BURATOVIC v Jakimovski
[2004] WASC 63
BURATOVIC -v- JAKIMOVSKI & ANOR [2004] WASC 63
| SUPREME COURT OF WESTERN AUSTRALIA | Citation No: | [2004] WASC 63 | |
| Case No: | CIV:1868/2003 | 31 MARCH 2004 | |
| Coram: | MASTER NEWNES | 7/04/04 | |
| 10 | Judgment Part: | 1 of 1 | |
| Result: | Default judgment set aside | ||
| B | |||
| PDF Version |
| Parties: | NINO BURATOVIC STOILKO JAKIMOVSKI KEVIN PENKIN |
Catchwords: | Practice and procedure Application to set aside default judgment regularly entered Turns on own facts |
Legislation: | Nil |
Case References: | Kostokanellis v Allen [1974] VR 596 Lau v Citic Australia Commodity Trading Pty Ltd [1999] VSCA 349 Palmer v Prince [1980] WAR 61 Parker v Transfield Pty Ltd [2000] WASC 382 Rolland v Bank of Western Australia Ltd, unreported; FCt SCt of WA; Library No 980498; 3 September 1998 Giacobino v Bains Harding Industries Pty Ltd [2001] WADC 59 Girando v Girando (1997) 18 WAR 450 Vacuum Oil Pty Ltd v Stockdale (1942) 42 SR (NSW) 239 |
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
- IN CHAMBERS
- Plaintiff
AND
STOILKO JAKIMOVSKI
First Defendant
KEVIN PENKIN
Second Defendant
Catchwords:
Practice and procedure - Application to set aside default judgment regularly entered - Turns on own facts
Legislation:
Nil
Result:
Default judgment set aside
(Page 2)
Category: B
Representation:
Counsel:
Plaintiff : Mr G J B Porter
First Defendant : Mr A P Hershowitz
Second Defendant : No appearance
Solicitors:
Plaintiff : Talbot & Olivier
First Defendant : D C Heldsinger
Second Defendant : K Penkin & Associates
Case(s) referred to in judgment(s):
Kostokanellis v Allen [1974] VR 596
Lau v Citic Australia Commodity Trading Pty Ltd [1999] VSCA 349
Palmer v Prince [1980] WAR 61
Parker v Transfield Pty Ltd [2000] WASC 382
Rolland v Bank of Western Australia Ltd, unreported; FCt SCt of WA; Library No 980498; 3 September 1998
Case(s) also cited:
Giacobino v Bains Harding Industries Pty Ltd [2001] WADC 59
Girando v Girando (1997) 18 WAR 450
Vacuum Oil Pty Ltd v Stockdale (1942) 42 SR (NSW) 239
(Page 3)
1 MASTER NEWNES: This is an application by the first defendant to set aside a judgment obtained by the plaintiff in default of appearance. The terms of that judgment require the first defendant to pay to the plaintiff the sum of $30,000, interest and costs. The action has been remitted to this Court from the District Court by reason of other issues connected with it.
2 The history of the matter is of relevance to the current application and it is therefore necessary to canvass it.
3 On 29 November 2001, the plaintiff issued a writ of summons in the District Court against, inter alia, the first defendant claiming the sum of $30,000 pursuant to a loan agreement made between the plaintiff and the first defendant. The plaintiff pleaded that the loan was repayable within 14 days of call or settlement of the sale of the first defendant's property in Eden Hill. The plaintiff pleaded that settlement of the sale of the Eden Hill property took place on about 20 July 2001, but the money was not paid to the plaintiff. Instead, it was lodged in a National Australia Bank account in the joint names of the plaintiff's solicitors and the second defendant, as solicitor for the first defendant.
4 On 30 January 2002, the plaintiff obtained an order for substituted service of the writ on the first defendant. On that application, evidence was adduced that previous efforts to effect personal service had proved fruitless because the first defendant's whereabouts could not be ascertained. The order for substituted service provided for service by sending the writ by ordinary prepaid post to the second defendant.
5 No appearance was entered on behalf of the first defendant and judgment in default of appearance was entered for the plaintiff on 22 April 2002 for the sum of $30,000, interest and costs.
6 On 10 March 2004, the plaintiff made the current application to set aside the judgment. An affidavit of the first defendant sworn 9 March 2004 was filed in support of the application. In that affidavit, the plaintiff says that he instructed the second defendant on 19 October 2001 regarding a dispute with the plaintiff. (In the light of later statements in the affidavit it is not clear whether that date is an error or the first defendant intended to say that that was the last date on which he instructed the second defendant.) He says he did not speak to the second defendant again until 18 November 2003. The first defendant says that, following the sale of his house is late July 2001, he went to Macedonia to visit his sick father, returning to Australia at the end of September 2001. According to the first defendant, during the period from late September 2001 to December
(Page 4)
- 2002, he lived in Perth, staying with a various friends. He says he changed residences frequently during this period. He had difficulty gaining employment and worked only intermittently, as he was depressed and also unfit to work due to neck and back injuries he had sustained previously. The first defendant says he gained a full-time position as a construction worker with BGC in February 2003. In about November 2003, he received a letter from the second defendant which had been left for him at the Macedonian Cultural Centre in Balcatta.
7 The first defendant says that, in the period between 19 October 2001 and 18 November 2003, he did not contact the second defendant because he was ill for most of the time and moving between different residences. He said he was in significant pain and it did not occur to him that he ought to contact the second defendant. He was therefore unaware of the proceedings in the District Court. He did not learn of those proceedings until he attended the second defendant's offices on 18 November 2003.
8 The first defendant says he has a defence to the plaintiff's claim. According to the first defendant, between February and May 2000, he worked for Zeylan Pty Ltd, trading as Nino Constructions, a company controlled by the plaintiff. He says he earned wages amounting to the sum of $37,632, but was not paid those wages. In about early May 2000, he raised the non-payment of the wages with the plaintiff, who said that he would pay them. He says he told the plaintiff that he had debts to pay arising from his bankruptcy and that Insolvency and Trustee Service Australia ("ITSA") required him to pay the sum of $30,000 to discharge his bankruptcy.
9 The first defendant says that, on about 15 May 2000, he and the plaintiff agreed that the plaintiff would pay the sum of $30,000 as part-payment of the outstanding wages. On about 22 May 2000, one Christine Oma, whom the first defendant understood was the plaintiff's personal secretary, requested that he attend "the office". He there collected a cheque in the sum of $30,000 and was asked by Ms Oma to sign a document as a receipt. The first defendant says that when he signed the document all he saw were provisions for signature by himself and the plaintiff and that of the witnesses to their signatures. He says he did not see anything preceding that or any reference to the sum of $30,000 being a personal loan. He says Ms Oma pointed to where he was to sign and he signed the document, believing he was signing a receipt for the cheque. Ms Oma told him it was for their records.
(Page 5)
10 According to the first defendant, he first saw the loan document in July 2001 at the offices of the second defendant. He says the text of the document was not "presented to [him]" when he signed it. He says he would not have signed the document if it had contained reference to a loan agreement and there never was any loan agreement with the plaintiff. He says he cannot say whether the text was added after he signed the document, or whether the document was folded to cover the text at the time he signed it.
11 The first defendant says that he instructed the second defendant that the payment of the $30,000 had been for part-payment of wages and had not been a loan. He says that he is aware of correspondence between the second defendant and the plaintiff and his solicitors, but does not recall whether he saw the correspondence at the time, but says he would not have approved correspondence conceding the existence of a loan. That relatively cryptic comment is the only reference he makes to the correspondence between the second defendant, on his behalf, and the plaintiff and his solicitors.
12 The correspondence is, however, significant in the context of this application. A bundle of correspondence is attached to the plaintiff's affidavit in opposition to the application. It is clear from that correspondence that the first defendant had instructed the second defendant in about July 2001 in relation to a caveat which the plaintiff had lodged against the title to the first defendant's house in Eden Hill. That caveat claimed an interest in the property to secure the sum of $30,000.
13 On 11 July 2001, the second defendant, as solicitor for the first defendant, wrote to the plaintiff denying that the plaintiff had an equitable interest in the property and demanding that the caveat be removed. In that letter, the second defendant said, among other things:
" …
(c) You have lodged the caveat over the property purportedly as a result of a personal loan of $30,000.00 that you made to our client on 22 May 2000.
(d) The terms of the loan do not include a provision to the effect that our client had agreed to grant you security over the property. [emphasis in original]
(Page 6)
- (e) Accordingly, you do not have a right to lodge a caveat over the property, as you have no proprietary interest in the property.
…
Although our client is not legally obliged to do so, our client is prepared to facilitate your immediate withdrawal of the caveat by unequivocably [sic] authorising and directing his settlement agent, Devon Settlements, to pay the sum of $30,000.00 into our trust account on the following terms:
(a) we will hold the sum of $30,000.00 on trust pending a resolution of the dispute that has arisen between you and our client regarding his claim for unpaid wages, which our client will seek to set off against your claim for repayment of the loan … "
14 I should interpolate that it is not apparent from the affidavits how the second defendant came by a copy of the loan agreement. The first defendant says he first saw it at the second defendant's office, which, if that is accepted, may indicate that it was obtained by the second defendant on a search of the caveat.
15 In any event, the second defendant wrote again to the plaintiff on 12 July 2001 to say that, under the terms of the loan agreement, the plaintiff was required to withdraw the caveat at settlement and was entitled to be paid the sum of $30,000 from the cleared funds of the settlement proceeds. The second defendant wrote again in similar terms on 16 July 2001, reiterating that the loan agreement did not give the plaintiff a caveatable interest in the property.
16 It appears that there was then a telephone conversation between the second defendant and solicitors instructed by the plaintiff in which it was arranged that the sum of $30,000 would be paid into a National Australia Bank account "pending agreement or court order" that the funds be paid to the plaintiff. In that conversation, the second defendant apparently also said that the first defendant required confirmation of the source of the $30,000 that had been paid to him.
17 In a letter dated 16 July 2001 from the second defendant to the plaintiff's solicitors, the second defendant, relevantly, said, apparently referring to the telephone conversation:
(Page 7)
- " … what we told you was that the evidence that our client had provided to us indicated that the cheque that was paid to ITSA had been paid by Nino Constructions and not by your client. Accordingly, we requested evidence to show that the loan was in fact a personal loan, and not a loan made by Zeylan Pty Ltd … As discussed, the reason for requesting the evidence is because our client claims to be entitled to certain moneys owing to him by Zeylan Pty Ltd and if that is correct, then the issue arises as to whether he is entitled to set off that sum against the loan moneys owed to your client."
18 The plaintiff's solicitors replied denying any entitlement of the first defendant to set off the sum owing to the plaintiff against any moneys owing to the first defendant by Zeylan Pty Ltd. They went on to say that the plaintiff had borrowed the funds he lent to the first defendant from Zeylan Pty Ltd.
19 On 30 July 2001, the second defendant wrote to the plaintiff's solicitors saying they had met with the first defendant that day to take his instructions regarding the loan money and had been instructed to investigate what had occurred in relation to a horse known as "Concrete Crusher" which was previously co-owned by their respective clients. The second defendant went on:
"Until such investigations have been completed, we have been instructed not to pay out the monies to your client. Rather, our client has suggested that the matter be held in abeyance until such time as that investigation has been completed."
20 It seems from the affidavits that, after a brief exchange of correspondence, the inquiries in relation to the horse petered out.
21 As I have mentioned, the plaintiff issued the current proceedings claiming the sum of $30,000 on 29 November 2001.
22 The plaintiff denies that the sum of $30,000 was paid by way of wages owing by Zeylan Pty Ltd. In an affidavit sworn 24 March 2004, the plaintiff says that he had discussions with the first defendant regarding the latter's bankruptcy. He accompanied the first defendant to ITSA's offices, at which the first defendant was told he could discharge his bankruptcy if he paid $30,000. The plaintiff said he agreed to lend the first defendant $30,000 on the basis that it would be repaid on the sale of the first defendant's house, if not sooner. The plaintiff then arranged for his bank to prepare a bank cheque payable to ITSA for $30,000, which
(Page 8)
- was given to the first defendant on 22 May 2000 when he signed the loan agreement.
23 According to the plaintiff, the first defendant earned a total of $34,608 in wages while working for Zeylan Pty Ltd. He says the first defendant has been paid all but $4923 of that; that is, an amount of $29,685. No financial records were produced to support that assertion.
24 In an affidavit sworn 24 March 2004, Ms Oma says that she was present when the first defendant read and signed the loan agreement. Ms Oma says she witnessed the first defendant's signature and gave him a copy of the agreement, which he took away with him.
25 It is implicit in the first defendant's statement in his affidavit of 9 March 2004 that he first saw the agreement in July 2001 at the second defendant's office that the first defendant denies that he read it or that he was given a copy of it by Ms Oma.
26 The relevant principles to be applied on an application of this sort were not in dispute.
27 The general rule is that when a judgment in default has been regularly entered, it is not to be set aside unless the application is supported by affidavit evidence which discloses a defence on the merits and explains the failure to comply with the rules and any delay in bringing the application: Palmer v Prince [1980] WAR 61 at 62. For an application to set aside a default judgment to be successful, the defendant must present a credible defence demonstrating that, if the default judgment was set aside and the matter was argued on its merits, the defendant would have a real prospect of success: Parker v Transfield Pty Ltd [2000] WASC 382. It is also a relevant consideration whether or not the delay in bringing the application has caused prejudice to the plaintiff: Rolland v Bank of Western Australia Ltd, unreported; FCt SCt of WA; Library No 980498; 3 September 1998; Kostokanellis v Allen [1974] VR 596.
28 The plaintiff says that the explanation for the delay of almost two years in applying to set aside the judgment is entirely inadequate. The plaintiff's counsel pointed out that the sum of $30,000 was placed in a joint account in July 2001 pending the resolution of the issue of the plaintiff's entitlement to it. The first defendant then made no enquiries about it and did not contact his solicitor from 19 October 2001 until November 2003 when he received the letter left for him at the Macedonian Cultural Centre. The first defendant has offered no
(Page 9)
- satisfactory explanation as to why he did not think fit to make any further inquiries about the matter for a period of more than two years.
29 On the merits, the plaintiff's counsel argued that the first defendant's claim that the $30,000 was for wages owing to him by Zeylan Pty Ltd was belied by the correspondence from his solicitor, in which not only was there no dispute that the moneys were a personal loan from the plaintiff, but that fact was clearly accepted. In addition, if the first defendant had truly considered that the money was his, it was inconceivable that he would have made no inquiries about it from October 2001 until he received the letter from his solicitor in November 2003.
30 I accept that there is considerable force in those submissions. The correspondence from the second defendant is consistent only with the plaintiff's contention that the sum of $30,000 was a personal loan by the plaintiff. The first defendant has made no attempt in his affidavit to account for the terms of his former solicitor's correspondence. The first defendant merely says that he does not recall seeing the correspondence and he would not have agreed to any concession that the funds were a personal loan. He asserts that he instructed the second defendant they were payment of wages. No affidavit of the second defendant has been filed in relation to these matters.
31 Although there has been a very long delay in making this application, it has not been suggested that that has caused any prejudice to the plaintiff. The moneys are held in a joint account and are earning interest.
32 In those circumstances, the predominant consideration on this application is whether the first defendant has a credible defence on the merits: Rolland v Bank of Western Australia Ltd (supra) per Malcolm CJ at 35 - 37; Kostanellis v Allen (supra) per Harris J at 606 In determining that issue, it is not appropriate to attempt to resolve issues of credibility on the affidavit evidence: Lau v Citic Australia Commodity Trading Pty Ltd [1999] VSCA 349.
33 In the end, there is a dispute of fact between the plaintiff and the first defendant as to whether the moneys the subject of the default judgment were a payment by the plaintiff in partial discharge of a debt owed by Zeylan Pty Ltd to the first defendant for wages or a personal loan by the plaintiff to the first defendant. The correspondence from the second defendant, on the first defendant's behalf, would appear to tell heavily against the first defendant's contention. The first defendant, however, claims that he does not recall ever seeing that correspondence and that he
(Page 10)
- had told his solicitor the money was a payment of wages. The first defendant apparently contends that, unbeknown to him, his solicitor wrote the relevant letters based on a misunderstanding of his instructions. The first defendant also says that either the document he signed as a receipt has been altered by inserting the terms of the loan agreement after he signed it, or the terms of it were concealed from him at the time he signed it. In explanation of his failure to follow up the matter, the first defendant says he was ill for most of the period and in significant pain and it did not occur to him to contact his solicitor.
34 I did not understand the plaintiff to dispute that if the first defendant's contention that the money was part payment of wages were to be accepted at trial, it would provide the first defendant with a defence to the claim. The plaintiff's position was that, in the circumstances, that contention was simply untenable.
35 Although the first defendant's case appears rather improbable in light of the correspondence and his lack of inquiry about the matter after October 2001, as I have said, issues of credibility are not appropriately to be determined on affidavit evidence on an application of this sort. I therefore consider, not without some considerable misgivings, that the default judgment should be set aside.
36 I will hear the parties on the appropriate form of orders and on costs.
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