FEDERAL COURT OF AUSTRALIA Jiangyin Yinying Goods and Materials Trade Co. Ltd v Australia Victoria Capital Pty Ltd [2012] FCA 274 Citation: Jiangyin Yinying Goods and Materials Trade Co. Ltd v Australia Victoria Capital Pty Ltd [2012] FCA 274 Parties: JIANGYIN YINYING GOODS AND MATERIALS TRADE CO. LTD v AUSTRALIA VICTORIA CAPITAL PTY LTD (ACN 146 080 908) and SHA ZOU File number: VID 770 of 2011 Judge: GRAY J Date of judgment: 29 February 2012 Legislation: Competition and Consumer Act 2010 (Cth) s 82 Federal Court of Australia Act 1976 (Cth) ss 51A, 52 Federal Court Rules 2011 rr 4.05(1), 5.22(a)-(d), 5.23(2)(b)-(c), 10.11, 10.32(c), 16.07(1)-(2), 39.06 Trade Practices Amendment (Australian Consumer Law) Act (No. 2) 2010 (Cth) item 6 of Sch 7 Trade Practices Act 1974 (Cth) ss 52, 75B, 82 Date of hearing: 29 February 2012 Place: Melbourne Division: GENERAL DIVISION Category: No Catchwords Number of paragraphs: 20 Counsel for the applicant: Mr N Wood Solicitor for the applicant: HenleyLegal Lawyers Solicitor for the respondents: Mr F Lin as agent of Wang Fang & Co Legal Pty Ltd IN THE FEDERAL COURT OF AUSTRALIA VICTORIA DISTRICT REGISTRY GENERAL DIVISION VID 770 of 2011 BETWEEN: JIANGYIN YINYING GOODS AND MATERIALS TRADE CO. LTD Applicant AND: AUSTRALIA VICTORIA CAPITAL PTY LTD (ACN 146 080 908) First Respondent SHA ZOU Second Respondent JUDGE: GRAY J DATE OF ORDER: 29 FEBRUARY 2012 WHERE MADE: MELBOURNE THE COURT ORDERS THAT: 1. Judgment be entered for the applicant against the second respondent. 2. The second respondent pay to the applicant damages in the sum of $479,285.15, together with interest on that sum at the rate specified in r 39.06 of the Federal Court Rules 2011 from time to time, from 9 November 2010 until the date of entry of judgment. 3. The second respondent pay the applicant's costs of the proceeding. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011. IN THE FEDERAL COURT OF AUSTRALIA VICTORIA DISTRICT REGISTRY GENERAL DIVISION VID 770 of 2011 BETWEEN: JIANGYIN YINYING GOODS AND MATERIALS TRADE CO. LTD Applicant AND: AUSTRALIA VICTORIA CAPITAL PTY LTD (ACN 146 080 908) First Respondent SHA ZOU Second Respondent JUDGE: GRAY J DATE: 29 FEBRUARY 2012 PLACE: MELBOURNE REASONS FOR JUDGMENT 1 By an originating application filed on 13 July 2011, the applicant claimed against two respondents damages pursuant to s 82 of the Competition and Consumer Act 2010 (Cth), or alternatively money had and received, an order rescinding a contract to purchase coal, interest and costs. The reference to the Competition and Consumer Act 2010 (Cth) was in fact erroneous. By item 6 of Sch 7 of the Trade Practices Amendment (Australian Consumer Law) Act (No. 2) 2010 (Cth), the Trade Practices Act 1974 (Cth) ("the Trade Practices Act") continues to apply after 1 January 2011 to acts and omissions that occurred prior to that date. The statement of claim that accompanied the originating application makes allegations of conduct that occurred in October and November 2010. The error is of no consequence because, in relevant respects, the provisions of the legislation were the same by whichever title the relevant Act was called. 2 Initially, there was some doubt about whether service had been effected properly on the second respondent to the proceeding. At the first directions hearing on 27 July 2011, I ordered that the respondents file and serve notices of appearance and referred the proceeding to a registrar for mediation. I adjourned the directions hearing to 25 October 2011. The record kept by the Court demonstrates that the respondents did not attend at the time appointed by the registrar for the conduct of the mediation. In due course, the matter came before me on 30 November 2011, when I gave directions for the making by the applicant of any application for judgment in default, and adjourned the directions hearing to 13 December 2011. 3 On 8 December 2011, a notice of address for service on behalf of the first respondent was filed by Mr Fang Wang of Wang Fang & Co Legal Pty Ltd, legal practitioners in Sydney. No notice of address for service had been filed at the time in respect of the second respondent. When the matter came before me on 13 December 2011, I was advised that the first respondent, a corporation incorporated in Australia, had in fact been removed from the register of corporations and therefore no longer existed. The solicitor who had filed a notice of address for service on behalf of the first respondent attended the directions hearing on 13 December 2011 by telephone conference. He indicated that he acted for the second respondent. I therefore ordered on 13 December 2011 that the second respondent file and serve a notice of address for service on that day. I also ordered that she file and serve a defence on or before 31 January 2012, and adjourned the directions hearing to 29 February 2012. 4 The second respondent complied with the first of those orders. On 13 December 2011, Mr Fang Wang on behalf of Wang Fang & Co Legal Pty Ltd filed a notice of address for service on behalf of the second respondent. That notice of address for service included an email address at which documents could be served on the second respondent. 5 The second respondent has failed altogether to comply with the order that she file a defence by 31 January 2012. Accordingly, on 22 February 2012, the applicant filed an application seeking judgment in default for damages in the amount claimed in the statement of claim, together with interest and costs. This application was listed for hearing today, 29 February 2012. 6 On 24 February 2012, Wang Fang & Co Legal Pty Ltd communicated with the Court and the solicitor for the applicant by email. They advised that they were aware of the listing for directions on 29 February 2012. The email said: We advise that we have lost contact with our client, the Second Defendant [sic] in the above matter. Since the last court date, we had two telephone conversations with our client who has always been in China; the last time was about two weeks ago, when our client indicated that she would come back to Sydney soon and would give further instructions to us as to the conduct of the matter. However, she has failed to contact us and given [sic] us instructions up to the date of this letter. Her mobile phone was switched off, and our emails to her have not been replied [sic]. Therefore, we intend to ask leave from the court to file Notice of Ceasing to Act on 29 February 2012. 7 Because Mr Fang Wang had been involved in the directions hearing on 13 December 2011 by telephone conference, yesterday my associate twice attempted to telephone him to find out whether he intended to appear at this directions hearing today. Both of those attempts failed. The telephone number rang out. There was no answering machine, so it was not possible to leave a message. At approximately 8.45 pm yesterday evening, an email was sent by Mr Fang Wang to the Victoria District Registry of the Court, requesting that he be able to appear at this directions hearing by telephone conference. When I was so informed this morning, I instructed my associate to tell him that, as we had no person available to set up a telephone conference in the Court, I would not be able to make that facility available to him. 8 After the proceeding was called on for directions, Mr Feng Lin came to the bar table and indicated to me that Mr Fang Wang had requested him to appear as agent, for the purpose of inviting the Court to grant leave to Wang Fang & Co Legal Pty Ltd to cease to act for the second respondent. After some discussion, I drew Mr Lin's attention to r 4.05(1) of the Federal Court Rules 2011 ("the Federal Court Rules"). That rule sets out the requirements with which a lawyer must comply in order to cease to act, so far as the court record is concerned. Those requirements are that the lawyer must serve on the party a notice of intention of ceasing to act in accordance with form 7 and, at least seven days after serving that notice, must file a notice of ceasing to act in accordance with form 8. There appears to be no provision in the rules by reference to which it would be open to me to grant leave to a legal practitioner to cease to act for a party to a proceeding, so far as the court record is concerned. Accordingly, I have not made such an order. 9 Once the second respondent filed her notice of address for service on 13 December 2011, the effect of r 10.11 was that the originating application was taken to have been served personally on her, at least on the filing of her notice of address for service. As to service of the application for judgment in default, I have the affidavit of Emily Kok, sworn on 27 February 2012. She says that she forwarded all of the relevant documents to Wang Fang & Co Legal Pty Ltd by email at the email address contained in the second respondent's notice of address for service. By virtue of r 10.32(c) of the Federal Court Rules, such service by email is taken to have been effective service on the day after the document was sent. I am therefore satisfied that service of the proceeding has been effected. 10 Rule 5.22 of the Federal Court Rules provides for the circumstances in which a party is in default. Such default occurs if the party fails to: (a) do an act required to be done or to do an act in the time required by the rules; or (b) comply with an order of the Court; or (c) attend a hearing in the proceeding; or (d) prosecute or defend the proceeding with due diligence. It is clear that the second respondent is in default in complying with an order of the Court, being the order that she file and serve her defence by 31 January 2012. She is also in default by failing to attend the directions hearing in the proceeding today. The effect of the failure to comply with the order to file a defence is also that the second respondent has failed to defend the proceeding with due diligence. The fact that she has resisted attempts by the legal practitioner acting for her in the proceeding to assist her to comply with the order, suggests the absence of due diligence on her part. 11 Rule 5.23(2) provides for the orders that the Court may make if a respondent is in default. They include, under para (b), an order for a debt or liquidated damages with interest and costs or, under para (c), in a proceeding that was started by an originating application supported by a statement of claim, an order giving judgment against the respondent for the relief claimed in the statement of claim to which the Court is satisfied the applicant is entitled. Although the interlocutory application filed by the applicant seeks judgment under para (b), in truth, the appropriate power is that found in para (c), to give judgment for relief claimed in the statement of claim. 12 In approaching that question, I apply r 16.07 of the Federal Court Rules. Subrule (1) of that rule requires a party pleading to an allegation of fact in another party's pleading to admit or deny specifically every allegation of fact in the pleadings. Subrule (2) provides that allegations that are not specifically denied are taken to be admitted. It is therefore open to the applicant to rely on deemed admissions of all the facts pleaded in the statement of claim. Those facts are as follows. 13 The applicant is a company duly incorporated in the People's Republic of China. The first respondent, as I have said, was a company duly incorporated in Australia. The second respondent was a director of the first respondent. In October 2010, the second respondent on behalf of the first respondent represented to the applicant that the first respondent: was a company rich in sourcing the supply of coal; had controlling interests in a coal mine; was able to source, sell and export coal to the applicant; and was able to deliver coal to the applicant on time. In reliance on the representations, the applicant signed an agreement with the first respondent on 24 October 2010, by which the first respondent was to deliver 45,000 tonnes of coal to the applicant for a total consideration of US$3,982,500. The agreement further provided that the first respondent must deliver the coal to the applicant between 15 November and 15 December 2010. 14 On 9 November 2010, pursuant to its obligation under the agreement, the applicant paid to the first respondent a deposit of RMB4,520,000 million, which converts to AU$672,404. The payment was made to the second respondent who received it on behalf of the first respondent. The first respondent accepted the deposit. The first respondent failed to deliver any coal or to perform the agreement at all. In June 2011 by various emails, the second respondent admitted personal liability for the agreement and for repayment of the deposit and, on 14 June 2011, promised to guarantee personally all losses of the applicant. 15 On or about 21 June 2011, the second respondent remitted the sum of AU$50,000 to the applicant as part return of the deposit. On 8 July 2011, the second respondent remitted a further sum of RMB1,000,000 or AU$143,118.85 to the applicant as part return of the deposit. The balance outstanding therefore is the sum of AU$479,285.15. 16 At the time when the representations were made, the respondents knew them to be untrue, or alternatively made them recklessly, without caring whether they were true or false. By making the representations, the first respondent engaged in conduct which was misleading and deceptive, and therefore a contravention of s 52 of the Trade Practices Act. The second respondent induced that contravention and was knowingly concerned in and a party to that contravention, and was therefore a person involved in it for the purposes of ss 75B and 82 of the Trade Practices Act. By reason of the contraventions of the Trade Practices Act by the first and second respondent, the applicant has suffered loss and damage being the loss of the outstanding balance of the deposit. The representations were made in trade and commerce. 17 So far as they related to future matters, the representations were misleading in that there were no reasonable grounds to claim that the first respondent would be able to comply with them. There were no reasonable grounds for the first respondent to claim: to be a company rich in sourcing the supply of coal; to have controlling interests in a coal mine; to be able to source, sell and export coal to the applicant; or to be able to deliver coal to the applicant on time. The applicant relied on each of the representations in making the payment to the first respondent. As a result, the first respondent engaged in conduct which was misleading and deceptive and a contravention of s 52 of the Trade Practices Act. The second respondent was a person involved in that contravention. Loss and damage to the applicant resulted from that contravention. On this basis, I am satisfied that the applicant is entitled to the relief sought, namely damages in the sum of $479,285.15, together with interest and costs. 18 With respect to interest, the requirement to award interest on a judgment for a sum of money appears in s 51A of the Federal Court of Australia Act 1976 (Cth) ("the Federal Court Act"), which requires the Court to include in the sum for which judgment is given interest at such rate as the Court thinks fit for the period between the date when the cause of action arose and the date as of which judgment is entered. The rate of interest is not specified. By s 52 of the Federal Court Act, a judgment debt carries interest from the date on which the judgment is entered at such rate as is fixed by the rules of court, or at such lower rate as the Court determines. The prescribed rate for the purposes of s 52 is specified in r 39.06 of the Federal Court Rules. In respect of each six-month period from 1 January to 30 June or 1 July to 31 December in any year, the rate is 6% above the cash rate last published by the Reserve Bank of Australia before the period commenced. The rate therefore varies from time to time, but can be calculated. In the circumstances, it seems to me appropriate that I should adopt that rate as the appropriate rate of interest for the period from 9 November 2010, when the applicant paid the deposit, until the date of entry of judgment. 19 The application for interlocutory orders did indicate that the applicant sought an order for costs on an indemnity basis. Counsel for the applicant properly abandoned that application in the course of the hearing. 20 For these reasons, the orders that I make are that: 1. Judgment be entered for the applicant against the second respondent. 2. The second respondent pay to the applicant damages in the sum of $479,285.15, together with interest on that sum at the rate specified in r 39.06 of the Federal Court Rules 2011 from time to time, from 9 November 2010 until the date of entry of judgment. 3. The second respondent pay the applicant's costs of the proceeding. I certify that the preceding twenty (20) numbered paragraphs are a true copy of the reasons for judgment herein of the Honourable Justice Gray. Associate: Dated: 22 March 2012