Virtual v Gye [2010] NSWSC 399 | Case summary

1 HIS HONOUR: This is an application to set aside a statutory demand which was served upon the plaintiff by the defendant. The defendant obtained default judgment in the Local Court in the sum of $32,025.50. The plaintiff filed an originating process on 3 February 2010 and seeks to rely on s 459 G and H of the Corporations Act. 2 It is apparent that the claim is really a claim of a genuine dispute as to the existence or quantum of the debt. The background facts are as follows. In August 2007 the plaintiff instructed the defendant to obtain legal advice and searches in a number of matters. On 17 December 2007 copies of accounts for legal costs were provided and on 30 May 2008 accounts were provided that complied, it is said, with s 333 of the Legal Profession Act. Proceedings were commenced in the Local Court on 10 July 2008 to recover $36,532.66. An amended statement of claim was served on 1 August 2008 and particulars were sought of that by the defendant. 3 In September the plaintiff sought more detailed particulars and the provision of an itemised bill. That bill was provided on 10 June 2009. A further amended statement of claim was served on 4 August 2009 and there was no response to correspondence thereafter. There was a warning that default judgment would be signed and on 30 November 2009 the defendant filed a notice of motion for default judgment. Default judgment was entered on 15 December 2009. 4 On 13 January 2010 the statutory demand for payment in accordance with the judgment was served on the defendant. As I have said, the originating process was served on 3 February 2010. 5 It is apparent from the affidavits, particularly the affidavit of Mr Wiltshire of 12 April 2010, that what the plaintiff seeks is to challenge the claim which is now the subject of the judgment. For instance, it refers to deficiency in particularisation of judgment debt claims, failure to mark up the statement of claim, that costs the subject of the judgment were not reasonably charged, failure to provide cost disclosure as soon as applicable, cost disclosure not made at the time with the third party payer, and that bill of costs did not give full notification of the plaintiff's rights and that the plaintiff was not contractually liable to the defendant to pay for relevant legal work. 6 All those matters challenge the existence of the judgment. In affidavits filed and sworn by the solicitor on 3 February 2010 and in Mr Wiltshire's affidavit, it is stated that an application is proposed to be made to the Local Court to set aside the judgment. 7 After the evidence was dealt with in this hearing, the argument continued and I in fact drew to the attention of Mr Velik, the solicitor who is appearing for the plaintiff, the decision of Barclays Australia (Finance) Pty Limited v Mike Gaffikin Marine Pty Limited 21 ACSR 235, which indicated that there being no application to set aside the judgment, the matter was res judicata between the parties. He said he had arranged for a notice of motion to set aside the judgment to be filed but he did not have a file copy. He said it was in the course of being done, presumably from his office. 8 What happened then was I adjourned at 11.20 am for the morning tea adjournment to enable him to obtain that document and said that I would return after the morning adjournment to continue and we would deal with it then. I returned at 11.50 and Mr Velik was nowhere to be seen. I then directed the defendant's solicitor to phone Mr Velik's office to get his mobile number and contact him. This course was not successful and as a result of an enquiry from me to the defendant as to whether he wished to proceed, he asked me to continue with the hearing. The solicitor, Mr Velik left the court precincts and he was not here when I returned to continue with the hearing of the matter. 9 In the circumstances, I do not know what he has done, whether he has gone to actually do the filing but he has not reappeared and accordingly there is no reason why I should not proceed with the hearing. 10 The principles that apply in respect of setting aside a statutory demand are set out by the court in Eyota Pty Limited v Have Pty Limited (1994) 12 ACLC 669 where at p 671 McLelland CJ in Equity made the following comments in respect of the expression "genuine dispute": "It is, however, necessary to consider the meaning of the expression 'genuine dispute' where it occurs in s 459H. In my opinion that expression connotes a plausible contention requiring investigation and raises much the same sort of considerations as the 'serious question to be tried' criterion which arises on an application for an interlocutory injunction or for the extension or removal of a caveat. This does not mean that the court must accept uncritically as giving rise to a genuine dispute, every statement in an affidavit 'however equivocal, lacing in precision, inconsistent with undisputed contemporary documents or other statements by the same deponent, or inherently improbable in itself, it may be' not having 'sufficient prima facie plausibility to merit further investigation as to (its) truth' (cf Eng Mee Yong v Letchumanan (1980) ACT 331 at 341), or 'a patently feeble legal argument, or an assertion of facts unsupported by evidence'' (cf South Australia v Wall (1980) 24 SASR 189 at 194). But it does mean that, except in such an extreme case, a court required to determine whether there is a genuine dispute should not embark upon an inquiry as to the credit of a witness or a deponent whose evidence is relied on as giving rise to the dispute. There is a clear difference between, on the one hand, determining whether there is a genuine dispute and, on the other hand, determining the merits of, or resolving, such a dispute. In Mibor Investments (at ACLC 1066; ACSR 366-7) Hayne J said, after referring to the state of the law prior to the enactment of Division 3 of Part 5.4 of the Corporations Law, and to the terms of Division 3: 'These matters, taken in combination, suggest that at least in most cases it is not expected that the court will embark upon any extended inquiry in order to determine whether there is a genuine dispute between the parties and certainly will not attempt to weigh the merits of that dispute. All that the legislation requires is that the court conclude that there is a dispute and that it is a genuine dispute.' In Re Morris Catering (Australia) Pty Limited (1993) 11 ACLC 919 at 922; (1993) 11 ACSR 601 at 605 Thomas J said: 'There is little doubt that Division 3...prescribes a f formula that requires the court to assess the position between the parties and preserve demands where it can be seen that there is no genuine dispute and no sufficient genuine offsetting claim. That is not to say that the court will examine the merits or settle the dispute. The specified limits of the court's examination are the ascertainment of whether there is a "genuine dispute" and whether there is a "genuine claim. It is often possible to discern the spurious and to identify mere bluster or assertion. But beyond a perception of genuineness (or the lack of it) the court has no function. It is not helpful to perceive that one party is more likely than the other to succeed, or that the eventual state of the account between the parties is more likely to be one result than another. The essential task is relatively simply to identify the genuine level of a claim (not the likely result of it) and to identify the genuine level of an offsetting claim (not the likely result of it).' I respectfully agree with those statements." 11 In the present case the basis upon which it is said there can be no genuine dispute is that there has been no setting aside of the judgment nor, indeed, any application for stay. The consequences of this are dealt with in Barclays Australia (Finance) Pty Limited v Mike Gaffikin Marine Pty Limited 21 ACSR 235 where at p 238 McLelland CJ in Equity had the following to say: "The assertion that there is a genuine dispute about the existence of the debt is in turn based on two grounds. The first relies on the existence of the undetermined appeal, in which orders are sought by Dan (inter Alia) that the proceedings brought by Gaffikin Marine be dismissed and that Gaffikin Marine pay the costs of those proceedings. If the appeal succeeds, it is possible that the costs orders of 16 July 1995 (including the order against Barclays, although it is not an appellant) may be set aside. The answer to this submission is that the possibility that a presently existing and enforceable debt may be set aside in the future pursuant to a subsisting appeal does not give rise to a genuine dispute about the existence of the debt within the meaning of s 459H; see eg Hoare Bros Pty Ltd v DCT (1995) 16 ACSR 213; 13 ACLC 348. Wilden Pty Ltd v Greenco Pty Ltd (1995) 13 ACLC 1039. The position would, of course, be different if there were a stay of proceedings under, or stay of execution of, the costs order against Barclays but there is not and in the absence of any such stay and notwithstanding the pendency of the appeal, the costs orders of 16 July 1995 against Barclays (together with the judgment of 15 May 1996), unless and until set aside on appeal, operate as res judicata determining the matter of Barclays' costs liability to Gaffikin Marine; see Spencer Bower & Turner Res Judicata 2nd ed p 144; Lahoud v B & M Quality Constructions (22 July 1994, NSWSC McLelland CJ in Eq, unreported)." 12 The only question might be whether there would be the same process of res judicata to apply to a default judgment, which this one is. Reference was made in the defendant's submissions to what Kirby J said in Linprint Pty Limited v Hexham Textiles Pty Limited (1991) 23 NSWLR 508. The matter is dealt with in some detail of res judicata by Spencer, Bauer and Handley at para 2.22. There the authors say the following: "A judgment (or order) by default is a judicial decision, whether the default was in filing an appearance, n pleading, in appearance at the hearing or in prosecution of, or resistance to, an appeal. In Henderson the ex parte hearings which led to the order for the taking of accounts, the Master's certificate, and the decree on further consideration were in a sense, default judgments. Where a point is overlooked in contested proceedings and the relevant party is later estopped, the judgment on that point is analogous to a default judgment. It may not be easy to identify the issues of fact or law determined by a default judgment. In some cases it may be a form of judgment by consent, but in others it may be the result of negligence, ignorance, or other demands on the defendant's time. A judgment by default in any form will, unless and until set aside, conclude the matters expressly decided by its operative and declaratory parts." 13 It is quite clear that there is a res judicata. 14 What I suspect Mr Velik has gone to do is what he said he was arranging to do, namely, file a notice of motion seeking to set aside default judgment. Even if he had done that, he has absented himself from the hearing to do it without making application to me to do so. However, the filing of the motion would make no difference because there has been no evidence of a stay of the judgment. 15 In the discussions with Mr Velik before the adjournment the matter of a stay was not raised although it was referred to in the copy of the case I gave to him. It is likely he would not be able to obtain a stay, one would think, for some time. The point, had he known about it and had researched it, has been obvious since these proceedings were started. 16 In the circumstances, it seems to me that there is no genuine dispute. Accordingly, I dismiss the proceedings with costs on the indemnity basis.

Virtual v Gye

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Judgment (10 paragraphs)

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