ACN 057 690 034 Pty Limited v Wykrota

Pre-trial directions hearings before Emmett AJA

1. On 20 November 2018, the associate to Emmett AJA sent an email to the parties, listing the matter for directions on 28 November 2018. On 27 November 2018, Mr Wykrota replied, "Thanks", using the email address referred to at [13]. Whilst Mr Wykrota said that he only became aware that the matter was listed before Emmett AJA on 28 November 2018 because he was already at Court that day in relation to other proceedings, this is not consistent with the contemporaneous documents which indicate that Mr Wykrota was informed of the listing by Emmett AJA's Associate on 20 November 2018, and acknowledged receipt of the email on 27 November 2018, the day before the directions hearing.
2. On 28 November 2018, Mr Wykrota appeared in person before Emmett AJA. Mr Wykrota informed his Honour that, given the meeting in February 2018 described at [25], he had not thought it necessary to defend the proceedings nor instruct a lawyer. Further: I did the work for Mr Lee Tuan which company is listed there. I completed work in 20[0]9. I obtained an interim occupation certificate because he didn't pay certain amounts of money. I said, well, it was not my responsibility to obtain final construction certificate because I only supply the certificates for the work which I did and I supervised. The plaintiff observed that, at no time during the directions hearing, did Mr Wykrota suggest that the building contract was with anyone other than him.
3. His Honour enquired of the plaintiff's counsel as the relief sought. Ms Cohen advised that, although specific performance had been sought, the plaintiff was now claiming damages as it had achieved the issue of an occupation certificate through the use of consultants. Damages was also sought for loss of rent. His Honour enquired whether the statement of claim needed to be amended or whether the damages now sought were adequately particularised. Ms Cohen explained that particulars of the damages were now to be found in the affidavits, but was unclear as to the total amount sought.
4. His Honour asked whether Mr Wykrota now understood the claim against him and asked what his answer to it was. Mr Wykrota again relied upon the agreement said to have been reached at the February 2018 meeting. Given the apparently substantial amount of damages sought, his Honour suggested in strong terms that Mr Wykrota obtain legal representation. Mr Wykrota said he would. His Honour indicated he would bring the matter back for directions before the end of the year to give Mr Wykrota time to do so. In addition, Emmett AJA directed the plaintiff to provide a detailed schedule of the claim for damages to be served on anybody who filed an appearance. The matter was stood over for further directions on 13 December 2018. On 29 November 2018, Emmett AJA's Associate sent an email to the parties confirming the orders which had been made.
5. On 6 December 2018, the plaintiff filed a schedule of damages, which was served on Mr Wykrota on 7 December 2018. The schedule listed 20 items. In respect of each item, a description was given together with the date when the loss was said to have been incurred, a reference to Mr Le's affidavit where evidence in support of the item could be found, the amount claimed and the payee, where applicable. The bulk of the items were expenses incurred in 2018, apparently in the course of obtaining the necessary certifications to support the issue of an occupation certificate. The largest item was lost rent of some $171,375.
6. On 7 December 2018, Mr Wykrota filed a notice of appearance "for defendant". On 13 December 2018, Mr Wykrota appeared in person before Emmett AJA for directions. Ms Cohen confirmed that the schedule of damages had been filed. The following exchange ensued between Emmett AJA and Mr Wykrota: HIS HONOUR: You've seen the claim? DEFENDANT: Yes, your Honour. I had a[n] advice from my solicitor and they couldn't take the case, and for that case I have to spend $25,000 …. This is bogus claim. I had an agreement. There is no further damage occurring to the plaintiff because he obtained an occupation certificate. If I have to I will ask for postponement on the hearing and lodge the defence, but I'm hoping that they will get some sense and will drop the case. Sorry for being-- HIS HONOUR: Well-- DEFENDANT: --stressed, but that's the case … HIS HONOUR: Well, why-- DEFENDANT: --if you give us to January, because the - my solicitor who is going to represent me is involved in case to 29 January. HIS HONOUR: The case is fixed for 28 February, I think. DEFENDANT: I understand that, but we'll ask for - we'll make the application for postponement if I can-- HIS HONOUR: Well-- DEFENDANT: Need, need the time with my solicitor. HIS HONOUR: It's fixed for hearing at the moment and-- DEFENDANT: I understand, I understand. I apologise for, for the chaotic approach, but I don't believe that this is a genuine case … …I would like - I would like to ask you to give me till early February, like, the - to organise myself and-- HIS HONOUR: Well, I gave you until today and-- DEFENDANT: Yes, I, I, I spoke to my solicitor … I'm not lying, I'm just trying to organise myself, that stressing situation, because I don't have a - money to spend on this, I lost a lot of money on this project and these people are really very unreasonable. They obtained a[n] occupation certificate by now with my cooperation and everybody, it was not my responsibility to give them occupation certificate in first place because when I took the job they didn't have a construction certificate… … the person who is pivotally in this everything is Mr Angelo [D'Ambrosio], who is the engineer who asked me to do this job, I did it for the small quote … On this application, the plaintiff again observed that at no time did Mr Wykrota suggest that the building contract was with anyone other than him.
7. His Honour indicated that he would list the matter for directions on 6 February 2019 and advised Mr Wykrota that any application to vacate the hearing would have to be dealt with then. Mr Wykrota advised that his lawyer was in another case from 29 January 2019 but, "I'll talk to him and try to lodge the application to postpone the case as soon as I can".
8. On 6 February 2019, there was no appearance by Mr Wykrota before Emmett AJA. His Honour confirmed the hearing on 28 February 2019.

Pre-trial communications with the Associate

1. On 27 February 2019, Emmett AJA's Associate sent an email to the parties confirming the hearing on 28 February 2019. Mr Wykrota replied, Please be inform that i am very sick and not able to be in Court tomorrow.
2. Later that day, Mr Wykrota sent a further email to Emmett AJA's Associate attaching a medical certificate and advised: I am very sorry but i can not be in Court tomorrow pleaswe pas my apologies to Justice Emmett
3. Attached was a certificate of incapacity for work issued by a medical doctor that day in respect of Mr Wykrota, declaring him unfit for work from 28 February 2019 until 15 March 2019 by reason of "acute viral illness". Emmett AJA later observed, "The certificate made no reference to any incapacity to attend Court": ACN 057 690 034 Pty Limited v Wykrota at [8]. On this application, Mr Wykrota's solicitor accepted that the medical certificate was unsatisfactory. That concession was rightly made.
4. His Honour's Associate replied by email shortly afterwards, It should not be assumed that the hearing will not proceed.

The hearing

1. On 28 February 2019, there was no appearance for Mr Wykrota. Ms Cohen informed his Honour that it had come to her attention that an application for voluntary deregistration of Arrowfab had been filed on 1 July 2018 and the fee had been paid on 27 February 2019 but, "in any event, the plaintiff is seeking a judgment against Mr Wykrota because that was the person he always dealt with. He received invoices from the second defendant but paid most of the money to the third defendant by way of progress payments". The following exchange followed: (emphasis added) HIS HONOUR: Are you proceeding just against Mr Wykrota or against the second and third defendants, or what? COHEN: Well, we're happy to proceed against Mr Wykrota rather than the second and third. HIS HONOUR: Well, it's a matter for you. COHEN: It's not disputed by the defendant that it was he that entered into the building contract. HIS HONOUR: Well, I have the statement of claim, but first of all, what steps do I need to satisfy myself that Mr Wykrota was aware of the hearing today? … Whilst Mr Wykrota was the first defendant, he was referred to in the transcript by both Ms Cohen and his Honour as simply "the defendant".
2. Mr Wykrota relied heavily on the italicised portion as an assurance by the plaintiff's counsel on the basis of which Emmett AJA proceeded thereafter and was misled. The plaintiff says there is nothing misleading about what Ms Cohen informed his Honour given that no defence had been filed and, also, Mr Wykrota's remarks to the Court on 28 November 2018 and 13 December 2018 set out at [36] and [40].
3. Sometime was then spent by Emmett AJA and Ms Cohen examining evidence of service of the statement of claim, affidavits and schedule of damages on Mr Wykrota. The affidavits of Mr Le and the expert valuer were then read. His Honour was then taken to the schedule of damages, which totalled $260,296.85. It is clear from the transcript that his Honour proceeded to check each of the evidentiary references in the schedule to see whether the head of damage claimed was supported by the evidence. His Honour was not prepared to allow Item 10, which sought an estimated amount of $15,000 for opportunity costs for loss of time taken in 2018 to obtain outstanding certificates and other requirements necessary to obtain the issue of an occupation certificate. His Honour also queried Items 13 and 16 (building inspection report in 2014 and unblocking toilets due to defective work).
4. Particular difficulties were encountered with Item 20 - lost rent - as Emmett AJA was concerned whether there was evidence to support the claim. His Honour observed: HIS HONOUR: I mean, the fact that Mr Wykrota hasn't chosen to come is one thing, but if I proceed in his absence and make a judgment, he's entitled to come and ask for the judgment to be set aside. COHEN: Yes. HIS HONOUR: But whether it would be is a different matter, but it seems to me it would be in everybody's interest, if there is proper evidence of these things, for me to be able to do that, rather than have Mr Wykrota come back next week or some other time and say, "I now want to have another go, and there was no real evidence to support these claims". COHEN: Yes. HIS HONOUR: It's in the plaintiff's interest to make sure we can tie it up, if we can.
5. After his Honour raised a number of evidentiary and legal issues in respect of the claim for lost rent, Ms Cohen asked Emmett AJA to stand the matter down to enable her to consider the evidentiary and legal problems raised. His Honour adjourned the hearing until 2.15 pm to enable counsel to do so. At 2.15 pm, Ms Cohen made further submissions in respect of the evidence and applicable legislation in respect of the claim for lost rent. Ms Cohen advised that she was trying to get an affidavit from a real estate agent to address concerns expressed by Emmett AJA as to the demand for rental properties at the time. His Honour observed that the claim for lost rent appeared to be in the nature of a loss of opportunity case but, unless the plaintiff could show that there was actually a tenant who would have been able to move in, the claim would need to be discounted by some 25% to 30%. The transcript records: HIS HONOUR: That's why it seems to me I have to put a very substantial discount on it unless you want - as I say, I'm not inviting you to adjourn the matter. COHEN: Yes, I'll get some instructions. … COHEN: My client's happy for you to put a discount on it on that basis.
6. It then became apparent that the figure claimed in the schedule of damages for lost rent was incorrect and should have been $339,992.52, not $171,375. His Honour noted that the higher figure had not been provided to Mr Wykrota. HIS HONOUR: … One course that I could adopt would be to say, well, that clearly represents a discount, and therefore, that's an appropriate figure to give you. COHEN: That's a very big discount. HIS HONOUR: It is. COHEN: Obviously.
7. A search was then made of the transcript of the directions hearing on 28 November 2018 to see whether Ms Cohen had informed the Court, and thus Mr Wykrota, on that occasion that the damages claimed exceeded the amount subsequently particularised in the schedule of damages. In the absence of any clear communication of the quantum sought on that occasion, the following exchange followed: HIS HONOUR: On that basis I'd find it difficult to … go beyond the figure that's served. COHEN: I'll just get some instructions. HIS HONOUR: Yes. COHEN: My client's prepared to accept that.

The judgment

1. His Honour then delivered an ex tempore judgment. His Honour observed at [1]: The plaintiff seeks damages from the first defendant, Mr Mick Wykrota, alleging that Mr Wykrota committed breaches of a building contract entered into between the plaintiff and Mr Wykrota. There are two other defendants, each of which is a limited liability company associated with Mr Wykrota. However, the plaintiff does not seek to proceed further against the second and third defendants. That is, Emmett AJA did not ignore the fact that the plaintiff had pleaded a cause of action against each of the defendants, but noted that the plaintiff had chosen to press only its primary claim against Mr Wykrota.
2. His Honour's judgment then addressed the question of service and Mr Wykrota's knowledge that the matter was listed for hearing today, concluding at [9]: …It is clear that Mr Wykrota was aware of the hearing fixed for today but has elected not to attend. In the circumstances, I consider that it is appropriate to proceed with the hearing in his absence. He will no doubt have a right under the rules to apply to have any order set aside that was made in his absence. That will be a matter for him if he is so advised. If he wishes to have any order that I make set aside, he will be required to indicate precisely why he was not in attendance today when the matter was called on for hearing.
3. His Honour then reproduced the pertinent paragraphs of the statement of claim and noted that no defence had been filed. At [11]: …It follows in effect that the allegations made in the statement of claim are admitted. Nevertheless, having regard to the amounts claimed and the absence of Mr Wykrota, I have given some attention to the quantum of the plaintiff's claim for damages.
4. In respect of the claim for damages, Emmett AJA was, "satisfied from that evidence that the expenses referred to in the Schedule of Damages have in fact been incurred by the plaintiff as a consequence of breach of the building contract by Mr Wykrota": at [12]. Nonetheless, his Honour disallowed Items 10, 13 and 16. As to Item 20, Emmett AJA set out the difficulties with the claim for lost rent, including that Mr Wykrota was informed that the claim was for $171,375, "and has had no forewarning that the claim would be for $339,994". His Honour considered that the head of damage should be assessed on the basis of a loss of opportunity and, given that the amount claimed in the schedule of damages was "certainly a substantial discount from the full amount of the claim, I consider that that is an appropriate measure of the loss of opportunity in the present circumstances": at [18]. Further, his Honour was satisfied that Mr Wykrota had breached his obligation to produce an occupation certificate and that there was a causal connection between that breach and the lost opportunity to let the premises: at [20]. Thus, his Honour was prepared to enter judgment against Mr Wykrota in the amounts claimed in the schedule of damages save for Items 10, 13 and 16.
5. The transcript then records the following exchange: HIS HONOUR: Now, what about the other defendants, Ms Cohen? COHEN: They've never appeared. One doesn't exist. HIS HONOUR: Do you want [to] proceed, or should I simply otherwise dismiss the proceedings? COHEN: Otherwise dismiss the proceedings.
6. His Honour completed his ex tempore judgment accordingly, at [22]. Ms Cohen then sought to rely on a further affidavit (which I apprehend was the affidavit awaited from the real estate agent), but his Honour was not prepared to have regard to the further affidavit as it had not been served on Mr Wykrota. Final orders were thus made as follows: 1. I direct the entry of judgment for the sum of $244,896.85 against Mr Wykrota. 2. I order Mr Wykrota to pay the plaintiff's costs in the proceedings. 3. I order that the proceedings be dismissed as against the second and third defendants.
7. The second defendant has been deregistered. According to the records of the Australian Securities and Investments Commission, the de-registration took effect on 12 December 2018.

Explanation for absence and delay

1. Mr Wykrota says that, although he was aware of the hearing before Emmett AJA, he did not appear as he had shingles and was in great pain.
2. Further, Mr Wykrota said that since about November 2014, he had been involved in a dispute with a former joint venture partner in relation to a property development at Wheeler Heights. In 2017, proceedings were commenced by purchasers of Lot 3 in the proposed sub-division against his joint venture partner and Mr Wykrota was joined as a cross-defendant. In addition, since 2017, Mr Wykrota had been involved in various proceedings concerning the Polish Club. One of those proceedings was heard at the Court on 29 to 31 January 2019, 1, 6, 22 and 26 to 28 February 2019, thus overlapping with the hearing in this matter on 28 February 2019.
3. In addition, Mr Wykrota says that the effect of "all of this litigation" had taken a toll on his mental and physical health and he had not been able to properly focus on any one thing and was being treated for depression. It is not clear whether Mr Wykrota was affected by depression at the time of the hearing before Emmett AJA or subsequently.
4. In addition, Mr Wykrota said, "I did not find out about the judgment made against me … until June or July 2019 …".

Enforcement action

1. On 9 July 2019, the plaintiff sought to enforce the judgment by filing a motion seeking the issue of a writ for the levy of property against Mr Wykrota. A writ was issued by the Court on 10 July 2019. The writ was recorded against properties owned by Mr Wykrota in Dural, North Narrabeen and Wheeler Heights. Efforts to record the writ on a property in Willoughby failed due to other caveats lodged on title. On 10 July 2019, the Office of the Sheriff of NSW sent a letter to Mr Wykrota advising of pending enforcement action on the judgment.
2. At the time that the writ was issued, Mr Wykrota had already exchanged contracts to sell Lot 3 in the Wheeler Heights subdivision. The purchasers had lodged a caveat on title in respect of their interest under the contract of sale. On 18 July 2019, Mr Wykrota consented to an order for specific performance of the contract: Day v Sternhell [2020] NSWSC 513 at [7].
3. On 23 August 2019, Sheriff Officers attended at Mr Wykrota's address. The Sheriff later reported in a Notice of Non-Levy: Sheriff's officers attended the given address and made enquiries with the occupant who identified himself as "Matt" and was very evasive. Officers were then able to identify the occupant as the judgement debtor. The judgement debtor argued with officers that there is a dispute with regard to the debt. … While in attendance, Officers made an assessment and concluded that it would be unlikely that a seizure of the available goods and chattels would justify their removal, storage and sale in order to satisfy the judgement debt. The Office of the Sheriff of NSW issued a Notice of Non-Levy.
4. On 19 December 2019, a notice of appointment of solicitor was filed on behalf of Mr Wykrota in these proceedings. Mr Wykrota says that he had instructed a solicitor to apply to set aside the judgment but was unable to place the solicitor in funds as he was awaiting completion of sale of Lot 3 of the Wheeler Heights property.
5. On 20 December 2019, a lapsing notice was served on the purchasers of Lot 3 at the request of the plaintiff. The purchasers filed a motion on 23 December 2019 seeking an order to extend the caveat, which was extended by consent: Day v Sternhell at [16]. On 13 January 2020, Mr Wykrota's solicitor contacted the plaintiff's solicitor, requesting the urgent removal of the plaintiff's application to record a writ over the Wheeler Heights property so that sale of Lot 3 could be completed.
6. On 11 February 2020, Mr Wykrota's solicitor enquired of the plaintiff's solicitor, "Could you please tell me what you believe your client is owed pursuant to the Judgement [sic], calculated to date?". This information was duly provided. In addition to the judgment debt and post-judgment interest, the plaintiff sought payment of its costs of the proceedings together with legal costs incurred in seeking to enforce the judgment which, together with the judgment and interest, amounted to some $346,000. The plaintiff's solicitor sought payment in full from the proceeds of sale although, if the costs were not accepted, noted that the plaintiff's costs could be submitted for assessment.
7. On 6 March 2020, consent orders were made in respect of the Wheeler Heights property to withdraw caveats and writs in order to permit registration of a plan of subdivision for the property. On 10 March 2020, sale of Lot 3 was completed. The net proceeds of sale were paid to the registered mortgagee. Thus, Mr Wykrota says he did not receive funds from which to pay his solicitor to apply to set aside the judgment. The plaintiff lodged a writ over the remaining two lots in the Wheeler Heights property.
8. Mr Wykrota also says that, shortly after the completion of the sale of Lot 3, the COVID-19 pandemic hit, although it is not clear how this affected his ability to bring an application to set aside his Honour's judgment.
9. On 30 April 2020, Mr Wykrota exchanged contracts to sell Lot 1 in the Wheeler Heights sub-division for $2.1 million. The registered mortgagee was owed some $1.35 million, which Mr Wykrota intended to pay from the proceeds of sale. Thus, Mr Wykrota could expect to receive some $750,000 on completion of the sale of this property.
10. Mr Wykrota says that in June and July 2020 he was involved in other proceedings in this Court.
11. On 22 June 2020, Mr Wykrota's current solicitors sent a letter to the plaintiff advising that they intended to bring this application and, on 30 June 2020 wrote again proposing to pay $250,000 from settlement of the sale of Lot 1 into court pending the resolution of these proceedings. Obviously, without reaching some agreement with the plaintiff such that the plaintiff withdrew the writ, Mr Wykrota would not be able to complete the sale of the property.
12. On 3 July 2020, a bankruptcy notice was issued to Mr Wykrota on the application of the plaintiff, claiming $268,382.41, being the amount of the judgment debt together with interest under section 101 of the Civil Procedure Act 2005 (NSW). On 9 July 2020, Mr Wykrota's solicitors proposed to deposit $270,000 into Court if the writ lodged by the plaintiff over Lot 1 was removed pending determination of the motion to have the judgment set aside. The plaintiff did not consent to this course. On 4 August 2020, the motion to set aside the judgment was filed. On 6 August 2020, on the undertaking of Mr Wykrota to pay $270,000 from the proceeds of sale of Lot 1 into Court, Kunc J removed the writ of execution over the property. The sale of Lot 1 was completed on 11 September 2020 and the money paid into Court.

Was judgment irregularly obtained?

1. Mr Wykrota contends that the judgment was given "irregularly" as deemed admissions arising from failure to file a defence did not support the judgment, relying on Fenato v Chief Commissioner of State Revenue (2010) 78 NSWLR 20; [2010] NSWCA 80 where the statement of claim failed to plead a material fact that was a condition precedent to the orders made. Mr Wykrota submitted that the plaintiff's claim as pleaded was obscurely and confusingly formulated, in particular, in identifying the contracting parties and their obligations. Given the problems with the pleading, the admissions which resulted from Mr Wykrota's failure to file a defence were said not to support the judgment and orders. The plaintiff's counsel's statement that, "It's not disputed by the defendant that it was he who entered into the building contract", was not justified in the circumstances and the Court was thereby misled. It was submitted that the Court was entitled to greater frankness from the plaintiff in the course of an ex parte hearing. It was submitted that the judge was, in effect, side tracked, misled or distracted by an assumption, inaccurately made, that there was no question "because when it said there was no issue that is really telling the Judge it is agreed in some way". It was submitted that Emmett AJA did not, in his judgment, consider or evaluate the question of the identity of the contracting parties but treated the allegations in the statement of claim as admitted in the absence of a defence.
2. Further, the Court was asked to award damages but the statement of claim did not plead any case of defective work under the building contract. The statement of claim did not refer to the unsigned building contract (described at [14]) including the warranties in clause 1.A.24 or the obligation to rectify defects in clause 1.A.25. The allegations of breach were said to be broad and meaningless, alleging not facts but an unvarnished conclusion of law. Thus, it was submitted that any admissions which flowed from a failure to file a defence were of limited significance.
3. Further, by allowing parts of the damages claim outside the parameters of the pleading, the plaintiff submitted that Emmett AJA failed to afford procedural fairness to Mr Wykrota, being a fundamental irregularity entitling the person aggrieved to have the judgment set aside: Miltonbrook Pty Limited v Westbury Holdings Kiama Pty Limited (2008) 71 NSWLR 262; [2008] NSWCA 38 at [85]. It was said that damages were awarded without his Honour having it drawn to his attention that there was nothing in the statement of claim to support such a claim. His Honour gave damages for items in the schedule of damages which were unrelated to the pleaded terms of the contract. Such damages ought not to have been awarded and the judgment was said to be irretrievably infected by this error, said to have been induced by the plaintiff's conduct at the ex parte hearing. This alone was said to entitle and require the Court to set aside the judgment. It was submitted that the damages "cannot now become supportable or legitimised by an ex post facto attempt to re-assign them as costs of obtaining an Occupation Certificate".
4. Further, Mr Wykrota contended that the judgment was given "against good faith" by reason of a failure by the plaintiff's counsel to specifically draw his Honour's attention to documents or portions of Mr Le's affidavit which may support a conclusion that the building contract was not with Mr Wykrota but another defendant. Although Mr Le's affidavit was read, it was said to be "not enough" that his Honour was not taken to the passage set out at [32] by the plaintiff's counsel. The fact that the plaintiff's counsel did not specifically take his Honour to the email set out at [13], nor the application filed in NCAT, nor point out the ambiguous nature of the quotation or the admission which might be thought to arise from commencing the NCAT proceedings against Arrowcon Construction, was said to have had the result of misleading Emmett AJA as these documents indicated that there was an issue in respect of the identity of the defendant with whom the plaintiff had a contract. Whilst Mr Wykrota's solicitor accepted that Emmett AJA would have read the whole of the affidavit in any event, it was said to be wrong to conclude that his Honour ignored the assurance given by Ms Cohen that there was no issue in the case about the identity of the contracting parties.
5. The plaintiff submitted that the judgment was not given against good faith. Counsel's statement that "It's not disputed by the defendant that it was he who entered into the building contract" was accurate: the defendants had not filed a defence. Emmett AJA recognised as much in his Honour's judgment. Further, although Mr Wykrota indicated during the directions hearings on 28 November 2018 and 13 December 2018 that he may defend himself, he never suggested that he was not a party to the contract.
6. The plaintiff submitted that the pleadings were broad enough to encompass the damages awarded, including damages for building work not properly performed. The statement of claim pleaded that there was a contract between the plaintiff and Mr Wykrota whereby Mr Wykrota would carry out building work; Mr Wykrota failed to perform the contract and the plaintiff suffered damage as a result. The essential elements of a cause of action for breach of contract were pleaded. The particular damages suffered were set out in the schedule of damages. The damages awarded by Emmett AJA were based squarely on Mr Wykrota's breach of contract and the loss particularised in the schedule, which had been provided to Mr Wykrota before the hearing. Nor could there said to be any procedural unfairness.

Conclusion

1. Having in mind the principles described at [3]-[7], the question is whether the judgment of Emmett AJA was procured by the plaintiff's misconduct or dishonourable conduct and the suggested irregularity is not inconsequential or causally unrelated to the making of the judgment and orders. Mr Wykrota relied on matters of pleading and evidence, combined with the contention that the plaintiff's counsel breached her duty of candour. I note, of course, that the hearing before Emmett AJA was not an ex parte hearing in the sense that Mr Wykrota was not informed of the hearing but rather that Mr Wykrota, having been informed, did not attend. While the duty of candour applies with especial stringency to ex parte applications, its scope extends to any application, contested or not, where evidence is presented to the court in support of an application: Kavia Holdings Pty Ltd v Werncog Pty Ltd [1999] NSWSC 839 per Santow J at [1].
2. Turning to the pleading point, by failing to file a defence, Mr Wykrota was deemed to have admitted the allegations made against him in the statement of claim, which included the primary allegation that the building contract was with him; that he was obliged to supply certificates and documents to the certifier to enable an occupation certificate to issue; and that he failed to do so. The fact that the plaintiff also contended that the second and third defendants had obligations which they failed to perform did not detract from the fact that Mr Wykrota admitted that he had failed to perform an obligation which he owed.
3. The fact that, after being informed by Ms Cohen that it was "not disputed" that Mr Wykrota entered into the building contract, Emmett AJA replied, "Well, I have the statement of claim …" indicates an appreciation by his Honour that Ms Cohen's assertion was referable to the failure to file a defence, but also an indication that his Honour had the pleading against which to check whether Mr Wykrota could be taken to have made such an admission. This is confirmed by the ex tempore judgment, in which Emmett AJA reproduced the relevant paragraphs of the statement of claim, noting that no defence had been filed. Importantly, his Honour summarised not only the paragraph of the statement of claim setting out the plaintiff's primary case against Mr Wykrota but other portions of the statement of claim which referred to the second and third defendants, "the defendants" and "the defendant". The plaintiff's claim, in all its forms, did not escape Emmett AJA's notice. His Honour then observed, "It follows in effect that the allegations made in the statement of claim are admitted": at [11].
4. It is thus clear that, whatever assurance was made by the plaintiff's counsel in the opening moments of the hearing, Emmett AJA carefully checked what admissions had in fact been made by reason of Mr Wykrota's failure to file a defence and whether the admissions were sufficient to support judgment against him for breach of the building contract. Further, having reviewed the 26 pages of transcript of the hearing, one thing is clear: whatever the plaintiff's counsel submitted to Emmett AJA, his Honour was in no way misled. Emmett AJA carefully checked each and every proposition put inter alia because Mr Wykrota had not appeared.
5. As to the damages claim, it was not incumbent on the plaintiff to plead that the building contract comprised the unsigned document prepared by Mr Wykrota. That was not the plaintiff's case. In circumstances where there was no evidence on this application that the unsigned document had been provided to the plaintiff, it was not incumbent on the plaintiff's counsel to draw his Honour's attention to the possibility that, if the matter was defended, then Mr Wykrota might rely on such a document. Nor is there any substance to the contention that the plaintiff's counsel failed to draw to his Honour's attention to the fact that the damages sought at trial fell outside the particulars in the statement of claim. That subject had been canvassed at length, in the presence of Mr Wykrota, at the pre-trial directions hearings on 28 November 2018 and 13 December 2018, with orders made, and complied with, for the preparation and service of a schedule of damages.
6. As described at [49]-[53], Emmett AJA did not enter judgment simply on the basis of Mr Wykrota's admission that, by reason of his failure to perform his obligations under the building contract, the plaintiff had suffered damage. His Honour was careful to ensure that each item of damage of which notice had been given to Mr Wykrota was established by the evidence on which the plaintiff relied. Given his Honour's finding that the items in the schedule of damages "have in fact been incurred by the plaintiff as a consequence of breach of the building contract by Mr Wykrota", the plaintiff's submission that the damages were unrelated to the pleaded terms of the contract cannot succeed. As the plaintiff submitted, the fact that some of the items claimed in the schedule of damages might relate to rectification of defective building work does not assist Mr Wykrota as, self-evidently, rectification work may have been required to obtain an occupation certificate. This was a question of fact to be determined on the evidence, as it was.
7. To the extent that Mr Wykrota relied on any failure by Emmett AJA to afford procedural fairness, any such failure does not assist Mr Wykrota as, on an application to set aside a judgment, the Court is concerned with whether the judgment creditor was responsible for bringing about the judgment by engaging in misconduct or dishonourable conduct: Zakaria v Dr Noyce at [22]. In any event, I accept the plaintiff's submissions on this subject. Emmett AJA was explicitly mindful to ensure that Mr Wykrota had forewarning of the damages sought. Emmett AJA held the plaintiff to the quantum sought in the schedule of damages in relation to lost rent, even though that figure understated the correct amount of the plaintiff's claim, as Mr Wykrota had only been informed of the lower claim set out in the schedule and had no forewarning of the higher amount. Mr Wykrota knew precisely the case against him. He had the opportunity to file a defence, serve evidence refuting the plaintiff's claim and appear at the hearing. He chose not to. The consequences of this choice were not the product of any denial of procedural fairness.
8. As to the suggested lack of candour of the plaintiff's counsel in respect of the evidence relied upon by the plaintiff, the plaintiff's counsel read the affidavit of Mr Le which, in the body of the affidavit and in the annexed documents, contained the email described at [13], Mr Le's description of his pre-contractual dealings with Mr Wykrota set out [32], the fact that proceedings were initially commenced in NCAT against Arrowcon Constructions and the orders made by NCAT set out [16]. Where Mr Wykrota had, effectively, admitted that he was liable to the plaintiff for failure to perform the building contract, it was not strictly necessary for the plaintiff's counsel to read these portions of Mr Le's affidavit, nor tender the exhibited documents, at all.
9. The affidavit evidence, quotation and NCAT orders did not have such adverse connotations for the plaintiff's primary claim against Mr Wykrota that failure to specifically bring this material to his Honour's attention misled the Court or had the result that judgment was entered on the basis of facts which were false or on the basis of a misapprehension: G E Dal Pont, Lawyers' Professional Responsibility (6th ed, 2017, Law Book Company) at [17.95]. There was no misconduct or dishonourable conduct on the part of the plaintiff in proceeding in the manner in which it did. Thus, I conclude that the judgment and orders of Emmett AJA were not given or entered irregularly or against good faith.

Should judgment otherwise be set aside?

1. Alternatively, Mr Wykrota submitted that an order should be made under rule 36.16 UCPR in circumstances where he has a defence on the merits. There was an explanation for his failure to attend the hearing as he was ill, unrepresented and caught up in other litigation at the time. The delay in moving the Court for an order setting aside the judgement of 28 February 2019 was significant, but not decisive. It was submitted that Mr Wykrota learned of the entry of judgment against him in June or July 2019. He had since been heavily preoccupied with other litigation and also suffered health and financial difficulties.
2. The plaintiff submitted that the discretion to set aside the judgment under rule 36.16(2)(b) UCPR should not be exercised in this case. Great value attaches to certainty in the outcome of litigation and the more egregious the delay in seeking to set aside an undefended judgment, the greater the burden of persuasion of the strength of its case that will be required: Northey v Bega Valley Shire Council at [16] per Barrett JA; Pham v Gall at [110] per Payne JA. The procedural background readily suggested that Mr Wykrota took the view that engagement with the proceedings was optional. He did not file or serve any documents in the proceedings apart from a Notice of Appearance. He attended some, but not all, of the numerous direction hearings. Nevertheless, he was kept informed of the progress of the case and the orders made by the Court. Mr Wykrota's explanation for his failure to attend the hearing before Emmett AJA was said to be inadequate. Mr Wykrota's explanation for his delay in seeking to set aside the judgment was also said to be unconvincing, being an important and potentially decisive factor: Pham v Gall at [57], [144]. Mr Wykrota's asserted health and financial difficulties did not stand in the way of him participating in proceedings against a former joint venture partner, being involved in "various proceedings" concerning the Polish Club (two of which were heard in the Supreme Court between January and March 2019) and another unspecified proceeding in the Supreme Court.
3. The plaintiff submitted that a factor to be taken into account was whether the proposed defence was strong: Magnate Projects v Youma Constructions (No 2) at [52] per Hodgson JA; Pham v Gall at [98]. Identification of the parties to a contract must be made in accordance with the objective theory of contract, including considering post-contractual conduct: Pethybridge v Stedikas Holdings Pty Ltd [2007] NSWCA 154 at [54]; BH Australia Constructions Pty Ltd v Kapeller (2019) 100 NSWLR 367; (2019) 375 ALR 159; [2019] NSWSC 1086 at [91] per Leeming JA. It was submitted that there was persuasive evidence that the contract was between the plaintiff and Mr Wykrota. 1. Mr Le gave evidence that in about September 2010, the plaintiff and Mr Wykrota agreed that Mr Wykrota would carry out the contract. When Mr Wykrota was introduced to Mr Le, he appears to have been introduced in his personal capacity; there was no evidence that he was introduced as an agent of Arrowfab. Mr Le also reported that Mr Wykrota told him, "My company Arrowfab will be doing the building work for me". The implication of this statement was said to be that, although Mr Wykrota was the contracting party, Arrowfab would be doing the building work on his behalf. 2. The email set out at [13] was sent from an email address that was plainly a personal address. Although Mr Wykrota's email contained the words "Arrowfab Pty Limited" under his name, there was no evidence that Mr Wykrota had explained anything about this company to Mr Le. 3. Mr Wykrota unilaterally determined the corporate entity to which the plaintiff's payment was to be directed at any point in time. Mr Wykrota's directions came from his personal email address. Mr Wykrota unilaterally determined which corporate entity would undertake the contract work at any point in time. Such conduct was said to be consistent with Mr Wykrota being the contracting party rather than the corporate defendants. He alone determined how the works would be performed and did so in his personal capacity.
4. Contrary to the pleading in the proposed defence, the plaintiff submitted that there was no evidence that the parties agreed that Arrowcon Construction would take over the contract from Arrowfab. A reasonable observer considering the matter objectively would not come to such a conclusion in circumstances where there is no evidence Mr Le knew anything about Arrowcon Construction, much less that it was properly licensed and insured and therefore a suitable contracting party for building work. The fact that, long after the event, the plaintiff commenced NCAT proceedings naming Arrowcon Construction as defendant was said to add little to the question of who the contracting parties were. It was submitted that Mr Wykrota would face serious difficulties in making out the proposed defence. Whilst the case was not unarguable, it did not satisfy the greater degree of persuasion required from Mr Wykrota in the circumstances.
5. The plaintiff submitted that it would be prejudiced if the judgment was set aside, in the form of the costs incurred in obtaining the judgment in the first place, together with the costs of seeking to enforce the judgment during which time Mr Wykrota stood by in a manner inconsistent with his currently stated intention to contest the proceedings. Prejudice naturally arose from the passage of time. The contract was formed in November 2010 and breached in 2012. The memory of the relevant witnesses was naturally receding, as was the plaintiff's ability to locate any further relevant documents.
6. Further, the plaintiff submitted that the proposed defence denied that Mr Wykrota was a party to the contract and pleaded that the statement of claim did not disclose a cause of action against him. If that defence had been filed on or before 2 May 2018, the plaintiff could have met it by simply amending its statement of claim to plead, in the alternative, that Arrowcon Construction was a party to - and liable for the breach of - the contract. That course was no longer available to the plaintiff as the proceedings against Arrowfab and Arrowcon Construction were dismissed: section 91(2) of the Civil Procedure Act. Dismissal of the proceedings against Arrowfab and Arrowcon Construction was said to be an entirely reasonable course considering the contract was found to have been with Mr Wykrota and judgment had been given against him. Mr Wykrota accepted that the dismissal of the proceedings against Arrowcon Construction should also be set aside by consent, although it was not entirely clear how this could be done in circumstances where Arrowcon Construction was not a party to the motion. Mr Wykrota's solicitor informed the Court that he was instructed on behalf of Arrowcon Construction to consent to such an order. After the hearing of this application, Mr Wykrota's solicitors filed a Notice of Appearance for Arrowcon Construction.
7. Finally, the plaintiff submitted that whilst, if the judgment was not set aside, Mr Wykrota would remain obliged to satisfy a judgment which he now says should not have been entered against him, this outcome was less prejudicial than it appeared. Mr Wykrota's proposed defence was that Arrowcon Construction was liable for any breach of the contract. As Mr Wykrota is the sole director and shareholder of Arrowcon Construction, in the event he succeeded in his proposed defence and judgment was entered against that company, that loss would ultimately be suffered by him as the company's sole shareholder. Thus, at a practical level, he would not avoid the consequence of any breach of that contract, relying on Leichhardt Council v Geitonia Pty Ltd (No 7) [2015] NSWLEC 79 at [51] by analogy.

Consideration

1. As will be apparent from the recitation of the procedural history at [23], [24], [29], [35], [45], Mr Wykrota's participation in the proceedings was intermittent. His evidence as to how the proceedings unfolded, and his knowledge of the proceedings, was not consistent with contemporaneous documents. I am satisfied that he became aware of the proceedings shortly after they were commenced and was regularly informed, both by the plaintiff's solicitor and, on occasion, by the Court, over the course of a dozen directions hearings, as to its progress towards a final hearing. His engagement with the proceedings was, however, selective.
2. Mr Wykrota was involved in several pieces of litigation at the time and had solicitors, although not in these proceedings. Mr Wykrota was, however, able to, and did, consult his solicitor in relation to these proceedings. Mr Wykrota was able to appear in person, and did on occasion. He appears to have been an experienced litigant who deployed his legal resources where he saw fit. When Mr Wykrota appeared before Emmett AJA in November and December 2018, it was apparent that his focus was to postpone the final hearing. It is also apparent that, when Mr Wykrota's efforts to postpone the hearing proved futile, he chose not to appear.
3. Mr Wykrota's explanation for his failure to attend the hearing before Emmett AJA was inadequate. Mr Wykrota's medical certificate referred to his unfitness for work, rather than any inability to attend Court. The medical certificate provided no explanation for Mr Wykrota's failure to have filed a defence, adduce evidence or make any attempt to arrange for someone else to appear on his behalf at the hearing, as he indicated at earlier directions hearings that he would. Accepting that Mr Wykrota was involved in other pieces of litigation, some of which were being heard at the same time as these proceedings, there is obviously a tension between Mr Wykrota suggesting that he was unwell and thus unable to attend the hearing before Emmett AJA, on the one hand, and suggesting that he could not attend the hearing because he was busy participating in other legal proceedings, which he was presumably well enough to attend at the same time.
4. Mr Wykrota's explanation for his delay in seeking to set aside the judgment was also problematic. The suggestion that Mr Wykrota did not find out about the judgment until June or July 2019 is inconsistent with the contemporaneous documents and thus unlikely. On 6 March 2019, the Associate to Emmett AJA sent a copy of the ex tempore judgment by email to the parties, including to Mr Wykrota at the email address referred to at [13]. Further, on 13 March 2019, the plaintiff's solicitor sent a letter to Mr Wykrota by Express Post informing him of the orders made by his Honour. According to the records of Australia Post, the letter was delivered on 14 March 2019. Even if Mr Wykrota was previously unaware of his ability to seek to have the judgment set aside, Emmett AJA's judgment expressly informed him of that right.
5. The suggestion that, having filed a notice of appointment of solicitor in these proceedings in December 2019, Mr Wykrota was not able to place his solicitor in funds to apply to set aside the judgment is not consistent with the fact that, over the next few months, Mr Wykrota's new solicitor did take steps on his behalf, described at [69] and following, albeit did not take any steps in these proceedings. As the plaintiff submitted, Mr Wykrota gave no evidence of his financial position apart from making bare assertions. His conduct as described in his affidavit told against his inability to fund an application to set aside the judgment. I consider that realising Lot 1, and a wish to preserve the net proceeds of sale, is a more likely explanation for why Mr Wykrota has delayed acting until now.
6. Turning to the hardship to the plaintiff, and what is proffered to reduce that hardship (Pham v Gall per Leeming JA at [57]), three items stand out. First, Arrowfab is now deregistered. It is not entirely clear when Arrowfab was deregistered, although it appears to have been at or about the time of the hearing before Emmett AJA. Having obtained judgment and orders against Mr Wykrota, the proceedings against Arrowfab were dismissed. There was no suggestion by Mr Wykrota as to whether, or how, this company should be reinstated. If the judgment and orders are now to be un-done, it is unclear how this head of prejudice is to be ameliorated.
7. Second, as described at [50]-[53], in order to finalise the proceedings and its claims on 28 February 2019, the plaintiff accepted a substantial discount of $168,607.52, or 50%, of its claim for lost rent, being roughly double the discount which Emmett AJA had earlier indicated that he considered appropriate. Mr Wykrota has paid into Court $270,000, representing the judgment and orders made by Emmett AJA together with interest. But that amount does not reflect the additional $168,000 which the plaintiff forewent. If Mr Wykrota had appeared at the hearing, the plaintiff could have pressed for the full amount of lost rent as the evidence on which it relied had been served on Mr Wykrota. Even if His Honour had discounted the claim by 25% to 30%, the plaintiff would likely have be awarded damages in a greater sum than that ordered in Mr Wykrota's absence.
8. Third, the plaintiff has costs thrown away, both in obtaining judgment from Emmett AJA and seeking to enforce his Honour's orders which Mr Wykrota now seeks to set aside. As best could be clarified during Mr Wykrota's solicitor's reply submissions, Mr Wykrota accepted that, in the event that the judgment was set aside, an order would properly be made that he pay the plaintiff's costs thrown away, although Mr Wykrota did not accept that those costs equated to the plaintiff's costs leading up to obtaining judgment from Emmett AJA, nor in any particular amount, but accepted such costs may be appropriate to be paid forthwith and, if the plaintiff put forward a suggested figure, then he would consider it. Mr Wykrota also ultimately accepted it may be appropriate to order that he pay the plaintiff's costs of seeking to enforce his Honour's judgment, but only as assessed. Whilst during oral submissions, Mr Wykrota's solicitor said he could get some instructions about whether Mr Wykrota was able to give an undertaking to meet any costs orders made against the third defendant, in circumstances where there was no evidence as to whether the third defendant had any assets, no further instructions were forthcoming.
9. Mr Wykrota's willingness to redress any hardship which the plaintiff may suffer if his Honour's judgment and orders are set aside was reluctant and ungenerous, particularly having regard to the fact that, on sale of Lot 1, Mr Wykrota appears to have received a substantial sum, even after paying $270,000 into Court, accepting of course that Mr Wykrota may have other creditors.
10. As to whether Mr Wykrota's defence suggests a clear case of merit, the proposed defence is arguable but not overwhelming. The defence faces a number of hurdles, not least of which is that Mr Wykrota contends that the building contract was with a company which did not exist at the time the contract was formed. The evidence on this application suggests a degree of informality and lack of attention to detail and proper paperwork, being a problem that 'cuts both ways' in terms of the plaintiff's claim and the proposed defence.
11. Having regard to the principles set out at [8]-[12], Mr Wykrota has not established that it is unjust to let the judgment and orders stand having regard to the circumstances in which the orders were made, the inadequate explanation for the subsequent 18 months' delay before bringing this application, the proposed defence and what is proffered to reduce the prejudice to the judgment creditor. I decline to make the orders sought.

Orders

1. For these reasons, I make the following orders: 1. Dismiss the first defendant's motion filed on 4 August 2020. 2. Order the first defendant to pay the plaintiff's costs of the motion. 3. Grant liberty to the parties to apply on two days' notice to seek any variation of the costs order, or any further orders in respect of the monies paid into Court by the first defendant on 14 September 2020.

DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 16 October 2020