FEDERAL COURT OF AUSTRALIA Yeo (as liquidator), in the matter of Lyco Innovations Pty Ltd (in liq) v Onesteel Trading Pty Ltd [2013] FCA 568 Citation: Yeo (as liquidator), in the matter of Lyco Innovations Pty Ltd (in liq) v Onesteel Trading [2013] FCA 568 Parties: ANDREW REGINALD YEO AND GESS MICHAEL RAMBALDI (IN THEIR CAPACITY AS JOINT AND SEVERAL LIQUIDATOR OF LYCO INNOVATIONS PTY LTD (IN LIQUIDATION) and LYCO INNOVATIONS PTY LTD (IN LIQUIDATION) ACN 112 319 481 v ONESTEEL TRADING PTY LIMITED (ACN 007 519 646) File number: VID 279 of 2012 Judge: BROMBERG J Date of judgment: 9 May 2013 Catchwords: PRACTICE AND PROCEDURE – Failure to comply with Court orders – Costs incurred in dealing with failure to comply – whether lawyer should bear costs personally – order made for firm of solicitors to bear costs personally. COSTS – Costs incurred in dealing with failure to comply – whether lawyer should bear costs personally – order made for firm of solicitors to bear costs personally. Legislation: Federal Court of Australia Act 1976 (Cth) ss 37M, 37N(1), 37N(2), 37N(5), 43(3)(f) Date of hearing: 9 May 2013 Place: Melbourne Division: GENERAL DIVISION Category: Catchwords Number of paragraphs: 17 Solicitor for the Plaintiffs: Mr N Kitingan of Macpherson & Kelley Lawyers Counsel for the Defendant: Mr G McDonald Solicitor for the Defendant: Austcom Law IN THE FEDERAL COURT OF AUSTRALIA VICTORIA DISTRICT REGISTRY GENERAL DIVISION VID 279 of 2012 IN THE MATTER OF LYCO INNOVATIONS PTY LTD (IN LIQUIDATION) (ACN 112 319 481) BETWEEN: ANDREW REGINALD YEO AND GESS MICHAEL RAMBALDI (IN THEIR CAPACITY AS JOINT AND SEVERAL LIQUIDATOR OF LYCO INNOVATIONS PTY LTD (IN LIQUIDATION) First Plaintiff LYCO INNOVATIONS PTY LTD (IN LIQUIDATION) ACN 112 319 481 Second Plaintiff AND: ONESTEEL TRADING PTY LIMITED (ACN 007 519 646) Defendant JUDGE: BROMBERG J DATE OF ORDER: 9 MAY 2013 WHERE MADE: MELBOURNE THE COURT ORDERS BY CONSENT THAT: 1. Orders 3, 4, 5 and 7 of the orders made on 17 April 2013 be vacated. 2. On or before 17 May 2013 the plaintiffs file and serve an Amended Outline of Evidence of Mr Richard Lyons to include further particulars of the evidence: (a) about insolvency (par 3); (b) of the impact on the business (par 5); (c) of the relationship between the Company and the Defendant (par 5); (d) of the concerns expressed regarding the company (par 8); and (e) to include any further particulars of dates, periods or times that the plaintiff wishes to lead. 3. On or before 24 June 2013, the defendant file and serve an Outline of Evidence of each witness to be relied upon on all issues other than the issue of the date of the second plaintiff's insolvency. 4. On or before 8 July 2013, the plaintiffs file and serve any Outlines of Witness Evidence in reply. 5. The mediation listed for 21 June 2013 be vacated. 6. The proceeding be referred to a further mediation before Registrar Allaway on a date to be fixed in July or August 2013. 7. Should the matter not resolve at mediation: (a) on or before 26 August 2013, the plaintiffs file and serve any further outlines of witness evidence and any affidavit of an expert in relation to the date of insolvency of the second plaintiff upon which they intend to rely; (b) on or before 23 September 2013, the defendant file and serve any further outlines of witness evidence and any affidavit of an expert in relation to the date of insolvency of the second plaintiff upon which they intend to rely; (c) on or before 14 October 2013, the plaintiffs file and serve any witness statements or affidavit in reply; (d) fourteen days before trial, the plaintiffs file and serve a court book; (e) the matter be fixed for trial on an estimate of four days on a date to be fixed. 8. The solicitors for the plaintiffs (Macpherson & Kelley Lawyers) pay the defendant's costs of and incidental to the plaintiffs' failure to comply with order 3 of the orders made on 17 April 2013 and of today's appearance, on an indemnity basis. Those costs are fixed in the sum of $1200 (incl GST) to be paid within 14 days. AND THE COURT ORDERS THAT: 9. The solicitors for the plaintiffs (Macpherson & Kelley Lawyers) bear the plaintiffs' costs of and incidental to the plaintiffs' failure to comply with order 3 of the orders made on 4 February 2013 and order 3 of the orders made on 17 April 2013, including the costs of today's appearance. 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 279 of 2012 IN THE MATTER OF LYCO INNOVATIONS PTY LTD (IN LIQUIDATION) (ACN 112 319 481) BETWEEN: ANDREW REGINALD YEO AND GESS MICHAEL RAMBALDI (IN THEIR CAPACITY AS JOINT AND SEVERAL LIQUIDATOR OF LYCO INNOVATIONS PTY LTD (IN LIQUIDATION) First Plaintiff LYCO INNOVATIONS PTY LTD (IN LIQUIDATION) ACN 112 319 481 Second Plaintiff AND: ONESTEEL TRADING PTY LIMITED (ACN 007 519 646) Defendant JUDGE: BROMBERG J DATE: 9 MAY 2013 PLACE: MELBOURNE REASONS FOR JUDGMENT 1 In this matter I made an order on 4 February 2013 that on or before 8 March 2013 the plaintiffs file and serve an outline of the evidence of each witness to be relied upon at trial. The plaintiffs did not comply with the order made. The plaintiffs' solicitors Macpherson & Kelley Lawyers, were contacted by my Chambers on at least three occasions between 8 March 2013 and 17 April 2013. The contact made related to the failure of the plaintiffs to abide by the orders of the Court and also the failure of the plaintiffs' solicitors to file a Notice of Change of Solicitor. 2 By an email from my Chambers of 15 April 2013, the plaintiffs were informed that the proceeding would be listed for directions to deal with non-compliance with the Court's orders. On 17 April 2013, minutes of proposed consent orders were filed extending the time for compliance with the order requiring the plaintiff to file and serve an outline of evidence. I made an order on 17 April 2013 that, on or before 26 April 2013, the plaintiffs file and serve an outline of the evidence of Mr Richard Lyons which was to include specified particulars of the evidence to be relied upon. 3 That order was also not complied with. On 3 May 2013, my Chambers communicated with the parties to indicate that the matter would be listed for hearing today and the plaintiffs and its solicitors were put on notice that the Court would consider dismissing the plaintiffs' application by reason of the plaintiffs' failure to comply with the orders of the Court. 4 The matter was called on this morning and after hearing Mr Kitingan of Macpherson & Kelley Lawyers for the plaintiffs and Mr McDonald for the defendant, I stood the matter down. When the matter resumed, minutes of proposed orders were put before the Court. Those proposed orders dealt with timetabling matters and also proposed the following order: The solicitors for the plaintiffs (Macpherson & Kelley Lawyers) to pay the defendant's costs of and incidental to the failure to comply with order 3 of the orders made by his Honour, Bromberg J, on 17 April 2013, and the appearance at the directions hearing on 9 May 2013 on an indemnity basis. These costs are fixed in the sum of $1200 including GST to be paid within 14 days. 5 As I understand it, that order is proposed by consent. 6 Upon resumption of the matter, I raised with Mr Kitingan the question of who should bear the costs incurred by the plaintiffs' in relation to today's hearing including the costs of the preparation of the affidavit of Victoria Nomikos, a principal with Macpherson & Kelley Lawyers, who provided an affidavit which sought to explain the plaintiffs' non-compliance. That affidavit was made on 8 May 2013. 7 Mr Kitingan resisted an order that Macpherson & Kelley Lawyers should bear those costs rather than the plaintiffs. As I understand it, the first plaintiff is a liquidator and the second plaintiff is a company in liquidation. 8 The affidavit of Ms Nomikos concedes that the order made by me on 4 February 2013 for the filing and service of outlines of evidence by 8 March 2013 was not complied with. She states that there were difficulties in the plaintiffs complying with the order. Those difficulties are described as being primarily due to the acquisition by Macpherson & Kelley Lawyers of Ms Nomikos' former practice and because the person who had primary carriage of the matter was on maternity leave. She also refers to a miscommunication with counsel. The affidavit does not explain why no approach was made to the Court to avoid non-compliance, including by an application to extend the time for compliance. 9 It appears to me that no proper regard was given by Ms Nomikos to the potential for non-compliance and the fact that impending breaches of the Court's orders needed to be addressed. It further seems to me that it was only after a number of communications from my Chambers, including a warning as to the potential costs consequences of further non-compliance, that any useful steps were taken to try to regularise the position. 10 Despite those efforts, the order extending the time for compliance made on 17 April 2013, was again not complied with. Again, no application was made prior to the plaintiffs' non-compliance occurring to seek to extend the time for compliance. It seems again that it was not until further communications came from my Chambers that an application was made for the Court's orders to be varied to extend time for compliance. 11 Ms Nomikos' affidavit seeks to explain that the non-compliance with the orders I made on 17 April 2013 was the result of the unavailability of a witness. What her affidavit does not explain is why at a time prior to the plaintiffs' failure to comply with the order made, the Court was not approached to seek an extension of time for compliance in order to avoid the impending breach. 12 As a result of the matters to which I have referred, the plaintiffs have been required to attend Court to explain their failure to comply with the Court's orders. Insofar as the plaintiffs have incurred legal costs by reason of the need to explain and deal with the failure to comply with the orders of the Court (including the costs of today's appearance and the affidavit of Ms Nomikos), it seems to me that those costs ought to be borne by Macpherson & Kelley Lawyers. I see no reason why the creditors of the second plaintiff company in liquidation ought to bear those costs when the failure of Macpherson & Kelley Lawyers to approach the Court for orders extending the time for compliance with the Court's orders, seems to be the source for those costs being incurred. 13 If that had been done, I would not have called this matter on for hearing and the work involved in the preparation for the hearing, including the affidavit of Ms Nomikos, would not have been necessary. 14 Section 37M of the Federal Court of Australia Act 1976 (Cth) sets out the overriding purpose of civil practice and procedure. That overriding purpose includes the just resolution of disputes as quickly, inexpensively and efficiently as possible. Section 37N(1) provides that the parties to a civil proceeding before the Court must conduct the proceeding in a way that is consistent with the overarching purpose. A party's lawyer must, in the conduct of a civil proceeding before the Court, assist the party to comply with that duty: s 37N(2). Section 37N(5) provides that if the Court or a Judge orders a lawyer to bear costs personally because of the failure to comply with the duty imposed by s 37N(2), the lawyer must not recover the costs from his or her client. 15 Section 43(3)(f) of the Federal Court of Australia Act 1976 (Cth) provides that the Court may order a party's lawyer to bear costs personally. 16 I am satisfied that if steps had been taken by Macpherson & Kelley Lawyers to alert the Court of impending difficulties with the plaintiffs' capacity to comply with the Court's orders, non-compliance with those orders would have been avoided and today's hearing would not have been necessary. 17 It seems to me that in those circumstances Macpherson & Kelley Lawyers should bear the plaintiffs' costs of and incidental to the plaintiffs' failure to comply with order 3 of the orders I made on 4 February 2013 and order 3 of the orders I made on 17 April 2013. In addition to the orders dealing with further timetabling and the order proposed by consent to which I earlier referred, I will make an order to that effect. I certify that the preceding seventeen (17) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Bromberg. Associate: Dated: 12 June 2013