Carnegie Capital Pty Ltd v Interstyle Building Pty Ltd
[2004] WASC 65
CARNEGIE CAPITAL PTY LTD -v- INTERSTYLE BUILDING PTY LTD & ORS [2004] WASC 65
| Link to Appeal : |
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| SUPREME COURT OF WESTERN AUSTRALIA | Citation No: | [2004] WASC 65 | |
| Case No: | CIV:1943/2001 | 1 APRIL 2004 | |
| Coram: | MASTER SANDERSON | 6/04/04 | |
| 13 | Judgment Part: | 1 of 1 | |
| Result: | Judgment entered against second defendant, Application by second defendant for extension of time to file defence dismissed, Application by second defendant to set aside default judgment dismissed | ||
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| PDF Version |
| Parties: | CARNEGIE CAPITAL PTY LTD (ACN 079 552 051) INTERSTYLE BUILDING PTY LTD (ACN 071 021 952) STELLEC PTY LTD (ACN 068 359 188) CLAYTON RAMSAY TRACEY RAMSAY |
Catchwords: | Practice and procedure Application by plaintiff for leave to enter judgment against second defendant Application by second defendant for extension of time to file defence Application by third defendant to set aside default judgment Turns on own facts |
Legislation: | Nil |
Case References: | Gibbings v Strong (1884) 26 Ch D 66 Palmer v Prince [1980] WAR 61 Wiedenhofer v The Commonwealth (1970) 122 CLR 172 ACCC v Bio Enviro Plan Pty Ltd [2003] FCA 232 Compaq Computer Australia Pty Ltd v Merry, unreported; Fed Ct; 14 August 1998 Faithful v Woodley (1890) 43 Ch D 287 Noden v Mason [1926] VLR 41 Parker v Transfield Pty Ltd & Anor [2000] WASCA 382 Patten v Burke Publishing Co Ltd [1991] 1 WLR 541 Pereira v DPP (1989) 82 ALR 217 Termijtelen v Van Arkel [1974] 1 NSWLR 525 |
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
- IN CHAMBERS
- Plaintiff
AND
INTERSTYLE BUILDING PTY LTD (ACN 071 021 952)
First Defendant
STELLEC PTY LTD (ACN 068 359 188)
Second Defendant
CLAYTON RAMSAY
TRACEY RAMSAY
Third Defendants
Catchwords:
Practice and procedure - Application by plaintiff for leave to enter judgment against second defendant - Application by second defendant for extension of time to file defence - Application by third defendant to set aside default judgment - Turns on own facts
(Page 2)
Legislation:
Nil
Result:
Judgment entered against second defendant
Application by second defendant for extension of time to file defence dismissed
Application by second defendant to set aside default judgment dismissed
Category: B
Representation:
Counsel:
Plaintiff : Mr M L Bennett
First Defendant : Ms C A Bahemia
Second Defendant : Ms C A Bahemia
Third Defendants : Ms C A Bahemia
Solicitors:
Plaintiff : Bennett & Co
First Defendant : Hammond Worthington
Second Defendant : Hammond Worthington
Third Defendants : Hammond Worthington
Case(s) referred to in judgment(s):
Gibbings v Strong (1884) 26 Ch D 66
Palmer v Prince [1980] WAR 61
Wiedenhofer v The Commonwealth (1970) 122 CLR 172
Case(s) also cited:
ACCC v Bio Enviro Plan Pty Ltd [2003] FCA 232
Compaq Computer Australia Pty Ltd v Merry, unreported; Fed Ct; 14 August 1998
(Page 3)
Faithful v Woodley (1890) 43 Ch D 287
Noden v Mason [1926] VLR 41
Parker v Transfield Pty Ltd & Anor [2000] WASCA 382
Patten v Burke Publishing Co Ltd [1991] 1 WLR 541
Pereira v DPP (1989) 82 ALR 217
Termijtelen v Van Arkel [1974] 1 NSWLR 525
(Page 4)
1 MASTER SANDERSON: This is the return of two chamber summonses. The first in time is the plaintiff's chamber summons seeking leave to enter judgment in default of defence, pursuant to O 22 r 7. The second summons was issued by the second and third defendants. The second defendant seeks an extension of time to 24 November 2003 in which to file its defence. The third defendants seek to set aside the default judgment entered against them. Before dealing with each of these applications it is necessary to say something about the claim made by the plaintiff against the defendants. The plaintiff's case is set out in an amended statement of claim dated 19 September 2003, which was filed on 25 September 2003. The pleading is very long and detailed. It runs to 160 paragraphs and 69 pages. For present purposes, no detailed examination of the pleading is required. I will summarise the claim in general terms. The plaintiff is a company which owns a property in Eagle Bay in the south-west of the State. The first defendant is a builder. The second defendant is the owner of a property at Lenamont Court, Dunsborough. The third defendants are officers of both the first and second defendants.
2 It is alleged by the plaintiff that in or about March 2000 the plaintiff retained the first defendant to build a house on its Eagle Bay property. The contractual arrangement between the plaintiff and the first defendant was varied from time to time and the details are not presently relevant. What the plaintiff alleges is that the first defendant caused or allowed goods and services paid for by the plaintiff to be delivered to the second defendant's Dunsborough property and to be used for the construction of a building on that property. As against the second defendant, it is alleged that it knowingly received the goods and services paid for by the plaintiff and used those goods and services in the construction of a building on the property it owned. As against the second defendant, the plaintiff says that it now holds the Dunsborough property on a constructive trust for the plaintiff. As an alternative, it is said that the second defendant was unjustly enriched as it received and obtained goods and services paid for by the plaintiff to which it was not entitled, and used the goods and services for the construction of a building on its property. In the prayer for relief the plaintiff seeks declarations against the second defendant. It would seem that were such declarations to be made, the plaintiff would then seek to have the second defendant account for the goods and services that have been paid for by the plaintiff and have found their way into the building on the Dunsborough property. As against the third defendants, the plaintiff says that they were knowingly concerned in a breach of s 52
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- of the Trade Practices Act and that they are therefore personally liable for any damage suffered by the plaintiff.
3 The action was originally commenced against just the first defendant. On 25 September 2003, Registrar Johnston, at a case evaluation conference, gave the plaintiff leave to reamend the writ and statement of claim terms of a minute dated 19 September 2003 which is, in all respects, the same as the now extant amended statement of claim. The first defendant was giving leave to file and serve its amended defence and any counterclaim by 23 October 2003. The second and third defendants entered an appearance on 9 October 2003. Pursuant to O 20 r 4(1), each of the second and third defendants was required to serve their defence by 24 October 2003. Neither did so. On 5 November 2003 the plaintiff entered judgment in default of defence against the third defendants. As the claim against the second defendant was not for a liquidated sum, leave was required to enter judgment. The plaintiff applied for leave on 6 November 2003 and it is that summons which is presently before the Court.
4 The first return date of the summons was 25 November 2003. On 17 November 2003 the plaintiff obtained a certificate under O 20 r 7(1A) stating that no defence had been filed by the second defendant. On 25 November 2003 the second defendant purported to file its defence. The document was accepted by the central office and now appears on the court file. It is clear that the filing of the defence by the second defendant was irregular. It did not comply with O 20 r 4. No application was made for an extension of time within which to file the defence before the document was filed.
5 In responding to the plaintiff's summons seeking judgment, counsel for the second defendant relied on two matters. The first is what might be called a technical objection to the plaintiff's application. It was said that O 22 r 7(1A) required that a certificate be issued "on the day of the hearing". As no such certificate was issued on the day on which this matter was heard, no judgment could properly be entered against the second defendant. Allied with that submission, it was said that as a defence had now been lodged, it was not possible for the plaintiff to obtain the necessary certificate and the application for judgment must therefore fail.
6 That submission can be disposed of quite simply. The defence which the second defendant purported to lodge was not lodged in compliance with the Rules. It cannot therefore be properly said that the second
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- defendant has lodged a defence. That being so, the plaintiff can obtain the necessary certificate. It is true that the certificate must be obtained on the day of the hearing. Assuming without deciding that the rule requires the plaintiff to obtain a certificate for the day that the matter is heard and determined, I will adjourn final consideration of this matter to a date to be fixed to allow the plaintiff to obtain a certificate for that day. I will also direct the central office to uplift the purported defence of the second defendant, with the effect that no defence will appear on the record. There will then be no practical impediment to the plaintiff complying with O 22 r 7(1A) and no reason why judgment could not be entered.
7 The second submission made by counsel was directed at the substantive issues raised by the application. It was said that when a motion for judgment was before the Court, the Court will not ignore a defence which is filed out of time unless it is merely frivolous or filed for the purpose of delay. It was also submitted that an extension of time for delivery of that defence may be granted without an affidavit of merits and the motion for judgment may be refused. In making that submission, counsel relied upon the decision of the High Court in Wiedenhofer v The Commonwealth (1970) 122 CLR 172.
8 In that case, Gibbs J was considering a High Court rule similar in terms to O 22 r 7(1). His Honour observed that the Court has a discretion to refuse to make the order asked for and that a defence served after the expiration of the prescribed time but before judgment has been given, cannot be disregarded. His Honour referred to what was said by the Earl of Selborne LC in Gibbings v Strong (1884) 26 Ch D 66. His Lordship said, after quoting from the English rule which in terms is very similar to the rule here in question (at 69):
"This means that the Court is to exercise some judgment in the case: it does not necessarily follow the prayer, but gives the plaintiff the relief to which, on the allegations in his statement of claim, he appears to be entitled; and if a defence has been put in, though irregularly, I think the Court would do right in attending to what it contains. If it were found to contain nothing, which, if proved, would be material by way of defence, the Court would disregard it. If, on the other hand, it discloses a substantial ground of defence, the Court will not take the circuitous course of giving a judgment without regard to it, and obliging the defendant to apply, … to have that judgment set aside on terms, but will take steps to have the case properly tried on the merits."
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9 This approach by the Lord Chancellor appears to have been a 19th Century attempt at case management. What O 22 r 7 (and any equivalent order) anticipates is the plaintiff obtaining judgment in default of the defence, but if such judgment is obtained, a defendant can apply to have the default judgment set aside. In our Rules the defendant's right to so apply is found in O 22 r 10. When an application is made to set aside a default judgment regularly entered, the applicant must show that there is a defence on the merits and that there is an explanation for failure to comply with the Rules: see Palmer v Prince [1980] WAR 61 at 62. In the Wiedenhofer case, Gibbs J put the position in this way (at 174 - 175):
"In the present case, where I have before me not only a motion for judgment but also a motion for extension of time for filing the defence, and where a defence has in fact been delivered although out of time, and there is no ground to suggest that this defence is merely frivolous or filed for the purpose of delay and an explanation has been given for the failure to deliver it within time, in my opinion it would lead to an injustice to take any other course than to grant a reasonable extension of time and to refuse the motion for judgment."
10 In my view, what was said by Gibbs J is not in any way inconsistent with the general principles which apply to setting aside of default judgment. His Honour was adopting the same approach as that adopted by the Earl of Selbourne in the Gibbings case. The defence filed, albeit filed irregularly, disclosed a defence on the merits. In the circumstances of those two particular cases, it was not necessary to have an affidavit which went to the merits of the defence - the merits of the defence emerged clearly from the purported pleading. Thus the first requirement of setting aside a judgment in default was satisfied. In Wiedenhofer, Gibbs J was satisfied that the explanation for the failure to deliver the defence in time was satisfactory. Therefore entry of judgment was refused, thus obviating the need for the defendant to apply to set aside the judgment which otherwise might have been entered. In my view, it is not appropriate to say that different rules apply when a defendant seeks to resist an application by a plaintiff made under O 22 r 7 to those which would apply if an application was made to set aside a default judgment under O 22 r 10. It is a matter of taking a practical approach and avoiding unnecessary duplication of proceedings.
11 On that basis it is then appropriate to consider both the nature of the second defendant's defence and the explanation as to why the defence was not filed within time.
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12 It is appropriate first to consider the merits of the second defendant's defence. The second defendant does not plead to much of the statement of claim. That is understandable, given that most of the statement of claim is directed at the first defendant. The second defendant does plead to par 62 of the statement of claim, but that is a relatively minor matter and for present purposes can be put to one side. It is par 156 and 157 of the statement of claim which are of particular importance to the second defendant. By par 156 the plaintiff says that in 2000 and to June 2001, the first defendant caused, or alternatively allowed goods and services paid for by the plaintiff, to be delivered to the Dunsborough property, and to be used in the construction of a building on that property. By par 157, it is said that the second defendant knew that the goods and services paid for by the plaintiff were being used in the construction of the building on the Dunsborough property. The second defendant pleads to that allegation by par 7 of the defence. Paragraph 7(a) admits that the second defendant owns the Dunsborough property. Paragraph 7(b) admits "that some bricks used in the construction of the house … have the same appearance as the bricks used in the construction …" of the building on the Dunsborough property. Paragraph 7(c) is then in the following terms:
"(the second defendant) says that Glenn John Wheeler (a director of the plaintiff) on behalf of the plaintiff told Ramsay (the first-named third defendant) that he, Wheeler, wanted Interstyle to absorb the amount of its fee for the construction of the Property ('the Builder's Fee') into the cost of the construction of the property and suggested to Ramsay that Interstyle obtain payment of the Builder's Fee by submitting invoices incurred on behalf of Stellec in the construction of the works at Lenamont Court, to the plaintiff for payment, instead of submitting invoices for the Builder's Fee."
13 The plea in par 7(c) is not easy to understand. What it seems to amount to is this. It is alleged that Glenn Wheeler and Clayton Ramsay had a discussion concerning payment by the plaintiff to the first defendant with respect to the building on the Eagle Bay property. It is said that Wheeler suggested to Ramsay that rather than the plaintiff pay the first defendant a fee, to which the first defendant as builder was entitled, the first defendant should build on the second defendant's Dunsborough property and bill the plaintiff as though the costs were incurred on the Eagle Bay property. Those costs would then be deducted from the builder's fee. The net result would presumably be that the first defendant's fee would be reduced, while the plaintiff would pay no more for the cost of construction of the Eagle Bay property.
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14 It must be said that this is a very curious arrangement. A natural first reaction is that it was a scheme designed to avoid the first defendant paying tax on its builder's fee. There does not appear to be any benefit available to the plaintiff. The first-named third defendant has filed two affidavits relating to this application. In the first of those affidavits sworn 17 November 2003, Mr Ramsay says that after the alleged discussion with Mr Wheeler, he discussed the position with his accountant and that he was advised that if the scheme was put into effect, he would have to declare the benefit and pay tax as if he was receiving income. If that is the case, then it is difficult to see why the arrangement was reached. In neither of his two affidavits does Mr Ramsay offer an explanation as to why he agreed to the arrangement. For his part, Wheeler denies that any such arrangement was entered into: see par 6 of the affidavit of Glenn John Wheeler, sworn 23 January 2004.
15 I could not be satisfied on balance that the defence filed by the second defendant discloses a defence to the plaintiff's claim. Furthermore, I am not satisfied that the affidavits filed by Mr Ramsay show a defence on the merits. I am not satisfied then that the merits of the second defendant's claim are such as to warrant a refusal to enter default judgment under O 22 r 7.
16 There is then the question of the explanation for the delay in filing the defence. The reasons for the delay are set out in an affidavit of Carol Aisha Bahemia ("Ms Bahemia"), sworn 6 November 2003. Ms Bahemia says that she is a partner of the law firm representing the defendants and that she has conduct of the action: see par 1. Although it is not covered in the affidavit, it is reasonable to assume that it was Ms Bahemia who caused the appearances to be entered on behalf of the second and third defendants on 9 October 2003. She then must have been aware that it was necessary for both defendants to file their defences by 24 October 2003. Furthermore, this action had been on foot since 5 July 2001. The first defendant (then the sole defendant) had filed its defence on 16 April 2002. Prior to that, there had been proceedings relating to an injunction. A glance at the extensive material to be found on the file indicates that by the time appearances were entered for second and third defendants, Ms Bahemia must have had a reasonable understanding of the nature of the claim as it was put against the second and third defendants. Moreover, the case against the second and third defendants is derivative. That is to say, the main focus of the plaintiff's claim is the first defendant. It is the first defendant who the plaintiff says has engaged in misleading and deceptive conduct, breach of contract and so on, resulting in the plaintiff being overcharged for the building on the Eagle Bay property. All that is
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- said against the second defendant is that it was knowingly concerned in and the beneficiary of the rorts allegedly undertaken by the first defendant. As against the third defendants, it is said that as officers of the first defendant, they were knowingly concerned in the contravention by the first defendant of the Trade Practices Act. It is difficult to see how detailed instructions would have been necessary to enable defences to have been filed on behalf of the second and third defendants. That is not to say that it would not have been necessary for Ms Bahemia to have taken instructions before filing defences. But equally, it is difficult to see how those instructions could have amounted to anything more than an authorisation to include in the defences of the second and third defendants, matters which were well known to the defendants' solicitors, based upon what had already occurred.
17 Anyway, Ms Bahemia says that she arranged a conference with the second-named third defendant on 8 October 2003. (The writ names the second-named third defendant as Tracey Ramsay. An appearance has been entered in that name. However, it would seem that the second-named third defendant is known as Tracey Eldridge. To avoid confusion I will refer to Tracey Ramsay throughout these reasons. In doing so I mean no disrespect to the second-named third defendant.) Ms Ramsay was unable to keep that appointment due to ill-health. On 10 October 2003 Ms Ramsay and her family travelled overseas and did not return to Western Australia until 20 October 2003. On 29 October 2003 Ms Bahemia met with Ms Ramsay "for the purpose of reviewing the documents which were relevant to the defence": par 8 of Ms Bahemia's affidavit. By that time, of course, it was too late. On 8 October 2003 Ms Bahemia wrote to the plaintiff's solicitors seeking an extension of time within which the first defendant was to file its amended defence. That letter makes no reference to the defences of the second and third defendants. They are not mentioned at all. The plaintiff's solicitors wrote back on 20 October 2003, advising that they would not agree to an extension of time with respect to the first defendant's defence. Not surprisingly, they did not refer to the defences of the second and third defendants.
18 With respect, there is nothing in the affidavit of Ms Bahemia which adequately explains the failure of the second and third defendants to comply with the requirement that they file their defences within 14 days of the filing of the appearance. This was not a case where the solicitor was starting from scratch in a complex case with the result that an extended period was necessary to allow a proper defence to be lodged. Rather, it seems that there was a casual approach to the time parameters
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- set out in the Rules. Moreover, the injunction proceedings indicate that this case is a bitter feud between the plaintiff and the defendants. It is difficult to imagine that the defendants could have expected the plaintiff to give any quarter when there was a failure to comply with the requirements of the rules.
19 On balance then, I am not satisfied that there is good reason why the application for judgment made by the plaintiff ought be refused. Prima facie then, the plaintiff should have the order it seeks under O 22 r 7. However, there is one further matter which does require consideration. That relates to the way in which the claim by the plaintiff against the second defendant interrelates with the claims made against the first and third defendants. The action by the plaintiff against the first defendant will continue - there is no default judgment by the plaintiff against the first defendant and no circumstances which would allow the plaintiff to apply for such judgment. The question then is whether entry of judgment against the second defendant would in some way be inconsistent with the action by the plaintiff against the first defendant proceeding. A similar question arises with respect to the third defendants. In both cases these issues are relevant to a consideration of the disposition of the chamber summonses. Before looking more closely at this question it is appropriate to say something about whether or not the third defendants have made out a case for setting aside the default judgment entered against them.
20 Dealing first with the delay, the explanation offered by Ms Bahemia with respect to the delay in the second defendant filing its defence, applies equally to the third defendants. There are no further facts either in the affidavits of the third defendants or the affidavit of Ms Bahemia which advanced their case beyond what was said with respect to the second defendant. That being so, I am satisfied that there is no proper explanation for the delay in the third defendants filing their defences.
21 Turning to the merits, as I have said, the claim put against the third defendants is that they were knowingly concerned in the breach by the first defendant of the provisions of the Trade Practices Act. The plaintiff says that the first defendant undertook a course of action that the third defendants were officers of the first defendant and that they were, in essence, the moving hand of the first defendant. For their part the third defendants say that the first defendant did nothing wrong and they cannot therefore be personally liable for any losses suffered by the plaintiff.
22 On one view of the matter, the fact that the third defendants could only be liable to the plaintiff if the plaintiff succeeds on its trade practices
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- claim under the first defendant, suggests that the default judgment ought be set aside and leave to defend ought be given. On the other hand, it is very difficult to see how, if the first defendant is liable under the Trade Practices Act to the plaintiff, the second defendants can avoid liability. I accept that they dispute that they were knowingly concerned in any breach by the first defendant of s 52 of the Trade Practices Act. But as the company acts through them, it would seem to follow that they must be liable if the first defendant is liable. On that view of the matter, there would be no real disadvantage to the third defendants if the judgment against them was not set aside.
23 On balance, I am satisfied that the merits of the third defendant's position is not such as to warrant the default judgment being set aside. However, as with the second defendant, there is the question of how such a judgment will interrelate to the proceedings against the other defendants.
24 So far as the second defendant is concerned, the plaintiff will now be entitled to enter judgment for a declaration. After obtaining such a judgment, the plaintiff will presumably move to obtain an order for an account. While the way in which the account would be conducted was not the subject of detailed submissions, presumably the accounting party would be the second defendant. As a consequence of the account, it should be possible to ascertain the amount of any benefit the second defendant has derived from goods and services billed to the first defendant but used in construction of the building on the second defendant's property. After all, there is no dispute between the parties that the second defendant has benefited. The real question is whether or not that benefit was authorised by agreement between the parties or whether the benefit is unlawful. Once the account is taken, then further steps in relation to the second defendant can await determination of the plaintiff's claim against the first defendant.
25 So far as the third defendants are concerned, judgment against them should be stayed pending determination of the plaintiff's claim against the first defendant. If it were found that the plaintiff could not make out a case under the Trade Practices Act against the first defendant, then the judgment against the third defendants would be of no consequence.
26 The conclusion I have reached unfortunately further complicates what was already difficult litigation. But in the circumstances of this case, I can see no reason why judgment should not be entered against the second defendant and I can see no basis for setting aside the default judgment entered against the third defendants. As always, it is a matter of
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- doing justice between the parties. I am satisfied on balance that justice in this situation favours the plaintiff.
27 The first order that I will make is to direct the central office to remove from the record the defence purportedly lodged by the second defendant. That will allow the plaintiff to obtain the necessary certificate as a precursor to the entry of judgment. I will then enter judgment for the plaintiff against the second defendant and dismiss the second defendant's application for an extension of time within which to file its defence and the third defendant's application to set aside the default judgment. I will hear the parties as to costs.
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