Accumulate Pty Ltd v St Augustine's College Sydney

[2013] NSWDC 296

District Court

New South Wales

Medium Neutral Citation:

Accumulate Pty Ltd v St Augustine's College Sydney [2013] NSWDC 296

Hearing dates:

15 and 18 November 2013

Decision date:

19 November 2013

Jurisdiction:

Civil

Before:

P Taylor SC DCJ

Decision:

(1) Set aside the default judgment in favour of Global Printing Systems Pty Ltd (in liquidation) A.C.N 136 369 401 awarded on 18 September 2013 on condition that the defendant deposits a sum of $35,000 with its solicitor by 5pm on 1 December 2013, such amount to be held by the defendant's solicitor pending further court order.

(2) Stay the entry of order 1 until 5pm on 2 December 2013 by ordering that order 1 is taken to be entered at 5pm on 2 December 2013 under Uniform Civil Procedure Rule 36.11(2).

(3) Direct the defendant to notify the liquidator, Adam Shepard, of these orders and directions by 5pm on 20 November 2013 to enable him to re-list the matter on 1 day's notice, if he is so minded.

(4) Stay enforcement of the default judgment pending the entry of order 1 on 2 December 2013.

(5) Order the costs of the application, including any costs thrown away, be costs of the proceedings.

Catchwords:

PROCEDURE - default judgment - setting aside - explanation of default - statement of claim sent to wrong address - whether defendant has a good defence on its merits - costs

Legislation Cited:

Acts Interpretation Act 1901 (Cth), s 29
Civil Procedure Act 2005, s 56
Corporations Act 2001 (Cth), s 109X, s 541
Interpretation Act 1987, s 76
Uniform Civil Procedure Rules 2005, r 10.22, r 16.3, r 36.11, r 42.1

Cases Cited:

Northumbrian Ice Cream Co Ltd v Breakaway Vending Pty Ltd [2006] NSWSC 1216
Roach v B & W Steel Pty Ltd (1991) 23 NSWLR 110
Vacuum Oil Pty Co Ltd v Stockdale (1942) 42 SR (NSW) 239

Texts Cited:

Ritchie's Uniform Civil Procedure NSW

Category:

Interlocutory applications

Parties:

Accumulate Pty Ltd ACN 145 848 148 (plaintiff)
St Augustine's College Sydney ACN 111 925 225 (defendant)

Representation:

Mr A E Maroya (defendant)
Somerset Ryckmans (plaintiff)
Lee & Lyons Lawyers (defendant)

File Number(s):

2013/209654

Publication restriction:

No

ex tempore Judgment

INTRODUCTION

1. St Augustine's College Sydney ("the College") applies to set aside a default judgment obtained against the College when it failed to file a defence within 28 days of service in accordance with the rules to a liquidated claim of debt by the plaintiff, Accumulate Pty Ltd ("Accumulate"). Accumulate says that there has been no explanation for the default or the delay and no defence has been established.

BACKGROUND

1. In August 2009 the College entered into two agreements in relation to its photocopying needs. The first, a service agreement, was with a company I shall call ECRM. ECRM was to provide a cost-efficient solution to the College's printing needs and was to be paid in proportion to the savings obtained by the College. Global Printing Systems Pty Ltd ("Global"), a company related to ECRM, is said to have performed the service agreement on behalf of ECRM since 2009.

1. The second agreement, which I shall call the "printing plan", was between the College and Macquarie Equipment Rentals Pty Ltd ("Macquarie"). Under the printing plan the College leased copying and printing hardware. Payment under the printing plan was according to a formula of a fixed amount per month for a certain quantity of pages or copies, then an amount per page for excess usage.

1. Mr Peter Johnston was an authorised representative of Global and ECRM. He also introduced the College to Macquarie. There is an issue between the parties about whether the two agreements are separate, as Accumulate maintains, or components of the one transaction, as appears to be maintained by the College. I have not been favoured with an agreement between Macquarie and ECRM (or Global or Accumulate) if one existed in or before August 2007.

1. However, as will appear, the debt claimed by Accumulate is said to be a debt originally owing to Macquarie that was, in 2013, assigned to Global and then assigned to Accumulate. Further, the first of these assignments indicates that Macquarie owed Global a sum in excess of $120,000, partly in respect of excess usage fees paid by the College. Presumably, this amount arose out of an agreement between Global and Macquarie.

1. The dispute between the parties arose out of the excess usage fees. Although the positions of the parties are not altogether clear, it seems to be common ground that the amount claimed by Accumulate is based on the monthly excess charges, whereas the College asserts its obligations are governed by an algorithm that determines annual excess charges. The calculation of annual excess charges is said to reduce the approximately $200,000 said by Accumulate to be owing by the College quite substantially to about $35,000 to $50,000. This reduction is a consequence of the ups and downs of monthly usage (because of peak times compared to holiday periods) which produce an average monthly usage over the year that is only a little greater than the minimum usage covered by the fixed amount per month.

1. In other words, the College says the obligation is to pay the excess after an annual reconciliation (a comparison between the annual actual usage and the annual minimum usage), whereas Accumulate says the obligation is to pay the excess after a monthly reconciliation. As indicated, Accumulate relies upon the written printing plan agreement to support its contention. The College relies upon asserted conversations with Mr Johnston.

1. Mr Johnston is alleged to have assured the College in about August 2007 and thereafter that (presumably notwithstanding the terms of the printing plan agreement) excess usage fees would be calculated after an annual reconciliation. There was evidence that, in August 2008 and August 2009, an annual reconciliation was undertaken and the College paid the amounts invoiced based upon those reconciliations.

1. This difference in the parties' perceived entitlements led to both sides engaging lawyers and correspondence ensued in 2011 and 2012. Both the service agreement and the printing plan appear to have been terminated in February 2012.

1. On 28 May 2013 Macquarie assigned its entitlements under the printing plan, as I mentioned above. The amount owed by the College is not specified in the deed of assignment of debt but less than three months later it was specified to be a sum over $210,000. The price paid by Global for this assignment was $21,950.50.

1. On 10 July 2013 Global commenced proceedings against the College for about $210,000 including interest. The statement of claim was served by express post to an address that appears to have been the address of a residence neighbouring the College. There was some evidence that the College did not receive the statement of claim. The affidavit of service evidenced that the envelope was correctly addressed and mailed by express post on 12 July 2013 and suggested that, by an Internet search, delivery occurred on 16 July 2013.

1. I note that s 76 of the Interpretation Act 1987 provides a presumption of service being "effected on the fourth working day after the letter was posted," in this case on 18 July 2013. The presumption is subject to "evidence sufficient to raise doubt [being] adduced to the contrary." It also requires an instrument to authorise the service, a requirement that appears to be satisfied by Uniform Civil Procedure Rule 10.22 and s 109X of the Corporations Act 2001 (Cth) (but compare s 29 of the Acts Interpretation Act 1901 (Cth)). This matter was not the subject of debate. I retain some concern about the proper date that service is taken to have been effected.

1. The first day after the 28-day period allowed for the filing of a defence, if service was effected on 16 July 2013, was 14 August 2013. On this date, without notice to the solicitors with whom Global's solicitor had been in correspondence concerning the debt, Global filed a notice of motion for default judgment, together with an affidavit of service and an affidavit of debt. As is contemplated by the rules (Uniform Civil Procedure Rule 16.3(1A)), there is no requirement for those documents to be served, although it is generally prudent to give notice of such an application (see Northumbrian Ice Cream Co Ltd v Breakaway Vending Pty Ltd [2006] NSWSC 1216 at [16]).

1. On the next day, 15 August 2013, Global assigned the debt of the College specified to be $214,184.66 to Accumulate for a price of $6,000. On the following day, 16 August 2013, Adam Shepard was appointed liquidator of Global under a creditors' winding up. At that stage no order had been made by the Registrar in respect of the application by Global for default judgment. An order for judgment in favour of Global for the specified sum was entered on 18 September 2013 and a sealed copy of that order was apparently obtained on 24 September 2013. On 25 September the College's Business Manager was advised of the order and less than a week later the College filed a notice of motion to set aside the default judgment.

ANALYSIS

1. In setting aside a default judgment, a defendant is ordinarily obligated to explain the default and any delay and show that there is a defence on the merits (see Vacuum Oil Pty Co Ltd v Stockdale (1942) 42 SR (NSW) 239 at 243 and Ritchie's Uniform Civil Procedure NSW at [36.16.15] (p 8269, Service 74). The explanation of the default is that the address on the envelope serving the statement of claim was not the correct address of the College, even though it appeared on the Australian Securities and Investments Commission ("ASIC") register, and that the notice was not received by the relevant person at the College.

1. The evidence to establish this could be clearer. Further, the evidence shows some negligence on the College's part in failing to ensure that the address on the ASIC records was correct. But there was no delay by the College once it became aware of the court proceedings as it filed a notice of motion a few days later. I am satisfied that the explanation for the default is sufficient to establish that "justice requires that in the circumstances [that the default] should be excused" (Vacuum Oil at 243).

1. I am fortified in this view by the failure of Global (by its solicitor) to inform the College's solicitor of the proceedings, notwithstanding that in 2011 and 2012 there was correspondence between the solicitors on the matter. Whether this conduct was "contrary to good conscience" (see Roach v B & W Steel Pty Ltd (1991) 23 NSWLR 110 at 113B) might be debatable (see also Northumbrian).

1. If the College has an arguable defence, the circumstances of this default do not raise any question in my mind about the fairness of the College having an entitlement to litigate the defence, which would be the result if I set aside the judgment. The question of whether the College has a good defence on the merits is not clear. I note that in Vacuum Oil at 243, Jordan CJ stated:

"[I]f there has been gross negligence on the defendant's part, the Court will be the more disposed to require at least a reasonably clear case of merits to be shown, to incline it to interfere".

I do not regard the conduct of the defendant as amounting to "gross negligence".

1. In the circumstances set out above, it follows that the obligation to establish a reasonably clear case on the merits is not required. Further, at a hearing such as this, the court is not concerned to embark upon the adjudication of the truth of the defence, but the defence must be asserted bona fide and there must be an arguable or triable issue (see Ritchie's at [13.16.15]). In the present case, the College relies upon the representations of Mr Johnston. I am persuaded that the representations are asserted bona fide, particularly because of the evidence of the annual reconciliations in 2008 and 2009.

1. However, there remains a question of whether representations or agreements of the kind asserted by the College are sufficient to establish a good defence. That matter is not at all clear to me. It depends upon Mr Johnston's relationship with Macquarie and, indeed, the relationship between Macquarie and companies which Mr Johnston undoubtedly represented, ECRM and Global. However, the circumstances of the default in this case do not persuade me that I should let that uncertainty deny the College the entitlement to have these matters ventilated at a trial.

1. There are other matters that raise my concern in this matter. I have mentioned that, prior to default judgment being obtained, and within the two days after it was sought, Global assigned the debt and went into liquidation. It seems to me that it is arguable that the assignment in August 2013 may have impacted upon Global's entitlement to a judgment in September 2013. Once the debt was assigned to Accumulate, Global had no entitlement to enforce the debt. This occurred several weeks prior to judgment being given.

1. Secondly, as I mentioned, Global went into liquidation on 16 August 2013. This might not preclude the liquidator obtaining a judgment already applied for two days earlier, but it raises a different concern. On 3 September Marc Ryckmans signed a notice of change of solicitor for Global. At that stage, and when the document was filed on 18 September 2013, Global was in liquidation but no reference to the liquidation was noted on the filed document. Section 541 of the Corporations Act 2001 (Cth) requires the expression "in liquidation" to follow the name of a company "in every public document" which I would infer includes documents filed in court proceedings. Section 541(2) makes contravention of this provision an offence of strict liability.

1. Nor is it apparent that the solicitor, Mr Ryckmans, was acting for Global (in liquidation) or for the liquidator. Mr Rosenblatt, a partner of Mr Ryckmans who appears for Accumulate, does not assert that he appears for the liquidator as well. This relates to the third concern, the interest of the liquidator, one Adam Shepard. At present, Global, the company of which he is the liquidator, has the benefit of a judgment for $214,184.66. The solicitor of that company has been changed in proceedings, as has the name of the plaintiff, apparently without his consent, and the application before me is to set aside the judgment in favour of Global.

1. As I indicated, neither Mr Shepard nor Global in liquidation is represented before me. So far as I am aware, the liquidator has no knowledge of the proceedings. Among the matters that may be of interest to Mr Shepard is that a debt for $214,184.66 had been assigned the day before the liquidation by the company he now controls for a consideration of $6,000.

1. Whilst it is difficult for me to see any matter that Mr Shepard could raise which would persuade me not to set aside the default judgment, I think he should be afforded an opportunity to be heard.

1. There is a real possibility that Mr Shepard may not wish to avail himself of the opportunity of being heard and, in that event, I would not wish to burden the parties with additional costs, consistent with my obligations under 56 of the Civil Procedure Act 2005. In these circumstances I think I should set aside the default judgment but order, under r 36.11, that the order is not to be entered, so as to stay the entry of the order for 14 days. In the meantime, I will direct the defendant to serve a copy of these orders on the liquidator by 5pm tomorrow. This will enable the liquidator to make application if so minded. The existing judgment should be stayed pending the entry of the orders.

1. The College concedes that it owes an amount of money for printing services of between $35,000 and $50,000. Whether this is owed to Global, the company in liquidation, or to Accumulate remains uncertain. I think, as a condition of the setting aside of the judgment, the plaintiff should deposit $35,000 with its solicitors to be held pending the resolution of the proceedings or further order. The defendant did not oppose that order.

1. Finally, there is the question of costs of this application. Ordinarily, the setting aside of a default judgment regularly obtained might entitle the plaintiff to its wasted costs. In view of the fact that the defendant has succeeded, which must carry some weight in view of Uniform Civil Procedure Rule 42.1, that the plaintiff has acted in haste and gave no notice of its intention to enter default judgment, and because of the concerns I have about the irregularity of the entered judgment in view of the assignment, the change of solicitor and the liquidation to which I have referred, I think the appropriate order is that costs of the application, including the costs thrown away, should be the costs of the proceedings.

1. Accordingly, the orders I make are:

(1)   Set aside the default judgment in favour of Global Printing Systems Pty Ltd (in liquidation) A.C.N 136 369 401 awarded on 18 September 2013 on condition that the defendant deposits a sum of $35,000 with its solicitor by 5pm on 1 December 2013, such amount to be held by the defendant's solicitor pending further court order.

(2)   Stay the entry of order 1 until 5pm on 2 December 2013 by ordering that order 1 is taken to be entered at 5pm on 2 December 2013 under Uniform Civil Procedure Rule 36.11(2).

(3)   Direct the defendant to notify the liquidator, Adam Shepard, of these orders and directions by 5pm on 20 November 2013 to enable him to re-list the matter on 1 day's notice, if he is so minded.

(4)   Stay enforcement of the default judgment pending the entry of order 1 on 2 December 2013.

(5)   Order the costs of the application, including any costs thrown away, be costs of the proceedings.

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Decision last updated: 06 March 2014