MacTaggart v. Burleigh Marr Distributions P/L [2004] QDC 480 (6 December 2004)

(3) A party who is entitled to the benefit of the order may, by application, require the party who has not complied to show cause why an order should not be made against it.

(a) must allege the grounds on which it is based; and

(b) is evidence of the allegations specified in the application; and

(c) must, together with all affidavits to be relied on in support of the application, be filed and served at least 2 business days before the day set for hearing the application.

(5) On the hearing of the application, the court may:

(a) give judgment against the party served with the application; or

(b) extend time for compliance with the order; or

(6) The party who makes the application may reply to any material filed by the party who was served with the application.

(8) A judgment given under subrule (5)(a) may be set aside:

(a) if the application is made without notice - on an application to set the judgment aside; or

[3] Burleigh Marr's application was based on MacTaggart's failure to comply with an order of His Honour Mr. Comans S.M., made on 22 April 2004, that MacTaggart amend "the defence" to reflect certain disclosed documents, such amended defence to be filed and served within 14 days of the order. His Honour stayed his order for 14 days, so the amended defence was to be filed and served by 20 May 2004.

[4] MacTaggart did not file and serve an amended defence by that date, so on 31 May 2004 Burleigh Marr filed its application under rule 374. On 7 June 2004 His Honour Mr. Herlihy S.M. heard the application (on which neither party was represented by the counsel who appeared before me).

[5] Burleigh Marr's action (filed on 24 November 2003) was against Blender Bar Pty Ltd as first defendant, Kym Crosbie as second defendant and MacTaggart as third defendant. As against Blender Bar the claim was for $41,509.89 for goods sold and delivered under a written agreement dated 16 July 2002. As against Crosbie and MacTaggart it was for the same sum under a written guarantee dated 17 July 2002.

[6] The Statement of Claim (filed 24 November 2003) alleged the sale of goods to Blender Bar between 31 March and 20 November 2002 at an alleged reasonable price of $41,509.89, alleged the giving of particulars of those sales to Blender Bar and Blender Bar's failure to pay. As against Crosbie and MacTaggart the allegations were no more than those contained in the claim (para [5] above).

[7] On 6 January 2004 MacTaggart's defence was filed. It did not admit the allegations against Blender Bar on the basis that despite making reasonable enquiries he was unaware of their truth or falsity. It then denied liability under the guarantee.

[8] On 22 April 2004 Burleigh Marr filed an amended statement of claim alleging for the first time that Burleigh Marr was at all material times a subsidiary of Bidvest Australia Limited. This was no doubt because the guarantee sued on is expressed to be between Bidvest (and its subsidiaries) and MacTaggart. It appears that this amended statement of claim was served by fax on MacTaggart's solicitors after the order of Mr. Comans S.M. was made.

"TAKE NOTICE that the applicant is applying to the Court for the following orders:

1. That judgment be entered against the Third Defendant in accordance with rule 374 of the Uniform Civil Procedure Rules for:

b) interest at the rate of 9% per annum pursuant to the Supreme Court Act 1995;

c) costs as endorsed on the Statement of Claim of $1082.20;

d) costs of the Order to Amend the Defence of $427.00;

2. Such further orders that the Court may deem necessary."

[10] It is patent that this application does not comply with rule 374 (4)(a). The intention of the rule is obvious. It is to have the application act as a pleading of all relevant facts and actually to stand as evidence of those facts. The reason behind that intention is also obvious. If the application can have the draconian result envisaged by rule 374 (5)(a), that is, the final determination of the action, the shutting out of a party forever, that party ought to be made aware in the clearest terms of the facts on which the application is based and be faced with evidence of those facts.

[11] The file endorsement made by Mr. Herlihy S.M. on 7 June 2004, after noting appearances, is merely:

"Argument heard. No reason for delay given by Third Defd, Judgment for Ptf. against Third Defd as per draft order initialled by me."

(that draft order followed the terms of the application)

[12] So it seems that the only basis on which His Honour exercised his discretion was the failure of MacTaggart to provide a reason for his failure to amend his defence. Nothing was placed before me to indicate that His Honour also considered the effect of the breach of rule 374 (4)(a). Indeed it seems obvious that no-one adverted to that most obvious defect in the proceedings.

[13] It is well settled that the exercise of judicial discretion is not lightly displaced. Thus in House v The King [(1936) 55 CLR 499], the majority judgment of Dixon, Evatt and McTiernan JJ, at 504-5 stated:

"It is not enough that the judges composing the appellate court consider that, if they had been in the position of the primary judge, they would have taken a different course. It must appear that some error has been made in exercising the discretion."

[14] In Atkinson v Atkinson ([1969] VR 278), it was held at 279 per Barry J that:

"It is ... a grave step for an appellate court to stigmatise as plainly unjust and unreasonable the exercise of discretion by a competent trial judge where no error of law or of fact invalidating his decision can be found ... The conclusion that an exercise of discretion which is not vitiated by some obvious error is plainly unreasonable or unjust is, after all, one of impression."

[15] His Honour's failure to consider the breach of rule 374 (4)(a) and its effect must be considered in the light of the consequences to which I have referred. In making his order he conclusively shut out MacTaggart from defending a substantial claim against him. MacTaggart had failed, for a period of about 11 days (or about 17 days if the whole period up to the date of His Honour's order is taken) to comply with an order to amend his defence. That was the only order he had failed to obey.

[16] It was, I expect, relevant to His Honour to consider the overall conduct of MacTaggart and his solicitor from the date of the commencement of the action onward to see whether he had been guilty of such extraordinary delay as to suggest that he was simply seeking to put off the inevitable, that he was manoeuvring for time. If that appeared then perhaps his failure to comply with the one order could be seen to be more reprehensible. But in fact the affidavit of Mr. Lambros filed on 31 May 2004 in support of the application shows no history of extraordinary delay by MacTaggart. Indeed it shows a delay of over two months on the part of the plaintiff in requesting an amended defence. So what was before His Honour was simply a delay of (at most) 17 days in complying with the order of Mr. Comans S.M.

[17] Moreover the further affidavit of Mr. Lambros filed on or just before the hearing of the rule 374 application before Mr. Herlihy S.M. disclosed the existence of an amended statement of claim. It does not appear from His Honour's brief endorsement whether this played any part in his consideration. So far as the material before me discloses, the amended statement of claim was not itself put before His Honour. In my opinion it is regrettable that it was not. It would have led him to realise that there was a corporate structure involving the plaintiff (see para [8] above) which might well prompt investigation. Indeed it now appears that a supplier of at least some of the goods to Blender Bar was neither Burleigh Marr nor Bidvest but yet another alleged associated company.

[18] Another matter which appears not to have been raised, nor considered by His Honour, was whether MacTaggart was actually in breach of the order of Mr. Comans S.M. at all. His order did not specify an amended defence to the amended statement of claim. The material before Mr. Herlihy S.M. (and me for that matter) does not establish that Mr. Comans S.M. was aware of the existence of an amended statement of claim. Indeed it seems fairly clear that he was not.

[19] Thus there was material before His Honour on 7 June 2004 to indicate that the action had not been properly pleaded by the plaintiff in the first place, that the order of Mr. Comans S.M. probably ordered the filing of an amended defence to the original statement of claim, that the unseen amended statement of claim might well have markedly altered the situation and that any delay by MacTaggart could not be described as gross or flagrant. And most importantly the rule 374 application before him was in gross breach of the rule itself. All of this makes it clear that His Honour, regrettably, failed to take into account (predominantly I suspect because he was not referred to) very serious matters which ought to have been considered in exercising his discretion. That being so, this is a case in which I have the power to, and should, exercise my own discretion.

[20] In exercising my discretion I take into account the matters I have discussed in relation to His Honour's exercise. There are, however, other matters which I take into account in the new exercise of discretion.

[21] I have said that it is a very severe thing to shut out a defendant forever and as I have tried to demonstrate this was not a case in which to do it. What remains to be considered however is the order I should make in substitution.

[22] During argument I referred to the initial surprise I felt that His Honour had not made use of a guillotine order, for example, that if MacTaggart did not by a specified date file his amended defence, his defence be struck out and the plaintiff be entitled to sign judgment.

[23] I am still of the view that such an order would be a just one. It gives to MacTaggart the opportunity to comply with the order of Mr Comans S.M. on the understanding that the amended defence should be to the amended statement of claim. And it provides him with a little extra time to do so which, the action being on a guarantee, is reasonably called for. There is nothing to suggest that MacTaggart was intimately concerned with the business affairs of Blender Bar so that he can be taken to know whether goods to the value claimed were supplied to Blender Bar and that Blender Bar did not pay for them. He may not accept the validity of the documentation which has apparently been disclosed. He may seek to go behind it. So far as I am aware (and his defence suggests this) he has no personal knowledge of those things. For a guarantor to mount what might be a proper defence in those circumstances would no doubt require some time.

[24] I propose to set aside the order of His Honour Mr. Herlihy S.M. dated 7 June 2004. MacTaggart should not receive his costs of that application because he was prima facie in breach of an order and did not raise before His Honour any proper explanation for the breach. Burleigh Marr should not receive its costs of the application because it did not put before His Honour a number of very relevant matters. MacTaggart should, on ordinary principles, receive his costs of the appeal.

[25] On the question of the proper exercise of discretion I acknowledge the assistance I have derived in this matter from the decisions in Lenjimar Pty Ltd v A.G.C. (Advances) Ltd [1990] FCA 520; (1990) 27 F.C.R. 388; Meredith v Palmcam Pty Ltd [2000] QCA 113; (2001) 1 Qd. R. 645 and Sunlouvre Pty Ltd v Juergen Huenerberg [2003] 2DC 439 (Robin DCJ).

[26] I allow the appeal and set aside the orders of His Honour Mr Herlihy S.M. dated 7 June 2004. I order that the appellant third defendant by 4 p.m. on 23 December 2004 file and serve an amended defence to the amended statement of claim filed on 22 April 2004 in default of which the plaintiff shall be entitled forthwith to enter judgment against the third defendant. I direct that in order to enter that judgment the amount properly due and owing may be proved by affidavit, on information and belief, of the solicitor for the plaintiff.

[27] I order that the respondent pay the appellant's costs of and incidental to this appeal to be agreed or assessed on the standard basis.