Whether the primary judge applied wrong test to the exercise of the discretion
57 Counsel for Mr Ballantyne made written and oral submissions to the primary judge that the Court's discretion to grant default judgment under r 13.03B(2)(c) should be guided by the considerations applicable to the exercise of the Court's discretion to set aside a regularly entered default judgment. Counsel submitted that these considerations required an explanation for failing to file the response and the demonstration of a defence on the merits. The present applicants submit that his Honour adopted that approach, but was wrong to do so.
58 In his reasons, the primary judge did not expressly state that he adopted the submission that the discretion should be guided by the considerations relevant to an application to set aside a regularly entered default judgment. However, an indication that his Honour took that approach is found in his Honour's extensive reference to a letter written by Mr Ballantyne to Hartnett Lawyers dated 14 January 2015. That letter referred to the application for default judgment and continued:
We apprehend from the defence that despite their default, your clients intend to defend the application proper and oppose the making of the orders sought in the said application. If that is the case, please serve on us affidavit material addressing the usual matters in respect of setting aside default judgment and any other material you intend to rely on, by 23 January 2015.
(Underlining added)
59 His Honour said:
18. The Second Respondent has totally ignored the letter of 14 January 2015. There is no material before me from either Respondent to clarify the matter for the Court.
I consider that his Honour must have been referring to the absence of "affidavit material addressing the usual matters in respect of setting aside default judgment" that had been sought in the letter of 14 January 2015. This indicates that his Honour did adopt the approach he was urged to take by Mr Ballantyne's counsel, namely that the considerations relevant to setting aside a regularly entered default judgment should guide the discretion to award default judgment under r 13.03B(2)(c).
60 An application to set aside a regularly entered default judgment must be supported by an affidavit demonstrating a defence on the merits: see, for example, Rubin v Eacott (1912) 15 CLR 386 at 388 per Barton J, at 389 per Isaacs J; National Mutual Life Association of Australasia Ltd v Oasis Developments Pty Ltd [1983] 2 Qd R 441 at 450 per McPherson J; Rosing v Ben Shemesh [1960] VR 173 at 176, per Herring CJ, O'Bryan and Dean JJ. As the primary judge noted, there was no such affidavit filed by the present applicants.
61 However, I consider that his Honour was incorrect to apply the principles relevant to an application to set aside a default judgment to an application for default judgment.
62 In Wiedenhofer v Commonwealth (1970) 122 CLR 172, the Commonwealth had failed to file a defence within the time required under the Rules of the High Court, although a defence was delivered outside that time. Order 28 r 11 provided that where a defendant made default in delivering a defence, the plaintiff could set down an action or motion for judgment and recover the judgment to which upon the writ or statement of claim the plaintiff was entitled. Gibbs J (as his Honour was then) rejected a submission that the principles applying to an application to set aside a default judgment ought to be applied to the application for a default judgment. His Honour said at 174:
It was however submitted on behalf of the plaintiff in the present case that judgment ought to be given for the plaintiff and that an extension for time should be refused because the defendant has failed to file an affidavit showing that it has a good defence on the merits. It was said in reliance on the remarks of the Earl of Selborne L.C., in Gibbings v. Strong (1884) 26 Ch. D. 66, at p. 69, that the reason why regard is had to a defence delivered out of time is to avoid the circuity which would result if judgment were given by default and subsequently set aside, and that therefore the general principle applicable to the setting aside of default judgments ought to be followed, namely, that a respondent ought not only to explain his default but ought also to file an affidavit of merits-that is an affidavit which shows that he has a prima facie defence.
63 Gibbs J continued at 174-175:
In my opinion. however, the discretion of the Court is not limited in that way. In the present case, where I have before me not only a motion for judgment but also a motion for extension of time for filing the defence, and where a defence has in fact been delivered although out of time, and there is no ground to suggest that this defence is merely frivolous or filed for the purpose of delay and an explanation has been given of the failure to deliver it within time, in my opinion it would lead to injustice to take any other course than to grant a reasonable extension of time and to refuse the motion for judgment.
64 In the present case, the primary judge did appear to conclude that the defence was frivolous or filed merely for the purpose of delay. His Honour reached that conclusion by finding that the allegation in the defence that Mr Ballantyne was employed personally by Mr Hartnett was untrue (his Honour appeared to go further than merely concluding that the allegation was incorrect). His Honour reached that conclusion because pay slips showed that Mr Ballantyne had been paid by Kentgale Pty Ltd and later by Hartnett Legal Services Pty Ltd. His Honour decided that there was "an implied contract" that Mr Ballantyne would provide his labour to Hartnett Lawyers and that he would be renumerated by Hartnett Legal Services Pty Ltd.
65 It is the case that r 13.03B(2)(c) allows the Court to give judgment against the respondent for the relief that "the applicant appears entitled to on the statement of claim". Once jurisdiction is established, the rule merely requires that on the face of the statement of claim there is a claim for relief sought: see, for example, Maylord Equity Management Pty Ltd v v Parazelsus Ltd [2014] FCA 979 at [11]-[13] per Gleeson J, and the cases cited therein. Default judgment may even be given where the respondent has filed a defence but failed to pursue its defence with reasonable diligence: Luna Park Sydney Pty Ltd v Bose [2006] FCA 94 at [19] per Jacobson J.
66 In the present case the primary judge went beyond the face of the statement of claim. His Honour also considered the defence, but held that the lawyer's certificate that there were reasonable grounds for the defence is "not worth the paper it's written on". His Honour rejected the allegation in the defence that Mr Ballantyne was employed by Mr Hartnett and found as a fact that he was employed by Hartnett Legal Services Pty Ltd.
67 In my opinion, it was not open to the primary judge to make findings of fact of this kind in the application before him. Even on an application to set aside a default judgment, it would not have been a matter for his Honour to make findings as to who was the employer, but only whether there was a prima facie defence on the merits. In the circumstances of the case, the question for his Honour was whether the defence was frivolous or filed merely for the purpose of delay.
68 In deciding whether an entity is an employer, the totality of the relationship must be considered, not merely the fact that wages are paid by the entity: Hollis v Vabu Pty Ltd (2001) 207 CLR 21 at 41 [44], 42 [48] - 44 [57]; Andonovski v Park Tec Engineering Pty Ltd (2009) 191 IR 250 at 259-260 [57]; Silcar Pty Ltd v Victorian Workcover Authority [2012] VSC 357 at [9]-[18]. It was pleaded in the statement of claim, and there was evidence before the primary judge in the form of a written agreement, that Mr Ballantyne's original employer was both Kentgale Pty Ltd and Mr Hartnett, although his wages were paid only by Kentgale Pty Ltd. It was pleaded in the statement of claim, and there was evidence, that Mr Ballantyne's employment involved the provision of services to Hartnett Lawyers, and that Mr Hartnett was the principal of that firm. It was not completely implausible that Mr Hartnett might have become Mr Ballantyne's sole employer upon the winding up of Kentgale Pty Ltd, although his wages were subsequently paid by Hartnett Legal Services Pty Ltd. While his Honour was understandably sceptical about the defence, it was not open to find that it was frivolous or filed merely for the purpose of delay.
69 I make no comment upon the merits of the defence, but merely point out that neither were the merits a matter for the primary judge. His Honour seems to have been influenced by the fact that no affidavit as to the merits of the defence had been filed on behalf of the present applicants. However, this was not an application to set aside a default judgment or an application for summary judgment.
70 In my opinion, the primary judge erred by applying to the application for default judgment the considerations his Honour understood to be applicable to an application to set aside a default judgment.