Capricorn Society Limited v GARDENER

[2009] WADC 106

JURISDICTION     :   DISTRICT COURT OF WESTERN AUSTRALIA

IN CHAMBERS

LOCATION:   PERTH

CITATION:   CAPRICORN SOCIETY LIMITED -v- GARDENER & ANOR [2009] WADC 106

CORAM:   REGISTRAR KINGSLEY

HEARD:   9 JUNE 2009

DELIVERED          :   22 JULY 2009

FILE NO/S:   CIV 2983 of 2008

BETWEEN:   CAPRICORN SOCIETY LIMITED (ACN 008 347 313)

Plaintiff

AND

DALE MICHAEL GARDENER
First Defendant

MICHAEL NEWMAN
Second Defendant

Catchwords:

Practice - Application to set aside judgment - Turns on own facts

Legislation:

Nil

Result:

Application allowed

Representation:

Counsel:

Plaintiff:     Mr C Ko

First Defendant              :     No appearance

Second Defendant         :     Mr I Blatchford

Solicitors:

Plaintiff:     Brickhills

First Defendant              :     Not applicable

Second Defendant         :     Blatchfords Lawyers

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

Commercial Bank of Australia Ltd v Amadio (1983) 151 CLR 447

Hall v Hall [2007] WASC 198

Parker v Transfield Pty Ltd [2000] WASCA 382

Rollond v Bank of Western Australia Ltd, unreported; FCt SCt of WA; Library No 980498; 3 September 1998

1. REGISTRAR KINGSLEY:  The plaintiff has entered judgment against the second defendant, Michael Newman (Newman), claiming $63,307.71 pursuant to a written guarantee between the plaintiff and Newman.  By an application dated 11 March 2009 the second defendant seeks to set aside that judgment.

2. Newman in his affidavit sworn 12 March 2009 deposes that he has been recently diagnosed as suffering from Attention Deficit Disorder ("ADD").  Newman believes that this condition has had a significant impact on his behaviour, relationships and judgment and deposes that poor business decision or judgment calls have led him declaring or being declared bankrupt twice in the past, the most recent being in November 2000.

3. Newman deposes that on 27 September 2004, the date he signed the guarantee, he was employed by his son as a motor mechanic in his business Gardener's Auto Care Centre.  Newman deposes that a representative of the plaintiff, John Ostendorf, visited the premises and arrived at a very busy time.  Newman deposes that he had not seen the guarantee before, nor had he previously been asked by his son, or Ostendorf, if he was willing to sign a guarantee for his son's debt.  Newman deposes that Ostendorf did not give any reason why he should sign the document, nor did he explain what the document was or what its effect would be.

4. Newman deposes that he was quite flustered by Ostendorf's appearance, and the unexpectedness of his request and was under a great deal of pressure to attend to customers and get work completed.  Newman deposes he signed the document and Ostendorf left.

5. Newman attaches a report from Benita Ranzon, a psychologist.  Ms Ranzon assessed Newman on 9 January 2009 and administered two diagnostic tests.  In her report Ms Ranzon comments that Newman is clearly a highly intelligent man, and none of Newman's scores are below average.  However, Ranzon notes a discrepancy between the scores that, in her opinion, is diagnostic of an underlying disorder.  Ms Ranzon in her assessment considers Newman is a highly intelligent man, but he does have the core features of ADD.  Ms Ranzon notes that Newman has developed a range of coping strategies that allow him to be effective with his job, and so the effect of his symptoms is lessened.

6. The plaintiff opposes the second defendant's application and has filed an affidavit of John Johannes Ostendorf sworn 16 April 2009.  Ostendorf deposes that Newman had initially informed him that he was going to be in partnership with his son, the first defendant, and they wished to open an account with the plaintiff.  On or about 21 September 2004 Ostendorf received the first defendant's application for credit, and it was at that point Ostendorf noted it was only signed by the first defendant on behalf of Gardeners' Auto Care.

7. Ostendorf undertook a business name search and determined that the business had been registered on 2 September 2004.  Ostendorf deposes that he telephoned Newman and during the course of the conversation mentioned to Newman that a deed of guarantee would need to be signed by him in order for the account to be accepted.  Ostendorf deposes that Newman simply said "Okay" and Ostendorf stated he would bring to Newman the paperwork to be signed.

8. On 27 September 2004 Ostendorf deposes he attended the business premises of Gardeners' Auto Care Centre and handed to Newman the guarantee.  Ostendorf explained to Newman that the document was the guarantee they had been talking about, which the plaintiff needed to be signed before the first defendant's account could be opened.  Ostendorf goes on to depose that he had no knowledge of any alleged conditions being suffered by Newman nor did Newman display any symptoms of the alleged condition.

Legal principles

1. The general rule is that when a regular judgment in default has been entered, then a court needs to be satisfied there is a defence on the merits before that judgment will be set aside.  It is for the defendant to present a credible defence which shows that if the matter were argued on its merits the defendant would have a real prospect of success (Parker v TransfieldPty Ltd [2000] WASCA 382).

2. In Hall v Hall [2007] WASC 198 Newnes J reviewed the authorities in relation to setting aside a regular judgment under O 13 r 10 RSC.  Newnes J concludes at [63] that what a defendant will generally be required to show by way of a defence has been expressed in a number of ways, but there are two fundamental principles that have never been doubted: firstly, that the discretion is unfettered and, secondly, the discretion is to be exercised so as to do justice between the parties having regard to the particular circumstances of the case.  At [67] Newnes J comments that he understands the Full Court in Rollond v Bank of Western Australia Ltd (unreported; FCt SCt of WA; Library No 980498; 3 September 1998) and Parker's case that it must appear from the affidavit material before the court that the defendant's case is not inherently incredible, and that if the defendant's evidence were accepted at trial, the defendant would have a real prospect of success.

The defendant's case

1. It would appear that the case being put forward by Newman is that there has been an unconscionable dealing with him.  The general rule is that if an adult person of ordinary understanding executes a document, they are bound by it, notwithstanding any misunderstanding by this person as to its terms.  However, there are exceptions to this general rule, and one of those exceptions, from Commercial Bank of Australia Ltd v Amadio (1983) 151 CLR 447, is the doctrine of unconscionability.

2. Unconscionable dealing looks at the conduct of a stronger party in attempting to enforce, or retain the benefit of, a dealing with a person under a special disability.  Newman's counsel submits that unconscionability applies whenever one party to a transaction is at special disadvantage in dealing with the other party because of illness, ignorance, inexperience, impaired faculties, financial need or other circumstances affecting his ability to conserve his own interest, where the other party unconscionably takes advantage of the opportunity.

3. The defendant's counsel submits that the relationship between Newman and the first defendant was such to put the plaintiff on inquiry to ensure that the purport and effect of the guarantee had been explained to Newman by a competent, independent and disinterested stranger.

4. Whilst Newman has annexed a copy of a psychologist report, I have some doubts whether Newman had a disability of the nature as described in Commercial Bank of Australia v Amadio for the purposes of establishing unconscionable dealing.  The psychologist had assessed Newman as being highly intelligent, had developed a range of adaptive strategies and that Newman's cognitive functioning tests showed he was above average in most areas.  However the psychologist does highlight a weakness in the information processing area and this includes difficulty sustained attention when listening or reading, and is easily distracted from these activities.

5. In my opinion, the reasons put forward by Newman are not inherently incredible and that if Newman's evidence is accepted at trial, there would be a real prospect of success.  The evidence before me is limited and is untested by cross‑examination.

6. I should also mention that there was no point taken about any delay in bringing the application.  Nor has it been suggested that the plaintiff would suffer any substantial prejudice if judgment were set aside.

Conclusion

1. In my opinion it is in the interests of justice that the default judgment be set aside.  Having regard to the fact that the documentation is very limited and the potential witnesses are equally limited, I am of the opinion this matter can come to an early trial.  I will hear the parties' counsel on what further orders are required to facilitate the resolution of the action, either by mediation or by adjudication.