Supreme Court of WA|2000-08-30|Before: Chernov J, Coldrey J, Miller J, Owen J, Parker J

Acn 076 676 438 Pty Ltd (In Liq) & Anor v A-Comms Teledata Pty Ltd & Anor [2000] WASC 214 (30 August 2000)

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA

CITATION : ACN 076 676 438 PTY LTD (IN LIQ) & ANOR -v- A-COMMS TELEDATA PTY LTD & ANOR [2000] WASC 214

Default judgment - Irregularly obtained - Whether defendants entitled ex debito justitiae to have judgment set aside

Armitage v Parsons [1908] 2 KB 410

Bratic v Toohey [1988] 2 Qd R 140

Elders v Invaway [1991] Qd R 398

Metroinvest Anstalt v Commercial Union Assurance Co plc [1995] 2 All ER 318

Michael v Hepburn, unreported; FCt of SCt of WA; Library No 940517; 22 September 1994

Mossensons v Van Haltren, unreported; SCt of WA (Bredmeyer M); Library No 920688; 16 December 1992

National Australia Bank Ltd v Meehan, unreported; SCt of Vic (Chernov J); 4 February 1994

Rember Pty Ltd v TVT Media Pty Ltd, unreported; SCt of WA (Bredmeyer M); Library No 980161; 2 April 1998

Salah v Lakeside Packaging, unreported; SCt of Vic (Coldrey J); 16 October 1997; (BC 9705173)

1 PARKER J: By chamber summons dated 3 August 2000 the defendants seek the setting aside of interlocutory judgment in this action which was entered by default of defence on the order of Miller J on 20 July 2000.

2 A writ with statement of claim indorsed was regularly issued out of this Court on 23 May 2000 and duly served on the defendants. Appearances were entered but no defence was filed and served by 29 June 2000 as required by the Rules.

3 On 23 May 2000 an interim interlocutory injunction was granted. By chamber summons dated 25 May 2000 the plaintiff sought a variety of interlocutory relief and procedural directions including the extension of the interim interlocutory injunction until trial and the delivery to the second plaintiff, pending trial, of certain items of computer equipment which were part of the subject matter in dispute.

4 By orders made on 31 May and 22 June 2000 the interim interlocutory injunction was extended for limited periods, but some aspects of the relief sought by the summons dated 25 May 2000 remained undetermined and the summons was adjourned over.

5 On 5 July 2000 a further document entitled "Minute of proposed orders" was filed and served in the proceedings on that summons by the plaintiffs. It proposed that orders be made granting some of the outstanding relief sought by the summons. It also sought an order for the entry of judgment in default of defence.

6 On 11 July 2000 Owen J granted to the plaintiffs a further interim interlocutory injunction to Monday 21 August 2000, with attendant orders, and the application was otherwise adjourned to chambers on 20 July 2000. His Honour's note of the orders made was for the "application" to be so adjourned, although the formal order, which was not extracted until 8 August 2000, erroneously records the order to be that the "matter" be otherwise adjourned to 20 July 2000.

7 The application so adjourned was, of course, that made by the chamber summons of 25 May 2000. It was no part of that application that judgment be entered in default of defence. An application to enter judgment in default of defence in the circumstances of this case was required to be by motion in open court although it could be moved orally. Insofar as the minute of proposed orders of 5 July 2000 sought the entry of judgment by default it was not grounded in the chamber summons of 25 May 2000 and, necessarily, it was an order sought in reliance on the failure of the defendants to file their defence to the original statement of claim by 29 June 2000.

8 Pursuant to the order of Owen J on 11 July 2000, the chamber summons of 25 May 2000 was listed in the general chambers list on 20 July 2000. There was no appearance for the defendants. It is accepted before me that this was due to an oversight by counsel but that was not known on 20 July 2000. In the absence of the defendant's representative, counsel for the plaintiffs moved for and were granted an order for interlocutory judgment in default of defence with costs against both defendants. By the judgment an agreement is declared to be void and is set aside, the first defendant is declared to hold on trust certain assets of the first plaintiff the subject of the agreement, and the defendants are to pay the plaintiffs' damages or equitable compensation to be assessed, together with interest from 28 September 1999. The order is expressed to be on the application of the plaintiffs by summons dated 25 May 2000 which is, of course, not the case.

9 Also served on the defendants' solicitors on 5 July 2000, with the other papers, was a document purporting to be an amended statement of claim. This added further allegations and sought relief additional to that claimed in the original statement of claim. The copy actually served on the defendants' solicitors failed to comply with the requirements of the Rules in that it was undated and unsigned. Further, the original document filed in the Court Registry, although dated 5 July 2000, was also unsigned despite the requirement of the Rules. Because of this defiency it seems the Registry initially refused to accept the document. In the end it was only accepted for filing after the Registry Clerk endorsed it with the words "Minute of" to precede the description "Plaintiffs amended statement of claim pursuant to O 21 r 3". The copy served on the defendants' solicitors did not have the endorsement "Minute of".

10 Order 21 r 3(1) enabled amendment of a statement of claim in the circumstances then existing without leave or other order, but service of the amended statement of claim is an express requirement of the rule inter alia because, by O 21 r 4, the defendants might seek to have the amendment disallowed. An amended statement of claim displaces entirely the original statement of claim and the time for filing a defence runs from the date of service of the amended statement of claim; O 21 r 3(2)(b).

11 While, initially, it was not clear on what basis the plaintiffs had moved for judgment in default on 20 July 2000, it has now been frankly accepted before me by counsel for the plaintiffs that judgment in default was sought and granted on the basis that the defendants were in default of defence to the purported amended statement of claim which had been filed and served on 5 July 2000, the time for such a defence having expired on 19 July 2000.

12 Hence, it is now clear that the interlocutory judgment in default of defence was founded in the purported amended statement of claim which had not been regularly filed or served.

13 I should note immediately that there is no suggestion the Court was deliberately misled on 20 July 2000. There was, however, a clear want of attention by counsel to necessary detail in applying by motion as he did. I need not stress the importance of due attention in such matters, especially when the application is of such significance as an entry of judgment in an action by default. I accept that on 20 July 2000 counsel had not adverted to the defiencies in the filing and service of the purported amended statement of claim which have been noted in these reasons. This seems to have remained the position of the plaintiffs' solicitors who, on 1 August 2000, replied to the protests of the defendants' solicitors (when they became aware of what had occurred on 20 July 2000) justifying the application and the entry of judgment by expressly relying on the failure by 19 July 2000 to file a defence to the amended statement of claim which had been served on 5 July 2000.

14 It is contended for the plaintiffs that the defendants waived the irregularities which affected the purported amended statement of claim in that no objection was raised when the parties were before Owen J in chambers on 11 July 2000. Relevantly, waiver of an irregularity occurs where a party with knowledge of an irregularity has taken some step which is only necessary or useful if the objection to the irregularity has actually been waived, or if the objection has never been entertained at all. In the absence of express statement it must appear that the proper inference from the party's conduct is that by going on in some way the party has indicated an intention not to rely on the point thereafter; Colbert v Tocumwal Trading Co Pty Ltd [1964] VicRp 108; [1964] VR 820 at 826. The irregular service had been made on 5 July 2000. No step in respect of the purported amended statement of claim was required until 19 July 2000. It is not contended there was any express waiver on 11 July 2000. Even accepting that no point was made about the irregularity at that hearing, it is not apparent how the events of 11 July 2000 could have provided a sufficient foundation for the necessary inference. More importantly, while the defendants had the means of knowledge of the irregularity in service, insofar as the service copy was unsigned and undated, it had no means of knowledge (and actual knowledge is not suggested) of the lack of signature on the filed document and the endorsement in the Registry before filing of the words "Minute of". Indeed the failure of the plaintiffs' solicitors to endorse the service copy with the words "Minute of" in the like manner as the filed original had the effect of hiding this irregularity from the defendants' solicitors. In these circumstances, on no view could there have been a waiver of the irregularity in respect of the filing of the purported amended statement of claim by the defendants by 20 July 2000.

15 The plaintiffs submit that despite the irregularities as to filing and service of the purported amended statement of claim the interlocutory judgment should not be set aside. They submit this is a matter of discretion, and that the discretion should not be exercised particularly as the defendants had been in default in filing their defence to the original statement of claim before 5 July 2000, and because the defendants are not in the position to plead an adequate defence. In this last respect it was submitted that an adequate defence could not be pleaded because, to do so, the defendants needed to rely on an agreement which was unstamped and s 27(1) of the Stamp Act 1921 precluded them pleading the agreement in those circumstances or relying on it in their defence. It came to be accepted, however, in the course of argument, that the second defendant might plead and rely on the agreement if the course contemplated by s 27(3) of the Stamp Act was followed, but the position was maintained that unless and until the agreement was stamped the first defendant was precluded from pleading or relying on it as the first defendant was the party charged with the payment of the duty. I was invited to infer against the first defendant that, as the agreement has remained unstamped since the institution of the proceedings in May, the first defendant was not in a financial position to effect the stamping, so that to set aside the judgment by default entered against the first defendant should be seen to be futile.

16 Despite those submissions, if the proper course to be followed in this situation is to consider whether in the interests of justice, as a matter of discretion, the judgment should be set aside, the parties are in agreement that there should be further evidence and submissions before a decision is reached. Instead of following that course, they have argued the case before me only on the anterior question whether or not the defendants are entitled, in the present circumstances, to have the interlocutory judgment set aside as of right - ex debito justitiae. That is the contention of the defendants.

17 It has been long established that where a judgment in default has been entered irregularly, ie without proper compliance with the Rules, or has been obtained in breach of good faith, it will be set aside; Hughes v Justin [1894] 1 QB 667; Alliance Acceptance Co Ltd v Makas (1976) 12 ACTR 19; Daly v Silley [1960] VicRp 57; [1960] VR 353. In such a case the Court is not obliged to enquire whether or not there is a good defence on the merits; Anlaby v Praetorius (1888) 20 QBD 764; Alexander v Ajax Insurance Co Ltd [1956] VicLawRp 70; [1956] VLR 436; White v Weston [1968] 2 QB 647; Daly v Silley (supra); Acclaim Holdings Pty Ltd v Vlado [1989] 1 WAR 128. The authorities recognise that in some circumstances those statements are to be qualified, as where the irregularity has been waived or results from an accidental omission which can be corrected, eg as to the precise amount for which the judgment is entered; Bank of Credit and Commerce International (Overseas) Ltd (in liq) v Habib Bank Ltd [1998] 4 All ER 753; City Mutual Life Assurance Society Ltd v Giannarelli [1977] VicRp 53; [1977] VR 463. Neither of those circumstances have application in the present case.

18 Some more recent decisions suggest that not every irregularity in the means by which a judgment in default is obtained will necessarily entitle the defendants to have the judgment set aside as of right. I was referred in particular to Australian and New Zealand Banking Group Ltd v Kostovski, unreported; SCt of Vic (Chernov J); No 5511 of 1997; 2 July 1997, (BC 97032660) where the writ contained two endorsements which breached the Rules and Commonwealth Bank of Australia v Buffett (1993) 114 ALR 245 where the writ had an incorrect endorsement as to service and stated that an appearance must be entered within 8 rather than 9 days of service. In both of these cases the writ was issued out of the Registry and served. In each case, the irregularity had not caused any prejudice to the defendant and did not lead to the defendant changing his position in any way or otherwise cause any injustice. In such circumstances the judgments were not set aside. In National Australia Bank Ltd v Meehan, unreported; SCt of Vic Appeal Division (Ormiston and O'Bryan JJ); No 8407 of 1993; 24 February 1994; (BC 9400980), the absence of the number of the proceeding from the service copy of the originating process was held to be merely a technical defect not producing an irregular judgment, although in contrast in Sargent v Veneris, unreported; SCt of Vic (Beach J); No 1303/1995; 20 December 1995; (BC 9507179) a failure to duly prove service of the originating process by omitting to exhibit a sealed copy of that process to the affidavit of service was held to be an irregularity which entitled the defendant to have the default judgment set aside. I was also referred to the observations of the Court of Appeal in Perry v Wong [1996] EWCA Civ 1031; [1997] 1 WLR 381 at 388 that, in this context, procedural irregularities vary greatly in significance and the discussion in Farrow Mortgage Services Pty Ltd (in liq) v Victor Tunevitsch Pty Ltd & Ors, unreported; SCt of Tas (Crawford J); No 1383 of 1993; 8 July 1994; (BC 9400421) at 4.

19 While, in an appropriate case, there will be need for some more extensive consideration of these and other more recent decisions, in this present case it seems to me to be critical, on any view of the authorities, that judgment was entered in default of defence to the purported amended statement of claim filed and served on 5 July 2000. Yet that purported amended statement of claim had not been regularly filed. It was not in a form fit for filing as an amended statement of claim and, in my view of what occurred when filing was attempted, it was not accepted for filing as an amended statement of claim. Having regard to what occurred and the practice of this Court, the events indicate that the document was received into the Registry as a minute of a proposed amendment. In my view until the amended statement of claim was regularly filed it had no force or effect as an amended statement of claim for the purposes of the Rules and in particular O 21 r 3(1). It would follow that there could not be regular service of it as an amended statement of claim for the purposes of the Rules, and the time for filing a defence to it pursuant to O 21 r 3(2)(b) had not commenced to run. If that be so, the defendants were not in default of filing their defence to it on 20 July 2000 when the order was made for judgment to be entered in default of defence. In my view, the irregularity in filing on 5 July 2000 had the effect, in this case, that the plaintiffs had no entitlement to enter judgment on the basis on which they applied to do so and on which the order was made. In these circumstances, in my view, by virtue of the irregularity in the filing the defendants are entitled ex debito justitiae to have the default judgment set aside.

20 Because of the view I have formed about the significance and effect of the irregularity in the filing of the purported amended pleading there is no need to consider the effect of the irregularities affecting service.

21 It was further contended that if the irregular filing on 5 July 2000 had the effect which I have indicated, then it should be seen that the defendants remained in default of defence on the original statement of claim and the entry of judgment in default should be taken to have been justified on that basis. The short and complete answer to this proposition was that this was not the basis upon which the judgment was sought or obtained. Further, in my view, the plaintiffs having acted to file and serve an amended statement of claim on 5 July 1999, the effect of their conduct was to waive the default of the defendants between 29 June 1999 and 5 July 1999 in respect of their defence to the original statement of claim, even though the attempt to amend the statement of claim proved ineffective.

22 There is one further matter I should mention. The hearing of this application to set aside the judgment entered by default was commenced by Templeman J on 11 August 2000. His Honour considered the question whether the order should be set aside ex debito justitiae on the basis that it was obtained irregularly. In reasons delivered extempore that day, he reached the conclusion on that issue "... that it would not be appropriate to set the judgment aside on the basis only that the judgment was obtain irregularly ...". He adjourned the application for further hearing on 21 August 2000 to deal with the question whether, in any event, the judgment should be set aside. His Honour's conclusion about irregularity was expressly founded in his understanding that the entry of judgment was based on the default in filing a defence to the original pleading by 29 June 2000, not to the purported amendment on 5 July 2000. When the written submissions relied on for the plaintiffs before his Honour are viewed it is manifestly clear why and how his Honour was led to this mistaken view of what occurred in chambers on 20 July 2000.

23 The defendants have now applied for leave to re-open the question of irregularity. Normally, this would have been dealt with by his Honour on the resumed hearing but, as his Honour is about to go overseas on leave and as the further hearing of the application was expected to be protracted, it was convenient for the continued hearing to be undertaken by another judge. The application to reopen having been made to me on the resumption of the hearing, and counsel for the plaintiffs having now frankly stated that the application to enter judgment in default was founded not in the default to plead to the original statement of claim but in default of pleading to the purported amendment, and having received further evidence on affidavit and having heard full argument over a day and a half, I have been persuaded that leave should be granted to reopen the question of irregularity. These reasons, therefore, have dealt again with that question.

24 For these reasons the interlocutory judgment in default entered against both defendants pursuant to the order made on 20 July 2000 should be set aside.

Acn 076 676 438 Pty Ltd (In Liq) & Anor v A-Comms Teledata Pty Ltd & Anor [2000] WASC 214

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Judgment (37 paragraphs)

Acn 076 676 438 Pty Ltd (In Liq) & Anor v A-Comms Teledata Pty Ltd & Anor [2000] WASC 214 (30 August 2000)

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