J & M McNamee Holdings Pty Ltd v Mungerie Vale Pty Ltd trading as Greenwood Group Realtors

Additional evidence on appeal

1. It is convenient at this point to refer to two additional pieces of evidence that were not before the primary judge and which were tendered by McNamee, without objection, on the hearing of the appeal. This evidence was relied upon by McNamee in the event that the Court found that the primary judge's discretion miscarried and proceeded to re-exercise the discretion.
2. The first piece of evidence concerns the terms of the contracts for sale of land between McNamee and the purchasers of the proposed lots in the subdivision. McNamee tendered the contract of sale relating to one of the proposed lots - lot 47.
3. The special provisions of that contract provided that completion of the contract was subject to and conditional upon registration of a community plan generally in conformity with the draft community plan, attached to the contract on or before the Sunset Date: cl 46.1. The "Sunset Date" was defined as 1 April 2018 or any later date as extended under cl 46: Definitions, cl 33. Whilst the special conditions provided for an extension of the Sunset Date by the vendor giving a notice to the purchaser under cl 46.3.1 in certain circumstances, cl 46.3.2 provided that in no case shall the Sunset Date be extended to later than 1 April 2019.
4. Clause 46.2 dealt with rights of rescission and provided: 46.2.1 If the Community Plan is not registered by the Sunset Date: (i) the Vendor may rescind this contract by notice to the Purchaser; or (ii) the Purchaser may rescind this contract fourteen (14) days after serving notice of its intention to rescind, but only if the Vendor does not give the Purchaser an extension notice under clause 46.3 prior to the rescission. 46.2.2 If the Community Plan is registered after the Sunset Date but prior to any rescission under clause 46.2.1 taking effect, then neither party will be entitled to rescind this contract.
5. Clause 46.4 is also relevant and provided: 46.4 Limitation If this contract is rescinded under clause 46.2, the parties expressly acknowledge and agree that the right of rescission is the only remedy available and neither party shall be entitled to make a Claim against the other party.
6. The second piece of additional evidence concerns the termination of one of the contracts for sale by the purchaser. McNamee tendered two notices addressed to its conveyancing solicitors from the purchaser of lot 21, one dated 29 November 2018, giving notice of the purchaser's intention to terminate the contract within 14 days, and the other dated 13 December 2018, giving notice of termination of the contract pursuant to Special Condition 46.2.

Greenwood's statement of claim

1. Greenwood's claim for commission, as particularised in its statement of claim, relied on cls 3 (i), (ii) and (vi)(c) of the agency agreement. There was no pleading of any alleged oral terms or a collateral oral contract; cf [11] above.
2. Greenwood pleaded that the balance of the 50 per cent commission was payable in respect of the 29 lots by reason of cl 3(vi)(c) of the agency agreement because McNamee and the respective purchasers of the 29 lots mutually agreed to rescind or terminate the respective contracts. Greenwood pleaded that it had demanded payment totalling $210,809.25 comprising the specified amounts referred to in 29 invoices and that McNamee had failed or refused to pay the amount demanded.

Correspondence between solicitors

1. Beginning in early March 2019, Mr Steven Spyros, the solicitor then acting for McNamee, engaged in correspondence with the solicitors for Greenwood seeking particulars, documentation and extensions of time for a foreshadowed defence and cross-claim.
2. Relevantly, on 6 March 2019 Mr Spyros sent a letter to Greenwood's solicitors referring to difficulties arising out of a particular director's age and significant health issues. Whilst the identity of that director was not then disclosed, it is not in dispute that the particular director is Mr John McNamee. Mr Spyros stated that his firm expected to be formally engaged within a week, but that the issues meant that a reasonable time would be required to progress the matter. He requested 28 days from 6 March 2019 to file a defence and cross-claim. He also requested a copy of an email from Mr Peter McNamee of Tyrone Corp Pty Ltd to Greenwood dated 10 August 2018, together with another email.
3. By letter dated 8 March 2019, Greenwood's solicitors indicated that they did not agree that the director's personal circumstances were an impediment to prompt action on the part of McNamee, but said that Greenwood would not seek default judgment until after 21 March 2019 (the first extension). Copies of the requested emails were provided to McNamee's solicitors. The 10 August 2018 email from Mr Peter McNamee to Mr Tim Foster-Greenwood confirmed an intention to sell an industrial site in Yatala in Queensland, owned by "John and Peg" prior to this coming Christmas and "Form (sic) these proceeds we will be able to pay you your outstanding commissions".
4. On 21 March 2019 being the last day of the first extension, Mr Spyros sent two letters to Greenwood's solicitors, the first seeking particulars, the second stating that, following the advice of senior counsel, the defence and cross-claim was being finalised and it was anticipated that the documents would be filed by 28 March 2019.
5. On 2 April 2019, Greenwood's solicitors wrote to Mr Spyros indicating that they had instructions to seek default judgment but would delay until 4 April 2019 (the second extension).
6. On 4 April 2019, Mr Spyros wrote to Greenwood's solicitors and sought to explain the further delay beyond 28 March 2019. He said he had only just learned that there was a question concerning the authenticity and the particulars of the agency agreement as pleaded in the statement of claim, and that as a result of this information and some delays in obtaining information from McNamee's former lawyers, further time was required to finalise the defence and cross-claim. He said that he presumed that Greenwood would not seek default judgment without first providing two business days' notice.
7. On 5 April 2019, Greenwood's solicitors wrote to Mr Spyros providing a response to the particulars requested on 21 March 2019 and rejecting the request for any further extension of time. As indicated, Greenwood applied for default judgment on 8 April 2019.

Explanation for the delay

1. At the hearing before Strathdee DCJ, the explanation for the delay was given primarily by Mr Spyros, and also by Mrs McNamee, the other director of the company.
2. Mr Spyros annexed copies of the relevant correspondence between the solicitors referred to above, and deposed that McNamee had been prejudiced in its ability to file a defence and cross-claim and by Greenwood's actions in respect of its motion for default judgment because: 1. both directors of McNamee are 94 years of age; 2. one of the directors has serious health issues; 3. there is a live dispute between the two directors of McNamee and the beneficiaries of the trust for which McNamee is the trustee, which made obtaining instructions for McNamee difficult; 4. there was a dispute as to the terms of the contract relied upon by Greenwood, in particular as to the handwritten notation contained next to cl 3; 5. McNamee had not been provided with a full copy of the agency agreement which Greenwood relied upon, despite requests by McNamee, including in its letter of 4 April 2019; 6. the agency agreement was entered into on behalf of McNamee by the director who was suffering some serious health issues. It may be inferred that this director was Mr John McNamee.
3. Mrs McNamee deposed that she became aware of the legal action commenced by Greenwood in about mid to late February 2019 and that on behalf of the company she engaged Mr Spyros to act in preparing a defence. She attended a conference with senior and junior counsel, accompanied by her son, Mr Bill McNamee, and Mr Spyros, and at that conference she gave instructions for the preparation of the defence and cross-claim. She said she understood that members of her family were managing the litigation on behalf of the company and she was unaware of details of the instructions given to and advice provided by Mr Spyros and counsel. She was unaware of correspondence from the solicitors for Greenwood to Mr Spyros on 5 April 2019 stating that no further extension of time would be allowed before the filing of the defence.
4. Mrs McNamee said that had she been aware of the urgency, she would have instructed the filing of the defence and cross-claim in the form of the documents which she annexed to her affidavit. The draft defence and cross-claim were not verified by Mrs McNamee as a director of McNamee, who was the named deponent to verify those pleadings.

Proposed defence

1. The draft defence pleaded in par 5 that it was a term of the agency agreement, subject to compliance with s 55 of the Property, Stock and Business Agents Act 2002 (NSW), that:

• if the purchaser exchanged a contract for sale of the property with McNamee during the exclusive agency period, or if after the expiry of that period, the purchaser was introduced to McNamee by Greenwood, McNamee would advance a sum to Greenwood calculated as 50 per cent of the 1.65 per cent of the agreed price, on account of commission to which Greenwood might later become entitled; and
• if the sale was completed, or if the contract was terminated in the circumstances identified in cls 3(vi)(b) or (c) of the contract, then Greenwood would become entitled to retain the sum advanced and to receive a further sum equal to the further 50 per cent of the 1.65 per cent of the price; and
• the handwritten notation next to cl 3 of the agency agreement - "50 per cent on exchange 50 per cent on completion" - is not part of the agency agreement. (However, somewhat inconsistently, the cross-claim pleaded that the agency agreement was varied in accordance with the handwritten notations at cl 3 of the agency agreement: cross-claim, par 4).

1. After admitting that McNamee had entered into deeds of mutual rescission with the purchasers of 13 identified lots (the 13 lots) (defence, in par 8(a)), the draft defence raised three defences.
2. First, no commission was payable by McNamee in respect of 16 identified lots (the 16 lots) as it had received notices of termination or rescission from the purchasers of the 16 lots, none of which notices alleged default by McNamee (defence, par 8(b)). This is conveniently referred to as the "no default defence". Related to this defence, in its draft cross-claim, McNamee pleaded that it was entitled to recover from Greenwood $116,248.50, being the 50 per cent "advance" of the commission paid to Greenwood on exchange of the contracts in respect of the 16 lots.
3. Second, McNamee denied that Greenwood had provided any proper notice before action in respect of seven identified lots (the seven lots), as required by s 36 of the Property, Stock and Business Agents Act (defence, par 10). This is conveniently referred to as the "s 36 defence". For six of the seven lots, the s 36 defence overlapped with the no default defence. For one of the seven lots (lot 39, new lot 8) the s 36 defence overlapped with the Sunset Date defence relating to the 13 lots, referred to in [36] below.
4. Third, although the pleading was obscure, McNamee contended that no commission was payable in respect of any of the 13 lots the subject of deeds of mutual rescission because on proper construction of cl 3(vi) of the agency agreement, if the registration of the proposed community plan did not occur before the Sunset Date, the purchasers were not obliged to complete and were entitled to walk away unilaterally, and this fell outside the scope of cl 3(vi) (defence, par 13). This is conveniently referred to as the "Sunset Date defence".

Hearing before the primary judge - 19 July 2019

1. Before the primary judge, counsel then appearing for McNamee accepted that there had been delay, and submitted that it was not inordinate delay in the circumstances and pointed to the explanation given by Mr Spyros.
2. Counsel for McNamee made submissions going to the merits of the no default defence in relation to the 16 lots, and also the cross-claim seeking recovery of the advance payment of 50 per cent commission in relation to the 16 lots, based on McNamee's version of the agency agreement. Counsel for McNamee accepted that Greenwood was entitled to commission in respect of the 13 lots, the subject of deeds of mutual rescission.
3. The primary judge indicated that she could see that there was an arguable case and sought further submissions from McNamee concerning the explanation for the delay. Counsel for McNamee responded by pointing to the matters identified in the affidavit of Mr Spyros.
4. Counsel then appearing for Greenwood submitted that the application should be determined primarily on the basis of delay. Counsel sought to identify weaknesses in the draft defence to support the submission that this meant that a better explanation for the delay was called for. Later, counsel accepted that there was a "barely arguable case". While not formally conceding the point, counsel seemed to accept that there may not be deeds of mutual rescission in respect of each of the 29 lots.
5. Nevertheless, counsel for Greenwood asked rhetorically in relation to the 16 lots, how could it not be that the purchasers' notices of termination were based on the vendor's default - that default being the vendor's failure to complete the proposed subdivision. The effect of this alternative submission was that commission would be payable by McNamee under cl 3(vi)(b) of the agency agreement. Counsel for Greenwood submitted that there was not "any real merit there".

The primary judge's reasons

1. The primary judge gave brief ex tempore reasons. No criticism is to be made of the brevity of those reasons, given the relatively confined issues argued by the parties.
2. After briefly referring to the background, the primary judge indicated that, having heard argument, she accepted there was an arguable defence and then turned to the question of delay, which her Honour said obviously involved the question of prejudice. The primary judge's dispositive reasoning was as follows: I am mindful of the obligations on all parties, including the Court, proposed by ss 56, 57 and 58 of the Civil Procedure Act, and that the proceedings must be dealt with in a just, quick and cheap fashion. I have heard the arguments valiantly advances (sic) on behalf of the defendant and the current solicitors for the defendant who submit that it would be an aberration for me not to set the judgment aside. However, in my view, there has not been an adequate explanation for the delay in the defending of the proceedings, and I note that the default judgment was entered on 8 April 2019, and yet the motion asking for it to be set aside was not filed until 17 May 2019.

Proposed grounds of appeal

1. McNamee seeks to raise two grounds of appeal. First, that the primary judge erred in determining that there was no reasonable explanation for delay. Second, that the primary judge erred in the exercise of her discretion to set aside the default judgment.
2. It is not sufficient that this Court might conclude that it would have exercised the discretion differently if the discretion had been conferred on it in the first instance: Micallef v ICI Australia Operations Pty Ltd [2001] NSWCA 274 at [45] (Heydon JA).
3. To succeed in challenging the primary judge's discretionary decision, McNamee must establish an error in the House v The King sense; that Strathdee DCJ made an error of legal principle, a material error of fact, took into account an irrelevant matter, failed to take into account, or give sufficient weight, to a relevant matter, or arrived at a result so unreasonable or unjust as to suggest one of the foregoing categories of error: House v The King (1936) 55 CLR 499; [1936] HCA 40 at 504-505.
4. These principles apply with special stringency in appeals such as the present from a discretionary decision in a matter of practice and procedure: Adam P Brown Male Fashions Pty Ltd v Philip Morris Inc (1981) 148 CLR 170 at 176-177; Magnate Projects Pty Ltd v Youma Constructions (No 2) Pty Ltd [2005] NSWCA 331 at [16] (Handley JA).

Principles - setting aside a default judgment

1. It is well established that the considerations relevant to an application to set aside a default judgment include whether the applicant has a bona fide ground of defence, an adequate explanation for the failure to defend and the length of any delay: Adams v Kennick Trading (Int) Ltd (1986) 4 NSWLR 503 at 506 (Hope JA; Glass JA agreeing). Whether the plaintiff will be prejudiced if the default judgment were set aside is also relevant.
2. Fundamentally, the question is whether it is in the interests of justice to allow the party seeking to set aside a default judgment to be permitted to defend the proceedings on the merits: Dai v Zhu [2013] NSWCA 412 at [83] (Sackville AJA; Barrett and Leeming JJA agreeing), citing, with approval, the remarks in Reinher Industrial Lease & Finance Pty Ltd v Jordan (Court of Appeal (NSW), 4 June 1974, unrep).
3. Two further matters referred to by Sackville AJA in Dai v Zhu should be mentioned. One is the observation by his Honour at [89] that the rationale for the requirement that the applicant for relief demonstrate a bona fide ground of defence is that, "In the exercise of its 'unfettered, though judicial, discretion' the Court will consider … (a) whether any useful purpose would be served by setting aside the default judgment, and (b) how it came about that the applicant found himself bound by a judgment regularly obtained".
4. The other matter, which is related to this, is his Honour's observation at [92] that, "In determining whether the defendant has a bona fide defence on the merits, the Court does not embark on a hearing of the full merits of the case … [A]ll that is necessary is for the defendant to show that the defence is asserted bona fide and that there is an arguable or triable issue. His Honour continued at [92]: The nature of the evidence required in a particular case may depend on the circumstances, including the cogency of the defendant's explanation for the delay or failure to comply with orders of the Court.
5. It is also to be accepted that the application of these principles must now be subject to the provisions of the Civil Procedure Act 2005 (NSW). In Dai v Zhu, Sackville AJA gave as an example at [93], that there may be circumstances where it would be contrary to "the just determination of the proceedings", referring to s 57(1)(a) of the Civil Procedure Act 2005 (NSW), to require a defendant to adduce affidavit evidence demonstrating a bona fide defence and in such cases the Court would be unlikely to reject the defendant's application to set aside a default judgment solely on the ground that no such affidavit had been filed whilst emphasising each case must of course depend on its own facts.

Ground 1 - Whether inadequate explanation for the delay

1. Counsel for McNamee submitted that her Honour erred in finding that the explanation for the delay was inadequate. In my view, no error in the House v The King sense has been made out in relation to this finding. Reference to the following matters is sufficient to demonstrate the inadequacy of the explanation for the delay in filing a defence.
2. First, the explanation given by Mr Spyros was inadequate in that his affidavit failed to address a number of significant matters relevant to the delay. One is the date when Mr Spyros was first contacted by McNamee with a view to instructing him to act on its behalf. That was significant given the unexplained delay of nearly four weeks between the date of service of the statement of claim and Mr Spyros' first letter to Greenwood's solicitors.
3. Next, the "significant health issues" affecting the "particular" director were not disclosed, nor was there evidence of that matter, as would be expected, by way of a medical certificate, so that a proper assessment could be made of the asserted difficulty in providing instructions to Mr Spyros.
4. Next, there was no explanation of the nature of the dispute between the directors of McNamee and the beneficiaries of the trust of which it was trustee, which made obtaining instructions from McNamee difficult.
5. Finally, Mr Spyros did not disclose the date of his conference with senior counsel, nor when a draft defence and cross-claim was first prepared, and what steps, if any, he took before 8 April 2019 to have counsel prepare or settle those pleadings.
6. Second, having been granted two extensions of time by Greenwood's solicitors, first to 21 March 2019 and then to 4 April 2019, Mr Spyros allowed both extensions of time to expire without obtaining Greenwood's prior agreement to a further extension of time for filing a defence. That was in circumstances where Mr Spyros had previously indicated to Greenwood's solicitors on 21 March 2019 that he anticipated filing a defence and cross-claim by 28 March 2019.
7. Third, notwithstanding the explanation given by Mr Spyros on 4 April 2019 that the further delay after 28 March 2019 was due to a new issue that had arisen as to the true form of the agency agreement and the difficulty in obtaining information from McNamee's former lawyers, Mr Spyros did not attempt to explain the failure to file a defence after receipt of the letter from Greenwood's solicitors of 5 April 2019 notifying their intention to apply for default judgment.
8. Fourth, the explanation for the delay given by Mrs McNamee was quite uninformative saying that she left the matter to other family members. Mrs McNamee did not say when she was told that default judgment had been entered and she gave no explanation for the further delay of about five weeks after the entry of default judgment on 8 April 2019 in filing the notice of motion on 17 May 2019.
9. Ground 1 has not been made out.

Notice of contention - whether bona fide defence

1. Before turning to ground 2, it is convenient to address Greenwood's challenge by its notice of contention to the finding of the primary judge that McNamee has a bona fide defence. The notice of contention asserts: 1. The primary judge should have found that the applicant did not demonstrate a bona fide defence on the merits on the evidence filed by the applicant. 2. The primary judge did not identify what defence raised by the applicant was arguable and gave no reasons as to why there was an a arguable defence and thereby was in error. 3. The primary judge should have taken into account that none of the affidavits filed on behalf of the applicant gave any evidence in support of any defence.

Absence of evidence and verified draft defence

1. In support of par 3 of the notice of contention, Greenwood points to remarks of Hodgson JA in Magnate Projects Pty Ltd v Youma Constructions (No 2) Pty Ltd at [52], a case involving an application to set aside a judgment obtained after a non-defended hearing: If that defence depends on facts, then there should be some evidence of those facts; and the circumstances may be relevant to the quality of the evidence that is required to show a defence on the merits in particular cases. Among such circumstances could be the degree of the applicant's default, and hardship to the respondent.
2. Greenwood emphasised that the draft defence was not verified by Mrs McNamee. That is so, but the absence of verification is mitigated by the inference from par 8 of Mrs McNamee's affidavit that she would have verified the defence because she is the named deponent of the verifying affidavit and she gave unchallenged evidence that the draft defence is in the form that she would have given instructions to file.
3. Greenwood submitted that there was no evidence of the factual circumstances underlying the proposed defences. As explained below, that is not correct in relation to the s 36 defence; and there were circumstances which supported the availability of the no default defence in relation to the 16 lots.

Notice before action - s 36 defence

1. Section s 36 of the Property, Stock and Business Agents Act relevantly provides: (1) An action or other proceedings cannot be commenced by a licensee for the recovery of remuneration or any sum as reimbursement for expenses until the expiration of 28 days after a statement of claim has been served personally or by post on the person to be charged with the remuneration or expenses. (2) The statement of claim must be in writing, set out the amount claimed and contain details of the services performed by the licensee in respect of which the remuneration or expenses are claimed. … (8) In this section: expenses means expenses or charges incurred in connection with services performed by a licensee in his or her capacity as a licensee. remuneration means remuneration by way of commission, fee, gain or reward for services performed by a licensee in his or her capacity as a licensee.
2. In support of the s 36 defence McNamee pointed to the admission in the letter from Greenwood's solicitors dated 5 April 2019, that a written notice of demand was not issued or served with respect to the invoices the subject of seven lots. That admission could function as evidence of the defence.
3. In this Court, whilst acknowledging the non-compliance with s 36 Greenwood submitted that it was a waste of time and Court resources to permit this defence because the non-compliance could be cured by Greenwood serving a notice and then commencing proceedings for those seven commissions. That the absence of notice before action can be cured in relation to the bringing of fresh proceedings, is no answer to the defence relating to the seven lots relying upon the breach of the prohibition in s 36 of the Property, Stock and Business Agents Act on the commencement of an action or proceeding for the recovery of commission.

No default defence - 16 lots

1. There are two compelling answers to Greenwood's submission before the primary judge concerning the absence of evidence from McNamee relating to the 16 lots. One is that the solicitors for Greenwood had refused to provide particulars, including copies of the deeds of mutual rescission in relation to the 29 lots referred to in the statement of claim, which had been requested by the solicitor for McNamee on 21 March 2019. The other matter is that Greenwood did not suggest before the primary judge that the factual proposition about the 16 lots being unilaterally terminated by the purchasers, rather than mutually rescinded or terminated, was in dispute.
2. In the circumstances, the primary judge was entitled to accept what seemed to be common ground, that there was at least a factual dispute as to whether there were deeds of mutual rescission in respect of all of the 29 lots.
3. In this Court, senior counsel for Greenwood accepted that there was an arguable defence in respect of the 16 lots that no commission was payable under cl 3(vi)(c) of the agency agreement.

Deeds of mutual rescission - 13 lots

1. Although not addressed by the primary judge, Greenwood submitted in this Court that the Sunset Date defence was not bona fide, given the acknowledgment below by counsel for McNamee that commission was payable in relation to the 13 lots.
2. Significantly, McNamee did not adduce evidence, let alone submit that the admission made before the primary judge was made by mistake because its counsel lacked knowledge of the relevant facts. Even if McNamee does not require leave to withdraw the admission, it has not shown why it is at least arguable that it should not be held to this admission: cf where a party seeks to withdraw an admission required of it by the Court under s 70(1)(c) of the Civil Procedure Act: see Coopers Brewery Ltd v Panfida Foods Ltd (1992) 26 NSWLR 738 in relation to the predecessor provision in s 82 of the Supreme Court Act 1970 (NSW).
3. The defence which McNamee advances in relation to the 13 lots relies upon the construction argument relating to the Sunset Date referred to at [36] above. It is contended that, as the community plan was not registered before the Sunset Date, the purchasers of the 13 lots were entitled to terminate their contracts unilaterally and although they did not do so and instead mutually agreed with the vendor to rescind the contract, this circumstance fell outside the scope of cl 3(vi) of the agency agreement. McNamee accepted that its construction involved reading down the words "mutually agree" in cl 3(vi)(c) if the purchaser has an available, but unexercised, right of termination under cl 46.2.1(ii).
4. The basis for this construction was not identified by reference to any matter arising from the text, context or purpose of the agency agreement. The defence involves the proposition, plainly at odds with the language of cl 3(vi)(c), that the entitlement to commission under that sub-clause does not look to whether the parties mutually agree not to proceed with the contract, but looks to events which might have happened, but did not eventuate.
5. Keeping in mind that it is not the task of the Court to adjudicate upon the ultimate merits of the defence, it is difficult to accept that this defence is bona fide, given the admission by McNamee before the primary judge that the commission was payable in respect of the 13 lots.
6. In my view, Greenwood's challenge to the primary judge's finding that the defence is bona fide should be rejected in relation to the 16 lots and the seven lots, noting that the s 36 defence in relation to the seven lots overlaps with the no default defence in relation to six of the seven lots.

Draft cross-claim

1. One matter should be mentioned concerning the draft cross-claim.

Whether signed copy of agency agreement served on McNamee - s 55

1. As mentioned, there is no affirmative pleading in the draft defence of non-compliance with s 55 of the Property, Stock and Business Agents Act, however, the draft cross-claim (par 5) asserts that the agency agreement was invalid because the signed copy of the agreement as executed and any attachments were not served upon McNamee as required by s 55. This contention is relied upon by McNamee in support of its proposed cross-claim to recover the 50 per cent advance payment of commission on exchange of contracts.
2. Section 55(1), which is to be read together with s 55A of the Property, Stock and Business Agents Act relevantly provides: 55 No entitlement to commission or expenses without agency agreement (1) A licensee is not entitled to any commission or expenses from a person for or in connection with services performed by the licensee in the capacity of licensee for or on behalf of the person unless: (a) the services were performed pursuant to an agreement in writing (an agency agreement) signed by or on behalf of: (i) the person, and (ii) the licensee, and (b) the agency agreement complies with any applicable requirements of the regulations, and (c) a copy of the agency agreement signed by or on behalf of the licensee was served by the licensee on that person within 48 hours after the agreement was signed by or on behalf of the person. Note. Section 55A allows a court or tribunal to order that commission and expenses are recoverable in certain circumstances despite subsection (1). … 55A Relief from disentitlement to commission and expenses (1) A court or tribunal before which relevant proceedings are taken may order that commission or expenses are wholly or partly recoverable by a licensee who would otherwise not be entitled to the commission or expenses (under section 55) because of: (a) a failure by the licensee to serve a copy of the relevant agency agreement on the person within 48 hours after it was signed by or on behalf of the person, or (b) a failure of the relevant agency agreement to comply with the requirements of the regulations. (2) A court or tribunal is not to make such an order in circumstances of a failure to serve a copy of the agency agreement within the required time unless satisfied that: (a) the failure was occasioned by inadvertence or other cause beyond the control of the licensee, and (b) the commission or expenses that will be recoverable if the order is made are in all the circumstances fair and reasonable, and (c) failure to make the order would be unjust. … (4) Proceedings are relevant proceedings if they are proceedings taken by a licensee for the recovery of commission or expenses from a person or proceedings on a consumer claim relating to commission or expenses (as referred to in section 36) in relation to which a licensee is a respondent. [Emphasis added.]
3. No submissions were made by McNamee before the primary judge concerning the asserted non-compliance with s 55(1)(c).
4. It is not necessary to address the merits of the draft cross-claim based on s 55(1). Greenwood accepted there is an arguable question of construction as to how s 55(1) operates in circumstances such as this case where it relies upon an oral contract or oral term.

Ground 2 - Unreasonable or unjust result

1. Turning to ground 2, McNamee relied upon the last limb in House v The King at 505 and submitted that the primary judge arrived at a result so unreasonable or unjust as to suggest that one of the other categories of error had occurred, even though the error in question did not explicitly appear on the face of the reasoning.
2. In this case, the degree of injustice that would be suffered by the respective parties as a consequence of refusing the application was considerably greater for McNamee than Greenwood: s 58(2)(b)(vi). The effect of refusing the application was that McNamee was shut out from defending the claim, at least in relation to the 16 lots and one of the 13 lots, in circumstances where Greenwood did not dispute the factual proposition that 16 lots were not the subject of deeds of mutual rescission, nor dispute the absence of notice before action in respect of the seven lots. Against this, the prejudice to Greenwood if the default judgment was set aside, or at least varied, was capable of being compensated by an order for costs.
3. Further, although McNamee's former solicitor did not adequately discharge his duty to eliminate delay (Civil Procedure Act, s 59), the lack of expedition in filing the defence arose from circumstances at least partly beyond the control of McNamee, as the relevant director, Mrs McNamee, left the conduct of the litigation to other family members: s 58(2)(b)(iii).
4. Accepting the primary judge's finding that there was an arguable defence, the interests of justice strongly pointed in favour of varying the default judgment in the manner outlined below, on terms which compensated Greenwood as to costs, in circumstances where the delay, although not adequately explained, was relatively short, and there was no special prejudice or hardship to Greenwood beyond the presumptive prejudice from delay.
5. Whilst interference with the exercise of the primary judge's discretion is only permitted in limited circumstances, I am satisfied that the primary judge arrived at a result that was so unreasonable or unjust that this Court should interfere.
6. Ground 2 has been made out.

Re-exercise of the discretion

1. Given the error in the discretionary judgment, this Court can either send the matter back or determine for itself what order should be made. The parties were content for this Court to re-exercise the discretion whether to set aside the default judgment.
2. It should be accepted that McNamee has a bona fide defence to Greenwood's commission claim in relation to the 16 lots totalling $116,248.50 based on the no default defence: cl 3(vi)(b) of the agency agreement. Related to this, McNamee has a bona fide cross-claim, based on its version of the agency agreement, to recover the sum of $116,248.50 being the 50 per cent "advance" of the commission paid on exchange of contracts in respect of the 16 lots.
3. McNamee also has a bona fide defence to Greenwood's commission claim in relation to seven lots based on the s 36 defence. However, since this defence overlaps with the no default defence for six of the seven lots, the consequence is that the s 36 defence only affords an effective answer to one of the 13 lots, relevantly, Greenwood's claim for commission of $7,218.75 in relation to lot 39 (new lot 8).
4. In view of the admissions in its draft defence and before the primary judge, McNamee does not have a bona fide defence to Greenwood's claim for commission of $94,528.75 relating to the 13 lots, except for the one lot referred to in [91] above. It is not in the interests of justice that McNamee be allowed to pursue this defence to a hearing.
5. No reason has been shown to differ from the primary judge's view as to McNamee's inadequate explanation for the delay. However, taking into account the relatively short period of delay, the available defences on the merits and the absence of evidence of special prejudice or hardship to Greenwood, in my view, the "dictates of justice" as referred to in s 58 of the Civil Procedure Act support the conclusion that the default judgment should be varied by substituting $90,966.75 as the amount of the judgment inclusive of costs and interest to 8 April 2019. This amount comprises the commission claim in respect of the 12 lots of $87,310.00 (being $94,528.75 less $7,218.75), filing fees of $1,362.00, solicitor's costs of $1,347.50 and interest of $947.25 (calculated at 5.5 per cent per annum, being $13.16 per day for 72 days).
6. There should be a stay of enforcement of the judgment pending the determination of the proceedings, since McNamee has an arguable cross-claim in an amount of at least $116,248.50, which is in excess of the judgment, as varied.
7. With respect to further procedural steps in the proceedings below, McNamee should be ordered to file its defence (excluding par 13 relating to the Sunset Date defence) and cross-claim within seven days.

Costs

1. Greenwood acted reasonably in opposing the application to set aside the default judgment. In particular, Greenwood gave adequate warning of its intention to enter default judgment; McNamee had placed no reliance on UCPR, r 36.16(2)(a) prior to the commencement of the hearing below; and McNamee had not served any affidavit evidence of the facts relating to the no default defence and Sunset Date defence.
2. As the party seeking an indulgence, it is appropriate that McNamee pay the costs of the application and also the costs thrown away by reason of the default judgment being varied: Magnate Projects Pty Ltd v Youma Constructions (No 2) Pty Ltd at [73]; Permanent Custodians Ltd v El Ali (No 2) [2008] NSWSC 1391 at [5], [13]; G E Dal Pont, Law of Costs, 3rd ed, 2013, LexisNexis Butterworths at [14.39].
3. McNamee should also pay the costs of the appeal, the substance of which involved McNamee pressing its application for an indulgence in circumstances where Greenwood again acted reasonably in opposing that application and succeeded in part in that regard.

Conclusion and Orders

1. Leave to appeal should be granted and the appeal allowed.
2. The amount of the default judgment should be varied by substituting the sum of $90,966.75 inclusive of costs and interest as claimed from 20 January 2019 to the date of judgment, being 8 April 2019. There should be a stay of the judgment. Orders should be made in relation to costs and for the filing by McNamee of its defence and cross-claim as indicated.
3. I propose the following orders: 1. Grant leave to appeal. 2. Direct the appellant to file a notice of appeal in the form of the draft in the White Book within 7 days. 3. Appeal allowed. 4. Set aside the orders made by Strathdee DCJ on 19 July 2019 and in place, order: 1. That the default judgment entered on 8 April 2018 be varied by substituting the figure "$90,966.75" in place of the figure "$215,805.54", such that judgment is entered against the defendant in the sum of $90,966.75. This judgment is to take effect from 8 April 2019. 2. The defendant/applicant to pay the plaintiff/respondent's costs of and incidental to the motion and also the costs thrown away by reason of the default judgment being varied. 1. The defendant to file and serve its defence (excluding par 13) and cross-claim within 7 days. 2. Stay the enforcement of the judgment and costs orders referred to in order (4) until the determination of the proceedings in the District Court. 3. The appellant to pay the respondent's costs in this Court.
4. BRERETON JA: I have had the benefit of reading, in draft, the judgment to be delivered by Gleeson JA, with which I agree. I am conscious that this involves interference with a discretionary decision on a matter of practice and procedure, in respect of which no specific error has been identified. However, I am satisfied that notwithstanding the absence of satisfactory explanation for the failure to file a defence, the delay was not such that it would be just for McNamee to be held bound by a default judgment in respect of the 16 lots, when the no-default defence and the s 36 defence were at least arguable. If it be necessary to identify specific error in the primary judgment, it is to be found in treating a satisfactory explanation for the failure to file a defence as an essential pre-condition to setting aside a default judgment, rather than as merely a relevant consideration. In the circumstances, the relevant question, which was whether it was in the interests of justice to allow McNamee to be permitted to defend the proceedings on the merits, [1] in respect of the lots to which those defences applied, admitted only of an affirmative answer. I agree with the orders proposed by Gleeson JA.
5. SIMPSON AJA: I agree with Gleeson JA.

Endnote

1. See Dai v Zhu [2013] NSWCA 412 at [83] (Sackville AJA; Barrett and Leeming JJA agreeing), citing, Reinher Industrial Lease & Finance Pty Ltd v Jordan (Court of Appeal (NSW), 4 June 1974, unreported). 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: 27 November 2019