Black v Helfand - [2010] SASC 233

SUPREME COURT OF SOUTH AUSTRALIA
(Magistrates Appeals: Civil)
BLACK v HELFAND
[2010] SASC 233
Judgment of The Honourable Justice Duggan
29 July 2010
PROCEDURE - JUDGMENTS AND ORDERS - AMENDING, VARYING AND SETTING ASIDE - ACTIONS TO REVIEW OR SET ASIDE JUDGMENT - IN GENERAL
Appeals against decision of Magistrate to set aside default judgment in two actions before Magistrates Court – whether at hearing before the Magistrate the respondent established an arguable case and a reasonable excuse for not having complied with r 87 of the Magistrates Court (Civil) Rules 1992 (SA).
HELD: appeals dismissed – orders made by the Magistrate cannot be upheld on the basis of the material before him – however on the basis of fresh information presented on appeal an arguable case and reasonable excuse for not complying with r 87 are established.
Magistrates Court (Civil) Rules 1992 (SA) r 87, referred to.
Saunders v Esanda Finance Corp Ltd (Unreported, Supreme Court of South Australia, Lander J, 31 May 1996), discussed.

BLACK v HELFAND
[2010] SASC 233
Magistrates Appeals: Civil

DUGGAN J: These two appeals are against the decision of a Magistrate to set aside default judgment in two actions before the Holden Hill Magistrates Court. The appellant was, at one time, engaged to represent the respondent in family law proceedings. The subject of the actions were claims for unpaid legal fees said to be payable by the respondent.
The appellant commenced two actions against the respondent in the Holden Hill Magistrates Court. The claim in Action No. 1497 of 2009 (“the 2009 action”) was filed on 8 December 2009 and served on the respondent by post on 10 December 2009. The time for filing a defence expired on 4 January 2010. No defence was filed by that date and the appellant signed judgment against the respondent on 5 January 2010.
The claim in Action No. 61 of 2010 (“the 2010 action”) was filed on 20 January 2010 and served on the respondent by post on 22 January 2010. The time for filing a defence expired on 15 February 2010 and no defence had been filed by that date. Judgment was signed against the respondent on 16 February 2010.
On 17 February 2010 the respondent filed an application to set aside the default judgment in the 2010 action. The application was listed for hearing on 25 March 2010.
The respondent filed an application to set aside the default judgment in the 2009 action on 18 February 2009. The application was listed for hearing on 22 April 2010.
On 17 November 2009 the appellant commenced a further action against the respondent for unpaid fees in the Adelaide Magistrates Court (“the Adelaide Magistrates Court action”), but that action is not the subject of an appeal in the present case. The Adelaide Magistrates Court action was stayed on 3 December 2009 pending a taxation of the costs claimed in that matter by a Master of the Supreme Court.
The application to set aside the default judgment in the 2010 action was heard on 25 March 2010. In the course of the hearing the Magistrate called for the Court file in the 2009 action. He then set aside the default judgments in both actions.
The Magistrate delivered the following reasons for his decision to set aside the default judgments:
The plaintiff has issued three sets of proceedings; one is in Adelaide Magistrates Court, two are in this court. The defendant claims he has a good defence. The defendant believed the causes of action as pleaded in this court were a repeat of the action pleaded in the Adelaide Magistrates Court. Those proceedings in the Adelaide Magistrates Court were stayed and referred to the Supreme Court for a taxation. It was not until some time had passed that the defendant became aware the claims here were a separate cause of action.
The defendant’s solicitor tells me today he has written to the plaintiff seeking details of the actions which are the subject of the application before this court. He has yet to receive a reply. This is an unusual matter and the defendant may have been confused as to the exact state of these proceedings and what proceedings were on foot, resulting in a failure to file a defence. It appears the plaintiff has failed to co-operate with the defendant’s lawyers. Despite the stay of the proceedings in the Adelaide Magistrates Court the plaintiff seeks to pursue separate actions in this court as if there was nothing happening in the Adelaide Magistrates Court, and it seems to me, in some defiance of the order made in that court. In my opinion the plaintiff ignored the order made in the Adelaide court by issuing more proceedings in this court. I am satisfied there are sufficient reasons to set the judgment aside and judgment will be set aside.
Applications to set aside default judgments in the Magistrates Court are regulated by r 87 of the Magistrates Court (Civil) Rules 1992 (SA) (“the Rules”) which provides as follows:
(1)The Court may set aside or vary a judgment (not being a final judgment.).
(2)The Court must not set aside such a judgment unless the party seeking to set it aside establishes that he or she –
(a)     has an arguable case on the merits;
and
(b)     has a reasonable excuse for not having complied with these Rules, or an order of the Court, or any time limit fixed by these Rules or order of the Court, in respect of the action or proceeding.
(3)When setting aside a judgment the Court may order –
(a)     payment to the other party of costs thrown away;
(b)     payment or security under Rule 81.
Rule 87(2) requires the applicant seeking to set aside a default judgment to establish the existence of two conditions precedent before the discretion conferred by sub-rule (1) can be exercised. It must be established that the applicant has an arguable case on the merits and a reasonable excuse for not having complied with the Rules.
The Magistrate referred to the fact that the defendant claimed he had a good defence. However, there is no further reference to the defence in the reasons for decision. There was no determination of whether the respondent has an arguable case on the merits. The nature of such an enquiry was explained by Lander J in Saunders v Esanda Finance Corp Ltd:[1]
It is not possible on an application of this kind, to resolve disputed questions of fact, particularly when those answers will depend upon the credibility of the parties (Watson v Anderson (1976) 13 SASR 329 at 334).
The appellant is not called upon to establish that his defence will be made out, but merely that he has an arguable case. To that end, the appellant must establish that upon the facts, as the appellant alleges them to be, the appellant has an arguable defence. The appellant must go further than assert that he has a defence, he must bring forward sufficient information and material to show that he is bona fide and intends to defend the action and that there “is some possibility of his doing so with success” (Grimshaw v Dunbar [1953] 1 QB 408 at 416).
[1] (Unreported, Supreme Court of South Australia, Lander J, 31 May 1996).
As for the question of reasonable excuse for not complying with the Rules, the Magistrate referred to the possibility of the respondent being confused as a result of the number of actions. However, His Honour seems to have placed most significance on the order staying the Adelaide Magistrates Court action.
The stay of proceedings in the Adelaide Magistrates Court action was ordered on 3 December 2009. On the information before me, the order was made because the appellant’s fees which were claimed in that action were the subject of a taxation of costs before a Supreme Court Master. The application for the taxation was made by the respondent. At the time of the hearing in which judgment was set aside the bills of cost upon which the 2009 and 2010 actions are based were not part of the taxation which prompted the stay of proceedings in the action in the Adelaide Magistrates Court.
Bearing in mind the pre-conditions set out in r 87 the circumstances summarised by the Magistrate in his reasons do not justify the orders which he made setting aside the default judgments. In particular, there was a failure to determine whether the respondent had an arguable case on the merits. As pointed out, it was necessary for this to be established before the discretion under r 87 could be exercised.
It follows that the orders made by the Magistrate cannot be upheld on the basis of the material which was before him. However, in the course of the hearing of the appeal, several affidavits relevant to the exercise of the discretion under r 87 were tendered by the appellant and the respondent. It is appropriate, therefore, that I should consider the matter afresh in the light of this further information.
It is not in dispute that there was an agreement between the appellant and the respondent that the fees charged by the appellant would not become due and payable until the conclusion of a trial concerning a family law matter in which the respondent was involved. The trial has not yet been completed. The appellant says that the agreement was to proceed on the understanding that the appellant would continue to act for the respondent, but this was not adverted to in the agreement.
The appellant also submits that there was an implicit retraction of the undertaking given by the appellant when the appellant ceased to act for the respondent.
Whether there was an implicit retraction or, in the alternative, an implied understanding that the agreement would only continue while the appellant was engaged would be for the Court to determine. However, it can be said that there is, at least, an arguable defence on the respondent’s version.
The next question is whether the respondent has a reasonable excuse for not complying with the rule stipulating the time for filing a defence.
I have said that the 2009 action was filed on 8 December 2009. The appellant claims it was served by post on 10 December 2009. The time for filing a defence expired on 4 January 2010.
The claim in the 2010 action was filed on 20 January 2010 and the appellant states it was served by post on 22 January 2010. The time for filing a defence expired on 15 February 2010.
In the case of each action judgment was signed against the respondent on the day after the time for filing the defence expired.
The respondent states in his affidavit that he left Adelaide for Brisbane on 14 December 2009 before continuing on to the Gold Coast. He then travelled from the Gold Coast to Sydney and from there to San Francisco, leaving Australia on 25 December 2009. He arrived back in Australia on 4 February 2010.
If this is so, he left Adelaide four days after the posting of the claim. He states that he did not receive the claim before he left. The claim was addressed to him at 22 Gulf Street, Port Hughes. He says that he was living at 22 Gulf Street, Moonta Bay. The appellant claims that the error in address would not have mattered because other correspondence addressed to the respondent at Port Hughes was received by him. It is clear the appellant was overseas when judgment was signed in relation to this action.
The respondent would have been overseas at the time the claim in the 2010 action was posted to him. Judgment was signed in that action 11 days after he returned from overseas.
Mr Kavanagh states in his affidavit of 16 June 2010 that he was first instructed by the respondent on 11 February 2010, four days after the respondent’s return from overseas. He was told that there were two matters in which the respondent was involved, one in the Adelaide Magistrates Court and the other in the Holden Hill Magistrates Court. The respondent instructed him that a default judgment had been entered in the Holden Hill Magistrates Court matter and that he should apply to set it aside. Mr Kavanagh said it appeared at that point that the respondent was unaware of a third proceeding and he was not instructed in respect of a third matter which was the 2009 action.
On 12 February 2010 Mr Kavanagh prepared an application to set aside default judgment in the 2010 action. When a representative from Mr Kavanagh’s office attended the Holden Hill Magistrates Court Registry he was told that there was no default judgment in the matter. Mr Kavanagh assumed that the respondent had advised him incorrectly and forwarded a defence in the 2010 action to the Holden Hill Magistrates Court.
Mr Kavanagh also wrote to the appellant on 12 February 2010 requesting various details relating to “the Holden Hill Magistrates Court proceedings”. He was referring to the 2010 action as he still had no knowledge of the 2009 action.
In his reply of 15 February 2010, the appellant referred to the application to set aside judgment in the 2010 matter and stated:
We and Counsel are of the opinion that such application is without merit and we advise as a matter of courtesy that we will defend such an application.
In fact, there was still time for the appellant to file a defence in the 2010 matter. However, Mr Kavanagh was unaware of this. There was no mention in the respondent’s reply of the 2009 action. At this time Mr Kavanagh was obtaining instructions from the respondent by telephone and email.
Mr Kavanagh did not learn of the 2009 action until he was contacted by the respondent who said he had received correspondence from the Sheriff’s office at Adelaide following the issue of a warrant for the sale of the respondent’s property. Mr Kavanagh then contacted the Registry at the Holden Hill Magistrates Court and obtained details of the claim in the 2009 action.
It is clear from the fact that Mr Kavanagh was unaware of the 2009 action until he contacted the Holden Hill Magistrates Court that there was confusion in his mind. If he had been aware that there were three actions, he could have ensured that a defence was filed in the 2010 action before time had expired.
The fact that the respondent did not advise Mr Kavanagh of the 2009 action supports the respondent’s claim that he was unaware of that action himself. In any event, there was clear confusion which, in my view, provides a basis for finding that there was a reasonable excuse for not complying with the Rules in relation to the filing of defences to the actions within the time limits.
The appeals will be dismissed.