Costa v Nationwide News Pty Ltd - [2012] WADC 63

JURISDICTION : DISTRICT COURT OF WESTERN AUSTRALIA
IN CHAMBERS

LOCATION: PERTH

CITATION: COSTA -v- NATIONWIDE NEWS PTY LTD [2012] WADC 63

CORAM: DEANE DCJ

HEARD: 16 APRIL 2012

DELIVERED : 4 MAY 2012

FILE NO/S: APP 71 of 2011

BETWEEN: PETER RAYMOND COSTA
Appellant
AND
NATIONWIDE NEWS PTY LTD
Respondent

Catchwords:

Application in Magistrates Court to set aside a default judgment obtained by respondent against appellant for advertising work carried out by respondent - Whether magistrate erred in exercising his discretion in granting appellant's application conditional upon appellant paying $10,000 into court within 21 days or failing that the appellant's application be dismissed

Legislation:

Magistrates Court (Civil Proceedings) Act 2004

Result:

Appeal dismissed

Representation:

Counsel:

Appellant: In person
Respondent: Mr T B Lyons

Solicitors:

Appellant: Not applicable
Respondent: Gibson Lyons

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

Batiste v Gilmour‑Latham [2011] NSWCA 391

DEANE DCJ: On 5 September 2011 Mr Costa (the appellant), who is a registered builder, appeared before his Honour Magistrate Bromfield in the Perth Magistrates Court. The appellant was self‑represented in his application to set aside a default judgment obtained by Nationwide News Pty Ltd (the respondent) against the appellant on 25 May 2011. The respondent's claim was in relation to payment for the cost of advertising services rendered by the respondent to a business 'Heritage Outdoor Building Systems' (the Heritage business) for which the respondent claimed the appellant was liable.
The appellant filed a Form 23 application to set aside the judgment, supported by an affidavit dated 27 July 2011 (the first affidavit). In that document the appellant generally sought to explain his delay stating that he intended to defend the claim against him by the respondent in full and he also intended to join a third party, being a Thomas George Hartwig (Mr Hartwig), to the proceedings on the basis that the appellant claimed it was Mr Hartwig who was liable for the debt to the respondent. In response Ms Linda Croft swore an affidavit on behalf of the respondent opposing the appellant's Form 23 application on 18 August 2011 (the Croft affidavit) and this was accompanied by a Form 24 response to an application filed on behalf of the respondent objecting to orders sought by the appellant to suspend the enforcement of all or part of the judgment. The appellant then swore another affidavit dated 2 September 2011 (the second affidavit) in response to the respondent's objection and addressing matters contained in the Croft affidavit. That second affidavit sworn by the appellant set out in some detail what he asserted was the background to the matter and annexed documentation relevant to some of the issues in question.
It is not necessary to descend into great detail regarding the contents of the appellant's second affidavit, but generally he attested that whilst he had agreed to purchase the Heritage business from Mr Hartwig and had been working for the business prior to about 26 August 2010 and had placed orders and purchasing advertising services with the respondent on behalf of the business, it was at that time owned by Mr Hartwig and his related entities. The appellant claimed that the purchase of the business was never completed by him and he never acquired the business or its name as the sale was never completed. As a result the appellant claimed that he was not responsible for the debt in relation to the advertising services of the respondent and that he had a defence to the claim which he wished to pursue.
In response to par 14 of the Croft affidavit stating that the respondent had incurred costs in applying for a property (sale and seizure) order against goods and land owned by the appellant, he said that if the court were to grant his application, an order could be made that the costs be paid to the respondent by the appellant forthwith, in which case the respondent would not be prejudiced. He then referred to certain items which the Croft affidavit stated the bailiff had seized, saying that contrary to the assertion in the Croft affidavit those goods did not belong to the appellant, rather they were owned by Mr Hartwig and his associated companies. As a result of alleged criminal offending by Mr Hartwig the appellant stated that all of Mr Hartwig's assets, including those mentioned as having been seized by the bailiff, were the subject of a WA Police freezing notice. Consequently the appellant said there was no likelihood that any of the assets seized would be dealt with other than in the respondent's interests.
When the appellant's application came on for hearing before his Honour Magistrate Bromfield, he reiterated that he believed he had a defence to the claim, namely, that the sale of the business, in the appellant's words, 'did not settle'. Magistrate Bromfield asked the appellant to explain to the court where he had deposed to the two‑month delay in bringing on his application. In response the appellant referred to the contents of his first affidavit but Magistrate Bromfield was not satisfied that it addressed the issue of delay and a similar observation was made by his Honour in relation to the appellant's second affidavit. His Honour also made a comment that if in fact the goods the bailiff had seized really belonged to Mr Hartwig then the seizure may well be unlawful because the judgment was recorded against the appellant and not Mr Hartwig.
In response to the application counsel for the respondent stressed the delay in the appellant bringing the application to have the judgment set aside and submitted that he had failed to supply an explanation, by which I understand that he meant a satisfactory explanation for the delay. Counsel also submitted that the appellant had failed to raise an arguable defence as to why the judgment should be set aside, noting in the appellant's second affidavit the core of his defence in the proceedings in the District Court appeared to be that the sale of the business never occurred. Counsel for the respondent pointed out that he had provided the court with a copy of a search of the business name register showing that the appellant became the registered proprietor of the Heritage business name on 1 July 2010, this document being annexed to the Croft affidavit. Counsel pointed out that the appellant had executed a credit application with the respondent on 26 August 2010 representing, according to the respondent's counsel, that the appellant was the owner of the business name in that application and pursuant to that between 3 October and 14 November 2010 the appellant placed several orders for advertising by telephone with the respondent. The respondent relied on the credit application and the orders being placed, as indicating that the appellant was responsible for payment of the resulting accounts. In the end the respondent's submission was that the appellant had not demonstrated an arguable defence in relation to the respondent's claim and therefore had not satisfied the requirement for setting aside the judgment which the respondent had obtained.
In reply the appellant reiterated that the sale of the business to him did not complete and that matters put forward on behalf of the respondent in opposition to the application were simply part of the process of the sale of the business and that all of the property remained with Mr Hartwig. Magistrate Bromfield reminded the appellant that in his pleadings in the action in the District Court, to which the respondent was not a party, the appellant had acknowledged the ownership of the business changed but stated he did not obtain any benefit in relation to what he had paid. Magistrate Bromfield pointed out to the appellant his assertion that he received no payment for all the time that the appellant worked in the business was a matter as between the appellant and the vendor and his associated entities, rather than the respondent. Nonetheless the appellant maintained that although he placed orders with the respondent, he did so on the basis of the previous account holder being Mr Hartwig and that until the sale completed, which it never did, then the cost of advertising and monies owed as a result, would not be the responsibility of the appellant. There were further exchanges between Magistrate Bromfield and the appellant during which the appellant admitted that he had signed the credit application on 26 August 2010 with the respondent. He also agreed that the document did not make reference to any obligations of the appellant to pay monies to the respondent only arising after the sale of the business had been completed. That was when the appellant asserted that there was an ancillary unwritten agreement between himself and a sales representative of the respondent, whereby the account controlled by Mr Hartwig for the Heritage business would be used for advertising and on completion of the sale of the business to the appellant, he would then be responsible for payment of any accounts to the respondent.
His Honour Magistrate Bromfield then delivered his reasons for judgment. He noted there were two issues requiring resolution by an applicant where a judgment had been entered in default. He said there was in a technical sense a portion of the judgment entered which was not a liquidated debt. Putting that issue aside he said the judgment debtor, being the appellant, had to present evidence to the court explaining the delay. He noted that the judgment in the matter arose as a result of the appellant failing to file a response to the claim by the respondent. It would appear that his Honour was somewhat critical of the appellant's explanation for the delay as it was not specific or supported by documentary evidence.
Magistrate Bromfield then went on to consider the issue of the appellant's obligation to demonstrate that he had an arguable defence, though it was not a matter that had to be determined with any finality in the course of the application before the Magistrates Court. It was necessary however for the court to have before it evidence from which it could conclude that there was a triable issue. His Honour then made reference to the appellant's submissions, in that regard noting that there was also a dispute between the appellant and other parties, not being the respondent, in the District Court which was yet to be resolved.
Magistrate Bromfield concluded that in the circumstances it was appropriate to grant the appellant's application but that it would be conditional upon the appellant paying a sum less the judgment debt into court. That sum, his Honour concluded, should be $10,000. He then inquired of the appellant when that sum could be paid into court and the appellant replied that he did not have that money available at that time and so Magistrate Bromfield inquired as to when realistically the appellant might be able to pay that sum into court and mentioned a period of 21 days. The appellant responded that it would be unlikely to be within three months but, according to Magistrate Bromfield, that was a rather unrealistic and long period of time. The appellant explained that he was a contractor and did not have that amount of money available. He explained he was attempting to secure work at the time and he was dealing with difficulties arising from the failed purchase of the business.
It is to be noted that when Magistrate Bromfield had the above exchange with Mr Costa the appellant said nothing about the amount of money mentioned by the magistrate, he simply said he did not have that money available at that point in time and further stated it was unlikely to be available in the immediate future. At the hearing of this appeal when queried as to why he did not pursue the amount of the sum Magistrate Bromfield contemplated the appellant pay into court, the appellant said he did not object or argue the point at the time because he was self‑represented and totally inexperienced in the legal system. It is to be noted however that the appellant at the time did take issue with the timeframe of 21 days that was mentioned, so it cannot be said that he truly did not appreciate he could make a submission to the court, objecting to the terms of the order to be made.
After hearing these submissions from the appellant Magistrate Bromfield said that the conditional order granting the application to set aside the judgment would be subject to the appellant paying into court the sum of $10,000 within 30 days from the date of the order. He further ordered that:
(a)The time within which the application to set aside judgment may be brought was extended to 27 July.
(b)The judgment is set aside.
(c)The time within which the appellant could lodge a response to the claim was extended to 5 October.
(d)The appellant was to pay the respondent's costs of the application and costs thrown away in any event and payable forthwith.
His Honour Magistrate Bromfield then said that in the event the appellant did not pay the sum referred to in those orders into court within the time set out it was ordered:
(a)The application be and is dismissed.
(b)The appellant was to pay the respondent's costs of the application.
It was appropriate in his Honour Magistrate Bromfield's view to suspend the enforcement of the judgment as the application was under the Civil Judgments Enforcement Act 2004 and so it was ordered that the enforcement of the judgment entered against the appellant on 25 May 2011 be suspended until and including 4.00 pm on 5 October 2011, which timeframe would cover the period within which the appellant was to make the payment into court.
Following this on 20 September 2011 a solicitor, Mr Alan Brook, acting on behalf of the appellant filed a notice of appeal in the District Court against the decision of his Honour Magistrate Bromfield on the ground that the magistrate imposed a payment order that was excessive. The following day he lodged a Form 23 application with the Magistrates Court seeking the order that the appellant be required to pay into court the sum of $10,000 on or before 5 October 2011 be made subject to his District Court appeal.
When the appeal came on for hearing before this court the appellant was asked to clarify what he meant by his ground of appeal. He told the court that the reason for the appeal was because he had a meritorious defence and essentially he could not understand why he had to pay any sum of money into court to pursue his defence. In the end it became apparent that the appellant's position was that it was not so much that the amount of $10,000 he had been ordered to pay into court was excessive but rather that he should not have been ordered to pay any amount of money into court and therefore the issue of whether the timeframe was appropriate or not fell away. He reiterated he did not have that amount of money to pay into court in any event and so in that sense I understand it might be said to be excessive. Although the appellant did not file submissions prior to the appeal, he handed to the court a copy of his submissions at the commencement of the hearing. Counsel for the respondent submitted that as the appellant failed to comply with the order imposed by Magistrate Bromfield and no extension of time in which to comply has been obtained, the respondent retains the default judgment entered on 25 May 2011.
The appellant's submissions set out in considerable detail the background to the matters resulting in the proceedings in the District Court in relation to the alleged sale of the Heritage business by Mr Hartwig and his associated entities to the appellant. For the purpose of this appeal it is unnecessary to consider those matters in depth, but an overview may assist in placing into context the appellant's argument. He acknowledges that the respondent's claim is for payment of services to the Heritage business and invoiced to that business over the period 3 October to 14 November 2010. Prior to the provision of those services the appellant states he had agreed to purchase the Heritage business but during the relevant period when the services were rendered he claimed the sale of the business had not yet settled and therefore he was not the beneficial owner of it. That person was and continues to be Mr Hartwig and it was to him that the services of the respondent were rendered. The appellant denied that he received any benefit from those services. The appellant claimed that subject to his providing adequate security to Mr Hartwig he agreed to vendor finance the appellant's purchase of the Heritage business on particular terms and conditions pursuant to an agreement prepared by Mr Hartwig. These are then set out in the submissions, but again it is not necessary to consider them in any detail for the purpose of the issue before the court in this matter. According to par M of the submissions the appellant was to carry on the Heritage business as if he owned it and to receive all of the proceeds of the business from the point he took possession of it up until settlement, when all transactions contemplated by the agreement to purchase had been completed, but the appellant would not become the owner of the business until that occurred. For that reason the appellant said Mr Hartwig told him to operate the Heritage business and in order to do so the appellant would be required to continue using Mr Hartwig's accounts with suppliers such as the respondent, which the appellant then did with Mr Hartwig's authority.
In relation to the appellant executing the business name form, he argued that he did not understand that to mean that he would become the owner of the Heritage business from 1 July 2010, rather he regarded the transfer of the business name to him as simply being one of the transactions contemplated by the agreement to purchase the business and there were other transactions to be completed in order for settlement to occur. The appellant's submissions then go into considerable detail to explain why in his view his purchase of the Heritage business remained conditional and had not settled. On 30 November 2010 the appellant says he accepted Mr Hartwig's repudiation of the agreement for the appellant to purchase the business and he rejected Mr Hartwig's or his related parties' invoices for work done for the Heritage business. The appellant then commenced taking steps to cease operating the Heritage business. In early January 2011 the appellant says that he handed over the keys of the Heritage business premises to Mr Hartwig, at which time the agreement to purchase the business had not been completed and so was at an end. As a result there was no transfer of ownership of the Heritage business to the appellant. For this reason he maintains that Mr Hartwig has at all material times been and remains the beneficial owner of the Heritage business and is therefore wholly liable to the respondent for the monies claimed for services rendered.
It is only in the last five paragraphs of the appellant's submissions that he addresses the issue of setting aside the default judgment, submitting that for the reasons advanced in his submissions he has a meritorious defence with a real prospect of success and that as the defence is not 'shadowy' it is not appropriate that the court order the appellant to pay money into court as security as a condition of leave to defend the action.
In submissions during the course of the appeal counsel for the respondent pointed out, validly in my view, that the defence foreshadowed by the appellant and said by him to be meritorious, in very large part relates to the claim brought against the appellant by a party or parties other than the respondent to this appeal. The issues between the appellant and Mr Hartwig in the District Court are not matters about which the respondent to this appeal has any knowledge. Whilst the respondent does have a copy of the appellant's proposed amended defence and counterclaim in the District Court proceedings involving Mr Hartwig, that is only because it is one of the documents annexed to the appellant's second affidavit in these proceedings. The contents of that document are in a sense of limited value to the respondent for the purposes of this appeal because it does not have a copy of the statement of claim in those proceedings. Nonetheless counsel for the respondent submitted that the amended defence and counterclaim is of some assistance because it highlights some contradictions which the respondent claims exist between the contents of that document and what the appellant asserts in argument before the court in this appeal.

It is the case that there are some documents before the court which on their face appear to be quite plain in meaning. The appellant admits that he signed the credit application dated 26 August 2010 which is annexure 'LC2' to the Croft affidavit. It is in the name of Heritage Outdoor Building and the contact name is given as 'Tom Hartwig'. The attached terms and conditions consist of 12 paragraphs which are clear in their meaning. Annexure 'LC3' to the Croft affidavit is a business names extract relevant to the business name of Heritage Outdoor Building Systems indicating that as at 1 July 2010 the person carrying on the relevant business (current) was the appellant. In annexure 'LC4', an email from the appellant to Pauline McIntyre regarding the credit application on 30 September 2010, the text reads:
Hello Pauline, here's my credit application. Tom should call to confirm the ad for this weekend. Regards, Peter Costa.
There is nothing in that email which indicates that the appellant is acting on behalf of anyone else and in fact he uses the word 'my' in reference to the credit application. There is no reference or instruction to the respondent that it should continue to bill for their services pursuant to or under the previous credit application in relation to Mr Hartwig.
There is no dispute that the respondent did provide advertising services to the Heritage business on a number of occasions between 3 October and 14 November 2010 and that invoices were rendered to the appellant pursuant to the credit application for those services. An email dated 1 October 2010 from the appellant to Pauline McIntyre, being annexure 'LC5' to the Croft affidavit, approves the formatting of an advertisement for Heritage Outdoor Building Systems. Annexure 'LC6' is a copy of Cybersell Booking Instructions recorded by Pauline McIntyre on 5 October 2010 in relation to advertising for Heritage Outdoor Building Systems ordered by the appellant and scheduled for 10 October 2010. This document simply records information in a telephone call received from a customer regarding advertising with the respondent and the details relevant to that call. Annexures 'LC7' to 'LC9' are further copies of the Cybersell Booking Instructions recorded by Pauline McIntyre on further dates between 12 October and 11 November 2010 for advertising for Heritage Outdoor Building Systems. It is therefore apparent from the above documentation that the appellant owned the business name Heritage Outdoor Building Systems and was responsible for, and active in, placing advertisements for that business with the respondent.
In the minute of proposed amended defence and counterclaim annexed to the appellant's second affidavit, par 7 of the counterclaim, which does not appear to be a proposed amendment to the counterclaim, pleads that:
The plaintiff, Mr Hartwig and/or his entities took out mortgages over properties owned by the appellant to secure payment of the purchase price. (presumably being a reference to the purchase price of the heritage business) -
and there then follow a number of particulars regarding those mortgages. I accept the submission of the respondent that it is unlikely such mortgages would have been taken out on the properties owned by the appellant in the circumstances without the appellant's knowledge and consent. Further, it is unlikely that this would have occurred except in circumstances where the appellant stood to acquire something. Again, I accept the submission of the respondent that logic suggests that what was to be acquired was the business. In addition, when one goes to par 16 of the counterclaim which does not appear to be a proposed amendment, it is pleaded that:
The contractual arrangements between the First Third Party, the Second Third Party and the Defendant did result in the transfer of ownership of the business to the defendant however there was failure of the First Third Party, Second Third Party and Plaintiff to provide any consideration to the defendant.
Paragraph 16 states quite plainly that there was a transfer of ownership of the business albeit that the appellant may not have been paid for it. I accept the submission however on behalf of the respondent that this is a matter between the appellant and others, not between the appellant and the respondent.
The material to which reference has just been made would certainly suggest on the face of it that there was a transfer of ownership of the business to the appellant.
When the appellant was queried about this apparent or potential inconsistency at the hearing of the appeal and in particular what was asserted in par 16 of the counterclaim, Mr Costa informed the court that in drafting the document, his former solicitor, Mr Brooks 'got it wrong' in the words of the appellant, in the sense that Mr Brooks misunderstood the situation and despite having documentation available to him, Mr Brooks made a significant typographical error. It is difficult to understand how in the context of a solicitor/client relationship, that documentation of this nature drafted or prepared presumably pursuant to the client's instructions, a person in the position of Mr Costa, being the client, would not be given the opportunity to check the final documentation to ensure that it accorded with his instructions.
In addition, annexed to the Croft affidavit as 'LC3' is a copy of the business name extract search confirming that the appellant acquired ownership of the Heritage business under the name of Heritage Outdoor Building Systems on 1 July 2010.
The argument of the appellant in this appeal as I understand it, is that his Honour Magistrate Bromfield erred in exercising his discretion to allow leave to defend the action conditional upon the appellant paying $10,000 into court by way of security within 21 days because the appellant has a strong and meritorious defence, the appellant cannot afford to pay that amount or indeed any amount of money into court due to his financial circumstances and that the making of such an order effectively means that the appellant is prevented from pursuing his defence of the claim made against him by the respondent.
It is not for this court, nor was it for Magistrate Bromfield in the Magistrates Court, to determine the merits of the appellant's defence to the respondent's claim with any finality. In the circumstances, Magistrate Bromfield was persuaded that the appellant had demonstrated he had an arguable defence and there was evidence before the court from which it could conclude that there was a triable issue. That is as much as Magistrate Bromfield was prepared to say in giving his reasons for decision.
In relation to the appellant's financial circumstances, it does not appear to me there was any detailed material before the court when Magistrate Bromfield heard the application, setting out in any detail the financial circumstances of Mr Costa. No formal leave to adduce further evidence in this regard was granted by this court in relation to the hearing of this appeal. The appellant did not request in a timely fashion, leave to provide relevant material to the court regarding his financial circumstances or his capacity to satisfy the order of the payment of $10,000 into court in the appropriate form. There was therefore nothing before the court at the hearing of the appeal in the form of documentation regarding this particular issue. The appellant asserted from the bar table that he was involved in a number of legal actions and attempting to find work but there was nothing of a formal nature such as an affidavit with relevant documentary annexures setting out his assets and liabilities that might have supported and clarified the appellant's financial circumstances.
Taking into account the history of the matter and the delays on the part of the appellant which Magistrate Bromfield clearly did not feel were fully or adequately explained, his Honour clearly entertained some doubts regarding the merits of the appellant's application and the future conduct of the matter from the appellant's perspective. It appears to me that in those circumstances his Honour Magistrate Bromfield took the view that it was appropriate to order that the money be paid into court and security given as a condition of leave to defend the action.
The appellant's argument that the order made by Magistrate Bromfield effectively prevents him from defending the action is not of itself persuasive in this appeal. In the case of Batiste v Gilmour‑Latham [2011] NSWCA 391 (31 October 2001) the court was considering an application filed by the appellant to vacate an order made by a judge in the court below that judgment against the appellant be set aside on terms that she provide security for $100,000 in a form satisfactory to the registrar on or before a certain date and that there be consequential leave to file a defence to the further amended statement of liquidated claim. It is to be noted that the judge who made that order had calculated that the total claim including interest would be roughly in the sum of $100,000. The appellant objected to the order essentially on the basis that unless that particular term was removed, the order setting aside the judgment would be nugatory and the appellant would be in a position where she would be unable to defend the proceedings.
It should also be noted that the appellant in that matter had provided some form of information to the court regarding what was said to be her somewhat impecunious financial situation. At [16] of the judgment, Giles JA (Heydon JA and Hodgson JA) noted:
I do not think the submission is soundly based. Power is given to set aside a judgment on terms, and no express fetter is placed on the nature or extent of the terms. It must depend on the circumstances of the particular case. Commonly in cases such as this, the plaintiff will suffer because the plaintiff will lose a judgment, will incur more costs, and will be delayed in achieving whatever success in the proceedings will ultimately be achieved. I do not see why that is not prejudice capable of pecuniary remedy by a term. But there is more than that. Default judgments and applications to set aside default judgments are not uncommonly accompanied by doubt about the bona fides of the proffered defence. It may well be proper to let a defendant in to defend notwithstanding some doubt about the bona fides of the defence, but where that is the case, in my opinion there is no reason why the terms available to the judge in the exercise of his discretion should not include that the defendant provide security for some or all of the amount at stake.
In that case, it should be noted that the amount of monies ordered to be paid into court by way of security reflected the total estimate of the final claim, whereas in this case the appellant has been ordered to pay into court a sum less than one third of the amount of the judgment sum obtained by the respondent.
There is no doubt s 19(3) of the Magistrates Court (Civil Proceedings) Act 2004 (the Act) empowers the Magistrates Court to set aside a default judgment on conditions as to payment of costs and a range of other matters. When such an order is made, s 20 of the Act allows the Magistrates Court to direct that the order is to take effect unless the party complies with a particular rule of the court, order or direction within a particular time as specified by the court. For that reason it is clear that a discretion reposes in the court relevant to the terms upon which a default judgment may be set aside. In this case the appellant was given the opportunity to be heard in relation to the nature of the order that Magistrate Bromfield contemplated was to be imposed, should leave to defend the action be granted and the default judgment set aside.
Having carefully considered the arguments put forward by the appellant and counsel for the respondent in this appeal, I am not satisfied that the appellant has demonstrated that in making the order which he did, his Honour Magistrate Bromfield was in error in exercising his discretion or that his discretion miscarried. For that reason, I am not persuaded that the ground of the appeal, namely that Magistrate Bromfield imposed a payment order that was excessive, has been made out and therefore the appeal is dismissed.
I will hear further as to what orders are appropriate to be made following this finding.