Idameneo (No 123) Pty Ltd v Auzcare Pty Ltd (No 3)

1. [1]

   HER HONOUR: These proceedings relate to claims made by the plaintiff arising from breach of the terms of a deed of settlement and release which was entered into between the plaintiff and the defendant. This judgment involves two issues, firstly, whether the defendants should be granted an adjournment and secondly, whether the plaintiff is entitled to judgment against the defendants.

2. [2]

   The plaintiff is Idameneo (No 123) Pty Ltd. The first defendant is Auzcare Pty Ltd. (“Auzcare”). The second defendant is Muhammad Azam. The third defendant is Imrana Azam. The second defendant and third defendant are husband and wife respectively.

(1) The adjournment application

1. [3]

   On the first day of the hearing at 10.05 am all defendants were called three times outside court. They did not appear. The defendants have, by letter, sought an adjournment.

2. [4]

   On 31 January 2017, (the day before the hearing was to take place) the defendants emailed my associate. (Ex 1). Dr Azam (Mrs Azam in her statement corroborates her husband’s account) says:

3. [5]

   Attached to Dr Azam’s letter is a medical report. Dr Khalid Zaman says:

4. [6]

   Counsel for the plaintiff opposes the application for adjournment on five bases. Firstly, he submitted that the defendants are in contempt of Court as they have not paid the sum of $7,000; secondly, the defendants have had numerous opportunities to put on evidence and they have not done so; thirdly, it offends the case management principles set out in Aon v Risk Services Australia Ltd v Australian National University [2009] HCA 27; 239 CLR 175; fourthly, Dr Azam’s evidence on the adjournment is insufficient; and finally, the allegations in their defences do not disclose any real defence.

5. [7]

   I shall briefly examine the recent procedural history.

The Court directions and orders

1. [8]

   These proceedings have been before the Court on at least 20 occasions.

2. [9]

   On 10 October 2014, the matter came before Adams J who made the following orders:

3. [10]

   On 7 November 2014, the matter again came before Adams J who made the following orders.

4. [11]

   On 5 February 2015, the matter came before Hidden J for the determination of whether the deed of settlement executed by the parties was void, in whole or in part, as a penalty. Hidden J reserved his decision.

5. [12]

   On 9 September 2015, Hidden J handed down his written reasons for decision and a copy of the judgment was emailed to the parties. His Honour found that in all the circumstances, the relevant clauses of the settlement deed did not amount to a penalty.

6. [13]

   On 1 October 2015, the matter came before the Registrar for directions. The Registrar noted the defendants were in Pakistan and stood the matter over to 6 October 2015.

7. [14]

   On 6 October 2015, when the matter came before the Registrar, there was no appearance for the defendants. The Registrar made orders regarding the filing and serving of both parties’ evidence and listed the matter for hearing on 7 March 2016, with a time estimate of three days and ordered the plaintiff notify the defendants of the orders.

8. [15]

   On 12 October 2015, the defendants filed a summons seeking leave to appeal the decision of Hidden J.

9. [16]

   On 12 November 2015, the matter was listed before the Registrar. There was no appearance by the defendants. The Registrar ordered:

10. [17]

    On 14 December 2015, Hidden J made orders in accordance with paragraph 1 and 2 of the document entitled Judgment/Order signed by the parties, dated 4 December 2015. The terms of the orders were:

11. [18]

    On 14 December 2015, the application for leave to appeal was heard by the Court of Appeal. On 18 December 2015, the Court of Appeal delivered judgment and made the following orders:

12. [19]

    On 25 February 2016, the matter was listed for directions before the Registrar. Mr Bryne appeared for the defendant. There was no appearance on behalf of the plaintiff and the matter was stood over to 26 February 2016.

13. [20]

    On 26 February 2016, this matter was referred to the duty judge, Campbell J heard the defendant’s application to vacate the hearing date of 7 March 2016. His Honour in his ex tempore judgment made the following orders:

14. [21]

    On 9 April 2016, this matter was listed for hearing on 6 September 2016 with an estimate of three days before me.

15. [22]

    On 19 April 2016, the matter was listed before the Registrar for directions who made orders that:

16. [23]

    On 29 April 2016, the matter came before the Registrar. Mr Gray appeared for the plaintiff. There was no appearance on behalf of the defendants. The Registrar made the following orders:

17. [24]

    On 26 May 2016, by consent Fagan J dismissed the plaintiff’s notice filed 22 April 2016 and reserved costs.

18. [25]

    On 17 June 2016, the defendants’ application for special leave, in relation to the separate determination as to penalty, to the High Court was refused.

19. [26]

    On Friday, 2 September 2016, the defendants’ solicitor emailed my associate advising that she had recently been retained by the defendants and was in the process of taking instructions and requested an adjournment.

20. [27]

    On Monday, 5 September 2016, the second defendant Muhammad Azam emailed my associate relevantly stating:

21. [28]

    My associate emailed Dr Azam advising him that as he was legally represented he should raise his concerns with his solicitor.

22. [29]

    On 6 September 2016 at 7.03 am, Dr Azam emailed my associate stating:

23. [30]

    On 6 September 2016, Dr Azam attended the hearing unrepresented. Mr Shariff of counsel appeared for the plaintiff. I granted an adjournment and relisted the matter before myself on 1 February 2017 for the three day hearing. I relevantly ordered that:

24. [31]

    The defendants did not serve any affidavit evidence.

25. [32]

    On 4 November 2016, the proceedings were listed for directions before Davies J. Dr Azam appeared by telephone conference from Brisbane. Davies J ordered:

26. [33]

    The defendants did not comply with these orders.

27. [34]

    On 29 November 2016, the matter was listed before the Registrar for directions. The Registrar relevantly ordered the defendants to file and serve any evidence in response to Idameneo’s notice of motion filed 21 November 2016 by 8 December 2016 and Idameneo’s notice of motion seeking summary judgment was listed before the duty judge for hearing on 12 December 2016.

28. [35]

    On 2 December 2016, the matter was listed for directions before Davies J who confirmed the hearing date of 12 December 2016.

29. [36]

    On 12 December 2016, Idameneo’s notice of motion came before N Adams J who made orders that:

30. [37]

    On 14 December 2016, N Adams J varied order (3) and extended the time for payment to no later than 8 January 2017.

31. [38]

    A mediation has taken place but was unsuccessful. To date the sum of $7,000 for costs has not been paid. The defendants have still not filed any evidence. They have breached numerous court timetables.

The legal principles in relation to adjournments

1. [39]

   Counsel for the plaintiff referred to ss 56, 57 58 and 66 of the Civil Procedure Act 2005 that relevantly read:

2. [40]

   In Hamod v State of New South Wales [2011] NSWCA 375, the Court of Appeal reviewed the principles to be considered in deciding whether an adjournment should be granted. The trial judge had refused an adjournment by a self-represented litigant part way through the hearing. The Court of Appeal referred to Aon and stated “In Aon, the Court was dealing with the rules of the Supreme Court of the ACT”, they are similar to those of the Supreme Court of New South Wales.

3. [41]

   Their Honours continued at [139] to [145]:

Conclusion – adjournment application

1. [42]

   It is my view that the defendants have had numerous opportunities to put on evidence to support their amended defences but they have not done so. The defendants’ application for adjournment is unsatisfactory. Dr Azam should have provided updated evidence as to his medical condition. The medical certificate was dated 30 December 2016 and stated that Dr Azam would be able to travel overseas four weeks after treatment. That period elapsed on 27 January 2017, prior to the hearing date, yet no updated medical evidence was furnished. The second and third defendants did not rely on sworn or affirmed affidavit evidence, nor was a motion filed seeking an adjournment prior to the hearing, yet Dr Azam had followed this procedure when he was granted an adjournment by me on 6 September 2016. The defendants have not paid the $7,000 despite the time for payment being extended. However, most importantly, in my view the defendants’ defences have no chance of success. I shall examine the defences in more detail shortly. Taking all of these circumstances into account, it is my view that justice between the parties is best served if the application for the adjournment is refused. Hence, I refuse the adjournment.

(2) Whether the plaintiff is entitled to judgment against the defendants

1. [43]

   The plaintiff’s claim relates to repayment of a debt of $800,000, plus interest, which was acknowledged and agreed to be payable in clause 2(a) of the deed of settlement and release (“settlement deed”). The question of whether this debt amounts to a penalty was determined in the plaintiff’s favour by Hidden J in Idameneo (No 123) v Auzcare [2015] NSWSC 1318 and by the Court of Appeal in Auzcare Pty Ltd v Idameneo (No 123) Pty Ltd [2015] NSWCA 412 (“Idameneo”). In Idameneo, the Court of Appeal at [20], [28] and [31] stated:

2. [44]

   On 17 June 2016, the defendants’ application for special leave to the High Court of Australia, in relation to the penalty decision, was refused.

The factual issues

1. [45]

   The factual circumstances that give rise to the plaintiff’s claim are mostly common ground.

2. [46]

   In 2004, the Springwood property was sold without notice to Idameneo. The Calamvale property is about to be sold by National Australia Bank. Hence, Idameneo is no longer seeking possession of these properties.

3. [47]

   The plaintiff is a company duly incorporated and able to sue in and by its corporate name and the lessee of medical centre premises at Oxley, Queensland (“the centre”).

4. [48]

   The plaintiff’s usual business is the provision of suitable medical centre premises, administrative and other services to licensed medical practitioners. The second defendant Dr Azam is a general medical practitioner and the sole director and secretary of the first defendant. The first defendant is a company duly incorporated and able to be sued in and by its corporate name. The third defendant Mrs Azam is the wife of Dr Azam.

5. [49]

   Prior to 21 August 2012, the first defendant owned and conducted a medical practice at premises at Springwood, Queensland. (“the practice”).

6. [50]

   On about 22 August 2012, the plaintiff entered into an agreement with the first and second defendants whereby, in consideration of the plaintiff paying to the first defendant $800,000 (‘the purchase price”), the plaintiff acquired the practice and a promise Dr Azam would (through the first defendant) render medical services from the centre. (“the sales agreement”). The sales agreement was signed by the plaintiff and Dr Azam for and on behalf of himself and the first defendant.

7. [51]

   On 22 August 2012, the plaintiff entered into the services agreement with the first defendant whereby the first defendant agreed to procure Dr Azam to render medical services from the centre (“the services agreement”). The services agreement was signed by the plaintiff and the first defendant. Also on that day, the plaintiff and Dr Azam entered the performance guarantee, whereby Dr Azam guaranteed the first defendant’s obligations to the plaintiff (“the performance guarantee”). The sales agreement, services agreement and performance guarantee are referred to as “the original agreements”.

8. [52]

   On 23 August 2012, the plaintiff paid the sum of $800,000 to first defendant by way of electronic funds transfer.

9. [53]

   Despite the terms of the original agreements and the payment of the $800,000 purchase price by the plaintiff, the first defendant and Dr Azam failed, refused or neglected to perform the terms of the original agreements.

10. [54]

    On 29 October 2012, the plaintiff commenced proceedings against the first and second defendants seeking that the defendants repay the sum of $800,000 for breach of the deed of settlement. The statement of claim was amended to join the third defendant Mrs Azam.

The settlement deed

1. [55]

   On about 15 April 2013, in order to resolve the proceedings, the plaintiff entered into an agreement with the first, second and third defendants (“the settlement deed”). Whereby, in consideration of the plaintiff not immediately enforcing its rights against the defendants, the defendants each acknowledged that they were jointly and severally indebted to the plaintiff in the sum of $800,000 (“the debt”). Each agreed to repay the debt should the settlement deed be breached by ay of the defendants.

2. [56]

   The relevant terms of the settlement deed include that:

3. [57]

   Importantly, in clause 2(c) of the settlement deed, the parties agreed that the amended agreements would be incorporated into the settlement deed. Clause 9.3 of the deed entitled “Sale of Practice” (as amended and incorporated into the settlement deed) and also clause 9.3 of the deed entitled “Provision of Services to Incorporated Medical Practitioner” (as also amended and incorporated into the settlement deed), Idameneo was able to terminate the amended agreements and, in turn, enforce its rights of recovery of the debt for breach of the settlement deed on the happening of any of the following events.

4. [58]

   There have been two breaches of the terms of the settlement deed. The first is that between April 2013 and January 2014, Auzcare, through Dr Azam, failed to comply with the amended agreements by failing to render medical services as agreed and in turn breached the settlement deed. Pursuant to the settlement deed and the amended sale deed, Dr Azam was to render medical services from the centre leased by the Idameneo at Victoria Point, Queensland (“the centre”) for not less than 45 hours per week for 48 weeks per financial year. The period commencing 9 April 2013 and ending 11 February 2014 inclusive comprises 44 calendar weeks and one day, that is to say, 44.2 calendar weeks. The hours report records that during those 44.2 weeks, Dr Azam rendered medical services from the centre for a total of 1,385.65 hours (436.85 hours in FYE2013 and 948.80 hours in FYE2014) which is an average of 31.4 hours per week (1,385.65 hours/44.2 hours). (Aff, Brewer, 9 February 2016, [6] and 8]). In other words, Dr Azam did not work the required 45 hours per week. For 44.2 weeks he only worked 31.4 hours.

5. [59]

   The second breach of the agreement is that on 20 January 2014, a condition was imposed on Dr Azam’s medical registration that is different to the one referred to in clause 2(f) of the deed. As from 20 January 2014, Dr Azam was not to consult, assess, examine or treat females. (CB2.225 EX A(2)). The imposition of the condition meant that from 20 January 2014 onwards Dr Azam was unable to see female patients that attended the Victoria Point Centre and was in turn, in breach of the settlement deed.

6. [60]

   The first and second defendants breached the original agreements (as amended). In particular they breached clauses 4.2(b), (c) and (d) of the sales agreement and clauses 5.1(b), 5.3(a), 5.3(b) and 7.4 of the services agreement.

7. [61]

   On 14 February 2014, Idameneo terminated the amended agreements.

The pleading in the defences

1. [62]

   By defence filed 24 October 2014, Auzcare and Dr Azam admit that:

2. [63]

   However, the Medical Board imposed this condition on Dr Azam’s registration to practice before he filed his defence. His allegation is contrary to the evidence.

3. [64]

   Apart from the argument in relation to the condition, Auzcare and Dr Azam have admitted that Idameneo is entitled to recover $800,000 from them, jointly and severally.

Mrs Azam’s position

1. [65]

   By amended defence filed 5 November 2014, Mrs Azam appears to admit executing the settlement deed (para 4) but states that she “has extremely limited command and understanding of the English language (the language Issue) and was at no time invited to seek legal advice in relation to the settlement deed” (“the representation issue”).

2. [66]

   In relation to the language issue, Mrs Azam has neither filed nor served any evidence to support her assertion that she has an “extremely limited command and understanding of the English language” despite being ordered to serve her evidence on many occasions. The only evidence before this Court is her letter supporting her husband’s application for an adjournment which is in English and well written.

3. [67]

   In relation to the representation issue, Mrs Azam was at all times represented by a solicitor when the original deeds were signed during the original proceedings and when the settlement deed was signed by the parties.

4. [68]

   In any event, irrespective of the pleading of the language issue and the representation issue, Mrs Azam set out her understanding of the settlement deed in her amended defence (para 6). Her understanding includes that the “$800,000 can be recovered in its entirety by the Plaintiff as a debt in the event of a breach by any of the Defendants of the Settlement Deed” Hence, by her defence, Mrs Azam was aware of the effect of the settlement deed, at least in so far as it related to Idameneo’s claim to recover the $800,000 debt owed to it by the defendants in the event of a breach of the settlement deed.

Conclusion – whether the plaintiff is entitled to judgment against the defendants

1. [69]

   I am satisfied that Dr Azam breached the settlement deed by firstly, not working the hours he was contractually obliged to work; and secondly, by having the condition imposed on his medical registration. Therefore the defences raise no arguable issues and should be dismissed. The debt can be recovered against the first and second defendants and against Mrs Azam. John Houston, a director of Idameneo, deposes (Aff, 8/2/2017 [3]) that having reviews the books and records of Idameneo, none of the defendants have made any payment in respect of the debt of $800,00 upon which Idameneo sues in these proceedings. The defendants are liable to pay Idameneo the sum of $800,000. I enter judgment accordingly.