A1 Pools Pty Ltd v Morris
[2000] WASC 161
•23 JUNE 2000
A1 POOLS PTY LTD -v- MORRIS & ORS [2000] WASC 161
| SUPREME COURT OF WESTERN AUSTRALIA | Citation No: | [2000] WASC 161 | |
| Case No: | CIV:2144/1999 | 13 JUNE 2000 | |
| Coram: | MASTER BREDMEYER | 23/06/00 | |
| 11 | Judgment Part: | 1 of 1 | |
| Result: | Applications dismissed | ||
| PDF Version |
| Parties: | A1 POOLS PTY LTD (ACN 078 129 905) TREVOR WILLIAM MORRIS GC CONSTRUCTIONS PTY LTD (ACN 002 837 588) GARY ALAN GRISBROOK HICOAST PTY LTD (ACN 085 823 810) |
Catchwords: | Application to set aside default judgment Application for leave to strike out statement of claim |
Legislation: | Nil |
Case References: | Chamberlain v Deputy Commissioner of Taxation (1988) 164 CLR 502 Kok Hoong v Leong Cheong Kweng Mines Ltd [1964] 1 All ER 300 P/C Rolland v Bank of WA Ltd, unreported; FCt SCt of WA; Library No 980498; 3 September 1998 Alpine Bulk Transport Co Inc v Saudi Eagle Shipping Co Inc [1986] 2 Lloyds Rep 221 "Aura" Herbert D Stolle GMBH & Ors v Turbo Chairs International Pty Ltd [1999] WASC 260 Blackbird Entertainment Pty Ltd & Anor v IO Research Pty Ltd, unreported; SCt of WA; Library No 980646; 3 November 1998 Chitty v Mason [1926] VLR 419 Evans v Bartlam [1937] AC 473 Hughes v Justine [1894] 1 QB 667 Palmer v Prince [1980] WAR 61 |
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
- IN CHAMBERS
- Plaintiff
AND
TREVOR WILLIAM MORRIS
First Defendant
GC CONSTRUCTIONS PTY LTD (ACN 002 837 588)
Second Defendant
GARY ALAN GRISBROOK
Third Defendant
HICOAST PTY LTD (ACN 085 823 810)
Fourth Defendant
Catchwords:
Application to set aside default judgment - Application for leave to strike out statement of claim
(Page 2)
Legislation:
Nil
Result:
Applications dismissed
Representation:
Counsel:
Plaintiff : Mr D Vilensky
First Defendant : Mr S Owen-Conway QC
Second Defendant : No appearance
Third Defendant : No appearance
Fourth Defendant : Mr S Owen-Conway QC
Solicitors:
Plaintiff : Bowen Buchbinder Vilensky
First Defendant : Camillo D'Angelo
Second Defendant : No appearance
Third Defendant : No appearance
Fourth Defendant : Camillo D'Angelo
Case(s) referred to in judgment(s):
Chamberlain v Deputy Commissioner of Taxation (1988) 164 CLR 502
Kok Hoong v Leong Cheong Kweng Mines Ltd [1964] 1 All ER 300 P/C
Rolland v Bank of WA Ltd, unreported; FCt SCt of WA; Library No 980498; 3 September 1998
Case(s) also cited:
Alpine Bulk Transport Co Inc v Saudi Eagle Shipping Co Inc [1986] 2 Lloyds Rep 221
"Aura" Herbert D Stolle GMBH & Ors v Turbo Chairs International Pty Ltd [1999] WASC 260
Blackbird Entertainment Pty Ltd & Anor v IO Research Pty Ltd, unreported; SCt of WA; Library No 980646; 3 November 1998
(Page 3)
Chitty v Mason [1926] VLR 419
Evans v Bartlam [1937] AC 473
Hughes v Justine [1894] 1 QB 667
Palmer v Prince [1980] WAR 61
(Page 4)
1 MASTER BREDMEYER: The first and fourth defendants, who were represented by the same solicitor, have filed two applications. I will consider first their application dated 9 May 2000 to set aside a default judgment. That judgment was entered by the plaintiff against these defendants on 7 April 2000 for failure to file a defence. It recites that the plaintiff has abandoned its claim for an account, a declaration and the return of the goods set out in par 1, par 3 and par 4 of the prayers for relief against the first and fourth defendants. The judgment is in these terms:
1. The first defendant and fourth defendant do pay to the plaintiff damages to be assessed.
2. The first defendant and fourth defendant pay to the plaintiff interest on any assessed damages pursuant to s 32 of the Supreme Court Act.
3. The first defendant and fourth defendant pay the costs of the plaintiff to be taxed.
2 The first and fourth defendants say that the judgment should be set aside as of right because of res judicata. They say the statement of claim is based on the existence of three contracts between the plaintiff and the second defendant and in a summary judgment application under O 16 brought by the second and third defendants against the plaintiff, and heard by me on 20 January 2000, I found that there were no such contracts. On that day I entered summary judgment for the second defendant against the plaintiff for the whole of the claim and the plaintiff's action against the third defendant was discontinued. The first and fourth defendants say that those findings of fact bind the plaintiff. There was no appeal. Hence that issue is res judicata and in the face of those findings, the entry of the default judgment was an abuse of process. The first and fourth defendants rely on Chamberlain v Deputy Commissioner of Taxation (1988) 164 CLR 502.
3 I do not consider those findings constitute res judicata against the defendants. The parties are not the same. In the O 16 application the parties were the plaintiff and the second and third defendants. In the present application the parties are the plaintiff and the first and fourth defendants. Res judicata binds the same parties and/or their privies. The first and fourth defendants are new parties who are not involved in the former hearing. They are not privies to the plaintiff or to the second and third defendants. So in the present action, if it went to trial, the plaintiff could produce further and better evidence about the existence of the three contracts.
(Page 5)
4 That is a complete answer to this argument, but, if I be wrong on that, the pleading must be scrutinised with great care to expose the bare essence of what must necessarily have been determined by the entry of the default judgment. See Kok Hoong v Leong Cheong Kweng Mines Ltd [1964] 1 All ER 300 P/C. Doing that, the default judgment does not necessarily mean that the plaintiff had three contracts with the second defendant. Even if they were not contracts but just negotiations for contracts, the default judgment means that Morris, as a director and employee of the plaintiff, obtained confidential information about those "contracts" and used that to get contracts for himself. The plaintiff would have got those contracts had it not been for Morris' conduct and so the plaintiff suffered loss and damage. That is one of the causes of action in the pleading, so I consider the judgment is regular.
5 A regular judgment can be set aside if there is (1) a reasonable explanation as to why it went by default and (2) there is a defence on the merits. On (1), the affidavit of Mr Guerrini is very relevant. On 28 February 2000 Master Sanderson ordered the defence to be filed within 14 days, ie on or before 13 March. That was not done. On 14 March the plaintiff's solicitors faxed a warning letter to the defendants' solicitors advising them that, unless their defence was filed on or before 17 March, they would be filing a chamber summons to compel the same without further notice. That date was missed. On 30 March the plaintiff's solicitors faxed a further warning letter to the defendants' solicitors advising that, unless the defence was filed by 4pm on Friday 31 March, "it is our intention to proceed to take whatever further steps are available to our client without further notice". That deadline was also missed. The plaintiff's solicitor on 3 April filed a draft interlocutory judgment for damages to be assessed. There was some requisitions from the Registrar to be met and the judgment was eventually entered on 7 April.
6 What were the solicitors for the first and fourth defendants doing during that time? They were in the process of bringing a strike-out application. By 8 January 2000 they had received detailed advice from a senior counsel that the pleading was bad and should be struck out. On 21 March they lodged the strike-out application in the form of a chamber summons returnable before a Master. It also sought an extension of time to file the defence until further order of the court. I note that this was filed outside the deadline for a defence as then extended by the plaintiff to 17 March. By 27 March the chamber summons had not come back from the court. Mr Guerrini made enquiries on that day of the court but was told there was nothing waiting to be collected. On 28 March he received a telephone call from Registrar Johnston's Associate stating that the
(Page 6)
- strike-out application was to be heard by a Registrar and should be re-filed as a Form 18A application. That application to a Case Management Registrar is prescribed by O 29A r 12. I should add that a strike-out application can be heard by a Master or a Registrar, see O 60A r 2. By r 2A of that order, such an application "shall" be made to a Registrar who may, however, by r 3, refer the matter for determination to a Master.
7 Mr Guerrini says he filed the Form 18A application on 6 April, too late to stop the default judgment issuing on 7 April. Our file shows that the Form 18A application was filed on 7 April. It is date stamped 7 April. Our filing stamp does not show the time of the day when the document was received but it is numbered document 24 in the court file. The default judgment is numbered document 23, suggesting that the default judgment came first. Be that as it may, even if the Form 18A application came first, I consider the Registrar was not wrong in entering judgment on 7 April, despite the existence of that application. It would have been different if the defence had been filed before the default judgment was entered.
8 I do not blame the defendants' solicitors for the delay between 21 March, when they filed the chamber summons to strike out, and 28 March when the court told them that the application needed to be on a Form 18A, returnable before a Case Management Registrar. But I do blame the solicitors for the delays between then and 6 or 7 April when the Form 18A application was lodged because, on receipt of the plaintiff's solicitors' letter of 30 March extending the deadline to 4pm on 31 March, the solicitors should have realised the great need for urgency - to get the application lodged and to get it heard before the deadline expired. As stated, the application included an order for extension of the time to file the defence until further order. The explanation as to why the judgment went by default is not good.
9 There was a further delay between the default judgment of 7 April and the application of 9 May to set it aside.
10 I turn now to the merits of the defence of the first and fourth defendants. Several affidavits have been filed by Mr Morris and others, not only on this application to set aside but on the O 16 application already mentioned, and those affidavits have been referred to by both sides on the hearing of this application. They enable me to form some view of the merits.
(Page 7)
11 The law in this topic is now authoritatively found in Rolland v Bank of WA Ltd, unreported; FCt SCt of WA; Library No 980498; 3 September 1998. The defence must be an arguable defence with some degree of conviction. The defendant must present a credible defence demonstrating that if the default judgment was set aside and the matter argued on its merits, the defendant would have a real prospect of success.
12 I turn now to the defence on the merits re the Beckenham contract. But first I outline the plaintiff's evidence. On 7 October 1998 Mr Morris, on behalf of the plaintiff, gave a written quote to GC Constructions to build this pool for $130,000. Later, on a date presently not known but before 18 December, Mr Morris gave GC Constructions a telephone quote to build the same pool for $125,000. That quote was accepted by a supply order from GC Constructions to Mr Morris on 18 December 1998. The plaintiff says that at the time Mr Morris gave that quote he was a director, shareholder and employee of the plaintiff. He had confidential information, namely he knew the plaintiff's quote because he had given it, and he was thus able to undercut it.
13 Mr Morris was a director and shareholder of the plaintiff at that time. That is not disputed, but he says he was not an employee at that time. He says his wages stopped in the second or third week of November 1998. I do not consider that fact alone a credible defence. He owed fiduciary duties and duties not to misuse confidential information as a director of the company at that time.
14 Secondly, Mr Morris said he made an oral agreement with the other director of the plaintiff company (Mr Rapoff) that he would remain in the swimming pool industry after his separation from the plaintiff and would be able to seek work from the builders who did work with the plaintiff. That is denied by Mr Rapoff, who says that Mr Morris told him in August 1998 that he was sick of the swimming pool industry and wanted to get out of it completely. He wanted to go on holidays for three months and then start a business with his wife importing wrought iron furniture from the Philippines.
15 I note that Mr De Pietro, an accountant and an independent witness, has given evidence inconsistent with the defendant's evidence on this point. He was present at a meeting between himself, Mr Grazziano (another accountant) and Mr Morris held on 18 November 1998 to discuss arrangements over his exit from the plaintiff. Mr Rapoff was not present. Mr Morris discussed the agreement he had reached with Mr Rapoff with the accountants and instructed Mr De Pietro to prepare necessary
(Page 8)
- documents to give effect to it. In the course of those discussions Mr Morris said that he and his wife would use the $50,000 cash payment to start a new wrought iron business. That would have been an excellent opportunity for Mr Morris to state "I intend staying on in the swimming pool industry and to seek work from the company's builders". It also would have been an appropriate time for Mr Morris to say to the accountant "put a clause in the agreement that as from today I have the right to compete with the company in getting contracts".
16 I consider it extremely unlikely that Mr Rapoff agreed that Mr Morris could compete with the company in getting swimming pool contracts prior to him receiving his termination payment from the company. It would be "commercial suicide". I consider that not a credible defence with any real prospect of success.
17 I would now like to consider the defence in relation to the Bunbury contract. The plaintiff's case is that it agreed to build a pool for GC Constructions at Bunbury for $160,000. The plaintiff, through Mr Morris, gave a quote for that sum in October 1998 and it was later verbally accepted by GC Constructions. It was a subcontract. The defendant's evidence is that GC Constructions never got the main contract to build the complex (that went to Broad Constructions) so the plaintiff did not suffer any loss through any misconduct of Mr Morris. It suffered loss because it tendered as a subcontractor to a main contractor who never got the job. It is not alleged that the plaintiff tendered to Broad and that Mr Morris, knowing of that tender price, put in his own lower tender and got the job instead of the plaintiff. On the evidence in the affidavits the plaintiff has no case for loss or damage against the first and fourth defendants arising out of this contract. The third matter is the Grisbrook contract. On the evidence this contract did not go ahead. The pool was not built. Mr Morris did not misuse confidential information and/or breach fiduciary duties owed to the plaintiff to take this contract from the plaintiff and get it for himself. The plaintiff is not likely to be able to prove any case against the first and fourth defendants in relation to the Bunbury contract or the Grisbrook contract.
18 For these reasons I decline to set aside the default judgment.
19 The second application by the first and fourth defendants is that addressed to the Case Management Registrar dated 7 April 2000 for leave to strike out the statement of claim and to strike it out for various defects. This need not be heard in view of my prior decision but, in case I be wrong on that, I will consider it briefly. The pleading was attached to the
(Page 9)
- writ. It was served on 27 October 1999. The 21 day period within which to apply to strike it out expired on 17 November 1999. The first and fourth defendants' counsel raised concerns about the pleading to Registrar Johnston at a status conference held on 11 November 1999. Registrar Johnston made programming orders that any request for particulars has to be filed by 18 November and answered by 25 November. No order was made to file a defence. The plaintiff supplied answers to the particulars requested on 3 December 1999. The defendants did not consider the answers satisfactory and issued a chamber summons for better answers on 16 December 1999.
20 On 8 January 2000 the solicitors for the first and fourth defendants sent a fax to the plaintiff's solicitor setting out senior counsel's detailed objections to the pleading and inviting the plaintiff to amend the statement of claim, failing which the defendants would apply to strike it out. No response was received to that letter.
21 The defendants' application for further and better particulars came on for hearing before Master Sanderson on 18 February 2000. It was then adjourned to 28 February 2000. On that day the history of the proceedings and the comments concerning the statement claim were outlined to Master Sanderson. He applied O 20 r 13(5) and said, in effect, that the particulars should not be requested prior to filing the defence. He dismissed the chamber summons. He ordered the first and fourth defendants to file and serve a defence within 14 days and he awarded costs of the application and any reserved costs to the plaintiff in any event.
22 Having failed in their endeavour to get further and better particulars of the statement of claim, the defendants then determined to lodge a strike-out application and the steps taken in that direction have been outlined by me earlier in this judgment.
23 Overall I do not consider that the first and fourth defendants have a good explanation as to why this strike-out application is late. They chose to go down the path of getting particulars. They were fortunate in getting them prior to filing the defence from the Registrar but they failed to get further and better particulars before Master Sanderson. I consider they greatly exaggerate the difficulties in filing a defence to this pleading. Senior counsel for these defendants said that the pleading was so bad that the only response would be to file a one-line holding defence denying all the allegations and that the court looks on such defences with disfavour. I consider that Mr Morris knew all about the subject matter of this pleading.
(Page 10)
- After all, he was a director and shareholder of the plaintiff and its chief salesman. He was the one who got the contracts for the plaintiff. It was perfectly possible for him to plead to the introductory par 1 to par 6, for example. After all, he was a director of the plaintiff, he knew who the other directors and shareholders were. The pleading at par 2B says that he was employed by the company until 22 December 1998. Mr Morris has his own views on that which is expressed in his affidavit. He was perfectly capable of pleading that he ceased employment in the first or second week of November 1998. He was knowledgeable about the second defendant, GC Constructions. The plaintiff and GC Constructions had done business before, for example, in the building of the Joondalup Body Club pool. He knew that Mr Grisbrook was the director of GC Constructions; he had negotiated contracts with him. The fifth and sixth paragraphs say that the fourth defendant Hicoast Pty Ltd was incorporated on a certain date and gives its registered office and the shareholders and that Mr Morris was a director and shareholder of Hicoast. That would not be disputed. The ASC search shows that he is the only director and the secretary. The pleading of the three contracts in par 7, par 8 and par 9 all involved Mr Morris. He gave the quotes, and it is alleged that Mr Grisbrook of GC Constructions communicated his acceptance of the quotes to Mr Morris. So Mr Morris was able to plead to that whether the contracts were made or not. As he stated in his affidavits, there was no acceptance of those contracts. He knew that. He was in a position to plead to that. Paragraph 11 relates to the termination agreement and the payment of $50,000 and the transfer of the two motor vehicles. Mr Morris knew all about that and was able to plead to it. Paragraph 12 and later refer to legal matters, fiduciary duties etc. Mr Morris was capable of getting legal advice on that and pleading to them, possibly by denying them. In par 15 it is pleaded that Mr Morris, as a director and employee of the plaintiff, gained information in relation to the Beckenham, Bunbury and Grisbrook contracts. The information is not specified. It should have been. (It probably was knowledge that the jobs were available and of the plaintiff's quotes for them). Nevertheless, the defendants could have pleaded to par 15. In the circumstances of the inadequate plea, a denial would have been an appropriate response.
24 Paragraph 16 pleads that Mr Morris resigned from the company and thereafter, whilst still a director of the plaintiff, entered into negotiations to build swimming pools at Beckenham and Bunbury. Mr Morris knows all about that. I can say that because of his affidavits. He built the pool for the Body Club at Beckenham but he says he had an oral agreement with Mr Rapoff that as from the first or second week in November 1998
(Page 11)
- he was free to enter into his own contracts. He also would be able to say whether he built a swimming pool at Bunbury and, if so, whether he built it for GC Constructions or for another company. As I understand his case, he built that pool as a subcontractor for Broad Constructions. He would also be able to say whether he entered into a contract to build a swimming pool at Mr Grisbrook's residence. As I understand his case, he did not. The same comments can be made for the rest of the pleading. It was a perfectly adequate pleading for Mr Morris to have responded to. Whatever its technical defects, Mr Morris has first-hand knowledge of the key material facts pleaded against him and was in a position to plead a meaningful defence, and any solicitor could have done that based on the information given in his affidavits. For all these reasons I decline to give leave to allow this application to be brought out of time. This application will be dismissed.
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