AKARI v SOLE

PARTIES : AKARI, Kathryn Dolores & ANOR v SOLE, Leslie Peter

COUNSEL : P: D Allen D: V Bizannes (Sol)

SOLICITORS : P: Hancocks Solicitors D: Bizannes & Associates

IN THE SUPREME COURT OF NEW SOUTH WALES COMMON LAW DIVISION

1 HIS HONOUR: The plaintiffs, Kathryn Dolores Akari and Benjamin Nuele Akari, commenced proceedings by summons filed in this Court on 13 February 2007 in which they sought leave to appeal from the order of Her Honour Magistrate O'Shane of 8 February 2007 in Local Court proceedings numbered 5382 of 2006 in the Downing Centre Local Court (General Division). 2 On 10 July 2007, the plaintiffs were granted leave to file an amended summons pursuant to which they sought relief by way of appeal pursuant to s.73(1) of the Local Courts Act 1982. That provision deals with appeals as of right and entitles a party to proceedings who is dissatisfied with a judgment or order of a Local Court sitting in its General Division to appeal to the Supreme Court "… but only as being erroneous in point of law". 3 In the amended summons, the "appeal grounds" were two-fold:- "(a) Her Honour erred at law in failing to give reasons. (b) Her Honour erred at law in failing to apply the law, in that she dismissed the motions despite there being unchallenged evidence of arguable defences." 4 The powers of this Court in determining appeals brought under the Local Courts Act 1982 relevant to the present appeal are set out in s.75 of the Act which provided:- "The Supreme Court may determine an appeal under this Division:- (a) by varying the terms of the judgment or order, or (b) by setting aside the judgment or order, or (c) by setting aside the judgment or order and remitting the matter to the Court for determination in accordance with the Supreme Court's directions, or (d) by dismissing the appeal. 5 In support of the application to set aside the default judgment, the plaintiffs relied upon:-

(a) The affidavit of Benjamin Nuele Akari sworn on 25 October 2006 (an affidavit that had been prepared for proceedings in the Federal Magistrates' Court of Australia, No SYG2641 of 2006).

(b) The affidavit of Kathryn Dolores Akari sworn on 25 October 2006. 6 The defendant relied in response upon his own affidavit sworn on 16 November 2006. In addition, an extract issued by the Department of Fair Trading in 2004-2005 (four pages) was admitted as an exhibit in the proceedings. 7 The plaintiffs seek in the present proceedings an order setting aside the order dismissing the plaintiffs' motions filed on 18 December 2006 and additionally the setting aside of the default judgment entered in favour of the defendant, Leslie Peter Sole. In the alternative, the plaintiffs seek an order that the matter be remitted to the Local Court for re-hearing.

History 8 Mr Akari and Mr Sole had been engaged in a commercial relationship since 1999 based on their shared interests in the building industry. Each would introduce work to the other and they would complete projects together in which Mr Akari would work as the builder and Mr Sole would work as the architect. 9 Over the course of their commercial relationship, Mr Akari borrowed $178,200 from Mr Sole, a fact disclosed in the affidavit of Mr Akari sworn 25 October 2006 in the Federal Magistrate's Court (Annexure "C" to the Affidavit of Jim Dai dated 23 May 2007 in these proceedings). The amount of the loan has been partly repaid by Mr Akari through certain monetary payments and through work completed for the benefit of Mr Sole.

10 Mr Akari stated in his affidavit dated 25 October 2006 that he and Mr Sole had a disagreement about two projects. The first concerned a relative of Mr Sole's, Geraldine Ryder, who is said to have brought an action against Mr Akari in the Consumer Tenancy & Trader Tribunal NSW. The second was a job completed in Auckland, New Zealand for relatives of Mr Akari.

The proceedings below 11 The proceedings brought by Mr Sole were commenced in the Local Court, Civil Claims Division, by way of a statement of claim. The relief claimed therein was in the amount of $54,178 together with filing fees and costs amounting, in all, to a total of $54,921.30. In the statement of claim, the following facts and matters were pleaded:- "The plaintiff relies on the following facts and assertions. 1. The defendants are indebted to the plaintiff in the sum of fifty four thousand, one hundred and seventy eight dollars ($54,178) for moneys lent by the plaintiff to the defendants at the request of the defendants on three occasions during the year 2005. Particulars 2 May 2005 $19,500 3 June 2005 $13,178 1 August 2005 $21,500

Total $54,178 2. The defendants have failed to repay the amount or any part thereof to the plaintiff. 3. The plaintiff claims interest pursuant to s.101 of the Civil Procedure Act from the date of issue of these proceedings and continuing until judgment at 9%. 4. Costs."

12 On 6 July 2006, Mr Sole, the defendant to these proceedings obtained default judgment in the Downing Centre Local Court against the plaintiffs in the sum of $55,578.30.

13 Bankruptcy proceedings in the Federal Magistrate's Court were commenced in September 2006. Mr Akari stated in his affidavit sworn 25 October 2006 that he was served with a bankruptcy notice on 4 September 2006. The petition against Mrs Akari has been adjourned on seven occasions and was set down for final hearing as a part heard matter in July 2007 pending the determination of proceedings in this Court. 14 The Akaris made application to set aside the default judgment entered in favour of Mr Sole. A hearing took place before the Registrar of the Local Court on 7 December 2006 at which both parties were legally represented. The Registrar dismissed the application and ordered that the Akaris pay Mr Sole's costs.

15 The Akaris then sought a review of the Registrar's decision and orders by a Magistrate of the Downing Centre Local Court. The review proceedings were heard by Magistrate O'Shane on 8 February 2007. Both parties were legally represented. Her Honour reviewed the evidence that had been before the Registrar and heard submissions from the parties. Her Honour dismissed the application and ordered the Akaris to pay costs.

The hearing before the magistrate 16 The transcript of proceedings before the magistrate dated 8 February 2007 records that the submissions of counsel for the plaintiffs before Her Honour, Magistrate O'Shane, dealt primarily with three factors relevant to the issue as to whether or not the default judgment should be set aside:-

(a) The reason(s) for not filing a defence to the statement of claim.

(b) Delay in taking steps to have the default judgment set aside, particularly having regard to the question as to whether any actual or specific prejudice would be occasioned to the plaintiff by setting it aside.

(c) Whether or not the defendants had arguable defences.

17 Counsel for Mr and Mrs Akari submitted that although they did not file a defence within the time allowed, they had not been ignoring the statement of claim. Mr Akari had taken steps on his and his wife's behalf to instruct a solicitor. It was stated by counsel that following a request by the solicitor for further and better particulars from Mr Sole, that Mr Akari instructed the solicitor not to proceed further with the matter because he said that he had reached an agreement with Mr Sole (transcript pp.8 to 10).

References to "delay", "prejudice", and "arguable defence" 18 There was discussion between counsel for the plaintiffs and the Magistrate during submissions regarding the delay on the part of Mr and Mrs Akari, in particular, their failure to file a defence within 21 days, as well as the failure on their part to respond to the default judgment in adequate time (transcript pp. 3 to 5). 19 Counsel for Mr and Mrs Akari contended that the principle enunciated in Cohen v McWilliam (1995) 38 NSWLR 476 as to how a court should regard delay, in respect of setting aside default judgment, should be understood as follows (transcript p.7):- "… if the court determines that there is a triable issue or an arguable defence and there's no prejudice suffered to the plaintiff that the delay is not really relevant and that default judgment should always be set aside in those circumstances to enable a defendant to properly run its case, speaking very broadly …"

20 Her Honour indicated to counsel that she considered delay in this matter to be significant (transcript pp.10 to 11) and also stated that, "What is equally significant in the view of this court dealing with this notice of motion now is that there appears to have been no attempt on the part of the defendants to respond to the claim made by the plaintiff until after bankruptcy proceedings had been initiated" (transcript p.11). 21 Counsel for Mr and Mrs Akari conceded that a notice to set aside default judgment was not filed until October 2006 (transcript p.11), despite default judgment against them on 8 August 2006. 22 Following submissions from counsel regarding the issue of delay in moving to have the default judgment set aside, Her Honour stated (transcript p.11), "Anyway unless you can put something else to me than I've heard so far and I think I understand your position I'm not prepared to grant this application". Counsel submitted, "Well, your Honour, my submission is one of law and I rely on the case of Coleman v McWilliam (supra) and the submission is that the delay is one of the three relevant factors that you take into account but it is not the deciding factor" (sic). Her Honour replied, "I understand that", and counsel then addressed Her Honour further on that point. 23 Following counsel's submissions and reference to authorities, including Cohen v McWilliam (supra), Vacuum Oil Pty Limited v Stockdale (1942) 42 SR (NSW) 239, Evans v Bartlam [1937] AC 473, and Davies v Paget (1986) 10 FCR 226, the transcript indicates that the following exchange regarding "delay", "prejudice" and an "arguable defence" occurred (transcript pp.13 to 14):- "HER HONOUR: … First of all I have indicated that there was or appears to have been on the court record a delay occasioned by the defendants failing to deal with the matter. DOLENEC [counsel for the defendants]: Yes, your Honour, and not in issue. HER HONOUR: I understand that. You're not putting anything different to the court. I understand that you are putting to the court that it is not such a lengthy delay that the court should find that they are out of court by reason of delay alone. That's not the point. There has been a delay. It is only one of the issues that can be taken into consideration. DOLENEC: Yes. HER HONOUR: And they should not be entitled as a matter of course to benefit from their lack of attention to what are really quite serious matters, commercial matters. DOLENEC: Your Honour, in my - HER HONOUR: All right, so then the next thing and the critical thing I think if I understand your submissions correctly is that the defendant, Mr Akari, has set out a number of matters in his affidavit from which the court should find that there is an arguable defence. DOLENEC: Yes, your Honour, and I just - HER HONOUR: That's the critical point if I'm understanding your submissions. DOLENEC: Yes, that's correct. HER HONOUR: Then the third factor to take into consideration is whether there is prejudice to the plaintiff. DOLENEC: Yes and then none has been asserted. … HER HONOUR: Well, I understand that. I've read through the plaintiff's affidavit opposing the notice of motion but in any event regardless of whether there has been specifically asserted in his affidavit the court does take the view that there is always a degree of prejudice occasioned to the other party in these kinds of circumstances. It is not an overriding consideration; far from it but it exists. There is an element - there is a substantial element of delay here. The length of the delay does not go to the issue of the substantiality of the delay. DOLENEC: Yes, your Honour. HER HONOUR: So that's not an issue and it's not being considered by the court. DOLENEC: I only raise it, your Honour, because we spent time on the delay factor. HER HONOUR: What I'm indicating to you is that the element of delay is established and it's clear on the record there is an element of prejudice. It bears little weight in the court's consideration of this notice of motion here this afternoon but there is an element of consideration. I just want you to be clear about that. So coming to the key issue so far as the defendants are concerned is whether or not the defendants have an arguable case."

24 The exchange between counsel and her Honour continued, as follows (transcript pp. 15 to 16):- "HER HONOUR: Sometimes the issue of delay assumes overall greater weight and importance in terms of considerations that have to be brought to bear on the issue than does the actual defence if there is any defence. But in this case that's not so as I've indicated to you … it's not a major delay in terms of time. It is a substantial delay for other reasons but not in terms of time. DOLENEC: Yes. Your Honour, all I wanted to say finally in relation to the delay was in my submission the prejudice has to be something more than the delay itself or there must be a delay that has caused prejudice. So to an extent any delay causes a prejudice in the ordinary course to someone but it must be seen to be more than that. HER HONOUR: It's not just that. It's just not that exactly. That's quite so. It's - DOLENEC: I don't think I need to address you any more on that today in light of your comments. HER HONOUR: No. I mean a major prejudice is that the person whom the money is owed to who is claiming the money doesn't have the benefit of that money whether it's for personal use; whether it's for investment; heavens, for any reason whatsoever. It's not up to the court to say to a person how that person might benefit from having that money."

25 The defence of 'set-off' was submitted by counsel for Mr Akari (so far as the claim made against him was concerned) to be available as an 'arguable defence' on the part of Mr Akari (transcript pp.16 to 17). After hearing further submissions by counsel for Mr and Mrs Akari in that regard, Her Honour stated:- "… You've certainly argued very strenuously on their behalf but I am not persuaded to accepting the argument and I've already indicated that having looked through the affidavit by Mr Akari and even more so the one by Mrs Akari I am not of the view that those affidavits disclose an arguable defence or a triable issue." (sic) (transcript p.19)

26 Counsel for Mrs Akari submitted that Mrs Akari had an "arguable defence" based on her complete denial of having requested the relevant monies as a loan from Mr Sole (transcript pp.19 to 21) or to having been a party to the loan agreement pleaded by Mr Sole. Counsel submitted that Mrs Akari's defence was a strong defence and a complete defence to the plaintiff's claim, further submitting that it was not the truth of the defence that was at issue but whether or not it was an arguable defence (transcript p.21).

27 Following short submissions from the plaintiff's counsel regarding a technical point, Her Honour dismissed the motion and awarded costs in favour of Mr Sole. Subsequent to this, the transcript indicates the following exchange took place between counsel for Mr and Mrs Akari and her Honour (transcript p.22):- "DELANEC: Could I just ask your Honour will your Honour gives reasons or should I take your - HER HONOUR: I indicated my business earlier but certainly reinforced by what Mr Bizannes has just put to the court. Thank you, ma'am, thank you, sir. ADJOURNED." (sic)

Legal principles 28 It is a long established and accepted requirement that a person applying to set aside an order, regularly made in his or her absence, bears the onus of showing an arguable case on the merits, that is, a case that might reasonably bring about a different result, as well as an explanation for his or her absence: Magnate Projects Pty Limited v Youma Constructions (No 2) Pty Limited [2005] NSWCA 331 at [51] per Hodgson JA. In that case, Hodgson JA also observed:- "In my opinion, an applicant seeking to set aside a judgment obtained after an undefended hearing, does not have to show that a different result is likely should the judgment be set aside and a new trial ordered. However, the circumstances may be such, as Jordan CJ (in Vacuum Oil Pty Co Limited v Stockdale (1942) 42 SR(NSW) 239) said, as to require 'a reasonably clear case of merits to be shown'; that is, that it appear reasonably clearly that there is a defence capable of producing a different result. If that defence depends on facts, then there should be some evidence of those facts; and the circumstances may be relevant to the quality of the evidence that is required to show a defence on the merits in particular cases. Among such circumstances could be the degree of the applicant's default, and hardship to the respondent." 29 Accordingly, in general terms, the relevant matters to be addressed on an application to set aside a default judgment include the issues of delay, an explanation for any delay or default which occasioned the entry of default judgment, whether a good defence on the merits has been established and the question of whether any prejudice would be occasioned to the plaintiff by the making of an order setting aside the judgment.

Plaintiffs' submissions 30 The plaintiffs submitted that the learned Magistrate failed to give reasons for the order made by her dismissing the plaintiffs' notice of motion and that, in consequence, it is impossible to discern upon what basis the decision and order was made. 31 In the submissions for the plaintiffs, it was observed that the original statement of claim in this matter contained a claim for debt based on an agreement to borrow money. It was contended that there was evidence on the application to set aside the default judgment of separate arguable defences on behalf, firstly, of Mrs Akari and, secondly, on behalf of Mr Akari. 32 Mrs Akari, who was not cross-examined in the Local Court proceedings, stated in her affidavit sworn 25 October 2007 in the Local Court (Annexure "B" to the affidavit of Jim Dai dated 23 May 2007 in these proceedings) that she did not request Mr Sole to lend money to her, that she did not authorise her husband to act on her behalf in borrowing the money, and that she is not a signatory to the account that the funds were paid into. It was submitted that this evidence raised an arguable defence by Mrs Akari on the merits, in accordance with the principle enunciated in Cohen v McWilliam (supra), that being a central or primary issue. 33 In relation to Mr Akari, it was observed that he admitted in his affidavit sworn on 25 October 2006 in the Federal Magistrate's Court matter, that he owed money to Mr Sole, but only in the sum of $33,800. In this respect, it was submitted that there is a defence as to quantum, based on repayment, an alleged agreement (see below), and statutory and equitable defences of set-off.

Defendant's submissions 34 The defendant submitted that the Magistrate did not err in the Local Court proceedings and opposed the making of any orders other than as to his costs. 35 The defendant submitted that there have been procedural irregularities in the way the plaintiffs had brought their case in the Local Court and in the proceedings before the Magistrate and in the way they have brought their case in this Court. 36 It was submitted that in the Local Court proceedings the plaintiffs failed to comply with UCPR Part 49 Rule 21 in that they did not state whether their application for review related to the whole or part and what part of the decision of the Registrar; that they did not state specifically the grounds relied on in support of the application; and, that they did not state what judgment or order was sought in place of the Registrar's decision. During the Local Court hearing, it was contended counsel for the plaintiffs sought separate orders from those sought in the original motion to set aside. 37 It was also submitted that the plaintiffs in bringing their action in this Court breached the UCPR requirements of Part 50.12(3) in that they did not file and serve with their summons a statement of the nature of their case and the reasons why leave should be given.

38 The defendant also relied upon the fact that subpoenaed material relating to the existence of a credit union account in the joint names of the Akaris tendered in evidence, established that monies were paid to a joint account held in the names of Mr and Mrs Akari on 3 May 2005, 6 June 2005, and 3 August 2005, as stated in the affidavit of Mr Sole dated 16 November 2006. 39 The defendant submitted that Magistrate O'Shane in the review proceedings considered relevant matters as required in Cohen v McWilliams (supra) as to setting aside of default judgments.

40 The defendant further submitted that the default judgment should not have been set aside as the plaintiffs had not satisfied the requirements in Cohen v McWilliam (supra). As to the issue of delay, the defendant relied on the fact that the plaintiffs failed to take action to set aside judgment for a period of three months. On the issue of an arguable defence, it was submitted that the merits of the proposed defences were not strong. It was observed that Mr Akari in his affidavit admitted indebtedness and relied upon repayment calculations that could not be justified. It was also submitted that Mrs Akari in her affidavit provided false information concerning her status as a signatory to the relevant account and provided nothing more than a blanket denial of her involvement in the matter. 41 The defendant additionally submitted that the weaknesses in the affidavit evidence of the plaintiffs showed the their proposed defences were not bona fide. It was submitted that two separate reviews of the matter by judicial officers prior to these proceedings have already canvassed the same facts. On each occasion the application of the plaintiffs has been dismissed with costs. It was submitted that a continuation of these proceedings and the consequent expenses constituted an abuse of Court process.

The proceedings by way of review 42 The proceedings heard by the learned magistrate were a "review" of the decision made by the Registrar given on 7 December 2006 dismissing the application for an order setting aside the default judgment for granting leave for the filing of defences. 43 Division 4 of the Uniform Civil Procedure Rules 2005, ("Review of decision of registrars other than judicial registrar") provides in Rule 49.19:- "If in any proceedings a registrar gives a direction or certificate, makes an order or decision or does any other act, the Court may, on application of any party, review the direction, certificate, order, decision or other act and make such order by way of confirmation, variation, discharge or otherwise, as the court thinks fit." 44 It is clear that a magistrate in "review" proceedings under these provisions exercises judicial power and, accordingly, must act in accordance with the principles that attend its exercise including, in particular, the provision of reasons for a final decision in proceedings that are heard and determined before the magistrate. The issue of a bona fide defence raised by each of the plaintiffs required the magistrate conducting the review to determine that issue as one of the primary matters. 45 It was apparent from the reading of the transcript of the review proceedings that the learned magistrate, during the course of submissions, referred extensively to the issue of delay and to the issue of prejudice but little was said to indicate that she had addressed her mind to the issues raised concerning the matters relevant to the issues on the matter of arguable defences. In Davies v Pagett (supra), the Full Court of the Federal Court, referred to the decision of the House of Lords in Evans v Bartlam (supra) as emphasising that fundamental to the exercise of the judicial discretion to set aside a default judgment was the need for a defendant to show a prima facie defence on the merits. This was described as "the primary consideration". The Full Court further observed that, speaking generally, the relevant cases showed that a defendant who has an apparently good defence should not be refused the opportunity of defending, even though a lengthy interval of time had elapsed, provided that no irreparable prejudice was thereby done to the plaintiff. 46 I consider that, in the particular circumstances and history of this case, that it is appropriate that I say something as to the possible merits of the proposed defences without, of course, in any way suggesting how the merits of either proposed defence should ultimately be determined on any new hearing of the plaintiffs' application.

Mr Akari's proposed defence of set-off 47 It is clear from the history of events that the plaintiff's claim is in the nature of a liquidated claim for the recovery of monies advanced to the plaintiff by way of loan. Mr Akari has not disputed and, in fact, admitted in the proceedings before the Registrar and before the Local Court that the monies were advanced by way of loan. The only defence sought to be argued on his behalf was one by way of set-off, either statutory or equitable set-off. 48 The basis of the set-off (the claimed performance of building work) had, on the evidence, suggested no inter-relationship to the facts that grounded the liquidated claim by Mr Sole. It sought to raise by way of set-off an unliquidated claim to damages in relation to alleged building work. 49 There is no provision in the Local Courts Act 1982 or the Rules thereunder that provide for a defence of set-off. However, by virtue of s.4(1) of the Civil Procedure Act 2005, s.21(1) of that Act applies to proceedings under Part 7, Civil Proceedings in Local Courts, of the Local Courts Act 1982. 50 Section 21(1) provides:- "21(1) If there are mutual debts between a plaintiff and a defendant in any proceedings, the defendant may, by way of defence, set off against the plaintiff's claim any debt that is owed by the plaintiff to the defendant and that was due and payable at the time the defence of set-off was filed, whether or not the mutual debts are different in nature. … (6) In this section, debt means any liquidated claim." 51 It is plain, as indicated above, that the set-off proposed to be raised by Mr Akari before the Registrar and the Local Court was not a "liquidated claim" in respect of work performed. Accordingly, it could not fall within the provisions of s.21. 52 A defendant may, in particular circumstances, however, rely on a defence of equitable set-off, whether or not the contrary claims are "mutual" in the sense required by the statutory right in s.21, and irrespective of whether or not both claims involve liquidated demands. The right of set-off in equity, it has been noted, however, depends on the more general proposition that the contrary liabilities are sufficiently closely connected that it would be inequitable for the plaintiff to be permitted to proceed with a claim without making allowance for the defendant's claim against it: Roadshaw Entertainment Pty Limited v ACN 053 006 269 Pty Limited (1997) 42 NSWLR 462. 53 There was, as noted above, no dispute that the loan monies referred to in the statement of claim had been advanced by Mr Sole by way of loan. A primary question which a magistrate conducting a review of the kind that is in question in these proceedings would need to consider was whether the facts relied upon could, as a matter of law, constitute an equitable set-off. Relevant authorities establish that mere cross-demands are not sufficient. A set-off in equity may arise where:-

(a) the defendant has a claim against the plaintiff for a debt or damages; and

(b) the defendant's claim is so closely related to the plaintiffs' claim in subject matter that it impeaches the plaintiffs' claim in the sense that it would be positively unjust that there should be recovery without an allowance or deduction: D Galambos & Son Pty Limited v McIntyre (1974) 5 ACTR 10 at 18. 54 On the evidence as to the facts relied upon by the plaintiff, Mr Akari, it would appear that the subject matters of his proposed set-off were wholly unrelated to the claim based upon the loans pleaded in the statement of claim. These matters would need to be considered in determining whether Mr Akari had, in fact, established or indeed whether he could have established a viable and therefore an arguable defence of set-off. There was no indication by the magistrate as to the basis of any conclusion reached on the question of Mr Akari's proposed defence. In fairness to her Honour, the last-mentioned matters I have referred to as to the legal nature and viability of a set-off as a matter of law was not argued before her. However, her Honour ought to have given reasons in relation to the matters that were argued. 55 Mr Akari also relied upon an alleged agreement said to have been entered into between him and Mr Sole whereby he claimed it was agreed that the outstanding loan would be repaid by periodical payments. Whether or not this could possibly provide a bona fide arguable defence is not a matter that falls for consideration on this appeal. It was, however, a matter raised in argument before the learned magistrate. Accordingly, it too required consideration and decision by her.

Mrs Akari's proposed defence 56 So far as the plaintiff, Mrs Akari, is concerned, the suggested defence, based on her evidence, was, as earlier stated, that she did not enter into any loan agreement with Mr Sole. In her affidavit, she claims she was not a joint signatory to the relevant credit union account, although other evidence indicates that this statement as factually incorrect. 57 The affidavit of Mr Sole in reply disputed Mrs Akari's factual contentions and claimed that the monies were lent to her husband to meet various financial commitments or expenses due to financial need. However, that was a factual dispute that could not be resolved on the application to set aside the default judgment. 58 In this respect, it is well-established that a court, in considering the question of a bona fide arguable defence on an application to set aside a default judgment, is not concerned to determine disputed issues of fact that may arise if the default judgment is set aside and the defence permitted. In this respect see Carr v Neill [1999] NSWSC 1263 (Sully J) and N & G Electrical Group Pty Limited v Terracon Industries Pty Limited [2002] NSWSC 837 per Bell J at [28] to [30]. The question for the magistrate to consider and decide was whether Mrs Akari's evidence raised an arguable defence based upon the proposition that she was not a contracting party to any loan agreement with Mr Sole. Again, this was a matter requiring a decision with supporting reasons. There were no reasons expressed by the magistrate for any conclusion that she reached on this issue. 59 There is one further matter to which I should refer. The statement of claim pleaded a loan entered into between Mr Sole and Mr and Mrs Akari. There was no alternative basis pleaded by Mr Sole as plaintiff, as for example, a claim made against Mrs Akari based on restitutionary principles. In the circumstances of the present matter, a magistrate properly exercising the jurisdiction to review the Registrar's decision and orders would be required to consider whether, on the claim as pleaded, Mrs Akari had sufficiently established a bona fide defence on the merits. In the absence of any decision by the learned magistrate, it is not at all apparent that this latter question was considered or determined.

Failure by the magistrate to give reasons 60 It was common ground that there was no formal decision or judgment produced by the learned magistrate or an ex tempore judgment recorded in the transcript of the hearing. The present appeal was argued upon the basis that the transcript of the proceedings, parts of which have been extracted above, constituted the only "record" in relation to the ultimate decision and orders made. 61 As already discussed, the learned magistrate was, of course, subject to an obligation to provide reasons for the decision on the review application. As relevant authorities have indicated, the reasons need not be elaborate or extensive in every case. It is sufficient if the court identifies the relevant issues, the evidence bearing upon them and the basis for the decision reached: Soulemezis v Dudley (Holdings) Pty Limited (1987) 10 NSWLR 247. 62 In Soulemezis, McHugh JA stated (at 279) that when the decision in question constituted was in fact or in substance a final order, the case must be an exceptional one for a judge not to have a duty to state reasons. That said, his Honour also emphasised (at 280) that if an obligation to give reasons for a decision exists, its discharge does not require lengthy or elaborate reasons. His Honour observed, it is necessary that the essential grounds or grounds upon which the decision rests should be articulated. 63 In Soulemezis (supra), Kirby P dissenting, stated that the absence of proper reasons constitutes an error of law. As such, it would authorise appellate intervention. 64 In Beale v Government Insurance Office of New South Wales (1997) 48 NSWLR 430, Mason J (with whom Meagher and Sheller JJA agreed) addressed the question (but did not need to decide it) whether the failure to provide reasons or the provision of inadequate reasons constitutes an error of law or other appellable error. The learned President stated that "it is sufficient to state that most cases have assumed the error is one of law" (at 445). 65 The transcript of proceedings, whilst recording the submissions and exchange with the bench, did not, as earlier indicated, therein record any ex tempore analysis or decision or judgment. In those circumstances, it is impossible to identify a basis or bases upon which the learned magistrate made the order dismissing the application for review. As the transcript indicates, the magistrate effectively declined to provide reasons when specifically requested to do so by the plaintiffs' counsel. 66 Apart from what may be considered the primary consideration (an arguable bona fide defence on the merits) the learned magistrate, of course, was also required to consider the issues of delay and prejudice and provide her reasons in relation to them. The learned magistrate appeared at times to focus on delay as an important issue at least insofar as supposed "prejudice" was concerned. 67 In Cohen v McWilliam (supra) Priestley JA listed a schedule of Australian authorities that made relevant reference to Evans v Bartlam (supra). His Honour observed (at 479 to 480):- "Although a number of the cases in the schedule refer to explanation of delay as a pre-condition in the way mentioned in the previous paragraph, I think a careful reading shows there is not one example in the schedule where a litigant has been shut out by procedural default from litigating (sometimes on severe conditions) a defence which the Court felt was arguable. The cases where litigants have been shut out are those where, in one form or another, the Court was not satisfied there was enough prospect of the applicant party succeeding on the issue raised to make it just for the issue to be tried." 68 It is evident that the issues as to bona fide arguable defences required separate and particular consideration in relation to Mr Akari's position from that of Mrs Akari. Whether or not it could be said that Mr and Mrs Akari had a basis for a defence is a matter, as I have earlier stated, best left for later determination, given my conclusion that the proceedings should be remitted back to the Local Court. 69 In failing to provide reasons for the magistrate's decision, I consider that the learned magistrate was in breach of the obligation upon her to do so and, as such, the decision given was erroneous in point of law within s.73(1) of the Local Courts Act 1982. 70 In the circumstances in which the learned magistrate by her decision can be said to have formed a firm view as to the merits of the application, I consider that under the orders I propose to make that the matter should be remitted to the Local Court but constituted by another magistrate for the purposes of determining the relevant issues arising with respect to each plaintiff on the review application. 71 Accordingly, I make the following orders:-

(b) Set aside the order made by the magistrate on 8 February 2007 dismissing the notice of motion brought by Mr and Mrs Akari.

(c) Remit the review proceedings to the Local Court to be heard and determined by it constituted by another magistrate. 72 I reserve the question of costs. I direct the parties to lodge with my associate written submissions as to costs within 21 days of the date of this judgment. **********

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