FEDERAL COURT OF AUSTRALIA

Carey v Freehills [2014] FCA 788

Citation: Carey v Freehills [2014] FCA 788

Appeal from: Carey v Freehills [2013] FCA 954

Parties: NORMAN PHILLIP CAREY and others named in the attached schedule v FREEHILLS

File number: VID 1350 of 2013

Judge: WHITE J

Date of judgment: 31 July 2014

Catchwords: PRACTICE AND PROCEDURE – application to set aside dismissal of appeal – appeal dismissed for want of prosecution and failure to comply with direction of the Court – principles relevant to power to set aside dismissal – whether adequate explanation provided for procedural defaults – utility in setting aside dismissal

Legislation: Federal Court Rules 2011 (Cth) rr 1.61, 17.01, 36.03, 36.09, 36.53, 36.74Federal Court of Australia Act 1976 (Cth) ss 25, 37M, 37N, 56

Cases cited: Billinudgel Pastoral Co Pty Ltd v Westpac Banking Corporation (Unreported, Federal Court of Australia, Cooper J, 27 March 1998)Bishopsgate Insurance Australia Ltd (in liq) v Deloitte Haskins and Sells [1999] 3 VR 863Cosdean Investments Pty Ltd v Football Federation Australia Ltd (No 3) [2007] FCA 766Dye v Commonwealth Securities Ltd [2012] FCA 992Idoport Pty Ltd v National Australia Bank Ltd [2002] NSWSC 18Microbio Resources Inc v Betatene Ltd (Unreported, Federal Court of Australia, Black CJ, Sheppard and Einfeld JJ, 8 October 1993)Pannu v Minister for Immigration and Citizenship (No 2) [2013] FCA 1406SZCOZ v Minister for Immigration and Citizenship [2007] FCA 641SZCZF v Minister for Immigration and Citizenship [2009] FCA 208

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SZISM v Minister for Immigration and Citizenship [2007] FCAFC 61; (2007) 158 FCR 292

Date of hearing: 15 May 2014

Place: Adelaide

Division: GENERAL DIVISION

Category: Catchwords

Number of paragraphs: 73

Counsel for the Appellants: Mr A Schlicht

Solicitor for the Appellants: Metaxas & Hager

Counsel for the Respondent: Mr D A Klempfner

Solicitor for the Respondent: Colin Biggers & Paisley Lawyers

IN THE FEDERAL COURT OF AUSTRALIA

VICTORIA DISTRICT REGISTRY

GENERAL DIVISION VID 1350 of 2013

ON APPEAL FROM THE FEDERAL COURT OF AUSTRALIA

BETWEEN: NORMAN PHILLIP CAREY and others named in the attached scheduleAppellants

AND: FREEHILLSRespondent

JUDGE: WHITE J

DATE OF ORDER: 31 JULY 2014

WHERE MADE: ADELAIDE

THE COURT ORDERS THAT:

1. The appellants’ application of 7 May 2014 be dismissed.

Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

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IN THE FEDERAL COURT OF AUSTRALIA

VICTORIA DISTRICT REGISTRY

GENERAL DIVISION VID 1350 OF 2013

ON APPEAL FROM THE FEDERAL COURT OF AUSTRALIABETWEEN:

NORMAN PHILLIP CAREY and others named in the attached schedule

AND:

FREEHILLS

JUDGE: WHITE J

DATE: 31 JULY 2014

PLACE: ADELAIDE

REASONS FOR JUDGMENT

1 On 20 September 2013, Kenny J dismissed the appellants’ cross-claim against Freehills:

Carey v Freehills [2013] FCA 954; (2013) 303 ALR 445. The appellants lodged an appeal

against that dismissal on 13 December 2013.

2 On 28 April 2014, North J ordered that the appeal be dismissed: Carey v Freehills [2014]

FCA 451. However, at the same time, North J granted the appellants leave to apply to have

the order of dismissal set aside. On 7 May, the appellants applied to have the order for

dismissal set aside.

3 The circumstances of the case are unusual. I consider that the application should be refused.

My reasons for that conclusion follow.

Background

4 The first appellant is Mr Carey. He founded a group of companies known as the Westpoint

Group, and, at relevant times, controlled their activities. In the proceedings at first instance,

each of the 26 appellants, being Mr Carey and 25 members of the Westpoint Group,

claimed, by way of cross-claim, damages from the solicitors, Freehills (now Herbert Smith

Freehills), in respect of alleged negligence, breaches of retainer and misleading or deceptive

conduct.

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5 As indicated, the appellants’ cross-claim for damages wholly failed. On 13 December 2013,

the appellants filed an appeal against the dismissal of their claim. That was outside the 21

day period fixed by r 36.03 of the Federal Court Rules 2011 (Cth) (FCR), but Freehills

consented to an extension of time for the commencement of the appeal.

6 On 4 February 2014, Marshall J made an order that the appeal be heard in the Full Court

sittings to be held in May. In accordance with the usual practice, Marshall J also made orders

with respect to the time of filing outlines of submissions and for the filing of Part C of the

appeal book. Later, on 13 March 2014, the National Appeals Registrar of this Court advised

the parties that the appeal would be heard in Melbourne on 15 and 16 May 2014.

7 By an application filed on 19 February 2014, Freehills sought an order securing their costs on

the appeal. That application was heard on 1 April 2014. Marshall J gave his decision that

same day (Carey v Freehills [2014] FCA 325) and made orders that:

1. On or before 17 April 2014, the appellants give security for the respondent’s costs of the appeal in the sum of $148,000 in a form acceptable to the Victoria District Registrar of the Court.

2. Failing compliance with order 1, the appeal is stayed, subject to further order.

8 The appellants did not provide any security for costs as required by the order of Marshall J.

The effect of the order of Marshall J was that the further pursuit of the appeal was then

stayed.

9 The last day for the provision of the security ordered by Marshall J was 17 April 2014. That

was the Thursday before the four day Easter break. On Tuesday, 22 April 2014, that is, the

Tuesday immediately following the Easter break, Freehills filed an interlocutory application

seeking the dismissal of the appeal in its entirety; alternatively, the dismissal of the appeal

brought by each of the corporate appellants; and alternatively again, the dismissal of the

appeal brought by those appellants who were said to have been deregistered. That

application was served on the appellants the same day. On the following day, namely,

Wednesday, 23 April 2014, the appellants were informed that the application would be heard

by North J on Monday, 28 April 2014 at 10.15am.

10 The appellants’ solicitors sought to have that hearing vacated on the ground that the

appellants had insufficient time to prepare for the hearing. Amongst other things, they

pointed out that the public holiday on Anzac Day (25 April) meant that they had, in effect,

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only a little over one working day for preparation and that r 17.01(2) of the FCR entitled

them to at least three days between service of the interlocutory application and the hearing.

Having regard to r 1.61(3), those three days were not to include the three days of the Anzac

Day long weekend. North J refused to vacate administratively the hearing scheduled for

28 April.

11 The appellants were represented by counsel at the hearing on 28 April. Counsel sought an

adjournment of the hearing in view of the short notice and told North J that the appellants

wished to file a further affidavit deposing to the steps they were taking to provide the security

for costs ordered by Marshall J. Counsel for Freehills opposed the grant of an adjournment.

North J did not rule on that application expressly. Instead, after hearing submissions from the

parties regarding Freehills’ application of 22 April, North J ordered that:

1. The time between the filing and the hearing of this application be abridged to allow for the hearing on this day.

2. Subject to order 3, the appeal is dismissed with costs.

3. The Appellants have leave to file an application, by 5 May 2014, supported by an affidavit, to set aside order 2.

4. The Appellants pay the Respondent’s costs of the interlocutory application filed on 22 April 2014.

12 As can be seen, rather than adjourning the hearing because of the short notice, North J made

an order abridging the time so as to allow the application to be heard on 28 April. His

Honour then dismissed the appeal with costs but coupled that dismissal with a grant of leave

to the appellants to apply, by 5 May 2014, to have the order of dismissal set aside.

13 The appellants did not need the Court’s leave to file an application seeking to have the order

for dismissal set aside. Order 3 is perhaps better understood as an order limiting the time

within which the appellants could bring their application.

14 The appellants filed that application on 7 May. I made an order extending the time fixed by

North J to that date.

The jurisdiction of this Court

15 In seeking to have the order of dismissal set aside, the appellants invoke s  25(2B)(bc) of the

Federal Court of Australia Act 1976 (Cth) (the FCA Act). Section 25(2B) provides

(relevantly):

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A single Judge (sitting in Chambers or in open court) or a Full Court may:

…

(ab) make an interlocutory order pending, or after, the determination of an appeal to the Court; or

…

(ba) make an order that an appeal to the Court be dismissed for want of prosecution; or

(bb) make an order that an appeal to the Court be dismissed for:

(i) failure to comply with a direction of the Court; or

(ii) failure of the appellant to attend a hearing relating to the appeal; or

(bc) vary or set aside an order under paragraph (ab), (ba) or (bb); or

…

16 As can be seen, the power of this Court under subs (2B)(bc) is confined to the variation or

setting aside of orders made under subpars (ab), (ba) and (bb). Relevantly, for present

purposes, those are orders of the Court dismissing an appeal for want of prosecution or for

failure to comply with a direction of the Court. Subsection (2B)(2c) does not expressly vest

the Court with jurisdiction to vary or set aside an order dismissing an appeal because of an

appellant’s failure to provide security for costs in accordance with an order of the Court,

although such a failure may be encompassed by subs (2B)(bb)(i).

17 This makes it necessary to identify the basis upon which North J dismissed the appeal.

Freehills’ interlocutory application filed on 22 April indicated that it was made pursuant to

ss 25(2B) and/or 56(4) of the FCA Act and rr 36.09(1)(c) and/or 36.74 of the FCR.

18 The relevant parts of s 25(2B) have already been quoted. Section 56 of the FCA Act

empowers the Court to order an applicant or an appellant to give security for the payment of

costs that may be awarded against them. Subsection (4) provides for the consequences of a

failure to provide the ordered security:

(4) If security, or further security, is not given in accordance with an order under this section, the Court or a Judge may order that the proceeding or appeal be dismissed.

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19 Rules 36.09 and 36.74 provide two circumstances in which the Court may dismiss an appeal

without a substantive hearing. Rule 36.09, which concerns security for costs of an appeal,

provides:

(1) A party may apply to the Court for an order that:

(a) the appellant give security for the costs of the appeal, and for the manner, time and terms for giving the security; and

(b) the appeal be stayed until security is given; and

(c) if the appellant fails to comply with the order to provide security within the time specified in the order—the appeal be stayed or dismissed.

(2) An application under subrule (1) must be accompanied by an affidavit stating the facts in support of the application.

Rule 36.74, which provides for the consequences of certain failures by appellants in relation

to appeals, states:

(1) A respondent may apply to the Court for an order that the appeal be dismissed for the failure by an appellant to do any of the following:

(a) comply with a direction of the Court;

(b) comply with these Rules;

(c) attend a hearing relating to the appeal;

(d) prosecute the appeal.

(2) An application under subrule (1) must be served on the appellant:

(a) at the appellant’s address for service; or

(b) personally.

20 Accordingly, Freehills’ application of 22 April sought to invoke the Court’s powers to

dismiss an appeal for failure to provide the ordered security for costs (s 56(4) of the FCA Act

and r 36.09(1)(c) of the FCR) and the Court’s powers to dismiss an appeal for want of

prosecution or on account of an appellant’s failure to comply with procedural requirements

(s 25(2B)(ba) and (bb) of the FCA Act, and r 36.74 of the FCR).

21 North J noted at [3] that Freehills sought the dismissal of the appeal because the security for

costs had not been provided, because the appellants had failed to comply with the Court’s

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directions, and because of a want of prosecution of the appeal. These were also the matters

on which North J relied for his decision:

12 It is noteworthy that the solicitor for the appellants has not addressed the reasons for the defaults in compliance with the steps necessary for the preparation of the appeal. But Mr Schlicht, who appeared as counsel for the appellants, contended that the periods of the defaults have not been gross or excessive. Nonetheless, the accumulation of the defaults, taken with the failure to pay security and the tenuous basis upon which it appears that the funds necessary for security could be raised by the appellants, suggests that there is not a genuine and real intention to prosecute the appeal on substantial grounds.

13 An appeal should not be dismissed lightly, but on the other hand, where the facts indicate a disinclination of the appellant to proceed with the appeal, that step should not be resisted.

…

15 It is appropriate to grant the respondent an abridgement of time for the hearing of this application, given the facts presently outlined. However, it is not possible to say at this stage that the appellants do not have matters of substance to raise, although it appears doubtful that they do have matters of substance to raise. Justice is therefore best served by making an order that the appeal be dismissed, but also by giving the appellants the opportunity within a short period to apply to set aside this order on further material.

16 The appeal should be dismissed, but with leave granted to the appellants to apply to set that order aside.

(Emphasis added)

22 These passages indicate that the principal reason for the dismissal was the conclusion of

North J that the appellants did not have “a genuine and real intention to prosecute the

appeal”. Underpinning this conclusion were the appellants’ procedural “defaults”, their

perceived “disinclination” to proceed with the appeal, and their failure to provide the ordered

security. This is evident in pars [4], [12] and [13] of his Honour’s reasons. In [4], North J

noted that the basis for Freehills’ application lay in four separate defaults. The first three of

those defaults were procedural defaults to which I will refer shortly. The fourth was a

procedural default of a different kind. It was the circumstance that 10 of the appellants (the

fourth, fifth, 10th, 11th, 13th, 15th, 17th, 19th, 20th and 25th) had been deregistered after

Kenny J delivered her judgment and were not therefore proper appellants in any event.

23 North J did refer to the failure to provide security in four passages: first, at [2], in

summarising the factual background; secondly, at [3], in summarising Freehills’ application;

thirdly, at [11], in noting the appellants’ application for an adjournment of the hearing; and

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lastly, at [12], in identifying a matter adding to the significance of the accumulation of

procedural defaults.

24 Accordingly, it seems that the principal reasons for the dismissal of the appeal were the

appellants’ procedural defaults and their failure to prosecute the appeal appropriately. Their

failure to provide security for costs in accordance with the order of Marshall J on 1 April was

a matter bolstering those reasons. The fact that North J did not rule on the appellants’

application for an adjournment, in order to have the opportunity to put on further material

regarding their attempts to provide security, confirms to my mind that this is an appropriate

analysis.

25 I conclude therefore that North J was exercising the Court’s power under s 25(2B)(bb)(i) of

the FCA Act and, to a lesser extent, the Court’s power under s 25(2B)(ba). The appellants’

failure to provide security formed part of their failure to comply with a direction of the Court

for the purposes of s 25(2B)(bb)(i). This means that the appellants’ present application can

be regarded as having been brought under s 25(2B)(bc).

26 In relation to the 10 deregistered appellants, North J also dismissed the appeal brought by

them on the basis (in effect) that their appeals were incompetent: at [14]. Section 25(2B)(bc)

does not vest the Court with power to set aside dismissals made on that basis. However, this

does not create a difficulty as, although the interlocutory application of 7 May was

purportedly brought on behalf of those appellants also, counsel accepted that this was

inappropriate and informed the Court that the application to set aside was not pursued in

respect of the deregistered appellants.

The exercise of the power to set aside

27 Normally, an application to set aside or vary an order of the Court is heard by the same judge

who made the order. Considerations of efficiency and comity indicate that that should be so.

However, North J indicated a difficulty in his hearing the application and, in that

circumstance, the Chief Justice assigned the hearing of the application to a different judge.

28 The nature of the Court’s power under s 25(2B)(bc) was considered by the Full Court in

SZISM v Minister for Immigration and Citizenship [2007] FCAFC 61; (2007) 158 FCR 292

(Black CJ, Weinberg and Allsop JJ). An issue in that case was whether the power in

subpar (bc) could be exercised after the orders of the Court had been entered. That limitation

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on the exercise of the power was rejected. In doing so, the Full Bench made some

observations concerning the power to set aside which are pertinent presently (at 297-8):

18 The clear purpose of s 25(2B)(ba), (bb) and (bc) is the efficient dispatch of Court business. Parties who do not prosecute an appeal, who fail to comply with a direction of the Court or who fail to attend relevant hearings face dismissal of their appeal for such conduct, without a hearing. Section 25(2B)(bc) can be seen as providing a safeguard to ensure that any injustice resulting from the invocation of s 25(2B)(bb) can be rectified. …

…

20 Section 25(2B)(bc) is the grant to the Court of a power in general terms. As a rule provisions conferring judicial power on a court should be construed liberally and without the making of implications or the imposition of limitations not found in the words used by Parliament: … In our view, to construe s 25(2B)(bc) as limited to orders not entered would not only infringe this principle, but would also bring arbitrariness and the potential for injustice to the operation of a provision that was intended to act as a safeguard for the confident exercise of a summary procedural power. Such an intention of Parliament is unlikely.

Their Honours’ view that subpar (bc) should be seen as providing a safeguard against

injustice resulting from summary dismissal of the appeal is to be noted. It has been followed

in a number of subsequent cases, including SZCZF v Minister for Immigration and

Citizenship [2009] FCA 208 at [11].

29 It is appropriate to recognise some other aspects of subpar (bc). It vests the Court with a

discretion in the defined cases to set aside or vary a previous order: not a jurisdiction to

review a previous decision as though on appeal. This means that the Court is not necessarily

concerned with the correctness or otherwise of the order sought to be set aside, and an order

which was correct when it was made may nevertheless be set aside. However, the

identification of an error in the order itself or in the reasons leading to the order may well be

significant in informing the exercise of the discretion.

30 Secondly, although the power of a Court to set aside a previous order is to be construed

liberally, the exercise of the power is a different matter. Several authorities indicate that

powers such as those contained in subpar (bc) are to be exercised with caution: SZCOZ v

Minister for Immigration and Citizenship [2007] FCA 641 at [3]-[4]; Pannu v Minister for

Immigration and Citizenship (No 2) [2013] FCA 1406 at [5]-[6]. The public interest in the

finality of litigation is an important consideration, but it is relevant to keep in mind that s

25(2B)(bc) is concerned with finality resulting from the summary disposal of appeals in

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circumstances of apparent default: SZISM v Minister for Immigration and Citizenship at [19],

297-8.

31 The appellants submitted that in determining the application to set aside, the Court should

have primary regard to the matters which usually inform the exercise of the Court’s discretion

to extend the time in which security for costs previously ordered may be provided and the

exercise of the Court’s power to dismiss proceedings in consequence of a party’s failure to

provide the ordered security. Counsel referred to authorities in which, before proceedings

were dismissed by reason of a failure to provide the ordered security, litigants had been given

an extension of time in which to provide the security. These were: Microbio Resources Inc v

Betatene Ltd (Unreported, Federal Court of Australia, Black CJ, Sheppard and Einfeld JJ, 8

October 1993); Idoport Pty Ltd v National Australia Bank Ltd [2002] NSWSC 18 at [24];

Cosdean Investments Pty Ltd v Football Federation Australia Ltd (No 3) [2007] FCA 766;

and Billinudgel Pastoral Co Pty Ltd v Westpac Banking Corporation (Unreported, Federal

Court of Australia, Cooper J, 27 March 1998). In Microbio, the Full Court said, at 9-10:

The Court is careful to see that orders for security for costs do not work injustice to parties against whom such orders are made. But if those parties do not comply with the orders and give no evidence or explanation as to why they have not complied with them, they cannot be heard to complain of injustice if, after a considerable length of time, and extensions of time, the ultimate sanction of dismissal is applied. It is incumbent upon parties in such circumstances to provide evidence of their position.

(Emphasis added)

Counsel emphasised the reference to the dismissal occurring after “a considerable length of

time, and extensions of time”. He submitted that this is the principle on which the Court acts

in circumstances such as the present. As the present appellants have not been afforded the

same opportunity, he submitted that the dismissal should be set aside so as to allow them a

further opportunity in which to provide the security ordered by Marshall J.

32 As counsel for Freehills pointed out, there is a relevant distinction between the authorities to

which the appellants referred and the present case. Each of those decisions concerned the

dismissal of first instance proceedings, whereas in this case, the appellants have had a first

instance adjudication. Adapting the language of Emmett J in Dye v Commonwealth

Securities Ltd [2012] FCA 992 at [27], the appellants have had their day in Court and a final

(as opposed to provisional) adjudication of their claims has been made.

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33 Further, the authorities on which the appellants relied did not involve circumstances in which,

in addition to the failure to provide the ordered security, the prosecution of the actions by the

plaintiffs had also been dilatory.

34 While I accept that the matters to which counsel for the appellants referred are relevant to the

exercise of the discretion, I do not regard them as the only matters to which the Court should

have regard. The very fact that the present application is to set aside an order for dismissal

already made, rather than an application for dismissal of proceedings, indicates by itself that

these considerations cannot operate in the same way. In addition to the matters to which the

appellants referred, I consider that the considerations which are particularly important to the

exercise of the discretion in this case are the appellants’ explanations for their non-

compliance with the Court’s procedural requirements and their failure to prosecute the appeal

diligently, whether there is any utility in setting aside the order, any prejudice which the

appellants may suffer if the dismissal stands, and the public interest in the efficient conduct of

litigation in this Court.

Evidentiary material

35 In addition to the decisions of Marshall J of 1 April 2014 and North J of 28 April 2014, the

appellants relied upon the affidavits of Mr Carey sworn on 27 March 2014, 31 March 2014, 5

May 2014 and 13 May 2014, together with an affidavit of the appellants’ solicitor, Mr

Metaxas, sworn 28 April 2014. In resisting the application to set aside, Freehills relied upon

the affidavits of their solicitor, Mr Tuohey, sworn 19 February 2014, 27 March 2014, 22

April 2014 and 14 May 2014, and the affidavit of a costs lawyer, Ms Young, sworn 28

February 2014.

The explanation for the procedural defaults

36 The evidence discloses a number of procedural defaults by the appellants in their conduct of

the appeal. These include that:

(a) The 21 day period within which the appellants should have commenced their

appeal expired on 11 October 2013. As noted, the appellants did not

commence the appeal until 13 December 2013;

(b) Although the appellants were required to submit the draft appeal book indexes

to the Federal Court Registrar by 3 February 2014 (rr 1.61(5) and 36.53(2) of

the FCR and Practice Note App 2 at [4.2]), the indexes were not provided until

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14 March 2014 and only then after numerous prompts, reminders and requests

from Freehills’ solicitors and from the Registrar. The appellants’ solicitors did

not provide the draft appeal book index to Freehills’ solicitors for their

consideration prior to submitting them to the Court;

(c) The draft appeal book indexes which were submitted to the Registrar were

deficient. Amongst other things, they contemplated the inclusion in the appeal

book of material which had not been admitted into evidence at trial; omitted

the inclusion of relevant material which had been admitted in evidence at the

trial; and contained material in an inappropriate sequence. The appellants’

solicitors accepted on 21 March 2014 that this critique of the draft appeal book

indexes by Freehills was justified;

(d) A hearing before a Registrar for the settling of the appeal book indexes was

held on 27 March 2014. It was agreed then that the appellants would, by

3 April 2014, review the transcript of evidence from the trial to identify

whether the documents marked for identification at the trial had later been

admitted into evidence; that Freehills would consider the review by 7 April

2014; and that the appeal book indexes then be finalised. Although some

communications occurred between the appellants’ solicitors and Freehills’

solicitors, the appellants had still not submitted the indexes to Parts A and B of

the appeal book to the Registrar for approval by 18 April 2014 when the stay

of the appeal pursuant to the order of Marshall J on 1 April 2014 came into

effect;

(e) Although the appellants’ outline of submissions and chronology for the appeal

hearing to commence on 15 May 2014 should have been filed by 14 April

2014 (Practice Note App 2 at [8.1]), the appellants have not filed any such

outline or chronology.

These defaults have to be viewed in the context that the appellants have known since

4 February this year that their appeal would be heard in May, and in the context that the

Court had allocated its resources so as to allow the appeal to be heard on 15 and 16 May. In

addition, it is evident that Freehills were preparing, in the conventional way, for the hearing

of the appeal.

37 Although in default in a number of instances, the appellants have not once initiated action to

obtain an extension of time, or otherwise to have their position accommodated. Instead, their

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conduct has been entirely reactive to the prompts, reminders and requests of the Court’s

Registrar and of Freehills, and then in a tardy fashion.

38 The appellants’ conduct has been the antithesis of an efficient preparation of an appeal

proceeding for hearing. Their non-compliance with the various procedural requirements has

generated a considerable number of communications from, and to, the Court and Freehills

which should have been unnecessary. It has thereby occasioned unnecessary expense and use

of resources.

39 The explanation provided by the appellants for this sorry state of affairs is limited. In his

affidavit sworn 28 April 2014, Mr Metaxas deposes to other work which he was carrying out

“[w]hen the application for security for costs of the appeal was heard by Justice Marshall”.

That work included the preparation of a further re-amended statement of claim in proceedings

in the Supreme Court of Western Australia (Action no COR 223 of 2009) in which

companies of which Mr Carey is a director are the plaintiffs and Korda Mentha, the primary

defendants. Mr Metaxas’ affidavit indicates that the amended statement of claim in that

action is a substantial document but I note that it involved the pleading of material which had

been available to Mr Metaxas since late July 2013. Mr Metaxas also referred to work he had

carried out in April 2014 in relation to the proceedings Action no COR 223 of 2009 involving

the preparation of an affidavit by Mr Carey and an outline of submissions in opposition to an

application for security for costs. Mr Metaxas also referred to work he had carried out for Mr

Carey or Carey companies in late April 2014.

40 The inference in Mr Metaxas’ affidavit is that he was preoccupied by his work on these other

matters and unable to give proper attention to the preparation of the present appeal.

However, Mr Metaxas does not make an express statement to that effect and it is pertinent

that several of the procedural defaults identified earlier had occurred well before April 2014

in any event.

41 The affidavit of Mr Carey sworn on 5 May 2014 is also relatively uninformative in relation to

the procedural defaults. That affidavit is concerned principally with the security for costs

issue and culminates in Mr Carey stating his optimism that Earlmist Pty Ltd (Receiver and

Manager appointed) (Controller appointed) as Trustee for the Earlmist Unit Trust will be able

to raise the funds required to provide the security ordered. In [10] of this affidavit, Mr Carey

acknowledges the requirement for the Court to operate “in a timely manner” and then deposes

that the Court should also have regard to seven separate matters. However, none of those

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matters bears at all on the procedural defaults and want of prosecution which occurred

between the delivery of judgment by Kenny J, on 20 September 2013, and 18 April 2014,

when the appeal was stayed. Indeed, some of the matters to which Mr Carey deposed in [10]

concern events which happened as long ago as late 2005.

42 This deficiency in Mr Carey’s affidavit was noted by Ms Josan, this Court’s National

Appeals Registrar. After consulting with the Chief Justice, Ms Josan wrote to the appellants’

solicitors on 8 May 2014 pointing out that Mr Carey’s affidavit did not address or identify the

grounds on which the order made by North J on 28 April 2014 to dismiss the appeal should

be set aside. She requested the appellants to file a further affidavit “that briefly but

specifically sets out the grounds on which the appellants say the Court should set aside North

J’s order of 28 April 2014”.

43 The appellants then filed a further affidavit from Mr Carey sworn on 13 May 2014. Again, a

large part of this affidavit concerns matters relating to the provision of security for costs.

This seems to reflect a misapprehension by the appellants that it was their failure to provide

the required security which was the sole or principal reason for the dismissal of the appeal.

The grounds of the application to which Mr Carey deposed can be paraphrased as being:

(a) It had been inevitable when Marshall J made the order for security on 1 April

2014 that “cash security” could not be provided within that time.

(b) As the appeal had been stayed after 17 April 2014 as a result of Marshall J’s

order, the appellants had no need then to prosecute the appeal.

(c) The respondents will not suffer prejudice from the hearing of the appeal being

delayed until security can be provided.

(d) The short notice given to the appellants of the hearing before North J on

28 April.

(e) The omission of the appellants to take any action in relation to Marshall J’s

order of 1 April 2014 was explicable: the appeal had been stayed as a result of

the Court’s order and no action by the appellants was necessary in that respect;

Mr Metaxas had in any event informed the Court on 22 April that security had

not been provided; the appellants had not brought an application for an

extension of time in which to provide the security because Mr Metaxas had

devoted his time to preparing for litigation in the Supreme Court of Western

Australia involving a member of the Westpoint Group; and the appellants had

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previously informed the Court (on 1 April) that they were unable to provide

the security within the time ordered.

(f) “[T]here is no reason to believe” that security cannot be provided if the

appellants are given a reasonable time within which either to realise an asset

or to borrow the required amount.

(g) The appellants’ failure to comply with the Rules regarding appeals was not

contumelious but rather the product of competing demands on the appellants’

solicitors.

44 After deposing to his decision not to have an instructing solicitor in Court during the trial

conducted by Kenny J and not to order a transcript of the evidence during the trial, Mr Carey

then set out a bare chronology of events as follows:

(a) Mr Metaxas prepared and filed the Notice of Appeal filed on 13 December 2013;

(b) draft indexes for the appeal books were compiled by Maria-Luisa Coulson who I engaged to assist because Mr Metaxas was then pre-occupied with other matters;

(c) Ms Coulson was not present at the trial and she provided draft indexes for appeal book A and B to Mr Metaxas on 13 March 2014;

(d) draft appeal book indexes were filed by Mr Metaxas on 14 March 2014;

(e) there was an issue between the parties as to whether the indexes should include documents marked for identification by the trial Judge and otherwise not dealt with by her;

(f) the solicitors for the parties and Registrar Pringle discussed this matter by telephone on 27 March 2014;

(g) after the conference on 27 March 2014 with the Registrar Mr Metaxas discussed the MFIs with me and I told him what I understood to be the relevant facts so that he did not need to send someone to read the transcript;

(h) between 27 March and 1 April 2014 Mr Metaxas prepared for the hearing of the respondents’ application for security for costs including preparing my affidavits and submissions;

(i) from about mid-March 2014 to 3 April 2014 Mr Metaxas devoted his time to completing the pleading in COR 223 of 2009;

(j) on 7 April 2014 Mr Metaxas sent by email to Mr Tuohey an application to permit fresh evidence to be adduced in the appeal and to amend the grounds of appeal to deal with the MFI documents;

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(k) Mr Metaxas devoted his time in the period 7-11 April 2014 to the affidavit I swore on 11 April 2014 in COR 223 of 2009;

(l) after the order for security for costs was made it was obvious that security could not be provided by 17 April 2014.

As can be seen, with three exceptions, this chronology does not provide any explanation at all

for the appellants’ procedural defaults or want of prosecution of the appeal. The exceptions

are in subpars (b), (i) and (k) in which Mr Carey deposes to Mr Metaxas being “pre-

occupied” and having devoted his time to Action no COR 223 of 2009 in the Supreme Court

of Western Australia, i.e., in effect having given priority to other matters.

45 In my opinion, this chronology, which was set out in [4] of Mr Carey’s affidavit, cannot

reasonably be understood as providing a satisfactory explanation for the procedural defaults

identified earlier, and which caused North J to dismiss the appeal. Both Mr Metaxas and Mr

Carey knew of the listing in this Court. It was incumbent on them, even in the face of other

commitments, to give proper attention to the preparation of this appeal and, in the event of

difficulties, to apply to the Court for an extension. It was not open to them to ignore the

requirements of this Court or to arrogate to themselves decisions as to the manner in which

the appeal would progress in this Court.

46 There are indications in the appellants’ affidavits and submissions that, almost paradoxically,

they considered that the stay contemplated by the order of Marshall J on 1 April 2014 would

operate for their benefit. As they could not provide the security and knew the stay would

come into effect, they considered that they were thereby relieved from doing anything further

to progress the appeal. It also meant, it was said, that there was no prejudice to the Court or

Freehills because there was no need for them either to do anything further in relation to the

appeal until the security was provided. This was a wholly inappropriate view of the effect of

Marshall J’s orders. They could not reasonably be understood as having been made for the

appellants’ benefit, and it was not open to the appellants to think that their appeal was

immune from dismissal. I note that Freehills had put the appellants on notice that they would

seek the dismissal of the appeal in the event that the security was not provided.

47 In considering the appellants’ procedural defaults and failure to prosecute the appeal

diligently, regard should be had to the statement of the “overarching purpose” of the civil

practice and procedure provisions stated in s 37M(1) of the FCA Act. That overarching

purpose is to:

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… facilitate the just resolution of disputes:

(a) according to law; and

(b) as quickly, inexpensively and efficiently as possible.

Section 37M(2) elaborates the content of the “overarching purpose”:

(2) Without limiting the generality of subsection (1), the overarching purpose includes the following objectives:

(a) the just determination of all proceedings before the Court;

(b) the efficient use of the judicial and administrative resources available for the purposes of the Court;

(c) the efficient disposal of the Court’s overall caseload;

(d) the disposal of all proceedings in a timely manner;

(e) the resolution of disputes at a cost that is proportionate to the importance and complexity of the matters in dispute.

Section 37M(3) of the FCA Act requires that the civil practice and procedure provisions must

be interpreted and applied, and any power conferred or duty imposed by them must be

exercised or carried out, in a way which best promotes the overarching purpose. By

s 37M(4), the FCR form part of the civil practice and procedure provisions to which the

section applies.

48 Finally, it is pertinent to note s 37N(1), which provides:

(1) The parties to a civil proceeding before the Court must conduct the proceeding (including negotiations for settlement of the dispute to which the proceeding relates) in a way that is consistent with the overarching purpose.

Section 4 defines a “proceeding” to include an appeal.

49 Both the FCR and Practice Note App 2 contain stipulations in respect of which the appellants

were in breach.

50 In summary, the appellants have not conducted themselves in relation to the appeal in a

manner which is consistent with the overarching purpose contained in s 37M of the FCA Act.

I consider that they have not provided a satisfactory explanation for the procedural defaults

on which North J relied on 28 April 2014 in dismissing the appeal.

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Utility in setting aside the dismissal

51 As already noted, counsel confirmed that the application to set aside was not pursued in

relation to any of the deregistered appellants. I am also satisfied that there is no utility in

setting aside the dismissal of the appeal in respect of the remaining corporate appellants.

52 The absence of utility in relation to those appellants arises from the circumstance that,

although the appellants claimed that the trial had been for damages for loss said to have been

caused by the alleged negligence and misleading or deceptive conduct of Freehills, trial

counsel for the appellants had acknowledged that the corporate appellants had not incurred

such a loss and that the claim for damages could be made only by Mr Carey in his personal

capacity. So much is evident from the reasons of Kenny J at [443]-[444], 562-3:

443 From the outset, the Carey parties’ fundamental claim was that, by reason of the Promissory Note Advice, they lost the opportunity to publicly list their shareholding in, or ‘float’, the companies in the Westpoint Group; alternatively, that they lost the value of their shareholding in the companies in the Westpoint Group: see amended cross-claim, particulars to paragraph 56. Other kinds of loss were also originally pleaded by the Carey Parties in their amended cross-claim, specifically, damages under s 87 of the TPA (or s 77 of the FTA) for Mr Carey’s loss of remuneration as a result of the collapse of the Westpoint Group; depletion in the value of the other cross-claimants’ assets and their loss of income. As previously noted, in the course of the trial, an application to amend in respect of claims by Vannin Pty Ltd and Earlmist Pty Ltd as “guarantor companies” was refused; and the loss said to have been occasioned to the non-shareholder cross-claimants was abandoned. Taking these matters into account, had the Carey parties made out the other elements of their misleading and deceptive conduct and negligence claims, I would have been required to focus on the loss said to be suffered by Mr Carey (and potentially Heca and Quartz to the extent that they were said to hold Mr Carey’s interests for him), namely: the lost value of Mr Carey’s shareholding; his lost remuneration; and the lost opportunity to publicly list his shareholding in the companies comprising the Westpoint Group.

444 In closing submissions, however, the Carey parties’ claim for loss and damages was apparently further narrowed. In closing written submissions, the Carey parties stated that the relevant loss was “the lost opportunity to float the Westpoint Group” or “the loss of the chance to list” and claimed damages in respect of “the lost opportunity [that] arose from the planned public listing of the Westpoint Group”. Mr Martindale SC confirmed in closing that it was “Mr Carey’s loss, as the holder of the shares in the would-be float vehicle that we [are] focussing on”. The other forms of claimed loss were not pursued.

This summary by Kenny J has not been challenged, whether in the notice of appeal itself or in

the affidavits and submissions relating to the present application.

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53 Accordingly, it can be concluded confidently that the corporate appellants will not be

prejudiced, and that no injustice will be occasioned to them, if the dismissal of the appeal

stands.

54 The parties’ submissions did not address the prospects of success on the appeal of Mr Carey

in his own right, nor the question of whether any of his grounds of appeal are reasonably

arguable. I acknowledge that the size and complexity of the judgment of Kenny J may mean

that it is not practical for the Court presently to make a detailed assessment of those matters,

but it is usual on an application of the present kind for the Court’s attention to be drawn to at

least some matters indicating that an appellant has an arguable case.

55 In these circumstances, I consider it appropriate to proceed on the basis that, if the dismissal

stands, Mr Carey will not be able to pursue his appeal, but whether that will be a real cause of

prejudice is a neutral consideration.

56 An important consideration affecting the utility of the orders sought by the appellants in

relation to Mr Carey personally is that, even if the order of dismissal is set aside, the appeal

will still be stayed, having regard to the order of Marshall J made on 1 April 2014. Unless

and until the security is provided, he will not be able to take any further step to pursue the

appeal.

57 As noted earlier, Mr Carey has expressed confidence that Earlmist can raise the funds

required to provide the necessary security. He outlined a process by which Earlmist, as

mortgagee of land known as the “Warwick Commercial Park” located within the Warwick

Regional Shopping precinct in Western Australia, would offer Lot 961 (area 2,214m2) for

sale by tender by a process called “fixed date sale”. This process involves prospective

purchasers submitting offers, without the seller having nominated a price. Mr Carey deposed

that the process would involve 30 days for advertising and marketing, 30 days in which the

offers could be submitted, and 30 days for settlement. Although Mr Carey did not depose to

the amount which Lot 961 could be expected to realise by this process, he expressed his

belief that funding would then become available within 90 days of the date of his affidavit.

58 Mr Carey also deposed to an alternative course by which Earlmist could raise funds by

applying for a loan from various lenders using its interest as mortgagee of Lot 961 as

security. Counsel said that the appellants had sought the adjournment of the proceedings

before North J in order to depose to these matters.

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59 In my opinion, the Court should exercise some caution about acting on Mr Carey’s evidence

about the prospects of the required security being provided. As is so often the case, actions

speak louder than words. Freehills first raised the issue of security for their costs of the

appeal with the appellants in December 2013. A period of private negotiation occurred

before they filed their application in this Court on 19 February 2014. The appellants have,

accordingly, had a considerable period of time in which to take the action now proposed by

which to provide security but have not done so. On the contrary, Mr Metaxas has

acknowledged that the appellants did not take any action at all before 17 April 2014 to

provide security.

60 Further still, it is apparent that the provision of security using funds derived from the interest

of Earlmist in Warwick Commercial Park is likely to involve litigation in the Supreme Court

of Western Australia. Mr Metaxas acknowledged as much in the affidavit which he swore on

28 April 2014 in connection with the application before North J:

[13] In order to put up the cash security as ordered by Justice Marshall the appellants have to utilise the interest of Earlmist Pty Ltd as first mortgagee of the Warwick Commercial Park – see Mr Carey’s affidavits sworn herein on 27 and 31 March 2014. The receivers with whom Mr Carey has been in conflict since 2009 will have to be notified [of] the proposal to deal with the land and it is expected that they will seek to restrain the interest being so utilised.

[14] The appellants have not yet sought that consent because they have been dealing with the matters above and other matters. The receivers are likely to oppose any use of the mortgagee’s interest on the basis that they will probably dispute payment of the judgment debt in CIV 1094 of 2008.

Mr Metaxas went on to depose that, in the event that the appeal was not dismissed, the

appellants would undertake to seek the receiver’s consent and make any necessary

application to the Supreme Court of Western Australia within seven days.

61 The circumstance that the security required by Marshall J may only be able to be provided in

the event that Earlmist obtains a favourable outcome in the foreshadowed proceedings in the

Supreme Court of Western Australia means, in my opinion, that there is significant

uncertainty as to whether the funds will become available and, even if they do, when that will

occur. Put more shortly, it is evident that the provision of the ordered security is subject to

the satisfaction of a contingency about which there is considerable uncertainty.

62 A further reason for caution is that these are not the only proceedings initiated by members of

the Westpoint Group in which security for costs has been sought. Such security has also been

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sought in the proceedings in the Supreme Court of Western Australia (Action no COR 223 of

2009). Mr Carey has not deposed in any detail to the security sought in those proceedings,

nor whether the proposed sale of Lot 961 will realise proceeds which will be sufficient to

allow security to be provided in all proceedings involving members of the Westpoint Group.

63 If Mr Carey personally is the only proper appellant, there may be questions in any event as to

whether it would be an appropriate use of Earlmist’s funds for it to provide security in

proceedings in which it has no interest. Counsel for Freehills referred to this issue, but did

not develop it in the course of his argument. In the view I take, it is not necessary to address

this issue further.

64 In summary, I consider that the appellants have not demonstrated the likelihood of real

prejudice if the dismissal of the appeal stands, or that there is utility in the setting aside of the

dismissal.

Other matters

65 The appellants submitted that Freehills would suffer “little or no” prejudice if the appeal were

reinstated, but remain stayed until they were in a position to provide the ordered security. I

do not accept that submission.

66 It is reasonable to infer that the very continuation of litigation is prejudicial to Freehills. That

prejudice lies not only in the monetary costs which Freehills will incur in their continued

defence of the appellants’ claims, but in the allocation of resources necessary for the conduct

of major litigation, the anxiety and worry which involvement in that litigation produces, and

the possible effect on goodwill and reputation. The observations of Tadgell and Ormiston JJ

in Bishopsgate Insurance Australia Ltd (in liq) v Deloitte Haskins and Sells [1999] 3 VR 863

at 887 are apposite in this context:

Every case exposes defendants to risk and in complex cases that risk may extend over a number of years. But the nature of the claim and the potentiality for prejudice must be looked at in the light of the claims made. Where a claim is made against individuals relating to their probity or their competence, especially their professional competence, and the claim is for many millions of dollars, then it is not hard to infer that defendants against whom such allegations are made are under a heavy burden. When that burden is not merely deferred but then unjustifiably drawn out over many years, it is easier still to infer serious prejudice of the relevant kind to a defendant. It has sometimes been said that where a defendant is insured or likely to be insured then the prejudice is not so great … But where a claim extends beyond mere casual negligence to acts which reflect upon the competence or probity of a defendant, especially when that competence or probity is critical to the defendant’s future livelihood, then the delay in bringing an action on for hearing will properly be held to

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impose severe additional prejudice on a defendant. This is particularly the case in claims alleging professional negligence, although such a description is not to be confined merely to the negligence of accountants, solicitors, doctors and the like for it is relevant to any person in respect of whom an unfavourable finding will be likely to place at risk his or her capacity to earn a living.

The circumstances of this case may not be as stark as those considered in Bishopsgate

Insurance, with the effect that the observations of Tadgell and Ormiston JJ may not apply

with the same force. Nevertheless, they provide a clear articulation of the kinds of prejudice

which defendants in the position of Freehills may suffer as a result of the dilatory pursuit of

claims brought against them.

67 For these reasons, I consider that the appellants’ bald submission that Freehills will suffer

little or no prejudice if the dismissal of the appeal is set aside cannot be accepted.

68 Courts are sometimes sympathetic to the position of litigants who have been let down by their

legal practitioners. Courts will often take the view that litigants should not be prejudiced in

such circumstances.

69 However, the present does not appear to be such a case. Mr Carey appears to be actively

involved in decision making regarding the manner of conduct in proceedings in which the

appellants have been involved and in the allocation of resources to those proceedings. I note,

for example, that Mr Carey gave instructions that his counsel should not have an instructing

solicitor present at the trial, and instructions that a transcript of the evidence taken at the trial

should not be obtained. Mr Carey was aware of the demands which he was placing on the

time of Mr Metaxas. He was in a position to direct that additional resources be allocated to

the prosecution of claims of the Westpoint Group.

70 The circumstances in which the appeal in this case was dismissed do appear to be somewhat

peremptory. It is a matter which has given me pause. The circumstance that, despite

dismissing the appeal, North J gave the appellants the opportunity within which to apply to

have the order of dismissal set aside is a cause for further pause.

71 However, I note again that the Court is not presently sitting on appeal to review the decision

of North J. The decision instead is whether the power to set aside the order of dismissal

should be made. For the reasons already indicated, that involves different considerations.

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Conclusion

72 I am not persuaded that the order for dismissal of the appeal should be set aside. The

appellants have not provided a satisfactory explanation for their want of diligence in

prosecuting the appeal and for their procedural defaults. There is no utility in any event in

the setting aside of the dismissal in relation to the corporate appellants. Mr Carey has not

sought to demonstrate that he has a reasonably arguable case on the appeal such that he will

be prejudiced by an inability to pursue it. There will be prejudice caused to Freehills if the

dismissal is set aside and it is appropriate for the Court to have regard to the overarching

purpose to which ss 34M and 34N of the FCA Act refer.

73 Accordingly, the appellants’ application of 7 May 2014 is dismissed. I will hear the parties

as to costs.

I certify that the preceding seventy-three (73) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice White.

Associate:

Dated: 31 July 2014

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SCHEDULE OF PARTIES

Second Appellant: QUARTZ NOMINEES PTY LTD (ACN 008 859 103)Third Appellant: HECA NOMINEES PTY LTD (ACN 053 581 874)Fourth Appellant: ACEBID PTY LTD (ACN 074 566 046)Fifth Appellant: ANDRIANNI PTY LTD (ACN 005 458 720)Sixth Appellant: ANN STREET BRISBANE PTY LTD (ACN 101 943 711)Seventh Appellant: BENNALONG HOLDINGS PTY LTD (ACN 008 741 008)Eighth Appellant: DOSIUS PTY LTD (ACN 009 449 450)Ninth Appellant: EARLMIST PTY LTD (RECEIVER AND MANAGER

APPOINTED) (CONTROLLER APPOINTED) (ACN 069 056 926)

Tenth Appellant: ETNAS PTY LTD (ACN 056 599 350)Eleventh Appellant: HEALTHCARE PROPERTIES PTY LTD (ACN 074 501

955)Twelfth Appellant: HUNTINGDALE VILLAGE PTY LTD (RECEIVER AND

MANAGER APPOINTED) (ACN 085 048 531)Thirteenth Appellant: JEVWOOD PTY LTD (ACN 074 525 321)Fourteenth Appellant: K.I.S. REALTY PTY LTD (ACN 100 871 314)Fifteenth Appellant: KEEP IT SIMPLE INVESTMENTS (GLOBAL) PTY LTD

(ACN 100 871 270)Sixteenth Appellant: NORTH SYDNEY DEVELOPMENT PTY LTD

(CONTROLLER APPOINTED) (ACN 107 037 838)Seventeenth Appellant: PAQUERO PTY LTD (ACN 003 540 556)Eighteenth Appellant: PARAGON APARTMENTS LTD (RECEIVER AND

MANAGER APPOINTED) (ACN 087 200 413)Nineteenth Appellant: RENAISSANCE MEZZANINE PTY LTD (ACN 110 978

491)Twentieth Appellant: ROMPRIDE PTY LTD (ACN 074 524 824)Twenty-first Appellant: SCOTS CHURCH DEVELOPMENT LTD (RECEIVER

AND MANAGER APPOINTED) (ACN 091 686 323)Twenty-second Appellant: SILKCHIME PTY LTD (RECEIVER AND MANAGER

APPOINTED) (ACN 066 849 429)Twenty-third Appellant: VANNIN PTY LTD (RECEIVER AND MANAGER

APPOINTED) (ACN 067 610 271)Twenty-fourth Appellant: WARWICK ENTERTAINMENT CENTRE PTY LTD

(RECEIVER AND MANAGER APPOINTED) (ACN 054 246 918)

Twenty-fifth Appellant: WESTPOINT FINANCIAL SERVICES PTY LTD (ACN 074 148 324)

Twenty-sixth Appellant: WESTPOINT MANAGEMENT (CENTREWAYS) PTY LTD (ACN 082 349 068)

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