Jurisdiction : MAGISTRATES COURT OF WESTERN AUSTRALIA

Appeal - Magistrates Court - Application to set aside default judgment - Turns on own facts

Allesch v Maunz [2000] HCA 40

Australian Competition and Consumer Commission v CLA Trading Pty Ltd [2016] FCA 377

Coventry Village Pty Ltd v R-Australia Group Pty Ltd [No 2] [2016] WADC 99

Hungerfords v Walker [1989] HCA 8; (1989) 171 CLR 125

Lackovic v Insurance Commission (WA) [2006] WASCA 38; (2006) 31 WAR 460

Naidoo v Naidoo [2005] WADC 41

O'Dea v Shire of Coolgardie [2013] WADC 150

Rollond v Bank of Western Australia Limited (Unreported, WASC, Library No 980498, 3 September 1998)

Shenton v Touchstone Farms Pty Ltd [2015] WASCA 252

Shilkin v Taylor [2011] WASCA 255

Starrs v Retravision (WA) Ltd [2012] WASCA 67

Strzelecki Holdings Pty Ltd v Clarke [2014] WADC 153

The Pilbara Infrastructure Pty Ltd v BGC Contracting Pty Ltd [2007] WASCA 257; (2007) 35 WAR 412

1 BOWDEN DCJ: Dr Nugawela appeals from a decision of his Honour Magistrate Cockram dated 18 April 2016 who dismissed an application to set aside a default judgment obtained against him by the respondent, American Express Australia Limited (American Express).

2 This appeal is by way of a 'reconsideration of the evidence' before the Magistrates Court (District Court Rules 2005 (WA) (DCR) r 50(1); Magistrates Court (Civil Proceedings) Act 2004 (WA) (MCCPA)) and is therefore an appeal in the nature of a re-hearing.

3 The court has the discretion to grant leave to admit additional evidence: MCCPA s 40(4), s 40(5); DCR r 50(2), r 50(3), however leave may only be given in 'exceptional circumstances': Shenton v Touchstone Farms Pty Ltd [2015] WASCA 252.

4 To succeed the appellant must demonstrate a legal, factual or discretionary error by the magistrate: Allesch v Maunz [2000] HCA 40 [23], 14.

5 If such an error has been made the appellate court may substitute its decision of the magistrate. If no error is shown, the Appeal Court cannot intervene.

6 American Express provides credit card facilities to customers.

7 Dr Nugawela applied for and was granted a credit card which was used subject to American Express' terms and conditions. By using the card Mr Nugawela obtained goods and services and incurred liabilities to American Express which remained unpaid.

8 Pursuant to a general procedure claim form, American Express sought the sum of $70,766.20 plus interest at the rate of 20.74%, pursuant to the terms and conditions relating to the issue of the card for the period of 29 May 2015 to 26 June 2015.

9 On 28 January 2016, in default of appearance by Dr Nugawela, judgment was entered in the following terms:

In default of appearance of the defendant, default judgment given against the defendant pursuant to r 41(4) of the (General Procedure Rules) 2005 for claim $71,892.12 and interest at 20.74% per annum from 26 June 2015 to 28 January 2016, $8,685.52 plus costs fixed at $2,448.10 being a total judgment of $83,025.74.

The application to set aside the default judgment

10 Dr Nugawela applied to set aside the default judgment before his Honour Magistrate Cockram on 18 April 2016.

11 At the hearing his Honour pointed out that the judgment was, in his opinion, irregular as it had been entered for an amount in excess of the court's jurisdiction. Ultimately, his Honour permitted American Express to amend the default judgment of 28 January 2016 effectively bringing it below the court's jurisdictional limit ($75,000).

12 Further, his Honour accepted that there was a genuine dispute over the sum of $3,000 in relation to a payment to Autodelta and, to that extent, allowed the application but otherwise dismissed the application and made orders giving default judgment in favour of American Express in the sum of $67,766.22 and ordered that Dr Nugawela pay interest on that sum at 20.74% from 26 June 2015 to 28 January 2016 but capped at $75,000. His Honour further ordered that Dr Nugawela pay American Express' costs fixed at $2,448.10 and that the Dr Nugawela have leave to defend $3,000 of the claim.

13 Dr Nugawela's appeal notice provides four grounds of appeal:

1. The magistrate wrongly amended the default judgment given by the registrar, even though he found that the default judgment was irregular.
2. The magistrate erred in fact in law in failing to recognise that he had a valid counterclaim and set-off on all the evidence before him.
3. The magistrate erred in fact and law in failing to set aside the default judgment in any event.
4. Further grounds after I have obtained the transcript and legal advice.

14 At the hearing of the appeal Dr Nugawela did not pursue ground 4 restating his grounds of appeal as the jurisdictional limit (ground 1) and the triable issue and counterclaim issues (ground 2 and 3).

15 I accept, as did the magistrate, that Dr Nugawela has adequately explained how the judgment was entered against him and the delay between the judgment being entered and the application to set it aside. American Express made no submissions to the contrary.

16 A heavy onus lies on a party who seeks to introduce new evidence on appeal.

17 It is not helpful to attempt to describe what constitutes 'exceptional circumstances'. The variety of circumstances that might arise is inexhaustible and restating the statutory test in different words would serve no useful purpose: Shilkin v Taylor [2011] WASCA 255.

18 No invariable rule concerning the admission of additional evidence should be laid down, however the discretion to admit further evidence is to ensure the overall interests of justice. If the needs of justice in the particular case require the reception of additional evidence, then it should be admitted: Lackovic v Insurance Commission (WA) [2006] WASCA 38; (2006) 31 WAR 460.

19 Ordinarily the court will refuse to admit new evidence on appeal unless the court is satisfied that the new evidence would have led to a different outcome if it had been led in the court below. That is, because unless that condition is satisfied it will seldom, if ever, be in the interests of justice to deprive the respondent of the orders made in the court below: Shilkin v Taylor [66] - [70].

20 Leave to admit additional evidence should not be used to rectify perceived weaknesses in a case already presented: Naidoo v Naidoo [2005] WADC 41 [9] (Eaton DCJ).

21 The additional evidence sought to be adduced is an affidavit of Dr Nugewela of 4 December 2016. Although the affidavit summarises previous submissions to the court, additional material is provided including but not restricted to pars 17, 18, 20, 21, 22 and the two annexures.

22 American Express opposes the introduction of the additional affidavit. Dr Nugawela claims the affidavit simply provides more quantification of claims previously made. Taking a fairly broad brush approach and, bearing in mind that Dr Nugawela is unrepresented, I consider it is in the interests of justice to receive the additional evidence.

The magistrate wrongly amended the default judgment given by the registrar, even though he had found the default judgment was irregular

23 Mr Nugawela argued that the judgment exceeded the monetary jurisdiction of the court and the magistrate, in essence, had no jurisdiction to amend an irregularly obtained judgment, saying the judgment was 'ex debito justitiate' or because it was irregular it should be set aside.

24 Clearly, the original default judgment was over and above the Magistrates Court jurisdiction: Starrs v Retravision (WA) Ltd [2012] WASCA 67, establishes that not every irregularity in the means by which a default judgment is obtained will necessarily entitle the defendant to have the judgment set aside as of right, and that the court may in the exercise of its discretion amend an irregularly entered judgment rather than set it aside. Such a power can be exercised even where the application for an amendment is made after the defendant has applied to set it aside: Starrs v Retrovision; O'Dea v Shire of Coolgardie [2013] WADC 150 (Davis DCJ).

25 The court does have the power to amend a default judgment even one irregularly obtained. Insofar as the ground of appeal argues to the contrary it has no merit.

26 If the ground is that his Honour erred in the exercise of his discretion in permitting the amendment, there is no merit in that ground. The magistrate did not err. Dr Nugawela has not pointed to any mistake of fact, wrong principle, extraneous or irrelevant material taken into account or the failure to take into account any material consideration in the exercise of his Honour's discretion and it was entirely appropriate and in the interest of justice to permit the amendment to remove that portion of the judgment based on interest on interest and to ensure that judgment did not exceed the monetary limits of the Magistrates Court.

27 The court does have the power to amend an irregularly obtained default judgment and there was no error in the exercise of the court's discretion to exercise that power.

28 Dr Nugawela complains that the pre-judgment interest was allowed at the contractual rate of 20.74% and not at 6%. Section 12(2)(c) of the MCCPA provides that the discretionary award of interest pursuant to s 12(1)(a) does not arise where interest is payable as of right: Hungerfords v Walker [1989] HCA 8; (1989) 171 CLR 125. In this case, interest at the rate of 20.74% was a contractual right. The order made by the magistrate capped the interest to be paid by virtue of the fact that the judgment plus interest was capped at $75000. No error has been demonstrated. There is no merit in Dr Nugawela's submissions

The magistrate erred in fact and in law in failing to recognise that he had a valid counterclaim and set-off on all the evidence before him

29 Dr Nugawela says that the law of New South Wales applies to his contract with American Express (cl 35 to annexure C of the affidavit of Mr Joseph of 11 April 2016 ) and that cl 8 of that contract is arguably illegal, unfair, void or unenforceable pursuant to the Consumer Credit Act 1995 (NSW) or arguably unconscionable or an unfair contract term pursuant to the Fair Trading Act 1987 (NSW) which in effect incorporates sch 2 of the Competition and Consumer Act 2010 (Cth) being the Australian Consumer Law 2010 (ACL), resulting as I understand his submissions, to the whole contract being void or unenforceable.

Suspension

Our rights. We can suspend your right to use the Card (including any Supplementary Cards) for any reason (even if the Account is not in default) and without prior notice, but we will inform you of this.

Consequences of suspension. You must ensure that a suspended card is not used until such time as arrangements satisfactory to us have been made for payment of outstanding Charges. During a suspension, we do not lose any of our rights under these Conditions or at law ,and your obligations under these Conditions continue. The same Conditions will continue to apply if and when a suspension is lifted.

31 Dr Nugawela swears in his affidavit of 23 March 2016 that on 24 December 2014 without any warning American Express froze his account preventing any use for 180 days as a result of becoming aware of a summons from the Australian Taxation Office being issued against him. He complains that the card facilities of his entire family were locked out without any recourse and that at the time his account was suspended it was up to date.

32 He says the consequence of this occurring on Christmas Eve threw his entire festive season arrangements, holidays and overseas' travel into chaos and he was left without notice to make alternative arrangements over the festive period when many banking entities and law firms are closed.

33 He says notwithstanding that he contacted American Express to make alternative emergency arrangements, they failed to accommodate any of his requests. As a result his daughter could not register to commence studies at the Boston College in January 2015 and his wife and he had to cancel their trip to the United States in January 2015.

34 Dr Nugawela says American Express sudden, repressive and unilateral actions in suspending the credit card facilities based upon the unproven debt claim, as a result of the summons from the Australian Taxation Office, was a breach of contract and he therefore has a counterclaim for breach of contract and an entitlement to damages and compensation and is entitled to set off those damages and compensation against any amounts owing to American Express.

35 The respondent submits that Dr Nugawela has done nothing more than make a bold assertion that the various provision of the consumer legislation referred to apply but has not established that he has an arguable case to either defend American Expresses claim or establish a counterclaim.

36 In my view the contract is for the supply of credit facilities and therefore a financial product or a contract for the supply, or possible supply of financial products, and the Australia Securities and Investments Commission Act 2001 (Cth) would apply rather than the ACL or the other New South Wales Acts referred to by Dr Nugawela. Australian Competition and Consumer Commission v CLA Trading Pty Ltd [2016] FCA 377 (Gilmour J). However, as this point was not raised by American Express, I will assume favourably to Dr Nugawela, that the consumer legislation to which he referred applies.

37 The learned magistrate in discussions during submissions and in his decision pointed out that Dr Nugawela's affidavit was full of bare statements and allegations and failed to provide any quantification of the counterclaim and that Dr Nugawela had in excess of 12 months to institute proceeding against American Express for damages and losses suffered but had not done so.

38 His Honour pointed out that, other than a sum of $3,000 which was disputed, Dr Nugawela had not disputed nor established that he had not spent the money advanced by American Express (ts 18) or that the money had not been properly paid out on his behalf.

39 For a default judgment to set aside, it must appear from the material before the court that Dr Nugawela's case is not inherently incredible and if his evidence was accepted, there would be a real prospect of success: Rollond v Bank of Western Australia Limited (Unreported, WASC, Library No 980498, 3 September 1998); The Pilbara Infrastructure Pty Ltd v BGC Contracting Pty Ltd [2007] WASCA 257; (2007) 35 WAR 412 [55].

40 Whilst a court is not required to resolve a factual dispute upon the affidavits, or form a provisional view as to probable findings of fact at trial, there must be in the affidavit evidence material of real substance, more than mere assertions, showing there is a serious question to be tried or the existence of a genuine counterclaim or genuine dispute about the debt : Strzelecki Holdings Pty Ltd v Clarke [2014] WADC 153 (Scott DCJ); Coventry Village Pty Ltd v R-Australia Group Pty Ltd [No 2] [2016] WADC 99 [18] (McCann DCJ).

41 On the materials before the magistrate and this court, there is insufficient evidence to justify a conclusion that Dr Nugawela has either a defence on the merits or a viable counterclaim. There is simply insufficient evidence to justify a conclusion that arguably the elements of the defences or a counterclaim pursuant to the consumer legislation referred to could be made out. The additional material in Dr Nugawela's affidavit of 4 December 2016 provides little assistance. Annexure AM1 shows a request was made for a hotel accommodation charges to be paid. No evidence is adduced to show those charges were paid. I decline to infer that you can infer from the contents of subsequent correspondence that the charge was paid. His counterclaim, as I understand it, is based on the fact that he cancelled his trip overseas. Annexure AM 2 shows that Dr Nugawela earned income he would not have otherwise earned if he had travelled overseas. Neither of these annexures in my view, considered alone or in conjunction with other evidence, assist in establishing an arguable defence or triable issue in relation to American Express' claim or an arguable counterclaim or assist in quantifying his purported counter claim.

42 It is not just a question of referring to the legislation, Dr Nugawela needs to establish why he says cl 8 is arguably illegal, unfair and the contract as a whole void or unenforceable or arguably unconscionable or unfair and the legal and factual basis of his counterclaim.

43 The consumer legislation referred to sets out extensive criteria for the court to consider in reaching a conclusion that a contract is unjust: s 70(2)(a) - s 70(2)(o) Consumer Credit Act (NSW) 1995; unfair or unconscionable: s 20, s 21, s 22(1)(a) - s 22(1)(l), s 22(2)(a) - s 22(2)(l), s 23, s 24, s 25(1)(a) - s 25(1)(n) Australian Consumer Law being sch 2 of the Competition and Consumer Act 2010 (Cth) incorporated into the Fair Trading Act 1987 (NSW).

44 Issues such as the parties' bargaining positions, whether undue influence or pressure was exerted, industries codes, the clarity and transparency of the terms, the parties' commercial relationship, to name but a few need to be addressed.

45 Details of the factual basis of the counterclaim and its quantification need to be provided sufficient to enable a conclusion that there is a serious question to be tried. The consumer legislation allows compensation and/or damages to be paid in certain circumstances, however I am not satisfied on the material before the magistrate or this court that Dr Nugawela has shown an arguable case that he fits those circumstances.

46 There is nothing in the material before the magistrate or this court that establishes any error of law or fact or erroneous exercise of discretion in his Honour's conclusion that no arguable defence to the claim was shown nor any arguable counterclaim established.

47 Dr Nugawela, in his affidavit of 4 December 2016, disputes the quantum of the claim. He says the claim has not been substantiated by any affidavit, document or schedule particularising the claim or the period of time over which the amount claimed was said to have been incurred. Nor, he argues, has any copy of statement of accounts or other records been lodged to verify the amount claimed. He says that American Express have failed to establish his liability for the amount claimed and denies liability for the amount claimed.

48 Dr Nugawela claims that he has disputed the claim in April 2015 and refers to annexure 'PN6' of his affidavit sworn 23 March 2016. This annexure is a letter from Dr Nugawela to American Express where, inter alia, he states he disagrees with the interest rate and penalties charged since the credit facilities had been effectively cancelled and disagreed with the figures they referred to.

49 However, Dr Nugawela finds himself in a position whereby default judgment had been entered and he is trying to set that aside. He has the onus of establishing the existence of a serious question to be tried or of a genuine dispute. A mere claim in the letter that he disputes the figures is not sufficient detail.

50 At the hearing before the magistrate, his Honour drew to Dr Nugawela's attention that the only specific account he challenged was the $3,000 Autodelta payment and when specifically asked, whether leaving aside the $3,000:

His Honour: ... it still leaves $67,766.22 which you are not disputed (sic) you spent and one assumes they are entitled to recover:

Nugawela Mr: Possibly, yes.

His Honour: Well, not possibly. There is nothing in your affidavit to say that you didn't spend that money. Is there anything else you want to say to me?

Nugawela Mr: No, your Honour. I can't ...

His Honour: Okay

Nugawela Mr: I didn't address that.

His Honour : Well, no doubt it's because you did spend it. I mean there's no suggestion that you didn't spend this money is there?

Nugawela Mr : There's nothing - nothing that I've submitted to that effect ...

His Honour: ... I would have expected that if you were saying you had not spent that money, you would have said so. I mean you've got statements don't you?

Nugawela Mr: I do

His Honour: Okay. So you would have been in the position to go through those statements and identify which ones you disputed and the only one you referred to was $3,000 from Autodelta.

Nugawela Mr: That's the only one I wrote to them about.

His Honour: Well that's the point I'm making. One assumes, if you hadn't spent the other $67,000, you would have told them. Anything else?

Nugawela Mr: No, your Honour (ts 17 - 18).

51 Notwithstanding that Mr Nugawela has filed an additional affidavit, he has not produced any material showing that other than the $3,000 Autodelta payment the money advanced by American Express were either not advanced at his request or used for his purposes.

52 Dr Nugawela claims on the appeal that because he has no documentation he cannot now show which amounts were in dispute. Dr Nugawela did not and does not dispute that he has received monthly statements but says because of other life issue he has not kept them.

53 Dr Nugawela has failed on the materials before the magistrate and before me to establish that any of the monies advanced by American Express for which a judgment sum has been obtained (other than the $3,000 relating to Autodelta, for which leave was granted to defend) were not advanced at his request or used by him for his purposes. He does not dispute that he owes money to American Express but provides no evidence as to how much he accepts he owes and how much he disputes.

54 There is nothing in the material before the magistrate or this court that establishes any error of law or fact or erroneous exercise of discretion in his Honour's conclusion that no arguable defence to the claim was shown nor any arguable counterclaim established.

The magistrate erred in fact and law in failing to set aside the default judgment in any event.

55 The court has the power on such terms as it thinks fit to set aside or vary any judgment entered. The power to do so is to be exercised 'so as to do justice between the parties having regard to the circumstances of the case'.

56 The overriding consideration in the exercise of the court's discretion must be whether or not the defence or proposed counterclaim has arguable merit.

57 In my view, there was no error demonstrated of fact or law in the exercise of his Honour's discretion not to set aside the judgment. The interest of justice require that the judgment not be set aside.

58 The appeal is dismissed and I order that Dr Nugawela pay American Express' costs of the appeal.