Trazblend v Simon Mathews Aviation & Anor

Mr Mathews was a director of Simon Mathews Aviation Pty Ltd ("SMA"), a company which is now under insolvency administration. The company ran a business of an aircraft broker. Aircraft are not generally sold by organisations who keep them in stock. A prospective buyer approaches an aircraft broker who agrees to find and purchase an aircraft on behalf of a purchaser. When an aircraft is found arrangements are made between the owner of the aircraft and the broker. This would usually involve the owner giving title to the broker so that the broker can become the principal in an agreement with the purchaser. In the instant case Trazblend wished to purchase a Cessna 208B aircraft which SMA sourced for it from Canada. The cost of the aircraft was $1,820,000.00. Trazblend claimed that it offered in part exchange a Navajo aircraft and that SMA accepted this arrangement and reduced the price by $80,000.00. The dispute between the parties is whether this was an agreement by the broker to purchase the Navajo aircraft or an agreement by the broker to use his best endeavours to sell the Navajo aircraft on behalf of the purchaser without commission. The agreement document, which is annexed to an affidavit of Max Dunbier dated 7 March 2006 in the original proceedings, shows the sum of $80,000.00 as a trade-in for the Navajo aircraft in two places. In a third place there is a document entitled "Authority to Act" between SMA and Trazblend authorising SMA to act exclusively on behalf of Trazblend in matters relating to the sale of the Piper Navajo:

"The customer warrants that the company is the sole agent and the aircraft could only be sold exclusively through the company."

In the event, there was a conversation between Mr Mathews and Mr Dunbier in April 2005 which related to the sale of the Navajo and following which the contract was cancelled. The proceeding brought by Trazblend was for the return of the sum of $87,500.00 paid to SMA.

The proceeding had an uneven history which is recited by me in my judgment Trazblend v Simon Mathews Aviation & Anor [2006] FMCA 452. The matter came before the court a number of times. On 25 January 2006 I made orders including an order that Trazblend file and serve an amended statement of claim on or before 8 February 2006 and that Mathews file and serve his defence by 22 February. Mathews had been sued under the Trade Practices Act 1984 (the "Act") as a person involved in the first respondent SMA's contravention and pursuant to s.82(1) of the Act. No response was filed to the amended application. On 22 March 2006 the matter came before me again when Mathews did not appear. I noted that Mathews had not complied with order 2 of my orders of 25 January to serve his defence and I made an order that this be done by 29 March. I then stood the matter over until 30 March noting that in the event that Mr Mathews did not comply with order 1 Trazblend could apply on that day for orders dismissing his defence and for judgment for damages to be assessed without further notice of the application to him.

Mathews' solicitors ceased to act for him. In the Notice of Ceasing to Act filed on 28 March 2006 they provided an address for him being 54 Harley Crescent Condell Park, New South Wales, 2200. That was also the address that they had given for Mathews in the Notice of Appearance filed on 9 August 2005. Mathews agrees that his company, Simon Mathews Aviation and its successors operated their business from those premises. He says there were six separate businesses operated from those premises with six separate mail boxes.

Mathews agreed in court on 12 March 2007 that until the time that his solicitors ceased to act for him he was kept advised by email and correspondence or telephone calls of the status of the proceedings so he knew that a defence had to be filed. He was aware that if he failed to file his defence to the amended statement of claim Trazblend would apply to have his defence struck out and seek summary judgment. He did not attend the hearing which took place on 30 March.

On 30 March, in the absence of Mathews, I ordered that his defence be struck out and verdict and judgment be entered against him. I then assessed the damages at $87,025.00 on the basis of the evidence described in my judgment. Because Mathews was not present I made a sixth order in the following form:

"This judgment is stayed for 14 days during which time the second respondent may file an application and affidavit in support for orders setting aside these orders, such application forthwith after filing to be served upon the applicant."

A copy of my orders was sent by the solicitors for Trazblend to Mathews and also to his former solicitors. Mathews agrees that he was informed of the content of my orders. He did not take advantage of the stay to bring an application to set aside the orders. He did nothing until a bankruptcy petition was served.

Mathews gave evidence before me on 12 March 2007. His explanation for his failure to take any steps prior to this application was that his company had been in financial difficulties and he had not received the bankruptcy proceedings. However, he agreed that he had been in communication with the process server in August 2006 and had spoken to him on the telephone on two occasions when the process server had indicated to him that he had an important document to serve upon him. Mathews does not blame his solicitors. He has now reinstructed them. The fault is clearly his. I am not satisfied that the bankruptcy notice did not come to Mathews' attention. He certainly knew about the judgment and the opportunity to set it aside. It would not be unreasonable for him to have comprehended that the company which had obtained the judgment against him would seek to enforce it.

Mathews seeks to persuade me that notwithstanding his failure to take any steps to set aside the judgment of March 2006 prior to December of that year, I should set aside the judgment and allow the case to be heard on the ground that his affidavit clearly indicates an arguable defence. Mathews states in his affidavit that he did not agree to take the Piper Navajo in part exchange for the new aircraft and that all he agreed to do was to sell the Navajo on behalf of Trazblend, hopefully prior to the time that the purchase of the Cessna was to be settled. He says that trade-ins were not the way business was done at that level in the aircraft industry. He says that he told Mr Dunbier that if he cancelled the contract then there would be costs and expenses and he would lose his deposit.

Mathews relies heavily on the decision of Tamberlin J in KM & A Chadwick Pty Limited v Yeung (Unreported, June 1995) where summary judgment had been entered by Sackville J. At page 2 of Tamberlin J's unreported judgment his Honour says:

"The primary reason given by Sackville J for making the orders was the failure of the respondents, on a number of occasions, to comply with the court's orders relating to discovery coupled with the failure to provide any explanation of such failures. His Honour pointed to repeated delays involving additional expense in the proceedings. He considered that the conduct of the respondents was such as to demonstrate an unwillingness to co-operate with the court or with the applicant to get the matter ready for trail. Moreover, the respondents even failed to appear before his Honour on 21 February 1995, when the application to strike out the defence and enter judgment was heard and decided. The order made on 1 march 1995 related to the interest claim and quantified the total amount due."

Whilst there are certainly similarities between the problems experienced by Sackville J and the case before me it is important to note that Sackville J's orders were made on 1 March 1995 and the matter first came before Tamberlin J on 17 March 1995, a mere sixteen days later. The second point to note is that Tamberlin J found:

"It was also clear that the lamentable delays in the matter had been occasioned as the result of the oversight and lack of any apparent attention to the conduct of the matter by the solicitor for the respondents. Indeed, in acknowledgment of this the solicitor handling the matter on 12 May 1995 did not demur to an order that she should meet the costs of the applicant of that hearing on an indemnity basis."

His Honour found that there were serious conflicts of interest between the various respondents in the proceedings and analysed those respondent's possible defences before saying:

"In relation to the summary judgment the "explanations" for the delays are quite unsatisfactory. However, the evidence before me discloses that there is an arguable case."

"In my view the relevant touchstone is whether there is an arguable case or question raised by the person seeking to set aside the judgment. It is of course also relevant to consider whether there has been an adequate explanation made as to the circumstances which led to the summary judgment. In the present matter I am satisfied that an arguable case has been shown, but the explanations for the delays have been quite unsatisfactory."

His Honour then went on to set aside the judgment before ordering that the respondents pay costs on a full indemnity basis.

Numerous decisions have dealt with the discretionary exercise by a court of its power to reopen litigation. There is significant authority to the effect that where a defendant has an arguable defence a court may set aside a judgment already entered. In the oft-cited decision Evans v Bartlam [1937] AC 473 Lord Wright states at 489:

"...if merits are shown the Court will not prima facie desire to let a judgment pass on which there has been no proper adjudication."

Bartlam has been affirmed by application in numerous cases. In Maher v Commonwealth Bank of Australia [2004] FCA 248 Finkelstein J considered an application to set aside a judgment entered against the defendant in the defendant's absence and seeking orders granting a new trial. At [2] his Honour states:

"...In Evans v Bartlam [1937] AC 473, 482 Lord Russell said that a judge who was called upon to consider such an application (here it is brought under O 32 r 2(2)) must consider two issues, viz (1) whether there is some purpose in setting aside the judgment: there will be none if the claim sought to be prosecuted or defended (as the case may be) is hopeless; and (2) how it came about that the applicant was bound by a regularly obtained judgment. In the same case Lord Wright said (at 489) that the principal consideration was whether the applicant had a case with merits to which the court should pay heed. It did not matter that the case is weak because, as Winneke P explained in Lau v Citic Australia Commodity Trading Pty Ltd [1999] VSCA 34 at [8] "that is not to say that, when all the facts are exposed, it [in that case a defence] will not turn out to be a good one.""

The exercise of the discretion to set aside a judgment made in the absence of the defendant should be exercised with caution and such exercise involves consideration of several factors including, importantly for present purposes, the applicant's explanation for delay. In Coffey v Centrelink & Anor (2004) FCA 188 the applicant sought to reopen a decision related to the proceedings made in 1998 which had at that time been summarily dismissed. Mansfield J discusses the applicable principles at [17]:

"[17] The respondents accept that the Court has power under O 35 r 7 to vary or set aside a judgment, even after an appeal, and so to re-open a proceeding. It is plain that the power should be exercised only with great caution, having regard to the importance in the public interest in the finality of litigation: see Donkin v AGC (Advances) Ltd [1995] FCA 696, (Black CJ, Davies and Whitlam JJ). In Autodesk Inc v Dyason (No 2) [1993] HCA 6; (1993) 176 CLR 300, Mason CJ said at 303_:_

'... it must be emphasised that the jurisdiction is not to be exercised for the purpose of re-agitating arguments already considered by the court; nor is it to be exercised simply because the party seeking a rehearing has failed to present the argument in all its aspects or as well as it might have been put. What might emerge, in order to enliven the exercise of the jurisdiction, is that the court has apparently proceeded according to some misapprehension of the facts or the relevant law and that this misapprehension cannot be attributed solely to the neglect or default of the party seeking the rehearing. The purpose of the jurisdiction is not to provide a back door method by which unsuccessful litigants can seek to re-argue the case.'

See also De L v Director-General, New South Wales Department of Community Services [1997] HCA 14; (1997) 190 CLR 207 at 215; McMullin v ICC Australia Operations Pty Ltd (No 7) (1999) 169 ALR 227; [1999] FCA 1814."

In Deputy Commissioner of Taxation v Johnston [2006] QSC 61; (2006) 230 ALR 575 Atkinson J considered an appliction to reopen a matter and set aside a judgment entered in default where the respondent failed to appear. His Honour states:

"[3] The discretion to set aside a regularly entered judgment is unfettered but a number of matters are relevant to its exercise: Evans v Bartlam [1937] AC 473 at 478, 481 and 482; 2 All ER 646 at 648-9, 651 and 652; Bratic v Toohey (1988) 2 Qd R 140 at 145. As I held in Yankee Doodles Pty Ltd v Blemvale Pty Ltd (QSC, No 78/1988, 23 June 199, unreported) at [13] there are three matters which will usually be relevant to the exercise of the discretion:

(1) whether the defendant has given a satisfactory explanation of the failure to defend;

(2) whether the defendant's delay in making the application to set aside precludes it from obtaining relief; and

(3) whether the defendant has a prima facie defence on the merits: Aboyne Pty Ltd v Dixon Homes Pty Ltd [1980] Qd R 142 at 143-4; National Mutual Life Association of Australaisa Ltd v Oasis Developments Pty Ltd [1983] 2 Qd R 441 at 449-50; Bratic v Toohey [1988] 2 Qd R 140 at 146-7.

[4] As the cases referred to in the footnotes show, the defendant must demonstrate "a very compelling reason" for the failure to appear and that it has a plausible defence either in law or in fact. Before allowing a defendant to come in and defend, the court should have before it material which enables it to say how it came about that the defendant found itself bound by a regularly entered judgment; that the defendant genuinely desires to be allowed to come in and present its case; and that issues are raised in such a form as to require serious consideration of the defence put forward. The affidavit material in support of an application to set aside judgment entered into in default of appearance must set out all the defences on which the defendant intends to rely and briefly set out the facts by which the defendant seeks to establish such defences. A mere statement by the defendant that he or she has a good defence is not sufficient to justify a review of the exercise of judicial discretion."

In Yankee Doodles Pty Ltd v Blemvale Pty Ltd (Unreported, Writ No 78 of 1998, Supreme Court of Queensland) Atkinson J states

"[13] The matters to be considered on an application to set aside a default judgment are whether the defendant has given a satisfactory explanation of the failure to defend; whether the defendant's delay in making the application to set aside is not such as to preclude it from obtaining relief; and whether the defendant has a prima facie defence on the merits: Aboyne Pty Ltd v Dixon Homes Pty Ltd [1980] Qd R 85 at 91; National Mutual Life Association of Australasia Ltd v Oasis Develpments Pty Ltd [1983] 2 Qd R 441 at 449-450; Bratic v Toohey [1988] 2 Qd R 140 at 146-147. The decision whether or not to set aside a default judgment is discretionary: Evans v Bartlam [1937] AC 473 at 478, 481,482; Bratic v Toohey (supra) at 145. An affidavit in support of an application to set aside judgment entered into in default of appearance to a writ of summons must set out all the defences on which the defendant intends to rely and briefly set out the facts by which the defendant seeks to establish such defences: Sue Oclee Pty Ltd v Bak (1979) 29 ACTR 8. A mere statement by the defendant that he or she has a good defence is not sufficient to justify a review of the exercise of judicial discretion. The defendant must demonstrate "a very compelling reason" for the failure to appear and that it has a plausible defence either in law or in fact..."

The discretion to set aside a judgment must be exercised with the importance of the overriding principle of finality of litigation borne in mind. In Davison v Queensland [2006] HCA 21 the High Court considered an application seeking an extension of the limitation period in relation to an action in tort. Kirby J states at [32]:

"The law abhors judicial orders (even of a temporary and conditional kind) which disturb the legal rights of parties without good reasons being demonstrated for making them. Thus, the necessity to demonstrate the existence of a "reasonably arguable" foundation for the granting of leave might be viewed as no more than affirmation of the common requirement that a litigant, seeking a privilege not otherwise belonging to it, must demonstrate, to a reasonable standard, the utility and justifiability of granting that benefit. Such an approach is not unknown in judicial procedure. Where a litigant has become out of time and seeks leave to file a defence, he or she will often be required to justify an order to overcome the time default by, for example, demonstrating that he or she has a real defence: Vacuum Oil Pty Co Ltd v Stockdale (1942) 42 SR (NSW) 239 at 243-244; Re Cameron Smith; Ex parte Vigilant Finance (NSW) Pty Ltd [1964] NSWR 1282 at 1285; Garrard v Email Furniture Pty Ltd (1993) 32 NSWLR 662 at 671; Evans v Bartlam [1937] AC 472 at 480; Grimshaw v Dunbar [1953] 1 QB 408 at 415. This is sometimes expressed as the requirement to show a defence on the merits. Applications for such leave might otherwise easily become a means of spinning out litigation, without any ultimate prospect of success and, in the meantime, imposing unreasonable burdens on the opposing party."

Similarly in D'orta-Ekenaike v VLA [2005] HCA 12; (2005) 214 ALR 92 Gleeson CJ, Gummow, Hayne and Heydon JJ enunciated the need for finality:

[34] A central and pervading tenet of the judicial system is that controversies, once resolved, are not to be reopened except in a few, narrowly defined, circumstances. That tenet finds reflection in the restriction upon the reopening of final orders after entry and in the rules concerning the bringing of an action to set aside a final judgment on the ground that it was procured by fraud. The tenet also finds reflection in the doctrines of res judicata and issue estoppel. Those doctrines prevent a party to a proceeding raising, in a new proceeding against a party to the original proceeding, a cause of action or issue that was finally decided in the original proceeding. It is a tenet that underpins the extension of principles of preclusion to some circumstances where the issues raised in the later proceeding could have been raised in an earlier proceeding.

[35] The principal qualification to the general principle that controversies, once quelled, may not be reopened is provided by the appellate system. But even there, the importance of finality pervades the law. Restraints on the nature and availability of appeals, rules about what points may be taken on appeal and rules about when further evidence may be called in an appeal (in particular, the so-called "fresh evidence rule") are all rules based on the need for finality. As was said in the joint reasons in Coulton v Holcombe [1986] HCA 33; (1986) 162 CLR 1 at [7]: "[i]t is fundamental to the due administration of justice that the substantial issues between the parties are ordinarily settled at the trial"." [Footnotes omitted.]

In coming to a conclusion as to whether or not this particular judgment should be set aside it is important to remember that this is not the typical case of a judgment being entered by default. Mathews was represented at the time the defence was due. The nature of the defence itself was at all times known. It found an original articulation in the Response filed on 26 August 2005 where it is pleaded in terms at paragraph 12. The defence that was not filed in compliance with my orders was a defence to the Amended Statement of Claim. Mathews does not deny that he knew about my orders requiring him to file the defence and the effect of not doing so. Mathews does not deny that he was aware that even after I had dismissed the defence and entered judgment he was allowed a further 14 days in which to restore the matter to the court. It is this failure to act upon known sanctions which I believe precludes Mathews from now seeking to reopen the proceeding, because if he was aware that he may have had an arguable defence on the merits but for his own reasons took no steps to prosecute that defence then he is the author of his own misfortune and should not be allowed to disturb a regularly obtained judgment a year later. The fact that steps taken by the successful applicant, Trazblend, in relation to the judgment obtained did not come to his attention (although this is a matter on which I have serious doubts) should not be allowed to confuse the issue. It cannot be in the interests of justice to allow a defendant who may have an arguable defence but who does not wish to prosecute that defence at a particular time to put judgments regularly obtained in abeyance by exercising their rights to seek the setting aside of the judgment, relying principally on the existence of the arguable defence that was known at the time of the judgment and which could have been determined at that time.

I am not prepared to exercise my discretion to set aside the judgment obtained in the circumstances of this case. I dismiss the application and order that the applicant Mathews pay the respondent Trazblend's costs to be assessed in accordance with Part 21, Rule 21.02(2)(b) and Schedule 1 of the Federal Magistrates Court Rules 2001.

I certify that the preceding twenty-two (22) paragraphs are a true copy of the reasons for judgment of Raphael FM.