Wellbe Properties Pty Ltd v Walter Projects Pty Ltd & Anor

District Court of NSW|2021-06-07

Mr M Klooster Defendants/Applicants to the Motion Ms M Castle

Solicitors: Plaintiff/respondent to the Motion New South Lawyers Defendants/Applicants to the Motion Brown Ward King Pty Ltd File Number(s): 2021/00113632

Judgment

The defendants, by Notice of Motion filed on 1 June 2021, seek orders for the setting aside of default judgment entered on 27 May 2021, as well as ancillary relief which includes the setting aside of garnishee orders (currently stayed) directed to the National Australia Bank on 31 May 2021.

The entry of default judgment in a claim for breach of contract and misleading or deceptive conduct

The claim brought against the defendants was pleaded as follows: 1. The plaintiff sought payment of a liquidated sum of $738,359.68, or alternatively damages, by reason of an asserted breach of a contract which was partly oral and partly in writing (paragraph 4 of the statement of claim), the terms of which were partly express and partly implied and which were reliant upon evidence of conversations as well as written communications. 2. "Further and in the alternative" (as the claim is put in the statement of claim at paragraph 10), express representations (partly oral and partly in writing) are pleaded as amounting to misleading or deceptive conduct, from which conduct the plaintiff "has suffered and is continuing to suffer loss and damage by reason of the ACL contravention for which Walter and Rose are liable in damages under section 82 of the CCA and/or section 236 of the ACL" (paragraph 18 of the statement of claim).
The timeline leading to default judgment is as follows: 1. The statement of claim was filed on 23 April 2021 and served the following day. 2. On 28 April 2021, the defendants' legal representatives sent the first of two emails to the plaintiff's legal representatives. There was no reply. 3. A Notice of Appearance was filed on 13 May 2021. 4. On 18 May 2021, the defendants' legal representatives again wrote to the plaintiff's legal representatives, foreshadowing a security for costs application, to which there was no reply. 5. On 31 May 2021, an application for default judgment was made without any notification to the defendants' legal representatives. They endeavoured to file a defence on 1 June 2021 without success.

The evidence

The defendants rely upon the following evidence: 1. The affidavit of Damien Ward sworn 1 June 2021. 2. Correspondence between the solicitors.
The plaintiff relies upon the following evidence: 1. Emails between the plaintiff and defendants and a copy of the contract for sale for the property assertedly purchased as a result of the representations of the defendants.

Setting aside a default judgment

The question for the court to determine is whether it is in the interests of justice to allow a party seeking to set aside a default judgment to be let in to defend the proceedings on the merits of the case. The relevant factors were identified by Hislop J in Hamafam Pty Ltd v Saadullah [2007] NSWSC 818 at [7] as follows: 1. Whether the defendants have shown a satisfactory explanation for the delay in filing a defence or moving to set aside the judgment. 2. Whether the default judgment was obtained without notice to the defendants. 3. Whether the proposed defence is asserted bona fide. 4. Whether, if the judgment was set aside, prejudice would be occasioned to the plaintiffs. 5. Whether the proposed defence presents an arguable or triable issue. 6. Whether it would be futile to set aside the judgment.
There is a preliminary issue as to regularity of the judgment obtained.

Was the judgment regularly obtained?

As Mr Klooster noted in his written submissions at paragraph 6, before the factors outlined above are considered, the court needs to be satisfied that the default judgment was regularly obtained.
Although the claim is framed as including a claim for damages (whether for the sum specified or in addition thereto is not stated in terms), the plaintiff submits that the claim is for a liquidated sum within the meaning of Uniform Civil Procedure Rule 2005 (NSW) ("UCPR") rule 16.2.
The UCPR does not define the expression "debt or liquidated claim", but similar expressions employed in other legislation have been interpreted as permitting the entry of default judgments for a precise amount, such as Spain v Union Steamship Co of New Zealand Ltd (1923) 32 CLR 138 (legal costs capable of calculation by a fixed scale of charges). Mr Klooster submits that his client is entitled to default judgment on the contract claim, as a "specified amount" (submissions, paragraph 9) is the only loss claimed, being the loss of the deposit for the amount of $681,818.15.
However, "the mere fact that calculation can be made of the precise amount of damages that are alleged to be payable does not convert what is a claim for damages into a claim for a liquidated sum": Alexander v Ajax Insurance Co Ltd [1956] VLR 436 at 450, cited in AE Consulting Pty Ltd v Online Valuations Pty Ltd [2012] NSWSC 1300 ("AE Consulting") at [9].
The facts in AE Consulting were as follows. The plaintiffs brought proceedings for breach of contract and for breach of s 18 of the Australian Consumer Law. No defence was filed and the plaintiffs sought default judgment. The Supreme Court Registrar referred the application to Davies J "because of doubt concerning whether the claim was one for liquidated damages" (at [4]).
Davies J noted that the precise sum claimed ($1,461,035.47) was the crystallisation of damages after selling a security property and noted the definition of "debt or liquidated demand" set out by Sholl J in Alexander v Ajax Insurance Co Ltd as follows: "6 In Alexander v Ajax Insurance Co Ltd [1956] VLR 436 Sholl J concluded that the expression "debt or liquidated demand" covered any claim: for which the action of debt would lie; for which an indebitatus (or "common") count would lie; for which covenant or special assumpsit would lie provided that the claim was for a specific amount not involving in the calculation thereof elements whose selection would depend on the opinion of a jury. 7 Sholl J said (at 442): It would therefore seem that, in order to be "liquidated", the sum claimed (save no doubt, in the case of a claim for a reasonable amount, where that could have been sued for under the common counts) must, in the opinion of the Court, have been agreed upon in some binding and conclusive fashion."
Davies J concluded that the plaintiffs had correctly claimed "damages from the defendants for breach of contract and for breach of section 18 Australian Consumer Law" and that, in those circumstances, default judgment was not available. The application was properly one pursuant to UCPR r 16.7 for default judgment for unliquidated damages, which required the lodgement of an affidavit in support as well as the use of form 39, and not form 36A, as was done here.
Mr Klooster acknowledged that a claim for liquidated damages for a pleading pursuant to s 18 of the Australian Consumer Law could not be made, but argue that the plaintiff was entitled to default judgment on the contract claim alone, as it was separable from the "further and in the alternative" claim for misleading or deceptive conduct.
For reasons similar to those expressed by Davies J in AE Consulting at [12] to [18], I am satisfied that disputed issues of fact in relation to the quantum of the claim arise and that the sum is not, in Sholl J's language, an "amount agreed upon in some binding and conclusive fashion".
The difficulty of ascertaining the true meaning of the phrase 'debt or liquidated demand' has been acknowledged in numerous cases, as is noted in the commentary under UCPR rule 6.3 at 6.3.10 of Ritchie's Uniform Civil Procedure New South Wales ("Ritchie's"). Unfortunately, many of the cases predating modern case management legislation are inconsistent with modern authority. For example, Richie's refers to Logos v Grunwaldt [1910] 1 KB 41, a claim made on a quantum meruit basis for professional work by a solicitor, as being a liquidated sum whereas, in Vimblue Pty Ltd v Toweel t/as Carpenters Core Building [2009] NSWSC 494 at [20], Barrett J considered a quantum meruit claim was not sufficiently definite to be treated as liquidated, adding: "20 If a mechanic spends half an hour repairing my car and there is no agreement between us as to the amount he will charge and I will pay, his subsequent claim for $1 million may be regarded as a liquidated claim. But no liquidated sum is thereby owing, due and payable by me to him. His entitlement is to be paid a reasonable sum upon a quantum meruit. Until the value of the work is ascertained and in the absence of some process that fixes what is reasonable according to what Palles CB called "positive data", as distinct from "opinion or conjecture", the liquidated claim does not mature into an entitlement to a liquidated sum."
If the claim is not a liquidated claim, then judgment has been entered irregularly, and may be set aside under UCPR r 36.15.
Mr Klooster alternatively submits that the defendants are not entitled to raise this issue, as they have failed to amend the Notice of Motion to allege any irregularity under UCPR r 36.15. In those circumstances, he argues, the court should proceed on the basis that the default judgment was regularly obtained.
This was a motion brought before the court on an urgent basis by reason of a garnishee order issued by the plaintiff. The orders sought include the setting aside of the judgment. It is not necessary for a party seeking such an order to set out every conceivable variation of the relief sought, even if the proceedings were not brought on an urgent basis. In addition, as occurred in AE Consulting, the court may raise the issue (in AE Consulting, the Registrar of the Supreme Court did so in circumstances where the point was not taken by the defendants, who in fact did not even appear).
I am satisfied that the judgment was not regularly obtained, as this was not a liquidated claim, and that it should be set aside pursuant to UCPR r 36.15.
In the alternative, I am satisfied that the reasons for the default which occasioned judgment have been satisfactorily explained, that the delay has not operated to the prejudice of the plaintiff, that there are strong discretionary factors and that there is a bona fide defence, warranting the setting aside if the judgment for the reasons set out below.

Delay

The application for default judgment was made only seven days after the expiry of the 28-day period for the lodgement of a defence.
Mr Klooster submits that "no actual explanation for the delay has been proffered" although he acknowledges the seven-day period is short. He submits that there is no evidence that the defendants' solicitor was busy, unaware of the deadline or had insufficient resources. In those circumstances, he submits, a defence should have been filed within the 28 days.
It is not in dispute that the plaintiff's solicitors not only failed to respond to the two emails sent by the solicitors for the defendants, but failed to give any warning of intention to enter judgment (Pope v Aberdeen Transport Co Pty Ltd [1965] NSW R 1550; Commonwealth Bank of Australia v Humphreys [2010] NSWSC 581 at [3]).
Mr Klooster points out that an applicant for default judgment is not bound to give notice of the application unless the court otherwise orders: UCPR r 16.3(1A). However, the absence of any specific requirement for explicit notice does not detract from the prudence of notification before applying for default judgment, and that is particularly the case where correspondence has been received from a solicitor and a notice of appearance has been filed. Ritchie's (at [16.3.10]) points out that the prudence of this practice minimises both the prospects of, and costs risks that may be associated with, any subsequent application by the defendant to set the judgment aside under UCPR rule 36.15 and 36.16: Northumbrian Ice Cream Co Ltd v Breakaway Vending Pty Ltd [2006] NSWSC 1216 at 16 per Brereton J.
More recently, judges have taken an increasingly firm line against what is often referred to as the practice of "snapping on" a judgment shortly after the 28-day period and with no notice to the opposing party.
In Commonwealth Bank of Australia v Wales [2012] NSWSC 407, McCallum J stated at [27]: "Telling Ms Wales by telephone that the bank's solicitors would be instructed "to continue legal action" does not amount, in my view, to her being put on notice of the motion for default judgment. Proper notice of that motion would have required that the motion and supporting affidavit be served in accordance with the rules. The default judgment was obtained without notice to her."
Although there is no express obligation set out in the rules, the professional courtesies practitioners owe to each other must be given some consideration. Failure to notify the opposing party where a notice of appearance has been filed and correspondence sent has been criticised by other judges in this court; in Josa Constructions Pty Ltd v Amarino Pty Ltd [2016] NSWDC 306 at [19], the judge hearing the application went so far as to describe such conduct as "grossly unprofessional and in clear breach of not only his professional obligations to his opponent, to his client and to the Court, but also in breach of his obligations pursuant to s.56 of the Civil Procedure Act 2005."
Similarly strong words have been used in courts in other jurisdictions around Australia. In Jender Pty Ltd v Flood Emergency Services Group Pty Ltd & Anor [2021] VSC 212 at [72], Daly AsJ stated: "Jender also relied on the decision of Beach J in Microscience (International) Pty Ltd v Total Peripherals Pty Ltd, as follows: I should add that I consider that where, as here, a solicitor has entered an appearance, the practice of 'snapping on' a default judgment, without notice, immediately upon the expiration of a period prescribed by the rules, should be strongly deprecated. It serves no useful purpose. It increases the costs of litigation unnecessarily. It should form no part of the practice of the law in Darwin. I simply add - nor should it be the practice in the State of Victoria." [Citations omitted]
The circumstances in which the solicitor for the plaintiff failed to notify the solicitors for the defendants needs to be seen in context of long-running prior litigation between these parties in the Supreme Court, where both parties are represented by the same legal firms. There can be no doubt that if notice had been given, a defence would have been filed.
In these circumstances, I do not accept Mr Klooster's submission that there has been no satisfactory explanation for the delay in filing the defence.
These are also strong factors warranting the exercise of a discretion in favour of the defendants, which I set out in more detail below.

Is there a bona fide defence?

The defence denies the case as pleaded and sets out at paragraph 20: "20. Further and in answer to the whole of the statement of claim the defendants say; On or about 4 July 2019 the second defendant confirmed in writing for and on behalf of the first and second defendants that the first defendant would not acquire the Site; Particulars Emails from Chris Rose to Ted Manny dated 5 July 2019. On or about 20 July 2019 it was represented by the plaintiff that it had exchanged contracts for sale on the site prior to this time and had paid a 5% cash deposit; Particulars Emails from Ted Manny to Chris Rose dated 20 July 2019. On or about 2 December 2019 Ted Manny confirmed that the First Defendant had acquired the site for its own part and for its own commercial purposes and offered the First defendant the opportunity to acquire the Site from it; Particulars Emails from Ted Manny to Chris Rose dated 2 December 2019. Any step taken by the plaintiff to acquire the site was a commercial decision made by it and its officers, nominees or directors unaffected by and not induced by any contractual arrangement between it or any misleading deceptive conduct undertaken by the defendants as alleged or at all."
Ms Castle explained the case as follows: 1. The representations set out in paragraph 10 of the statement of claim are the key to the case. These representations were essentially that Walter would acquire the site from the plaintiff on or before the completion of the contract for sale and enter into a contract to purchase the site in substitution for the plaintiff prior to completion of the contract for sale, or alternatively use its best endeavours to do so. There were also representations about having the financial capacity to take these steps. 2. As is set out in paragraph 20, the defendants informed the plaintiff that it would not acquire the site on 4 July 2019 and despite this, the plaintiff went ahead and exchanged contracts (see the email of 20 July 2019 at 9:28 AM) 3. Particulars provided include an email of 20 July 2019 from Mr Rose to Mr Mani sent at 12:06:12 stating that "it is Walter Projects intension [sic] to acquire this site". This is merely an expression of intention and does not constitute a binding contract or deceptive or misleading conduct: Kids Club Rozelle Pty Ltd v European Hire Cars Pty Ltd [2018] NSWSC 1115 at [56] - [57]. 4. It should also be noted that the "intension" [sic] referred to was in fact expressed three hours after "Ted M", on behalf of the plaintiff, emailed the second defendant, Mr Rose, that: "I've paid $340,909 on exchange with the balance $340,909 due on the 15th of August. I've agreed to give Simon $150K on the 15th of August. Note: Completion under the contract is 5th of December 2019." 1. Clearly, the question of the parties' understanding of any agreement they had prior to exchange of contracts will be a contested issue of fact for the hearing. 2. Additionally, there are reliance and causation issues arising from the facts as determinable from the plaintiff's own tender bundle, as well as paragraph 20 of the defence.
Mr Klooster submits the defendants have not established they have a bona fide defence, and gave eight reasons for this: 1. The mere statement in Mr Ward's affidavit that he believes there is a strong basis upon which the defendants can defend the proceedings is insufficient and no material facts are identified to found this statement. I agree that this alone is insufficient: Magnate Projects Pty. Ltd. v. Youma Constructions (No.2) Pty. Ltd. [2005] NSWCA 331 at [55]. In addition, I note that an affidavit verifying a defence where the deponent swears to the belief that the allegations of fact in the defence are true is not sufficient: National Australia Bank Ltd v McCann [2010] NSWSC 766 at 43. However, the court's task is to ascertain from the factual material before it whether there is an arguable defence, as opposed to relying upon affidavit evidence of this kind, and I am satisfied by the material put before me by Ms Castle that there is sufficient evidence. 2. While the court does not embark on the hearing of the full merits of the case, there should be some evidence of the facts relied upon by the defendant: Magnate Projects Pty. Ltd. v. Youma Constructions (No.2) Pty. Ltd. at [52]. However, given the explanation of the claim by Ms Castle, I am satisfied that there is sufficient material before the court to demonstrate a bona fide defence on the merits. 3. The only material put before the court is "extraordinarily limited" (submissions, paragraph 11.3). There is, however, sufficient information before the court to demonstrate that the question at the hearing will be when and in what circumstances were any asserted representations and, if so, what they were, bearing in mind that oral statements as well as correspondence is relied upon. 4. Mr Klooster's next point is that, while each case turns on its own facts, a verified defence with nothing further has been held to be insufficient. I regard this as a repetition of the point he made in (a) above. 5. The defence is little more than bare denials, notwithstanding paragraph 20, and in the absence of any evidence to support the pleaded defence, the court should assume that the case is "obscure". I regard this as a repetition of the point he made in (b) above. 6. No explanation has been given for failure to adduce evidence demonstrating a bona fides defence to the claims made. However, there is no requirement for the adducing of evidence for some sort of mini-trial in circumstances where the nature of the claim is demonstrated on legal principles, as well as clearly set out in the defence. 7. Mr Klooster next submitted that the defendants' unexplained omission to adduce any evidence arises notwithstanding being represented by experienced legal practitioners. This is effectively the same point is that based in paragraph (f) above. 8. Finally, Mr Klooster submitted that, as Mr Rose has elected not to adduce any evidence at all in support of the application, I should "draw a Jones v Dunkel inference", namely that any evidence given by him would not have assisted the defendants' application. This is effectively a restatement of the matters set out in paragraphs (f) and (g) above. Additionally, conformably with the observations of Allanson J in BOSI Services Ltd v Wright [2013] WASC 431 at [51], "I do not regard rules such as the rule in Jones v Dunkel (1959) 101 CLR 298 as having any particular application in interlocutory proceedings of this nature" (see also McMillan Investment Holdings Pty Ltd v Mangos [2021] NSWSC 37 at [12]).
I am satisfied from the material before me that there is a bona fide dispute as to the existence of a contract at all, and also as to the characterisation of the representations asserted to have been made in the correspondence. There is sufficient material before me to establish that there is a bona fide defence.

Prejudice

The plaintiff complains of the delay and cost if default judgment is set aside. Mr Klooster particularly relies on the fact that "the defendants have elected not to adduce any evidence whatsoever as to any prejudice occasioned to them in the event that the Default Judgment is not set aside" (submissions, paragraph 14).
I do not need evidence in the form of affidavits to appreciate that the prejudice to the plaintiff of the loss of its forensic advantage is far outweighed by the potential prejudice to the defendants of not being let in to defend a very substantial claim.

Discretionary factors

The role of judicial discretion in any application to set aside judgment is helpfully outlined by Hislop J in Lawteal Finance v Chrapacz [2010] NSWSC 73 at [45] - [47], citing Evans v Bartlam [1937] AC 473; [1937] 2 All ER 646; 53 TLR 689, the landmark case in terms of the undesirability of "snapping on" a judgment. The jurisdiction that a court exercises on an application of this nature will be significantly affected by what might be demonstrated to be the requirements of justice.
The factors discussed in the section of this judgment dealing with the defendants' asserted delay in filing the defence are also relevant to the exercise of discretion. I also note the observations of Bongiorno J in French v Triple M Melbourne Pty Ltd [2006] VSC 36 at [18] - [23] concerning the discretionary factors to take into account where default judgment is entered in a claim where the nature of the subject matter (in those proceedings, a claim for defamation) clearly presages disputed issues of fact, as would be the case in these proceedings, where the issues in dispute are also framed in terms of misleading or deceptive conduct.
This is a clear case where the discretion should be exercised in favour of the defendants.

Costs

The court's discretion extends to the terms on which it will set aside or vary a judgment. While the matter is discretionary, it is not unusual for terms to include an order that the defendant pay the costs of the application and the costs of steps rendered useless by the judgment being set aside: Commonwealth Bank of Australia v Humphreys at [3].
The plaintiff offered to consent to the setting aside of judgment if the defendants would pay the costs, not only of these proceedings, but also "enforcing default judgment", which I assume includes the garnishee order sent to the NAB (Exhibit 2). This was in response to the defendants' offer to set aside judgment on the basis that the parties bear their costs of the motion, and any costs thrown away in seeking and enforcing judgment be costs in the cause (Exhibit 2). If the offer was not accepted, those costs would be sought to be payable forthwith under UCPR r 42.7.
The discretionary factors in relation to costs favour the defendants, as their proposal was a reasonable one.
I propose to order the plaintiff to pay the defendants' costs of the motion, although I am not prepared to do so on the basis that the costs be payable forthwith, as the circumstances in which judgment was entered, although perilously close to sharp conduct, are not "unreasonable": Fiduciary Ltd v Morningstar Research Pty Ltd (2002) 55 NSWLR 1. Costs of enforcement, however, should be costs in the cause.

Orders: 1. Default judgment entered on or about 27 May 2021 against the first and second defendants set aside pursuant to UCPR r 36.15. 2. The defendants have leave to rely upon the defence filed in court on 7 June 2021, which is deemed to be their defence in these proceedings. 3. Dispense with any requirement for further filing of the defence or for service of the defence. 4. The plaintiff pay the defendants' costs of the motion. 5. The defendants' application for the costs of the motion to be payable forthwith is refused. 6. Garnishee orders against the defendants directed to the National Australia Bank made on 31 May 2021 set aside. 7. Costs of enforcement of the judgment by way of garnishee order to be the parties' costs in the cause. 8. These proceedings listed for further directions before the Judicial Registrar on 9 July 2021.

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: 16 June 2021

Uniform Civil Procedure Rule 2005(NSW)rr 6.3, 16.2, 16.3(1A), 16.7, 36.15

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