Dendroff v Hartz - [2001] WASC 303

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CHAMBERS

CITATION: DENDROFF -v- HARTZ [2001] WASC 303

CORAM: MASTER SANDERSON

HEARD: 17 OCTOBER 2001

DELIVERED : 9 NOVEMBER 2001

FILE NO/S: CIV 1521 of 1998

BETWEEN: WALTER CHEODORUS DENDROFF
Plaintiff
AND
MILLICENT MARIE HARTZ
Defendant
SUSAN ROBERTSON
Applicant

Catchwords:

Practice and procedure - Application by nonparty to be joined as defendant to counterclaim and to set aside judgment entered by default in favour of the defendant against the plaintiff on the counterclaim - Turns on own facts

Legislation:

Nil

Result:

Application granted

Category: B

Representation:

Counsel:

Plaintiff:     No appearance
Defendant:     Mr B S Dodd
Applicant:     Mr K F Sleight

Solicitors:

Plaintiff:     No appearance
Defendant:     Mallesons Stephen Jaques
Applicant:     Mayberry Hammond & Co

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

Acclaim Holdings Pty Ltd v Vlado Pty Ltd (1989) 1 WAR 128
Longmuir v Prosser, unreported; FCt SCt of WA; Library No 9141; 7 November 1991

Case(s) also cited:

Baumgartner v Baumgartner (1987) 164 CLR 137
Kais v Turvey (1994) 11 WAR 357
Muschinski v Dodds (1986) 160 CLR 583

MASTER SANDERSON: This is an application brought by Susan Robertson for an order that she be joined as a defendant to the defendant's counterclaim and for an order that the judgment entered for the defendant against the plaintiff on the counterclaim be set aside. It is an unusual application. It arises in this way.
The applicant is the sister of the defendant. The two women are daughters of the plaintiff by his first marriage. The plaintiff commenced this action on 20 May 1998. He died on 3 August 1998. As yet, no‑one has been appointed as his personal representative either for the purposes of these proceedings or otherwise. That omission is the root cause of all problems that have arisen and has led directly to this application. (Throughout the hearing counsel referred to the applicant as Mrs Robertson. In the interests of consistency I will adopt the same nomenclature).
The plaintiff commenced these proceedings seeking from the defendant the return of the sum of $354,381.99. The plaintiff alleged that the defendant had received that amount as a result of misuse of a power of attorney granted to the defendant by the plaintiff. The defendant lodged a defence and counterclaim denying wrongful use of the power of attorney in claiming that she had received the money pursuant to an agreement with the deceased. The terms of that agreement and a subsequent variation are pleaded in pars 4 and 5 of the defence and counterclaim. They read:
"4.In August 1996 the plaintiff agreed to transfer certain assets to the defendant and Mrs Robertson in settlement of the issue of the division of the estate of the late Mrs Dendroff ('the agreement').
PARTICULARS OF ASSETS
The plaintiff agreed to transfer the following assets:
(i)the proceeds of an investment in debenture stock of $570,000 in CBFC Ltd held in Australia ('the CBFC investment') to be shared equally between the defendant and Mrs Robertson;
(ii)an apartment being Unit 16, 16 Richardson Avenue in the State of Western Australia ('the apartment') to be transferred to the defendant; and
(iii)all shares in the plaintiff's name in Polyplastics Pty Ltd to the defendant.
PARTICULARS OF AGREEMENT
The agreement was partly oral and partly in writing;
(i)Insofar as it was oral it was negotiated in two telephone conversations between the plaintiff and Mr Tan on 2 and 17 May 1996;
(ii)Insofar as it was in writing it is contained in 2 letters dated 1 August and 7 August 1996 respectively addressed to the plaintiff and from Mr Tan.
5.The agreement was varied as between the plaintiff and the defendant in or about October 1997 when the plaintiff and the defendant verbally agreed that the apartment would be sold by the plaintiff with the proceeds therefrom to be paid to the defendant."
The plaintiff was a wealthy businessman who prior to his death had considerable assets and business activities centred in Singapore. The three assets referred to in the particulars of assets in par 4 of the defence and counterclaim were held in Australia and, for the purposes of the action, are the only relevant assets. The CBFC investment referred to in par 4 (i) of the particulars of assets has since been liquidated and is now held in cash. Polyplastics is a company conducted by the defendant's husband and a business associate of the deceased. It is pleaded by the defendant in her defence and counterclaim that, apart from the variation of the agreement pleaded in par 5 there was a further variation with the effect that the plaintiff's shares in Polyplastics Pty Ltd were to go to her.
The following facts are agreed. It is common ground between the parties. On or about 29 January 1998 the apartment was sold and the proceeds were paid to the defendant. During the course of 1996, Mrs Robertson received $60,000 from the plaintiff and the defendant received $10,000. Mrs Robertson received a further $25,000 from the plaintiff in January 1998. Also in January 1998 the defendant redeemed the CBFC investment. This yielded an amount of $354,381.99. This was substantially less than the $570,000 which was described as the CBFC investment. This is an aspect of the plaintiff’s case against the defendant: see para 4 and para 5 of the statement of claim. What is important for this application is simply the fact of the redemption and the resulting cash.
Against that background the defendant puts her counterclaim in this way. She says she was entitled to half of the $570,000 being the CBFC investment - that is, $285,000. She received $10,000 from the plaintiff in 1996. She is entitled to half of the proceeds from the redeemed CBFC investment being $177,190.99 to be offset against the amount owed to her by the plaintiff. In those circumstances she is entitled to judgment against the plaintiff in the sum of $97,809. As part of the relief claimed in the counterclaim she also sought an order for specific performance of the agreement in relation to the Polyplastic shares. That is, she sought an order that these shares be transferred into her name.
The counterclaim was lodged on 24 July 1998. The plaintiff died some one month later. The evidence suggests the plaintiff was ill for some time prior to his death and no defence to the counterclaim has been filed. As I have mentioned above, no‑one has been granted probate or letters of administration of the estate of the deceased. There are apparently four Wills made by the plaintiff in existence. The first one was made on 31 May 1989, the second one was made on 19 September 1997, the third on 6 July 1998 and the fourth on 7 July 1998. The plaintiff had a daughter by another relationship, her name being Severin Goh. Ms Goh commenced an action in Singapore against Mrs Robertson and the defendant seeking a declaration in the alternative that she should be granted letters of administration of one of the last three Wills of the deceased. She made no application with respect to the Will made in 1989 for reasons which are presently unimportant. Each of the last three Wills named as the Executor a solicitor who has since renounced probate. Mrs Robertson and the defendant opposed the applications by Ms Goh, essentially on the basis that all three of the later Wills were invalid. Mrs Robertson and the defendant raised a question as to the plaintiff's testamentary capacity when these Wills were made.
These probate proceedings in Singapore appear to have taken a desultory course. From time to time there have been negotiations between the parties but nothing has been resolved. Meanwhile the estate of the plaintiff is in limbo. No‑one has been appointed to protect the interests of the estate pending determination of Ms Goh's application.
At a case management conference held 24 May 2001 Registrar Johnson made the following order:
"Unless by 24 June 2001 application is made for appointment of a legal personal representative of the deceased plaintiff's estate and for substitution of plaintiff the action be dismissed and judgment entered for the defendant on the counterclaim with costs."
At first pass that may seem a surprising order. However, it was the 10th status conference held in these proceedings and nothing had happened since the death of the plaintiff in August 1998. Furthermore, the learned Registrar was, I understand, at the status conference advised that Ms Goh intended to apply to be substituted for the plaintiff in the proceedings. In fact, that application was made on 21 June 2001. It was supported by an affidavit of Ms Goh sworn 20 June 2001. For reasons which do not emerge from the file the application was not pursued and on 1 August 2001 it was dismissed. The defendant then sought and obtained judgment based upon presumably, a failure of the plaintiff, to comply with the springing order made by Registrar Johnston on 24 May 2001. It is that judgment which Mrs Robertson now seeks to set aside.
I should pause at this point to say that I have some doubt as to whether or not given the terms of the order the defendant is in a position to enter default judgment. What was required by the springing order was that someone, unnamed, apply to be substituted as plaintiff and appointed as personal representative of the defendant. That order was complied with, at least in part. The fact that the application may not have been successful is not a relevant factor in determining whether or not the defendant is able to enter judgment on the counterclaim. This was not a matter argued during the course of the hearing and, given the conclusion I have reached I need take the matter no further.
Mrs Robertson's position can be summarised in this way. She agrees that in 1996 there was a settlement reached between the plaintiff, the defendant and her which would have seen the division of the assets referred to in par 4 of the defence and counterclaim. She disagrees about what her entitlement was to be either pursuant to the 1996 agreement or pursuant to some subsequent variation of that agreement. I need not go into specifics. It is enough if I say that Mrs Robertson says that she was entitled to more than half of the CBFC investments to counterbalance the proceeds of sale of the apartment which were received by the defendant. Consequently, Mrs Robertson says that she is entitled to more than the $177,000 being half of the proceeds realised from the CBFC investment. She says that if the judgment on the counterclaim is allowed to stand she will be precluded from arguing that she has any greater entitlement than the $177,000 the defendant says is hers. If she were to take separate proceedings against the defendant, it would amount to a collateral attack on the judgment in favour of the defendant on her counterclaim and would be liable to be struck out. She therefore says it is necessary for her to protect her interests to not only be joined as a defendant to the counterclaim but have the present judgment set aside.
On behalf of the defendant it was submitted that any judgment obtained by the defendant on the counterclaim dealt only with the rights of the plaintiff and the defendant. It was submitted that if there was an argument between the defendant and Mrs Robertson that could be pursued in separate proceedings. Counsel pointed out that there was no disagreement between Mrs Robertson and the defendant as to what assets they were to receive from the plaintiff. Any dispute as to the division of those assets could be resolved in separate proceedings.
I accept that submissions put on behalf of Mrs Robertson. In my view, allowing the default judgment to stand would or might adversely affect her interests. She may well be precluded from taking any action against the defendant in separate proceedings. That being the case I think it is proper that she be joined as a defendant to the counterclaim pursuant to the provisions of O 18 r6(2)(b). The remaining question then is whether or not the default judgment should be set aside.
During the course of the hearing counsel for Mrs Robertson submitted that the default judgment ought be set aside as it was irregular. It was submitted that in par 4 of the defence and counterclaim under the particulars of agreement the defendant had relied on two letters as constituting part of a written agreement. It was said that as these two letters were not stamped, any judgment entered should be set aside as a nullity: see Acclaim Holdings Pty Ltd v Vlado Pty Ltd (1989) 1 WAR 128 at 134, 135. Counsel for the defendant indicated that this point had only been raised with him just prior to the commencement of the proceedings and he had not had the opportunity to consider it. He pointed out there was a question as to whether the letters referred to could be regarded as a written agreement which required stamping or whether the letters were simply evidence of the agreement, thus not attracting the interest of the Commissioner for Stamp Duties. It is clear this is an issue not free from doubt.
Assuming without deciding that the judgment is regular, I would still be minded to set it aside. In Longmuir v Prosser, unreported; FCt SCt of WA; Library No 9141; 7 November 1991 it was held that a party against whom no cause of action was raised and who was not responsible for the default could nonetheless apply to set aside a judgment if the existence of the judgment was a bar to any further proceedings by that party. As I have indicated above, that is the position in this case. Accordingly I am satisfied that Mrs Robertson has standing to bring the application to set aside the judgment and in all the circumstances I would be prepared to order accordingly.
The question then arises of how the action is to proceed from this point onwards. There are no personal representatives of the plaintiff and there is no indication when any might be appointed. I think the answer is that someone should be appointed to represent the plaintiff under the provisions of O 18 r 15(1). As I read r 15(1) it is open to the Court to appoint a person to represent the estate of the plaintiff of its own motion, or the application of any party to the proceedings. In my view, the most appropriate representative of the estate of the plaintiff would be Ms Goh. However, it may be that she would decline to take on this role. Under r 15(2) the Court may require notice to be given to any party having an interest in the estate. Subject to hearing from counsel I think it is appropriate that Ms Goh be given notice that a representative of the plaintiff's estate may be appointed for the purposes of these proceedings. If she indicates that she does not wish to act as the plaintiff's representative, then I think it may be appropriate to appoint the Public Trustee.
When the parties have had the opportunity to consider further the terms of this judgment, I will hear further submissions as to the appropriate form of the orders and as to costs.