Court of Appeal
Supreme Court
New South Wales
Medium Neutral Citation: Arnold v Forsythe [2012] NSWCA 18 Hearing dates: 30 January 2012 Decision date: 23 February 2012 Before: McColl JA at 1;
Young JA at 2;
Sackville AJA at 3Decision: 1. Appeal allowed.
2. Orders made by Truss DCJ on 4 March 2011 be set aside.
3. The default judgment and orders made by Truss DCJ on 30 September 2010 and 14 October 2010 be set aside.
4. Remit to the District Court for hearing and determination Prayer 2(b) of the notice of appeal dated 19 August 2011.
5. The appellant pay the costs of the respondents:
(a) thrown away by reason of the entry of default judgment on 30 September 2010, including the costs of the hearing on 30 September 2010;
(b) thrown away by reason of the entry of default judgment on 14 October 2010, including the costs of the hearing on 14 October 2010; and
(c) of and incidental to the appellant's notice of motion to set aside default judgment filed on 28 October 2010, including the costs of the hearing on 10 February 2011.
6. The respondents pay the appellant's costs of the appeal, including the costs of the application for leave to appeal.
[Note: The Uniform Civil Procedure Rules 2005 provide (Rule 36.11) that unless the Court otherwise orders, a judgment or order is taken to be entered when it is recorded in the Court's computerised court record system. Setting aside and variation of judgments or orders is dealt with by Rules 36.15, 36.16, 36.17 and 36.18. Parties should in particular note the time limit of fourteen days in Rule 36.16.]
Catchwords: PRACTICE AND PROCEDURE - default judgment - whether judgment given irregularly - whether plaintiff's claim was for a debt or liquidated sum - whether affidavit in support stated the source of the deponent's knowledge - whether plaintiff entitled to retain portion of the default judgment Legislation Cited: Civil Procedure Act 2005
District Court Act 1912 (NSW)
Supreme Court Act 1970
Supreme Court Rules 1970
Uniform Civil Procedure Rules 2005Cases Cited: Agricultural and Rural Finance Pty Ltd v Gardiner [2008] HCA 57; 238 CLR 570
Alexander v Ajax Insurance Co Ltd [1956] VLR 436
Australian Woollen Mills Pty Ltd v Commonwealth [1954] HCA 20; 92 CLR 424
Cameron v Cole [1944] HCA 5; 68 CLR 571
Canny Gabriel Castle Jackson Advertising Pty Ltd v Volume Sales (Finance) Pty Ltd [1974] HCA 22; 131 CLR 321
Commonwealth v Verwayen [1990] HCA 39; 170 CLR 394
Coulton v Holcombe [1986] HCA 33; 162 CLR 1
Dalgety Futures Pty Ltd v Poretsky [1980] 2 NSWLR 646
Environmental Systems Pty Ltd v Peerless Holdings Pty Ltd [2008] VSCA 26; 19 VR 358
Fenato v Chief Commissioner of State Revenue [2010] NSWCA 80; 70 NSWLR 20
Fiduciary Ltd v Morningstar Research Pty Ltd [2002] NSWSC 432; 55 NSWLR 1
Gregory's Transport Pty Ltd v Ray's Haulage Pty Ltd…
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- AGLC
- Arnold v Forsythe [2012] NSWCA 18
- Case
- [2012] NSWCA 18
- Decision Date
CaseChat Overview and Summary
The Court of Appeal was required to determine whether the plaintiff's claim, as pleaded in the statement of claim, constituted a debt or liquidated sum for the purposes of entering default judgment. Further, the court had to consider whether the affidavit in support of the default judgment application adequately stated the source of the deponent's knowledge, and whether the plaintiff was entitled to retain the portion of the default judgment awarded.
The court found that the statement of claim, when properly construed, did not clearly allege that the appellant had acquired the interests and entitlements under the separation agreement, nor that he had assumed specific liabilities or was obliged to pay a sum of money independently of further steps being taken. The language used in the pleading suggested that the agreement contemplated future actions by the respondents to effect the transfer of interests and assumption of liabilities. The court noted the inherent complexity in dissolving partnerships or dealing with retiring partners, which required precise identification of liabilities and mechanisms for their assumption. Given these ambiguities and complexities, the court concluded that the claim was not sufficiently clear to support the irregular entry of default judgment.
Consequently, the Court of Appeal allowed the appeal, setting aside the default judgment and related orders. The matter was remitted to the District Court for hearing and determination. The court also made orders regarding the costs of the proceedings, reflecting the irregular entry of the default judgment.
Orders
Orders of the court
1. Appeal allowed.
2. Orders made by Truss DCJ on 4 March 2011 be set aside.
3. The default judgment and orders made by Truss DCJ on 30 September 2010 and 14 October 2010 be set aside.
4. Remit to the District Court for hearing and determination Prayer 2(b) of the notice of appeal dated 19 August 2011.
5. The appellant pay the costs of the respondents:
(a) thrown away by reason of the entry of default judgment on 30 September 2010, including the costs of the hearing on 30 September 2010;
(b) thrown away by reason of the entry of default judgment on 14 October 2010, including the costs of the hearing on 14 October 2010; and
(c) of and incidental to the appellant's notice of motion to set aside default judgment filed on 28 October 2010, including the costs of the hearing on 10 February 2011.
6. The respondents pay the appellant's costs of the appeal, including the costs of the application for leave to appeal.
[Note: The Uniform Civil Procedure Rules 2005 provide (Rule 36.11) that unless the Court otherwise orders, a judgment or order is taken to be entered when it is recorded in the Court's computerised court record system. Setting aside and variation of judgments or orders is dealt with by Rules 36.15, 36.16, 36.17 and 36.18. Parties should in particular note the time limit of fourteen days in Rule 36.16.]
Background
Background to the litigation
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Evidence
Evidence Before The Court
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Decision
Reasons for decision
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Ratio Decidendi
Legal Principle Established
The respondents submitted that paras 3 and 4 of the statement of claim ([7] above) should be construed as pleading that upon execution of the Separation Agreement : There are several difficulties with this interpretation of the statement of claim. The first is the conditional language used in the pleading. Sub-paragraph 3(b) of the statement of claim pleads that under the Separation Agreement the appellant would acquire the various interests and entitlements. The statement of claim does not allege that the appellant acquired those interests or entitlements upon execution of the Separation Agreement. Similarly, sub-paras 3(c) and (d) plead that the appellant would assume certain unspecified liabilities and would pay the respondents the sum of $203,459.31. While this language is not unambiguous, it suggests that the Separation Agreement (which was alleged to be partly in writing and partly oral) contemplated that the appellant would be obliged to pay the specified sum if and when the respondents took the necessary steps to assign or otherwise transfer the various interests and entitlements to him. The second difficulty is that, as Mr Horowitz accepted, unless this interpretation of the statement of claim is adopted, the allegations in sub-paras 3(b) and (c) are surplusage. If the intent was to allege that the Separation Agreement contained a term requiring the appellant to pay a particular sum independently of any other term or condition, it was neither necessary nor appropriate for the statement of claim to plead the other terms or conditions in the Separation Agreement. Thirdly, where a partnership is dissolved or one partner retires from the partnership (the statement of claim is not clear on this point), the acquisition by one former partner of the interests of the others is not a simple matter: see Livingston v Commissioner of Stamp Duties [1960] HCA 94; 107 CLR 411, at 453, per Kitto J; Canny Gabriel Castle Jackson Advertising Pty Ltd v Volume Sales (Finance) Pty Ltd [1974] HCA 22; 131 CLR 321, at 327-328, per curiam ; United Builders Pty Ltd v Mutual Acceptance Ltd [1980] HCA 43; 144 CLR 673, at 687-688, per Mason J; Lindley & Banks on Partnership (19 th ed, 2010), at [19-09]-[19-12]. Similarly, the mechanisms by which a retiring partner or former partner is able to assume the liabilities of his partners require careful consideration, starting with precise identification of the liabilities to be assumed. There is no evidence as to whether the partners appreciated the potential complexity of the arrangements required to bring about the legal consequences contemplated in an agreement in the terms pleaded in sub-paras 3(b) and (c) of the statement of claim. Nonetheless, the complexity of those arrangements tends to suggest that the statement of claim, properly construed, does not allege that the appellant acquired the interests by virtue of the Separation Agreement itself, without the need for the respondents having to take any further steps to implement the arrangements in a legally effective manner.