FEDERAL COURT OF AUSTRALIA Young v ICM Agriculture Pty Ltd [2009] FCA 1065 PRACTICE AND PROCEDURE - application by a corporate applicant for leave to commence and carry on proceeding without a solicitor - company one of two applicants - other applicant sole shareholder, director and controlling mind of company - counsel representing both applicants but without instructing solicitor - proceeding brought in substance by the individual for his benefit - company an additional applicant only in case assignment of cause of action by it to the individual should be held ineffective. Held: Leave granted. Federal Court Rules O 4 r 14(2) Uniform Civil Procedure Rules 2005 (NSW) r 7.1 Australian Competition & Consumer Commission v Dataline.net.au Pty Ltd [2004] FCA 1361 cited Checked-Out Pty Ltd v Eagle Eye Inspections Pty Ltd [2002] FCA 1002 distinguished Cytel Pty Ltd v Peoplebank Recruitment Pty Ltd [2006] FCA 985 distinguished Silkearl Pty Ltd v Ainsworth Game Technology Ltd [2006] FCA 949 distinguished Tobacco Control Coalition Inc v Philip Morris (Australia) Ltd [2000] FCA 131 distinguished DARYL WILLIAM YOUNG and AUSTRALIAN AGRICULTURAL COMMODITIES PTY LTD (ACN 057 795 632) v ICM AGRICULTURE PTY LTD (ACN 006 077 765) NSD 874 of 2009 LINDGREN J 16 SEPTEMBER 2009 SYDNEY IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY general division NSD 874 of 2009 BETWEEN: DARYL WILLIAM YOUNG First Applicant AUSTRALIAN AGRICULTURAL COMMODITIES PTY LTD (ACN 057 795 632) Second Applicant AND: ICM AGRICULTURE PTY LTD (ACN 006 077 765) Respondent JUDGE: LINDGREN J DATE OF ORDER: 16 SEPTEMBER 2009 WHERE MADE: SYDNEY THE COURT ORDERS THAT: 1. The second applicant have leave nunc pro tunc to commence and carry on this proceeding. 2. If the second applicant should cease to be represented by counsel, the respondent have liberty to apply for a termination of the leave referred to in para (1) in so far as it relates to the then future carrying on of the proceeding. 3. The parties' costs of the second applicant's application for leave be the respective costs of the second applicant and the respondent of the proceeding. 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 general division NSD 874 of 2009 BETWEEN: DARYL WILLIAM YOUNG First Applicant AUSTRALIAN AGRICULTURAL COMMODITIES PTY LTD (ACN 057 795 632) Second Applicant AND: ICM AGRICULTURE PTY LTD (ACN 006 077 765) Respondent JUDGE: LINDGREN J DATE: 16 SEPTEMBER 2009 PLACE: SYDNEY REASONS FOR JUDGMENT Introduction 1 The second applicant, Australian Agricultural Commodities Pty Limited (AAC), seeks leave pursuant to O 4 r 14(2) of the Federal Court Rules to commence and carry on this proceeding otherwise than by a solicitor. For the reasons that appear below, leave should be given 2 The applicants sue the respondent, ICM Agriculture Pty Ltd (ICM), on the causes of action which are pleaded in a statement of claim that was filed on 17 August 2009. 3 The causes of action are somewhat complicated and are related to other proceedings. 4 On 19 February 2009 I allowed an appeal from a decision of the Federal Magistrates Court of Australia which had set aside a bankruptcy notice issued on the application of ICM against the first applicant, Daryl William Young (Mr Young): see ICM Agriculture Pty Ltd v Young [2009] FCA 109. 5 By a creditor's petition issued on 5 June 2009, ICM commenced proceeding NSD 530 of 2009 in this Court against Mr Young seeking a sequestration order (the Sequestration Proceeding). Judgment in that proceeding is reserved. 6 Mr Young's attempt to set aside the bankruptcy notice depended, and now his resistance to a creditor's petition depends, upon a claim that he makes against ICM. 7 Until recently there has been pending in the District Court of New South Wales proceeding no 5792 of 2007 brought by Mr Young and AAC against ICM. On 4 September 2009 that proceeding was transferred to the Supreme Court of New South Wales in proceeding number 13822/09. On the same day, the Supreme Court ordered that the proceeding be transferred to this Court where it has been numbered NSD 1026 of 2009. I will call it "the former District Court proceeding". 8 Mr Young is the sole member, director and controlling mind of AAC. His claim against ICM is based on causes of action which were previously those of AAC. AAC purportedly assigned them to Mr Young. 9 The claim made against ICM in the former District Court proceeding is in substance the same as the claim made against ICM in this proceeding. 10 AAC has been included as second applicant in this proceeding, and was included as second plaintiff in the former District Court proceeding, only against the contingency that the assignment may be held not to have been effective. In order to succeed, either AAC or Mr Young would have to prove the subsistence of AAC's cause or causes of action and entitlement to the relief sought, but in the case of Mr Young he would have to prove in addition the effectiveness of the assignment. Facts 11 There is in evidence a resolution of Mr Young as sole director of AAC dated 12 August 2009 authorising him to act on behalf of AAC and to represent it in this proceeding. 12 It is common ground that Mr Young's personal financial position is that he is insolvent if one leaves out of account his claim against ICM. It follows that absent that claim, he does not have the ready means with which to pay for a solicitor or satisfy an adverse costs order. 13 The evidence shows that AAC has contracts with growers of seed lines and that it employs seven staff plus two to three casual staff in peak periods of operation. 14 According to the evidence, AAC's business is that of researching, developing and distributing new and existing crop types and varieties, including storing, grading and cleaning to market specification various types of grain, and marketing and developing a range of summer and winter crop types for domestic and international markets. 15 AAC commenced its business activities in 1996 as a seed tender company. AAC has successfully tendered for, and has under licence or contract, twelve different chickpea lines and several Brassicas. According to an affidavit of Mr Young, these seed lines are at various stages of development from seed selection to commercial release. 16 AAC attempted to lead evidence as to its financial position. Much of it was rejected. Admitted evidence shows, however, that Mr Young is employed by AAC on a gross wage of $1,192.69 per week, and that as at 31 August 2009 AAC had a credit bank balance of $17,640.21. The admitted evidence also shows that: · for the year ended 30 June 2007, AAC made a net profit of $266,493.71; · as at 30 June 2007, AAC had net assets of $1,266,499.71; · for the year ended 30 June 2008 AAC made a net profit of $71,098.00; and · as at 30 June 2008 AAC had net assets of $1,371,104.50. There is no suggestion in the evidence that AAC is insolvent, but apparently in terms of ready cash it has only the sum of $17,640.21 mentioned above. Counsel for AAC submitted that I should accept that this would not be sufficient to retain both solicitor and counsel if the amount was to cover all of the work to be done for the applicants in the proceeding. Consideration 17 There are unusual and important features of the present proceeding. AAC is not a sole applicant and both Mr Young and AAC are represented by counsel. Mr JT Svehla of counsel who appears for them settled the form of the application and statement of claim. He intends to continue to represent both applicants, but without an instructing solicitor because of lack of funds. Accordingly, counsel, not Mr Young, will represent AAC on the final hearing if the proceeding goes so far (whether it does might or might not depend on the outcome of the Sequestration Proceeding as to which outcome I have not yet formed any view). 18 Order 4 r 14(2) of the Federal Court Rules provides: Except as provided by or under any Act, a corporation may not, without the leave of the Court, commence or carry on any proceeding otherwise than by a solicitor. Counsel for the parties referred me to the following authorities in relation to the approach to be taken on an application for leave under the rule: Tobacco Control Coalition Inc v Philip Morris (Australia) Ltd [2000] FCA 131 (Tobacco Control); Checked-Out Pty Ltd v Eagle Eye Inspections Pty Ltd [2002] FCA 1002 (Checked-Out); Silkearl Pty Ltd v Ainsworth Game Technology Ltd [2006] FCA 949 (Silkearl)and Cytel Pty Ltd v Peoplebank Recruitment Pty Ltd [2006] FCA 985 (Cytel). I will return to these authorities below. 19 As I understood his submission, Mr Svehla urged me to construe O 4 r 14(2) in the light of r 7.1 of the Uniform Civil Procedure Rules 2005 (NSW). That rule provides that a company within the meaning of the Corporations Act 2001 (Cth) may commence and carry on proceedings in the New South Wales courts in which the rule operates, by a solicitor or by a director of the company, but, in the case of a proceeding in the Supreme Court of New South Wales, only if the director is also a plaintiff in the proceeding. 20 I reject the submission. At one stage Mr Svehla seemed to suggest that the New South Wales rule reflected "the modern approach" to the issue of the representation of companies in litigation in Australia. He conceded, however, that he did not know how common in Australian courts a rule like that of New South Wales is. 21 The New South Wales rule is more modern in the sense of more recent than O 4 r 14(2) of the Federal Court Rules. I do not venture upon the question whether it would be desirable that this Court or other courts adopt a similar rule. All that matters for present purposes is that any suggestion that the construction of the Federal Court O 4 r 14(2) is to be influenced by the New South Wales rule must be rejected. 22 It is, however, a weighty consideration in the exercise of my discretion that Mr Young is a co-applicant with AAC. Prima facie, the proceeding will continue with Mr Young not represented by a solicitor, whether or not AAC obtains the leave that it seeks. A consideration of this kind may well have underlain the adoption of the New South Wales rule. In the present case there is more – see [27] below. 23 Counsel for ICM submits, and I accept, that there is some inconvenience and cost to his client arising from the absence of a solicitor on the opposite side of the record. Affidavits are apparently being prepared by Mr Young without legal assistance and are faxed by him to the Court Registry and, no doubt, to ICM's solicitors. Those solicitors are required to read and consider the affidavits, substantial parts of which have been ruled inadmissible on evidentiary grounds. In addition, there have been formal and technical problems associated with Mr Young's use of facsimile transmission. Even if a solicitor had prepared the affidavits, however, parts might have been rejected on evidentiary grounds, although one would hope not as much as has been the case here due to Mr Young's lack of knowledge of the rules of evidence. 24 I suggested to counsel for ICM that these problems would continue even if AAC were not granted the leave that it seeks, since Mr Young as first applicant would continue to carry on the proceeding without a solicitor, as he is entitled to do. His response was that this would not necessarily be the case since AAC may decide to engage a solicitor. One then must ask: but what of Mr Young's position? He is entitled to litigate without a solicitor. It might be thought improbable that AAC would retain a solicitor while Mr Young, for whose benefit (avoidance of bankruptcy) the proceeding is in substance brought, would be left preparing and filing his own affidavits for example. It might be thought likely that either both or neither of the applicants will have a solicitor. If counsel for ICM's suggestion is correct, Mr Young might well be forced to have a solicitor although O 4 r 14(1) the Federal Court Rules entitles him to proceed in person. 25 On the other hand, a solicitor for AAC, although on the record, might not, in view of AAC's "backstop" role, take any active role in the preparation, filing and service of affidavits, issuing of subpoenas, briefing of counsel, and so on, relying instead and in order to save money, on all of those matters being attended to by Mr Young in person in his own case. If events took that course, while the sum of $17,640.21 would apparently be more than sufficient for the purpose, nothing would have been achieved by a refusal of leave. 26 I asked counsel for the applicants what would happen if the assignment were held ineffective but AAC succeeded on its claim. He replied that in one way or another, AAC would fund Mr Young to discharge the amount owed by him to ICM on the judgment debt. As noted earlier, there is no suggestion that AAC is insolvent. Counsel submitted that it would be in AAC's commercial interests to fund Mr Young to save him from bankruptcy, because AAC's business depends on him. Counsel submitted that without Mr Young as its director, the business would come to an end. 27 In summary, in the unusual circumstances in which: · AAC is not a sole applicant, and its director, Mr Young, who is AAC's sole shareholder, director and controlling mind, is also an applicant; · counsel is appearing for AAC and Mr Young and intends to continue to appear for them; · in substance the proceeding is brought for the benefit of Mr Young alone, and AAC's involvement is only by way of a backstop measure in case the assignment should not be upheld; and · the proceeding will involve no evidence being led by AAC beyond that which will be led by Mr Young in any event; I have concluded that leave should be granted. 28 Do the cases to which I was referred suggest a different result? 29 In Tobacco Control,Wilcox J granted Tobacco Control Coalition Incleave under O 4 r 14(2) to carry on the proceeding without a solicitor but limited to preparation for, and attendance at, the hearing of certain motions which were fixed for hearing 12 days after the making of the order. The order was limited in point of time to the conclusion of the hearing of those motions. 30 His Honour observed (at [7]) that if the matter went to a hearing on the merits it would involve extensive evidence and complex questions of law, and that it would be "most inappropriate for such an action to be litigated without the services of a solicitor". 31 The present case will involve complex questions of law. Most of the evidence will be documentary, although apparently there will be some evidence as to one or two contested conversations. 32 Tobacco Control is, nonetheless, distinguishable by reason of the factors listed in [27] above. In particular, there was in that case only one applicant – the company. In the present case the proceeding will continue in so far as it is brought by Mr Young. 33 In Checked-Out, Emmett J granted leave to the applicant to carry on the proceeding without a solicitor for the purpose of resisting certain motions for summary dismissal, and to be represented on the hearing of those motions by a named individual who was not a solicitor. However, his Honour declined to grant general leave for the company to carry on the proceeding without a solicitor, noting the complexity of the legal and factual issues involved as one reason militating against the grant of leave. 34 The case is distinguishable on the same or a similar basis. 35 In Silkearl, Allsop J (when a judge of this Court) refused an application for leave under O 4 r 14(2). The individual who wished to represent the applicant company was, with his wife, a director of the company. The case involved complex factual and legal issues. His Honour referred to the emotive language used by the individual concerned and the making of sweeping allegations of impropriety by him in correspondence with the respondent and its solicitors. I note in passing that this characteristic, which one often encounters in self-represented litigants, has been noticeably absent, so far as I am aware, in the dealings that Mr Young has had with ICM and its solicitors. In his case, the problem has not been one of lack of courtesy, but has been one of lack of knowledge of rules and procedures. 36 The case is distinguishable on the same or a similar basis. 37 Finally, in Cytel Bennett J refused an application for leave under O 4 r 14(2). The applicant company sought leave to be represented by its sole director. Her Honour said that it was clear from the matters put by the director in submissions and the material that he had sent to her Honour's chambers, that he had no understanding of court procedure or of evidence. Her Honour was firmly of the view that if the director were to represent the applicant, the time taken to deal with evidence and submissions would be greatly extended. 38 Her Honour also referred to the fact that the director was to be a witness for the company and that there were difficulties in his position as a witness and in presenting evidence and making submissions (her Honour referred to Australian Competition & Consumer Commission v Dataline.net.au Pty Ltd [2004] FCA 1361 at [3]). That difficulty does not exist in the present case because counsel will lead the evidence to be given by Mr Young. There is, however, some residual difficulty in the preparation and filing of affidavits to which I referred earlier. 39 The case is also distinguishable on the same or a similar basis. 40 In summary, I do not find any reason in the authorities to which I was referred and have discussed above to dissuade me from the view that leave should be granted. 41 ICM should, however, have leave to apply for a termination of the leave if AAC ceases to be represented by counsel because I have been heavily influenced by the consideration that AAC is so represented. I say nothing as to the likely fate of such an application. 42 On the question of costs, AAC sought a concession in the form of an exemption from the ordinary operation of O 4 r 14(2). ICM's opposition to the granting of the leave was reasonable, being based on the inconvenience and additional costs to which it is being exposed. The costs of AAC's application for leave should be the respective costs of the proceeding of AAC and ICM. Conclusion 43 There will be orders: · that AAC have leave nunc pro tunc to commence and carry on this proceeding; · that, if AAC should cease to be represented by counsel, ICM have liberty to apply for a termination of the leave in so far as it relates to any then future carrying on of the proceeding; and · the parties' costs of AAC's application for leave be the respective costs of AAC and ICM of the proceeding. I certify that the preceding forty-three (43) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Lindgren. Associate: Dated: 21 September 2009 Counsel for the Applicants: Mr J T Svehla Counsel for the Respondent: Mr E C Muston Solicitor for the Respondent: Swaab Attorneys Date of Hearing: 8 September 2009 Date of Judgment: 16 September 2009