BOROWIAK v HOBBS & 1Ors

Cohen v McWilliam and Another (1995) 38 NSWLR 476 Davies v Pagett (1986) 70 ALR 793 CASES CITED : Stollznow v Calvert [1980] 2 NSWLR 749 Suduk v Burton [1999] NSWSC 1277 Vacuum Oil Pty Co Ltd v Stockdale (1942) 42 SR (NSW) 239

Gweneth BOROWIAK PARTIES : Pamela HOBBS Philip HOBBS

COUNSEL : Mr J Sheller (Pl) Mr B Glover (Defs)

SOLICITORS : William Roberts Lawyers (Pl) Insight Litigation & Legal Services Pty Ltd (Solicitors) (Defs)

LOWER COURT JUDICIAL OFFICER : Stapleton LCM

LOWER COURT MEDIUM NEUTRAL CITATION : Pamela & Philip J HOBBS v Gweneth BOROWIAK

• 11 - IN THE SUPREME COURT OF NEW SOUTH WALES COMMON LAW DIVISION

JUDGMENT 1 HIS HONOUR: Motor vehicles owned respectively by the defendants and the plaintiff were involved in a motor vehicle accident. It took place on 13 May 2005. There is no dispute that the collision was caused by the negligence of the plaintiff. 2 The plaintiff made a claim on her insurer (NRMA). Subsequently, her claim was met by the insurer. The defendants took steps to recover, inter alia, the repair costs to their vehicle (commencing with a letter of demand to the insurer, dated 11 August 2005, which received no response). The claim was in excess of $28,000. 3 The defendants commenced proceedings in the Local Court. Service of the process was effected prior to 5 September 2005. It was on that date that the process was brought to the attention of the insurer and it took over the conduct of the proceedings on behalf of the plaintiff. No defence was filed. The defendants obtained default judgment on 14 November 2005 and proceeded to levy execution thereon. 4 An application to set aside the default judgment was made on 30 December 2005. 5 The application was heard and dismissed by a Registrar. The plaintiff then sought a review of that decision. The review was heard and determined by a Magistrate (Stapleton LCM). 6 The review that took place might be described as having the characteristics of a fresh hearing of the application. The Magistrate admitted considerable evidence additional to that which had been before the Registrar. 7 The nature of what is now described as a "review" (it is probably an appeal) is not in issue. Accordingly, I put it aside for present purposes. 8 After conducting the review, Her Honour reserved her decision. The reserved decision was delivered on 31 May 2005. 9 Before proceeding further, it is necessary to advert to certain of what appears in the judgment. 10 Paragraph 5 thereof is in the following terms:- "The plaintiffs' claim is in negligence for damage occasioned to her motor vehicle. She claims the sum of $28,372 plus interest and costs. The defendant's evidence disputes the quantum of the claim. The plaintiff would not concede that the defence was a bona fide defence. A defence as to quantum is a good defence. On this application the court cannot enquire into the substance of the defence. For the purpose of the argument it is a bona fide defence on the merits." 11 The Magistrate then proceeded to observe that "The argument was about the failure by the defendant to file a defence". She then proceeded with a narrative of events, commencing with the demand and concluding with the dismissal of the application by the Registrar. 12 She then rejected written submissions made on behalf of the plaintiff concerning the matter of explanation for the failure to file a defence. She observed, inter alia, that there was no evidence that, at any point, anyone gave consideration to the rule that the defence must be filed within 28 days of service. 13 She then proceeded to deal with submissions made by the plaintiff, relying on the decisions of Suduk v Burton [1999] NSWSC 1277 and Davies v Pagett (1986) 70 ALR 793. I should add that in this Court the plaintiff also relied on Cohen v McWilliam and Another (1995) 38 NSWLR 476. 14 She then made the following observations:- "13 Suduk and Davies were decided prior to the commencement of the Uniform Civil Procedure Act. Part 6 of the Act emphasises the importance of compliance with the time limits set by the rules. Section 56(1) provides that the overriding purpose of the Act and of the rules of court in their application to civil proceedings, is to facilitate the just quick and cheap resolution of the real issues in the proceedings. 14 I do not accept the applicant's submission that the delay is irrelevant in this case because there is a bona fide defence on the merits. It seems to me that the ratio in Davies is now tempered by Part 6 of the Uniform Civil Procedure Act 2005. An explanation for the failure to comply with the rules must be made and has not been made. I have been told how the insurer attended to its business of insurance but not how it attended to the legal responsibility it accepted on behalf of the defendant." 15 She then observed that the defendants had not called evidence that their claim would be irreparably prejudiced if the judgment was set aside. However, she found that the defendants would be significantly prejudiced by the additional legal costs required to prepare the matter for a defended hearing and that no costs order on a final hearing would fully compensate them for those costs. 16 The judgment concluded with the following:- "16 When I balance the competing interests of the parties and I consider the absence of any explanation as to why the defence was not filed, I cannot find that the applicant has made out its case to set aside default judgment." 17 On 28 June 2006, the plaintiff brought proceedings in this Court. On 17 July 2006, the defendants filed a notice of contention. 18 The summons alleges three grounds of appeal. The grounds are as follows:- "8. Her Honour Stapleton LCM erred at law in failing to follow binding authority (being the decisions of the Supreme Court in Suduk v Burton [1999] NSWSC 1127 (Adams J) (sic) and the full Federal Court in Davies v Pagett (1986) 78 ALR 793) (sic) on the circumstances in which a default judgment should be set aside. 9. In the alternative, Her Honour Stapleton erred at law in determining that binding authority on the circumstances in which a default judgment should be set aside was to be read subject to the Civil Procedure Act 2005. 10. In the circumstances where there was an absence of evidence of prejudice to the defendants and based on her finding that there was a legitimate defence to the defendants' Statement of Liquidated Claim, Her Honour erred at law in refusing to set aside the Registrar's decision and therefore the default judgment." 19 It is common ground, that the plaintiff needs a grant of leave. Leave is required because the appeal is brought in respect of an interlocutory judgment. Leave is also required in respect of the third ground (it is said to concern a mixed question of law and fact). 20 Before turning to the question of leave, it is convenient to first look at the question of the merits of the appeal. 21 The Magistrate had before her, inter alia, a draft proposed defence and an affidavit sworn by James Gethen (a motor vehicle loss assessor). 22 Broadly speaking, the proposed defence may be described as containing an admission of liability, which sought to put in issue part only of the quantum of the claim (in the order of $7,000). 23 The affidavit put forward the deponent's views on the assessment relied on by the defendants, and his assessment. 24 In the conduct of the proceedings before both the Registrar and the Magistrate, the plaintiff did not make any offer concerning the undisputed part of the claim (even though it was seeking to put in issue only a small part of it). For this and other reasons it might be thought to be an arrogant or bold application. 25 Because there was confusion in the manner in which the dispute was conducted before Her Honour, I should briefly set out my understanding of the relevant law. 26 Application to set aside the judgment was made pursuant to rule 36.16 of the Uniform Civil Procedure Rules 2005 (the Rules). This is a rule which confers an unfettered discretion. It is a discretion that is exercised having regard to the particular facts of the case before the Court and so that the dictates of justice are best served. The applicant bears the onus of satisfying the Court that the judgment should be set aside. 27 There is a plethora of case law concerning the exercise of the discretionary power to set aside a default judgment and other discretionary powers. This case law is replete with competing views. What has been said in the cases provides useful guidance in the exercise of a discretion by a Court. 28 The cases provide assistance as to what may be regarded as relevant circumstances. An application is unlikely to succeed unless there is a bona fide defence on the merits. Other relevant matters include the default and delay of the party seeking the indulgence of the Court (including what is offered to explain that default and delay). In dealing with matters of default and delay, matters of prejudice can be relevant. The weight that may be given to such circumstances will vary from case to case. Each case will turn on its own particular circumstances. 29 It may be helpful if I set out certain passages from the decided cases. The reference to these passages is not sought to be extensive or exclusive. 30 In Vacuum Oil Pty Co Ltd v Stockdale (1942) 42 SR (NSW) 239 at p 243, Jordan CJ said:- "It is obvious that decisions on other sets of facts are of no assistance in arriving at a decision as to how it would be proper to exercise the Court's discretion in the present case."

This observation was part of a full passage which Priestley JA stated in Cohen, at pp 478-479, to bear out his own understanding. The passage also refers to the necessity to consider how it came about that the applicant found itself bound by a judgment regularly obtained (an explanation of the defendant's absence which shows that justice requires that, in the circumstances, it should be excused).

In Stollznow v Calvert [1980] 2 NSWLR 749 at p751-2, Moffitt P said:- " [(4)] It is preferable that I confine myself to such matters of principle as are necessary to decide this appeal. I adopt this approach because the present confused state of the authorities appears to be due largely to the generation of many dicta which were intended to, or have been taken to, define the boundary confining the exercise of a discretion to do that which is just in all the circumstances. Often what has been said has been appropriate to the circumstances of the case there under consideration. but may be less appropriate, or even inappropriate, in other cases. [(5)] While useful guidance is provided by the manner of exercise of the discretion in other cases, and by the factors considered in those cases to favour the exercise of the discretion in a particular way, each case must depend on its own facts. It would be contrary to what I understand to be the accepted law in this country, to confine the exercise of a judicial discretion by judge made rigid formulae. The exercise of a discretion by a judge of first instance is examinable on appeal in accordance with authority such as House v The King (6a); Lovell v Lovell (7a), so that a decision will be subject to interference if error appears in one of the ways referred to in those authorities.

[(6)] The view I have stated was well expressed by Walsh J when a member of this Court, in Witten v Lombard Australia Ltd (13a). Having made reference to earlier local authority and to English authority, including the decision just then given in the Court of Appeal in Allen v Sir Alfred McAlpine & Sons Ltd (1), Walsh J said (13a): "… a balance must be struck as between the plaintiff and the defendant and, in the end, 'the court must decide whether or not on balance justice demands that the action should be dismissed.'"

[(7)] He further said (13b) the exercise of the Court's discretion should not be fettered "by rigid rules", but required "a decision to be reached, upon a balance of the relevant circumstances". It is of assistance to quote at length what he ultimately said (13b): "Everything must depend upon the circumstances disclosed in each particular case. It is, of course, proper to consider whether any explanation or excuse has been offered for the delay, and whether any explanation or excuse that has been offered is credible and satisfactory. It is proper to consider whether or not there is evidence of particular prejudice to the opposing party by reason of the delay. When all relevant factors have been taken into account, a decision is then to be reached as to the manner in which the discretionary power should be exercised …" 31 For completeness, I should observe that what was said in Stollznow was made in the context of the discretionary power to dismiss for want of prosecution. However, for present purposes, that is not of significance. 32 The plaintiff has submitted that the Magistrate found that it had a bona fide defence on the merits. Whilst there may be room for contention on the matter, it seems to me that she did not make such a finding. I consider that she first observed that it was a matter in issue between the parties and then proceeded to deal with the application on the assumption that there was a bona fide defence on the merits. Her initial concentration was on what she described as the argument about the failure to file a defence. 33 She dealt with that argument as earlier mentioned. I do not consider that she was in error in reaching that view. All that she had been given by the insurer was a narrative of events (what it did). 34 Further, in the circumstances of this case, I consider that she was entitled to accord significant weight to the conduct of the insurer. 35 I should mention certain of the matters deposed to by the insurer's Litigation Operations Consultant (Archana Naidu). The matter had been referred to the assessment department subsequent to the letter of demand and prior to 5 September 2005. It was given priority according to the date it "hit the work list". It was in the hands of the litigation department by about 5 October 2005. The insurer was aware of the writ of execution by about 25 November 2005. A solicitor was not instructed until about 21 December 2005 (this was not done until after it received the assessment from its assessor). 36 An aspect of the business of this insurer was to deal with claims and litigation of this nature. It had set up facilities to process the same. It was not suggested that there was a lack of knowledge of litigation procedures or the relevant rules. 37 There was no evidence that the insurer had any regard to the time limits imposed by the rules for the filing of a defence. Indeed, it would seem that they were either disregarded entirely or treated with distain or indifference (preferring to concentrate on internal procedures concerning priority observed in respect of litigation work). 38 A court could not be expected to favourably view an application for indulgence in circumstances where the applicant takes such an approach. To do so, would bring about injustice. 39 Rule 36.16 is the successor to Part 40 Rule 9 of the Supreme Court Rules 1970. It has a similarity in terminology. However, it appears in a context which is different from that of its predecessor (despite the introduction of Part 1 Rule 3 in 1995). 40 The power conferred by it has to be exercised in the context of the Civil Procedure Act 2005 (the Act) and the Rules. Part 6 of the Act is headed "Case Management and Interlocutory Matters" and contains, inter alia, section 56. This is the overriding purpose provision referred to by the Magistrate. It is in the following terms:- 56 Overriding purpose (cf SCR Part 1, rule 3) "(1) The overriding purpose of this Act and of rules of court, in their application to civil proceedings, is to facilitate the just, quick and cheap resolution of the real issues in the proceedings. (2) The court must seek to give effect to the overriding purpose when it exercises any power given to it by this Act or by rules of court and when it interprets any provision of this Act or of any such rule. (3) A party to civil proceedings is under a duty to assist the court to further the overriding purpose and, to that effect, to participate in the processes of the court and to comply with directions and orders of the court. (4) A solicitor or barrister must not, by his or her conduct, cause his or her client to be put in breach of the duty identified in subsection (3). (5) The court may take into account any failure to comply with subsection (3) or (4) in exercising a discretion with respect to costs." 41 Where it has application (such as when the Court exercises any power given to it by the Act or the Rules), the Court must seek to give effect to the overriding purpose. 42 Before concluding this judgment, I should mention one other matter. It concerns the question of prejudice (which may not have been material to the decision reached by Her Honour, as it appears to have been founded on the weight she gave to the deficiency of explanation and failure to discharge the onus). Leaving aside what was said by Her Honour on this matter, if the application had been granted on the basis sought, the defendants, would have been kept out of their monetary entitlement to the undisputed part of the claim until the small amount in issue had been resolved. 43 Where an appeal is brought on the basis of alleged error in point of law, the onus is on the plaintiff to demonstrate that there has been error in point of law that justifies the disturbing of the decision of the Magistrate. In my view, the plaintiff has failed to discharge that onus in this case. Further, I consider that the Magistrate reached the right result. 44 In these circumstances, even though there be consensus between the parties that the appeal throws up important questions of law, the application for leave must fail. It would be futile to grant it. If the Magistrate has erred (and I do not need to dwell on that matter), it is not of materiality in this case. It may be added that what was in issue involved a small sum which went to part only of the claim. 45 The summons is dismissed. The plaintiff is to pay the costs of the proceedings. The exhibits may be returned. **********

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