Portcam Pty Ltd trading as Edge Residential Real Estate v Mervyn Keane

The Power to Set Aside a Default Judgment

1. There are two relevant provisions in the Uniform Civil Procedure Rules 2005 ('UCPR') which, the Applicant submits, permit the Court to set aside a default judgment.
2. The first, UCPR 36.15(1), is relied upon by the Applicant in circumstances where the Court might find that the failure to attach the SEPA Form 1 notice would render the judgment as having been irregularly obtained. That rule provides as follows: 36.15 General power to set aside judgment or order (1) A judgment or order of the court in any proceedings may, on sufficient cause being shown, be set aside by order of the court if the judgment was given or entered, or the order was made, irregularly, illegally or against good faith.
3. The second relevant provision is UCPR 36.16(2)(a), and is relied upon by the Applicant in the event that, having rejected the argument relating to the Form 1, the Court still finds that the judgment should be set aside due to the merits of the case and consideration of the overriding purpose. That rule states: 36.16 Further power to set aside or vary 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 …

Service and Execution of Process Act 1992 (Cth)

1. SEPA, the principle legislation dealing with the interstate service of legal process and the enforcement (or execution) of Court orders outside the State or Territory in which they are made, permits for initiating processes to be served interstate, so long as they comply with certain requirements.
2. Section 15 provides: 15 Initiating process may be served in any part of Australia (1) An initiating process issued in a State may be served in another State. (2) Service on an individual must be effected in the same way as service of such an initiating process in the place of issue. …
3. Section 16 qualifies that service is "effective only if copies of such notices as are prescribed are attached to the process, or the copy of the process, served".
4. The disputed Form 1 document is prefaced with a notice, which reads as follows: Note: This form is to be used when serving an initiating process in civil proceedings in a court: see section 16 of the Act.
5. Importantly, section 8 of SEPA provides guidance as to the interaction of the legislation with any orders for substituted service: Effect on the operation of other laws (1) This Act does not affect a decision of a court or tribunal to allow substituted service of a process. …

Substituted Service

1. UCPR 10.20(2) requires that, unless otherwise provided for by the Rules, an originating process must be served in person.
2. The relevant provision which allows for substituted service is UCPR 10.14, which provides as follows: 10.14 Substituted and informal service generally (1) If a document that is required or permitted to be served on a person in connection with any proceedings - (a) cannot practicably be served on the person, or (b) cannot practicably be served on the person in the manner provided by law, the court may, by order, direct that, instead of service, such steps be taken as are specified in the order for the purpose of bringing the document to the notice of the person concerned.

Chronology

1. In order to best understand the relevant series of events which have led to this application being made, it is helpful to set them out as a chronology. I do so as follows: Date Event 22 October 2020 The Respondent emailed the Applicant a copy of the agency agreement for the sale of 31 Elinya Lane Davistown NSW 2251. The exclusive agency period is listed as commencing 22 October 2020 and concluding 22 March 2021. On or about 31 October 2020 The Applicant returned a signed copy the agency agreement, dated 31 October 2020. 21 December 2020 The Applicant emailed the Respondent's reception address purporting to give notice of termination of the agency agreement, however the Respondent estate agent did not receive any notice until she returned from holidays on 4 January 2021. 30 December 2020 The Applicant provided further written notice to the Respondent seeking to terminate the agency agreement. 4 January 2021 Having returned from leave, the Respondent receives and responds to the Applicant's purported written notice of termination, advising that the request to terminate is rejected. 28 January 2021 Applicant sends additional letter to Respondent requesting termination of the agency agreement, stating "I have been asking for this release since Christmas". The Respondent contends that this is the first proper written notice to terminate, operative from 27 February 2021. 5 February 2021 Contracts exchanged for the sale of 31 Elinya Lane Davistown. 11 February 2021 The Respondent is informed that the Applicant's property was sold by Paula Taylor, from The Agency Sales NSW Pty Ltd, for a sum of $1,500,000.00, and that a commission of $33,000.00 was paid to The Agency. 23 February 2021 Sale of 31 Elinya Lane Davistown settles. 26 February 2021 Applicant received a letter by the Respondent's solicitor, Ms Ceu Felicio, advising of breach of agreement and requesting that outstanding commission of $30,000 be paid within 7 days, or else a statement of claim will be issued. 8 March 2021 Applicant replied to Ms Felicio by email, advising that he was 'misled' by the Respondent and rejects the assertions made by the Respondent. 27 April 2021 Statement of Claim filed by the Respondent at Gosford District Court registry. 2 June 2021 Motion for substituted service filed. Orders made by Registrar Steptoe allowing for substituted service: 3 June 2021 • by ordinary pre-paid post to 403/13 Lynne Avenue, Point Frederick; and • by email to 'murvking@gmail.com'. 4 June 2021 Respondent's solicitor emailed Applicant attaching a copy of the statement of claim. 7 June 2021 Applicant received and opened email of 4 June 2021 attaching the statement of claim, however instead of responding he contacted 'The Agency' real estate agents and began to make enquiries to obtain a solicitor. 9 July 2021 Applicant filed a notice of motion seeking that the proceedings be transferred to Albury District Court. 14 July 2021 Respondent filed a notice of motion seeking default judgment. 16 July 2021 Default judgment entered in favour of the Respondent for the sum of $31,987.22.

Applicant Submissions

1. In oral submissions, counsel for the Applicant made reference to s 15 of SEPA in submitting that, as the Applicant normally resides in Victoria, the Court's jurisdiction is not properly engaged, for want of compliance with the appropriate procedures of that Act (i.e attaching a Form 1 notice).
2. Counsel for the Applicant further submitted that while the Court may have made orders permitting substituted service, the Respondent was still required to attach a Form 1 document to the initiating process. The South Australian matter of Johns v Johns [2012] SASC 147 was referenced in support of this submission, where Lunn J was said to have observed that there is "no necessary inconsistency" between sections 8 and 16 of SEPA. On this basis, it was submitted that orders for substituted service do not prima facie dispense with the need for compliance with SEPA, and that the Respondent's failure to attach said notice therefore falls foul of that authority.
3. Counsel for the Applicant pointed to further authorities which held that such failure to submit an appropriate Form 1 notice could be held as undermining the authority of the judgment, or otherwise be considered as an irregularity. In particular, the matter of Carron Investments Pty Ltd v George Lang and Anor [2016] VSCA 287 was highlighted to support the submission that a Form 1 notice is vital in circumstances where SEPA is relied upon, and therefore it "cannot be sidelined as effectively a mere technicality". It was further submitted that such an irregularity might fall within the meaning of UCPR 36.15(1), thereby attracting the remedy of having the default judgment set aside.
4. Counsel further submitted that, in the event that the irregularity argument was not made out, the Court retained the discretion to set the judgment aside under UCPR 36.16(2)(a) for 3 reasons, all of which were said to assist in giving effect to the overriding purpose, as stated in s 56(1) of the Civil Procedure Act 2005 (NSW).
5. First, counsel for the Applicant contended that even if the failure to attach the Form 1 notice did not compel the judgment being set aside, it did constitute a strong discretionary factor justifying doing so, insofar as it would have provided the Applicant with an opportunity to respond to the material in the statement of claim. The difficulty with this submission is that the Applicant did in fact take action upon receipt of the statement of claim.
6. Counsel's second submission was that, in defaulting by less than a week, no material prejudice was caused by the Applicant to the Respondent. In those circumstances, coupled with the fact that the Respondent did not give notice to the Applicant of the intention to seek default judgment, the Court ought to set aside the default judgment as a matter of fairness. In oral submissions, counsel clarified that this argument was not put on the basis that default judgment was obtained in bad faith. Instead, it was submitted that, in circumstances where the Respondent "gets substituted service as a departure from the ordinary process of service [and] served their process on an address which is … known not to be the address of the defendant", and then obtains default judgment only a few days after they were entitled to do so, without any further notice to the Applicant, the Applicant is entitled to apply to have it set aside. It was submitted that, given the Respondent's obligation to comply with the overriding purpose, as identified in s 56 of the Civil Procedure Act 2005 (NSW), the Respondent ought to have given notice to the Applicant prior to obtaining default judgment, so as to avoid the inevitable future costs incurred through any application to have it set aside. It should be observed that the Rules do not require an application for default judgment to be served on a defendant and permit such an application to be dealt with in that party's absence (UCPR 16.3(1A)).
7. The third point relied upon to support enlivening the Court's discretion was that the Applicant "clearly has an arguable defence on the merits". To support this submission, counsel pointed to the apparent issues of fact as to the various correspondence between the parties, as well as the contents of the contracts relied upon by the Respondent. A particular aspect of this contended defence was that a signed copy of the property sale agreement was not provided by the Respondent to the Applicant within 48 hours, as required by s 55(1)(b) of the Property and Stock Agents Act 2002 (NSW). The applicant failed to tender any evidence to make good this submission.
8. In oral submissions it was conceded by counsel that, despite the orders for substituted service misspelling the Applicant's email address, the statement of claim was sent to the Applicant's correct email address on 4 June 2021, and was opened by the Applicant on 7 June 2021.

Respondent Submissions

1. In written submissions, counsel for the Respondent conceded that there is authority that the service of a District Court statement of claim must be effected in accordance with SEPA, however, pointed to an apparent inconsistency between this authority, s 47 and s 161 of the District Court Act 1973 (NSW), the latter of which provides that rules which are inconsistent with the UCPR are not to be made, unless a specific provision permits for it. It was submitted that, as there is no specific reference in the District Court Act or the UCPR, then the relevant UCPR provisions ought to be adopted as to service.
2. Further, counsel pointed to UCPR 10.14, which allows for substituted service at the discretion of the Court. Counsel submitted, on the bases that an order for substituted service was made on 3 June 2021 (which did not require service under SEPA), of which order no review was sought by the Applicant, and that it is an accepted fact that the Applicant received and opened a copy of the statement of claim via email on 7 June 2021, evidencing that the statement of claim was served properly.
3. In addressing the authority raised by the Applicant, being Johns v Johns, counsel for the Respondent submitted that the decision "was not discussing whether it was necessary to have a Form 1 in circumstances where the order for substituted service had not included a s 16 SEPA notice", though acknowledged that the decision appears to hold that no advantage should be gained by a plaintiff not attaching a Form 1 notice by having an order for substituted service.
4. Counsel conceded that, if the order for substituted service was not in accordance with the UCPR (insofar as it was not in accordance with SEPA), then the judgment was indeed "irregularly made". However, it was submitted that, as the UCPR is an alternative means of service, including the rules for substituted service, compliance with SEPA was not necessary.
5. Even if it was held that failing to attach a Form 1 notice constituted a breach of the UCPR and SEPA, UCPR 36.15(1) provides the Court with a discretion, rather than an obligation, to set aside the judgment, it was submitted. On that basis, counsel contended that as the Respondent's neglect in attaching a Form 1 notice was not suggested to be unlawful or in bad faith, and that the Applicant obtained legal advice and sought a change of venue in any event, there is no real basis upon which the discretion should be exercised.
6. Turning to the Court's discretion under UCPR 36.16(2)(a), counsel for the Respondent submitted that when considering the full circumstances leading to this application, the Court would find insufficient evidence to justify the default judgment being set aside. In support of this proposition, counsel for the Respondent highlighted a number of relevant considerations.
7. It was firstly submitted that, as there is no sworn affidavit evidence tendered by the Applicant himself, it cannot be said that there is compelling evidence which demonstrates a defence on the merits. It was further submitted that submissions by counsel for the Applicant from the bar table do not constitute evidence, and should not be considered, particularly when contrasted against the sworn and unchallenged evidence from the Respondent. As to counsel for the Applicant's written submission that "the affidavit evidence raises a real issue of fact as to the attachments to the email sent on behalf of the plaintiff on 22 October 2020", counsel for the Respondent observed that "no specific affidavit is referred to and it is insufficient as a submission from the Bar Table".
8. Further, counsel contended that the Respondent had "more than adequately" warned the Applicant of her intention to commence proceedings, as well as engage the Court's processes to determine the dispute, however the Applicant failed to acknowledge those processes. Indeed, counsel for the Respondent referred to a general procedural chronology which, in his submission, demonstrated the Applicant (including through his legal representatives) wilfully ignoring and evading attempts to be contacted by the Respondent in order to commence proceedings.
9. Broadly supporting its submissions, counsel for the Respondent stated: In general terms, service requirements cannot and should not be used as a shield, technicality or delaying tactic to prevent the Court exercising its jurisdictional obligations of determining disputes for which they have legal authority.
10. Counsel finalised his written submissions by observing that there were no written or oral submissions made in support of any application to change the venue, and that, in respect of costs, these ought to follow the event.

Consideration

1. In order to determine this matter, it is useful to separate the arguments into 3 key issues. I do so as follows.

Was Service Effected?

1. A primary question in this dispute is, in fact, a simple factual matter.
2. While there was some debate as to whether the Applicant received a copy of the statement of claim through various channels of correspondence, it was ultimately conceded by his counsel that, by way of email on 4 June 2021, the Applicant was sent the statement of claim, and this was opened on 7 June 2021.
3. As to the various surrounding submissions relating to this issue, I accept counsel for the Respondent's submission that, having received and opened the originating process on 7 June 2021, the Applicant was put on notice as to the claim being brought against him.

Was Service Compliant with the Law?

1. Both parties submitted as to the application of SEPA and, particularly, the consequences of failing to attach a Form 1 notice, as contemplated by Schedule 1 of that Act.
2. Relevantly, SEPA establishes "a cooperative scheme for the service and execution of process and the enforcement of judgments between States and Territories" [1] .
3. As I have stated previously, the legislation mandates that any originating process which is served in another State is only effective if it complies with applicable SEPA provisions. In the instance of serving an originating process, this includes attaching the relevant Form 1 notice.
4. However, as section 8 of the Act provides that SEPA does not impact upon a Court's power to allow for substituted service, it is then necessary to consider the orders made by the Registrar of Gosford District Court on 3 June 2021. Made pursuant to UCPR 10.20, these orders are as follows: Notice of Motion for substituted service granted as follows: That the Plaintiff serves by way of ordinary pre-paid post, a copy of the Statement of Claim filed 27 April 2021 to the residential address of the defendant, Mervyn Keane, namely 403/13 Lynne Avenue, Point Frederick. Such service deemed to be effective 7 days from positing of same; That the Plaintiff, by way of electronic means, serves the defendant, Mervyn Keane, with a copy of the Statement of Claim filed 27 April 2021 at murvking@gmail.com. In accordance with Order 1, the Statement of Claim is deemed served 7 days after the sending of the email; That the Plaintiff, with respect both orders 1 and 2 include a copy of the Notice of Motion and accompanying affidavit, together with the orders of the Court with respect substituted service; I decline to make a substituted service order for Torq Murray, Solicitor.
5. It is clear that these orders for substituted service contemplated a postal address within New South Wales (as well as by way of email). There is no reference to compliance with the SEPA processes in the orders for substituted service. In my view, the orders made on 3 June 2021 dispensed with the need for the Respondent to comply with the SEPA requirements when serving the originating process upon the Applicant.
6. As I have already observed, it is accepted by both parties that on 7 June 2021 the Applicant opened and read the statement of claim, having viewed it as an attachment to the email to him from Ceu Felicio dated 4 June 2021 at 4:03pm. While the orders of 3 June 2021 nominated an incorrect email address, being 'murvking@gmail.com', the email from Ms Felicio was ultimately sent to the correct email address of the Applicant.
7. It is therefore apparent that the Applicant received the originating process via that email, in accordance with the orders for substituted service. As the service effected by the Respondent was done so in accordance with the Registrar's orders, and no complaint was made by the Applicant in respect of same under UCPR 49.19, I find that the originating process was served in compliance with them. Further, as the orders for substituted service made no reference to compliance with SEPA, it was not necessary that they enclosed a Form 1 notice in order to be valid. The originating process was served by email and also by post within the State of New South Wales.
8. In any event, it is relevant to consider the contents of the Form 1 notice found in SEPA. In short compass, the notice does the following: 1. it directs a reader to obtain legal advice if they are uncertain of the contents of the originating process; 2. it advises the reader that they may make an application to have the proceedings stayed or transferred to a court in another State or Territory if they believe another court may be more appropriate; and 3. it advises the reader that, in the event that they wish to contest the claim, they must file an appearance, and otherwise take any action set out in the attached process "as being necessary to contest the claim".
9. I observe that, having received the statement of claim by way of email on 4 June 2021, the Applicant began making enquiries in order to find legal representation, with instructions ultimately being provided to a solicitor in Albury on 2 July 2021. On 9 July 2021 an application was filed by the Plaintiff's former solicitor, Rod Pogson, seeking to have the proceedings transferred to Albury District Court.
10. It is apparent that, despite a Form 1 notice not being attached to the originating process, the Applicant was perfectly able to exercise his rights in accordance with the guidance that the Form 1 notice would have provided. In his written submissions, Counsel for the Applicant stated: no explanation has been proffered as to why the plaintiff attempted service at a New South Wales address and relied upon difficulties in service there in support of orders for substituted service to the same New South Wales address. Had the Plaintiff arranged for service in Victoria, it would no doubt have appreciated the need to give the defendant notice of his rights to apply for a transfer of proceedings and the need to obtain legal advice promptly.
11. When one considers the actions that were in fact taken by the Applicant after opening the statement of claim on 7 June 2021, it is difficult to see what practical difference an attached Form 1 notice would have made. While it does appear that there were some delays between the Applicant receiving the originating process and ultimately finalising instructions to a solicitor, these appear to largely be of his own doing, and are no fault of the Respondent.
12. As to the authority relied upon by counsel for the Applicant, being Johns v Johns, my interpretation of those remarks aligns with that submitted on behalf of the Respondent. That matter is factually different from the present, insofar as the orders for substituted service made by the Registrar in Johns included a provision that required "due compliance with the applicable provision of [SEPA]". The Registrar's orders in the present matter do not.
13. Further, I accept counsel for the Respondent's submission that, in Johns, the essence of Lunn J's opinion appears to be that a plaintiff ought not gain any advantage from failing to attach a SEPA Form 1 notice. As I have already stated, the Applicant does not appear to have suffered any practical disadvantage from such a failure, as evidenced by his actions following receipt of the originating process. Put differently, the Respondent has not obtained any advantage that is not otherwise available to it under the UCPR.
14. On that basis, I find that even if the Respondent had attached a Form 1 notice to the originating process served by way of email, the practical impact upon the factual matrix that followed would be minimal to non-existent.

Is There A Prima Facie Defence?

1. Having rejected the Applicant's submissions as to the effectiveness and legal compliance of the service of the originating process, the final matter to consider is whether the Court should exercise its discretion under UCPR 36.16(2)(a).
2. Part of determining whether to set aside the default judgment on this basis is to give due consideration to the overriding purpose set out in s 56 of the Civil Procedure Act. That is to facilitate the just, quick and cheap resolution of the real issues in the proceedings. Having already determined that this maxim has not been offended on administrative or technical grounds, it is necessary to look at the facts and the evidence surrounding the proposed defence.
3. In Adams v Kennick Trading (International) Ltd (1986) 4 NSWLR 503, Hope JA set out the principles to which the Court has regard in determining whether to set aside a default judgment at 506-507:

• the court has to look at the whole of the relevant circumstances and decide whether or not sufficient cause has been shown;
• the existence of a bona fide ground of defence and an adequate explanation for the default are the most relevant matters to consider;
• the defendant must swear to facts which, if established at the trial, will afford a defence: Simpson v Alexander (1926) SR (NSW) 296 at 301;
• if the judge concludes that the applicant is lying about the alleged defence and is thus dishonest in raising it, the defence is not 'bona fide';
• the applicant does not necessarily fail for want of an adequate explanation for the default. It depends on the circumstances. "[I]f merits are shown, the Court will not prima facie desire to let a judgment pass on which there has been no proper adjudication": Evans v Bartlam [1937] AC 473 at 489; and
• the absence of an explanation for the default, particularly if it is coupled with prejudice to the plaintiff, may justify the denial of relief, but only when considered with other relevant circumstances.

1. I also note the remarks of Priestly JA in Byron v Southern Star Group Pty Ltd t/as KGC Magnetic Tapes (1995) 123 FLR 352, who emphasised the importance of a defence on the merits, relative to countervailing considerations at 364: Frequently, persons have been let in to defend who have had little or no explanation for their delay but who have shown reasonable grounds of defence; in some cases such persons are put on severe terms concerning provision of security or payment into court or the like, but the court sees to it that subject to compliance with such terms, a person who has an arguable defence and wishes to have it determined on the merits, will be heard by the court before judgment.
2. The proposed defence, marked Exhibit B, argues that the Respondent failed to comply with s 56 and Schedules 1 and 2 of the Property and Stock Agents Act 2002 (NSW), insofar as a copy of the Fair Trading Booklet was never received from the Respondent, nor was a copy of the final agreement.
3. While counsel for the Applicant contends that the affidavit evidence "raises a real issue of fact as to the attachments to the email sent on behalf of the plaintiff on 22 October 2020", counsel for the Respondent fairly raised that this assertion is not strongly supported by evidence in this application. There is, in effect, no sworn evidence from the Applicant as to any of the matters sought to be raised in the proposed defence.
4. I accept the Respondent's submission that the Applicant has failed to put on any affidavit evidence justifying the failure to respond to the statement of claim within time, despite his counsel acknowledging that it was received. While the affidavit of the Applicant's solicitor, Mr Murray (Exhibit A), affirms that he received instructions to the effect that the Applicant "never received a copy of the complete agency agreement from the plaintiff as is alleged in the affidavit of Ruth Cameron sworn August 30, 2021", this is not a substitute for evidence from the Applicant himself. Counsel for the Applicant made a forensic decision not to rely on any affidavit evidence sworn by the Applicant. Consequentially, I am now in a position where there is no evidence before me which I can consider whether, if factually established at trial, it may afford a defence as pleaded (see Violi v The Commonwealth Bank of Australia [2015] NSWCA 152 at [109]).
5. In any event, if the Applicant was genuinely of the view that the contract was invalid for the reasons which he now seeks to plead in the proposed defence, then he had no reason to comply with the terms in respect of providing written notice of termination. Instead, by providing written notice to the Respondent seeking release from the contract on a number of occasions, the Applicant appears to have accepted, at least by way of acquiescence, the validity of the agreement.
6. Accordingly, I am effectively unable to consider the merits of the Applicant's proposed defence due to a lack of supporting evidence. Nonetheless, it remains my view that, by reason of his apparent acquiescence to the contract in the lead-up to proceedings being commenced, the Applicant's actions appear to be at odds with his own proposed defence. If the Applicant believed that the contract had not been properly executed, or that he required the additional documents as highlighted in their proposed defence, then he ought to have raised this with the Respondent at a much earlier time than he ultimately did.
7. As such, I am not satisfied that this is a matter in which the Court ought to exercise its discretion under UCPR 36.16(2)(a). In all the circumstances, I am of the opinion that this outcome best accords with the overriding purpose of the UCPR (s 56).

Change of Venue

1. While one of the prayers in the Applicant's notice of motion contemplated an order changing the venue of this matter to Albury, there were no submissions made by either party at any stage in respect of this issue.
2. In any event, given my findings in relation to the other issues, it is not necessary to consider this matter further.

Orders

1. Accordingly, for the reasons provided, I make the following orders: 1. the Applicant's application seeking to set aside the default judgment entered against it on 16 July 2021 is dismissed; 2. the balance of the Applicant's motion filed 10 August 2021 is dismissed; and 3. the Applicant is to pay the Respondent's costs of the application on an ordinary basis; 4. the Applicant's motion filed 12 July 2021 seeking a change of venue is dismissed with no order as to costs; 5. the default judgment entered 16 July 2021 in favour of the Respondent against the Applicant in the sum of $31,987.22 stands.

I certify that the previous [64] paragraphs are the reasons for the Judgment of his Honour Judge D Wilson SC. J Bailey Associate

Endnote

1. https://www.aph.gov.au/Parliamentary_Business/Committees/Senate/Legal_and_Constitutional_Affairs/Completed_inquiries/2008-10/cross_border/report/c02.

Amendments 17 December 2021 - Catchwords updated 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: 17 December 2021