Mango Boulevard Pty Ltd v Spencer
[2007] QSC 276
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- Unreported Judgment
- Mango Boulevard Pty Ltd v Spencer[2007] QSC 276
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Mango Boulevard Pty Ltd v Spencer[2007] QSC 276
Mango Boulevard Pty Ltd v Spencer[2007] QSC 276
SUPREME COURT OF QUEENSLAND
CITATION: | Mango Boulevard P/L v Spencer & Ors [2007] QSC 276 |
PARTIES: | MANGO BOULEVARD PTY LTD (ACN 101 544 601) |
FILE NO/S: | BS1999 of 2006 |
DIVISION: | Trial Division |
PROCEEDING: | Application |
DELIVERED ON: | 4 October 2007 |
DELIVERED AT: | Supreme Court, Brisbane |
HEARING DATE: | 28 June 2007 |
JUDGE: | Wilson J |
ORDER: | The application is dismissed |
CATCHWORDS: | PROCEDURE – SUPREME COURT PROCEDURE – QUEENSLAND – PROCEDURE UNDER RULES OF COURT – JUDGMENTS AND ORDERS – RELIEF AGAINST – a self-executing order was made requiring the applicants to provide disclosure in a specified way by a specific date – in the event of failure to comply with the order, parts of the defence were struck out and judgment was entered on the counterclaim – the applicants seek relief from the operation of that order, under r 7 or r 668 of the Uniform Civil Procedure Rules – whether to grant relief Uniform Civil Procedure Rules 1999 (Qld) s 7, s 668 Arrow Nominees Inc v Blackledge[2000] All ER (D) 854, followed FAI General Insurance Company Limited v Southern Cross Exploration NL (1988) 165 CLR 268, followed IVI Pty Ltd v Baycrown Pty Ltd [2006] QCA 461, cited |
COUNSEL: | I R Perkins for the applicants/first and second defendants J K Bond SC and T Bradley for the respondent/plaintiff |
SOLICITORS: | TressCox Lawyers for the applicants/first and second defendants Minter Ellison for the respondent/plaintiff |
- Wilson J: By an application filed on 8 May 2007 the applicants/first and second defendants seek relief against a self-executing order made by the Chief Justice on 3 April 2007. The application is made under r 668 or alternatively r 7 of the Uniform Civil Procedure Rules 1999 (Qld).
Background
- The third defendant is the owner of a valuable parcel of land at Mango Hill adjacent to North Lakes which it acquired by a contract which was completed in 2004.
- When the contract was made in May 2002 the first and second defendants held all of the shares in the third defendant and were its only directors. On or about 4 July 2003 the first and second defendants entered into two agreements with the plaintiff –
- The Share Sale Agreement by which they sold 50% of the shareholding in the third defendant to the plaintiff; and
- The Shareholders Deed which contained certain provisions allowing the shareholders to acquire the other shareholders’ shares in certain circumstances.
- In about January 2006 the first and second defendants were considering mortgaging their shares to raise finance. They raised with the plaintiff the matter of its consent under the provisions of the Shareholders Deed. The plaintiff indicated it would refuse to give consent. When the consent was formally sought, it was refused. The first and second defendants allege that the refusal was unreasonable and in breach of the Shareholders Deed.
- In about February 2006 the plaintiff gave the first and second defendants notices of default under the Shareholders Deed based on their inability to pay their debts.
- The present proceeding was commenced on 9 March 2006. The plaintiff alleges that as at 22 February 2006 the first and second defendants were in default under the Shareholders Deed in that they were unable to pay their debts, that the plaintiff followed the contractual process and was accordingly entitled to acquire their shares in accordance with that process. The plaintiff particularised the first and second defendants’ inability to pay their debts by reference to ten specific debts owed to creditors. The debts totalled some $15,391,199 of which $2,278,610 was alleged to be owed pursuant to unsatisfied judgments in respect of monies payable under guarantees, and the balance were alleged to be owed pursuant to guarantees.
- In their defence the first and second defendants denied that they were unable to pay their debts as at 22 February 2006 and asserted positively that as at the date of their pleading (namely 1 June 2006) they were not in default under the Deed in any respect.
- By counterclaim the first and second defendants alleged that the plaintiff was the party in default under the Deed, that they had complied with the relevant procedure and had acquired the plaintiff’s shares, and that the plaintiff by its defaults (and by other breaches of duty) had caused them loss.
Non-disclosure
- The first and second defendants failed to comply with their obligations in relation to disclosure. Orders were made against them by Justice Atkinson on 21 November 2006 and Justice Byrne on 20 March 2007. Then on 3 April 2007 the Chief Justice ordered –
- disclosure by preparation of lists of documents in a particular form and with respect to particular categories of documents and delivery of copies of those documents; and
- that in the absence of compliance by 4.00 pm on 27 April 2007, upon the plaintiff filing a solicitor’s affidavit to that effect, the paragraphs of the defence denying default be struck out, the entirety of the counterclaim be struck out, and there be judgment for the plaintiff on the counterclaim with costs.
Non-compliance
- The first and second defendants did not comply with the order by 4.00 pm on 27 April 2007. There was some partial compliance later that evening.
- On 30 April 2007 the plaintiff’s solicitors filed an affidavit by Melinda Lee Smith, a solicitor in their employ, in accordance with the self-executing provision of the Chief Justice’s order, identifying various continuing aspects of non-disclosure.
- Thereafter there were various piecemeal attempts at compliance. The plaintiff filed the present application on 8 May 2007. There were further piecemeal attempts at compliance after it was filed. At the hearing on 28 June 2007 counsel for the first and second defendants conceded that compliance was still not complete. He submitted that the first and second defendants had by then come close to complete compliance, but senior counsel for the plaintiff submitted that they still had a long way to go.
Applicable principles
- As counsel for the plaintiff submitted, where a party has defaulted in its disclosure obligation, the appropriate focus is the effect of impugned conduct on the fairness of the trial itself. In Arrow Nominees Inc v Blackledge[1] Chadwick LJ said –
“I adopt, as a general principle, the observations of Mr Justice Millett in Logicrose Ltd v Southend United Football Club Limited (The Times, 5 March 1988) that the object of the rules as to discovery is to secure the fair trial of the action in accordance with the due process of the Court; and that, accordingly, a party is not to be deprived of his right to a proper trial as a penalty for disobedience of those rules – even if such disobedience amounts to contempt for or defiance of the court – if that object is ultimately secured, by (for example) the late production of a document which has been withheld.
But where a litigant’s conduct puts the fairness of the trial in jeopardy … or where it amounts to such an abuse of the process of the court as to render further proceedings unsatisfactory and to prevent the court from doing justice, the court is entitled – indeed I would hold bound – to refuse to allow that litigant to take further part in the proceedings and (where appropriate) to determine the proceedings against him. The reason, as it seems to me, is that it is no part of the court’s function to proceed to trial if to do so would give rise to a substantial risk of injustice. The function of the court is to do justice between the parties; not to allow its process to be used as a means of achieving injustice. A litigant who has demonstrated that he is determined to pursue proceedings with the object of preventing a fair trial has forfeited his right to take part in a trial. His object is inimical to the process which he purports to invoke.
Further, in this context, a fair trial is a trial which is conducted without an undue expenditure of time and money; and with a proper regard to the demands of other litigants upon the finite resources of the court. The court does not do justice to the other parties to the proceedings in question if it allows its process to be abused so that the real point in issue becomes subordinated to an investigation into the effect which admittedly fraudulent conduct of one party in connection with the process of litigation has had on the fairness of the trial itself.”
- The Court clearly has jurisdiction to relieve against the consequences of a self-executing order either under r 7 or under r 668.
- Rule 7 provides –
“(1) The court may, at any time, extend a time set under these rules or by order.
(2) If a time set under these rules or by order, including a time for service, has not ended, the court may shorten the time.”
- In FAI General Insurance Company Limited v Southern Cross Exploration NL[2] Wilson J (with whom Brennan, Deane and Dawson JJ agreed) said of a rule cognate to r 7 that it is to be regarded as a remedial provision conferring on a court a broad power to relieve against injustice, but manifestly a power to be exercised with caution and, in the case of self-executing orders, with due regard to the public policy centred in the finality of litigation and the principle that orders are made to be observed. See also Singh v Starkey.[3]
- Rule 668 provides –
“(1) This rule applies if –
- facts arise after an order is made entitling the person against whom the order is made to be relieved from it; or
- facts are discovered after an order is made that, if discovered in time, would have entitled the person against whom the order is made to an order or decision in the person’s favour or to a different order.
(2) On application by the person mentioned in subrule (1), the court may stay enforcement of the order against the person or give other appropriate relief.
(3) Without limiting subrule (2), the court may do one or more of the following –
(a) direct the proceedings to be taken, and the questions or issue of fact to be tried or decided, and the inquiries to be made, as the court considers just;
(b) set aside or vary the order;
- make an order directing entry of satisfaction of the judgment to be made.”
- This applies to facts which arise after the making of the order and to facts in existence when the order was made but discovered after it was made. As Mackenzie J said in IVI Pty Ltd v Baycrown Pty Ltd[4] –
“In the case of facts which arise after the order is made, the question is whether they entitle a person against whom the order was made to be relieved from it (r 668(1)(a)). In the case of facts discovered after an order is made, the question is whether, if discovered in time, they would have entitled the person against whom the order has been made to either an order or a decision in the person’s favour, or a different order from that made (r 668(1)(b)).”
- At the hearing counsel for the first and second defendants submitted that I might vary the order by deleting the whole of the self-execution provision or, for example, deleting only that part which dealt with the counterclaim so leaving the guillotine order striking out the denial of insolvency.
- The first and second defendants relied on “new” facts, summarised (accurately in my view) by counsel for the plaintiff as –
- their attempts at compliance with the order after the time fixed by it;
- their assertion that disclosure was very extensive and that their defective disclosure would cause no forensic prejudice to the plaintiff; and
- their assertion of certain obstacles making it more than usually difficult strictly to comply with the order.
I shall address these new facts shortly.
The extent of non-compliance as at the hearing on 28 June 2007
- Each of the first and second defendants was ordered to serve a list of documents in particular categories and in four schedules as follows –
- In the first schedule each was required to list all of the identified documents “that are in [his or her] possession or under [his or her] control” (noting any claim of privilege).
- In the second schedule each was required to list the identified documents that he or she “has had, but does not now have, in [his or her] possession or under [his or her] control, stating when each document was last in [his or her] possession or under [his or her] control, the circumstances in which it passed out of [his or her] possession or control and where, to the best of [his or her] knowledge and belief the document may now be found”.
- In the third schedule each was required to list any of the identified documents “that [he or she] has never had in [his or her] possession or under [his or her] control, stating whether to the best of [his or her] knowledge and belief the document ever existed and, if so, where [it] may now be found”.
- In the fourth schedule each was required to list “any of the [identified documents] in respect of which [he or she] asserts [there is] no obligation to disclose”.
- The plaintiff’s first complaint is that the lists of documents delivered since the order –
- do not comply with the requirement that they be made by reference to the “identified Spencer documents” and the “identified Perovich documents” but rather simply list a hodge-podge of documents and pay no regard to listing documents within each of the four schedules by reference to the specific categories nominated in the order;
- ignore the requirements underlined in sub-paras (b) and (c) of the preceding paragraph.
There is substance in this complaint.
- There are helpful schedules attached to the plaintiff’s written submissions[5] identifying documents by reference to the respective paragraphs of the order and their description, and then listing in columns (like a Scott schedule) purported compliance with the order, the nature of any non-compliance, the respective defendant’s response to the assertion of non-compliance and finally comments by the plaintiff. By the time of the hearing the remaining non-compliance related to the following categories of documents specified in the order –
Spencer: Para 3(h), 3(e), and 3(n); and
Perovich: Para 6(e).
I shall deal with each in turn.
- Spencer para 3(h): Bank account statements for any part of the period 22 February 2006 – 1 June 2006. The complaint relates to the absence of bank account statements in relation to specified mortgages over properties held in the names of the first defendant and his wife. The first defendant refused to disclose these bank statements on the basis that the mortgages relate to properties he held on trust and he is no longer the trustee.[6] However, the unchallenged evidence is that he and his wife are still registered proprietors of those properties – that he is still a mortgagor. He is still personally liable on the mortgages. That the existence of such a trust relationship, whether in the past or the present, could affect his disclosure obligation is absurd, particularly when taken by the first defendant who is a solicitor of 24 years’ standing. His solicitors had advised that they would be reviewing matters in relation to which he had contended documents should not be disclosed, and if after giving advice they were instructed disclosure should be made of schedule 4 documents an amended position would be taken.[7] That is a quite inadequate response to the disclosure obligation, and the Chief Justice’s order.
- Spencer para 3(e). Documents evidencing the liabilities in respect of “Loans” listed in the Statement of Assets and Liabilities disclosed by the first defendant dated 22 February 2006 and 1 June 2006, including records of advances, repayments and interest accruals. The plaintiff has had a number of complaints about the first defendant’s response to this paragraph of the order. By the time of the hearing some of those complaints had been answered. There was an outstanding complaint about failure to disclose documents relating to loan transactions with AMP and Home Loans Ltd. The first defendant had placed loan statements in schedule 4. He said they related to properties in Warwick of which he and his wife were registered as joint tenants. He said that they had held the properties as trustees but he had ceased to be a trustee of the relevant trust in 2005.[8] This is a similar argument to the one taken in relation to paragraph 3(h), and it similarly has no substance. There was a complaint that he had not provided documents relating to “other liabilities”. He made the same ineffectual response.[9] Finally, he said the copies of five mortgage documents which he had executed in respect of real property of which he was a registered proprietor might be in the possession of his wife or solicitors acting for his wife.[10] He had not disclosed them. He did not depose to making any inquiries of his wife or her solicitors about the documents since his duty to disclose arose. In short, his response is quite inadequate.
- Spencer para 3(n): Documents relating to any legal or beneficial interest in any real property and/or relating to the disposal of the same, held or disposed of during the period from 22 February 2006 to 1 June 2006. Again the first defendant contended that he did not have an obligation to disclose these documents because he is no longer a trustee.[11] Again, the argument is untenable.
- Perovich 6(e): Documents evidencing the liabilities in respect of “Liberty”, “Guarantor Liabilities” and “Loans” listed in the Statements of Assets and Liabilities disclosed by the second defendant dated 22 February 2006 and 2 June 2006, including records of advances, repayments and interest accruals. The second defendant swore an affidavit on 28 June 2007 deposing (inter alia) to the absence of documents beyond those already disclosed in relation to certain named creditors. However, as at the hearing she had still not disclosed documents relating to properties in Victoria which she jointly owned with her brother. Her explanation as to the circumstances in which her brother was having difficulty in locating documents[12] was quite inadequate.
- This is not the occasion for an examination of the minutiae of documents which ought to have been disclosed and those which have been disclosed. It was conceded at the hearing that disclosure was still incomplete.[13] A broad examination of the categories in which the plaintiff asserts that disclosure is still not complete and of the first and second defendants’ responses to the plaintiff’s complaints leads me to the view that the first and second defendants’ response to the self-executing order has been casual and their attempts at compliance desultory.
Prejudice
- Counsel for the first and second defendants submitted that his clients’ disclosure had been very extensive and that their defective disclosure would not cause forensic prejudice to the plaintiff. I cannot accept this submission.
- In consequence of the first and second defendants’ non-compliance with the self-executing order, the issues on the plaintiff’s claim are very narrow – the construction of the Shareholders Deed and the exercise of the discretion in relation to declaratory relief. If the self-executing order were set aside, the issue of their solvency would again be a live one on the claim. It would also be relevant to the counterclaim, in that the plaintiff alleges that the first and second defendants were themselves in default and so not entitled to issue a default notice against it. The first and second defendants’ response to their disclosure obligations so far provides no basis for confidence that they would meet those obligations fully if the self-executing order were set aside or varied. The plaintiff would be prejudiced in the litigation by incomplete disclosure.
Obstacles to disclosure
- The first and second defendants rely on a number of circumstances which they say affected their efforts to comply with the self-executing order, such as their attempt to comply with another request for disclosure made by the plaintiff about a fortnight after the self-executing order was made and requiring the copying of about 1,300 documents and the delivery of them to the plaintiff’s solicitors by 26 April 2007, a breakdown in their photocopying equipment, and pressure to make an application to withdraw admissions. Those matters may well be some explanation, but not an excuse, for failure to comply by 4.00 pm on 27 April 2007. However, they carry very little weight in all of the circumstances.
Conclusion
- This is an application to relieve against the consequences of non-compliance with a self-executing order. Two months passed between the making of that order and the hearing of the application. Compliance was still incomplete, and the explanations relied upon were, as counsel for the plaintiff submitted, quite lame. Whether the application be considered as one to extend time under r 7 or one under r 668, the same factors inform the exercise of the discretion. The first and second defendants’ response to the self-executing order has been such as to put the fairness of a trial in jeopardy. I decline to extend time for compliance with the self-executing order, or to vary it in any respect.
- In all the circumstances the application is dismissed.
Footnotes
[1] [2000] All ER (D) 854, [54]-[55].
[2] (1988) 165 CLR 268, 283.
[3] [1999] QCA 279.
[4] [2006] QCA 461, [41].
[5] Document 65 on the court file.
[6] See column 5 (“First Defendant’s Response”) to the schedule annexed to the plaintiff’s written submissions, p 25; affidavit of R W Spencer, filed 19 June 2007, [9].
[7] See column 6 (“Comments”) to the schedule annexed to the plaintiff’s written submissions, p 25.
[8] Affidavit of R W Spencer, filed 19 June 2007, [9].
[9] Affidavit of R W Spencer, filed 19 June 2007, [10(f)].
[10] See column 5 (“First Defendant’s Response”) to the schedule annexed to the plaintiff’s written submissions, p 17.
[11] Affidavit of R W Spencer, filed 19 June 2007, [19].
[12] Affidavit of S Perovich, filed 19 June 2007, [9].
[13] Transcript of the hearing, p 12.