Care v Care
[2006] VSC 190
•24 May 2006
| IN THE SUPREME COURT OF VICTORIA | Not Restricted | |
AT MELBOURNE
PRACTICE COURT
No. 4037 of 2005
| ANTONIO CARE | Plaintiff |
| v | |
| JOHN FORTUNATO CARE and ANGELA CARE | First Defendant Second Defendant |
---
JUDGE: | KELLAM J | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 16 May 2006 | |
DATE OF JUDGMENT: | 24 May 2006 | |
CASE MAY BE CITED AS: | Care v Care and Anor | |
MEDIUM NEUTRAL CITATION: | [2006] VSC 190 | |
---
PRACTICE – Appeal from Order of Master setting aside judgment entered in default – Appeal dismissed.
---
APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr S. Minahan | Mills Oakley Lawyers |
| For the First and Second Defendants | Mr J.R. Dixon | Chembri & Co |
HIS HONOUR:
I have before me an appeal from the order of a Master dated 1 May 2006. The order appealed is an order of Master Evans that the interlocutory judgment entered into in default of appearance of the defendants be set aside.
The somewhat convoluted background of this proceeding requires brief consideration. The writ commencing proceedings was filed on 24 December 2004. The writ claims that the plaintiff, Antonio Care, is the brother of the first defendant, John Care. The second defendant is the wife of John Care. The writ (as subsequently amended pursuant to the order of Master Evans on 14 April 2005) alleges that in mid-1995 the plaintiff and the defendants entered into an agreement whereby the plaintiff agreed to guarantee the defendants’ obligations under a loan in the sum of $250,000 from the National Australia Bank. It is alleged that in order to do this the plaintiff mortgaged premises owned by him in Fitzroy North to the National Australia Bank as security. The plaintiff asserts that he received none of the funds made available to the defendants by the National Australia Bank.
Subsequently, it is asserted that in 1998 the plaintiff and the defendants entered into an agreement to discharge the loan from the National Australia Bank by borrowing funds from the State Bank of New South Wales Limited and mortgaging the premises in Fitzroy North and in addition further premises situated in Fitzroy North. Once again, the plaintiff asserts that he received none of the funds made available by the State Bank of New South Wales.
Subsequently, the loan from the State Bank of New South Wales was refinanced. As a part of the refinancing arrangements the plaintiff alleges that he, at the request of the defendants, agreed to provide one of his properties in Fitzroy North as security for a loan of $250,000 from Perpetual Trustees Victoria Limited and that he would act as the sole borrower on the loan on the basis that all payments of principal interest and other charges payable to Perpetual Trustees would be met by the defendants and that the plaintiff would not be responsible for making any payments to Perpetual Trustees. Once again, the plaintiff asserts that he received none of the funds made available by Perpetual Trustees.
The plaintiff asserts that between October 2000 and July 2004 all repayments of principal and interest to Perpetual Trustees were made in accordance with the original agreement. However, he asserts that in breach of the agreement on 27 August 2004, 27 September 2004 and 27 October 2004 and since, the defendants have failed to make payments of the monthly instalments of principal and interest owing to Perpetual Trustees under the loan. In consequence of this demand the plaintiff has made payments under the loan.
The writ was served on the first defendant on 12 January 2005 and upon the second defendant on 31 January 2005.
No appearance was made in accordance with the Rules and on 14 April 2005 interlocutory judgment was entered for damages in default. That day Master Evans made an order permitting the plaintiff to amend the statement of claim filed on 12 May 2005. It should be observed that the judgment which was entered was in the sum of $2,195 with damages to be assessed. An appointment was made for the assessment of damages to take place on Tuesday 28 June 2005 before the Master. On 6 June 2005 the Master ordered that the defendants attend before him on 28 July 2005 for oral examination under Rule 67.02. On that date the matter came on before Master Efthim who further adjourned the matter to 4 August 2005. Finally, after a number of adjournments, a further order to attend for oral examination on 12 September 2005 was made by Master Efthim. On 12 September 2005, the defendants were represented by their solicitor, Mr Volpe. Orders were made that the further hearing of the oral examination be adjourned to 28 September 2005. Master Evans further ordered that any application to set aside the default judgment in the proceeding be made returnable on 28 September 2005 and be filed and served with any affidavits in support by 26 September 2005. The Court records reveal that on 27 September 2005 the solicitors for the plaintiff forwarded a letter to the associate to Master Evans stating as follows:
“The parties have arrived at an interim settlement arrangement and as a result the oral examination of the defendants scheduled for tomorrow will not be proceeding at this time. We request the Court adjourn the oral examination hearing sine die with costs to be reserved.
The parties are currently attending to the drafting of terms of settlement. A copy of the executed terms will be provided to you by facsimile for inclusion on the Court’s file shortly.”
It is apparent that in September of 2005 the parties endeavoured to resolve their dispute. Terms of settlement were entered into on 28 September 2005. These terms of settlement were signed by the solicitors for the plaintiff and the then solicitor for the defendants, and by the plaintiff and the firstnamed defendant. The terms of settlement do not in any way refer to the fact that judgment had been entered against the defendants for damages to be assessed. Indeed, the recitals do not refer to the proceeding on foot save to say that the plaintiff and the defendants “are parties to this proceeding and each have agreed to deal with a number of outstanding matters pending further hearing of the proceeding”. The terms of settlement provide for payments by the defendants of amounts by way of legal costs incurred by the plaintiff and in addition to “pay to the plaintiff the sum of $12,823.81 being 50% of the mortgage instalments paid by the plaintiff to Perpetual from August 2004 to 28 September 2005, and the parties agree that such payment shall not waive or limit the plaintiff’s right to later seek payment of the remaining 50% of such instalments from the defendants in the absence of subsequent agreement to the contrary”.
Paragraph 2(a) of the agreement provides:
“The liability in respect of the balance of instalments paid by the plaintiff to Perpetual Trustees Victoria Limited be determined at a future date taking into consideration, inter alia, the benefits received by each party at the time the loans were taken out; and (b) the interlocutory judgment obtained by the plaintiff on 15 April 2005 not be acted upon until the respective liabilities of the parties and Perpetual Trustees Victoria Limited is determined;”
The terms of settlement further provide that if the defendants default under any obligation of the terms then they agree and consent to the plaintiff pursuing his claim “in this proceeding and any other claim it may have against the defendants”. Likewise, the terms provide that if the plaintiff defaults “then the plaintiff agrees and consents to the defendants pursuing their defence in this proceeding and any other claim it may have against the plaintiff”.
The terms of settlement contain the following oblique clause:
“The parties further agree that these terms are entered into by the parties as a means of facilitating a resolution to all outstanding matters in between them and are not to be construed as final orders in the proceeding.”
On 5 January 2006, the solicitors for the plaintiff requested the Prothonotary to re‑list the oral examination and a consent order was made before Master Evans on 10 February 2006 for the oral examination to be fixed for 8 March 2006. An oral examination of the defendants took place on that day although it was further adjourned to a date to be fixed for the resumption of the examination.
On 5 April 2006, the defendants filed a summons seeking to set aside the judgment in default of appearance in the matter. That summons came on before Master Evans on 1 May 2006. Before the Master were a number of affidavits. John Care, by his affidavit, states that it is not the fact that the plaintiff received no benefit from the loans entered into and referred to in the statement of claim. In particular, it is asserted that the plaintiff was the beneficiary of $346,663 of funds advanced over a period of time. Insofar as Mr John Care explains the failure to file an appearance he states in his affidavit:
“Initially, in the course of this proceeding I instructed the solicitor Vincent Volpe to act on my behalf. I asked Mr Volpe to file and serve a defence. Instead, Mr Volpe advised me that it was more cost effective for me to negotiate a settlement of the dispute between my brother and I. Mr Volpe represented me during the course of the preparation of the terms of settlement. … “
In addition, an affidavit of one John Cilmi, finance broker, was before the Master. Mr Cilmi deposed that he had known both the plaintiff and the first defendant for many years and had acted as mortgage broker on behalf of both of them. He states in his affidavit that in late 2000 he received a telephone call from the plaintiff in relation to a cheque in the sum of $122,737. He recalls having informed the plaintiff that such sum which came from sums borrowed from the State Bank of New South Wales should be used to pay out the plaintiff’s former wife and in part discharge the mortgage over a property owned by him at Wallan.
In opposition to the defendants’ application, the plaintiff swore an affidavit deposing that the statement of Mr Cilmi that he received a cheque in the sum of $122,737 is mistaken and that he never received any such cheque. He denies that he ever received any benefits as a result of the loan funds. The solicitor for the plaintiff, Mr Dunell, has sworn an affidavit in opposition to the application to set aside judgment. He asserts that at all times the defendants were legally represented by their former solicitor, Vincent Volpe, and since December 2005 by their present solicitors, Schembri & Co. He relies upon the fact that the defendants in 2005 stated an intention to apply to set aside judgment and that Master Evans ordered that they had until 26 September 2005 to make application to do so. He contends that the defendants have failed to disclose a defence and furthermore, he asserts that the defendants breached the terms of settlement by failing to pay the ongoing monthly instalments due under that agreement. In relation to the issue of prejudice that the plaintiff would suffer he states:
“In addition to the time lapse of 12 months, the numerous applications and court appearances that have occurred as a direct result of the interlocutory judgment, mean that the plaintiff would suffer substantial prejudice should the plaintiff’s application to set the judgment aside be granted.”
The principles as to the discretion to set aside a judgment under Rule 21.07 of the Rules are clear. In the case of a default judgment which is regularly obtained, as here, the circumstances relevant to the exercise of the discretion of the Court to set the judgment aside include:
(a)whether the defendant has a defence on the merits;
(b)the reason for the default of the defendant in consequence of which the judgment was obtained;
(c)whether the application to set aside the judgment was made promptly after the judgment came to the knowledge of the defendant; and
(d)whether if the judgment was set aside the plaintiff would be prejudiced in any respect which could not be adequately compensated for by a suitable award of costs and the giving of security.[1]
[1]Rosing v Bem Shemesh [1960] VR 173 and Kostakanellis v Allen [1974] VR 596.
As stated in Kostakanellis v Allen:[2]
“ … What the judge is required to do is to determine what, in his opinion, is the just way in which the Court’s discretion should be exercised. To do this must involve 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 it aside. In many cases the situation will be that the plaintiff will not suffer any prejudice that cannot be remedied by an appropriate order as to costs. … On the other hand if the defendant does show on affidavit a prima facie defence on the merits it would seem that usually he will be seriously prejudiced if he is debarred from being able to present his defence at a trial of the action. One cannot tell until this has been done whether or not the defendant will succeed in such defence. While it is undoubtedly relevant to the judge to consider what explanation the defendant has for not appearing on the return of the summons of final judgment, the weight to be attached to his explanation will depend upon the circumstances. Thus, for example, where the explanation shows that his non‑appearance was due to some mistake or to his being mislead, this may well assist the Court in deciding to exercise its discretion in his favour. Again, the explanation given may reflect on the question of whether the defendant has made out a prima facie defence on the merits. However, it does not necessarily follow that if the explanation does not amount to something which can be categorised as a ‘sufficient reason’ the defendant’s application should fail. It must all depend on the circumstances.”
[2]At p.605.
In the case before me there is a clear dispute as to the facts. The plaintiff says that he received no benefit from loan moneys which he guaranteed by providing security to various lenders. On the other hand, the defendants say that one sum of $88,966 was used to pay the mortgage in the plaintiff’s name and that a further sum of $132,052 was paid to the plaintiff’s former wife, together with a sum of $1,947 paid in legal costs. Insofar as another sum of $122,737 is concerned, the plaintiff says that he never received a cheque for that amount and an apparently independent person, Mr Cilmi, says that he did. In circumstances where there was no formal agreement between the parties and it appears that most arrangements were oral as between the parties, there is clearly a question as to who is to be believed. There is, accordingly, a defence on the merits in my view.
As to the explanation for the default, Mr Minahan of counsel for the plaintiff contends that there is no adequate explanation as to why appearance was not filed and why such a long delay occurred between the entry of judgment and the application to set it aside. He argues that the terms of settlement demonstrate that the defendants are prepared to accept the “lion’s share” of liability. Furthermore, he contends that the terms of settlement are enforceable and that the parties have entered into an agreement and that it is not unjust that the plaintiff hold the judgment. They have had legal advice, he argues, and they have executed an agreement in settlement of the issues in the proceeding. He contends that the application now made by the defendants is being made because they are “unhappy” with the agreement which they reached by way of settlement.
It may well be that the arguments advanced by Mr Minahan in due course prove to have some considerable merit. However, it appears to me that the terms of settlement do not reveal an acceptance by the defendants that they are liable for the whole of the judgment. An explanation has been given by the defendants for their delay in filing a defence and in not making application to set the judgment aside. That explanation is that their former solicitor was of the view that a more cost effective way to manage the litigation was to endeavour to resolve it. It is apparent that the plaintiff, by having the discussions which led to the terms of settlement, did not disagree with that course. In the end result, at least some of the delay is explained by the endeavours between the parties to resolve the issues. It is not appropriate for me to determine whether or not there has been breach of the terms of settlement and if so what consequences might flow from such breach. In all the circumstances I do not consider the delay in making application to set aside is gross and inexcusable to the point that it causes severe prejudice to the plaintiff.
Turning further to the issue of prejudice, of course there has been some delay caused to the proceeding by the failure of the defendants to either appear, defend or make application to set aside judgment. The plaintiff’s costs thrown away were ordered by the Master to be paid and obviously such an order is appropriate. In the end result, it is difficult to see that the plaintiff has suffered prejudice which cannot be cured by a cost order. In the end result, I conclude that the appeal against the decision of the Master should be dismissed.
The plaintiff should pay the defendants’ cost of the appeal.
I am prepared to make further orders and directions as to the conduct of the proceeding. In particular, I assume that the plaintiff will seek to amend his statement of claim so as to maintain his argument as to the enforceability of the terms of settlement.
---
0
0
0