Carnaby v Stevens

[2011] WADC 99

JURISDICTION     :   DISTRICT COURT OF WESTERN AUSTRALIA

IN CIVIL

LOCATION:   PERTH

CITATION:   CARNABY -v- STEVENS [2011] WADC 99

CORAM:   PRINCIPAL REGISTRAR GETHING

HEARD:   16 JUNE 2011

DELIVERED          :   16 JUNE 2011

FILE NO/S:   ALB CIV 1 of 2011

BETWEEN:   DEAN CARNABY

ROWENA CARNABY
Plaintiffs

AND

DAMIEN FRANCIS STEVENS
JOANNE STEVENS t/as DAMIEN STEVENS HOMES
Defendants

Catchwords:

Practice and procedure - Default judgment - Application to set aside

Legislation:

Nil

Result:

Default judgment set aside - case management orders made

Representation:

Counsel:

Plaintiffs:     Mr P J Mugliston

Defendants:     Mr G D Cobby

Solicitors:

Plaintiffs:     Latro Lawyers

Defendants:     Great Southern Legal Pty Ltd

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

Hall v Hall [2007] WASC 198

Lawrence v Slemko [2009] WASC 33

PRINCIPAL REGISTRAR GETHING:  [This judgment was delivered extemporaneously on 16 June 2011 and has been edited from the transcript.]

1. By application dated 18 May 2011, the defendants seek orders setting aside the judgment in default of pleadings entered on 29 March 2009.  The claim relates to building work carried out by the defendants for the plaintiffs pursuant to a 'costs plus' contract.  The defendant filed an affidavit sworn by Mr Stevens, the first‑named defendant, on 24 May 2011 in support of the application.  The plaintiffs filed an application by their solicitor, Mr Jeff Stephen Atkinson in opposition to the application.

2. The action started out as a general procedure claim in the Magistrates Court by the first‑named plaintiff against the first‑named defendant.  The claim was filed on 26 June 2009.  On 6 July 2009, the first‑named defendant lodged a notice setting out his intention to defend the claim.

3. A pre‑trial conference was held on 10 September 2009 and the action did not settle.  The pre‑trial conference was adjourned to a date to be determined upon a request in writing.  That request was not made until 5 January 2010.  The pre‑trial conference was re‑listed to 27 January 2010.  Programming orders were made for the filing of pleadings.  The statement of claim was to be filed within the timeframe specified.  The statement of claim was not, in fact, filed until 21 June 2010.  By consent order, filed 23 June 2010, Rowena Carnaby was joined as a claimant, and Joanne Stevens, trading as Damien Stevens Homes, was joined as a defendant.

4. On 4 January 2011, a consent order was made transferring the action to the District Court.  A minute of proposed amended statement of claim was filed on 19 January 2011.  On or about 6 February 2011, a consent order was filed with the court which included an order that the defendants file their defence by 3 March 2011.  On or about 14 March 2011, I made orders in terms of the consent.  The default judgment was filed on 22 March 2011 and entered on 29 March 2011.  The defendants accept the default judgment was regularly entered.

Relevant law

1. The power of the court to set aside a regularly entered default judgment arises in Rules of the Supreme Court 1971 (WA) (RSC) O 13 r 10. The power is:

   The court may, on such terms as it thinks just, set aside or vary any judgment in pursuance of this order.

2. The nature of this discretion was considered by his Honour Newnes J, in the decision of Lawrence v Slemko [2009] WASC 33 [34]. His Honour stated:

   The discretion to set aside a default judgment is unfettered, but in the exercise of that discretion the court will usually require that the defendant show that he or she has an arguable defence on the merits, no purpose being served by setting aside the judgment if the defendant has no defence to claim.  The court will also usually require that the defendant provide a reasonable explanation as to how the judgment came to be entered in a matter where it is said that there is such a defence.  But the primary consideration is whether the defendant has a defence on the merits.

3. In an earlier decision, Hall v Hall [2007] WASC 198 [63], his Honour, after reviewing the authorities on discretion to set aside default judgments, stated:

   It is apparent that what a defendant will generally be required to show by way of a defence on the merits has been expressed in a number of ways that, in their terms, are not always easy to reconcile.  There are, however, two fundamental principles that I think have never been doubted.  The first is that the discretion is unfettered and no hard and fast rules can be laid down to how it is to be exercised.  The second is that the discretion is to be exercised so as to do justice between the parties, having regard to the particular circumstances of the case.

Reasons for delay

1. I turn first to the reasons for the delay in filing the defence, which ultimately led to the filing of the application for default judgment.  Looking at the affidavits of Mr Stevens and Mr Atkinson, it appears that, subsequent to filing its amended statement of claim, the plaintiffs had been pressing the defendants to file and serve a defence.  The entry of default judgment was threatened.  On the other hand, the defendants had taken issue with certain parts of the statement of claim and had threatened to bring the strike‑out application.  The final piece of correspondence sent by the defendants to the plaintiffs prior to the filing of the application for default judgment was a letter dated 18 March 2011.  That letter continued a chain of correspondence relating to the adequacy of the conferral process.  At the end of the letter, the solicitor for the defendants stated:

   Please forward your client's instructions no later than close of business 25 March 2011, failing which an application to strike out your client's statement of claim will be made.

2. The application for default judgment was lodged on 22 March 2011.  It is apparent from the chain of the correspondence that the reason why no defence was filed at that time was that it was the belief of the solicitors for the defendants that they were engaged in an ongoing process of conferral in relation to the statement of claim.

3. The application, as I have mentioned, was filed on 18 May 2011.  The fact that default judgment had been entered was notified by the plaintiffs to the defendants by letter dated 29 March 2011.  Counsel for the plaintiffs sought to add weight to the argument that the defendants have not been progressing the matter in a timely manner by drawing attention to the delay in filing the application.

4. The counsel for the defendants stated the reason for the delay was the need to file a detailed affidavit in support.  The affidavit in support of the application to set aside default judgment of Mr Stevens is very detailed. It goes through each and every one of the numerous allegations in his statement of claim.  It runs for 136 paragraphs in 24 pages.  In my view, there is no inference or point adverse to the defendants to be drawn in the delay taken to file the affidavit.

Defence on the merits

1. The statement of claim alleges numerous breaches by the defendants of the contract between the parties, including:

   •work not being performed competently or in a workman‑like manner;

   •defective work charged to the plaintiffs;

   •unnecessary work charged to the plaintiffs;

   •unnecessary subcontractor costs charged to the plaintiffs;

   •water damage due to the defendants' failure to secure the building while the roof was off;

   •other damage to the plaintiffs' property;

   •excess materials ordered and charged to the plaintiff;

   •damages due to the delay in completion of the works;

   •costs not connected with the agreed works.

2. Mr Stevens, in his affidavit, addresses each of the allegations made against the defendants by the plaintiffs.  He addresses them paragraph by paragraph.  If the court accepts the version of events put forward by Mr Stevens in his affidavit, then it is evident that the plaintiffs' claim will fail, either totally or substantially.  Further, there is a counterclaim for unpaid monies foreshadowed in the affidavit which, if accepted, could constitute a set‑off.  On the materials before me, I am satisfied that the defendants have an arguable defence on the merits.

Balancing the risks of an injustice

1. The final factor I am required to consider is to balance the risks of an injustice. In doing so, the RSC require me to look to the issues of proportionality and efficiency in the conduct of litigation between the parties.

2. If the default judgment is allowed to stand, then this matter will proceed through to assessment of damages.  Given the detailed claims involved, the assessment of the damages will probably take five, perhaps seven days worth of trial time.  There will be a considerable amount of time and cost involved in getting this case up.

3. What is also likely to happen if the default judgment stands is that the defendants will lodge a separate action for the matters the subject of the counter‑claim.  In the ordinary course, it would be difficult to see the court not acceding to an application that that action be consolidated with the primary action.  We then get to, probably, a ten day trial. 

4. If the default judgment is set aside, then the risk of injustice to the plaintiffs is that the defendants can raise the full gamut of the defences raised against them.  In many cases, these defences go to the quantum.  Hence, they will arise on an assessment in any event.  However, they go beyond quantum to the substantial terms of the contract and the contractual arrangement between the parties.

5. If the matter goes to trial on the basis of the defence as set out in Mr Stevens' affidavit, then my preliminary view is that it will take about 10 days.  On that analysis, there is little practical difference to the plaintiffs if the defendants' claim gets set aside or not in terms of the litigation process.  On the other hand, the prejudice to the defendants is that they will not be able to litigate the entirety of their defence.  The balance of the risk of injustice in this case seems to favour the setting aside of the default judgment.

Conclusion

1. In the modern era of case management, the course that the plaintiffs ought to have adopted in the present action was to have listed the action for a directions hearing to make orders programming the matter forward.  It ought to have been reasonably obvious to the solicitors for the plaintiffs that if default judgment was entered in the circumstances of the ongoing conferral, it would be immediately met by an application to set it aside.

2. I accept that the concerns of the plaintiffs as to the time taken to progress the matter had a basis.  However, it could have been dealt with at directions by making orders, if appropriate, for a springing order on the filing of the defence.  However, those programming orders would not have been made until the court had made a determination as to whether or not the defendants' application to strike‑out the claim ought to have been heard prior to the defence being filed.

3. For these reasons, the defendants' application, dated 18 May 2011, ought to be allowed, and the judgment be set aside.  I will hear from counsel on the issues of costs.