Federal Court of Australia Benjamin Hornigold Ltd v John Bridgeman Limited (No 2) [2024] FCA 1041 File number(s): NSD 967 of 2023 Judgment of: NEEDHAM J Date of judgment: 10 September 2024 Catchwords: PRACTICE AND PROCEDURE – application by a sole director to represent a company where director is not a lawyer – exercise of the Court's discretion to waive compliance with r 4.01(2) of the Federal Court Rules (2011) Cth – where the applicant has not furnished the Court with significant evidence of the financial position of the company or its ultimate shareholders – where the applicant has not furnished the court with significant evidence of its ability to manage its case effectively – whether allowing a non-legally qualified party a limited grant of leave to advance a case is of utility to the Court – consideration of requirements of s 37M of the Federal Court of Australia Act 1976 (Cth) Held: application allowed in part – applicant granted leave to proceed without a solicitor in a limited way restricted to specific matters Legislation: Federal Court Rules 2011 (Cth) r 4.01(2) Cases cited: ACN 656 077 020 Pty Ltd v Li [2024] FCA 770 Aon Risk Services Australia Ltd v Australian National University (2009) 239 CLR 175 Australian Securities & Investments Commission v Axis International Management Pty Ltd (No 4) [2010] FCA 685 Molnar Engineering Pty Ltd v Burns (1984) 3 FCR 68 Shargrate Pty Ltd v .AU Domain Administration Limited [2002] FCA 657 Southcorp Brands v Australia Rush Rich Winery Pty Ltd and ors [2019] FCA 720; (2019) 369 ALR 299 Termi-Mesh Australia Pty Ltd v Josu Manufacturing Pty Ltd [1999] FCA 1241 Tobacco Control Coalition Inc v Philip Morris (Australia) Ltd and ors [2000] FCA 131 Division: General Division Registry: New South Wales National Practice Area: Commercial and Corporations Sub-area: Corporations and Corporate Insolvency Number of paragraphs: 41 Date of hearing: 5 September 2024 Counsel for the Plaintiff: Mr J Hynes Solicitor for the Plaintiff: Corrs Chambers Westgarth Counsel for the First Defendant: The First Defendant did not appear Solicitor for the Second Defendant: Kanther Law Counsel for the Third Defendant: Mr H Somerville Solicitor for the Third Defendant: William James Counsel for the Fourth Defendant: Mr P Aardoom appeared on behalf of the Fourth Defendant with leave of the Court ORDERS NSD 967 of 2023 BETWEEN: BENJAMIN HORNIGOLD LTD ACN 614 854 045 Plaintiff AND: JOHN BRIDGEMAN LIMITED ACN 503 477 185 First Defendant BRYAN RAYMOND COOK Second Defendant VINCENT ROY GORDON (and another named in the Schedule) Third Defendant order made by: NEEDHAM J DATE OF ORDER: 10 SEPTEMBER 2024 THE COURT ORDERS THAT: 1. Pursuant to r 1.34 of the Federal Court Rules 2011 (Cth), leave is granted to Peter Aardoom to carry on the proceedings on behalf of the fourth defendant otherwise than by a solicitor, limited to the following actions: (a) the filing of a Defence; (b) the filing of evidence on which the fourth defendant intends to rely at trial; and (c) filing any interlocutory application and supporting evidence seeking leave for Mr Aardoom to represent the fourth defendant after 19 December 2024. such leave to operate up to and including 19 December 2024, or until earlier order. 2. Any interlocutory application and supporting evidence as referred to in Order 1(c) above must be filed and served on or before 9 December 2024. 3. Any evidence upon which the fourth defendant intends to rely at trial must be filed and served on or before 9 December 2024. 4. Liberty to any party to apply on three days' notice. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011. REASONS FOR JUDGMENT NEEDHAM J: Procedural Background 1 In these proceedings the plaintiff, Benjamin Hornigold Ltd (BHL) seeks relief by way of Originating Process filed on 6 September 2023 and Statement of Claim filed 13 March 2024 against four defendants. 2 The first defendant is a company which was at one time the exclusive investment manager of BHL. The fourth defendant, JB Markets Pty Ltd (JBM), held an Australian Financial Services Licence and, as pleaded in the Statement of Claim, provided financial services to BHL as a representative of the first defendant. The first defendant is not represented in these proceedings. 3 The second and third defendants were, at various times, former directors of BHL. They are represented in these proceedings. 4 Mr Peter Aardoom was a director of BHL, and is the sole director of the fourth defendant. An ASIC search of JBM dated 8 March 2024 showed Prime Investment Management Services Pty Ltd as the sole shareholder of the company. There was no evidence as to the identity of the shareholders in that company before me, but its principal place of business is the same as Mr Aardoom's address in Queensland according to ASIC records attached to an affidavit from Mr Michael Catchpoole, affirmed on 4 September 2024 (Mr Catchpoole's affidavit). Further, as noted in [17] below, Mr Aardoom referred to JBM as "my company". 5 The matter has been docketed to me after being commenced before Markovic J and case-managed by Lee J. It has, as noted by counsel for the plaintiff in the case management hearing on 5 September 2024, just celebrated its first birthday. 6 One of the issues underpinning the delays in this matter has been the filing of purported Defences by the first and the fourth defendants without a grant of leave to do so without being represented by a lawyer. The procedural history of the matter is set out in Mr Catchpoole's affidavit but need not be repeated in detail here. 7 The issue before the Court is whether Mr Aardoom should be given leave to represent JBM in these proceedings without a lawyer as required by r 4.01(2) of the of the Federal Court Rules 2011 (Cth) (FC Rules) which provides: 4.01 Proceeding by lawyer or in person (1) a person may be represented in the Court by a lawyer or may be unrepresented. (2) A corporation must not proceed in the Court other than by a lawyer. 8 At the first case management hearing in this matter on 13 March 2024, Mr Aardoom sought to appear for JBM. Lee J and Mr Aardoom had the following discussion: HIS HONOUR: Do you intend to instruct legal representatives? MR AARDOOM: No. I will probably present myself. HIS HONOUR: Well, you've got no entitlement to present the case by yourself. A company appears by its solicitor. His Honour's statement is an accurate summation, in lay terms, of r 4.01(2) of the FC Rules. 9 Justice Lee granted Mr Aardoom leave to appear on 13 March 2024 on behalf of JBM "for the purposes of making orders today". 10 On 29 April 2024, a document was filed in the Registry headed "Defence of Fourth Defendant". This document was not filed by a lawyer, but by Mr Aardoom personally. 11 A third case management conference was held before Lee J at which Mr Aardoom was recorded as observing the proceedings by video link. At that hearing his Honour "made it clear … that the rules of the court provide that a corporation can only appear in this court by a lawyer, and in the event that they seek relief from the rules, they need to make an application". 12 Lee J ordered on 13 June 2024 that the "irregular document purporting to be [a] defence" filed by JBM be removed from the Court file. His Honour further noted in the orders of that date: A. The issue of representation of … the fourth defendant, [JBM], has been raised at case management hearings in March and April 2024, including the requirement under r 4.01(2) … Notwithstanding this, no notices of appearance have been filed by … the fourth defendant and the purported defence … filed by the … fourth defendant on 29 April 2024 are to be removed from the Court file in accordance with Order 1 above as irregular. B. The Court has informed … Mr Aardoom, director of the fourth defendant, of the necessity to obtain legal advice as to what steps they need to take in order to regularise the position. In the event that the positions of the first defendant and fourth defendant are not regularised, then it is open to the plaintiff to apply for default judgment. Interlocutory application 13 On 11 July 2024, Mr Aardoom emailed the Associate to Lee J, copying the other parties, attaching documents filed on 9 July 2024, including: (a) an interlocutory application seeking that he be allowed to represent JBM; and (b) A further purported Defence. 14 The case had been docketed to me on 10 July 2024, and so came before me for case management, and the return of the interlocutory application, on 5 September 2024. On that day I ordered, inter alia, that the further purported Defence be removed from the Court file. I granted leave for Mr Aardoom to represent JBM on the case management hearing. 15 Mr Aardoom sought the orders in his interlocutory application, in support of which he read an affidavit affirmed by himself of 8 July 2024 (Mr Aardoom's affidavit), and made oral submissions. Mr Hynes of counsel, instructed by Corrs Chambers Westgarth, appeared for the plaintiff and argued against the orders sought. The other represented parties – the second and third defendants – did not seek to be heard in relation to the interlocutory application. 16 In summary, Mr Aardoom relied on three matters. They were: (a) that JBM could not afford legal representation in what was to be a complex and lengthy proceedings; (b) that he was able to represent the company effectively; and (c) that JBM was a defendant to the proceedings and had not chosen to be a litigant. Lack of ability to afford legal representation 17 Mr Aardoom's affidavit dealt with this aspect in his affidavit as follows: 7. I state the following reasons for allowing me to represent my company: a. JBM underwent a small business restructure in September 2024 to allow it to eliminate mounting debts. b. The plaintiff in this case disrupted the SBR by claiming they were a creditor of JBM. c. After costly legal advice, and external compliance advise, the JBM appointed small business restructurer practitioner concluded that it was a bogus claim and ascribed nil value to the alleged claim by the plaintiff in this case. d. Although 6 of the 8 JBM creditors voted in favour of the SBR, one abstained and the ATO voted it down as they felt it was not a good commercial outcome for them, so the SBR was unsuccessful. At that stage JBM had run out of money. e. JBM had its AFSL suspended in Oct 2023 and cancelled on 12 April 2024.f. JBM has exhausted all the funds it had, to rebut the claims by the plaintiff during the SBR. It has unfortunately no reserves and funds to defend itself against this nefarious claim. 8. For the avoidance of doubt, JB Market's defence in this case is largely material and advice that was used during the defence of the plaintiff's claim during the JB Markets' SBR and which was produced by KL Gates and external compliance firm Ariel and Associates and on which JB Markets relies. JB Markets has paid for this advice and is using it. 9. Furthermore, I have extensive knowledge in this field. I have represented JB Markets successfully at AFCA and in the Supreme Court of Queensland in the past seven years, where not one case has been lost. JB Markets has taken extensive advice in the past and invested a lot of time, effort and funds on these cases, which were all frivolous actions .. 10. JB Markets is no longer in a position to expend more money on this current frivolous action. 18 Mr Aardoom's affidavit sets out in brief form his efforts to find pro bono assistance, and he annexes a letter from LawRight which indicated that, as at 5 July 2024 (some two months ago) LawRight "can still attempt to find legal assistance for you". Mr Aardoom indicated in oral submissions that attempts for representation had not been successful. 19 Mr Hynes, for the plaintiff, noted that apart from the statements in Mr Aardoom's affidavit as set out above, and his contentions as to the company's poverty from the Bar table, there was no evidence of the company not being able to afford representation. He pointed out that there was no evidence of the financial position of Mr Aardoom himself, as the sole director of the company, nor of the shareholder company or any other companies or persons which may sit behind JBM. He submitted that I could not be satisfied that the company was insufficiently solvent to ground the dispensation with r 4.01(2). Mr Aardoom's ability to represent the company 20 Mr Aardoom contended that he was in a good position to represent the company, relying on his Affidavit at [7] to [10] as extracted above at [17] above. 21 In oral submissions, he gave some more information about the kinds of cases in which he had been involved. He said he had been to AFCA in 39 cases, including against the plaintiff, and had "never lost one of them". 22 Mr Hynes submitted that there was nothing in the submissions which would give the Court comfort on this point, and that "bold assertions about abilities and experience" aren't made good in the evidence before the Court. JBM's role as defendant 23 It was submitted by Mr Aardoom that r 4.01 only applies to plaintiffs, not defendants, because defendants did not choose to be brought into proceedings and thus were vulnerable to what was described as being "held hostage" to a "frivolous" suit. 24 Mr Hynes submitted that the Court would not be assisted by a company represented by a lay person, given the likely delays that would entail and, it was submitted, the deleterious effect on the proper administration of justice (citing the well known principles in Aon Risk Services Australia Ltd v Australian National University (2009) 239 CLR 175 per French CJ, Gummow, Hayne, Heydon, Crennan, Kiefel (as her Honour then was) and Bell JJ). Exercise of the Court's discretion 25 As French J (as his Honour then was) said in Termi-Mesh Australia Pty Ltd v Josu Manufacturing Pty Ltd [1999] FCA 1241 (at [13]): The power of the Federal Court to grant leave to a corporation to carry on a proceeding otherwise than by a solicitor is conferred as an integral part of the Rules in Order 4, r 14 and Order 9, r 1. There is no threshold requirement of special or exceptional circumstances. 26 I adopt what was said by Dowling J in ACN 656 077 020 Pty Ltd v Li [2024] FCA 770 in consideration of the relevant principles. His Honour said (at [12] to [16], [18]): 12. The overarching policy of r 4.01(2) is clear. Ordinarily, a corporation, such as MLI, will be required to be represented by a lawyer: see Termi-Mesh Australia Pty Ltd v Josu Manufacturing Pty Ltd [1999] FCA 1241 at [13] and 5G Developments Pty Ltd (in liq) v Massie, in the matter of 5G Developments Pty Ltd (in liq) (No 3) [2021] FCA 1211 (Stewart J) at [14]. 13 Rule 1.34 of the Rules provides that the Court can dispense with any of its Rules. Whilst special circumstances are not required to dispense with the Rules, the Court must have some reason to do so: see Termi-Mesh at [13]. 14 The exercise of the Court's discretion to waive compliance with r 4.01(2) is to be exercised by reference to all relevant considerations: see Basetec Services Pty Ltd v CPB Contractors Pty Ltd (formerly Leighton Contractors Pty Ltd) [2017] FCA 510 (White J) at [8], Pharm-a-Care Laboratories Pty Ltd v The Commonwealth (No 12) [2012] FCA 289 (Flick J) at [18]. 15 In Termi-Mesh at [13]-[14], French J set out a number of relevant factors that should guide the Court's discretion to waive compliance with r 4.01(2): see also Cooper (Receiver), in the matter of Green Grain Processing Technologies Pty Ltd (Receivers Appointed) [2024] FCA 628 (O'Sullivan J). Those factors included: the financial capacity of the corporation and those standing behind it; the effect of diverting company resources to pay legal expenses; the nature of the company's undertaking and its financial structure; the corporation's ability to retain and pay its staff; the identity and spread of its shareholders; the factual complexities of the case; and the capacity of the proposed representative to conduct litigation effectively. 16 In Termi-Mesh, French J held at [14] that three considerations were decisive. They were: (a) The potential factual complexity of the case; (b) The failure to provide any detailed financial information about the company or those who stand behind it and their ability to engage legal representation; and (c) The obvious difficulty [the proposed representative] will have in dealing efficiently with the legal and factual issues involved. … 18. Additionally, I consider there are two further relevant factors: (d) The overarching purpose of civil practice and procedure under s37M of the Federal Court of Australia Act 1976 (Cth) to facilitate the proceeding as quickly, inexpensively, and efficiently as possible: see Basetec at [8(c)]; and (e) That when the company is a respondent a more liberal approach to the exercise of the discretion may be warranted: Termi-Mesh at [14] and Basetec at 8(g). Consideration 27 It is correct to say that the evidence of the precarious nature of JBM's ability to fund the proceedings is sparse, relying only on Mr Aardoom's evidence that that is so. No financial documents such as balance sheets or bank statements were produced, nor was there any indication of Mr Aardoom's personal finances, nor the financial position of the shareholder company. I am unable to say whether JBM is unable to fund a lawyer, or has significant wealth underlying it. Even accepting Mr Aardoom at his word, there is no information about any other sources of funds, for instance, himself or the shareholder. 28 Most of the cases which deal with impecunious companies being represented by persons rather than solicitors require some degree of evidence as to the state of the company's finances. An exception to that principle is found in Shargrate Pty Ltd v .AU Domain Administration Limited [2002] FCA 657, in which Sackville J reluctantly allowed representation of the applicant company by its sole director. The factors which overcame his Honour's reluctance to do so were that (a) the matter was an urgent duty matter and (b) the respondent, who was represented, did not object to that course. Additionally, the director was the second applicant in that case. His Honour said (at [3]): Cases of this kind are difficult enough to deal with at short notice without having the additional complications flowing from the fact that a corporate applicant seeking relief is represented by a non-legally qualified person: cf Molnar Engineering Pty Ltd v Burns (1984) 3 FCR 68; Termi-Mesh Australia Pty Ltd v Josu Manufacturing Pty Ltd [1999] FCA 1241. 29 Equally, the evidence that Mr Aardoom is an experienced and capable litigator despite not being a lawyer is not strong. The evidence that he had undertaken numerous cases is, again, only his word to that effect. No details of the various cases in which he had been involved were given. He did expand upon his affidavit evidence in his oral submissions, but when reminded that what he said from the Bar table was not evidence, did not appear to appreciate the distinction. While Mr Aardoom is clearly intelligent and has a commercial background, he was quick to use strong language such as the following passage from the transcript: Most of those cases were frivolous. They were misleading, they were nefarious. And some of them were classic insurance grabs, like this one, and it needs to be defended. 30 Mr Aardoom did not always grapple with the essence of questions posed to him from the Bench. However, his submissions were generally relevant, despite the occasional diversion into hyperbole or evidence from the Bar table, and the second purported Defence filed by him appears to engage with the Statement of Claim in an adequate manner. 31 Finally, while the submission that r 4.01(2) applies only to plaintiffs or applicants is clearly incorrect, there is authority that "a distinction may be drawn between the case in which the company in question is an applicant and that in which it is a respondent, and that in the latter case, it may be that a more liberal approach to the ground of leave is warranted." (See Australian Securities & Investments Commission v Axis International Management Pty Ltd (No 4) [2010] FCA 685 per Gilmour J at [8], citing French J (as his Honour then was) in Termi-Mesh). 32 Mr Hynes, for the plaintiff, drew my attention to the decision of Beach J in Southcorp Brands v Australia Rush Rich Winery Pty Ltd and ors [2019] FCA 720; (2019) 369 ALR 299 at [81] where his Honour acknowledged that any dispensation with the requirement for representation should be exercised cautiously, "but the guiding principle is the attainment of justice" (at [82]). The last three factors which his Honour pointed to were (at [82]): (f) whether a lack of disciplinary measures available against the proposed representative may affect the administration of justice; (g) the manner in which the case has progressed to date and the manner in which it may progress without the company having legal representation; and (h) whether the proposed representative is also a witness and, if so, whether they will properly be able to conduct the case of the company whilst also being a witness. 33 In relation to Beach J's factor (f), the question of whether the privileges granted to Mr Aardoom, not being a lawyer but filing documents and appearing before this Court as one, may be abused is not without some importance, given Mr Aardoom has twice filed a Defence without leave. He was on the second occasion clearly on notice that he was not entitled to do so. This is also relevant to Beach J's factor (g); the matter has progressed slowly to date, mainly (but in fairness not entirely) due to the two persons, including Mr Aardoom, purporting to act on behalf of the first and fourth defendants. 34 Finally, as to Beach J's factor (h), at this early stage it is impossible to say whether Mr Aardoom would be a witness for JBM. He is not joined as one of the directors of BHL, but appears in the pleading in his role as a "related party" to BHL and another company in the narrative (referred to in the pleading as JBFG). No relief is sought against him. Were he a significant witness in the proceedings, it would be difficult to see how he could advocate dispassionately for the company and give evidence as well. 35 In order to dispense with compliance with r 4.01(2), I must be satisfied that there is "sufficient reason" to do so: see Molnar Engineering Pty Ltd v Burns (1984) 3 FCR 68 (a decision of the Full Court) per Smithers, Sweeney and Keely JJ. I currently have only an outline of evidence on which to be satisfied that there is such sufficient reason. 36 However, against that, is the important principle of the position in which JBM would be found if no dispensation from the requirement for legal representation were given. Mr Aardoom characterised this an important case for JBM, and the relief sought is (presumably significant) damages, compensation, or equitable compensation (see paragraphs 142(s) to (w) inclusive of the Statement of Claim). It would leave the company – if what Mr Aardoom says about its ability to fund representation is correct – without the ability to defend itself. 37 As Willcox J said in Tobacco Control Coalition Inc v Philip Morris (Australia) Ltd and ors [2000] FCA 131 at [8]: For all the above reasons, if the question was whether I should grant leave in an open-ended way, the answer would be a resounding negative. I would not contemplate such a course. However, when the question becomes whether I should grant leave for a limited period and for a limited purpose, the answer is not so clear-cut. I think the issue is finely balanced. My mind has fluctuated somewhat during the argument. 38 I concur with Willcox J's conclusions that, in certain circumstances, allowing a non-legally qualified party a limited grant of leave to advance a case is of some utility to the Court. Likewise, I am sympathetic to his Honour's fluctuations of mind on the point. 39 Having weighed up all the factors, in particular the overarching purpose of the Federal Court Act in s 37M, and the fact that JBM is a defendant to these proceedings, and noting the scarcity of evidence in support of an open-ended order to dispense with the rule, I am of the view that I should only allow Mr Aardoom to carry on the proceeding without a solicitor in a limited way, restricted to the following matters: (a) the filing of a Defence; (b) the filing of evidence on which the company intends to rely at trial; and (c) filing any interlocutory application and supporting evidence seeking leave for Mr Aardoom to represent JMB after 19 December 2024. 40 The matter is again before me at 9.30am on 19 December 2024 for case management and the setting down of a hearing date. I will order that any interlocutory application by Mr Aardoom to continue representing JMB after that date be filed and served along with the evidence upon which JMB intends to rely at trial, by 9 December 2024. 41 The parties have liberty to apply, by email to my chambers, on three days' notice. That liberty may be exercised by Mr Aardoom if he seeks any variation to the above order to enable him to prepare the evidence for the fourth defendant, or if there are issues (as was raised at the hearing of the interlocutory application) in relation to discovery. That liberty may also be exercised by the plaintiff, should the conduct of the case by Mr Aardoom be such that I should review the orders made, or if it seems to the plaintiff that notwithstanding the above, it remains of the view that it should apply for default judgment as envisaged by Lee J on 13 June 2024. I certify that the preceding forty-one (41) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Needham. Associate: Dated: 10 September 2024 SCHEDULE OF PARTIES NSD 967 of 2023 Defendants Fourth Defendant JB Markets Pty Ltd