Konstruct v Arrow [2012] ACTSC 14

Supreme Court of the ACT|2012-01-31|Before: Burns J

1. The orders of the learned Master made on 4 February 2011 are set aside.

3. Judgment is entered for the appellant in the sum of $248,621.99.

4. The respondent's counterclaim be heard separately.

2. On 24 November 2010 Master Harper heard an application by the appellant for judgment on its debt claim pursuant to either r 425 or r 1452 of the Court Procedure Rules 2006 (ACT). On 4 February 2011 Master Harper effectively refused the appellant's application and made the following orders:

1. an order that the respondent have until 4 April 2011 to deliver to the appellant's solicitors a draft further amended defence and counterclaim in conformity with the Master's reasons;

2. an order that each party be at liberty to have the matter listed in the Friday applications list on seven days notice.

3. On 11 February 2011 the appellant filed an appeal from Master Harper's orders. It is common ground that the appellant has a right of appeal pursuant to s 9 (2) of the Supreme Court Act 1933 (ACT). On an appeal to a single judge of this Court under s 9 (2) (a) the court must have regard to the evidence given in the proceedings out of which the appeal arose, may draw inferences of fact from the evidence and may also receive further evidence. No application was made to lead further evidence in the appeal before me.

4. On an appeal under s 9 (2) the court may confirm, amend or set aside the order of the Master and may make any order that in the circumstances it considers just.

5. The parties are in agreement that in making his orders of 4 February 2011 the learned Master was exercising a discretion. The parties agree that the present appeal, being an appeal against the exercise of a discretion, is circumscribed and the appellant must show an error of fact or law or that irrelevant matters were considered or relevant matters were not considered or that the outcome is so unreasonable that the discretion has miscarried: See House v The King [1936] HCA 40; (1936) 55 CLR 499.

6. Before I turn to the published reasons of the learned Master, I will provide some background information as to the conduct of this litigation prior to the learned Master hearing the application of the appellant on 24 November 2010.

7. New as I am to this Court, I can only hope that the course these proceedings have taken to date is atypical, if not extraordinary. These proceedings have been on foot for three and a half years, and as yet no proper defence or counterclaim has been lodged. I will set out a brief chronology of these proceedings.

19 May 2008 Statement of Claim served on the respondent.

19 June 2008 Order for default judgment entered against the respondent.

23 July 2008 Respondent files application to set aside default judgment.

11 August 2008 Orders made by Registrar setting aside default judgment and ordering the respondent to pay the appellant's costs.

15 August 2008 Defence and counterclaim served on the applicant.

10 December 2008 Appellant files an application for orders requiring the respondent to provide particulars and to prepare and provide a Scott Schedule.

15 December 2008 Orders made by the Deputy Registrar that the respondent provide particulars of the defence and counterclaim by 22 December 2008, and that the respondent prepare and file a Scott Schedule by 23 March 2009.

24 December 2008 Further and better particulars of defence and counterclaim provided.

19 March 2009 Respondent's Scott Schedule provided.

9 June 2009 Appellant writes to respondent complaining of inadequacy of further and better particulars and Scott Schedule.

June 2009 Correspondence between the parties concerning the adequacy of the further and better particulars provided by the respondent and Scott Schedule prepared by the respondent.

10 July 2009 First strikeout application. Appellant files an application seeking orders that the Defence and Counterclaim be struck out or in the alternative, the particulars to the defence and counterclaim be provided.

31 July 2009 Directions made by Deputy Registrar that the respondent provide better particulars of the defence and counterclaim, with the appellant's request for further and better particulars to be forwarded to the respondent's solicitors by 14 August 2010, with the respondent to provide answers by 6 September 2010.

10 August 2009 Appellant delivers letter setting out its complaint as to the inadequacy of the respondent pleadings. The letter invites the respondent to amend its defence and counterclaim.

14 September 2009 The appellant seeks a direction that the respondent file and serve its defence and counterclaim within 5 weeks. Directions made by the Deputy Registrar that the respondent file and serve its application for leave to amend its defence and counterclaim by 5 October 2009.

19 October 2009 Directions made by Deputy Registrar extending the time for the respondent to file and serve its application for leave to amend its defence and counterclaim to on or before close of business 23 October 2009 and the appellant file and serve any application to strikeout the defence and counterclaim on or before the close of business 23 October 2009.

27 October 2009 Second strikeout application filed by the appellant seeking an order that various paragraphs of the defence and counterclaim be struck out.

5 November 2009 Respondent files an application for leave to amend its defence and counterclaim outside of the time allowed by the Deputy Registrar on 19 October 2009.

13 November 2009 The second strikeout application and the respondent's application for leave to amend its defence and counterclaim comes before Master Harper. By consent the matter is adjourned until 4 December 2009 to allow the respondent to prepare further amendments to its defence and counterclaim, including its Scott Schedule.

4 December 2009 The applications before Master Harper are further adjourned until 11 December 2009 on the basis that the respondent's counsel has not been briefed to appear.

11 December 2009 The applications are not reached before Master Harper and are adjourned to a special fixture on 29 January 2010.

29 January 2010 Master Harper grants leave to the respondent to file and serve an amended defence and counterclaim, directing that it do so by 26 February 2010.

24 March 2010 Amended defence and counterclaim served on the appellant.

29 March 2010 Directions made by Deputy Registrar that the appellant request further and better particulars of the amended defence and counterclaim by 9 April 2009 and the respondent to provide a response to the appellant's requests by 7 May 2010. The matter was further adjourned until 24 May 2010 for further directions.

4 May 2010 Appellant's solicitors write to respondent's solicitors seeking further and better particulars of the amended defence and counterclaim.

20 May 2010 Respondent's solicitors seek an adjournment of up to three months to respond to appellant's request for further and better particulars. By consent, the directions hearing on 20 May 2010 is vacated and the matter is listed for further directions on 12 July 2010.

26 May 2010 Appellant's solicitors write to respondent's solicitors enquiring whether the respondent is prepared to enter into a consensual arrangement for the provision of security for the appellant's costs.

1 July 2010 Respondent's solicitors write to the appellant's solicitors declining the appellant's offer to enter into a consensual arrangement in relation to security for costs.

9 July 2010 Respondent's solicitors write to appellant's solicitors providing answers to some of the appellant's request for further and better particulars of the amended defence and counterclaim.

26 July 2010 Appellant's solicitors write to respondent's solicitors regarding the respondent's failure to provide further and better particulars to all requests made by the appellant.

9 August 2010 Third strikeout application. Appellant files application for orders that the amended defence and counterclaim be struck out and for security for costs.

20 October 2010 Master Harper hears appellant's application. Master Harper orders that the respondent give security for the appellant's costs in the sum of $75,000.00 by way of an irrevocable bank guarantee to be given to the court within 28 days. Master Harper further directs that the respondent serve and provide to the Master's associate a draft further amended defence and counterclaim within 21 days i.e. by 10 October 2010. The matter was then adjourned to 24 November 2010 for directions.

19 November 2010 Respondent's solicitors write to appellant's solicitor enclosing proposed further amended defence and counterclaim.

19 November 2010 Appellant's solicitors write to respondent's solicitors enclosing proposed orders to be sought on 24 November 2010.

24 November 2010 Master Harper hears appellant's application for strikeout and reserves his decision.

4 February 2011 Orders made by Master Harper that the respondent have until 4 April 2011 to deliver to the appellant's solicitor, a draft further amended defence and counterclaim in conformity with his published reasons.

11 February 2011 Appellant appeals from order made by the Master on 4 February 2011.

9. It is apparent that by far the greater responsibility for this litany of delay rests with the respondent. In the course of the application before me, the respondent made some faint suggestions that it did not agree with all of the rulings made by the learned Master, presumably so as to suggest that the chronology may not be as damning as first appears. Little weight can be given to that suggestion in view of its lack of particularity and the fact that the respondent has chosen not to formally challenge any of the learned Master's rulings. In the course of his submissions to me Mr Meagher SC for the respondent effectively accepted that the respondent had been dilatory, but submitted that its conduct was not so egregious as to justify the orders sought by the appellant.

10. Master Harper noted briefly the history of these proceedings and the alleged factual background to the appellant's claim. After considering an issue that had arisen with the form of the proposed bank guarantee, he then set out what he considered to be the deficiencies in the respondent's proposed further amended defence and counterclaim. Some of those deficiencies, such as the proposed renumbering of certain paragraphs, are of little moment. Others are more significant.

11. At par 18, Master Harper notes that in the proposed par 20B of the further amended defence and counterclaim, the respondent simply denies the allegations in pars 22 to 26 inclusive of the statement of claim. This is inadequate and unhelpful in that the respondent is essentially denying that it was not entitled to deduct any amount from certain progress payment claims served by the appellant. The learned Master observed at [18]:

A simple denial does not identify the issues for trial in relation to this paragraph. If the defendant proposes to assert an entitlement to deduct any amount from any of those claims, each such amount should be identified. Paragraph 24 of the statement of claim asserts a failure on the part of the defendant to pay to the plaintiff each of five identified amounts. Again, a blanket denial of the facts asserted in the paragraph does not isolate the issues to be determined by the court. It is unclear whether the defendant proposes to establish that all or some of the amounts said not to have been paid were in fact paid; whether all or some of the amounts are said not to have been payable; or precisely what the defendant says in response to the assertions. The defendant should plead to paragraph 24 of the statement of claim in precise terms, responding to each factual assertion contained in the paragraph.

12. The learned Master found further faults in the proposed further amended defence and counterclaim:

In paragraph 21, in purported answer to the whole of the statement of claim, the defendant asserts that pursuant to clauses 5 and 6 of the subcontract, the defendant was required to pay only an amount representing the value of the work detailed and executed to its reasonable satisfaction for each progress payment claim. In paragraph 22, the defendant says that the work carried out by the plaintiff was not executed to its reasonable satisfaction and the amount claimed did not represent the value of the work. This does not enable the plaintiff, or the court, to know what is really in issue between the parties. The defendant refers to particular aspects of the work said to be defective or otherwise unsatisfactory, but it is not possible for the plaintiff or the court to follow readily, in relation to each progress payment in dispute, how much of the work was accepted by the defendant as satisfactory and how much was not, or how much of each claim related to the satisfactory work and how much related to the defective or unsatisfactory work. In paragraph 22A, the defendant refers to the particulars of defective and incomplete work set out in paragraph 30 of the counterclaim. This is inadequate. The counterclaim is separate from the defence. The defence should enable the plaintiff, and the trial judge, to know what is really in issue between the parties.

In passing I point out that in paragraph 23 of the proposed defence, it is asserted in particular (a) that the original contract price between the parties was $272,401.00 plus GST, a total of $310,641.00. Assuming a GST rate of 10%, the total is consistent with a price before GST of $282,401.00. I have already expressed my provisional view about the discrepancy in the contract price.
In clauses 24A and 25A of the proposed defence, the defendant refers to the counterclaim and asserts a set-off of the losses it claims to have suffered as set out in the counterclaim. This is impermissible. The defence should be capable of standing alone if the counterclaim is dismissed or severed. If there is a defence of set-off it should be properly pleaded, and it should be made clear whether it is said to be a set-off at law or in equity. The principles, including the differences between a set-off and counterclaim, are usefully summarised by Dr B.C. Cairns in Australian Civil Procedure, 8th edition, Law Book Co at paragraph [7.180] and following.
The principle fault with the counterclaim is found in paragraph 30. The defendant in paragraph 29 sets out a number of obligations undertaken by the plaintiff under the agreement, generally in words quoted from the subcontract. The defendant then at clause 30 asserts that wrongfully and in breach of the terms of the agreement, the plaintiff failed to carry out the works in compliance with each of those obligations. For example, the defendant says that the plaintiff failed to carry out its works in compliance with the provisions of the head contract required to be observed by the defendant, as far as they related or applied to the subcontract works. The clause does not identify which provisions of the head contract are said not to have been complied with, or the way in which those provisions are said not to have been complied with. In other words, the paragraph does not set out the material facts on which the defendant will be relying in establishing this aspect of the counterclaim.
Similarly, the defendant asserts that the plaintiff failed to carry out its works in a proper and tradesmanlike manner, and using suitable new materials. It does not identify which part of the works carried out by the plaintiff are said to have been carried out in an improper or untradesmanlike manner. It does not identify which parts of the work are said to have been carried out using unsuitable or old materials. Again, it does not plead the material facts on which the defendant will rely.
Further, the paragraph asserts that the plaintiff failed to carry out its works so as to comply with any Act of Parliament or any regulation or by-law of any local authority or any public service company authority [sic] having any jurisdiction with regard to the works. No such Acts or regulations or by-laws are identified, still less any breaches of any Acts, regulations or by-laws.
Having simply listed the wording of the various terms of the subcontract already listed in paragraph 29, paragraph 30 then descends to some nine pages of particulars of asserted breaches of the subcontract by the plaintiff. Perhaps these are in large part intelligible to a building construction professional, but they fall far short of informing the plaintiff or the court adequately of the material facts on which the defendant will be relying in making out the counterclaim. They are not expressed in a form which lends itself to a conventional pleading response by the plaintiff which would enable the court to understand precisely what the defendant is alleging, and which of those allegations the plaintiff admits, denies, or responds to by asserting additional material facts.

13. I adopt the findings of the learned Master with regard to the respondent's pleadings and I agree with his view that "these defects amount to more than a technical failure to adhere to the requirements of pleading in the Court Procedures Rules..." The defects identified by the learned Master mean that the appellant cannot be sure what is in issue, what case it has to meet, or how to plead to the proposed counter-claim.

14. After referring briefly to the High Court decision of Aon Risk Services Ltd v Australian National University [2009] HCA 27; (2009) 239 CLR 175 (Aon), and the New South Wales Court of Appeal decision in McMahon v John Fairfax Publications Pty Ltd [2010] NSWCA 308, Master Harper determined to allow the respondent "one more opportunity to get its pleading into order". He allowed the defendant a further two months to prepare further pleadings consistent with his reasons.

(a) His Honour made an error of legal principle by failing properly to apply the relevant parts of Court Procedures Rules 2006 (ACT) to the plaintiff's application on 24 November 2010 in conformity with the requirements of r21 of the Court Procedures Rules 2006 (ACT).

(b) His Honour failed properly to direct himself as to the operation of r21 of the Court Procedures Rules 2006 (ACT).

(c) His Honour failed to take into account or gave insufficient weight to the relevant consideration of the timely disposal of the proceedings, and all other proceedings in the Court, at a cost affordable by the respective parties.

(d) His Honour took into account an irrelevant consideration in purporting to apply case management principles pursuant to r21 of the Court Procedure Rules 2006 (ACT) by characterising a building case between corporations and a defamation action as being classes of proceedings which are subject to different case management principles.

(e) His Honour failed to take into account or gave insufficient weight to the relevant consideration raised by the plaintiff, being the costs and the commercial burden occasioned to it by the defendant's ongoing delay in the conduct of the proceedings.

(f) His Honour failed to take into account or gave insufficient weight to the relevant consideration that the defendant had been ordered to give security for the plaintiff's costs pursuant to r1900 of the Court Procedure Rules 2006 (ACT) and/or pursuant to s1335 of the Corporations Act 2001 (Cth).

(g) His Honour failed to expose his reasons for disposing of the plaintiff's application made on 24 November 2010 in finding that it was reasonable to allow the defendant a further two months to prepare a further amended defence and counterclaim, notwithstanding the history of, and his Honour's findings in, the proceedings.

(h) His Honour arrived at a result so unreasonable or unjust as to suggest that one or more of the foregoing errors had occurred, even though the error in question did not explicitly appear on the face of the reasoning.

(a) An ORDER pursuant to s 9 of the Supreme Court Act 1933 (ACT) setting aside ORDER 1 of the Orders of Master Harper made on 4 February 2011.

(b) An ORDER pursuant to r 425 (1) or alternatively r 1452 (4) of the Court Procedures Rules 2006 (ACT) or alternatively the Court's inherent power to control its processes that the amended defence and counterclaim filed in these proceedings and dated 5 March 2010 be struck out.

(c) An ORDER pursuant to r 425 (3) (a) or alternatively r 1452 (4) of the Court Procedures Rules 2006 (ACT) or alternatively the Court's inherent power to control its processes, entering judgment for the plaintiff in the amount of $248,621.94.

(d) An ORDER that the defendant pay interest on the judgment sum of $248,621.94.

(e) Costs.

(f) Any other ORDERS that this Honourable Court considers appropriate.

17. In its written submissions, the appellant conveniently groups these grounds into three related groups. I will approach the matter in the same way.

Aon Risk Services Australian Ltd v Australian National University

18. The group encompasses grounds 4(a), 4(b) and 4(c). In its written submissions, the appellant states the "argument underpinning the appeal is that the learned Master fell into error by failing properly to apply case management principles in the application of the [Court Procedures Rules] as explained by the High Court" in Aon. The appellant submits that in the light of the learned Master's findings on delay and wasted costs due to the conduct of the respondent's case, the learned Master gave insufficient importance to case management principles in giving the respondent a further indulgence.

19. Aon marked a turning point in the application of principles concerning judicial management of civil litigation in our adversary system of justice. It is not appropriate for litigants or their lawyers to attempt to confine the decision in Aon to its particular facts. Much of what fell from the members of the High Court in Aon is applicable generally to civil litigation.

20. In Aon the respondent, the Australian National University, successfully sought leave to amend its claim against Aon Risk Services very early in the course of a four week trial, raising issues that had not previously been raised between the parties. The trial judge granted leave on the basis that the issues the respondent sought to raise were real, triable issues which should be determined so as to avoid the delay and cost caused by multiplicity of proceedings. In doing so, he referred to the decision in Queensland v JL Holdings [1997] HCA 1; (1997) 189 CLR 146. An appeal by Aon Risk Services was dismissed by a majority of the Court of Appeal. On appeal to the High Court, in upholding the appeal by Aon Risk Services, French CJ said at [5]:

"Both the primary judge and the Court of Appeal should have taken into account that, whatever costs are ordered, there is an irreparable element of unfair prejudice in unnecessarily delaying proceedings. Moreover, the time of the court is a publicly funded resource. Inefficiencies in the use of that resource, arising from the vacation or adjournment of trials, are to be taken into account. So too is the need to maintain public confidence in the judicial system."

21. Whilst these comments are directed towards inefficiencies arising out of the adjournment of trials, they are equally apt to be applied to inefficiencies arising out of repeated failures to comply with rules of court and directions given by the court, or to properly and efficiently prepare a case for trial. The evils identified by French CJ are not only to be found in cases of adjournment in the course of a fixed trial date but also, as here, where a litigant is subjected to the forensic equivalent of the death of a thousand cuts.

"The discretion [to allow amendments] is exercised in the context of the common law adversarial system as qualified by changing practice. But that is not a system which today permits disregard of undue delay. Undue delay can undermine confidence in the rule of law. To that extent its avoidance, based upon a proper regard for the interests of the parties, transcends those interests. Another factor which relates to the interest of the parties but transcends them is the waste of public resources and the inefficiency occasioned by the need to revisit interlocutory processes, vacate trial dates...because of noncompliance with court timetables..."

23. With respect to the operation of r 21 of the Court Procedure Rules, an issue central to this appeal, the plurality said:

"97. The objectives of case management are now expressly stated in r21 of the Court Procedure Rules. It cannot be overlooked that later rules, such as r 21, are likely to have been written with the decision in J L Holdings in mind. The purposes stated in r 21 cannot be ignored. The Court Procedures Rules make plain that the Rules are to be applied having regard to the stated objectives of the timely disposal of the proceedings at an affordable cost. There can be no doubt about the importance of those matters in litigation in the courts of the Australian Capital Territory.

Of course, a just resolution of proceedings remains the paramount purpose of r 21, but what is a "just resolution" is to be understood in light of the purposes and objectives stated. Speed and efficiency, in the sense of minimum delay and expense, are seen as essential to a just resolution of proceedings. This should not detract from a proper opportunity being given to the parties to plead their case, but it suggests that limits may be placed on re-pleading, when delay and cost are taken into account. The Rule's reference to the need to minimise costs implies that an order for costs may not always provide sufficient compensation and therefore achieve a just resolution."

24. Consistent application of case management principles as found in the Court Procedures Rules and interpreted in the light of r 21 is likely to provide many benefits to the community and to individual litigants, not the least of which is a levelling of the playing field between litigants of unequal financial strength. Nothing could be more corrosive of public confidence in the judicial system than the perception that the court's own processes can be used as an instrument of oppression, perhaps with the objective of obtaining a forensic advantage in the dispute.

25. The respondent has had since default judgment was set aside on 11 August 2008 to file a defence and counterclaim in proper form. To date, it has not done so. Its continuing failure to progress this matter in a timely and efficient manner is beyond any doubt prejudicial to the appellant. The appellant has been called upon to engage in numerous interlocutory processes, with concomitant cost accruing to it. Perhaps of more importance is that the failure of the respondent to comply with the rules of the court, and directions given by the court, has significantly delayed the appellant's ability to have its claim for significant damages dealt with for the better part of three years.

26. It is apt to remember the dicta of Heydon J in Aon at [137]:

"Commercial life depends on the timely and just payment of money. Prosperity depends on the velocity of its circulation. Those who claim to be entitled to money should know, as soon as possible, whether they will be paid. Those against whom the entitlement is asserted should know, as soon as possible, whether they will have to pay. In each case that is because it is important that both the claimants and those resisting claims are able to order their affairs. How they order their affairs affects how their creditors, their debtors, their suppliers, their customers, their employees, and, in the case of companies, their actual and potential shareholders, order their affairs. The courts are thus an important aspect of the institutional framework of commerce. The efficiency or inefficiency of the courts has a bearing on the health or sickness of commerce."

In my view, the stage has been reached where costs orders are no longer a panacea for that prejudice. The learned Master fell into error by not properly applying r 21 to those provisions of the Court Procedure Rules which he considered or applied in the course of his decision of 4 February 2011. A just resolution of the appellant's claim requires that the respondent's defence be struck out and that judgment be entered for the appellant in the sum of $248,621.99 together with interest on that amount. The respondent's counterclaim should be severed.

27. The effect of these orders will not be to deprive the respondent of an opportunity to litigate its claim against the appellant for alleged breach of the contract. The respondent will be able to pursue that aspect of the litigation should it choose to do so. But the appellant will no longer have to pursue the respondent over its claim; it will be for the respondent to pursue its claim with as much vigour as it thinks appropriate.

28. Under this heading the appellant groups grounds of appeal 4 (d), 4 (e), and 4 (f). Amongst the matters agitated by the appellant under these grounds are questions of delay and timeliness that have already been dealt with under group 1 of the grounds of appeal. Specifically with respect to this group of grounds, the appellant complains that the learned Master fell into error by impermissibly comparing the circumstances which existed in McMahon with those in the present case.

29. At par 28 of the learned Master's Reasons for Decision, he states:

28. "Counsel for the plaintiff urges the court to strike out the defence and counterclaim, not to permit further amendment, and to direct entry of judgment for the plaintiff. Counsel relies on Aon Risk Services, mentioned above, and on a recent decision of the NSW Court of Appeal, McMahon v John Fairfax Publications Pty Ltd [2001] NSWCA 308, per Allsop P and Giles and Young JJA. The court unanimously dismissed that appeal from a single judge in a defamation action which had been dismissed after a series of unsuccessful attempts by the plaintiff to get his statement of claim in order. Whilst I accept the principles expressed by the court in that decision, whether or not to bring a claim or a counterclaim to an end for pleading deficiencies remains a discretionary decision. One factor in McMahon not present here is that it was a defamation case. As Allsop P said at [35]:

Defamation cases should be brought on with all the despatch required by the Civil Procedure Act. Vindication of reputation if traduced should occur promptly. That is why the defamation list exists.

Whilst all litigation should be dealt with as promptly as the demands upon the court allow, a building case between corporations does not share that characteristic with a defamation action."

30. I do not read this passage by the learned Master as expressing a principle that the application of r 21 of the Court Procedures Rules is inevitably different in a building case as opposed to a case in defamation. However, in the application of r 21 to any particular case it will always be appropriate to take into account the particular facts and circumstances relevant to that case, including the nature of the litigation. I do not accept that the learned Master fell into error as submitted by the appellant under these grounds.

31. Under this heading the appellant groups grounds of appeal 4 (g) and 4 (h). Essentially, the appellant complains that the learned Master failed to expose his reasons for disposing of the appellant's application and determining that it was reasonable to allow the respondent an opportunity to prepare a further amended defence and counter-claim. It is submitted that the result is so unreasonable or unjust as to suggest error on the part of the learned Master.

32. It is one of the undoubted difficulties with the decision of the learned Master that no process of reasoning is exposed leading to the orders made. His Honour correctly sets out the history of the matter, together with a number of authorities relevant to the exercise of his discretion. Having done that, he concludes by saying: "In the circumstances I propose to allow the defendant one more opportunity to get its pleading into order." It is not clear which circumstances the learned Master is referring to which militate in favour of granting a further indulgence to the respondent.

33. It may well be that the failure of the learned Master to expose the reasoning process he employed to reach his conclusion would constitute an error, allowing me to revisit his discretionary decision. However, I prefer to deal with the matter on the basis of an identifiable error as set out above under group 1 of the grounds of appeal.

34. The appeal is allowed, and the orders made by the learned Master on 4 February 2011 are set aside. The respondent's defence is struck out, and judgment entered for the appellant/plaintiff in the sum of $248,621.99. Pursuant to r 471 of the Court Procedures Rules I order that the respondent/defendant's counterclaim be heard separately. I will hear the parties on the question of costs and on what directions should be made with respect to the counterclaim.

I certify that the preceding thirty four (34) numbered paragraphs are a true copy of the Reasons for Judgment herein of his Honour, Justice Burns.

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