BETWEEN : CAPESAIL NOMINEES PTY LTD (In Liq) (ACN 084 751 717)

JENNIFER LOW as Liquidator for Capesail Nominees Pty Ltd (In Liq) ( ACN 084 751 717)

Default judgment for failure to file a statement of claim - Application for such a default judgment must be made by chambers summons served on the plaintiff and after consultation under O 59 r 9

Rules of the Supreme Court, O 13 r 10, O 22 r 1, 2, 10, O 58 r 23, O 59 r 5, 9

Andri & Anor v Clovertree Holdings Pty Ltd & Ors; unreported; SCt of WA (Ipp J); Library No 960400; 16 July 1996

Fine & Anor v Howell, unreported; FedCt (NSW) (Lehane J); NG 3641/95; 22 November 1995

1 MASTER BREDMEYER: This is an application by the plaintiffs dated 4 December 2001 under O 22 r 10 of the Rules of the Supreme Court to set aside an ex parte order made by Acting Master Chapman on 29 October 2001 dismissing the plaintiffs' claim against the first and fifth defendants.

2 The writ was issued on 7 September 2001, and was served on the first and fifth defendants on 24 September 2001. The statement of claim was required by the rules to be served on these defendants within 14 days, ie, on or before 8 October 2001. That was not done, so these defendants were entitled to apply for default judgment.

3 The application for default judgment was governed by O 22 r 1 which I quote:

"If the plaintiff, being required by these Rules to serve a statement of claim on a defendant fails to serve it on him within the time allowed by or under these Rules for that purpose, the defendant may after the expiration of that time, apply to the Court for an order to dismiss the action, and the Court may by order dismiss the action or make such other order on such terms as it thinks just."

4 Unlike some other default judgments, eg O 13 - in default of appearance - and O 22 r 2 - in default of defence - in order to get a default judgment for non-service of a statement of claim there needs to be an application, as stated in O 22 r 1. The word "apply" there, I consider, refers to a chamber summons.

5 The first and fifth defendants did apply by way of chamber summons dated 16 October 2001 for default judgment and filed an affidavit of Mr Paul Williams sworn 16 October 2001 in support. So far, so good. The chamber summons should have been served on the plaintiffs under O 59 r 5. It is just to do so. No man should be condemned, unheard. Also, the plaintiffs have just filed and served a writ and paid the court filing fee, and it is highly likely that they plan to file a statement of claim. In the same way, if a party wants final judgment for default in any other procedural step, leaving aside the defendant's failure to appear, or to file a defence, it is done by chamber summons inter partes. For example, if there has been a failure to provide discovery, a failure to provide particulars, a failure to provide an expert's report, a failure to answer interrogatories - in all those cases the party not in default applies by way of chamber summons for a dismissal of the action (or for default judgment against the defendant) for a failure to comply with the rules or an order. The likely order in all those cases is a springing order in the first instance, giving the defaulting party a last chance to remedy the default. Some chamber summonses ask for a springing order in the first place. But that is not essential. The chamber summons could ask for a dismissal of the action, or a striking-out of the defence, as the case may be, but whatever the form of the chamber summons, it is the Court's practice normally to give a springing order only in the first instance.

6 The second point I make is that the application for a default judgment to be brought upon failure to serve a statement of claim, needs consultation under O 59 r 9. It is an interlocutory application and prior consultation is required, and important. It is not enough to write a letter after service of the writ stating, "We want you to file a statement of claim within the time limits" or that "the time limits must be strictly observed". The consultation must be about the proposed application. It can be, for example:

"We have not been served with a statement of claim. The time limit for serving a statement of claim has now expired. We propose to apply to the Court for a default judgment because of this failure. Unless you can satisfy us why we should not do that within the next four days we propose to make such an application."

7 So, there were two errors made by the defendant. The chamber summons to get the default judgment was ex parte when it should have been served on the plaintiffs. Secondly, there was no prior consultation under O 59 r 9 about the defendants' proposed application. Based on these two failures, I consider the default judgment obtained was irregular and should be set aside with costs.

8 The normal costs order for setting aside a default judgment which is irregular is that the party, in this case the first and fifth defendants, pay the other parties' costs of the application in any event, Seaman, 13.10.5. However, the plaintiffs have asked for indemnity costs against these defendants and/or against their solicitor, and I need to consider that.

9 The two failures mentioned, to serve the chamber summons and to consult beforehand, are significant; but I note, in the defendants' favour, that there are no notes in Seaman under O 22 r 1 stating that an application under that rule - to get a default judgment for failing to file a statement of claim - must be by way of chamber summons served on the plaintiff, and not by an ex parte motion. So, my view that it should be by way of a served chamber summons is a decision of the Court, but may not be well-known. If it was well-known, I would expect a note to that effect to be found in Seaman. Secondly, Mr Williams is a young solicitor and may not have known of the correct practice. Thirdly, these two defects that I have mentioned were overlooked by Acting Master Chapman. In other words, counsel's two mistakes were shared by Acting Master Chapman. I do not intend that as criticism of my brother Master, who did not have the benefit of the detailed argument I have received, and whom I respect, but I say that to lighten the blame that falls on Mr Williams.

10 Mr Brickhill for the plaintiffs, also said that Mr Williams in the ex parte application for default judgment, failed to disclose certain matters to the Court; namely, that, prior to the writ being issued, he had seen a lengthy opinion from Mr Brickhill dated 30 July 2001 on the merits of the then proposed action. The opinion was sent by the liquidator of the plaintiff company to the first and fifth defendants, Mr and Mrs Ride on 31 July 2001. Mr Ride provided it to Williams & Co on 24 August 2001. Mr Williams sent a holding reply to Mr Brickhill, and later, on 6 September 2001, wrote to Mr Brickhill saying that he was forwarding the opinion to counsel and he suggested a conference between the plaintiffs' counsel and the defendants' counsel.

11 Mr Brickhill in argument referred me to O 58 r 23. Order 58 deals with proceedings by originating summons and r 23 provides:

"The Court may set aside any order which has been made ex parte."

That rule on the face of it applies to ex parte orders made in proceedings commenced by originating summons. Mr Brickhill referred me to the notes in Seaman at 58.23.1 which state that that rule extends to ex parte orders made in chambers under O 59. The notes in Seaman read:

"This rule extends to any ex parte order in chambers (O 59 r 9) so that a party affected by it who was not before the court is entitled to apply to the court inter partes to discharge the order. Although in general one judge has no power to vary the order of another judge (see [63.0.12]), any judge may set aside the ex parte order of another judge (Minister of Foreign Affairs, Trade and Industry v Vehicles & Supplies Ltd [1991] 1 WLR 550 at 555; [1991] 4 All ER 65 at 70) but before the jurisdiction to reconsider an ex parte order can be enlivened, it is necessary for a party seeking such relief to adduce additional material evidence or to establish that there was material non-disclosure by the party who obtained the order. The principles relating to non-disclosure on applications for interim injunctions apply: Bell Group NV (in liq) v Aspinall (1998) 19 WAR 561 at 569, 570 (FC). See [52.1.13], [52.1.14]."

12 I do not disagree with the reference there to material non-disclosure, but I do not think it has much application to this particular specie of ex parte order - namely a judgment in default of failure by a plaintiff to file a statement of claim. I say it has not much application because there is no mention in Seaman of these matters in the notes to O 22 r 10 under which this present application to set aside an order, is brought. Also, there is no mention of that duty to disclose in the notes in Seaman to O 13 r 10. I mention O 13 because the notes in Seaman on O 22 r 10, those notes being 22.10.1, simply refer to the law as stated at 13.10.1 - 13.10.12. There is nothing in those latter notes referring to a party's material non-disclosure being relevant.

13 The plaintiffs have not persuaded me that there has been any material non-disclosure by these defendants before Acting Master Chapman. They did not have to disclose the lengthy opinion sent to them by the plaintiffs' pre-writ, nor how they had responded to that by letters and had referred the matter to counsel. All that is not relevant. The defendants were seeking a default judgment for non-service of a statement of claim. The only relevant matters were (1) Had there been consultation under O 59 r 9? (2) Had the statement of claim been served in time? (3) Had the defendants had any communication from the plaintiffs explaining the delay or asking for an extension of time?

14 I consider the judgment should be set aside as irregular for the two reasons given above. The first and fifth defendants should pay the costs of this application, including costs of the appearance on 13 February 2002. I am reinforced in these views on costs by offers put by the plaintiffs to these defendants which were not accepted. The offers were: "Consent to an order setting aside the judgment with no order as to costs." This offer was made by letter on 16 November 2001 and was repeated by letter on 29 November 2001. Both offers were prior to this application being filed on 4 December 2001. They were good offers, but not accepted.

15 The first and fifth defendants shall be required to pay the plaintiffs' costs of the application, including costs of the appearance on 13 February 2002 and including any reserved costs, in any event.

16 I will give the plaintiffs a further seven days to file and serve the statement of claim on these defendants.