Mark AC Enterprises Pty Ltd v Done Diesel Pty Ltd [2012] QDC 229

Carr v Finance Corporation of Australia Ltd [1981] HCA 20; (1981) 147 CLR 246

FCA Finance Pty Ltd v Spartan Holdings Pty Ltd [1989] 1 Qd R 280

Gallagher v Boylan [2012] QCA 159

National Mutual Life Association of Australasia Ltd v Oasis Development Pty Ltd [1983] 2 Qd R 441

Mr M. Campbell of Counsel instructed by Corser Sheldon and Gordon, Solicitors for the Appellant/Applicant

Ms T.A. McGarvie, Solicitor of Suthers Lawyers for the Respondent/Defendant

[1] This proceeding is concerned with an appeal against the decision of the learned Magistrate below not to set aside a default judgment regularly entered against the appellant on 5 December 2011. For the reasons set out below the orders of the Court are:

3. The decision of the Magistrates Court at Maryborough dated 5 December 2011 is set aside.

4. That judgment by default dated 9 August 2011 be set aside pursuant to r 290 of the Uniform Civil Procedure Rules 1999.

5. I will hear from the parties as to costs and any other consequential orders if required.

[2] The respondent commenced proceedings against the appellant suing it for money alleged to be owed by the appellant for repair works carried out by the respondent at the appellant's request. The repair works were to drilling equipment owned and operated by the appellant.

[3] On 27 June 2011 the respondent filed its statement of claim in the Magistrates Court at Maryborough. It was served on the appellant on 8 July 2011.

[4] There being no notice of intention to defend filed within the prescribed time limits the respondent sought and was granted default judgment on 9 August 2011.

[5] On 29 August 2012, the appellant filed its application to have the judgment set aside. In support of that application the appellant relied on an affidavit of a Mr David Hinton who was the appellant's solicitor. Mr Hinton set out the reasons why the notice of intention to defend and defence was not filed and served until 9 August 2011, the same date default judgment was entered. In paragraph 15 of his affidavit Mr Hinton deposed:

"Based upon the instructions provided by the defendant I believe the defendant has a prima facie defence to the plaintiff's claim, as well as a prima facie counter-claim against the plaintiff. In summary the defendant's allegations are that the work performed by the plaintiff was negligent and/or did not provide the outcome promised by the plaintiff, as a consequence of which the defendant has suffered significant loss and damage. Exhibited hereto marked 'DJH4' is a true copy of the proposed defence and counter-claim which I confirm has been prepared based on instructions provided by the defendant."

[6] At the hearing of the application to set aside the judgment on 5 September 2011 it was not disputed that judgment had been regularly entered on 9 August 2011. However, Ms McGarvie, solicitor for the respondent, took the point that the affidavit of Mr Hinton could not assist the appellant's case as he was in no position to depose to the facts and circumstances alleged in the proposed defence and counter-claim. At page 7 of the transcript of that hearing the following exchange took place between the learned Magistrate and Mr Hinton:

"Bench: I guess, can we distinguish though the matter between receiving instructions and attesting to a matter with full foundation of the knowledge is an absence...

Mr Hinton: Well, in my submission, it's open to Your Honour to - to make that finding. Yes

Bench: Yes. But why not - if - if it be able to be substantiated, have Mark Crouse [sic] complete an affidavit and lodge it with the - with the Court?

Mr Hinton: Well, it certainly was possible, Your Honour. As I said, I - the - the only reason it wasn't done that way was because we hadn't already attempted to file the affidavit in the first place.

Bench: My own opinion is that it falls far short of what required under the established principles, in which case the application would probably fail in relation to the affidavit material relied upon to show there is - a merit - a merit defence to the claim. What you might seek to - to bring by way of separate claim is another matter. But, clearly, what I have before me, the affidavit material indicates a regularly entered judgment and a - a failure to provide sufficient information in an appropriate form that there is good defence on its merits. I'm - I'm happy to hear anything further you want to put, but what I've got before me falls far short of what's required to set aside the regularly entered judgment."

[7] In my respectful opinion, what Mr Hinton should have done upon the earlier indication of the learned Magistrate was to ask that the matter be adjourned to allow appropriate affidavit material to be filed in support of the appellant's application. Unfortunately that was not done.

[8] A second application was made by the appellant to have the regularly entered default judgment set aside. On the second occasion an affidavit was sworn by a Mark Crowson who was a previous director of the appellant and its drilling advisor. It was not contested before me that Mr Crowson was not in a position to swear up the proposed defence and counter-claim.

[9] On 5 December 2011 the same learned Magistrate dismissed the second application. During that hearing His Honour relevantly said:

"....I accept the submission made by Ms McGarvie. Clearly it was open to the applicant on the 5th of September to make an appropriate application. I just can't see any change in the circumstances or change in argument and, accordingly, I must rule the same way as I did on the 5th of September. That is the application to set aside the judgment by default of 9th of August 2011 is formally dismissed."

[10] In my respectful opinion His Honour erred in concluding that in the second application there had been no change in circumstance or argument. The affidavit of Mr Crowson swearing to the proposed defence and counter-claim was a material change in circumstance founding an entirely different argument in support of the application to set the judgment aside. It would appear, although it was not expressly stated, that His Honour took the view that it was not open for the appellant to bring a second application when the matter could have been properly dealt with on the first occasion.

[11] As I have said it was not contended on behalf of the respondent that Mr Crowson's affidavit was not capable of supporting the proposed defence and counter-claim. Nor was it argued that the draft defence and counter-claim supported by the affidavit of Mr Crowson did not raise at least an arguable defence on the merits. Instead it was contended on behalf of the respondent that the appeal should be dismissed because: first; that the decision of the learned Magistrate to dismiss the application was not able to be interfered with pursuant to s 43 of the Magistrates Court Act 1921, subject only to rights of appeal which were not exercised by the respondent. And, second, by virtue of the operation of s 45 of the Magistrates Court Act the appeal could only proceed with the leave of the Court and there was no sound basis for granting leave in this case.

[12] Dealing with the first of those matters, s 43 provides:

(1) Subject to this Act, all judgments and orders made by a Magistrates Court shall be final and conclusive.

(2) Except as provided by this Act, or by or pursuant to any other Act now in force or hereafter to be passed, a judgment given by a Magistrates Court, or an action brought before it or depending therein, shall not be removed by appeal, motion, writ of error or certiorari, or otherwise into any other court."

[13] Section 43 does not, in my view, operate in the manner contended for on behalf of the respondent. The subject proceeding was an interlocutory one. This not a case where judgment has been given and orders made following a hearing of the substantive merits of the case. If s 43 operated in the manner contended for on behalf of the respondent it would defeat the specific relief provided for pursuant to r 290 of the Uniform Civil Procedure Rules 1999 (UCPR) which provides:

"The Court may set aside or amend a judgment by default under this division, and any enforcement of it, on terms, including terms about costs and the giving of security, the Court considers appropriate."

[14] Turning to the second limb of the respondent's argument, s 45 of the Magistrates Court Act relevantly provides:

(1) Subject to this Act, any party who is dissatisfied with the judgment or order of a Magistrates Court -

(a) in an action in which the amount involved is more than the minor civil dispute limit; or

(b) in an action for the recovery of possession of land if -

(c) in proceedings in interpleader in which the amount claimed or the value of the goods in question is more than the minor civil dispute limit; or

may appeal to the District Court as prescribed by the rules.

(a) where in any of the cases above referred to in subsection (1) the amount is not more than the minor civil dispute limit, an appeal shall lie by leave of the District Court or a District Court judge, who shall not grant such leave to appeal unless the court or judge is satisfied that some important principle of law or justice is involved;

(b) an appeal shall not lie from the decision of the Magistrates Court if, before the decision is pronounced, both parties agree, in writing signed by themselves or their lawyers or agents, that the decision of the court shall be final." (emphasis added)

[15] Pursuant to ss (5) of s 45 the minor civil dispute limit means the amount that is, for the time being, the prescribed amount under the Queensland Civil and Administrative Tribunal Act 2009 (Qld). It was uncontroversial in this appeal that at all material times that limit was $25,000.

[16] According to Mr Campbell that limit was exceeded because the combined total of the respondent's claim and the appellants counter-claim exceeded $25,000. Ms McGarvie, submitted that in the context of this appeal it was only the amount pleaded in the respondent's claim that was relevant.

[17] On balance I consider Ms McGarvie is correct. At this stage of proceedings the only action on foot is that of the respondent and the quantum involved there is considerably less than $25,000. As Mr Campbell acknowledged the entering of a default judgment does not prevent his client filing and prosecuting its claim against the respondent. But that is a separate matter and involves a proceeding which has not yet been commenced.

[18] At this stage the relevant action for the purposes of s 45 involves an amount of less than the relevant limit and, accordingly, leave of the Court is required.

[19] In American Express International Inc v Hewitt,[1] it was considered that an important principle of justice required that there be a question going beyond the consequences of the decision upon the immediate parties to the action or matter. This appeal involves two significant questions of law: first, whether a second application to set aside a regularly entered default judgment can be made pursuant to r 290 of the UCPR and, second, whether a defendant who has an arguable defence on the merits ought be denied the opportunity to defend the case alleged against it. While the second question may arguably be properly described as a consequence as between the immediate parties the first issue is of broader import. On balance I am satisfied that in this appeal an important principle of law or justice is involved.

[20] It is well established that "it is not often that a defendant who has an apparently good ground of defence would be refused the opportunity of defending provided that no irreparable prejudice is thereby done to the plaintiff".[2]

[21] This case involves no extensive delay on the part of the respondent and explanation for the delays has been given. Further, it is uncontroversial that the proposed defence and counter-claim raises at least an arguable defence to the respondent's claim and it was not contended before me that to set aside the default judgment at this stage would cause any material (let alone irreparable) prejudice to the respondent. Prima facie then the default judgment ought to have been set aside.

[22] Rule 290 of the UCPR neither expressly provides for nor prohibits the bringing of a second application. Rule 290 is remedial in character and that is a relevant consideration in determining its operation. It is also of course significant that even upon the entering of a regularly entered default judgment there has been no final determination of the merits of the case.

[23] As I have already stated, this appeal is not concerned about interfering with final orders made after a full hearing of the merits. While no authorities on point were referred to me during argument it seems tolerably clear to me that there is no bar to bringing a second application to set aside a regularly entered default judgment and that the court has a general discretion to entertain a second and subsequent application.

[24] In Carr v Finance Corporation of Australia Limited[3] Mason J (as he then was) relevantly said:

"[...] . However, it is said that there is a generally accepted principle that the refusal of an application to set aside a default judgment is not a bar to the making of a fresh application. Two cases appear to support that proposition.

The first is the Court of Appeal decision in Atwood v Chichester (1878) 3 QBD 722 where the point was assumed, for it was not discussed. There a wife, having a separate estate without power of anticipation, was sued for a debt contracted during coverture, the action then not being maintainable under the existing law. After an earlier application by the wife to set aside a default judgment had failed, she made another application which ultimately succeeded in the Court of Appeal. It was not suggested in the judgments that the earlier refusal could constitute a bar. The report does not identify the grounds of that refusal.

The second case is Hewitt v Mirror Newspapers Ltd (1977) 17 ACTR 1, where an interlocutory judgment in a defamation action was obtained. The defendant applied to set aside the judgment. The application was refused on the ground that no proper affidavit of merits had been filed. A second application was made, based on a proper affidavit of merits and this succeeded. Connor J followed Atwood v Chichester, taking the view that three members of this court in Hall v Nominal Defendant [1966] HCA 36; (1966) 117 CLR 423 had endorsed it. In that case the court by majority held that the refusal of an application for extension of time within which to commence an action against Nominal Defendant under the Traffic Act 1923 (Tas) was not a final order, but Barwick CJ, dissenting, considered that there was no right to make a second application either by reason of a construction of the statute, 'or by reason of the estoppels arising from a refusal of an application to extend the time'. His Honour distinguished the case from setting aside a default judgment saying (at 429):

'The matter, it seems to me is quite different from the case of successive applications for extensions of time for the taking of a step in an action or for setting aside a default judgment in an action. In these cases, the matter is under the control of and generally within the discretion of the court in which the action is brought' ..."[4]

[25] In FCA Finance Pty Ltd v Spartan Holdings Pty Ltd[5] Thomas J (as he then was) considered that the court had a general discretion to entertain a second and subsequent application for a summary judgment when a plaintiff had failed on an initial application.

[26] That the court retains a general discretion to allow a second and subsequent application to set aside interlocutory orders concerning judgment by default and summary judgment does not necessarily mean however that the second application should succeed. In FCA Finance (which was concerned with the then rules of the Supreme Court Order 18) Thomas J said:[6]

"I would summarise my conclusions thus: courts have a general discretion to entertain second and subsequent applications for summary judgment when a plaintiff has failed on an initial application. The criteria for exercise of the discretion are not limited to those in O18 r 1(5). The present case does not fall within O18 r 1(5). The omission to tender available evidence of the second guarantee was not a formal defect in the evidence; it was a defect in substance. I interpret the words 'formal defects in the evidence' [the words used in RSC O18 r 1(5)] as referring to defects which result from technical error. Familiar examples would include the failure to swear 'in my belief there is no defence to the action', or a failure to swear that an appearance had been entered, or a failure to disclose in sufficient detail the source of a deponent's knowledge if he is deposing from hearsay under O41 r 3. This is by no means a complete list, but those are the types of formal defects in evidence which are covered by sub rule 5. Such words plainly do not cover a defect of proof of one of the essential documents upon which a plaintiff must rely in establishing his debt. There are no other circumstances that justify exercise of the discretion in favour of the applicant. Indeed, to accede to this application would be to encourage the bringing of successive claims where the real need for the second claim arises from a lack of preparation of the plaintiff on a matter of substance."

[27] In this case the initial application failed by reason of what could only be reasonably described as a lack of proper preparation on a matter of substance. However, in my respectful opinion, cases concerned with dealing with a second application for summary judgment can be materially distinguished from those dealing with a second application to set aside a default judgment. In the former case the plaintiff is not prevented from prosecuting his case at trial. In the latter the defendant is deprived of the opportunity to defend the case against it on the merits.

[28] On balance, in circumstances where there has been no suggestion that the draft defence and counterclaim does not raise an arguable defence and there is no suggestion of any mala fides on the part of the appellant or abuse of process and where no material prejudice would be suffered by the respondent, I have concluded that the learned Magistrate below erred in not hearing the second application. It also seems to me that there would be no good purpose served by referring the matter back to the Magistrates Court. The matter was fully argued before me and all the relevant documentation produced. After hearing the arguments presented I am satisfied that the default judgment entered on 9 August 2011 should be set aside.

3. The decision of the Magistrates Court at Maryborough dated 5 December 2011 is set aside.

4. That judgment by default dated 9 August 2011 be set aside pursuant to r 290 of the Uniform Civil Procedure Rules 1999.

5. I will hear from the parties as to costs and any other consequential orders if required.

[1] [1992] QCA 107; (1993) 2 Qd R 352.

[2] National Mutual Life Association of Australasia Ltd v Oasis Developments Pty Ltd [1983] 2 Qd R 441 at 449 per McPherson J (as he then was).

[3] [1981] HCA 20; (1981) 147 CLR 246: cited in Gallagher v Boylan (2012) QCA 159 at [16].

[4] See also Gallagher v Boylan [2012] QCA 159 at [16].

[5] [1989] 1 Qd R 280.