Intelmail Explorenet Pty Limited v Vardanian [2009] FCA 653

FEDERAL COURT OF AUSTRALIA

Intelmail Explorenet Pty Limited v Vardanian [2009] FCA 653 INTELMAIL EXPLORENET PTY LIMITED (ACN 088 887 889) and HEROS DILANCHIAN v AVO VARDANIAN and CONTROLMECH PTY LIMITED (ACN 075 681 373)

NSD1922 of 2008

MOORE J

12 JUNE 2009

SYDNEY IN THE FEDERAL COURT OF AUSTRALIA

NEW SOUTH WALES DISTRICT REGISTRY NSD1922 of 2008

BETWEEN: INTELMAIL EXPLORENET PTY LIMITED

(ACN 088 887 889)

First Applicant

HEROS DILANCHIAN

Second Applicant

AND: AVO VARDANIAN

First Respondent

CONTROLMECH PTY LIMITED (ACN 075 681 373)

Second Respondent

JUDGE: MOORE J

DATE OF ORDER: 12 JUNE 2009

WHERE MADE: SYDNEY

THE COURT ORDERS THAT:

1. The Applicants' Notice of Motion filed on 10 June 2009 be dismissed. 2. The Applicants pay the Respondents' costs of and incidental to the Applicants' Notice of Motion. 3. The time for the Applicants to file and serve all the evidence on which it relies in the proceedings be extended to 19 June 2009. 4. Extend the time for the Cross-Claimants to file and serve their Evidence in Chief to 3 July 2009. 5. Vacate directions on 15 July 2009. 6. Liberty to apply on 2 days notice. Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules. The text of entered orders can be located using eSearch on the Court's website. IN THE FEDERAL COURT OF AUSTRALIA

NEW SOUTH WALES DISTRICT REGISTRY NSD1922 of 2008

BETWEEN: INTELMAIL EXPLORENET PTY LIMITED

(ACN 088 887 889)

First Applicant

HEROS DILANCHIAN

Second Applicant

AND: AVO VARDANIAN

First Respondent

CONTROLMECH PTY LIMITED (ACN 075 681 373)

Second Respondent

JUDGE: MOORE J

DATE: 12 JUNE 2009

PLACE: SYDNEY

REASONS FOR JUDGMENT 1 This is an application by the first applicant, Intelmail Explorenet Pty Limited, for leave to be represented by someone other than a solicitor: see specifically Order 4 Rule 14 and also Order 9 Rule 1 of the Federal Court Rules. The application is made on the footing that the company's accountant, Mr Malouf, will hereinafter prosecute the proceedings on behalf of the company. The respondents oppose the grant of leave. They submitted, correctly, that in the ordinary course a company ought to be represented by a solicitor. So much is recognised by both the rules of the Court and authorities dealing with applications such as this. 2 The application is made in circumstances where the proceedings were commenced by the company in December 2008. Hearing dates have been set and the hearing of the matter is only a matter of weeks from today, on 27, 28, 29, 30 and 31 July 2009. Those hearing dates were fixed with considerable expedition on the application of the company, and the second applicant though supported by the respondents. 3 For reasons relating primarily to the health of the first respondent it is, in my opinion, necessary to maintain the dates that have been fixed. The solicitors that were retained by the applicants to conduct this litigation have not been paid all moneys due to them and, as a consequence, have ceased to act for the applicants. It is accepted by the respondents that, broadly described, the financial circumstances of the company at present are difficult. 4 Three things are conceded. First, that at present the company does not have sufficient cash flow to support its business. Secondly, at present the company is deriving no income from the sale of its assets. The primary nature of the company's business is the sale of machines to assist in the processing of mail, and there is evidence that no sales have recently been made of those machines. Thirdly, the only income the company is receiving is being generated by its service division, and that is of the order of $300,000 to $400,000 per month. It is also conceded that that amount is insufficient to pay the company's expenses. What emerges both as a matter of inference having regard to the failure of the company to pay its solicitor's fees and the facts conceded, is that the company itself does not have a sufficient cash flow to continue to pay the solicitors originally retained or, indeed, to pay any solicitors it might wish otherwise to retain. 5 Accepting for the moment that the company does not itself have the capacity to presently retain solicitors, it leaves unanswered the question whether or not the second applicant, Mr Dilanchian has the capacity to fund these proceedings both on his own behalf and on behalf of the company. There is no evidence about his financial circumstances and his incapacity to do so furnished in support of this application. In my view that is significant. 6 Mr Dilanchian is the guiding hand of the first applicant. He is the sole director, sole shareholder and secretary of the company. In the absence of any evidence from Mr Dilanchian about his incapacity to fund the litigation both on his own behalf and on the company of the applicant, I would not draw the inference that the company itself with his assistance is unable to continue to fund this litigation. In addition, other considerations militate against the grant of leave. 7 I disregard the submission made by the respondents that the company can in effect make an election to dispense with its workforce on the one hand or fund the litigation on the other. Difficult questions would arise for any company in following that course, not the least of which would be its capacity to maintain a viable business, the essence of which is a workforce capable of performing work on behalf of the company. Whilst that is a neutral factor in the present case, in my opinion, several of the other factors identified by the respondents point to the refusal of the grant of leave. 8 The issues that are likely to arise at the hearing are not straightforward either factually or legally. They concern what appears to be a serious contest between the applicants and the respondents about the relationship of the first respondent with, in particular, the first applicant and, having regard to the nature of that relationship, whether the copyright in certain software is the property of the first applicant. I am not satisfied that the preparation for the trial of this matter and the trial are able to proceed within the timeframe that is required in the absence of solicitors representing the first applicant. Discovery has not yet been given, though I am told it will be given shortly. Whether it is adequate or not, I am simply not in a position to say. The evidence of the applicants has not yet been filed and that has involved non-compliance with procedural directions earlier given by the Court. I am not prepared to assume that were Mr Malouf to represent the company, the evidence would be able to be filed within an appropriate timeframe and in a form that would enable the trial to proceed in an orderly and regular way. 9 The other consideration of some significance in my mind which suggests that leave should not be given is the personal relationship between the second applicant and the first respondent. The first respondent is married to the sister of the second applicant. I cannot discount the possibility that the trial of this matter will be complicated by that relationship. This provides, in my opinion, a compelling reason for the involvement of a solicitor, if not counsel, in order to ensure a dispassionate approach to the litigation which otherwise may not be present if the company is not represented by lawyers. 10 In all the circumstances I propose to dismiss the application of the first applicant for leave to appear other than by a solicitor, and I so order. I certify that the preceding ten (10) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Moore.