This is an application to set aside a default judgment. The only issue is whether the defendant has a bona fide defence.
The plaintiff ("Ringwood") supplied timber and timber-related products to the defendant ("Conform") pursuant to a commercial credit application agreement ("the Agreement"). As at 31 August 2013, Conform owed $174,615.09 to Ringwood pursuant to 12 invoices issued in June and July 2013. Conform was experiencing cash flow problems. It tendered cheques to Ringwood for some of the invoices but apparently requested the cheques not be presented. By 28 October 2013, one of the invoices was paid. Accountants for Conform wrote to Ringwood requesting an arrangement in respect of the other 11 invoices in the following terms:
"CONFORM AUSTRALIA PTY LTD PAYMENT PLAN REQUEST
We are accountants for the abovenamed and we have been requested to work out a payment plan forecast to repay the account of Ringwood & Ply.
Due to a substantial uptake in formwork contracts over the last six months, this has put some pressure on the company's cash flows.
We refer to the company's account standing at $156,88573.
We ask that you agree to the following monthly payment arrangement to clear the account within 7 months.
[There then referred to eight invoices with amounts and a proposed payment date.]
We understand you are holding two cheques for invoices numbers [the other three invoices]. Please accept payment of these invoices on the following dates: 8 November 2013 for $22,997.92 and 8 December 2013 for $21,668.02.
To give you some comfort we advise that Conform has currently $2.7M work in progress with $7M in contract works to start over the next 2/3 months.
We ask that you agree to this arrangement and should cash flow permit then the account will be settled earlier in a lump sum."
This arrangement appears to have been modified to some extent on 15 January 2014. Conform's accountant wrote to the collection agency for Ringwood in the following terms:
"I am contacting you on behalf of Conform Australia in regards to their payment arrangement for their debt to Ringwood &\and Ply,
I had a meeting with a client today and was advising him of the upcoming payment that were [sic] falling due and he was shocked to learn of the payment due on 18/1/14,
There was a miscommunication in which one of the emails had 18/2/14 instead of the correct date of 18/1/14 this led the client to believe that the payment was due next month and has budgeted accordingly which means that he no longer has funds to make the $42,208.51 by 18/1/14.
The client wanted to delay the payments by one month to allow the payments to be made on time,
He wanted to pay the following:
$42,208.51 by 18/02/14
$42,208.51 by 18/03/14
$42,208.15 by 18/04/14
Please call if you wish to discuss any of the above details".
On 7 February 2014, Ringwood commenced proceedings for the debt then outstanding of $112,219.79, four invoices totalling $62,395.30 having been paid in the period 31 October 2013 to 8 December 2013. A statement of claim was served on the commencement date of 7 February 2014, noting a need for a defence to be filed within 28 days at risk of a default judgment being entered. On 4 March 2014, Conform's accountant made a further proposal in the following terms:
"We refer to the statement of claim dated 7 February 2014 totalling $115,350.19 and advise that our client has instructed us that due to poor cash flow due the [sic] weather and non payment by builders/developers he is proposing a payment arrangement as follows:
• 50% payment of $57,675.10) on Tuesday 11 March 2014
• and the balance of $57,675.10 by 4 April 2014
Can you please consult your client and advise
We regret that it has come to this point but it has been a extremely difficult cash flow period after Christmas
We look forward to your positive response".
The proposal was not accepted. Ringwood's solicitor wrote to Conform's solicitor on Tuesday, 18 March 2014 stating, "I am now instructed to apply for default judgment." Conform responded that it had received instructions to file a defence. Other offers were made. On Friday, 21 March 2014 at 11.53am, Ringwood's solicitor advised that, "unless payment is paid today by 5.00 pm as previously proposed by us in our letter to you dated 19.3.14 that we are instructed to enter judgment." Conform's solicitor made another offer that afternoon. On Monday, 24 March 2014 at 10.17am, Ringwood's solicitor responded, "We refer to your email…and advise that we are instructed to reject the offer and file for default judgment." No payment had been made by Conform since 8 December 2013.
Late in the evening of Monday, 24 March 2014, Ringwood, by electronic means obtained a default judgment. On 25 March 2014 at 3.11pm an unsealed defence was served on Ringwood's solicitor. The defence admitted that goods were ordered from Ringwood but stated that it was unable to ascertain which goods were ordered from or delivered by Ringwood, and denied that Conform had breached the agreement.
It was a term of the agreement that:
"12(a) The company's [Ringwood] delivery records shall be prima facie proof of delivery of the goods of the quality and description stated herein in good order to the customer [Conform] and his receipt thereof notwithstanding the absence of any representative of the customer at the delivery site upon delivery…"
[2]
THE DEFENCE
In the defence, Conform denies a breach of the agreement but concedes that it does not know what goods were delivered. The initial affidavit of Joseph Younan, the sole director of Conform, gave no further particularity to the defence. However, in submissions, Conform prepared a schedule that asserted that the goods in the four invoices paid, totalling $62,395.30, were not delivered. In addition, the goods in two of the unpaid invoices, totalling $19,633.68, were asserted not to have been delivered. The residue of the unpaid amount, $30,190.81, was a subject of a cheque that was given to Ringwood on the morning of this hearing.
The reply affidavit of Mr Younan was relied upon in support of these submissions. It deposed at paragraph 6, "the Defendant did not receive delivery of all of the goods from the Plaintiff" and purported to assert that the usual practice was that Mr Younan or Conform's foreman would sign or initial the Ringwood delivery document to confirm delivery. Mr Younan said at paragraph 9:
"Turning my mind to the matter, I now realise that I should not have paid any of the Plaintiff's tax invoices until and unless the Plaintiff was able to demonstrate that the goods the subject of the Plaintiff's tax invoices were delivered to the Defendant."
This assertion is repeated a further time in the affidavit.
Notwithstanding that Mr Younan in his affidavit conceded that Conform kept no records of its own evidencing delivery of the goods in question, he asserts at paragraph 18, "the Defendant's records reveal that goods which are the subject of [the paid] invoices were not delivered."
The records referred to are Ringwood's records, including invoices, delivery dockets and, "picking slips" (where goods are collected by the customer). Those records evidence delivery but contain signatures not recognised by Mr Younan, or contain no signatures. One of the signatories authorised by Mr Younan and said to be recognisable by him was "a contractor namely Gary of Deltacon", no surname given. In the result, Conform says that without authorised signatures, the "records reveal that goods…were not delivered". This assertion is inconsistent with clause 12(a) of the agreement.
Mr Younan gave evidence that the goods invoiced were ordered by him, that he ordered the goods because he needed them in his business and that the goods were critical to his business. At no stage after the invoices in June and July 2013 did he notice that the goods had not been delivered. In fact, the evidence shows that some of the invoices were subject to small adjustments because certain ordered items had not been delivered. The circumstance that the records confirmed minor adjustments in invoices indicated that Conform noticed errors in deliveries.
I could not accept Mr Younan's evidence that in respect of the same delivery, the absence of a recognisable signature on the delivery docket or picking slip should be evidence that the delivery did not occur. As I have said, the agreement of the parties is contained in clause 12(a) quoted above, confirmed that the delivery docket or picking slip, signed or not, was evidence of delivery. Mr Younan gave no evidence of any attempts to identify whether the goods were held by Conform and thus necessarily delivered or collected. His sole defence was to assert the absence of a signature recognisable to him on the delivery documents and to conclude that this cast doubt on the delivery. In my view, this does not create a bona fide defence. He needs to swear "to facts which, if true, would establish a defence" (Adams v Kennick Trading (Intl) Ltd (1986) 4 NSWLR 503 at 509E) but he has not done so.
If the contract says that unsigned delivery documents are prima facie evidence of delivery, unsigned delivery documents cannot be evidence of non‑delivery, even if there is a practice of signing delivery documents. Post-contractual conduct is not relevant to the construction of the terms of the contract. See Brambles Holdings Ltd v Bathurst City Council [2001] NSWCA 61 at [26], Agricultural & Rural Finance Pty Ltd v Gardiner (2008) 238 CLR 570 at 582 [35] and see generally Franklins Pty Ltd v Metcash Trading Ltd [2009] NSWCA 407. Clause 12(a) of the agreement is unambiguously contrary to the alleged usual practice constituting evidence of delivery or non-delivery.
In my view, the fact that Conform:
1. paid the invoices in respect of most of the disputed deliveries;
2. repeatedly affirmed a desire to pay for all of the invoiced amounts for a period extending some nine months after deliveries;
3. received adjustments to the unpaid invoices in the weeks after delivery because of the non‑delivery of some items, thus conceding the delivery of the remainder (and denying that whole orders could remain undelivered without being noticed by Conform);
4. failed to identify the basis for why the non-delivery of goods was not asserted until the week before this hearing;
5. identified that basis (in the week before the hearing) as the absence of an authorised signature on a delivery docket or picking slip, when the agreement between the parties accepts that an unsigned document of this type is prima facie evidence of delivery; and
6. ordered the goods because they were needed, even critical to the business and yet at no stage raised any complaint about purported non-delivery,
altogether persuade me that there can be no substance to the defence.
The defence is not, "fairly arguable in law or fact", Dunwoodie v Teachers Mutual Bank Ltd (formerly NSW Teachers Credit Union Ltd) [2014] NSWCA 24 at [45].
The defence is effectively that the goods were not delivered. Yet there is prima facie evidence of delivery supported by concessions by Conform by way of payments, concessions by Conform by way of invoice adjustments, concessions in negotiations for many months and concessions in evidence that the ordered items were needed for the ordinary operation of the business, and Conform does not assert an absence of delivery but only that it is "unable to ascertain" if goods were delivered. In my view, that is insufficient to raise a bona fide defence. Mr Younan may have come to believe in recent times that the absence of signed delivery documents may constitute a defence. But his belief is uninformed by cl 12(a) of the agreement. His belief is insufficient possibly to constitute a proper defence.
[3]
COSTS
Ringwood asked that I order indemnity costs if it was successful in resisting the motion. Indemnity costs are unusual and the fact that the application has failed is insufficient of itself to warrant such an order. On the balance I do not consider the application, although unsuccessful, to be an abuse of process as was submitted by Ringwood.
[4]
ORDERS
Accordingly, the orders of the Court are:
1. The defendant's notice of motion to set aside the default judgment is dismissed.
2. The defendant is to pay the plaintiff's costs of the application.
[5]
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Decision last updated: 30 April 2015