Paul Springthorpe trading as Atanaskovic Hartnell; v Australian Style Group Pty Ltd

District Court of NSW|2021-09-03

Solicitors: Plaintiff: Atanaskovic Hartnell House Defendants: Gadens File Number(s): 2019/00403329

The application before the court

The defendants, by Notice of Motion filed on 16 August 2021, seek orders setting aside default judgment entered on 5 August 2021 pursuant to Uniform Civil Procedure Rules 2005 (NSW) ("UCPR") r 36.16(2) and r 36.16(3A).
The judgment the subject of the application was entered by the Judicial Registrar pursuant to UCPR r 12.7, following a series of non-compliances by the defendants with orders previously made by the court, as well as two failures to appear.
The proceedings relate to legal costs the defendants incurred when they instructed the plaintiff, a legal firm. The legal firm is acting for itself, and I have accordingly referred to it as "the plaintiff" throughout this judgment.
I set out short reasons for the orders I made on 3 September 2021 setting aside the judgment, but on terms as to costs.

The orders breached by the defendants

These proceedings were commenced by statement of claim served on the first and second defendants on 9 January 2020 and on the third defendant on 20 January 2020.
The defendants conducted the proceedings in a dilatory fashion from the beginning. First, they failed to file a defence. After repeated complaints, including warning of an application for default judgment, a Notice of Motion was filed seeking default judgment on 3 June 2020. On 10 June 2020, the former solicitors for the defendants provided the defence, on the basis that the plaintiff consent to the default judgment being set aside. The plaintiff agreed to the setting aside of the judgment and did not seek costs.
Despite their delays in compliance, the defendants took a combative stance about the plaintiff's conduct of the matter. Indeed, the defendants' solicitors' letter of 10 June 2020 warned that "our client is considering whether Paul Springthorpe of your firm has breached his obligations in [sic] r 19.4 of the Legal Profession Uniform Law Australian Solicitors' Conduct Rules 2015". Given the defendants' delays and failure to respond to correspondence warning of the application, this assertion was uncalled for.
After judgment was set aside in June 2020, orders were made for the future conduct of the proceedings, including service of proposed categories of discovery, and the plaintiff filed a Reply on 21 August 2020. Once again, the defendants failed to respond to correspondence or to comply with the orders.
On 15 September 2020, the plaintiff filed an application seeking an order for the defendants to provide discovery. Once again, after further discussion between the parties, the plaintiff agreed to consent orders, which included dismissing the Notice of Motion listed on 2 October 2020 with no order as to costs.
The defendants continued to delay in relation to discovery. On 24 November 2020, the plaintiff sought an explanation of the delay, on the basis that if a satisfactory explanation was not given, the matter would have to be relisted. The failure to comply continued and, on 16 December 2020, the plaintiff warned that the matter would be relisted to deal with the defendants' non-compliance with the discovery orders.
It was in these circumstances that, on 17 December 2020, the plaintiff submitted an online court request seeking to revisit the matter for a status conference in light of the defendants' non-compliance with the orders made on 8 October 2020. On 8 February 2021, Judicial Registrar Howard asked the parties for proposed orders and submissions. The defendants did not consent to the plaintiff's proposed orders and sought a further extension of time until 6 April 2021 to provide their discovery.
On 11 March 2021, Judicial Registrar Howard made orders for the defendants to complete discovery by 16 April 2021 and for a settlement conference to be held by 23 April 2021. A further order was added to the effect that any further adjournment would have to be supported by an affidavit. This order is an indication of the court's concern at the defendants' continued delays.
A settlement conference proceeded on 21 April 2021, but the solicitors for the defendants did not attend. Instead, Mr Bolton appeared on his own behalf and on behalf of the other two defendants. This is significant, because the explanations proffered by Mr Bolton for being unable to conduct the litigation after his solicitors ceased to act for him on 28 May 2021 include a claim to the effect that he is a relatively unsophisticated litigant and dependant on his lawyers rather than able to conduct his affairs.
In the course of the settlement conference, Mr Bolton told the solicitors for the plaintiff that the defence filed on his behalf "isn't right" (affidavit of Mr Springthorpe, paragraph 91) and that he was going to instruct his solicitors to prepare an amended defence. This is also significant, because it shows a litigant able to control and understand litigation and pleadings.
The plaintiff's solicitors sought appropriate orders from the Online Court to ensure that the amended defence was provided expeditiously. Judicial Registrar Howard made orders for provision of the proposed amended defence on 3 May 2021: "1) Draft Defence to be served by 17/5/2021. 2) If consent not given to draft defence by 7/6/2021 an application to amend the defence to be filed and served by 11/6/2021 and returnable 25/6/2021. 3) Stood over CMLDH 25/6/2021 at 9.30am to follow motion. 4) Any further adjournment to be supported by an affidavit otherwise parties to make an OLC request for a hearing date."
This required the defendants to do the following: 1. Draft and serve the proposed amended defence by 17 May 2021. 2. If the proposed amended defence is not agreed to by the plaintiffs, the plaintiff would have to bring an application returnable for 25 June 2021 for leave to amend. 3. If a further adjournment was to be sought on 25 June, an affidavit would have to be provided to the court. 4. Finally, and most importantly, the defendants had to attend on 25 June 2021 to satisfy the Judicial Registrar that the steps set out in the orders he made had been complied with.
Although, on a date between 3 May 2021 and 28 May 2021, the defendants' former solicitors informed their clients of the Judicial Registrar's orders of 3 May 2021, not one of these steps was undertaken.
The defendants' former solicitors then filed a Notice of Ceasing to Act on 28 May 2021. That Notice nominated two addresses for the three addresses.
It is a requirement that any solicitor filing such a Notice should provide a copy to the former client and there is no reason to assume that this was not done. This is relevant, because the defendants assert that the addresses in the Notice of Ceasing to Act filed and served by his former solicitors were wrong.
Neither the Court nor the plaintiff was aware of there being any problem with the addresses provided in the Notice of Ceasing to Act. The Court acted promptly on this new address information and, on 31 May 2021, sent Notices of Listing to the three defendants at each of the two addresses indicated in this Notice. The solicitors for the plaintiff also wrote to these two addresses, and also to an email account used by the third defendant, setting out the orders that had been made.
None of the defendants were present in court on 25 June 2021. Given the fact that the defendants had been represented when this directions date was selected, and that the Court had sent notices to all defendants at the addresses indicated on the Notice of Ceasing to Act, this was of concern to Judicial Registrar Howard, who made orders as follows: "1) Stood over CMLDH 22/7/2021 at 9.30am. 2) Notices to issue to the defendants i) 4/112 Wellington Parade, East Melbourne VIC 3002. ii) 4/50 Fitzroy Street, St Kilda VIC 3782. 3) If no appearance on 22/7/2021, the defence filed 18/6/2020 to be struck out under r 12.7 UCPR."
Once again, contacting the defendants was not a task the court left up to the plaintiff. The court's Notice of Listing was sent to the defendants on 25 June 2021. The court sent notices to each of the following addresses: 1. First defendant: 4/112 Wellington Parade, East Melbourne VIC 3002 2. Second defendant: 4/112 Wellington Parade, East Melbourne VIC 3002 3. Third defendant: 4/50 Fitzroy Street, St Kilda VIC 3782
There was no appearance by any of the defendants on 22 July 2021 and the following orders were made by Judicial Registrar Howard: "1) Under rule 12.7 of the UCPR 2005, the Defence filed 18/6/202 is struck out. 2) Stood over CMLDH 2/9/2021 at 9.30am. 3) Liberty to submit a SMO and affidavit in support of judgment."
The letter to the third defendant sent by the court was later returned, marked "Return to sender" and "not known at this address" (received by the court on 22 July 2021). The letters to the first and second defendants were not returned. Ms Levi, who appeared for the plaintiff on 22 July 2021, told the court that the Judicial Registrar searched in the file for returned correspondence prior to making the orders, but was unable to find any. The likelihood is that these did not arrive in sufficient time to be placed in the file.
On 26 July 2021 the plaintiff sought default judgment, which was entered on 5 August 2021.
On 11 August 2021 Mr Springthorpe received a phone call from a Mr Harty of Gadens, who said that he was now acting for the defendants and proposed to seek the setting aside of the default judgment. He added that the supporting affidavit "will include a draft amended defence which was prepared by Bakers before they ceased to act" (affidavit of Mr Springthorpe, paragraph 107).
On 18 August 2021, the Notice of Motion the subject of this judgment was filed. Although the defendants were in default of the order of 3 May 2021 to serve a draft amended defence by 17 May 2021, the defence prepared by the defendants' former solicitors was not attached. This is relevant because, as is noted in National Parks and Wildlife Service v Pierson (2002) 55 NSWLR 315 at [19], an application under UCPR r 36.16 to set aside a dismissal under UCPR r 12.7 will rarely succeed if the plaintiff has not remedied a default which forms part of the dismissal.

The defendants' submissions

Mr Fielder, for the defendants, submits that the default judgment was entered in the absence of, and without notice to, the defendants, stating that the defendants "did not appear [on 25 June] as they were not made aware of the listing" (written submissions, paragraph 15). He points to the affidavit of Mr Bolton, which sets out that, had he been aware of the proceedings being listed, he would have "taken steps to ensure that a legal representative would be present" at both the 25 June and 22 July 2021 and "would not simply abandon [the intention to proceed] and ignore important correspondence" (affidavit of 2 September 2021).
Given that the plaintiff (and, for that matter, the court) addressed the correspondence to the addresses provided in the Notice of Ceasing to Act, how can such a submission be made? Mr Fielder argues that the plaintiff "failed to properly alert the defendants of their intention" to seek default judgment because the plaintiff did not take "sufficient or exhaustive steps to alert the defendants to matters which transpired in June and July 2021" (paragraph 29 of Mr Fielder's submissions).
The rationale behind this extraordinary submission is that the defendants (and, presumably, the court) should not have relied upon the addresses provided on his behalf by his former solicitors in the Notice of Ceasing to Act, even though those addresses had been used in other affidavit material and pleadings as well. The plaintiff had also sent an email to a personal address for the first defendant, but even this additional step is criticised, as Mr Bolton claims that this is an email address that he only rarely checked.
Other relevant explanations are asserted to be the lockdown which commenced in New South Wales on the evening of 25 June 2021 and the circumstances in which the former solicitors for the defendants were exercising a lien over the court file.
The defendants also submit that they have a bona fides defence on the merits (written submissions, paragraph 32). This was a difficult point to make in circumstances where an amended defence has been foreshadowed, but there has been failure to comply with orders to serve it. Fortunately, the amended defence was able to be produced during the application and no point as to its adequacy was taken by the plaintiff.

The plaintiff's submissions

Ms Levi pointed to the procedural history of non-compliance by the defendants. First, she submitted that explanations such as the impact of the lockdown and the former solicitors' lien could not satisfactorily explain a deliberate failure to attend court on 25 June 2021 where the defendants had been told by their former solicitors that the matter had been listed for directions on that date. Second, she submitted that the plaintiff (and the court) should be entitled to rely upon the correctness of the addresses set out in the Notice of Ceasing to Act, the source for which could only be the defendants themselves. Third, she submitted that Mr Bolton's claim that he had not resided at the Fitzroy address since 2012 was implausible, because: 1. This is the address provided in the Notice of Appearance filed on 24 February 2020; 2. This is the address provided in the affidavit verifying the defence as affirmed by Mr Bolton on 5 June 2020; 3. This is the address provided in the affidavit verifying the List of Documents verified by Mr Bolton on 16 April 2021; and 4. This is the address contained in an ASIC historical organisational search obtained by the plaintiff on 27 August 2021.
Ms Levi also challenged Mr Bolton's claim of being an inexperienced businessman dependent on his lawyers, pointing to his ability to represent himself at the settlement conference as well as his many years in business, in the course of which he had become familiar with the legal system and its processes.
Ms Levi noted that the impetus for the making of the order had come from the Judicial Registrar's dissatisfaction with the failure to attend, and submitted that the case management problems arising from the defendants' continued delays made the continued conduct of these proceedings not merely difficult but also potentially unfair. The defence raises complex questions of fact requiring extensive evidence and the ongoing delays were prejudicial to the plaintiff, as the two main witnesses to give evidence had retired from the legal profession in 2018.

Failure to conduct proceedings expeditiously

UCPR r 12.7 provides: "12.7 Dismissal of proceedings etc for want of due despatch (1) If a plaintiff does not prosecute the proceedings with due despatch, the court may order that the proceedings be dismissed or make such other order as the court thinks fit. (2) If the defendant does not conduct the defence with due despatch, the court may strike out the defence, either in whole or in part, or make such other order as the court thinks fit."
UCPR r 36.16 provides: "36.16 Further power to set aside or vary judgment or order (1) The court may set aside or vary a judgment or order if notice of motion for the setting aside or variation is filed before entry of the judgment or order. (2) The court may set aside or vary a judgment or order after it has been entered if - (a) it is a default judgment (other than a default judgment given in open court), or (b) it has been given or made in the absence of a party, whether or not the absent party had notice of the relevant hearing or of the application for the judgment or order, or (c) in the case of proceedings for possession of land, it has been given or made in the absence of a person whom the court has ordered to be added as a defendant, whether or not the absent person had notice of the relevant hearing or of the application for the judgment or order. (3) In addition to its powers under subrules (1) and (2), the court may set aside or vary any judgment or order except so far as it - (a) determines any claim for relief, or determines any question (whether of fact or law or both) arising on any claim for relief, or (b) dismisses proceedings, or dismisses proceedings so far as concerns the whole or any part of any claim for relief. (3A) If notice of motion for the setting aside or variation of a judgment or order is filed within 14 days after the judgment or order is entered, the court may determine the matter, and (if appropriate) set aside or vary the judgment or order under subrule (1), as if the judgment or order had not been entered. (3B) Within 14 days after a judgment or order is entered, the court may of its own motion set aside or vary the judgment or order as if the judgment or order had not been entered. (3C) Despite rule 1.12, the court may not extend the time limited by subrule (3A) or (3B). (4) Nothing in this rule affects any other power of the court to set aside or vary a judgment or order."
Where an order is made in the absence of a party, the question of the circumstances leading to that absence are relevant. However, where a party is aware that there are proceedings before the court but elects not to attend, courts are generally unsympathetic, and the defendants ignored the directions hearing date of 25 June 2021 at their peril: Michail v Mt Druitt and Community Area Legal Service Inc [2015] NSWCA 396.
Mr Fielder submits that steps should have been taken by the plaintiff to ensure that the addresses provided on the Notice of Ceasing to Act were correct. However, UCPR r 4.5 places the onus for providing a proper address squarely upon the litigant(s) providing those addresses. This is to ensure litigants cannot misuse the court's process by hiding their true place of residence: Troiano v Voci [2019] VSC 859; Kostov v Zhang; Kostov v Fairfax Media Publications Pty Ltd [2017] NSWDC 7; Aboriginal Group Training (WA) v PEEDAC Pty Ltd [2004] WASC 51; Sheen v Burke [1993] 1 VR 584.
I am satisfied that the defendants were on notice that the proceedings were in court on 25 June 2021 and did in fact receive correspondence from the court as well as from the plaintiff to this effect. The address with which Mr Bolton claims to have no association was listed as current in ASIC documentation only days ago. As for the second and third defendants, what responsible accountant fails to open a series of letters to his clients contained in an envelope marked "District Court of New South Wales"?
The defendants have been very foolish. Despite being told by their former solicitors that these proceedings were listed for directions on 25 June 2021, they took the risk of not showing up. Despite their obligations to the court, they either failed to provide proper addresses for service or, worse, have been less than frank with the court about whether the addresses provided by their former solicitors in the Notice of Ceasing to Act are correct. The Judicial Registrar's action in striking out the defence in those circumstances is entirely understandable.
However, it would be very harsh penalty for the defendants to suffer the loss of their entitlement to defend the proceedings by reason of that foolishness. Despite the defendants' delay, as a result of the efficiency of the plaintiff, the proceedings are otherwise close to readiness for hearing. A substantial sum of money is involved. The delay in question is of a very short nature and the prejudice to the plaintiff can be remedied by an appropriate costs order.
The dictates of justice and the balancing exercise set out in section 56 of the Civil Procedure Act 2005 (NSW) require that the defendants be given a final opportunity, subject to appropriate costs orders, to continue to defend these proceedings.

The appropriate costs order

Ms Levi indicated that her client seeks only payment of the disbursements incurred in the application, which total $3,151.00. That is an eminently reasonable sum in the circumstances. I propose to make a gross sum costs order for this amount pursuant to s 98(4) of the Civil Procedure Act 2005.
This sum should, in my view, be paid forthwith, conformably with UCPR r 42.7, by reason of the defendants' unsatisfactorily explained failure to attend court on 25 June and 22 July 2021 despite knowing the proceedings were listed and their implausible claims about the accuracy of the addresses in their own solicitors' Notice of Ceasing to Act: Fiduciary Ltd v Morningstar Research Pty Ltd (2012) 55 NSWLR 1. Parties have obligations not only to each other but also to the court, and the requirement to provide a genuine address for service of court documents is a fundamental part of those obligations.

Order: 1. Order that, on the condition that the defendants file their amended defence by 7 September 2021, the default judgment entered on 6 August 2021 be set aside pursuant to rule 36.16(2) and 36.16(3A) of the Uniform Civil Procedure Rules 2005 (NSW). 2. Order that the plaintiff files a reply to the amended defence by 20 September 2021. 3. List the matter for directions before the Judicial Registrar on 23 September 2021. 4. Order that the defendants pay the plaintiff's costs thrown away in relation to the default judgment and the Notice of Motion as a gross sum costs order in the amount of $3,151.00.

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: 10 September 2021

Civil Procedure Rules 2005(NSW)

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