C and M Partnership v Van Der KUYL - [2000] WADC 123

JURISDICTION : DISTRICT COURT OF WESTERN AUSTRALIA
IN CHAMBERS

LOCATION: PERTH

CITATION: C AND M PARTNERSHIP -v- VAN DER KUYL & ANOR [2000] WADC 123

CORAM: COMMISSIONER REYNOLDS

HEARD: 26 APRIL 2000

DELIVERED : 12 MAY 2000

FILE NO/S: CIV 7903 of 1990

BETWEEN: C AND M PARTNERSHIP
Plaintiff
AND
HENDRICK VAN DER KUYL
First Defendant
AGNES OLWYN VAN DER KUYL
Second Defendant

Catchwords:

Appeal - Application to set aside judgment - Whether defendants have credible defence on the merits - Delay - Prejudice - Turns on own facts

Legislation:

Nil

Result:

Appeal dismissed - Judgment to stand

Representation:

Counsel:

Plaintiff:     Mr R W Bower
First Defendant             :     Mr P A Monaco
Second Defendant         :     Mr P A Monaco

Solicitors:

Plaintiff:     Corsers
First Defendant             :     Godfrey Virtue & Co
Second Defendant         :     Godfrey Virtue & Co

Case(s) referred to in judgment(s):

Jackamarra v Krakour (1998) 72 ALJR 819
Morris (Herbert) Ltd v Saxelby [1916] 1 AC 688
Palmer v Prince [1980] WAR 61
Robert Edward Rollond & Anor v Bank of Western Australia Ltd, unreported; FCt SCt of WA; Library No 980498; 3 September 1998
Say v Fitzpatrick, unreported; FCt SCt of WA; Library No 6865; 14 September 1987

Case(s) also cited:

Carr v Finance Corporation of Australia Ltd [No 1] (1981) 147 CLR 246
Chitty v Mason [1926] VLR 419
Drake Personnel Ltd v Beddison [1979] VR 13
FAI General Insurance Co Ltd v Southern Cross Exploration NL (1988) 165 CLR 268
Greenpark Pty Ltd v Odin Inns Pty Ltd [1989] WAR 322
Hitachi Sales (UK) v Mitsui Osk Lines Ltd [1986] 2 Lloyds Rep 574
John Walker and Sons Ltd v Henry Ost & Co Ltd [1970] R.P.C. 151
Kertesz v Kesster [1966] VR 453
Kostokanellis v Allen [1974] VR 596
National Australia Bank Ltd v Singh [1995] 1 Qd R 377
Stained Glass Overlay Australasia Pty Ltd (ACN 006 311 762) & Ors v Kevin James Rea & Anor [1998] WASC 325
STP (Gas) Retail Pty Ltd & Ors v Jubilee Road Pty Ltd & Anor [1998] WASCA 251
Turner v Bulletin Newspaper Co Pty Ltd (1974) 131 CLR 69

COMMISSIONER REYNOLDS:

Introduction

Before me for determination is an appeal against the decision of a Deputy Registrar of this Court made on 14 December 1999 refusing to order that the default judgment entered in favour of the plaintiff on 22 December 1992 be set aside and that the entry for trial filed on 4 December 1998 be countermanded. The Deputy Registrar also ordered that the costs in connection with the defendant's application to set aside the default judgment be the plaintiff's.
The defendants seek orders inter alia that the default judgment entered against them and in favour of the plaintiff on 22 December 1992 be set aside and that the entry for trial dated 4 December 1998 be countermanded.
The appeal came on for hearing before me on 26 April 2000.

The background

A Writ of summons with a statement of claim was filed herein on 6 November 1990. A copy of the Writ was served on each of the defendants in Geraldton on 20 November 1990. A memorandum of appearance for both of the defendant's was filed herein on 6 December 1990 by solicitors Birman and Ride. A defence was filed herein on 16 January 1991.
The plaintiff pleaded in para 2 of its statement of claim that by a written contract dated 30 May 1989 the plaintiff agreed to purchase the business known as "The Uptown Food Hall and Flea Market" from the defendants for the consideration and upon the terms and conditions as specified in the contract. This is admitted by the defendants in their defence. By para 3 of the statement of claim the plaintiff pleaded that pursuant to clause "e" of the Agreement and in consideration of the terms and conditions of the Agreement the defendants jointly and severally agreed and covenanted with the plaintiff that they and the Van Der Kuyl family would not carry on any other business of a similar nature to the plaintiff's business or be associated in any capacity with any such business whether as owner, partner, shareholder or otherwise howsoever for a period of five years and within a radius of 20 kilometres from The Uptown Food Hall and Flea Market which was situated at Fitzgerald Street, Geraldton. The defendants admitted para 3 of the statement of claim and added that it was a further express term of the agreement that the defendants shall be entitled to carry on any other business within such radius at any time.
In para 4 of the statement of claim the plaintiff pleaded that the first defendant breached the restraint of trade provision of the Agreement by owning and engaging in a business known as "The Cuisine Connection Foodhall" in partnership with one Tjhing Kiauw The ("The") from on or about 6 June 1990 which is situated in Durlacher Street, Geraldton and within a radius of 20 kilometres of The Uptown Food Hall and Flea Market in Fitzgerald Street, Geraldton. Although this breach is only alleged against the first defendant both defendants deny such breach in their defence.
In para 5 of the statement of claim the plaintiff has pleaded that the second defendant has engaged in and been employed in a coffee shop named "The Nantucket Coffee Shop" situate inside "The Cuisine Connection" as previously mentioned from on or about 6 June 1990 and within a radius of 20 kilometres of The Uptown Food Hall and Flea Market. Although this breach is only alleged against the second defendant both defendants in their defence have admitted para 5 but pleaded in doing so they did not breach the terms of the agreement.
The plaintiff claims damages for breach of contract, interest and costs. The defendant's denied that they breached the agreement and further denied that the plaintiff had suffered and continued to suffer loss and damage.
By notice dated 22 January 1991 the plaintiff sought discovery and inspection of documents from the defendants. On 22 February 1991 the plaintiff made an application for an order that the defendants give discovery on oath as requested by the notice dated 22 January 1991. This application came on for hearing on 25 March 1991. The defendants filed an affidavit verifying a list of documents and the list of documents on 26 February 1991 ("the first discovery") which was before the return date of the application. The first discovery by affidavit is in the usual form and part 1 of the first schedule of the list of documents only refers to two documents one being a facsimile dated 30 May 1989 of the agreement between the parties for the sale and purchase of the food hall business. The other document referred to is a copy of a licence agreement dated 15 August 1990 between The as licensor and the defendants as licensees.
Affidavit evidence subsequently filed on behalf of the defendants shows that The and the first defendant were the registered proprietors as tenants in common in equal shares of the land on which the building was constructed in which the business of the Cuisine Connection Foodhall was conducted ("the Premises"). By a written lease agreement dated 17 July 1990 The and the first defendant as lessors leased the Premises to The as the lessee ("the Lease"). The defendants say that The occupied the Premises pursuant to the Lease and operated the Cuisine Connection Foodhall business ("the Cuisine Connection") on the Premises. The defendants also say that neither of them were involved in the running of the Cuisine Connection.
The Cuisine Connection was operated on the basis that The as the proprietor of the business granted licences to various food stallholders to operate a foodstall business in the Premises. The defendants say that as the proprietor of the Cuisine Connection The licensed a multiple number of stallholders to operate foodstalls in the Premises, marketed the Cuisine Connection to the public and collected licence fees from the licensees. Accordingly the defendants say that neither of them was engaged in the Cuisine Connection in any way at all.
The licence agreement discovered in the first discovery sets out that The is entitled to possession of the Premises and as licensor granted a licence to the defendants as licensees on terms and conditions set out in the licence to conduct a drinks (non-alcoholic beverages) stall under the name "Nantucket Coffee Cove" from shop number six in the Premises.
The defendants say that operating a coffee shop in its own right and as one stall only in a foodhall complex is not the same or similar in any way at all with operating a foodhall business as a whole involving the granting of a multiple number of licences to a multiple number of licensees for each of the licensees to conduct a business from their own foodstall within a foodhall complex as a whole. I accept that as a proposition this is clearly credible. The question is whether on the material before the Court the defendants have a credible defence on the merits based on this proposition.
The plaintiff was understandably dissatisfied with the first discovery by the defendants. It appeared to be deficient and this was the view taken by the plaintiff. On 22 March 1991 the solicitors for the plaintiff filed a chamber summons seeking leave to vary its application dated 22 February 1991 and sought an order that the defendants give further and better discovery of documents on oath in addition to the documents discovered by the first discovery. In particular the plaintiff sought orders inter alia that the further discovery include documents relevant to:
(i)The sale of The Uptown Food Hall by the first and second defendants to the plaintiff;
(ii)Documents relevant to the first defendant's purchase and ownership of the freehold land situate at 19 Durlacher Street, Geraldton;
(iii)The first and second defendants' financial records relevant to the purchase of the said land;
(iv)The first and second defendants' accounting records and taxation records relevant to The Cuisine Connection and The Nantucket Coffee Shop.
The plaintiff and the defendants were represented at the hearing on 25 March 1991 of both the chamber summons filed on 22 February 1991 and the chamber summons filed on 22 March 1991. The chamber summons filed on 22 February 1991 was dismissed and otherwise the hearing was adjourned to 28 March 1991. On that later date a Registrar of this Court made an order that within 21 days from the date of the order the defendants do provide further and better discovery of documents on oath of documents falling within the categories set out in paras (i), (ii), (iv), (v) of the application filed 22 March 1991 which paragraphs are worded in the same terms and in the same sequence as paras (i) to (iv) inclusive set out above.
The Registrar clearly took the view that the plaintiff was not in a position to itemise particular documents and that it was appropriate in the circumstances for the defendants to be required to discover all documents which fell within a particular category of documents expressly outlined in the order. In reasons given by the Registrar he indicated that the defendants' accounting records relating to The Cuisine Connection and the Nantucket Coffee Shop were relevant to the issue of their association with a business at the Premises and were therefore relevant.
Subsequent to the orders of the Registrar made on 28 March 1991 the defendants filed a further affidavit verifying a list of discoverable documents and the list of discoverable documents in the usual form on 12 April 1991 ("the second discovery"). Part 1 of the first schedule of the list of documents of the second discovery described nine different documents. The seven additional documents to the first discovery consisted of copies of a statement relating to the sale of the lease of The Uptown Food Hall and Flea Market dated 29 May 1989, an offer and acceptance relating to the purchase of Lot 19 Durlacher Street, Geraldton dated 2 December 1989, a settlement statement relating to such purchase, a building contract relating to the building constructed on 19 Durlacher Street, Geraldton a partnership agreement between the first defendant and The dated 17 July 1990, a lease between The and the first defendant dated 17 July 1990, an executed and stamped offer and acceptance between The and the first defendant as vendors and Nesday Pty Ltd as purchaser of Lot 19 Durlacher Street, Geraldton dated 19 September 1990 and a copy of the settlement statement relating to such sale and purchase dated 15 October 1990. It can be noted that the second discovery did not contain any banking records or accounts relevant to the first defendant's ownership of Lot 19 Durlacher Street, Geraldton or any of the defendants' accounting records and taxation records relevant to the Cuisine Connection and the Nantucket Coffee Shop as provided in the orders of the Registrar made on 28 March 1991.
After receipt of the second discovery the plaintiff was still of the view that the defendants had failed to provide a full discovery of documents. On 12 June 1992 the solicitors for the plaintiff filed a chamber summons returnable on 23 June 1992 seeking an order that unless within 10 days from the date of the order the defendants do make, file and serve a list of further documents which are or have been in their possession custody or power and do make and file a further affidavit verifying such list and serve a copy thereof on the plaintiff as ordered on 28 March 1991, then judgment herein be entered for the plaintiff. On 23 June 1992 a Deputy Registrar made the following orders by consent:
1.Unless within 28 days the first and second defendants do comply with O1 made on the 28 day of March, 1991 judgment be entered for the plaintiff together with the costs of the action;
2.The first and second defendants do pay the plaintiff's costs of the application in any event.
On 20 July 1992, one day prior to the expiry of the 28 day period provided in the order made on 23 June 1992, the solicitors for the defendants filed a further affidavit by the defendants verifying a list of discoverable documents and the list of discoverable documents in the usual form ("the third discovery"). Part 1 of the first schedule of the third discovery only set out three documents even though nine were set out in the second discovery. The defendants' solicitors did not serve the third discovery on the plaintiff until 31 July 1992 which was the tenth day after the expiry of the 28 day period provided in the springing order made on 23 June 1992.
On 7 August 1992 the solicitors for the plaintiff filed an affidavit setting out the failure by the defendants to comply with the springing order made on 23 June 1992 and sought an entry of judgment in favour of the plaintiff. On 31 August 1992 judgment was entered in the following terms:
"The first and second defendants having failed to comply with the conditional order for judgment made on the 23 June 1992 IT IS THIS DAY JUDGED that the first and second defendants do pay to the plaintiff damages to be assessed together with costs of the action to be taxed."
On 22 September 1992 the solicitors for the defendants filed a chamber summons on behalf of the defendants seeking orders inter alia that the judgment be set aside. An affidavit of Brett Kenneth Davies ('Mr Davies"), a solicitor employed by Birman and Ride and who had the conduct of the matter for the defendants was filed in support of the application to set the judgment aside. Mr Davies stated in his affidavit that on 20 July 1992 an outside clerk was instructed to file the third discovery at the District Court and serve a copy of it on the plaintiff's solicitors. The third discovery was filed but not served on 20 July 1992. A copy of the third discovery was forwarded to the plaintiff's solicitors by post on 30 July 1992 under cover of a letter dated 8 July 1992. Mr Davies stated in his affidavit that the defendants' solicitors were not present when the order was made on 23 June 1992 but he took no issue with the order expressly providing that it was made by consent.
The plaintiff and the defendants were represented at the hearing of the chamber summons on 30 September 1992. On that date programming orders were made that within 14 days the plaintiff do file and serve any affidavit in answer and that within 14 days thereafter the defendants do file any affidavit in reply. Otherwise the chamber summons was adjourned sine die. An affidavit of the first defendant sworn on 29 September 1992 in support of the application to set aside the judgment was filed on 30 September 1992. An affidavit of Mary Tomlinson, a partner in the plaintiff, was sworn 21 October 1992 in answer to the application to set aside judgment and filed on 22 October 1992.
There was no further activity at all on the Court file until 3 July 1995 when the plaintiff's solicitors filed a chamber summons seeking programming orders for the assessment of damages. Programming orders for the assessment were made on 17 July 1995. Thereafter there was no further activity on the Court file until 5 August 1998 when the plaintiff's solicitors filed a notice of intention to proceed and another chamber summons seeking directions for the assessment of damages. On 29 October 1999 the plaintiff and the defendants appeared by their solicitors before a Registrar and the defendants renewed their application made on 22 September 1992 to set aside the judgment entered on 31 August 1992.
On 4 December 1998 the defendants' solicitors filed a chamber summons seeking orders inter alia that the plaintiff's entry for trial dated 12 November 1998 be countermanded and that the defendants' application dated 22 September 1992 to set aside the judgment entered on 31 August 1992 be listed for hearing at a special appointment. On 28 October 1999 Godfrey Virtue & Co filed a notice that they acted on behalf of the defendants in place of Birman and Ride. On 4 January 1999 a Registrar of the Court ordered that the application be adjourned to a special appointment on a date to be fixed upon application. The Registrar also ordered that the defendants file and serve any affidavit in reply within 21 days.
A number of affidavits were filed in and after December 1998 relating to the plaintiff's application to enter the assessment for hearing and the defendants' applications to countermand the entry and to set aside the judgment. I will refer to some of the affidavits and their contents later.
On 14 December 1999 all of the applications came together and were heard by Deputy Registrar Harman. He dismissed the defendants' application to set aside the judgment and cleared the way for the plaintiff's claim to be entered for assessment.

The applicable legal principles

The focus of this appeal is on the decision of the Deputy Registrar to dismiss the defendants' application to set aside the judgment entered on 31 August 1992. If the judgment is set aside and liability is put back in issue then no doubt various programming orders will be necessary in relation to the pleadings. If the judgment is not set aside then the matter can proceed towards assessment of damages.
The judgment entered on 31 August 1992 is clearly in the nature of a default judgment. It was entered as a result of the defendants' failure to comply with the provisions of a springing order made on 23 June 1992. There is no real issue between the parties on the law applicable to an application to set aside a judgment.
In Palmer v Prince [1980] WAR 61 Jackson CJ at 63 stated as follows:
"The general rule is that where a judgment has been regularly entered, it is not to be set aside unless the Court is satisfied that there is a defence on the merits: Rubin v Eacott (1912) 14 WALR 162, following Farden v Richter (1889) 23 QBD 124. This rule has been approved by the House of Lords in Evans v Bartlam [1937] AC 473. At p480 of the report Lord Atkin refers to the rule laid down by the Courts to guide the normal exercise of their discretion in a case where the judgment was regularly obtained that 'there must be an affidavit of merits, meaning that the applicant must produce to the Court evidence that he has a prima facie defence', although he concedes that in rare but appropriate cases the rule could be departed from. One instance where the rule was not insisted upon can be found in Collins Book Depot Pty Ltd v Bretherton [1938] VLR 40, where the failure to deliver a defence arose from a solicitor's clerk's error, and the defendant was an executor who sought and was given the opportunity to investigate, by his defence, circumstances of suspicion regarding a claim against his testator. But instances of departure from the rule are rear: see the cases referred to by Mr Neil Williams at p390 of vol 1 of the Practice of the Supreme Court of Victoria.
It is also important, because it is relevant to the exercise of the Court's discretion, that a defendant seeking to have a judgment against him set aside should explain his failure to comply with the rules and the delay (if any) in making the application: Evans v Bartlam, supra; Term Sales Pty Ltd v Joseph (1950) 67 WN (NSW) 44, and Rosing v Ben Shemesh [1960] VR 173."

The first passage set out above from the judgment of Jackson CJ should not be taken to mean that if a defendant shows that he has a good defence on the merits then a regularly entered judgment should be set aside. In Palmer v Prince the affidavit relied on in support of the application to set aside was sworn by the defendant's solicitor and not the defendant himself. The defendant's solicitor in his affidavit set out various instructions given to him by the defendant. It was asserted that such instructions disclosed that the defendant had an arguable defence. At p64 Burt J as he then was stated as follows:
"As to that, I would only say that the test in these matters is not whether upon facts as asserted by way of instructions to a solicitor or otherwise the applicant appears to have an arguable defence; it is whether the facts have been sworn to by a person who would be competent to depose to them if the matter should go to trial, which if proved would satisfy the court that the applicant has a good defence on the merits. And even if this be done, it would still be a discretionary judgment as to whether the judgment should be set aside, and this because the length of the delay and the effect it may have on the position of the judgment creditor are also to be considered."
In Palmer v Prince the writ was filed on 2 February 1971 and served three days later. The claim was for damages for breach of contract arising out of the sale to the defendant in August 1970 of the plaintiff's guesthouse business in Bunbury. After reasonable warning to the defendant's solicitors, the plaintiff entered judgment in default of defence on 27 April. The judgment was that the plaintiff recover against the defendant damages to be assessed. On 28 May, the defendant applied by summons in chambers for an order setting aside the judgment and giving leave to file a defence. The application to set aside was dismissed in the first instance and this decision was upheld on appeal.
In Say v Fitzpatrick, unreported; FCt SCt of WA; Library No 6865; 14 September 1987 the Court upheld a decision made in the first instance to dismiss an application to set aside a judgment obtained by default. At pp 2 and 3 Burt CJ said:
"It is clear, I think, upon all the authorities collected in the notes to the comparable order of the Supreme Court of Victoria – Williams Supreme Court Practice – that an application to set aside a default judgment should be taken within a reasonable time, and fairly short time. The reasons for that, I suppose, are obvious enough – that delay will prejudice the judgment creditor and the recovery of money to which he is prima facie entitled and the difficulty which will be created by trying to litigate old issues, as in this case, by litigating upon a conflict of evidence bearing upon an agreement now made some five years ago, and the general consideration that there must be an end to litigation. I am not saying that the delay is necessarily fatal in every case, and of course it is not; it is simply one of the matters which are to be taken into consideration in the exercise of the discretion, but I am saying that as the delay increases then it becomes a more weighty matter to be considered in the exercise of that discretion, and a delay as here, in the order of two years, which is explained in a very equivocal way, by asserting that all the fault lay on the shoulders of the applicant's solicitors, a delay of that order, would well sustain the exercise of the discretion which the trial Judge exercised in declining to make the order."
In Robert Edward Rollond & Anor v Bank of Western Australia Ltd, unreported; FCt SCt of WA; Library No 980498; 3 September 1998 the Full Court of the Supreme Court of Western Australia unanimously dismissed an appeal from a Masters decision to dismiss an application to set aside a default judgment. The Honourable Chief Justice Malcolm CJ cited a number of cases with approval relating to setting aside default judgments and delay in the context of such applications. At pp 35 and 36 he stated as follows:
"The appellants submitted that their delay in applying to set aside default judgment should not prejudice their opportunity to defend the action. The appellants relied on National Australia Bank Ltd v Singh [1995] 1 Qd R 337 at 380 in which the Court of Appeal applied the following passage in the judgment of McPherson J in National Mutual Life Association of Australia Ltd v Oasis Development Pty Ltd [1983] 2 Qd R 441 at 449:
'It is not often that a defendant who has an apparently good ground of defence would be refused the opportunity of defending, even though a lengthy interval of time had elapsed provided that no irreparable prejudice is thereby done to the plaintiff'.
In National Australia Bank Ltd v Singh (above) the reason for the defendant's delay which was accepted by Pincus JA, delivering the judgment for the court, as sufficient, was 'the appellant's mental condition due to stress which caused or contributed to his not giving proper attention to these proceedings brought against him.' The appellants also relied on the decision of the Court in Grimshaw v Dunbar [1953] 1 QB 408 at 415:
'… has there been any undue delay by the absent party in launching his proceedings for a new trial? In answering that question I venture to think that delay in itself would not be important, but delay prejudicing the other party, or delay enabling rights of third paries to intervene, would be most material.'
This passage was adopted by the Full Court in Victoria in Kostokanellis v Allen [1974] VR 596 at 604, per Harris J.
The appellants submitted that no prejudice has been caused by the delay to any party including the respondent and they should have been allowed to defend the action.
The cases relied on by the appellants in support of their submissions concerning delay support the proposition that the Court has a discretion whether to set aside a default judgment. Delay by the party applying to set aside judgment does not necessarily defeat the application, but is one of a number of relevant considerations to consider according to the particular circumstances. The exercise of the discretion 'involve[s] weighing up the extent to which the defendant is prejudiced by allowing the order and judgment to stand and the prejudice to the plaintiff in setting them aside': Kostanellis v Allen (above) at 606, per Harris J. The primary question must be whether the applicant has a sufficient defence on the merits. In Kostanellis v Allen (above) at 606 Harris J said:
'A discretion necessarily involves a latitude of individual choice according to the particular circumstances, and differs from a case where the decision follows ex debito justitiae once the facts are ascertained. In a case like the present there is a judgment, which, through by default, is a regular judgment, and the applicant must show grounds why the discretion to set aside should be exercised in his favour. The primary consideration is whether he has merits to which the Court should pay heed; if the merits are shown the Court will not prima facie desire to let a judgment pass on which there has been no proper adjudication.'
See also Evans v Bartlam [1937] AC 473 at 488 per Lord Wright.
The same position was adopted by the Full Court in National Australia Bank Ltd v Singh (above). If the applicant does not have a credible defence, then other considerations, such as a delay in applying to set aside judgment, need not be considered because the application to set aside default judgment will be refused. Consequently, the first question to be considered is whether there is a credible defence on the merits."
The judgment entered herein on 31 August 1992 is not one to which O13 r10 of the Rules of the Supreme Court applies because it was not entered as a result of a default of appearance. Nevertheless in a case such as this the Court does have the power to set aside the judgment entered on 31 August 1992. Whether or not the judgment is set aside is a matter of discretion.
When considering the matter the Court should first address the question whether or not the defendant has a credible defence on the merits. If so then the Court should move on and consider the extent of the delay actually involved on the part of the defendant. The extent of the delay is not of itself a basis to refuse to set aside a judgment. It is the prejudice to the other party, if any, resulting from the delay which is material.
It is also necessary to assess and weigh the prejudice to the party in whose favour the judgment has been entered if the judgment is set aside with the prejudice to the other party if the judgment is not set aside. No one factor should be considered in isolation from the rest. Each factor must be considered and weighed in light of the other relevant factors taken alone and in combination. In the final analysis the decision is based on an assessment of all of the relevant factors as a whole. It is trite to say but always important to bear in mind that whether or not a judgment is set aside depends on the particular circumstances of the case under consideration.

The merits of the defence

In my opinion it is necessary when assessing the merits of the defendants' defence to have regard to the three lists of discoverable documents verified by the defendants on affidavit and the specific orders made by the Court in relation to discovery before the judgment was entered and the extent to which it appears that such orders were or were not complied with by the defendants. I will expand on this point during the course of my reasons.
Condition four of the agreement between the parties for the sale and purchase of The Uptown Food Hall and Flea Market business provides as follows:
"4. Trade Restraints
The Vendor will not carry on any other business of a nature similar to the business hereby agreed to be sold or be associated in any capacity with any such business whether as owner partner shareholder or otherwise howsoever at any place within the radius from the premises as specified in paragraph (E) of the Particulars for the period as specified in paragraph (E) of the Particulars from the date of the Contract but shall be entitled to carry on any other business within such radius at any time."
Paragraph (E) of the particulars provides a period of five years and a radius of 20 kilometres.
The submissions made on behalf of the defendants that they have a good defence on the merits has two limbs to it. First they say that neither of them has breached the restraint of trade condition. Secondly they say that the restraint of trade condition is unenforceable because both the period of five years and the radius of 20 kilometres are unreasonable. I now turn to consider the first limb of the submission.
In the first defendant's affidavit sworn 29 September 1992 in support of the defendants' application to set aside the judgment he stated that the defendants and The owned a building on Lot 19 Durlacher Street, Geraldton which was leased to The. He also stated that it was The who conducted a business in the building similar to the business known as the Uptown Foodhall and Flea Market which they sold to the plaintiff. The Lease to which I have earlier referred shows that it was only the first defendant and The and not both defendants and The who leased the Premises to The. A photocopy of the Certificate of Title for Lot 19 Durlacher Street, Geraldton attached to the affidavit of Mary Tomlinson sworn 21 October 1992 shows that the first defendant and The were the registered proprietors as tenants in common in equal shares and not both defendants and The. Given the first defendant's evidence that both defendants and The owned the building it is arguable that the second defendant had an interest in the Lease even though she was not a named party to it.
The defendants say that the Lease to The is transparent and it shows that it was The and neither of them who conducted the Cuisine Connection. I note that para 11 of the second schedule of the Lease provides that the business to be conducted on the Premises is that of a restaurant or eating-place. I also not that clause 12.5 of the Lease provides:
"12.5 Partnership
The Lessor does not in any way or for any purpose become a partner of the Lessee in the conduct of its business or otherwise or joint adventurer or a member of a joint enterprise with the Lessee."
The first defendant also stated in his affidavit sworn 29 September 1992 that the defendants run a coffee shop at Lot 9 Durlacher Street, Geraldton. Attached to his affidavit is a copy of the licence to which I have earlier referred. It shows the defendants as licensees and The as licensor and the licensed premises being Shop 6 in the premises. The defendants say that the licence is transparent and shows the nature of their business, namely a coffee shop business and not a foodhall business or anything similar. Further they say that the licence itself together with the Lease shows that it was The alone who operated the Cuisine Connection and that neither of them had any interest at all in such business. Further to these submissions it is also submitted that it could not be argued that the first defendant had an interest in the Cuisine Connection simply because he had an interest in the land and building at Lot 19 Durlacher Street, Geraldton.
The first defendant also stated in his affidavit sworn 29 September 1992 that the defendants have no association with The Cuisine Connection Foodhall business or The other than what I have just set out from the contents of such affidavit.
I have already mentioned that the defendants' application to set aside the judgment was adjourned sine die on 30 September 1992 with certain programming orders being made for the filing of affidavits. The record shows that the affidavit of Mary Tomlinson sworn on 21 October 1992 was then filed on 22 October 1992 in opposition to the defendants' application to set aside the judgment. Thereafter there was no further affidavit filed in relation to the defendants' application to set aside the judgment and no further activity in relation to the application until late 1998 when the plaintiff moved to list the assessment for hearing. This led to the defendants resurrecting and pursuing their application to set aside the judgment.
An affidavit sworn by the first defendant on 30 November 1998 was filed on that date in further support of the defendants' application to set aside the judgment. The first defendant replied to the affidavit of Mary Tomlinson sworn on 21 October 1992. In summary, the first defendant stated that there is no other documentation in the possession and control of the defendants relating to the sale of The Uptown Food Hall and Flea Market business by the defendants to the plaintiff, all documents relevant to the purchase and ownership of Lot 19 Durlacher Street, Geraldton had been discovered, the defendants were not in possession or control of any taxation records relevant to The Cuisine Connection, the ownership of The Nantucket Coffee Shop by the defendants is entirely irrelevant to these proceedings and that all documentation relating to the terms upon which the defendants held The Nantucket Coffee Shop had been discovered. I will refer to the contents of this affidavit in more detail later when I deal with the issues of delay and prejudice.
A further affidavit of the first defendant sworn 10 November 1999 was filed on 12 November 1999 in support of the defendants' applications to set aside judgment and countermand the entry for the assessment of damages.
In the first defendant's affidavit sworn 10 November 1999 he stated that in or about February 1987 he and his wife through a family company Vexillum Pty Ltd ("Vexillum") entered into a lease of the Uptown Food Hall premises. Vexillum operated the Uptown Food Hall business until it was sold to the plaintiff on 30 May 1989. He stated that The Uptown Food Hall business consisted of six food stalls. He also stated that neither he nor his wife, the second defendant, were involved in the day to day running of the foodhall and that their role was limited to collecting licence fees from stallholders, paying the electricity, water and gas bills and passing on any complaints or compliments from customers to the individual stallholders and discussing any problems which arose between the stallholders.
The first defendant also stated in this affidavit that it was decided to sell The Uptown Food Hall business because it was not making much money and he knew that some of the stallholders were struggling to make money and were not paying the licence fee on time. He stated that The located the land at Lot 19 Durlacher Street, Geraldton and told him that he wanted to set up a foodhall on the property. He stated that he informed The that he had agreed to a restraint condition in the agreement whereby the Uptown Food Hall and Flea Market business was sold to the plaintiff and that he could not be involved in a foodhall business. On The offering to take on the lease of the premises the first defendant became involved but limited his involvement to acquiring the land and securing finance through Vexillum for the purchase of the land and the construction of the building on the land. Later on 17 July 1990 the first defendant and The entered into the Lease to which I have earlier referred. The first defendant and The also signed a deed to formalise the partnership formed by the two of them for the purpose of developing Lot 19 Durlacher Street, Geraldton.
Paragraphs 19 to 24 inclusive of the first defendant's affidavit sworn 10 November 1999 set out as follows:
"19.Although we were partners, Mr The never paid me any money from the business of The Cuisine Connection Foodhall. I was informed by Mr The and verily believe that the licence fees received from the stallholders did not cover Mr The's obligations for the repayment of the loan for the purchase of the land and construction of the building.
20.Mr The and I sold the Durlacher Street property to Nesday Pty Ltd which became the registered proprietor on 12 October 1990.
21.Neither I or the second defendant have at any material time had any interest in the business of The Cuisine Connection Foodhall.
22.On 15 August 1990 my wife and I entered into a licence agreement in respect of stall 6 in The Cuisine Connection Foodhall. The stall was used to sell drinks under the name 'Nantucket Coffee Cove'. The Nantucket Coffee Cove was a business quite dissimilar to the food hall business. The Nantucket Coffee Cove involved the second defendant and I in licensing a stall from The Cuisine Connection Foodhall, and selling coffee, drinks and related products to members of the public. The second defendant and I decided to sell The Nantucket Coffee Cove in about July 1993.
23.Mr The ceased to be the proprietor of the business of The Cuisine Connection on 12 October 1990.
24.In para 9 of her affidavit sworn 21 October 1992 Mary Tomlinson avers that the transactions to which I have referred above are 'merely a sham designed to circumvent the provisions contained in the restraint of trade' clause. I deny that allegation and say that the transactions are entirely transparent and that at all material times the conduct of the second defendant and I and arrangements with Mr The have been consistent with the tenor of the various discovered documents."
The plaintiff has not taken issue with the existence of the Lease and the licence agreement. It says that they are a sham and that the defendants did have an interest in the Cuisine Connection. The legal structure created by the Lease and the licence agreement lend support to the argument that the defendants had no interest in the Cuisine Connection and that such business was conducted solely by The. In cases where a legal structure is alleged to be a sham it is necessary to look beyond the structure and to examine the actual conduct of the party or parties concerned in order to ascertain whether or not the reality of the situation is an accurate reflection of the legal structure. If what the first defendant stated in para 24 of his affidavit sworn 10 November 1999 is true then I think that the defendants would have an arguable or credible defence on the merits. In this particular case the position is by no means as clear as I have painted so far. There are a number of factors which cast some doubt on the merits of the defendants' defence.

Mary Tomlinson stated in her affidavit sworn 21 October 1992 that the Lease and the licence agreement to which I have referred are merely a sham designed to circumvent the restraint of trade condition in the agreement between the plaintiff and the defendants for the sale and purchase of the Uptown Food Hall and Flea Market business. This allegation went unanswered by the defendants for about six years until an affidavit of the first defendant was sworn and filed on 30 November 1998.
Mary Tomlinson set out in her affidavit the results of various searches she had undertaken or caused to be undertaken at the office of titles in relation to Lot 19 Durlacher Street, Geraldton and also a residential property owned by The and his wife and another residential property owned by the defendants. She attached copies of the various searches to her affidavit. They show that Lot 19 Durlacher Street, Geraldton was purchased by the first defendant and The using funds advanced by Town and Country WA Building Society ("Town and Country") and that Town and Country secured the advance to the first defendant and The by way of mortgages registered against Lot 19 Durlacher Street, Geraldton, a property owned by The and his wife and also a property owned by the defendants. Mary Tomlinson stated that the defendants had discovered the contract of sale dated 1 December 1989 and the settlement statement relevant thereto in relation to the purchase of Lot 19 Durlacher Street, Geraldton but had not discovered any other documents relevant to the acquisition and ownership of Lot 19 Durlacher Street, Geraldton including financial documents with Town and Country.
Mary Tomlinson also referred to a partnership agreement dated 17 July 1990 which was discovered by the defendants in the second discovery. She attached a copy of the partnership document to her affidavit. The partnership agreement provides the first defendant and The as the partners. The recitals in the partnership agreement set out inter alia that "the partners have since the first day of February ('the commencement dated') carried on the business of the ownership and development of real property in Durlacher Street, Geraldton".
I note that clause 5 of the partnership agreement provides that all monies received by a partner on behalf of the partnership shall be paid into the bank account of the partnership. It also provides that cheques drawn by or on behalf of the partnership shall be signed by both partners. I also note that clause 10 requires usual books of account to be kept properly posted up at the business premises of the partnership and that both partners shall have access to the books and not remove them from the premises without the consent of the other.
The plaintiff alleged in para 4 of its statement of claim that the first defendant in partnership with The owned and engaged in a business named "The Cuisine Connection Foodhall" situate in Durlacher Street, Geraldton. Clearly the partnership between the first defendant and The was an issue raised on the pleadings. The fact of the matter is that there was a partnership between the first defendant and The. By the written provisions of the partnership agreement itself the purpose of the partnership was to carry on the business of the ownership and development of Lot 19 Durlacher Street, Geraldton. Whether such development extended to the operation of the Cuisine Connection conducted at the Premises is of course a matter of fact that in the usual course would be determined at trial.
I accept that the written terms of each and both of the Lease and the partnership agreement would not provide the basis to conclude that the first defendant had an interest in or was concerned in some way in the running of the Cuisine Connection. However both the Lease and the partnership agreement are relevant to an issue raised between the parties on the pleadings and should have been discovered when discovery was first requested. Neither document was discovered by the defendants in the first discovery. No doubt if there was a trial on the issue of liability the defendants or one of them would be cross-examined on the failure to discover documents in their first discovery which linked the first defendant and The with the development of Lot 19 Durlacher Street, Geraldton even if it was only in relation to the real estate.
In my opinion the partnership accounts are relevant. I have already referred to provisions in the partnership agreement for proper accounts to be kept. A consideration of whether or not the partnership and the second defendant actually had an interest in or were concerned in some way with the running of the Cuisine Connection would require an examination of the partnership accounts. What payments were paid in and out of the partnership account or accounts? Did The make lease payments to the partnership? Was any licence fee payable by a stallholder operating from the Premises paid into a partnership account? Were funds in any partnership account used to pay any expenses of the Cuisine Connection? Was there any payment in or out of the partnership by or on behalf of either of the defendants in relation to the Nantucket Coffee Shop? and if so what were the details of it? The partnership accounts would be relevant to the consideration of whether or not the reality of the situation vis a vis certain parties was consistent in all respects with their legal structure.
I have already referred to the provision of the partnership agreement requiring proper accounts to be kept. It has not been stated by either of the defendants that no such accounts were kept. In addition to the partnership accounts the taxation returns of the partnership and the defendants would be relevant to show the true position.
The orders made by the Registrar on 28 March 1991 expressly required the defendants to discover documents relevant to the first defendant's purchase and ownership of the freehold land situate at 19 Durlacher Street, Geraldton and the first and second defendants' accounting records and taxation records relevant to the Cuisine Connection and the Nantucket Coffee Shop. Clearly these orders were designed to ensure that discovery of documents covered not only the legal structure but also the reality of the situation at the operational level.
I am mindful that the reference to the Cuisine Connection in the order relating to the provision of accounting records and taxation records is a reference to the business itself and not the Premises and that the defendants say that they have never had an interest in the business. If that is true then it of course provides an adequate explanation for no such documents being discovered. This is why the further order that the first defendant provide documents relevant to his ownership of Lot 19 Durlacher Street, Geraldton is so important in this case. In my view accounting records and taxation records relating to the Lease and the partnership come within this category. It should also be remembered that the orders made on 28 March 1991 did not operate to limit the defendants' ongoing obligation to provide discovery to only those documents which fell within the categories provided in the orders.
The first defendant in his affidavit sworn 29 September 1992 did not complain about the substance of the orders made on 28 March 1991. He did not state that there were no such documents or that he could not access any of them. In para 3 of this affidavit he stated:
"3.I refer to my and the second defendants affidavit executed 16 July 1992 and confirm that both I and the second defendant have discovered all discoverable documents relating to the above action."
The defendants' affidavit sworn on 16 July 1992 to which the first defendant referred in para 3 as set out above is the affidavit of the defendants verifying the third discovery. I note that the third discovery only discovers three documents in part one of the first schedule, two of which were the only two discovered in the first discovery. This can be compared with nine documents having been discovered in part one of the first schedule of the second discovery. It seems that the defendants paid little regard to the discovery process. It also seems that the first defendant considered himself to be the best judge of what documents were relevant and should be discovered. In any event it seems that the defendants gave scant regard to the provisions of the orders made on 28 March 1991 to which I have just referred. There is no evidence of any attempt by either of the defendants shortly after the orders were made or within a reasonable time thereof to find out about the existence and their ability to access documents which fell within the categories provided in the orders. In particular there is no evidence of any such attempt in relation to any accounts of the partnership or in connection with the Lease.
The first defendant made no mention in his affidavit sworn 29 September 1992 that the defendants and their family company Vexillum were borrowers together with The and his wife of funds from Town and Country to purchase the vacant land at Lot 19 Durlacher Street, Geraldton and to construct a retail foodhall thereon comprising of six shops. He referred to it in his affidavit sworn 30 November 1998 but this was after it was first referred to by Mary Tomlinson in her affidavit sworn on 21 October 1992. The first defendant stated in para 4.2 of his affidavit sworn on 30 November 1998 that other than a letter dated 26 January 1990 from Town and Country, which he added is not relevant to the action, there is no other documentation in the control or possession of the defendants which relates to the purchase of 19 Durlacher Street, Geraldton. He nevertheless attached a copy of such letter to his affidavit. In my view the letter is relevant and further, it should have been discovered pursuant to the orders made on 28 March 1991.
The Town and Country letter dated 26 January 1990 shows that the amount of the advance was $401,700. An offer and acceptance attached to the affidavit of Mary Tomlinson sworn on 21 October 1992 shows that the vacant land was purchased on 2 December 1990 for $150,000. The Town and Country letter also shows that in addition to Town and Country requiring a mortgage over the defendants' residence to secure the advance it also required a joint and several guarantee by the defendants and a guarantee by their family company, Vexillum. It also shows that interest on the advance was to be paid by monthly instalments of $6,702 commencing on 20 June 1990.
This document raises a number of questions including what interests each of the parties disclosed when the advance was sought? And on what income and projected income, if any, and from who or what entity did Town and Country approve the advance?
The Lease required The as lessee to pay rental to the first defendant and The as the lessors of $42,000 per annum by equal successive monthly payments in advance of $3,500. There is a shortfall of $3,202 per month between the interest payment and the rental payment pursuant to the lease and yet under the conditions of the advance by Town and Country the defendants by themselves and their family company had guaranteed the full amount of the advance and the necessary monthly interest payments pursuant to the advance.
The first defendant does not state in para 19 of his affidavit sworn 10 November 1999 when it was that The informed him that the licence fees did not cover The's obligations for repayment of the loan from Town and Country. Given the liability taken on by the defendants and Vexillum with Town and Country I would have expected the first defendant to have known The's financial circumstances and the projected income from the Cuisine Connection including the licence fees when the advance was sought. All of this together with the contents of paras 20 and 23 of the first defendant's affidavit sworn on 10 November 1999 raises questions including, why was Lot 19 Durlacher Street, Geraldton sold? Why was the Cuisine Connection sold? Was the property and/or business sold because of some financial difficulty? Did the partnership between the first defendant and The or one or both of the defendants pay any of the Cuisine Connection expenses to support the business in any way? Did The as lessee pay rates and taxes to the first defendant and The as lessors as required under the lease or did the partnership pay them? This is where the discovery of financial documents is both relevant and important to show the reality of the situation. It is only by reference to such evidence that an informed decision can be made on whether or not the structure or form accurately reflects the true position.
In the second discovery the defendants discovered a copy of a duly executed and stamped offer and acceptance dated 19 September 1990 between the first defendant and The as vendors and Nesday Pty Ltd as purchaser of Lot 19 Durlacher Street, Geraldton and a copy of the settlement statement dated 15 October 1990 relating to such sale and purchase. A copy of each of these documents is attached to the affidavit of Mary Tomlinson sworn on 21 October 1992. The offer and acceptance shows that the purchase price was $562,500. It describes the property as 19 Durlacher Street and shows that the following chattels including plant and equipment were included in the purchase:
"Air condition equipment, all exhaust systems, tables, chairs, carpet, cutlery, stainless steel benches, dishwasher, light fittings."
The standard form offer and acceptance document provided space for the parties to add in conditions of the sale and purchase which were not expressly provided elsewhere. In such space the parties expressly provided as follows:
"All licence are signed Mr Tjhing Kiauw The sign's licence for shop food 5 year 2 plus 2 licence drawn up as for others."
Mary Tomlinson stated in her affidavit sworn 21 October 1992 that she recognises one of the vendor's signatures to be that of the first defendant. The first defendant has not denied that it is his signature. Indeed he has accepted that he and The sold 19 Durlacher Street, Geraldton to Nesday Pty Ltd. He has also accepted that the sale of the property and the sale of the business were both effected on the same date. Mary Tomlinson has stated inter alia in para 17 of her affidavit sworn on 21 October 1992 that this offer and acceptance is not merely for the sale of the land and building at 19 Durlacher Street, Geraldton but also for the business conducted on the property. The first defendant has not directly responded to this assertion in any of the three affidavits sworn by him in support of the defendants' application that the judgment be set aside. Paragraphs 20 and 21 of the first defendant's affidavit sworn 10 November 1999 do not fully respond to this assertion by Mary Tomlinson.
I accept that the condition added by the parties concerning the signing of licences by The is by itself unclear. The express reference to tables, chairs and cutlery as forming part of the property the subject of the sale and that the sales of the property and the business were both effected on the same date lend weight to the assertion by Mary Tomlinson that the sale to Nesday Pty Ltd included the business as well as the land and building at Lot 19 Durlacher Street, Geraldton. If the offer and acceptance relates to both the property and the business at 19 Durlacher Street, Geraldton then such evidence would support the assertion that the first defendant had an interest in the Cuisine Connection.
In order to properly determine this issue at trial it would be necessary to examine accounting records for each and both of the defendants created on and about the time of the sale and documents on the relevant file of the agent who handled the settlement. No such documents have been discovered and the relevant file of the settlement agent is no longer available.
The first defendant stated in his affidavit sworn 10 November 1999 that the defendants at no time sought to conceal documents from the plaintiff and that they were confused about the discovery process because of a lack of understanding of the Court process and a lack of advice from their solicitors Birman and Ride. This statement needs to be considered in light of the contents of the affidavits sworn by the defendants in support of each of the first discovery, the second discovery and the third discovery. The wording of each affidavit supporting each of the three lists of documents separately discovered should have made the importance of discovery clear to the defendants. Further the statement of claim and the defence are both brief and uncomplicated documents. They clearly put into question whether the first defendant and the second defendant had an interest in the Cuisine Connection. Each of the three affidavits verifying the lists of documents makes express reference to documents relating to any matter in question in the action. If this was not enough, the plaintiff sought further and better discovery first by notice and then by chamber summons. Further, two Court orders were made in relation to further and better discovery one detailing categories of documents required and the other being a springing order that judgment would be given to the plaintiff if the further and better discovery as ordered was not provided.
Even if there was some confusion at the time of the first discovery there would have been no basis for any by the time the defendants were required to give the third discovery. Even then only three documents were discovered in part one of the first schedule of the list of documents and to date it appears that the defendants have still failed to comply with any of the orders made on 28 March 1991. If it be the case that the defendants are now genuinely unable to comply with such orders given the passing of so much time then this would provide good reason for the judgment not being set aside.
In support of their application to set aside the judgment the defendants have provided evidence of the structure of their relationships with The in relation to the Cuisine Connection and The Nantucket Coffee Shop. They have also provided evidence by assertion from the first defendant to the effect that neither of them has had any interest in the Cuisine Connection and is not in breach of the restraint of trade condition. However the defendants have failed to provide any substance to this assertion by way of any financial documents or evidence from a third party. The profit and loss statement of the Nantucket Coffee Shop provided in the third discovery provides no support. It must be borne in mind that the onus is on the defendants to show that they have an arguable or credible defence. In order to show that a legal structure or form is not a sham it is necessary to provide some evidence to show the actual conduct of the parties. The defendants have failed to do this save for bald assertions to the effect that their conduct was consistent with the legal structure or form.
The second limb of the defendants' submission on the merits of their defence relates to the enforceability of the restraint of trade condition. The defence filed herein on 16 January 1991 which currently stands as the defendants' defence does not raise any issue with the enforceability or reasonableness or lack thereof of the restraint of trade condition. The affidavit of the first defendant sworn on 29 September 1992 in support of the application to set aside the judgment makes no reference at all to the restraint of trade condition being unreasonable.
The first time that this is raised as an issue is by way of the first defendant's affidavit sworn 10 November 1999 which carries as an attachment a proposed substituted defence. By para 3 of the affidavit the first defendant has verified the facts set out in the proposed substituted defence to be true and correct in every respect. Paragraph 5 of the proposed substituted defence relevantly provides that the restraint of trade condition is unenforceable because both the radius of 20 kilometres and the period of five years are unreasonable. The proposed substituted defence does not particularise the grounds relied on by the defendants to establish that the restraint of trade condition is unreasonable and unenforceable. Neither of the defendants has sworn on affidavit that he or she has ever considered the restraint of trade condition to be unreasonable. Further, neither of the defendants has sworn on affidavit any fact or combination of facts relied on to support the view that the restraint of trade condition is unreasonable and unenforceable.

If a covenant imposes a restraint on the covenantor's freedom to pursue his or her trade or calling, it will not be enforced if it is either unreasonable as between the parties or unreasonable in the public interest. The onus of proving that the restraint is unreasonable as between the parties lies on the party seeking to uphold it (normally the covenantee). If that test is satisfied, the onus then shifts to the covenantor to show that the restraint ought not to be enforced because it is not reasonable in the interests of the public at large. For the restraint to be regarded as reasonable between the parties it "must afford no more than adequate protection to the party in whose favour it is imposed". See Morris (Herbert) Ltd v Saxelby [1916] 1 AC 688 at 707 per Lord Parker. See also The Law of Contract 1987 edition Greig and Davis pp 1105 and 1106. Whether the restraint is reasonable as between the parties and in the public interest will involve a consideration of the length of time of the restraint and the area over which the restriction is to operate. See again The Law of Contract 1987 edition Greig and Davis p1106. The decision in each case will depend on its own particular facts.
In this particular case counsel for the defendants has argued that the restraint of trade condition is on the face of it too wide and should be held to be unreasonable both as between the parties and in the public interest. It is difficult to lean one way or the other on this point in the absence of further evidence. Other than speaking generally and saying that the size of the geographical area and population of Geraldton is a relevant factor, I do not propose to speculate on this issue. At a trial on liability the plaintiff would carry the onus of establishing that the restraint of trade condition is reasonable as between it and the defendants. However in the context of an application by the defendants to set aside a judgment entered in favour of the plaintiff because of some default by them I think that they ie the defendants, carry the onus of at least initially putting forward sufficient factual material to show that it has an arguable or credible case that the restraint is not reasonable in the circumstances. The defendants have failed to do this in this particular case.
For all these reasons I am of the opinion that the defendants have not shown that they have an arguable or credible defence on the merits. However should I be wrong about that and for the purpose of completeness I propose to consider the issues of delay and prejudice. I also propose to consider the submission made on behalf of the defendants that the judgment was irregularly entered.

Delay and prejudice

I propose to consider the issues of delay and prejudice together because they are both inextricably linked. It has been submitted on behalf of the defendants that their delay in this case can be distinguished from the delay by unsuccessful defendants/appellants in various authorities such as Palmer v Prince and Say v Fitzpatrick because in those cases the appellants delayed making an application to set aside a judgment entered against them whereas in this case the defendants made an application to set aside the judgment only 22 days after the judgment was entered. I do not know when the defendants or their solicitors Birman and Ride were given notice that the judgment had been entered. The delay in this case relates to the defendants' failure to prosecute their application to set aside the judgment entered in favour of the plaintiff.
While I readily accept that such a distinction exists I am not persuaded that it is of any real significance. Further, the length of delay in this case is much greater than the delay in the particular authorities just mentioned.
It has been submitted on behalf of the defendants that an application to set aside the judgment having been made, the plaintiff could have requested that it be re-listed and heard and determined and that it failed to do so. With respect I do not think that there is much merit in this submission. The plaintiff had a judgment in its favour and the onus was on the defendants to show that there was a good reason or good reasons why it should be set aside.
Despite affidavit evidence filed on behalf of the plaintiff to the effect that it was busy working on the assessment of damages even though there was nothing on the Court record to show for it I have no difficulty in concluding that the plaintiff has dragged its heels in having its damages assessed. In saying this I am appreciative that in a case such as this the plaintiff may well have needed some time to elapse in order to enable it to reliably quantify its loss. However in my opinion such delay on the part of the plaintiff did not shift or diminish the onus on the defendants to timeously prosecute their application to set aside the judgment.
Mr Davies stated in an affidavit sworn 29 April 1999 that at all material times until 15 August 1994 he had the conduct of this matter on behalf of the defendants. He stated that he attended the hearing of the chamber summons by the defendants to set aside the judgment on 30 September 1992 and advised the defendants of the outcome by letter dated 2 October 1992. He further stated that he recollects sometime thereafter having a telephone conversation with the first defendant as a result of which he understood the defendants did not wish him to take any further action in the matter. He then closed and archived the file.
The first defendant stated in his affidavit sworn 10 November 1999 that he did not terminate instructions to Birman and Ride and he cannot recall any telephone conversation with Mr Davies in which he did so. He stated in this affidavit that after he swore his earlier affidavit, which I take to mean his affidavit sworn on 29 September 1992, he assumed that the matter was under control by Birman and Ride. He also stated that he was unaware of any further developments in the matter until 1998 when he was advised by Birman and Ride that steps were being taken by the plaintiff to have the matter listed for trial.
I am in no position to determine this conflict in the evidence between Mr Davies and the first defendant. However this conflict should be determined, the fact of the matter is that the defendants knew that they had a judgment against them. The first defendant stated in his affidavit sworn 29 September 1992 that he was authorised to make the affidavit by the second defendant. For the purpose of determining this appeal I will proceed on the basis that the defendants were not contacted by Birman and Ride from 29 September 1992 to 1998.
Much has been made on behalf of the defendants that the judgment was entered as a result of the neglect by their solicitors, Birman and Ride. Further, the first defendant stated in his affidavit sworn 10 November 1999 that neither of the defendants has any prior experience of litigation or dealing with lawyers and therefore expected that the matter was being handled for them by their solicitors Birman and Ride.
In Jackamarra v Krakour (1998) 72 ALJR 819 at p834 Kirby J said:
"It may also be relevant, where the default is that of a party's legal representative, to take into account any considerations personal to the party which might have affected its ability to safe guard its own interest, for example, by applying pressure to its lawyers."
The defendants have a history of being involved in business and commercial arrangements. If it be the case that they knew nothing about their application to set the judgment aside from 29 September 1992 until 1998 then they must accept a large part of the responsibility for that. Indeed in my opinion, given the nature of the matter and the amount the plaintiff paid to the defendants for the business, namely $85,000, the defendants should have and were capable of safeguarding their own interests by contacting their solicitors Birman and Ride to find out about the progress of their application to set aside the judgment at least within a month or so of 29 September 1992 when the first defendant signed his affidavit. The defendants did nothing to further prosecute their application to set aside the judgment for about six years from 29 September 1992 until late in 1998. This is an exceptionally long time in the circumstances.
As lengthy as the delay by the defendants is in this particular case it is still necessary to consider what prejudice, if any, would likely be suffered by the plaintiff if the judgment is set aside. Mary Tomlinson in her affidavits sworn 21 October 1992 and 25 November 1999 has indicated that the plaintiff would be prejudiced because full discovery is now impossible because of the delay. She has stated in her affidavit sworn on 25 November 1999 that she believes that some of the people who were involved in the operation of the Uptown Foodhall have left Geraldton and may be difficult to contact. It is submitted on behalf of the defendants that the plaintiff would not be prejudiced if the judgment was set aside. It is also submitted that Mary Tomlinson does not give any details of a particular witness who would be unavailable and the evidence that the plaintiff expects such witness to give.
I wish to make a general comment at the outset. It is a notorious fact that recollections of events and details of events fade with the passing of time. Given the exceptionally long delay in this case I think it likely that some or all of the witnesses called on the issue of liability, should it get to that, would have difficulty in accurately recalling some factual matters. Indeed I consider it inevitable that the length of the delay in this case would adversely affect the quantity and quality of the evidence. In relation to people involved in the operation of The Uptown Foodhall I would have expected them to be more likely to be required to give evidence in relation to the assessment rather than liability. I do not give any weight to the prospect of any of them being unavailable at trial in my consideration of the issue of prejudice. However, the general comment I have just made needs to be taken into account.
In my opinion the plaintiff would be materially prejudiced if it was now required to establish liability. I have already mentioned the need for financial documents to be discovered in this particular case and that it appears that the defendants have still not complied with any of the orders made on 28 March 1991. The lengthy delay has resulted in it being impossible for the defendants to comply in relation to some documents.
In para 4.3 of the first defendant's affidavit sworn on 30 November 1998 he stated that to the best of his recollection and belief payments of rental by The in respect of Lot 19 Durlacher Street, Geraldton were made by The to Town and Country. The first defendant stated that he has been informed by the manager of Town and Country that it has been unable to locate any documentation for the relevant loan account. He also stated that neither of the defendants have in their possession or control any taxation records relevant to The Cuisine Connection. The first defendant indicated in para 5 of this affidavit that he has been informed by Birman and Ride that they no longer have on their database and cannot trace their files relating to the Lease and the licence agreements. The first defendant stated in para 6 that he has been informed by the proprietor of Sun City Settlements which attended to the settlement of the property situate at 19 Durlacher Street, Geraldton that he has no further documentation relating to the purchase and sale of the property by himself and The. This is of particular interest because it is necessary to consider whether the offer and acceptance between Nesday Pty Ltd as purchaser and the first defendant and The as vendors dated 19 September 1990 concerned both the property and the Cuisine Connection or the property only. I have previously referred to the relevance of accounts of the partnership between the first defendant and The. The first defendant makes no mention in any of his three affidavits about any account of the partnership, what financial institution any such account was held with and what attempts if any have been made by the defendants to obtain a copy of such an account.
For all these reasons I am of the opinion that the delay is excessive and that the plaintiff would be materially prejudiced by the delay if the judgment was set aside and it was required to establish liability.

The judgment

It has been submitted on behalf of the defendants that the judgment was irregularly entered as the springing order made 23 June 1992 referred to the order for discovery dated 28 March 1991 which was not clear in its terms. It has been submitted that the order made on 28 March 1991 did not refer to discrete or particularly identified documents and therefore could be said to be speculative or a "fishing expedition". In my view it was sufficient for the order to have expressly referred to specific categories of documents. It must be appreciated that there may well be cases of which this is one where the plaintiff cannot be reasonably expected to know the specific documents in the possession power or control of the other party. In such a case the best the plaintiff could do is to define particular categories of documents which on the face of them would be relevant to the issues disclosed on the pleadings. This is precisely what happened in this particular case. I also note that while the orders made on 28 March 1991 were not made by consent the springing order made on 23 June 1992 which referred to such orders was made by consent. I consider it unlikely that a party would consent to an order which made it vulnerable to a judgment being entered against it if it genuinely thought that what it was required to do pursuant to the order to avoid judgment was unclear.
It has also been submitted on behalf of the defendants that the order made on 28 March 1991 does not explicitly state that the discovery on oath should be filed and served. It merely states that it should be "provided". It is submitted that the defendants did so provide discovery on oath by filing the affidavit verifying the list of discoverable documents together with such list on 16 July 1992. In my opinion the meaning to be given to the words "do provide" in the context of the order made on 28 March 1991 includes a requirement that the defendants serve the further and better discovery on the plaintiff. Indeed the defendants' solicitor at the time, Mr Davies, was obviously under no misunderstanding that the order required service of the further and better discovery because in para 7 of his affidavit sworn on 29 September 1992 he stated that he instructed his outside clerk to file and serve the affidavit of discovery on 20 July 1992.
For these reasons I find that the judgment was regularly entered.

Conclusions

In my opinion the defendants' application to set aside the judgment should be dismissed.
The defendants have failed to establish a credible defence on the merits. In my view the legal form of the various relationships involving one or both of the defendants and The as shown in the Lease and the partnership and licence agreements and the assertions by the first defendant that neither of the defendants had any interest in the Cuisine Connection must be weighed with all of the other matters raised by me including the defendants' conduct in these proceedings in relation to discovery and their failure to provide much if anything in the way of evidence including financial accounts on the way in which the business relationships involving one or both of the defendants and The were actually conducted.
Given that the defendants are seeking to set aside a judgment against them and that the issue between the parties is that certain legal structures were a sham, I think it reasonable to expect that the defendants would have provided evidence of substance if it was consistent with form.
If the defendants do have a credible defence on the merits given the evidence of the legal structures outlined by the Lease and the partnership and licence agreements and also given the evidence of the first defendant that neither of the defendants had any interest in the Cuisine Connection then bearing all of this in mind and weighing it with the importance of financial documentation in a case such as this where a sham is alleged, the apparent non-compliance by the defendants with the orders for further and better discovery made on 28 March 1991 and the matters mentioned by me under the heading of delay and prejudice I conclude that the defendants' application to set aside the judgment should be dismissed.
For all these reasons I conclude that the orders made by the Deputy Registrar on 14 December 1999 should stand and that the defendants' appeal be dismissed. I will hear from the parties on the question of costs.