Australia and New Zealand Banking Group Ltd v Mahaffy

Judgment The background to this application 1These are proceedings for the recovery of a liquidated claim of $155,306.73 against each of the defendants following an agreement between the plaintiff and the first defendant for financial accommodation in the form of a business saver loan for which it is alleged that the second defendant was a guarantor. I handed down a judgment on 16 November 2012 in which I explained my reasons for adjourning these proceedings until 30 November 2012. These are my reasons for making orders on 30 November 2012 dismissing the notice of motion. It was not possible to deliver an ex tempore judgment on 30 November 2012 and the parties agreed I could provide reasons for these orders at a later date. 2As is set out in more detail in my judgment of 16 November 2012, the defendants filed a defence and cross-claim on 1 December 2011, following which the plaintiff brought a notice of motion for summary dismissal. On the first return date of 10 February 2012, the matter was adjourned to the Judicial Registrar's List on 23 March 2012. The defence and cross-claim were struck out, but with leave to replead by 4 May 2012. 3When no fresh pleadings were filed by the due date (the defendants instead issuing subpoenae), the court acceded on 11 May 2012 to the plaintiff's motion to strike out the defence and cross-claim. Judgment for the plaintiff for $180,094.19 plus interest and costs was entered on 21 June 2012. 4By notice of motion filed 5 November 2012, the first defendant (Mr Mahaffy) seeks to set aside the judgment entered against him. This is the application which was before me on 16 November 2012. 5On 16 November 2012, Mr Mahaffy was not able to tell me what had occurred before Judicial Registrar Smith on 11 May 2012, other than that he believed his defence and cross-claim had been struck out in some fashion. He is a litigant in person, and he was not present when the application was heard by the Judicial Registrar. A solicitor appeared on his behalf, although there is no notice of address on file. The plaintiff was also unable to tell me, in any detail, what had occurred, as no notes were available to describe the proceedings before the Judicial Registrar. 6I decided to err on the side of caution, and adjourned the proceedings to 30 November 2012, so that I could obtain the transcript of the proceedings before the Judicial Registrar on both occasions. That transcript has now been prepared, and was provided to the parties together with my judgment of 16 November 2012. The application before me on 30 November relates to the final disposition of the defendants/cross-claimants' motions. 7It is clear, both from the transcript of what occurred and from further information provided by both parties since 16 November 2012, that the defence was not simply struck out with leave to replead, and that judgment was therefore correctly entered on 21 June 2012. The cross-claim was similarly struck out and dismissed. 8The first question is whether the application to set aside the judgment would fall within the narrow confines in which this court has jurisdiction, namely Uniform Civil Procedure Rules 2005 (NSW) ("UCPR") rr 36.15 and 36.16. The second question is the entitlement of the defendants either to have the cross-claim reinstated, or to commence fresh proceedings. A preliminary issue: is the summary striking out of pleadings an interlocutory or final order? 9There were two pleadings struck out by the Judicial Registrar. One was the defence, and the other was the cross-claim. Where a statement of claim or a cross-claim (as opposed to a defence) is struck out, or leave to amend refused, courts have frequently stated that such orders are interlocutory in nature. A recent and helpful summary of the case law is provided by the Full Court of the Federal Court of Australia in Fuller v Toms [2012] FCAFC 155 at [14]-[15]: "[14] The decisions below were made on an interlocutory application for leave to file an amended pleading. The application failed and the proceeding was dismissed. Those orders did not finally dispose of the rights of the parties: Licul v Corney (1976) 180 CLR 213 at 225 per Gibbs J (dissenting); Hall v Nominal Defendant (1966) 117 CLR 423 at 442-443; in Bienstein v Bienstein (2003) 195 ALR 225 at [25], as it would be open to the applicant to commence and prosecute another proceeding if he is able to craft a pleading which satisfies the rules and discloses a cause(s) of action. An order summarily dismissing proceedings on the ground that no reasonable cause of action has been disclosed is interlocutory: Marketing Advisory Services (MAS) v Football Tasmania Ltd (2002) 42 ACSR 128 at [29] citing Weatherall v Satellite Receiving Systems (Australia) Pty Ltd (1999) 92 FCR 101; Dai v Telstra Corporation Ltd (2000) 171 ALR 348 at 352. The orders were therefore interlocutory, not final. [15] Accordingly, the applicant requires leave to appeal the decisions. We informed him at the outset of the hearing that we would deal with the question of leave in the course of our judgment even although he had not applied for leave. We are well satisfied that there is insufficient doubt about the correctness of the primary judge's decisions to warrant them being reconsidered by the Full Court, and that the refusal of leave would not result in any substantial injustice: Décor Corporation Pty Ltd v Dart Industries Inc (1991) 33 FCR 397 at 398-399." 10Where a statement of claim has been struck out, a fresh application may be made to the same court: Cranbrook v Stanley [2002] NSWCA 290 (successive applications to strike out a personal injury claim on a Limitation Act 1969 (NSW) basis); National Parks and Wildlife Service v Pierson [2002] NSWCA 273; (2002) 55 NSWLR 315 at [19] (successive applications to replead a struck-out claim for damages). 11However, orders for the entry of judgment are final regardless of UCPR rr 36.15 or 36.16: Mothership Music Pty Ltd v Flo Rida (aka Tramar Dillard) [2012] NSWCA 344. 12Once judgment is entered against a defendant, the question of whether to approach this court, the Supreme Court or the Court of Appeal will depend on a number of factors.: (a)If judgment is entered by default, an application is generally made to the court entering the judgment to set the judgment aside, showing both a reason for the failure and a defence to the claim, under UCPR r 36.16 (but c.f. Mothership Music Pty Ltd v Flo Rida (aka Tramar Dillard), supra). (b)If a contested hearing results in an order for summary judgment made by the Judicial Registrar, the avenue of appeal, if UCPR rr 36.15 or 36.16 is not satisfied, is to a judge of the Supreme Court, and not to this court: s 127 District Court Act. (c)If a defence is struck out by a judge following a contested application for summary judgment, the defendant can either seek to have the judgment set aside under UCPR rr 36.15 or 36.16 (Zakaria v Dr Noyce [2012] NSWSC 981) or appeal the decision. 13What happens, however, where the defendant is also the cross-claimant, as is the case here? The same principles applies to cross-claims as applied to statements of claim. This means that the decision to strike out the defence would be final while the decision to strike out the cross-claim would be interlocutory (Fuller v Toms, supra) and leave to appeal would be required. In addition, the entitlement of the plaintiff (or cross-claimant) to bring a fresh action setting out the claim in proper form would, subject to limitation restrictions, continue to exist. 14The favourable position in relation to plaintiffs also applies to amendments. Defendants are brought to the court to defend pleadings, and the provisions of the UCPR require them to comply with what can often be a strict framework for filing defences. This may be difficult and expensive for a defendant of straitened means. In addition, courts are not sympathetic to late amendments by defendants (Aon Risk Services Australia Ltd v Australian National University (2009) 239 CLR 175). This puts a heavy burden on a defendant to plead in proper form, early in the proceedings. Also, whereas the plaintiff in these proceedings amended the statement of claim once, without needing the leave of the court, no such right is available to the defendant, who needs leave to amend once any defence is filed. The defendant in these proceedings had his defence struck out after one attempt to plead it, and one failure to comply with an order to replead. That seems like a harsh result. 15This result might be understandable if Mr Mahaffy had been represented by solicitors. However, Mr Mahaffy is a litigant in person, in poor health, and he lives in a remote part of New South Wales. The circumstances in which his defence and cross-claim were struck out raise difficult issues about whether what occurred was just, quick and cheap, or whether the comma between "just" and "quick" may be at risk of being omitted where a defendant's failure to act is seen as unsatisfactory by the court. 16These comments are not intended to be criticisms of the plaintiff. This is an adversarial system. The defence and cross-claim were poorly drafted. This was compounded by a failure to comply with an earlier order for amended pleadings despite a generous timetable being given. The application was not rushed on; everything was done in accordance with the Rules. The plaintiff and its legal representatives made appropriate submissions to the Judicial Registrar on each occasion. The issue of subpoenae before a defence in proper form had been filed and served was premature. When the proceedings were struck out in May, the plaintiff was unable to attend, but he was represented by a legal practitioner who did all he could to put his client's position to the court. The Judicial Registrar gave a short ex tempore judgment referring to the appropriate legislation. Mr Mahaffy then delayed the bringing of this application for six months, despite knowing that judgment had been entered. He brought an earlier application to stay the judgment in October 2012, which was dismissed by another judge of this court. This is not a case where there has been flagrant disregard of the Rules by the plaintiff, or a rush to judgment by the court. Has an injustice occurred and, if so, what power does this court have to remedy the situation? Setting aside summary judgment in the District Court 17The provisions under which judgment may be set aside or varied in this court are both narrow and statutorily based. 18I shall first consider UCPR r 36.16, which provides: "36.16 Further power to set aside or vary judgment or order (1) The court may set aside or vary a judgment or order if notice of motion for the setting aside or variation is filed before entry of the judgment or order. (2) The court may set aside or vary a judgment or order after it has been entered if: (a) it is a default judgment (other than a default judgment given in open court), or (b) it has been given or made in the absence of a party, whether or not the absent party had notice of the relevant hearing or of the application for the judgment or order, or (c) in the case of proceedings for possession of land, it has been given or made in the absence of a person whom the court has ordered to be added as a defendant, whether or not the absent person had notice of the relevant hearing or of the application for the judgment or order. (3) In addition to its powers under subrules (1) and (2), the court may set aside or vary any judgment or order except so far as it: (a) determines any claim for relief, or determines any question (whether of fact or law or both) arising on any claim for relief, or (b) dismisses proceedings, or dismisses proceedings so far as concerns the whole or any part of any claim for relief. (3A) If notice of motion for the setting aside or variation of a judgment or order is filed within 14 days after the judgment or order is entered, the court may determine the matter, and (if appropriate) set aside or vary the judgment or order under subrule (1), as if the judgment or order had not been entered. (3B) Within 14 days after a judgment or order is entered, the court may of its own motion set aside or vary the judgment or order as if the judgment or order had not been entered. (3C) Despite rule 1.12, the court may not extend the time limited by subrule (3A) or (3B). (4) Nothing in this rule affects any other power of the court to set aside or vary a judgment or order." 19As the notes to this rule set out in Ritchie's Uniform Civil Procedure NSW (LexisNexis) point out, the principal use of this provision is for orders made in the absence of a party: r 36.16(2)(b) (but c.f. Mothership Music Pty Ltd v Flo Rida (aka Tramar Dillard), supra). The general rule is that the court may amend, vary or recall a final judgment before it has been formally entered, but that thereafter the court has no power to set aside a final judgment: DJL v Central Authority (2000) 201 CLR 226 at 245. 20The rule was introduced to overcome difficulties caused by the court automatically entering judgment; prior to computerisation, it was necessary for the parties to "take out" the court order. At common law, no right to set aside lay after judgment was entered. In AT v Commissioner of Police (No 2) [2010] NSWCA 337 Basten JA described the 14-day time limit of this rule as follows: "The rule is a trap for unrepresented litigants; even the legal profession appears to have been slow to realise the time constraint imposed. Nevertheless, the rule itself constitutes an amelioration of the position under the general law." 21However, that rule has no applicability here. This is not a default judgment. Mr Mahaffy was represented in court, submissions were heard on the merits of the claim, and an order summarily dismissing the proceedings, including the cross-claim, on the grounds that there were no reasonable defence and no reasonable cause of action in the cross-claim was made. Nor is it the case that an application has been made to recall or vary a judgment within 14 days of entry under r 36.16(3A) and 36.16(3B), and this period of time cannot be extended, for the reasons explained by Basten JA, supra. 22An additional problem is that the Court of Appeal has recently held that even where proceedings have been heard in the absence of a party (the first part of this rule), the correct approach is not to seek orders setting the judgment aside under r 36.16, but to appeal to the Court of Appeal: Mothership Music Pty Ltd v Flo Rida (aka Tramar Dillard) [2012] NSWCA 344. One of the defendants in those proceedings was an overseas resident who sought to challenge whether service had been effected. The plaintiff submitted to the Court of Appeal that the correct course for the defendant to take was to bring proceedings in the District Court to set aside judgment. Meagher JA rejected this submission, holding that the entry of judgment was final, not interlocutory, and the proceedings had been correctly commenced in the Court of Appeal. This decision is, however, not relevant to the proceedings before me. 23The next question is whether judgment can be set aside under UCPR r 36.15 which provides: "36.15 General power to set aside judgment or order (1) A judgment or order of the court in any proceedings may, on sufficient cause being shown, be set aside by order of the court if the judgment was given or entered, or the order was made, irregularly, illegally or against good faith. (2) A judgment or order of the court in any proceedings may be set aside by order of the court if the parties to the proceedings consent." 24An entry of judgment may be irregular if it has occurred in contravention of, or without compliance with, the Rules, and this court would then have jurisdiction to set the judgment aside. This includes failure to properly serve the defendant (Hoskins v Van Den-Braak (1998) 43 NSWLR 290, but c.f. Mothership Music Pty Ltd v Flo Rida (aka Tramar Dillard), supra), judgment for a sum in excess of the sum owed, or an irregularity arising from the court's administration. 25Can the circumstances in which the Judicial Registrar entered judgment, or failed to give adequate reasons, amount to the entering of judgment in circumstances amounting to irregularity? 26The issue is whether the Judicial Registrar's conduct of the matter amounts to irregularity due to a denial of procedural fairness. Davies J considered an application of this nature in Zakaria v Dr Noyce, supra. The plaintiff in those proceedings, who was acting for herself but later retained counsel, complained of procedural unfairness on the basis that the judge who heard her claim turned a mention into a hearing and gave judgment before reading submissions sent to him by her counsel. Davies J described the relationship between a lack of procedural fairness and irregularity at [25]: "25 A denial of procedural fairness will be a fundamental irregularity that will entitle a person aggrieved to set aside an order as a matter of unconditional right: Cameron v Cole (1944) 68 CLR 571. That right is part of the court's inherent power. Further, such an irregularity falls within r 36.15: Miltonbrook Pty Ltd v Westbury Holdings Kiama Pty Ltd [2008] NSWCA 38 at 85. " 27The application in Zakaria depended upon an alleged denial of the right to be heard. The irregularity in Miltonbrook (now reported at 71 NSWLR 262) was a failure to disclose. The irregularity in these proceedings is, however, much more difficult to determine. 28Could it be said that the Judicial Registrar's reasons were insufficient? Mr Wood points out that there is in fact no strict requirement to give reasons, at least at common law: Brittingham v Williams [1932] VLR 237 at 239; Public Service Board of NSW v Osmond (1986) 159 CLR 656; Housing Commission of NSW v Tatmar Pastoral Co (1983) 3 NSWLR 378 at 386. The appeal lies from the order made, not the reasons: R v Ireland (197) 126 CLR 321 at 330. While UCPR r 36.2 refers to reasons, it commences with the word "if". The Court of Appeal has on a number of occasions (most recently in Bar-Mordecai v Attorney-General (NSW); Bar-Mordecai v State of NSW [2012] NSWCA 207) heard, without criticism, appeals from orders made by judges of this court where no reasons have been given. 29The degree to which reasons need be adequate, and the question of what should happen if the inadequacy is extreme (for example, failure to give judgment on a part of the claim) is not the subject of consistent jurisprudence. On the one hand, there are decisions referring to the need to take into account "the limited nature of judicial resources and the cost to litigants and the general public" (Soulemezis v Dudley (Holdings Pty Ltd (1987) 10 NSWLR 247 at 259) in relation to procedural rulings, evidence and similar applications. On the other hand, the Court of Appeal embarked in an exhaustive analysis of a judgment on costs, before dismissing the appeal, in Brereton v Higgins [2004] NSWCA 48, which must have been a considerable strain on the successful respondent, a litigant in person. Mr Wood also refers to Ahmed v John Fairfax Publications Pty Ltd [2006] NSWCA 6 (where the court was critical of Nicholas J for failing to give reasons for imputations rulings, although these were not sought by the parties at the time). That decision is of little assistance as Nicholas J did later give reasons, which the Court of Appeal set aside on substantive grounds. 30The reasons for judgment given cover the whole of the defence and cross-claim. Any asserted inadequacy in the reasons is a matter for determination by another court. 31Nor could it be said that the Judicial Registrar acted in a precipitous fashion. He made an order in accordance with the relief sought in a Notice of Motion where there was non-compliance with his earlier order. The solicitor appearing for Mr Mahaffy was given an opportunity to be heard. I have carefully read the transcript of the proceedings before the Judicial Registrar and there is no evidence that the solicitor appearing for Mr Mahaffy was cut off, or prevented from representing his client. 32Another possible complaint (not articulated before me) might be a denial of natural justice. While I note that Davies J was satisfied that an application to set aside judgment in proceedings heard on their merits could be brought under r36.15 in relation to such claims, complaints of procedural unfairness and denial of natural justice are in my view matters best raised by an application for prerogative relief, which relief is not available in this court. The District Court is a statutory court where powers are limited to those conferred by the UCPR, a point helpfully made by Magistrate B Williams in Bastian v Travel Air International Pty Ltd [2011] NSWLC 33 at [25]: "...the Local Court is a statutory court and therefore one whose powers are limited to those conferred in express terms by statute (see Coles v Burke (1987) 10 NSWLR 429 below, where a similar statement was made in relation to the powers of the District Court). The only power this court has to set aside the judgement is that conferred by rule 36.15 referred to above. Therefore the consideration for me is whether the judgment was entered irregularly, illegally or against good faith. If I was to find that the judgment was in fact irregular illegal or against good faith, the court still has a discretion in that it will only proceed to set aside the judgment if sufficient cause is shown. The applicants had submitted that the only ground they rely upon is that it was 'irregular'." 33Although not raised before me, I have also given consideration as to whether s 14 of the Act may apply. For the reasons explained by the Court of Appeal in AT v The Commissioner of Police (No 2) [2012] NSWCA 337, I am satisfied that it cannot assist Mr Mahaffy. 34I am satisfied that the judgment cannot be set aside on the basis of irregularity, this being the sole basis for reliance on this rule. Discretionary considerations 35Even if the court had jurisdiction, issues of discretion would apply. The delay in bringing the application is considerable: Rosing v Shemesh [1960] VR 173. Mr Mahaffy has told the court about his illness and while he is clearly unwell, medical evidence is generally required. Mr Wood has referred me to evidence of Mr Mahaffy being able to appear in other courts, including bankruptcy proceedings and an unsuccessful application for a stay of judgment before another judge of this court in October 2012. 36These are difficulties which Mr Mahaffy must surmount not only in his application to this court, but in any application to another court. That brings me to a consideration of what court that would be.