These are proceedings for damages arising out of a contractual relationship between the plaintiff and defendant as set out in the statement of claim filed on 19 January 2018. The sum to be assessed is likely to be reasonably substantial, as it would appear to include the sum of $380,000 as consideration for the purchase of the franchise.
The loss and damage particularised at paragraph 25 is:
1. loss of the franchise rights and goodwill associated with the name Meetfresh and a name in Chinese;
2. loss of intellectual property rights;
3. the cost of fit out of the leased premises;
4. the cost of equipment purchased for the business;
5. loss of profit;
6. the initial franchise fee and other fees paid to the defendants consequent upon the execution of the second franchise agreement.
The statement of claim was served on the registered address for the defendant on 31 January 2018 at 9.20am by Mr Martin Folkes, whose affidavit of service is exhibit A. He states:
"I served the document by delivering it to Shu Ying Mui, a female person apparently over the age of 16 and apparently employed at Progressive Accounting and Taxation, Suite 7, 170 Burwood Road, Burwood, in the State of New South Wales.
At the time of service I asked, 'Is this the registered officer of Meetfresh Franchising Pty Ltd?' The female replied, 'Yes.' I then asked, 'Are you authorised to accept this document on their behalf?' The female replied, 'Yes.'"
The affidavit of service was completed on 5 February but not filed until 6 March 2018. On 7 March 2018 the matter came before the judicial registrar conformably with the case management standard timetable which provided for a pre‑trial conference date of 7 March 2018 at 9.45am. There is a notation: "A tender slip is required unless consent orders have been filed or approved by the Court.'
On 7 March Ms Zhang appeared on behalf of the plaintiff before Judicial Registrar Howard, who noted there was "no appearance" for the defendant. The Judicial Registrar made the following orders:
1. Stood over PTC 24 April 2018 at 12 noon.
2. Plaintiff to notify defendant.
3. Costs of today reserved.
It is not in dispute that the plaintiff's solicitor did not notify the defendant of the adjourned date for the pre‑trial conference as directed by the Judicial Registrar. Instead, what she did was to apply for default judgment, but without notifying the defendant of that intention either.
The plaintiff's application for default judgment was made on 14 March, which was a matter of some six weeks after service. Most unfortunately, the defendant's registered office was changed on 15 March. Since the defendant were not served with the application for default judgment, this does not make any difference, because it is common ground documents that the plaintiff did not contact the defendant after service at any time until the night before this hearing, but it tends to underline the caution a court should take where service has been effected on a registered office for a corporation, even by personal service of the kind effected here. In this regard I note that White J in New Era Enterprises (Aust) Pty Ltd v Aron Australia Pty Ltd [2006] NSWSC 1311 set aside a winding up order where the failure of the company to appear to contest the order was due to "either a slip in the office of the accountants, whose offices were the registered office of the company, or inattention by the directors of the company" (at [5]).
On 28 March the application by the plaintiff for default judgment came before a registrar who made the following orders:
1. Judgment for the plaintiff against the defendant for damages as referred to in the statement of claim to be assessed.
2. The defendant pays the plaintiff's costs.
Once again, the defendant was not notified of the making of these orders, but if the directions hearing date of 24 April had been retained, the court would have been aware of this. Instead of keeping the 24 April directions date, an application was made by the plaintiff on 17 April 2018 and a case management order was made by the Court as follows:
1. The following hearing dates are vacated: 24 April 2018, 12pm; 8 August 2018, 9.30pm.
I note that the 8 August 2018 was the second pre‑trial date allocated in the Court's notice of 19 January when the statement of claim was filed.
The reason given for this was: "other", and the "other reason" identified was that the proceedings were "Listed for assessment hearing on 1 May 2018," which is of course today.
As the proceedings were listed for assessment, evidence had to be prepared. An affidavit (which I have not yet seen, but understand is some 299 pages long) annexing all the relevant documentation was prepared. That affidavit was not served.
No notification was given to the defendant of the hearing until a document which was hand delivered on 30 April 2018, addressed to the current registered address of the defendant, (which I note is now in Chester Hill), referring to these proceedings and stating:
"We refer to the above matter.
It has come to our recent attention that your registered address has been changed to unit B, 152 Miller Road, Chester Hill, New South Wales.
Judgment has been entered into in the above matter and the damages assessment hearing is scheduled for 10am on 1 May 2018.
Enclosed is a copy of a notice of orders dated 28 March 2018.
Please note that our client does not have the obligation to notify you of the above.
Yours faithfully,
Sunfield Chambers Solicitors & Associates"
Attached to it is a copy of the orders made on 28 March 2018. The evidence was not served. Counsel for the defendant did not see that evidence until this morning.
Ms Zhang is correct in stating that there was no provision in those orders for the notification of the defendant. This is something of an ongoing difficulty for courts where a party has not filed an appearance, because the whole basis upon which cases move forward is predicated upon the opposing party having some notice of the proceedings because of service. Unfortunately, if what White J calls "a slip in the office" occurs and the party is unaware of service of the initiating service, there is no safety net in the Civil Liability Act 2005 (NSW) or cognate Rules to require the continued notification of that party, because all the Rules are predicated upon the opposing party filing a Notice of Appearance.
Before setting out the relevant rules, I note the position of the defendant, Mr Chan, who appears for the defendant, who says that his client knew nothing of the proceedings until last night, when the letter was hand delivered. I note he has tendered an letter sent by ABP Lawyers which states:
"We act for the defendant in the above matter and have just received instructions to appear at tomorrow's assessment hearing.
We are instructed that our client has never received the statement of claim or the notice of motion for default judgment and that they have only become aware of this matter being on foot today.
Please be advised that we intend to seek an adjournment of the matter for 14 days to file a notice of motion with supporting affidavit to set aside default judgment tomorrow with a further seven days for you to file evidence of the claim.
Please confirm as soon as possible whether you will agree to the above so that we may submit consent orders.
Kindly forward to us a copy of the default judgment with affidavit of service for our records.
We look forward to your urgent response.
Yours faithfully,
ABP Lawyers"
The letter is signed by Mr Lu and I note that a Notice of Appearance has now been filed in court today.
This letter correctly asserts that no further notification was given. The difficulty is, as the relevant rules show, that there is no entitlement of a party to receive documents where there is no appearance.
Rule 10.1 Uniform Civil Procedure Rules 2005 (NSW) ("UCPR") provides:
"10.1 Service of filed documents
(1) Unless the court orders otherwise, a party that files a document must as soon as practicable serve copies of the document on each other active party.
(2) In the case of proceedings in the Local Court, an originating process may, and a defence must, be served on the other parties, on behalf of the party by whom it was filed, by an officer of the Local Court.
Note: See rules 10.7 and 10.8 as to how service is to be effected by a court.
(3) Despite subrule (2), a defence that is filed in proceedings in the Local Court by means of Online Registry (within the meaning of Part 3) must be served on the other parties by the party that filed the defence rather than by an officer of the Local Court."
Rule 10.2 UCPR provides:
"10.2 Service of affidavits
(1) A party intending to use an affidavit that has not been filed must serve it on each other interested party not later than a reasonable time before the occasion for using it arises.
(2) A party who fails to serve an affidavit as required by subrule (1) may not use the affidavit except by leave of the court."
The methods of service are set out in r 10.5. I also note UCPR r 10.16 which provides:
"10.16 Service by filing
(1) If in any proceedings any document is required or permitted to be served on:
(a) a person who is in default of appearance, or
(b) a person who has entered an appearance but is not an active party in the proceedings,
the filing of the document is taken to have the same effect as service of the document on the person unless the court orders otherwise.
(2) This rule does not apply to any document that is required to be served personally."
I note the contents of r 10.20, but the entitlement of a party to proceedings being able to rely upon service to a registered office seems to fit in with r 10.20(2)(d) and r 10.22 for personal service on a corporation.
It would be fair to say, looking at these rules, that the whole of the case management following the commencement of proceedings is dependent upon the effective service of the statement of claim.
The difficulty is that if there is "a slip in the office" at the commencement of that litigation procedure, the Court is in a difficult situation as to whether there should be literal compliance with the rules or whether the court should examine the subsequent conduct of the proceedings. In applications to set aside judgments, courts are called upon to determine complaints that the original statement of claim did not come to the attention of the defendant, whether that is justifiably explained or not. The Court places weight upon a number of factors, as is set out in Evans v Bartlam [1937] AC 473, which is the locus classicus in relation to setting aside judgments, and not merely a literal reading of the rules.
It is for this reason that the New South Wales Court of Appeal in Violi v Commonwealth Bank of Australia [2015] NSWCA 152 observed at [123]:
"[123] The second is that a plaintiff applying for judgment against a defendant in default must comply meticulously with the requirements of the UCPR. The reason for insistence on meticulous observance of those requirements, quite apart from the language of the relevant rules themselves, is that an application for default judgment under UCPR r 16.3(1) may be dealt with in the absence of the parties and need not be served on the defendant: UCPR r 16.3(1A). The requirement, for example, that a plaintiff seeking a default judgment on a claim for a debt or liquidated amount file an affidavit in support that complies with UCPR r 16.6(2) is intended to ensure that the officers of the court responsible for processing the application can ascertain that all preconditions for a default judgment have been satisfied. (See District Court Act 1973 (NSW) s 18FB; District Court Rules 1973 (NSW) r 43A.1)"
If there had been even one letter sent to the defendant after the statement of claim, or if there had been compliance with the order to notify the defendant in accordance with the orders of Judicial Registrar Howard of 7 March 2018, the Court would have had a greater certainty that this was a case where there was a defendant who was genuinely inactive, as opposed to a defendant who had lost the one and only opportunity to be notified of these proceedings in circumstances where, rather than being inactive, the letter of last night was sufficient to ensure that the defendant attended court today.
Mr Carolan submits that there was no obligation on the part of his solicitor to comply with the orders of Judicial Registrar Howard in that she elected subsequently to commence proceedings, as she was entitled to do, for the bringing of a notice of motion for default judgment, that she was not obliged to serve the notice of motion for default judgment upon the defendant, or indeed to serve anything or even notify them of the hearing.
In this regard, Mr Chan drew to my attention the difference in wording between "active party" and "interested party", but I note the discussion of this issue in Satz v ACN 069808957 Pty Ltd [2010] NSWSC 365 at [75] as follows:
"[75] The statement made by the plaintiff's counsel after Austin J asked the question about service was, in terms, non-responsive. The position was that the vast bulk of the substantive evidence was in the plaintiffs' first affidavit that was served. In addition, the plaintiff makes the compelling point that, since the defendant had filed no notice of appearance, there was no formal requirement for the additional affidavits to be served. Under r 10.2 of the Uniform Civil Procedure Rules, a party may not use an affidavit that has not been filed unless it has been served on "each other interested party". Under r 10.1, a document that has been filed by a party must be served on "each other active party", that is, according to the dictionary at the end of the rules, a party who has an address for service in the proceedings. In the case of a defendant, an address for service will be notified by means of the notice of appearance. It follows that a defendant is not an "active party" unless and until a notice of appearance has been filed. Rule 10.2 refers to an "interested party", not an "active party" but, as counsel for the plaintiff pointed out, it would be an odd situation if unfiled affidavits must be served on parties who are not "active" but those which are filed need not."
However, the facts in Satz were somewhat different, in that there had been an appearance and, what was more, the vast bulk of the plaintiff's material had in fact been served. What had not been served was a minor affidavit correcting two errors (see [74]), and Barrett J's observations need to be seen in that light. In addition, his Honour was not taken to UCPR r 10.16, which clearly indicates that persons who are in default of appearances, or who have entered an appearance but are not active parties, are still able to be served, although there is a special procedure for service by filing.
That course, of course, can no longer be availed of by Mr Carolan in order to conduct this assessment, because the defendant has now filed a notice of appearance, but I am troubled by the concept of a notice of motion for default judgment being able to be filed without being served. That seems to me to be an unacceptable gap in the rules and one which requires speedy rectification.
If the notice of motion for default judgment for unliquidated damages had been served on the defendant at the previous registered office it would no longer have been the valid registered office, which creates separate problems again in terms of valid service.
However, the real difficulty is that the very late notice given to the defendant of these proceedings means that the defendant has come before the Court without any of the documents which would usually be produced, such as an affidavit of explanation of the delay and/or a defence.
What seems to me is the best course forward is to have regard to the provisions of s 66 of the Civil Procedure Act, which provide that a Court may adjourn a trial in specific and unusual circumstances. Late service of affidavit materials (which is clearly the case here) may be a ground for such an order; I note, for example, that late service of documents upon an unrepresented litigant may suffice (Scott v Handley [1999] FCA 404). Against this, as is noted in Ritchie's Uniform Civil Procedure at [66.5], where proceedings have been regularly fixed for hearing with due notice to the affected parties applications for adjournments are unlikely to succeed.
The real questions is, however, what amounts to due notice? Clearly, notice must be better than the night before. Even a party who has not filed a notice of appearance should be entitled to know when damages are being assessed and to see the evidence.
I also need to have regard to the overriding provisions of ss 56 to 62 Civil Procedure Act 2005 (NSW), which I consider should have been enough motivation for the plaintiff in these proceedings to notify the defendant of the hearing well in advance, if only because it may be that the defendant may have conceded liability but may have wished to be heard in relation to damages. After all, it is quite common for challenges to be brought to damages in personal injury proceedings where liability is admitted. Issues of quantum should not be seen as being conceded merely because liability has been conceded, if indeed that is the case here.
I am conscious that the circumstances in which a Court would refuse the request of a party who has served the defendant with apparent regularity and seeks to prosecute a hearing today for which it is otherwise ready would need to be compelling. However, having regard to the just, quick, and cheap requirements of s 56 I consider that the very late notice that was given to the defendant is a matter of some concern.
In French Consulting Pty Ltd v Lawson Stuart Donald [2011] NSWSC 584 at [14], Hallen J observed that the right of a defendant to be informed of a hearing, if not complied with, means there has been what his Honour called "no valid trial at all." However weak the defendant's arguments on quantum may be, or even if they did not wish to attend, the mere fact that they have not filed a notice of appearance does not mean, having regard to the overriding principles of ss 56 to 62, that that defendant is not entitled even to know the hearing date, or not entitled to be told until the night before.
Taking all of the above into account I take the view that the best course, although an unusual one, is to adjourn these proceedings part heard pursuant to s 66 Civil Liability Act for a very short period of time, to enable the parties to formulate some orders so that I can deal with the application to set aside the judgment and to be heard in relation to liability and quantum, which I apprehend will be made by the defendant, and the competing application from the plaintiff to proceed with the assessment.
[The parties addressed the court on a timetable.]
[2]
Orders
1. Grant leave to the defendant to file an Appearance in court.
2. Defendant to file and serve any notice of motion, supporting evidence to set aside default judgment and any affidavits in relation to assessment by 15 May 2018.
3. Plaintiff to file its evidence in reply by 22 May 2018.
4. Matter stood over part heard to Wednesday 23 May 2018 at 10:00am (estimate 1 day).
5. Costs reserved.
[3]
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.
Decision last updated: 03 May 2018