FEDERAL COURT OF AUSTRALIA S M Enterprises (Vic) Pty Ltd v Henderson's Industries Pty Ltd [2005] FCA 301 PRACTICE AND PROCEDURE – non-compliance with orders of court – application for extension of time refused in part – costs thrown away to be paid on an indemnity basis Ratnam v Gumarasamu [1965] 1 WLR 8 applied S M ENTERPRISES (VIC) PTY LTD v HENDERSON'S INDUSTRIES PTY LTD V1132 of 2001 FINKELSTEIN J 24 MARCH 2005 MELBOURNE IN THE FEDERAL COURT OF AUSTRALIA VICTORIA DISTRICT REGISTRY V 1132 of 2001 BETWEEN: S M ENTERPRISES (VIC) PTY LTD Applicant AND: HENDERSON'S INDUSTRIES PTY LTD Respondent JUDGE: FINKELSTEIN J DATE OF ORDER: 24 MARCH 2005 WHERE MADE: MELBOURNE THE COURT ORDERS THAT: The motion filed 8 March 2005 be dismissed. 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 V 1132 of 2001 BETWEEN: S M ENTERPRISES (VIC) PTY LTD Applicant AND: HENDERSON'S INDUSTRIES PTY LTD Respondent JUDGE: FINKELSTEIN J DATE: 24 MARCH 2005 PLACE: MELBOURNE RULING 1 This action is quite old. It was commenced in October 2001. It relates to an improved moulding process and apparatus allegedly invented in 1988 by Mr Maleczek. The applicant, SM Enterprises (Vic) Pty Ltd, contends that in August 1989 Mr Maleczek assigned his rights in the invention to the respondent, Henderson's Industries Pty Ltd, in return for a royalty of 3% of the annual turnover from products made by the use of the invention and 3% of the proceeds from any licensing of the invention. Subsequent to this assignment Mr Maleczek incorporated S M Enterprises and assigned to it all his remaining rights in the invention; presumably those rights included the right to receive royalties. At all events, S M Enterprises says that Henderson's exploited the invention, applied in its own name to patent the invention and wrongfully refused to pay the royalty. It seeks orders that will enable the royalty to be calculated and then paid to it. There are alternative claims in deceit and misleading conduct (s 52 of the Trade Practices Act 1974 (Cth)) which are founded on a representation allegedly made by Henderson's to Mr Maleczek that it would execute a royalty agreement which provided for the payment of the agreed royalty. It is unclear whether these causes of action were assigned to S M Enterprises (if indeed they were capable of assignment) for the pleading is silent on this aspect. Finally there is a claim in damages for breach of confidence arising out of the dealings between Mr Maleczek and Henderson's. The action is not (as I read the pleadings) founded in contract or on Lord Cairns' Act. Again the pleading does not indicate how this cause of action is maintainable by SM Enterprises. I raised this with Mr Golvan SC but did not receive a satisfactory answer. Whether or not this omission is a fatal defect need not presently be decided. 2 On 8 March 2005 S M Enterprises moved to amend its application and statement of claim for a fourth time. It also sought leave to file an affidavit from an independent expert. During the course of the argument it became apparent that S M Enterprises' draft pleading was deficient in several respects and Mr Golvan said that it would need further change before it could be delivered. For its part, the respondent did not oppose many of the proposed amendments either because they did not bring about a substantial change to the case or because they raised issues that had already been addressed in affidavits which have been filed for the trial. It was for this reason alone that I gave S M Enterprises leave to make the amendments to its application and to its statement of claim. I made the usual order as to costs, save that those costs were to be paid on an indemnity basis. I made special provision for the payment of the costs. First, I ordered the costs to be taxed and paid forthwith. Secondly, I ordered that the action be permanently stayed unless the costs were paid. These reasons will explain why I made those orders. 3 The problem with which I was confronted came about because the action had proceeded through its interlocutory stages at a snail's pace. I am in part to blame for allowing the parties to dictate the pace. The application was filed on 25 October 2001 with a statement of claim. A timetable for pleadings and particulars was set on 6 December 2001. The parties fell behind in their compliance with the timetable almost immediately and the relevant dates were extended on 21 February 2002. At this point, at the parties request, the dispute was referred to mediation. Before the mediation was held, S M Enterprises delivered an amended statement of claim. There were several appearances before the mediator during the next six months or so. I do not know what happened at the mediation, save that it was unsuccessful. Thereafter two problems arose that caused further delay. The first was S M Enterprises' desire to inspect a third party's premises where the invention had been put to use. The third party refused to allow inspection and that dispute was not resolved until 23 May 2003. The second matter was the parties' wish to appoint an independent expert to provide a report to the Court on the use to which the invention had been put. The expert was appointed under orders I made on 17 October 2003 and his report was received on 2 March 2004. The parties indicated, and I accepted, that no steps should be taken in the proceeding until the report was to hand; the parties were of the view that dependent upon the terms of the report the issues at trial could be narrowed substantially. 4 Following receipt of the expert's report, directions were given on 22 April 2004 to progress the litigation. S M Enterprises was given leave to deliver its third amended statement of claim. That required the delivery of a further amended defence, for which an order was made. The pleadings then closed and the applicant provided particulars of its new pleading on 27 June 2004 – a mere seven-day delay. 5 It was at this point that directions could be given to get the case ready for trial by affidavit. Those directions were made on 3 September 2004 and I indicated that I would inform the parties of the trial date once I had consulted my calendar. The orders required S M Enterprises to file its affidavit evidence by 5 November 2004. On 16 September 2004 the parties were told that the trial would begin on 26 April 2005. Ordinarily I do not set down a case for trial until the completion of most interlocutory steps. The reason is that if there is a delay in getting the case ready and the trial date is vacated, the days which have been set aside may be wasted. In this instance I fixed a trial date before the pre-trial steps were completed because of the delays that have plagued this case. The parties were well aware of the need for diligent preparation. 6 Yet the delays continued, at least on S M Enterprises' side. On 23 November 2004 I was asked to extend until 15 December 2004 the time within which S M Enterprises could file its evidence. I was also asked to "split" the trial between liability and damages. I extended the time for the filing of affidavits but to ensure that S M Enterprises kept to the new timetable, I ordered that it "shall not file any further affidavit after 15 December 2004 without the leave of a judge". I said that I would consider whether there should be a split trial once the affidavits had been filed. The parties were advised on 22 February 2005 that I would not split the case. 7 Then on 8 March 2005 S M Enterprises by motion made the present application. The motion was supported by an affidavit from S M Enterprises' solicitor. The purpose of the affidavit was to explain why it was necessary to amend the statement of claim and file further evidence so late in the day. This is what the solicitor had to say about the amendments: "Following the filing of the Applicant's Affidavits on 15 December 2004, I undertook a review of the matter with counsel. It was Counsel's advice to make amendments to the Application and the Amended Statement of Claim to fully reflect the evidence in chief in support of the Applicant's case." As regards the additional evidence, all the solicitor said was that "[i]n the course of finalising the affidavit of Wojciech Maleczek sworn on 15 December 2004 in this proceeding Counsel advised that evidence from an Expert Witness able to give evidence in respect of royalty payments and other matters associated with inventions sold to corporations should be sought". Because of "the pre Christmas rush and subsequently the Christmas-January holidays" he was unable to retain the expert until 3 February 2005, whose affidavit was not received until 3 March 2005. I should add that before serving the present motion S M Enterprises gave Henderson's no notice that it might seek leave to amend its pleadings or file further evidence. 8 When the solicitor's affidavit was read I made it quite clear that its contents did not justify the orders sought. In Ratnam v Gumarasamu [1965] 1 WLR 8, 12 the Privy Council said in relation to an extension of time for compliance with rules of court: "The rules of court must prima facie be obeyed, and in order to justify a court in extending the time during which some step in procedure requires to be taken there must be some material upon which the court can exercise its discretion. If the law were otherwise, a party in breach would have an unqualified right to an extension of time which would defeat the purpose of the rules, which is to provide a time table for the conduct of litigation". The same holds true for a timetable fixed by order of the court. In this case what the solicitor said did not justify any extension of time. To the contrary, his evidence indicates that there was no explanation for S M Enterprises' failure to prepare its case in a timely fashion. 9 Mr Golvan then sought leave to call his solicitor to give oral evidence to supplement the contents of his affidavit. I granted that leave, principally because no purpose would be served by my refusing to do so and requiring S M Enterprises to bring on a fresh motion. However, when the solicitor was called he said little more than appeared in his affidavit. On one view of things matters were made worse for S M Enterprises because it appeared that, at least as regards the amendments, they had been under review from September 2004, and nothing had been done about them. 10 Those were the circumstances in which I made the order permitting the delivery of the new pleading and the costs order that I have described. As far as the costs order is concerned, I saw no reason why Henderson's should in any way be out of pocket. That justified both indemnity costs and the order that the costs be paid forthwith. To ensure that the costs were in fact paid I imposed the stay in default. I was not prepared to allow S M Enterprises to gain any advantage by reason of its dilatory conduct. 11 When I pronounced the orders relating to the pleading I said that I would consider later what was to be done with the expert's affidavit as I had not had the opportunity of reading that affidavit. On further reflection I should have rejected the application out of hand. If I were to allow S M Enterprises to make use of the affidavit in this case it would have rendered irrelevant the fixing of a timetable. Parties should not, as in this case, be allowed to do as they please. It is probably notorious that judges of the Federal Court (including myself) accommodate parties and their lawyers as much as possible in relation to timetables and trial dates. But the balance has now tipped too far in favour of the parties to the general disadvantage of proper court administration. I, for one, am not prepared to be so indulgent in the future. 12 As it turns out my refusal to allow in the new affidavit will not greatly prejudice S M Enterprises. The affidavit upon which it sought to rely adds little to its existing case. The expert says that a 3% royalty is reasonable in all the circumstances. That is consistent with S M Enterprises' evidence (if that evidence be accepted) that a 3% royalty had been agreed. If the evidence is not accepted there is little left in the case. 13 Save for the orders previously made, the motion will be dismissed with costs. I certify that the preceding thirteen (13) numbered paragraphs are a true copy of the Ruling herein of the Honourable Justice Finkelstein. Associate: Dated: 24 March 2005 Counsel for the Applicant: Mr C Golvan SC Mr W Rothnie Solicitor for the Applicant: Robinson Gill Lawyers Counsel for the Respondent: Mr L Glick SC Solicitor for the Respondent: Clayton Utz Date of Hearing: 11 March 2005 Date of Judgment: 24 March 2005