BETWEEN : RAPID METAL DEVELOPMENTS (AUSTRALIA) PTY LTD (ACN 004 304 447)

BETWEEN : RAPID METAL DEVELOPMENTS (AUSTRALIA) PTY LTD (ACN 004 304 114)

Practice and procedure - Springing order - Judgment entered following non-compliance with springing order - Subsequent application to extend time for compliance - Turns on own facts

Property Law Act 1969 (WA), s 9

Aon Risk Services Australia Ltd v Australian National University [2009] HCA 27; (2009) 239 CLR 175

Bornecrantz v Queensland Bridge Associate Inc [1999] QSC 58

Brocx v Hughes [2008] WASC 34

Caldwell v Treloar (1982) 30 SASR 202

Composite Buyers Ltd v JC Taylor Constructions Pty Ltd [1983] VicRp 91; [1983] 2 VR 311

FAI General Insurance Co Ltd v Southern Cross Exploration NL [1988] HCA 13; (1988) 165 CLR 268

Hodak v Bosman (1983) 36 SASR 164

Hytec Information Systems Ltd v Coventry City Council [1996] EWCA Civ 1099; [1997] 1 WLR 1666

Keysen v Gregg (1932) 32 SR (NSW) 288

Lifelong Investments v Karageorge [2008] WASC 86

Link Blocks Pty Ltd v Fullin [1986] WAR 187

Melville v East End Holdings Inc [2003] WASCA 133

Monarch Petroleum NL v Citco Petroleum Ltd [1986] WAR 310

MTQ Holdings Pty Ltd v Lynch [2007] WASC 49

Osgood v Wham [2007] WASCA 178

Rapid Metal Developments (Australia) Pty Ltd v Anderson Formrite Pty Ltd [No 5] [2009] WASC 194

Rapid Metal Developments (Australia) Pty Ltd v Anderson Formrite Pty Ltd [No 6] [2009] WASC 217

Rawcliffe v Bianco Hiring Service Pty Ltd [2002] SASC 430

Re Romer & Haslam [1893] 2 QB 286

Scottish Amicable Life Assurance Society v Reg Austin Insurances Pty Ltd (1985) 9 ACLR 909

Skahill v Kestral Holdings Pty Ltd (in liq) [2000] WASCA 185

Walsh v Westpac Banking Corporation (1991) 104 ACTR 30

1 LE MIERE J: The second defendant by summons dated 18 May 2010 seeks orders that the judgment entered against the second defendant on 29 July 2009 be set aside and that the time for the second defendant to comply with the springing order of 13 July 2009 be extended.

2 The first defendant was a company engaged under a subcontract for the construction of the Woodside Building. The second defendant was the sole director of the first defendant. On or around 26 September 2001 the first defendant and the plaintiff agreed in writing that the first defendant would open a trade account (the Trade Account) with the plaintiff so that the plaintiff would provide the first defendant with credit in respect of the hire and purchase of equipment provided by the plaintiff from time to time. The agreement was signed by Mr O'Neil on behalf of the plaintiff and the second defendant on behalf of the first defendant. The Trade Account also included a written deed of guarantee and indemnity dated 26 September 2001 signed by the second defendant (the Guarantee) whereby the second defendant guaranteed the debts and obligations of the first defendant to the plaintiff. The plaintiff then alleges that five agreements were entered into between October and December 2001 whereby the plaintiff agreed to sell and hire equipment to the first defendant pursuant to the Trade Account. Invoices were issued to the first defendant, however, they were only partly paid. The plaintiff claims the balance that is outstanding and for certain goods that were hired and not returned. The plaintiff alleges that the second defendant is personally liable due to the written Guarantee. The second defendant pleads that the Guarantee was incomplete, rendering the Guarantee unenforceable. Further, the second defendant pleads that he did not intend to be personally bound by the Guarantee.

Legal Principles for application to extend time and to set aside judgment

3 The court has a wide discretion to relieve a party of the consequences of non-compliance with a self-executing order: FAI General Insurance Co Ltd v Southern Cross Exploration NL [1988] HCA 13; (1988) 165 CLR 268. The governing consideration, as in every aspect of practice and procedure, is what justice requires. As stated by Burt CJ in Link Blocks Pty Ltd v Fullin [1986] WAR 187:

... all the circumstances must be weighed in the balance and one must not ... lose sight of the fact that the justice spoken of is an even-handed justice to [both sides] (190).

4 In relation to the application of O 3 r 5 Rules of the Supreme Court 1971 (WA) to springing orders, the Full Court comprising Hasluck and Pullin JJ in Melville v East End Holdings Inc [2003] WASCA 133 stated:

By O 3 r 5 of the Rules of the Supreme Court, the court may, on such terms as it thinks just, by order extend or abridge the time within which a person is required by any order to do any act in any proceedings. The court may extend any such period, although the application for extension is not made until after the expiration of that period.

It has been held that this rule provides authority to extend the time for compliance with a springing order, even after judgment has been entered by its automatic operation. The rule is remedial and confers a broad power upon the court to relieve against injustice: FAI General Insurance Co Ltd v Southern Cross Exploration NL [1988] HCA 13; (1988) 165 CLR 268. It has also been held that the principles and objects of case flow management which are contained in O 1 r 4A and O 1 r 4B of the Rules of the Supreme Court must now be taken into consideration: Seaman Civil Procedure at para 3.5.1 [16] - [17].

5 There are four matters to which the court will normally have regard in deciding whether to extend the time for compliance with a springing order as set out by Master Newnes (as his Honour then was) in MTQ Holdings Pty Ltd v Lynch [2007] WASC 49:

... the power to extend time when a springing order has not been complied with is a power to be exercised cautiously and with due regard to the necessity for maintaining the principle that orders are made to be complied with, and not to be ignored: Samuels v Linzi Dresses Ltd [1981] QB 115, per Roskill LJ at 126-127 [14].

...

And while no hard and fast rules can be laid down as to the matters to which the Court should have regards, in my view in the exercise of its discretion the court will normally have regards to at least the following matters:

(1) the circumstances in which the springing order came to be made;

(2) the reason for non-compliance with the springing order;

(3) the prejudice to the defaulting party if the time were not extended; and

(4) the prejudice to the other party if the time were extended.

It will also normally be a relevant consideration whether or not the defaulting party has a reasonably arguable case on the merits - there being no point in resuscitating a case that is devoid of merit - but, on the other hand, the fact that a party has an apparently meritorious case cannot be permitted effectively to act to insulate it from the consequences of a failure to comply with a peremptory order of the court [56] - [57].

6 Further it was stated in Hytec Information Systems Ltd v Coventry City Council [1996] EWCA Civ 1099; [1997] 1 WLR 1666 that 'a sufficient exoneration will almost inevitably require that [the defaulting party] satisfies the court that something beyond his control has caused his failure to comply with the order' (1675).

The circumstances in which the springing order came to be made

7 The reasons for the springing order can be found in my reasons in Rapid Metal Developments (Australia) Pty Ltd v Anderson Formrite Pty Ltd [No 5] [2009] WASC 194 and those of Hasluck J in Rapid Metal Developments (Australia) Pty Ltd v Anderson Formrite Pty Ltd [No 6] [2009] WASC 217.

8 On 15 February 2008 the action was entered for trial. On 3 December 2008 the action was listed for trial from 27 July to 21 August 2009. On 27 February 2009 pre-trial directions were made by Halsuck J, which included the filing of witness statements by 5 June 2009. On 21 May 2009 Hasluck J varied the order, extending the time to 12 June 2009. Hasluck J also ordered the first defendant to file and serve further and better answers to interrogatories. On 10 June 2009 Hasluck J made a springing order in relation to interrogatories against the first defendant. On 3 July 2009 the matter came before me for further directions with no appearance by either defendant. On 9 July 2009 the plaintiff entered judgment against the first defendant for failure to comply with the order of Hasluck J of 10 June 2009. On 10 July 2009 the matter came on for hearing before me with no appearance by the defendants. The second defendant had not served any witness statements on the plaintiff. The plaintiff sought a springing order against the second defendant. On 13 July 2009 I made a springing order against the second defendant that unless within seven days the second defendant served its witness statement on the plaintiff then judgment would be entered for the plaintiff. In Rapid Metal Developments (Australia) Pty Ltd v Anderson Formrite Pty Ltd [No 5] I stated:

The second defendant has not served any witness statements in accordance with the pre-trial directions. The second defendant did not appear at the hearing before Hasluck J on 10 June 2009 nor at either of the hearings before me on 3 July 2009 and 10 July 2009. In the circumstances I infer that the second defendant no longer intends to defend the claim against him and does not intend to defend the plaintiff's claim at the trial of this action [20].

9 The matter was listed for trial on 27 July 2009 before Hasluck J and adjourned with no appearance by the second defendant. The matter was listed again on 28 July 2009 before Hasluck J with no appearance by the second defendant. On 29 July 2009 Hasluck J ordered judgement be entered against the second defendant for failure to comply with the springing order of 13 July 2009.

The reasons for non-compliance with the springing order

10 The second defendant submits that although Solomon Brothers had ceased to act for him in the current proceedings, he believed they would continue to protect his interests.

11 In the absence of any agreement to the contrary the general rule is that when a client retains a solicitor the solicitor contracts to finish the business for which he is retained: Re Romer & Haslam [1893] 2 QB 286, 298. However, this rule is varied by a solicitor obtaining an order under O 8 r 7, that is, an order that they cease to act.

12 Solomon Brothers obtained an order from the court that they no longer act for the defendants as they had not been paid fees of approximately $18,000, nor had $250,000 been deposited into their trust account. The second defendant submits he was not in a position to make those payments as a result of Family Court orders. Where the client fails to provide funds or disbursements that failure may constitute good reason for the solicitor discharging himself from the retainer: Caldwell v Treloar (1982) 30 SASR 202, 208. There is no dispute that Solomon Brothers had established that they had good cause to withdraw and gave reasonable notice.

13 On 29 May 2009 Hasluck J made orders that Solomon Brothers cease to act for the defendants. Solomon Brothers mailed a copy of the extracted order to the second defendant at his Mulgoa Road and Fernhill addresses as well as by fax to each address. The letter states:

You should immediately take advice as to the progress of the action, including compliance with programming directions (particularly the direction requiring the filing of further and better answers to interrogatories).

In Mr Anderson's affidavit sworn 23 July 2010 he states:

I do not specifically recall receiving any of the documents from Solomon Brothers or Dwyer Durack referred to in the affidavits mentioned in para 4 and 6 above but, contrary to what I said in my previous affidavit, I am sure I would eventually have received some if not all of them. I do recall that Solomon Brothers filed answers to interrogatories on my behalf after they had informed me that they were no longer acting for me.

14 On 26 June 2009 Solomon Brothers assisted the defendants by filing and serving the first defendant's answers to interrogatories dated 26 June 2009. A letter of 29 June 2009 to Mr Anderson from Solomon Brothers states:

Dear Warren

RAPID METAL DEVELOPMENTS (AUSTRALIA) PTY LTD v ANDERSON FORMRITE PTY LTD & ANOR

SUPREME COURT CIV 2446 of 2002

We refer to your recent telephone conversation with our Chris Williams.

We received your answers to interrogatories on 26 June 2009. We attended to filing those answers and serving them on Dwyer Durack on 26 June 2009.

We enclose a copy of the answers that were filed and served. We also enclose, for your information, a copy of our self-explanatory letter sent to Dwyer Durack.

Enclosed is a letter of 26 June 2009 from Solomon Brothers to Dwyer Durack:

Dear Ms Van der Kwast and Mr Gill

RAPID METAL DEVELOPMENTS (AUSTRALIA) PTY LTD v ANDERSON FORMRITE PTY LTD & ANOR

SUPREME COURT CIV 2446 of 2002

We refer to the above action.

As you are aware, we have ceased acting for Anderson Formrite Pty Ltd and Warren Anderson and have been removed as solicitors of record.

We have had delivered to us Anderson Formrite Pty Ltd's amended answers to interrogatories for the limited purpose of us attending to filing and serving those answers. The fact that we have filed and served those answers does not mean that we are acting for Anderson Formrite Pty Ltd in respect of the above action or have resumed as solicitors of record.

We note that the answers record that they are prepared by Solomon Brothers. We did not prepare the answers. We presume that the answers state that they were prepared by us simply because they were adapted from a document that we had prepared previously.

15 The letters above clearly show that Solomon Brothers were no longer acting for the defendants and did not intend to do so at any time in the future.

16 During cross-examination Mr Anderson stated in response to a question from counsel for the plaintiff that in the letters he was taken to by counsel for the plaintiff, there was nothing in the correspondence sent to him which indicated Solomon Brothers would continue to act in his interests.

17 In re-examination Mr Anderson was asked why he thought Solomon Brothers would protect his interests.

Mr Gentilli: Mr Anderson, you were asked about the correspondence from Solomon Brothers, I think obviously aimed at a statement you made in your affidavit paragraph 18(a) of the affidavit of 23 July where you said:

'I can only explain my failure to register the contents of and act in relation to the letters which I must have received from Solomon Brothers and Dwyer Durack by -'

and then there are three items (a), (b) and (c). Item (a) is:

'an assumption on my part that Solomon Brothers would not actually cease to look after my interests and would do whatever was necessary to protect my position, even if they were not in funds and had said they would not continue to act.'

What was your basis for saying that?

Mr Anderson: When they took themselves off the record, I was in contact with [a solicitor of Solomon Brothers] and he said they were in a position where they had to take themselves off the record because the funds hadn't been placed on deposit, and at that stage I couldn't get it because I had no funds. I'd been hamstrung by the Family Court but [a solicitor of Solomon Brothers] did say to me - look, he said, 'We'll monitor it,' and I'm fairly sure after they had taken themselves off the record that they did do the odd part, bits and pieces for us.

18 The 'odd part, bits and pieces' Mr Anderson refers to is the filing and serving of interrogatories. Apart from this act, there is no other evidence of Solomon Brothers assisting the defendants after they obtained orders from the court ceasing to act. As set out above, on that occasion Solomon Brothers clearly indicated they were no longer acting for the defendants in the action.

19 In Skahill v Kestral Holdings Pty Ltd (in liq) [2000] WASCA 185, Owen and Heenan JJ said:

Actual, and not merely constructive, knowledge of such an order is necessary on the part of the person against whom it is made. Subject to what we say later, a party will have 'actual knowledge' of the order if it is served at the address for service [14].

...

In our view, the following principles should guide the practice relating to springing orders. All of what follows is, of course, subject to any orders that the case manager may make to suit the circumstances of a particular case.

1. If the party against whom the order is made is present in Court, personally or by solicitor or counsel, when the order is made, the party can be taken to have had actual knowledge of the making of the order and of its terms and no special steps need to be taken by a party seeking to enforce the order. In those circumstances there is no objection to the order being framed so that compliance is required by a specified date.
2. If the party against whom the order is made is not present in Court, personally or by solicitor or counsel, when the order is made, the order ought normally to be framed so that the party is required to comply within a specified number of days after the order has been served on the party.
3. In a case to which the preceding paragraph applies, the onus is on the party seeking to rely on the order to serve the order on the party against whom it is made. It should not be left to the Court to bring the orders to the notice of the defaulting party. Where the defaulting party is represented by solicitors and has an address for service that complies with the Rules, service at the address for service in accordance with O 72 r 5 normally would be sufficient. Where the litigant is unrepresented, actual personal service normally would be required [18].

20 In the current case the springing order of 13 July 2009 was served by:

(i) courier to 53 Johnston Street, Peppermint Grove, WA;

21 Mr Anderson first submitted that he collected the envelope containing the springing order of 13 July 2009 from the Mulgoa Post Office on 20 July 2009. He said that he had no recollection of opening the envelope but believes that he would have done so. Mr Anderson has deposed that the signature on the slip which acknowledges collection of the envelope from the Mulgoa Post Office containing the springing order of 13 July 2009 is his.

22 In Mr Anderson's affidavit sworn 23 July 2010 he states:

I do not recall collecting the envelope and do not recall seeing a copy of the court's orders of 13 July 2009 at that time but I probably did see it. It is my practice to open mail when I receive it.

Mr Anderson later submits he did not open the letter.

23 Subsequently an affidavit sworn by Mr Gentilli, solicitor for the second defendant, gave details of unopened envelopes provided to him by Mr Anderson. Contained in these unopened envelopes is the springing order of Le Miere J of 13 July 2009. This envelope is the one which Mr Anderson collected from the Mulgoa Post Office. The springing order of 13 July 2009 was also sent to the Peppermint Grove address, however, Mr Anderson deposes he was in Sydney at the time. The unopened mail recovered by Mr Anderson and sent to his solicitor contains various letters from the plaintiff's solicitors. However, only some of the mail sent by the plaintiff's solicitors was contained in the bundle of unopened mail. The plaintiff submits that that mail which has not been recovered must have been opened and read by Mr Anderson. The second defendant denies this submission.

24 The plaintiff's solicitors had not effected personal service as is stated to be 'normally required' in Skahill. However, they effected service by registered post. I am of the opinion that service by registered post was sufficient in the circumstances as the second defendant was located in a different State than the plaintiff's solicitors. Requiring the plaintiff's solicitors to effect personal service would incur an unnecessary expense. Therefore, according to Skahill, the second defendant has 'actual knowledge' of the orders.

25 The question is then whether there are any other circumstances which render the judgment unjust as the second defendant did not read the orders.

26 In Hodak v Bosman (1983) 36 SASR 164, White J stated that one of the reasons that an extension of time to comply with a springing order should be allowed is that the plaintiff was oblivious to the possibility that his action may be struck out and of the coming and goings in chambers surrounding interrogatories (the subject of the springing order). However, that case can be distinguished from the present. In Hodak the plaintiff was in the Northern Territory for work. There were mail delays and lost mail due to a dislocating long strike where the plaintiff was located. These matters were beyond the plaintiff's control. To the contrary, in the current case Mr Anderson was not the victim of any mail strikes or delays. In fact, he received the envelope containing the springing order of 13 July 2009 but neglected to open it and read the contents of the letter on his own accord. There would need to be something that was 'beyond the [second defendant's] control' in order for an extension of time to be allowed, however, the circumstances surrounding this case, in that Mr Anderson was not aware of the springing orders as he had not read the contents of the letter, will not suffice.

27 The plaintiff submits that Mr Anderson demonstrated an intention to ignore or flout the orders of the court. As stated in Brocx v Hughes [2008] WASC 34, a finding of intentional or contumelious conduct by a party in the conduct of the action will be a significant factor [34].

28 Both parties have admitted that the envelopes containing the springing order were clearly marked with the name of the plaintiff's solicitors. It can be inferred from this that Mr Anderson deliberately chose not to open select mail from the plaintiff's solicitors. There appears to be no other explanation except that Mr Anderson was 'overwhelmed' at the time of receiving the mail. However, the second defendant fails to provide sufficient evidence in support of this. The plaintiff submits that in seeking an indulgence from the court for an extension of time in which to comply with the springing order the second defendant must provide detailed evidence to support his assertions: Brocx v Hughes. An applicant who has willingly refused to receive information readily available to him will not be assisted by the law in circumstances such as these.

29 In Bornecrantz v Queensland Bridge Associate Inc [1999] QSC 58 (upheld on appeal) the applicant in an application for judicial review had been sent a letter via registered post which included a report of the applicant's behaviour and a date for a committee meeting to discuss the report. The applicant was handed a card indicating that the registered mail could be collected at the post office. The applicant by 'deliberate policy' does not accept registered mail unless the contents is known. The court said:

...when one comes to consider whether, in this case, the application was deprived of the right to be heard by reason of his declining to obtain and read [the letter], it is helpful to know that both common law and equity developed the notion that a man should be taken to possess that information which was immediately available but which he did not acquire only because of his conscious refusal to do so. Both law and equity, by their separate approaches, withhold an advantage which comes only from an irresponsible commitment to ignorance [27].

30 Therefore, the mere fact Mr Anderson did not read the springing order, and was therefore unaware of the orders of 13 July 2009 is not a situation in which the court will consider just to extend time for compliance with the springing order. Wilful ignorance of court orders is not sufficient to allow an extension of time.

31 Mr Anderson had various other litigation on foot at the same time as the current litigation. In particular, there was a claim by Anderson Formrite Pty Ltd against Baulderstone Hornibrook in the Federal Court. The hearing of this matter was to be held at the same time as the current proceedings and would require many of the same witnesses.

32 The second defendant was aware that the current action was to proceed to trial on 27 July 2009. An unsuccessful attempt to vacate those dates had been made on 19 January 2009.

33 In a letter of 21 May 2009 from Solomon Brothers to Mr Anderson it states:

We confirm that trial dates have been set down for trial of the claim against Baulderstone Hornibrook commencing on 24 July 2009. Those dates clash with the trial of this action. Given that you are involved in both actions, and there will be common witnesses, arrangements either need to be made to accommodate this or an application will need to urgently be made to vacate the trial dates, supported by a detailed affidavit explaining how the trial of the claim against Baulderstone came to be listed on 24 July 2009.

Further in a letter of 29 April 2009 from Solomon Brothers to Mr Anderson it states:

Given that RMD's Supreme Court action has been listed for trial commencing on 27 July for some time, this was known to Anderson Formrite when trial of the Federal Court proceedings against Baulderstone Hornibrook Pty Ltd was vacated and re-listed, we consider there is little prospect of the trial of RMD's action being deferred or vacated because of the clash with the trial of the Baulderstone Hornibrook action. Consequently, you should seek that the trial of the Federal Court Proceedings against Baulderstone Hornibrook is not listed for dates that clash with the trial of RMD's action (which begins on 27 July 2009).

34 During this period Mr Anderson had instructed lawyers in regards to the Federal Court action, Family Court proceedings and other proceedings. Mr Anderson in his affidavit sworn 30 July 2009 states that he gave evidence in the Federal Court action on 14, 15 and 16 July 2009 and that he attended the court on each day of the hearing up to and including 3 August 2009. Mr Anderson also attended the Family Court on 9 July 2009.

35 The plaintiff submits that the second defendant made a conscious decision to ignore the current action as a calculated risk.

36 Mr Anderson deposes that he was able to instruct lawyers in the Federal Court action as it was being funded by Anderson Formrite Pty Ltd through Angas Securities Ltd. Mr Anderson deposes in his affidavit sworn 18 May 2010:

Angas funded the action against Baulderstone rather than [the current action] and other litigation because the Baulderstone action has the prospect of recovery of in excess of $10 million if it is successful.

37 It is a feature of litigation that in many circumstances a party will not be able to afford the costs of engaging solicitors to represent them in litigation. Litigation is often lengthy and of great expense. In the case of Mr Anderson he submits that he was unable to fund the litigation due to the orders of the Family Court and also was overwhelmed due to the prevalence of other litigation. However, Mr Anderson made no attempt to bring these issues to the knowledge of the court or the plaintiff's solicitors at any time.

38 In Composite Buyers Ltd v JC Taylor Constructions Pty Ltd [1983] VicRp 91; [1983] 2 VR 311 it states that one needs to balance any prejudice to the party benefited from the operation of the self-executing order against the prejudice to the party adversely affected.

39 The second defendant will suffer prejudice if time is not extended to comply with the self-executing order, that is, he will have a judgment debt against him. The second defendant submits that the plaintiff has adduced no evidence of any prejudice it will suffer if time for compliance is extended. The second defendant further submits that there will be costs thrown away, the payment of which could be made a condition of time being extended and the judgment being set aside. I do not agree with the second defendant's submission. Costs thrown away as a result of the extension of time for compliance are not the only prejudice that will be suffered by the plaintiff. There is the prejudice of continued litigation, further, the delay itself can have an adverse impact on the litigation and hence on the plaintiff's interests: Brocx v Hughes, [65].

40 The High Court in Aon Risk Services Australia Ltd v Australian National University [2009] HCA 27; (2009) 239 CLR 175 emphasised the concern with which courts view delays in the conduct of commercial litigation. As stated by Heydon J:

... Those claims rest on the idea that a failure to resolve commercial disputes speedily is injurious to commerce, and hence injurious to the public interest ... 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 [137].

41 The majority in Aon also stated that it is now generally accepted that 'justice cannot always be measured in money and that a judge is entitled to weigh in the balance the strain the litigation imposes on litigants'.

42 In the current matter there is prejudice to both sides as outlined above. In consideration of what is just in the circumstances, I have come to the conclusion that the plaintiff will suffer more prejudice. This is in light of the fact that Mr Anderson has deliberately ignored court orders by his own behaviour in not opening the mail containing the springing order of 13 July 2009. As I stated on 13 July 2009 'the second defendant no longer intends to defend the claim against him and does not intend to defend the plaintiff's claim at the trial of this action'. It is not for the second defendant to dictate when and how the proceedings should progress, such a situation would not be just or fair. The second defendant had ample opportunity to convey any difficulties in progressing with the action to the court, or the plaintiff, but did not do so.

43 In considering prejudice weight may be given to the fact it has been the fault of the party's solicitor and not the party itself as to why there was no compliance with the orders of the court. The same cannot be said here, it is entirely the fault of Mr Anderson.

Merits of the defence of the second defendant

44 In Osgood v Wham [2007] WASCA 178, McLure JA said the widely held view was misconceived, that is, the view that the justice of the case will always, or practically always, permit a party to litigate an issue that is fairly arguable, regardless of non-compliance with court orders and procedures [20]. To hold that view would create a culture amongst the legal profession of non compliance. In MTQ Holdings Pty Ltd v Lynch Master Newnes observed that it would normally be a relevant consideration whether or not the defaulting party has a reasonably arguable case on the merits [56]. However, Master Newnes added that the fact that a party has an apparently meritorious case cannot be permitted effectively to act to insulate it from the consequences of a failure to comply with a peremptory order of the court. Therefore, it is appropriate to consider the merits of the action, albeit briefly, there being no point in resuscitating a case that is devoid of merit: Lifelong Investments v Karageorge [2008] WASC 86.

45 Mr Anderson's defence is that the Guarantee is unenforceable. Annexed to Mr Anderson's affidavit sworn 18 May 2010 is a document entitled 'Application for Trade Account'. The document is signed by Mr Anderson with the word 'Director' written underneath. On another document, seemingly the same document, entitled 'Application for Trade Account', Mr Anderson has signed the document but the word 'Director' does not appear underneath his signature. Additional writing appears on the first page and the second document is also witnessed by George MacFarland, who has day to day conduct of Anderson Formrite. It is Mr Anderson's defence that he did not intend to give a personal guarantee, but only a guarantee as a director of the company. Further Mr Anderson says that the Guarantee is void and/or unenforceable by reason of s 9 of the Property Law Act 1969 (WA).

46 The approach in cases such as these is identified by McHugh JA in Scottish Amicable Life Assurance Society v Reg Austin Insurances Pty Ltd (1985) 9 ACLR 909:

This appeal raises the question whether a person whose signature purports to be made on behalf of an incorporated company is nevertheless personally liable ...

The formation of a contract does not depend upon the actual intention of the parties. A contract exists because the law attaches rights and obligations to the external conduct of the parties, one at least of whom has expressly or impliedly made a promise ... The meaning which a party intends that his words or conduct should have is irrelevant. Words and conduct are interpreted according to what was said and not according to what was meant ...

The present case, therefore, depends on what the parties did and not on what they intended to do when they signed the Indemnity and the Agency Agreement. And what they did depends on the construction to be placed on the documents which they signed. A commercial document, however, must be construed in its commercial setting - in accordance with the surrounding circumstances known to the parties ... This is so whether the issue concerns construction in the strict sense or whether, as here, the issue concerns the capacity in which a person signs a document ... In some cases the contents of a document may indicate that the signatory is bound even though a qualification attaches to his signature. Expressly or by implication the body of the document may make it plain that the signatory is a party to the contract. In the examples given by Atkin LJ [in a decision discussed in an omitted passage], it would usually follow that there was no liability on the part of the person signing. But this is because the express disavowal of responsibility in those examples is so strong that no other consideration, based on the terms of the document, can overcome it. In other cases, however, the qualification to the signature may be overcome by the terms of the document and the surrounding circumstances. In the end the decision must depend upon the terms of the document including the qualification attaching to the signature together with the surrounding circumstances. This is a question of fact, not of law (923 - 924).

47 The plaintiff submits there is no evidence to support the defence that the second defendant did not intend to be personally bound. The plaintiff submits that it would be an absurd situation for a company to guarantee its own debt, therefore it must have been a personal guarantee. A claim that a company would guarantee its own obligations means that a transaction lacks commercial reality: Rawcliffe v Bianco Hiring Service Pty Ltd [2002] SASC 430. However, this is not a strict rule, that is, just because Mr Anderson is a director does not automatically mean he intended to be personally bound. The parties must have an opportunity to bring forth evidence of the surrounding circumstances so it can be determined what the parties intended objectively.

48 The second defendant pleads that the Guarantee is not a deed as s 9(1)(b) of the Property Law Act is not complied with as his signature is not 'attested' as required. Further, the second defendant pleads that there is no evidence that the Guarantee was delivered to the plaintiff on behalf of Mr Anderson. The plaintiff submits that there is an absence of evidence that the attesting witness was not present and further that the subsequent inclusion of the witness' details is not a material alteration.

49 In order for a variation in a deed of guarantee to render the guarantee void it needs to be a material alteration: Walsh v Westpac Banking Corporation (1991) 104 ACTR 30.

50 In relation to delivery of a deed, Kennedy J in Monarch Petroleum NL v Citco Petroleum Ltd [1986] WAR 310 said:

Delivery means some conduct indicating that the person who has executed the deed intends to be bound by it. Anything which shows that he treats the instrument as his deed will suffice ... It 'depends upon intention manifested by some words or by some act, either expressly proved or inferred from circumstances' - In Re Carile [1920] VicLawRp 86; [1920] VLR 427 at 433 (355).

No particular form of words or act is necessary to constitute delivery - any words or acts that sufficiently show that it was intended to be finally executed will do ... it is not necessary that the deed be delivered into the possession or custody of the person intended to take the benefit of the deed or to someone on his behalf ... it will frequently be inferred from execution.

51 The Application for Trade Account was received by facsimile on or about 28 September 2001. Mr Anderson submits that there have been alterations to the Application for Trade Account. He submits he did not alter this document and it was later altered without his knowledge or authority. The alterations include, amongst others, the removal of the word 'Director' and the sum of $100,000 inserted with a signature added. An example of a material alteration is one which imposes a greater liability on the promiser. In the current case, the alteration of the word 'Director' arguably increases Mr Anderson's liability as he is now personally liable. The plaintiff argues that the removal of 'Director' did not materially alter the Guarantee and as such the second defendant does not have a meritorious case. I am hesitant to say that on the face of the facts the second defendant has no meritorious defence. As stated in Keysen v Gregg (1932) 32 SR (NSW) 288:

Although one cannot help feeling that the defence to the action is not meritorious, yet it would be altogether too dangerous to permit the existence of a general rule that one party to a document merely because blanks were left in it should be impliedly authorised to make in the absence of the other and without his knowledge any alteration calculated to give effect to the intention of the parties. Such a course in a vast number of cases for instance would destroy a defence based on the Statute of Frauds (291 - 292).

52 Having regards to the matters raised in the defence there appears to be a reasonable defence, the matters to which should be determined at trial if extension were to be granted.

53 In my view the reasons for non-compliance with the springing order are inadequate and this factor weighs heavily against time being extended. The plaintiff would suffer prejudice if the time for complying with the springing order is extended. The second defendant has an arguable defence and will suffer prejudice if the time for compliance is not extended. However, those matters are not sufficient to overcome the prejudice to the plaintiff if the time is extended and to overcome the inadequate explanation for the second defendant's failure to comply with the springing order. Furthermore, the second defendant knowingly failed to attend the trial of the action at the date set down and that goes against the exercise of discretion to extend the time for compliance with the springing order.