Federal Court of Australia Malecki v Macko (No 2) [2024] FCA 82 File number: SAD 142 of 2021 Judgment of: BESANKO J Date of judgment: 15 February 2024 Catchwords: PRACTICE AND PROCEDURE — application by the respondents for an order dismissing the proceeding under rr 5.23(1)(b), 5.22(c) and (d) of the Federal Court Rules 2011 (Cth) — where the first applicant failed to attend hearings and is in default — where the first applicant failed to prosecute the proceeding with due diligence — held an order for the dismissal of the proceeding should be made Legislation: Bankruptcy Act 1966 (Cth) s 116 Federal Court of Australia Act 1976 (Cth) s 31A Federal Court Rules 2011 (Cth) rr 2.16, 5.22, 5.23, 8.01, 11.01, 11.09, 16.21 Cases cited: Malecki v Macko [2022] FCA 766 Division: General Division Registry: South Australia National Practice Area: Other Federal Jurisdiction Number of paragraphs: 33 Date of last submissions: 25 September 2022 Date of hearing: 16 September 2022 Counsel for the Applicant: The Applicant did not appear Counsel for the Respondents: Ms T Flaherty Solicitor for the Respondents: WRP Legal & Advisory ORDERS SAD 142 of 2021 BETWEEN: ANDREW MALECKI Applicant AND: CHRISTOPHER EDWARD MACKO First Respondent MACKO CORPORATION PTY LTD (ACN 163 659 925) IN ITS OWN RIGHT AND AS TRUSTEE FOR THE MACKO CORPORATION TRUST Second Respondent order made by: BESANKO J DATE OF ORDER: 15 February 2024 THE COURT ORDERS THAT: 1. The proceeding dated 21 July 2021 be dismissed pursuant to rr 5.23(1)(b), 5.22(c) and (d) of the Federal Court Rules 2011 (Cth). Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011. REASONS FOR JUDGMENT BESANKO J: 1 This is an application for an order dismissing a proceeding on the basis of a failure to attend a hearing and/or a failure to prosecute a proceeding with due diligence under rr 5.23(1)(b), 5.22(c) and (d) of the Federal Court Rules 2011 (Cth) (the Rules). Under those Rules, such an order may be made where a party is in default for one or other or both of the circumstances identified. For the reasons which follow, the proceeding should be dismissed. 2 Alternative orders were sought in the application: an order for summary judgment under s 31A of the Federal Court of Australia Act 1976 (Cth) or an order striking out the Statement of Claim under r 16.21(1) of the Rules. In view of the conclusion I have reached in relation to the first order sought, it is not necessary for me to address the application insofar as it seeks these alternative orders. 3 The applicants in the proceeding were Andrew Malecki and Better Lending Pty Ltd (Better Lending). I say "were" because by order of the Supreme Court of South Australia made on 28 January 2022, Better Lending was wound up and Mr Peter Lanthois of Powell Duncan, an official liquidator, was appointed liquidator of Better Lending. On 18 August 2022, Better Lending discontinued the proceeding on terms (by consent) that there be no order as to costs. The remaining applicant is Andrew Malecki and it appears that a sequestration order was made against his estate on 17 December 2021. The respondents did not dispute that Mr Malecki's right of action in this proceeding, to the extent that he has one, is not property divisible amongst his creditors (Bankruptcy Act 1966 (Cth) s 116). 4 The respondents in the proceeding are Christopher Edward Macko and Macko Corporation Pty Ltd (Macko Corporation) in its own right and as trustee of the Macko Corporation Trust. They are the applicants in this application. 5 An affidavit of Mr Macko establishes that for a period of time until approximately April 2020, Better Lending was a mortgage manager engaged by Macko Corporation to manage loans and mortgages that Better Lending had placed on behalf of Macko Corporation. This involved loans by Macko Corporation to Better Lending or its clients and Better Lending managing the loan on behalf of Macko Corporation. The management of the loans involved the collection of interest by Better Lending, the deduction by Better Lending of its commission or fee and the forwarding of the net balance to Macko Corporation. According to Mr Macko, this did not always occur. Mr Macko said that the responsibilities of Better Lending included ensuring that the borrowers complied with the terms of the loans, including those terms dealing with the payment of interest. 6 The relationship between the parties deteriorated in 2019 and 2020 and was terminated by Macko Corporation. That company instituted proceedings in the District Court of South Australia resulting in judgments against Mr Malecki and Better Lending which ultimately led to the sequestration order against Mr Malecki's estate and the winding up order in relation to Better Lending. 7 There were then various publications by Mr Macko or Macko Corporation about the conduct of Mr Malecki and/or Better Lending, of which a lengthy email of complaint dated 23 June 2020 to the Australian Financial Complaints Authority forms an important part. The various publications by Mr Macko and Macko Corporation in turn form the basis of this proceeding wherein Mr Malecki claims damages against those parties for the publication of defamatory matter. 8 I turn now to Mr Malecki's conduct in this proceeding. 9 Mr Malecki has at all times appeared on his own behalf and when he did appear, I granted him leave, limited to the particular occasion, to appear on behalf of Better Lending. 10 In the Originating application and Statement of Claim, the applicants provided a telephone number, an email address of andrew@betterlending.com.au (the first email address) and an "Address for service of Suite 5, 9 Hackney Road Hackney SA 5069" (the Hackney Road address). In Notices of address for service filed at the same time in relation to each applicant, the "Place" address was identified as the Hackney Road address and the "email" address was identified as the first email address. In later documents filed by Mr Malecki, he referred to himself as being at an address at Carrickalinga, SA (the Carrickalinga address). 11 An Originating application starting a proceeding in the Court's original jurisdiction must contain an address for service (r 8.01(2)(b)) and an address for service must include the address of a place within Australia at which a document for a party may be left and to which a document may be posted (r 11.01(1)). Where a party is not represented by a lawyer and that party provides an email address, then that party is taken to agree to receive documents at that email address (r 11.01(5)). A party may change his or her address for service by filing a new notice (r 11.09(a); Form 28). A party's address for service must appear at the foot of each document filed by the party in the proceeding (r 2.16). 12 Mr Malecki's address for service were the first email address and the Hackney Road address and the last documents that he filed in the proceeding referred to those addresses. 13 On 25 July 2022, I delivered reasons on the Court's jurisdiction to hear the proceeding. I held that the Court had jurisdiction to hear the proceeding: Malecki v Macko [2022] FCA 766. At that time, a solicitor appeared on behalf of Better Lending in liquidation and on behalf of Mr Malecki's trustee in bankruptcy. Mr Malecki did not appear. An email had been sent by the Court to the first email address on 30 June 2022 advising of the hearing date and time and furthermore, an attempt had been made by the Court to contact Mr Malecki by telephone on the morning of the hearing. The telephone was not answered. The solicitor for the liquidator and trustee in bankruptcy advised the Court that they did not intend to press the claims. She said that neither the liquidator nor the trustee in bankruptcy had been able to contact Mr Malecki since the making of the sequestration order. The respondents appeared by counsel and counsel advised that the respondents accepted that Mr Malecki could pursue the proceeding despite the sequestration order and that she understood that Mr Malecki was ill and had been in hospital. The matter was adjourned to 2 August 2022. 14 On 2 August 2022, counsel for the respondents appeared as did a solicitor for Better Lending in liquidation. The solicitor for the liquidator sought further time for the liquidator to consider his position about whether to pursue the matters. Counsel for the respondents advised the Court that Mr Malecki was proving difficult to contact. The respondents had tried to contact him by the first email address, but the respondents had had no response. Counsel advised that the respondents had been informed that Mr Malecki had had surgery and had been ill. She referred to proceedings in the Supreme Court of South Australia and attempts to serve Mr Malecki in that matter. The Court was told that those proceedings involved an application for payment of monies out of court and of attempts to serve Mr Malecki at the Carrickalinga address. Orders for substituted service had been made in those proceedings. The matter in this Court was adjourned to 19 August 2022. 15 On 19 August 2022, counsel for the respondents appeared as did a solicitor for the liquidator. The liquidator had filed a Notice of discontinuance that morning and appeared in case the Notice had not been processed by the time of the hearing. I asked counsel for the respondents whether she was able to provide information concerning Mr Malecki's apparent non-involvement in this proceeding. Counsel for the respondents told me that she had been involved in many matters with Mr Malecki on the other side during the last two and-a-half years. She said that there had been a number of allegations by him in the Supreme Court, the District Court and the Federal Circuit Court of illness and of hospitalisation. Mr Malecki had put information before the Court about those things. Counsel told me that in relation to those other matters, communications had been sent to Mr Malecki at the first email address, but no responses had been received. Counsel for the respondents told me that the first email address is the company email address that he had which is no longer operative. She told me that that email account had been shut down. She told me that there was another email address relevant to Mr Malecki. With respect to the Hackney address, counsel told me that that was one of the trading addresses for Better Lending as well and that was no longer an address for service as the premises had been relet to another business. Counsel told me that in other proceedings, the respondents had attempted to serve Mr Malecki at the Carrickalinga address, but the premises had appeared vacant. 16 The solicitor for the liquidator told me that the liquidator had been seeking information and documents from Mr Malecki as the former director of Better Lending for some time. He told me that Mr Malecki had been prosecuted and convicted in proceedings instituted by the Australian Securities and Investments Commission (ASIC) for failing to cooperate with the liquidator. He told me that there were proceedings in the Supreme Court in which non-party discovery had been sought from Mr Malecki. The liquidator had sought orders for substituted service with respect to Mr Malecki. That included service at the Carrickalinga address and also via an email address that is not Better Lending's domain which was shut down by the liquidator "fairly shortly after his appointment". The solicitor told me that there had been a further attempt to serve Mr Malecki by service on his de facto partner. He told me that whilst service had been effected in those ways, there had been no engagement by Mr Malecki for as long as the solicitor had been involved in the matter. 17 At the conclusion of the hearing, I made the following orders: 1. The respondents issue any application for summary judgment or for dismissal on the basis of want of prosecution on or before 4:00pm on 5 September 2022. 2. The application in order 1 be listed for hearing or mention on Friday, 16 September 2022 at 9:00am. 3. The respondents give notice or make all reasonable attempts to give notice to the first applicant of these orders and file an affidavit of the notice or reasonable attempts as to notice and service of the application on or before 12:00pm on 15 September 2022. 18 On 8 September 2022, the respondents issued the application which is now before the Court. The application was supported by an affidavit sworn by Mr Macko. The evidence in that affidavit is referred to earlier in these reasons (at [5]–[7]). In addition, there is an affidavit of Mr Francesco Trimboli who is a solicitor employed by the firm of solicitors representing the respondents. 19 Mr Trimboli states that the solicitors acting for the respondents commenced acting for them in early February 2022. Mr Trimboli had a telephone conversation with a solicitor at the firm previously acting for the respondents. The solicitor advised Mr Trimboli that his office had been communicating with Mr Malecki via an email address of a.malecki@me.com (the second email address). On 31 August 2022, Mr Trimboli sent an email to my associate, with copies to Mr Malecki using both the first email address and the second email address. Mr Trimboli said that on 2 September 2022, he received a "bounce-back" email in relation to the first email address, but he did not receive a bounce-back email from the second email address. Mr Trimboli states that he did not receive any communication from Mr Malecki in relation to his email of 31 August 2022. 20 Mr Trimboli states that on 9 September 2022, he instructed a law graduate employed by the respondents' solicitors to serve by email on Mr Malecki the Interlocutory application dated 8 September 2022 and an affidavit of Mr Macko at both email addresses. The email is as follows: We refer to the above matter. We attach, by way of service, the following documents sealed by the Court: – Interlocutory Application; and – Supporting Affidavit of Christopher Edward Macko. We note that the matter is listed for mention on 16 September 2022 at 9:00 AM in Court Room 1, Level 5, 3 Angas Street, Adelaide SA 5000. 21 A bounce-back email was received in relation to the first email address, but not in relation to the second email address. 22 Mr Trimboli states that he also acts for Macko Corporation in Supreme Court proceedings CIV-21-008812. The parties in the Supreme Court proceedings are Better Lending Pty Ltd (In Liq) v Macko Corporation Pty Ltd In Its Own Right and As Trustee for The Macko Corporation Trust. Mr Darren Richard Coles Farley is an interested party in the Supreme Court proceedings. Mr Trimboli states that on 27 April 2022, he received an email from Mr Malecki in respect of the Supreme Court proceedings from the second email address. 23 On 29 July 2022, an Auxiliary Master of the Supreme Court made an order that the liquidator of Better Lending serve Mr Malecki with an application in that proceeding by substituted service by sending documents to the second email address, being an address that Mr Malecki had on previous occasions communicated with the Supreme Court and by ordinary post to Rosemary Farley at an address in Campbelltown, SA, a woman said to be the "on-again, off-again" domestic partner of Mr Malecki and by affixing the documents to the Carrickalinga premises. 24 Mr Trimboli states that on 14 September 2022, he instructed his executive assistant, Ms Nicole Wilson-Moore, to arrange hand delivery by Post Haste Couriers of a copy of the Interlocutory application and the affidavit of Mr Macko to Ms Farley at the above address. Mr Trimboli states that he is informed by Ms Wilson-Moore and believes it to be true that Post Haste Couriers attended at the address for Ms Farley on 14 September 2022 and that a woman answered the door, but refused to accept the documents. Ms Wilson-Moore told Mr Trimboli that the courier was instructed to place the documents in the letterbox at the Campbelltown address. 25 The matter came before the Court on 16 September 2022. There was no appearance by Mr Malecki. Counsel for the respondents appeared. She referred to the fact that I had been informed by the solicitor for the liquidator on the previous occasion that the Hackney address was no longer the business address and that the premises had been relet to another party. Counsel for the respondents handed up a Record of Outcome with the seal of the Supreme Court of South Australia showing that in the Supreme Court proceedings, there was a hearing on 30 August 2022 before a Master of that court. Counsel for the respondents appeared, as did a representative for the interested party, Mr Darren Richard Coles Farley. There is also a note that Mr Malecki appeared and the following was noted: Mr Malecki appears today. He received a copy of an interlocutory application seeking production of documents. He indicates that the documents recently provided to the applicant's solicitors are the documents in his possession that respond to the application. He will file an affidavit. The unresolved issue in this matter is the question of monies paid into the Suitors Fund. The applicant [Better Lending] went into liquidation after the payment in. The interested party says that the funds were provided by him and that the monies should be paid back to him. The liquidator denies that the interested party has any entitlement to the money. 26 Counsel for the respondents asked me to dismiss this proceeding for want of prosecution. She submitted, correctly, that this was the fourth occasion on which Mr Malecki had not appeared. She also submitted, again correctly, that it was Mr Malecki's proceeding and that it was up to him to update the Court file in relation to his address for service, including both a residential or a street address and an email address. She asked me to infer that Mr Malecki was choosing not to appear. I reserved my decision and suggested to counsel for the respondents that a further affidavit may need to be filed. 27 A further affidavit of Mr Trimboli sworn on 26 September 2022 was filed. Mr Trimboli deposed to Mr Malecki's appearance before the Supreme Court on 30 August 2022. He referred to the orders made by the Auxiliary Master to the effect that service in the Supreme Court could be effected by fixing a copy of the relevant documents to the Carrickalinga address, being Mr Malecki's last known residential address. He referred to the fact that Mr Malecki had filed an affidavit in the Supreme Court proceedings on 26 August 2022 and he produced the front page of that affidavit. He deposed that on 21 September 2022, he instructed the office administration assistant of the respondents' solicitors to send by express post, a copy of the Interlocutory application dated 8 September 2022 and affidavit filed in this proceeding to Mr Malecki at the Carrickalinga address. That was done. Mr Trimboli had not received any communication from Mr Malecki in respect of the proceeding at the time he swore his affidavit on 26 September 2022. 28 Part 5 of the Rules deals with the Court's supervision of a proceeding and includes the Court's powers (or at least some of them) to make orders where a party is in default. A party is in default in various circumstances and those circumstances include where the party fails to attend a hearing and where the party has failed to prosecute the proceeding with due diligence (r 5.22(c) and (d)) and the orders which may be made on the application of the other party include an order that the proceeding be dismissed. 29 I am comfortably satisfied, having regard to these matters, that Mr Malecki has not appeared at a hearing and has not prosecuted the proceeding with due diligence and that an order for the dismissal of the proceeding should be made. The proceeding is his proceeding. He has not corrected his address for service and he has failed to appear at a number of hearings. 30 The respondents filed two further affidavits after the hearing on 16 September 2022. 31 The first affidavit was an affidavit sworn by Mr Lanthois. I am satisfied on the basis of that affidavit that Better Lending ceased being a formal tenant of the Hackney Road premises in October 2020 and that the premises were sublet to a new entity. I am also satisfied that as a result of investigations carried out by the liquidator or his solicitors with respect to the Carrickalinga address, whilst that address was the address on the electoral roll for Mr Malecki, there was no other evidence that he was living there. I am satisfied on the basis of that affidavit that Mr Malecki's failure to cooperate with the liquidator was the subject of a report by the liquidator and action by ASIC. Mr Malecki was convicted in the Adelaide Magistrates Court of offences under ss 475 and 530A of the Corporations Act 2001 (Cth). I am satisfied that ASIC was unable to serve Mr Malecki personally with the criminal proceedings and that "a friend" of Mr Malecki accepted service on his behalf at the Carrickalinga address. I am satisfied on the basis of that affidavit that the proceedings in the Supreme Court involved an application by Better Lending prior to its liquidation to set aside a statutory demand that had been issued by Macko Corporation and that on 10 August 2021, Better Lending paid a sum of money into court as part of its application to set aside the statutory demand. However, Better Lending's application was never heard as the company was wound up on the basis of a different statutory demand. On 31 March 2022, the liquidator obtained orders in the Supreme Court proceedings that the monies paid into court be paid to him as liquidator of the company. Mr Malecki appeared by telephone on that date and told the Court that there was a third party interested in the funds in the court, being a person who had allegedly lent monies to the company in the first place. The Court's order was therefore stayed for 28 days so that the third party could make an application in respect of those funds. On 28 April 2022, an application was made by Mr Farley for an order that the monies in court be paid to him and he relied on a loan agreement allegedly entered into between him, Mr Malecki and the company. It then became clear to the liquidator that he needed access to the electronic records of the loan agreement prepared by Better Lending and/or Mr Malecki in respect of the alleged loan from Mr Farley. The liquidator made an application for non-party discovery of certain electronic documents from Mr Malecki. The liquidator's solicitors informed him that they had been unable to locate and serve Mr Malecki with the application. The liquidator then made an application for substituted service. The liquidator states that the grounds of his application included the following: (1) a process server engaged by the solicitors had attended the Carrickalinga address and formed the view that no one was living at that residence; (2) a process server made inquiries of a neighbour to the Carrickalinga address and was informed that she had never heard of Mr Malecki; (3) express post to the Carrickalinga address was sitting at the Normanville Post Office as uncollected; (4) an email sent to andrew@betterlending.com.au had bounced back as undeliverable; (5) there was no response from the email address a.malecki@me.com being an address that the Supreme Court held on record for Mr Malecki; and (6) Mr Farley in the Supreme Court proceedings had sworn an affidavit stating that his mother was in an "on-again, off-again" relationship with Mr Malecki and Mr Malecki still spends some time at his mother's address. On 29 July 2022, the Auxiliary Master made orders for substituted service and the liquidator is informed by his solicitors that Mr Malecki was served with the liquidator's application by serving the documents in the manner set out in the orders of 29 July 2022. The liquidator states that he has had no communication from Mr Malecki at all since the commencement of the liquidation of the company. He is aware from his solicitors that they have received an email from Mr Malecki from the email address a.malecki@me.com. 32 There was also an affidavit affirmed by the liquidator's solicitor. He outlines the actions taken with a view to obtaining the order in the Supreme Court for substituted service. He outlines the actions taken following the orders for substituted service. He states that on 26 August 2022, he received an email from Mr Malecki at the email address a.malecki@me.com referring to the solicitor's letter to him of 8 August 2022 and attaching the documentation, the subject of the company's application. On 5 September 2022, Mr Malecki filed an affidavit in the Supreme Court proceedings deposing to his compliance with the orders sought on the company's application. The address for Mr Malecki detailed on that affidavit is the Carrickalinga address. 33 This additional material adds to the conclusions I have already reached, although it is not strictly necessary for me to rely on it. I certify that the preceding thirty-three (33) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Besanko. Associate: Dated: 15 February 2024