FEDERAL COURT OF AUSTRALIA Technology Leasing Limited v TMAC Pty Ltd [2011] FCA 239 Citation: Technology Leasing Limited v TMAC Pty Ltd [2011] FCA 239 Parties: TECHNOLOGY LEASING LIMITED (ACN 071 702 264) v TMAC PTY LTD(ACN 093 834 023) TRADING AS NORTHSTAR PROPERTY SERVICES TECHNOLOGY LEASING LIMITED, DIVVIE ENTERPRISES PTY LTD(ACN 118 973 943) TRADING AS THE OUTDOOR FURNITURE SPECIALISTS TWEED HEADS, VALENTINA RURAL DEVELOPMENTS PTY LTD (ACN 093 041 067), TREVOR DAVID MCGRATH, CHRISTOPHER MARK BOWES, RAYMOND JOHN DIVERTIE, MARK ALIPRANDI, THOMAS DAVID FORD, BOWER FINANCE PTY LIMITED(ACN 104 375 715) and DAVID BEAT File number: NSD 163 of 2010 Judge: COWDROY J Date of judgment: 18 March 2011 Catchwords: PRACTICE AND PROCEDURE – Application for default judgment pursuant to Order 35A r 3(2) – withdrawal of defence by respondents without explanation – conduct justifying an award of indemnity costs Legislation: Federal Court of Australia Act 1976 (Cth) s 43(2) Federal Court Rules O 35A r 3(2) Trade Practices Act 1974 (Cth) Cases cited: Arthur v Vaupotic Investments Pty Ltd [2005] FCA 433 Australian Competition and Consumer Commission v 1Cellnet LLC [2005] FCA 856 AWA Ltd v George Richard Daniels T/A Deloitte Haskins and Sells (unreported, No 50271 of 1991, NSWSC Comm D, 8 October 1992, BC9201567) Luna Park Sydney Pty Limited (ACN 102 907 184) v Bose [2006] FCA 94 Date of hearing: 15 March 2011 Place: Sydney Division: GENERAL DIVISION Category: Catchwords Number of paragraphs: 21 Solicitor for the Applicant: Mr C Pedersen, Horton Rhodes Lawyers Solicitor for the Respondents: Attwood Marshall Lawyers (until 16 November 2010) IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY GENERAL DIVISION NSD 163 of 2010 BETWEEN: TECHNOLOGY LEASING LIMITED (ACN 071 702 264) Applicant AND: TMAC PTY LTD (ACN 093 834 023) TRADING AS NORTHSTAR PROPERTY SERVICES TECHNOLOGY LEASING LIMITED First Respondent DIVVIE ENTERPRISES PTY LTD (ACN 118 973 943) TRADING AS THE OUTDOOR FURNITURE SPECIALISTS TWEED HEADS Second Respondent VALENTINA RURAL DEVELOPMENTS PTY LTD (ACN 093 041 067) Third Respondent TREVOR DAVID MCGRATH Fourth Respondent CHRISTOPHER MARK BOWES Fifth Respondent RAYMOND JOHN DIVERTIE Sixth Respondent MARK ALIPRANDI Seventh Respondent THOMAS DAVID FORD Eighth Respondent BOWER FINANCE PTY LIMITED (ACN 104 375 715) Ninth Respondent DAVID BEAT Tenth Respondent JUDGE: COWDROY J DATE OF ORDER: 18 MARCH 2011 WHERE MADE: SYDNEY THE COURT ORDERS THAT: 1. Judgment be entered against the Fourth and Fifth Respondents in the amount of $69,200.86. 2. The Fourth Respondent pay the costs of the Applicant on an indemnity basis of the proceedings brought against him by the Applicant. 3. The Applicant's costs of the motion for default judgment pursuant to O 35A r 3(2) be paid by the Fourth and Fifth Respondents on an indemnity basis. 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 Federal Law Search on the Court's website. IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY GENERAL DIVISION NSD 163 of 2010 BETWEEN: TECHNOLOGY LEASING LIMITED (ACN 071 702 264) Applicant AND: TMAC PTY LTD (ACN 093 834 023) TRADING AS NORTHSTAR PROPERTY SERVICES TECHNOLOGY LEASING LIMITED First Respondent DIVVIE ENTERPRISES PTY LTD (ACN 118 973 943) TRADING AS THE OUTDOOR FURNITURE SPECIALISTS TWEED HEADS Second Respondent VALENTINA RURAL DEVELOPMENTS PTY LTD (ACN 093 041 067) Third Respondent TREVOR DAVID MCGRATH Fourth Respondent CHRISTOPHER MARK BOWES Fifth Respondent RAYMOND JOHN DIVERTIE Sixth Respondent MARK ALIPRANDI Seventh Respondent THOMAS DAVID FORD Eighth Respondent BOWER FINANCE PTY LIMITED (ACN 104 375 715) Ninth Respondent DAVID BEAT Tenth Respondent JUDGE: COWDROY J DATE: 18 MARCH 2011 PLACE: SYDNEY REASONS FOR JUDGMENT 1 By notice of motion dated 10 March 2011, the applicant ('Technology Leasing') seeks the following orders: Pursuant to Order 35A Rule 3(2): 1. Judgment for the Applicant against the Respondents on the motion (the Fourth and Fifth Respondents) in the sum of $69,200.86. 2. The Respondents on the motion (the Fourth and Fifth Respondents) pay the Applicant's costs of these proceedings taxed on an indemnity basis. 2 The Motion is supported by an affidavit of Helena-Portia Hansell sworn 11 March 2011 ('the affidavit'). FACTS 3 By statement of claim filed on 9 June 2010, Technology Leasing alleges that on or about 9 April 2008 it entered into a Rental lease agreement ('the lease agreement') with the first respondent ('TMAC'), the fourth respondent ('McGrath') and the fifth respondent ('Bowes'). Such agreement was signed on or about 27 February 2008 by McGrath and Bowes as guarantors of the obligations of TMAC. Pursuant to such agreement, Technology Leasing agreed to acquire and lease to TMAC a NEC digital telephone system. McGrath and Bowes agreed to guarantee the punctual payment of monthly rental instalments and other monies which TMAC agreed to pay. 4 The statement of claim alleges breaches by TMAC and McGrath and Bowes of their obligations under the lease agreement. Paragraphs 24 and 25 of the statement of claim contains the following allegations of breach of contract by McGrath and Bowes: 24. By letter dated 14 July 2009, the Applicant demanded that the Fourth and Fifth Respondents pay the sum of $60,174.67 to the Applicant. 25. In breach of their obligations under the Guarantee provision of the First Agreement, the Fourth and Fifth Respondents have not paid the sums of $60,174.67 and $6,017.47 totalling $66,192.14, nor interest, to the Applicant. 5 In consequence of the alleged breaches of the lease agreement by McGrath and Bowes as guarantors, Technology Leasing claims liquidated damages from those parties. 6 On 29 June 2010 a defence was filed in which McGrath and Bowes did not admit to the breaches alleged against them. Further, on the same day both McGrath and Bowes filed a statement of cross-claim claiming damages against Technology Leasing and other parties arising out of, inter alia, breaches of the Trade Practices Act 1974 (Cth). 7 On 30 July 2010 Technology Leasing filed its defence to the cross-claim. 8 On 15 October 2010 an amended statement of cross-claim was filed in the proceedings against Technology Leasing and other parties. In such cross-claim McGrath became the third claimant. Bowes did not participate in this cross-claim. 9 On 2 November 2010 Technology Leasing filed its defence to the amended cross-claim. 10 On 16 November 2010 a notice of withdrawal of solicitor for TMAC, McGrath and Bowes was filed. Also on 16 November 2010, TMAC, McGrath and Bowes purported to discontinue the cross-claims against Technology Leasing. It was not clear whether the notice of discontinuance was intended to discontinue both the amended cross claim as well as the original cross claim. However, on 17 March 2011 a notice of discontinuance of the amended cross-claim was filed on behalf of McGrath. Accordingly, neither McGrath nor Bowes now have any current cross-claims against Technology Leasing. CONSIDERATION 11 Accordingly, the current position is that McGrath and Bowes have withdrawn any defence to the allegations made against them in Technology Leasing's statement of claim filed on 9 June 2010. 12 The affidavit attaches a copy of the lease agreement. Such document includes the signatures of McGrath and Bowes as guarantors of TMAC's obligations under the lease. 13 The affidavit also calculates interest on the liquidated amount claimed. The total amount owing to Technology Leasing is the debt owing under the lease agreement ($60,174.67) plus interest ($9,026.19) totalling $69,200.86. Judgment is claimed for this amount against McGrath and Bowes pursuant to their guarantees contained in the lease agreement. 14 Order 35A of the Federal Court Rules ('the Rules') makes provision for the making of default judgments. Order 35A r 3(2) provides: (2) If a respondent is in default, the Court may: (a) … (b) if the claim against the respondent is for a debt or liquidated damages – grant leave to the applicant to enter judgment against the respondent for the debt or liquidated damages and, if appropriate: (i) costs: (A) in a sum fixed by the Court; or (B) to be taxed; and (ii) interest; or Subparagraph (c) continues: (c) if the proceeding was commenced by an application supported by a Statement of Claim or the Court has ordered that the proceeding continue on pleadings -- give judgment against the respondent for the relief that: (i) the applicant appears entitled to on the Statement of Claim; and (ii) the Court is satisfied it has power to grant; or (d) … 15 In this instance a statement of claim was filed and as a consequence of the withdrawal of the defence, there is no defence to the action on behalf of TMAC, McGrath and Bowes. 16 To be entitled to a default judgment pursuant to O 35A r 3(2) it is not necessary that the Court have proof of an applicant's claim, provided there is a claim for relief which the Court has jurisdiction to grant upon the face of the statement of claim: see Arthur v Vaupotic Investments Pty Ltd [2005] FCA 433; Australian Competition and Consumer Commission v 1Cellnet LLC [2005] FCA 856; Luna Park Sydney Pty Limited (ACN 102 907 184) v Bose [2006] FCA 94. That is, default judgment may be entered in such instances with minimal formality. 17 Both McGrath and Bowes, by the withdrawal of their defences, prima facie acknowledge liability to Technology Leasing. Based upon the above authorities and O 35A r 3(2), the Court is satisfied that the content of the statement of claim, the affidavit showing the debt and interest outstanding and the annexed lease agreement to the affidavit, entitles Technology Leasing to default judgment against McGrath and Bowes. 18 As to costs, the Court has power to award costs in the exercise of its discretion: see s 43(2) of the Federal Court of Australia Act 1976 (Cth). Indemnity costs may be awarded where a party has engaged in misconduct or inappropriate conduct in the course of litigation. As was observed by Rogers CJ Comm D in AWA Ltd v George Richard Daniels T/A Deloitte Haskins and Sells (unreported, No 50271 of 1991, NSWSC Comm D, 8 October 1992, BC9201567), misconduct or inappropriate conduct by a party in the course of litigation may warrant an order for indemnity costs. His Honour said: This could include deliberately delaying the proceedings by putting a knowingly false defence, or bringing proceedings for an ulterior motive… 19 When leave was granted by the Court on 10 November 2010 to allow TMAC, McGrath and Bowes to withdraw their defence, an order for costs was made. However, the costs order did not provide for any costs order against McGrath. 20 The Court will order McGrath to pay Technology Leasing's costs incurred in relation to McGrath's defence on an indemnity basis. 21 There has been no explanation provided why the defence was put before the Court by McGrath and Bowes or why it was withdrawn. Accordingly, the Court will order both McGrath and Bowes to pay the costs of Technology Leasing of this motion on an indemnity basis. I certify that the preceding twenty-one (21) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Cowdroy. Associate: Dated: 18 March 2011