a defence. Also on that day, the parties, through their legal representatives, appeared before a Registrar of this Court for directions. The Registrar ordered that the parties exchange lists of discoverable documents by 10 November 2003; that inspection be completed by 24 November 2003; and that the matter be referred to mediation by 19 December 2003, with costs reserved. On 12 November 2003, Ms Wu filed her list of documents. The remaining respondents failed to comply with the Registrar’s orders relating to discovery.

11 On 1 December 2003, Ms Wu filed a notice of motion, returnable on 16 December 2003, seeking orders that the respondents file and serve their lists of documents. On 15 December 2003, Christopher and Joan Armitage filed lists of documents. On 16 December 2003, a Registrar ordered, by consent, that:

• the first to fourth respondents file and serve lists of documents by 15 January 2004;

• the first to fourth respondents pay Ms Wu’s costs of the application dated 1 December 2003 fixed in the sum of $768, with such costs to be paid within 7 days;

12 Between 16 January 2004 and 4 February 2004, the parties’ solicitors exchanged correspondence concerning the respondents’ apparent failure to produce their discovered documents for inspection and to make good the outstanding costs order of 16 December 2003. On 9 February 2004, Ms Wu filed another notice of motion seeking orders that the first to fourth respondents file and serve lists of documents.

13 The notice of motion was listed for hearing on 18 February 2004. On that day, Avin and Barry Armitage filed their list of documents. The following orders were also made:

• the first and second respondents pay Ms Wu’s costs of the motion, to be taxed in default of agreement; and

Ms Wu, with her solicitor and counsel, attended the mediation on 24 February 2004 and so did the respondents’ solicitor, Joseph Guss. None of the respondents appeared personally. Ultimately, the mediation did not take place on that date by reason of the ill health of Barry Armitage.

14 On 4 March 2004, at a directions hearing, a Registrar ordered, amongst other things, that Avin and Barry Armitage provide further discovery as to documents listed as 153 and 154 in their lists of documents. The document listed as 153 is Avin’s accounts and statutory records. The document listed as 154 is the file kept by Barry Armitage in respect of Ms Wu’s application for an Australian visa and her alleged investment in Avin. On 24 March 2004, Barry Armitage filed an affidavit stating that document 153 was "mistakenly removed by a waste paper removalist with various other papers and records" and that he believes the documents have been destroyed. Barry Armitage deposed that he was unable to locate document 154.

15 Between 4 March 2004 and 9 June 2004, Ms Wu was unsuccessful in her attempts to inspect the respondents’ discovered documents. From 5 March 2004 until 8 April 2004, her solicitor sent numerous letters to the respondents’ solicitor, Mr Guss, requesting an opportunity to inspect the documents. On 14 April 2004, Mr Guss filed a document, through the registry, purporting to remove him as the solicitor acting on behalf of the respondents. Ms Wu’s solicitors then attempted to contact the respondents directly. By a letter dated 21 April 2004, Barry Armitage informed Ms Wu’s solicitors that he was "unable to facilitate" the inspection of documents because the relevant documents "are located at the office of Joseph Guss".

16 On 9 June 2004, the matter came on for directions. Ms Wu’s solicitor appeared on her behalf. The respondents did not appear, although Ms Wu’s solicitor informed the Court that she had received a telephone call from a woman who stated that she was the daughter of Barry and Joan Armitage and that her parents were in Newcastle attending to her grandfather. On that day, the Court made orders providing that:

• inspection of the respondents’ documents was to take place on or by 23 June 2004;

• Avin and Barry Armitage were to inform Ms Wu’s solicitor of the place for inspection and other relevant arrangements on or by 21 June 2004; and

• Avin and Barry Armitage were to ensure that the documents were available for inspection by Ms Wu until 21 July 2004.

Ms Wu served these orders by mailing them on 11 June 2004 to the respondents’ address for service, but she was unable to inspect the respondents’ discovered documents pursuant to this order.

17 On 4 August 2004, Ms Wu filed the notice of motion that is the subject of these reasons. The motion was listed before a Registrar, who, after a short hearing on 11 August 2004, adjourned the matter to 23 August 2004. On 23 August 2004, Ms Wu, represented by her solicitor, and Avin and Barry Armitage, represented by Ms Fregan of counsel, appeared before the Registrar. The Registrar referred the motion to me. Ms Fregan advised that she was instructed by solicitors who expected to act in the matter on the respondents’ behalf. This expectation was not fulfilled.

18 The motion was subsequently heard on 13 October 2004, 8 December 2004, and 27 April 2005.

19 On 13 October 2004, the respondents appeared by counsel who informed the Court that he was instructed by Geoffrey Grantham & Associates. On this day, the Court adjourned the hearing of the motion to 8 December 2004, to enable the respondents to take steps to have a subpoena issued against the respondents’ former solicitor to obtain documents relevant to the proceeding. The Court also ordered, amongst other things, that Geoffrey Grantham & Associates or any other solicitors retained by the respondents were to give notice that they acted for the respondents by noon on 14 October 2004. No notice was given. Instead, by letter dated 18 October 2004, Geoffrey Grantham & Associates informed the Court that they had no instructions to act for any of the respondents.

20 The Court further adjourned the hearing of the motion on 8 December 2004, 17 December 2004 and 28 January 2005, pending the resolution of issues arising under the subpoena.

21 On 3 December 2004, George Liberogiannis and Associates went on the record as the solicitor for Barry, Christopher and Joan Armitage. Also on 3 December 2004, Barry Armitage was granted leave to file a subpoena to be served on his former solicitor, Mr Guss. On the return of the subpoena on 10 December 2004, the Armitages’ solicitor did not appear. The Registrar adjourned the matter until 23 December 2004.

22 On 23 December 2004, Mr Guss appeared before a Registrar on the return of the subpoena. The Registrar ordered, amongst other things, that any party wishing to inspect the documents produced under subpoena should contact the Registry on three days’ notice and that the reasonable costs of production of the documents be paid by the respondents and taxed in default of agreement. On that same day, Ms Wu, through her solicitor, wrote to the Registry requesting that a description of the documents and things produced under the subpoena be provided; that the documents remain on the court file until the final hearing; and that she have leave to inspect the documents produced. The subpoena was not finally discharged against Mr Guss until 16 February 2005.

23 Mr Guss did not produce all of the documents listed in the subpoena, saying, on oath, that he was unable to locate anything other than those produced. The produced documents were, for the most part, copies of correspondence passing between Mr Guss and his clients and file notes of attendances. The respondents claim legal professional privilege in respect of many of them. Ms Wu has not challenged their claims.

24 Mr Liberogiannis appeared at the adjourned hearing on 27 April 2005, seeking leave to withdraw as the solicitor on the record. He gave sworn evidence that, notwithstanding his numerous calls to their cell phones and place of residence, Barry and Christopher Armitage had failed to keep appointments with counsel arranged for them and to provide him with instructions for the conduct of the matter. On the basis of his evidence, I gave Mr Liberogiannis leave to withdraw. On 28 April 2005, George Liberogiannis and Associates filed a notice of solicitor ceasing to act, stating that the firm no longer represented Barry and Christopher Armitage.

25 By a letter dated 18 January 2005, Ms Wu’s solicitors indicated that, at an adjourned hearing on 28 January 2005, they would seek an order that Barry Armitage pay her costs in an amount of over $9,000; and, in default of payment, that his defence be struck out. At the parties’ request, as already indicated, this hearing was subsequently adjourned to 27 April 2005, in order that matters arising under the subpoena could be concluded.

26 Ms Wu relied on seven affidavits from her solicitor, Ms Anna Maria Krycer. They were affirmed at various stages of these proceedings. Ms Wu also relied upon an affidavit sworn by herself on 30 November 2004 and an affidavit from Ms Hairong Xia sworn on 26 November 2004. Ms Wu and Ms Xia’s affidavits support Ms Wu’s claims. It is unnecessary to set out their contents.

27 The respondents relied on three affidavits of Barry Armitage, an affidavit of Christopher Armitage and an affidavit of Joan Armitage. The respondents also relied on two affidavits from their former solicitor, Mr George Liberogiannis and an affidavit of Avin’s former bookkeeper, Ms Helen Saldeneri. The affidavits of Christopher and Joan Armitage and Helen Saldeneri contest the claims made by Ms Wu against the respondents. It is also unnecessary to set out their contents.

28 In essence, Ms Krycer’s affidavits review the procedural history discussed above and outline her efforts to inspect the respondents’ documents. She referred to extensive correspondence between her and Mr Guss and between her and Barry Armitage. This correspondence (exhibits to her affidavits) reveals a lengthy pattern of delay on the part of Mr Guss and the respondents.

29 Ms Krycer’s evidence is that, on 21 November 2003 - that is, three days before the lists of documents were first due - Mr Guss informed her that the respondents were unable to complete the list of documents because Barry Armitage was still searching for documents. Later, after the respondents were ordered to produce their list of documents by 15 January 2004, Mr Guss told Ms Krycer that he had mistakenly thought that the list was due on 30 January 2004. As noted above, Avin and Barry Armitage produced their list of documents only after Ms Krycer filed a second notice of motion seeking production.

30 Ms Krycer’s third to seventh affidavits outline her extended efforts to obtain inspection of Avin’s and Barry Armitage’s discovered documents. Ms Krycer sent numerous letters to Mr Guss seeking inspection. After Mr Guss filed his notice of ceasing to act on 14 April 2004, Ms Krycer contacted the respondents directly. As can be seen from the procedural history outlined above, her efforts were not successful, although Ms Krycer has now had access to some of these documents by way of the subpoena directed to Mr Guss.

31 Barry Armitage’s first affidavit was filed on 23 August 2004 in defence of the notice of motion before the Court. He deposes to various personal matters which resulted in him having no knowledge of the notice of motion until 10 August 2004 (the motion being originally returnable on 11 August 2004) and no knowledge of the adjourned hearing date (29 August 2004) until 20 August 2004.

32 Barry Armitage’s evidence is that he was unable to comply with the order of 9 June 2004 because he and the other respondents were in a dispute with Mr Guss. He deposes that the discovered documents are no longer in his custody or power. He states that, by providing Ms Wu’s solicitors with the address of Mr Guss, he has done all he can to facilitate inspection.

33 In an affidavit of 12 October 2004, Barry Armitage also deposes to having no knowledge of Ms Krycer’s "difficulties in dealing with Mr Guss" in relation to arranging for inspection of the discovered documents. He deposes to suffering from "a severe non-operable cardiac myopathy ... that prevents [him] from full and regular attention to [his] affairs". His evidence is that he is no longer a director or other officer of Avin, and has no authority to make any representations on its behalf.

34 By his first affidavit, Barry Armitage also seeks to have the notice of motion struck out for having allegedly been filed "in the full knowledge of the inability of the Respondents to provide access to the documents" and that all costs should be costs in the cause.

35 In his third affidavit, Barry Armitage deposes to the outcome of the subpoena issued by Mr Liberogiannis, on his instructions, calling on Mr Guss to produce his discovered documents to the Court. His evidence was that, on 23 December 2004, Mr Guss produced certain of the discovered documents but failed to produce all of them.

36 Barry Armitage also addressed the affidavits of Ms Wu and Ms Xia. It is sufficient to note that Barry Armitage denies the claims and contests Ms Wu and Ms Xia’s evidence. He states he has never falsely represented to Ms Wu matters concerning her proposed investment in Avin and that all undertakings given concerning the investment have been fulfilled. According to him, Avin’s "business failure" was "unexpected and caused by various unforeseen factors". Barry Armitage said that Ms Wu failed in her application for a business skills (residence) (class BH) visa because of matters within her own responsibility and control.

37 On 16 February 2005, Mr Liberogiannis filed an affidavit regarding the documents produced by Mr Guss on subpoena. His evidence was that Mr Guss did not produce all the documents listed in the list of documents provided by Avin and Barry Armitage. His assessment was that Mr Guss produced only correspondence and instructions passing between him and the respondents. Mr Liberogiannis also prepared a list of the documents produced by Mr Guss on subpoena over which legal professional privilege is claimed. I have already referred to Mr Liberogiannis’s evidence in court on 27 April 2005.

38 The parties’ submissions were largely made prior to the discharge of the subpoena served on Mr Guss, although the solicitors for Ms Wu and the Armitages filed affidavits concerning the return of the subpoena and Mr Castelan of counsel made both written and oral submissions for Ms Wu.

39 The principal submissions for Ms Wu were that (1) Avin and Barry Armitage were in breach of orders of the Court and, in particular, the order of 9 June 2004 for inspection; (2) there was a history of non-compliance on the respondents’ part with the Court’s orders sufficient to display a determination not to cooperate with the Court in preparing the matter for trial; and (3) she is entitled to judgment for the liquidated sum of $334,000 pursuant to O 35A r 3 of the Rules.

40 In written submissions dated 7 December 2004, it was submitted for Ms Wu that she had been "forced" to take steps to progress the preparation of the case by bringing numerous motions before the Court. She also cited the following instances as indicative of the first and second respondents’ uncooperative attitude:

• Service: the applicant was "forced" to bring an application to the Court for an order for substituted service.

• Discovery: the applicant was "forced" to bring "two separate applications seeking orders that the First to Fourth Respondents provide their Lists of Documents". The First to Fourth Respondents were in breach of two separate court orders (of 8 October 2003 and 16 December 2003) for the provision of these lists.

• Inspection: the applicant was "forced" to bring on this current notice of motion because the "Respondents have refused to make available the Documents for inspection, despite orders by the Court on 8 October 2003, 16 December 2003 and 9 June 2004"

• Absence of subpoena: on 23 August 2004 and 13 October 2004, it was made clear in open court that the Court considered that it was open to the respondents to serve a subpoena on their previous solicitor to produce the discovered documents to the Court and, as at the hearing on 8 December 2004, no such step had been taken.

• Mediation: the respondents personally did not attend the mediation, although their solicitor did.

• Status of the First Respondent: Barry Armitage resigned as the sole director of Avin on 23 August 2004 and there has been no replacement.

• Varying legal representation of the respondents: Since Mr Guss ceased to act for them, "the modus operandi of the Respondents has been to engage a solicitor to brief Counsel to appear on several one-off occasions whenever this matter got to the doorstep of the Court. On each of these occasions, the solicitor who briefed Counsel has not filed a Notice of Solicitor Acting for the Respondents". There was no appearance for the respondents on 9 June 2004 and 11 August 2004. As previously noted, Ms Fregon of counsel appeared on 23 August 2004, stating that she was instructed (by Bailey Timms Hansen & Rossis). On 13 October 2004, Mr Baker of counsel appeared, stating that he was instructed by Geoffrey Grantham & Associates. Neither firm became solicitors on the record.

Also in these written submission, Ms Wu submitted that her own affidavit and the affidavit of Minnie Xia proved sufficient evidence of the facts on which she relied to make out her causes of action.

41 In oral submissions, counsel for Ms Wu reiterated that the respondents’ conduct in the proceeding showed a determination on their part not to cooperate in preparing the matter for trial. Counsel submitted that the first and second respondents remained in breach of the order of 9 June 2004.

42 On 8 December 2004 (when the respondents were represented by counsel) and on 27 April 2005, counsel for Ms Wu sought orders that Ms Wu have leave to enter judgment against the first and second respondents for $334,000 and interest; alternatively, indemnity costs and a self-executing order in the event of non-compliance with any such costs order.

43 The respondents did not appear on 27 April 2005, although Mr Liberogiannis did attend court in the circumstances already noted. Prior to 27 April 2005, counsel for the Armitages had submitted that they have cooperated with the Court in preparing for trial and that the application for summary disposition depended on their failure to give inspection, but that they had in fact done all they could to facilitate inspection. He also said that the bulk of the respondents’ discovered documents were known to Ms Wu.

44 Counsel had noted that the Armitages’ defence denies each of Ms Wu’s pleaded claims, except that she invested some $175,000 in Avin (for whom counsel did not have instructions to appear). On this basis, all facts relied on by Ms Wu were in contention.

45 Further, counsel for the Armitages had submitted that the Rules required direct evidence of the facts alleged in the statement of claim before the court could dispose of the matter summarily. In all the circumstances, counsel had contended that this matter would be more appropriately dealt with by a "stringent costs order" at trial.

46 The motion before the Court originally sought orders pursuant to O 10 r 8. This rule was repealed with effect from 30 August 2004 by the Federal Court Amendment Rules (No 4) 2004 (Cth) and a new O 35A was introduced in its stead. Counsel for Ms Wu made it clear that she now relied on O 35A. Nothing turns on the reference in the motion to the former O 10 r 8.

48 Order 35A of the Rules collects together all the provisions relating to the Court’s procedures on default, including the former O 10 r 8. Order 10 r 8, which was introduced by the Federal Court Amendment Rules 2001 (No 3), elaborated on an existing power under Order 10 r 7. This rule provided that, if a party had failed to comply with an order of the Court directing the party to take a step in the proceeding, any other party could move the Court on notice for an order that the proceeding be stayed or dismissed as against an applicant in default, or for judgment or an order against a respondent in default.

49 In Lenijamar Pty Ltd v AGC (Advances) Ltd (1990) 27 FCR 388 ("Lenijamar"), Wilcox and Gummow JJ considered the nature of the Court’s power when a party is in default. Although Lenijamar concerned the former O 10 r 7, certain of their Honours’ observations can be applied to O 35A: Cadbury Schweppes Pty Ltd v Darrell Lea Chocolate Shops Pty Ltd [2004] FCA 1718 ("Cadbury Schweppes") at [22]-[23] per Ryan J. As with O 35A, the power given by the former O 10 r 7 is conditioned only upon the failure of the party to comply with an order of the Court directing that party to take a step in the proceeding. There is no requirement of intentional default or contumelious conduct, or of inordinate and inexcusable delay, or of prejudice to the other party: Lenijamar at 395-396. These are, however, usually important factors to be weighed in the exercise of the discretion. Further, the power conferred on the Court must be "administered sensibly and with an appreciation both of the fact that some delays are unavoidable, and unpredictable ... and of the likely serious consequences to [the party in default]": Lenijamar at 396.

50 In Lenijamar, Wilcox and Gummow JJ also observed that, while it was undesirable to make any exhaustive statement of the circumstances in which the power granted by O 10 r 7 would be appropriately exercised, there were two obvious candidates for such exercise: "cases in which the history of non-compliance ... is such as to indicate an inability or unwillingness to co-operate with the Court and the other party or parties in having the matter ready for trial within an acceptable period and cases ... in which the non-compliance is continuing and occasioning unnecessary delay, expense or other prejudice to the [other party]": Lenijamar at 396.

51 When applying these principles, the Court must balance the need for the expeditious conduct of litigation, particularly in a court committed to a case management system, and the "the strong reluctance of courts to prevent litigants having a proper opportunity to present their cases": KM & A Chadwick Pty Ltd v Yeung [1995] FCA 354 per Tamberlin J. Ms Wu’s motion must also be considered in light of the other powers of the Court to sanction non-compliance, such as the use of costs orders.

52 The history of this matter is troubling. The first and second respondents have been in default numerous times in the course of this proceeding. They filed their first lists of discoverable documents on 18 February 2004, over three months after the original deadline and over a month after orders by consent that they be filed by 15 January 2004. Moreover, these lists were filed only after Ms Wu brought two motions for compliance. Subsequent to this, Ms Wu has been required to take extraordinary steps to secure inspection of documents.

53 In addition, it is clear that Ms Wu has been frustrated by other action, or inaction, by these respondents, even if not amounting to non-compliance with court orders. The application for substituted service, the initial failure to seek to have a subpoena issued to Mr Guss, the failure of the respondents personally to attend mediation, the resignation of Barry Armitage from office in Avin, and the frequent changes in legal representation are matters that have undoubtedly caused Ms Wu vexation and have made the conduct of litigation more difficult than it would otherwise have been. Having regard to their conduct, I find that the first and second respondents have failed to defend the proceeding with due diligence. They are therefore in default for the purposes of O 35A r 2(2)(h) of the Rules.

54 Despite this conclusion and the unsatisfactory history of the proceeding, I would not at this stage make orders precisely in the terms of the present motion. Instead, pursuant to O 35A r 3(2)(e), I would order that judgment for $334,000 and interest thereon against the first and second respondents be given under O 35A r 3(2)(c) if the first and second respondents do not comply with the costs order that I propose to make (see below). I would not order that judgment be entered without more because, following the return of the subpoena directed to Mr Guss, there remains no continuing and unexplained default on the respondents’ part. If Barry Armitage’s evidence is accepted, there is nothing more the respondents can do to facilitate inspection of documents. Although Mr Guss did not produce all of the documents the subject of the subpoena, Barry Armitage has affirmed that the remaining documents remain in Mr Guss’ custody. Ultimately, the credibility (or lack thereof) of Barry Armitage’s claims regarding these and like matters will be an issue for trial: see Australian Finance Group Ltd v Accent Financial Group Pty Ltd [2005] FCA 66 at [33] per Nicholson J. Whether he is believed or not is likely to have other consequences for this litigation.

55 I note too that there may be circumstances that partly explain the delays. These circumstances include the ill health of Barry Armitage and of a family member and the disturbance caused by changes in legal representation. Moreover, although the respondents have needed repeated prompting by Ms Wu’s solicitor, they have filed their defence, various affidavits responding to Ms Wu’s claims and lists of discoverable documents. They have mostly participated in court hearings and they were represented at the mediation by their solicitor. Barry Armitage ultimately took steps to have a subpoena issued to Mr Guss, in order that Ms Wu have access to the first and second respondents’ discovered documents.

56 In these circumstances, any prejudice caused to Ms Wu can, at this stage, be met by an appropriate costs order, subject to an entitlement to enter judgment in the event of non-compliance with such an order. Plainly enough, this is not to condone the delay occasioned by Avin and Barry Armitage; and this is not an invitation to them to continue to litigate this matter in the unsatisfactory manner they have thus far done. As indicated below, it is appropriate that they pay Ms Wu’s costs of the motion on an indemnity basis; and, since they are in fact in default, that there be orders of the kind contemplated by O 35A r 3(2)(e). I also note that there is again apparently no solicitor on the record. The repeated last-minute retainer of solicitor and counsel to is mischievous since it militates against the efficient conduct of the litigation. The evidence of Mr Liberogiannis about the Armitages’ failure to cooperate with their legal advisers is concerning. Nothing in these reasons would preclude Ms Wu from bringing fresh notices of motions for summary judgment upon further breaches of court orders.

57 The respondents contended that Ms Wu’s application should fail because she failed to provide legally admissible evidence of all the facts necessary to substantiate her entitlement to the relief claimed. Under the former O 10 r 7, an applicant was required to file proof by way of evidence of his or her claims when seeking judgment: see Australian Securities Commission v Macleod (1994) 54 FCR 309 at 312-313 per Drummond J. Under the new O 35A r 3, it now seems that reliance may be placed on the allegations in the relevant statement of claim. Judges of the Court have held that the rule does not require proof by way of evidence of the applicant’s claim, but that on the face of the statement of claim there is a claim for the relief sought and that the court has jurisdiction to grant that relief: see Arthur v Vaupotic Investments Pty Ltd [2005] FCA 433 at [3] per Heerey J; Australian Competition and Consumer Commission v 1 CellNet LLC [2005] FCA 856 at [14] per Nicholson J; Australian Competition and Consumer Commission v Albert [2005] FCA 1311 at [6]--[7] per Jackson J and Deisel Spa v Hwang [2005] FCA 1619 at [2] per Tamberlin J. Having read the statement of claim, I find that these conditions are satisfied. Accordingly, the motion does not fail because of an insufficiency of evidence showing entitlement to relief claimed.

58 As indicated above, I am not prepared to make the order that Ms Wu principally seeks because, although the first and second respondents have failed to defend the proceeding with due diligence, there is no continuing and unexplained failure to comply with an extant order and, having regard to the nature of the case, including the respondents’ defence and supporting affidavits, I do not consider that it is in the best interests of justice to deny them the chance of defending themselves against the serious allegations made by Ms Wu.

59 It is clear, however, that Ms Wu’s conduct in filing the motion on 4 August 2004 was appropriate. There had by then been considerable delay in providing inspection. The second respondent took steps to have the subpoena issued to Mr Guss only after the motion was part heard. Plainly enough, the first and second respondents should pay the costs of the motion.

60 Counsel for Ms Wu has sought costs on an indemnity basis. Although costs in this Court are ordinarily awarded on a party and party basis, this is a case in which indemnity costs are justified. In Re Wilcox; Ex parte Venture Industries Pty Ltd (No 2) (1996) 72 FCR 151 at 156-157, Cooper and Merkel JJ said that, in order to exercise its discretion as to costs judicially: (a) the court ought not to depart from the usual party and party basis for costs unless this was warranted by the circumstances of the case; and (b) these circumstances arise "as and when the justice of the case so requires or where there may be some special or unusual feature in the case to justify the court in departing from the usual course". In this case, the first and second respondents have repeatedly failed to comply with the orders of this Court; and Ms Wu’s motion for summary judgment was precipitated by these recurring violations. Further, as already stated, the first and second respondents’ conduct (e.g., the last minute and short-term retainer of legal representatives, the failure to take steps promptly to have a subpoena issued to Mr Guss, the failure to cooperate with their own legal advisers and/or to attend court) delayed the hearing of the motion and increased the costs associated with it. In these circumstances, it is appropriate that Ms Wu should be indemnified for all reasonable costs incurred in relation to this motion.

61 Further, having regard to the first and second respondents’ conduct to date and to the fact that they are in default, I would, as already indicated, order, pursuant to pursuant to O 35A r 3(2)(c) and (e), if the first and second respondents do not pay these costs, as taxed in accordance with these orders, within 14 days from the service of a certificate of taxation upon them, then there be judgment against the first and second respondents for $334,000 and interest thereon.

I certify that the preceding sixty-one (61) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Kenny.

Counsel for the Applicant:	J Castelan

Solicitor for the Applicant:	Pryles & Co

Counsel for the Respondent:	George Liberogiannis

Solicitor for the Respondent:	George Liberogiannis & Associates

Date of Hearing:	27 April 2005

Date of Judgment:	3 February 2006

JUDGE:	KENNY J
DATE:	3 FEBRUARY 2006
PLACE:	MELBOURNE

Federal Court of Australia

Wu v Avin Operations Pty Ltd (ACN 076 956 913) [2006] FCA 36 (3 February 2006)