Direct Engineering Services Pty Ltd v A Goninan and Co Ltd
[2001] WASC 148
DIRECT ENGINEERING SERVICES PTY LTD -v- A GONINAN & CO LTD [2001] WASC 148
| SUPREME COURT OF WESTERN AUSTRALIA | Citation No: | [2001] WASC 148 | |
| Case No: | CIV:1098/2001 | 8 JUNE 2001 | |
| Coram: | MASTER SANDERSON | 12/06/01 | |
| 7 | Judgment Part: | 1 of 1 | |
| Result: | Judgment set aside | ||
| PDF Version |
| Parties: | DIRECT ENGINEERING SERVICES PTY LTD (ACN 008 700 178) A GONINAN & CO LTD (ACN 000 003 136) |
Catchwords: | Practice and procedure Application to set aside default judgment regularly entered Turns on own facts |
Legislation: | Nil |
Case References: | Palmer v Prince [1980] WAR 61 Astley v Austrust (1999) 161 ALR 155 Carr v Finance Corp of Australia Ltd (1981) 147 CLR 246 Johnsen v Duks [1963] NSWR 730 Lombank Ltd v Cook [1962] 1 WLR 1133 Parker v Transfield Pty Ltd [2000] WASCA 382 |
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
- IN CHAMBERS
- Plaintiff
AND
A GONINAN & CO LTD (ACN 000 003 136)
Defendant
Catchwords:
Practice and procedure - Application to set aside default judgment regularly entered - Turns on own facts
Legislation:
Nil
Result:
Judgment set aside
(Page 2)
Representation:
Counsel:
Plaintiff : Mr L F A Nixon
Defendant : Ms P E Cahill
Solicitors:
Plaintiff : Clayton Utz
Defendant : Jackson McDonald
Case(s) referred to in judgment(s):
Palmer v Prince [1980] WAR 61
Case(s) also cited:
Astley v Austrust (1999) 161 ALR 155
Carr v Finance Corp of Australia Ltd (1981) 147 CLR 246
Johnsen v Duks [1963] NSWR 730
Lombank Ltd v Cook [1962] 1 WLR 1133
Parker v Transfield Pty Ltd [2000] WASCA 382
(Page 3)
1 MASTER SANDERSON: This is the defendant's application to set aside judgment entered in default of appearance. The judgment was regularly entered. Both parties accepted that in order for the judgment to be set aside the defendant must establish by affidavit evidence that it has a defence on the merits and it must explain the failure to comply with the rules: see Palmer v Prince [1980] WAR 61 at 62.
2 It is convenient to deal first with the defendant's explanation for non-compliance with the rules. The relevant evidence is to be found in an affidavit of Philip Vane Lansell sworn 4 April 2001. The position can be summarised as follows. In late April 2000 Mr Lansell received a letter from HIH Insurance Limited ("HIH") seeking legal advice in relation to a claim made upon the defendant by the plaintiff. HIH was the public liability insurer of the defendant. In August 2000 Mr Lansell instructed insurance assessors to further investigate the claim. Upon completion of those investigations it was Mr Lansell's intention to provide HIH with an opinion on indemnity, liability and quantum with respect to any claim.
3 On 24 January 2001 the plaintiff issued its writ. On the same day it was sent by registered post to the defendant's office in New South Wales. On 5 February 2001 Mr Lansell received by facsimile a copy of the writ from HIH. There is no evidence as to how the writ came to be in the possession of HIH. Counsel for the plaintiff made specific mention of this lack of evidence and it is a matter to which I will return later in these reasons.
4 On 13 February 2001 Mr Lansell wrote to the plaintiff's solicitors advising that he was acting for HIH. Mr Lansell advised that he was providing preliminary advice and that he expected to be in a position to file a memorandum of appearance "within the next week or so". He asked the plaintiff's solicitors to take no further action without adequate notice. On 28 February 2001 the plaintiff's solicitors wrote to Mr Lansell acknowledging his letter and asking if Mr Lansell's firm, Jackson McDonald would be acting for the defendant and if so, when a memorandum of appearance would be filed. That letter provoked no response. On 16 March the plaintiff's solicitors again wrote to Mr Lansell referring to the lack of an appearance. The letter concluded:
"Please ensure that Goninan enters an appearance immediately and in any event no later than 4pm 22 March 2001. Should Goninan not enter an appearance within that time our client may enter default judgment without further notice to you."
(Page 4)
5 The date stamp on that letter indicates it was received by Jackson McDonald and presumably Mr Lansell on 20 March 2001. On 16 March 2001 Mr Lansell was advised that a provisional liquidator had been appointed to HIH. This was confirmed by a letter from HIH dated 20 March 2001. This letter (which appears as annexure "F" to Mr Lansell's affidavit) provides no clear guidance as to what steps should be taken by solicitors with respect to claims where they were instructed by HIH. Mr Lansell took no steps in relation to the entry of an appearance. On 26 March the plaintiff's solicitors entered default judgment.
6 Mr Lansell says (by par 25) that he understood from the letter of 16 March 2001 from the plaintiff's solicitors that he would be notified if the plaintiff intended to enter default judgment. With respect, it is difficult to see how Mr Lansell could have placed that interpretation upon the letter from the plaintiff's solicitors. The terms of the letter are quite explicit. It is conceivable that Mr Lansell overlooked the deadline for the appearance. Such things happen from time to time. Possibly, in the chaos caused by the collapse of HIH that the need to file an appearance in this case was overlooked. But without a more detailed explanation I could not accept that Mr Lansell was simply mistaken as he says.
7 For the plaintiff it was submitted that properly viewed, there was no evidence at all as to why the defendant had not entered an appearance. There is no evidence Jackson McDonald and Mr Lansell were at any stage instructed by the defendant. It was submitted that there was no evidence as to what steps had been taken by the defendant once it received the writ and no explanation as to why it had not taken some action on its own account. It was said that this lack of evidence was fatal to the defendant's application on the principles set out in Palmer's case (supra).
8 In my view that submission takes too narrow an approach to an application of this nature. There is clear evidence that HIH was the defendant's public liability insurer. Assuming the writ was validly served on the defendant then the writ must have come into the possession of HIH because the defendant passed it on to its underwriter. It may have done so via its insurance broker but that is of no consequence. How else could HIH have come into possession of the writ? Having passed the writ onto their insurers, the defendant no doubt expected HIH to instruct solicitors and take over the conduct of the litigation. In my view that was obviously the sequence of events. It emerges from the affidavit evidence, all be it, obliquely and to an extent, be omission. In my view it provides a satisfactory explanation for the failure to file an appearance.
(Page 5)
9 The circumstances which gave rise to the claim and the basis of the defence are set out in the affidavit of Robert James Clark sworn 21 May 2001 and filed in opposition to this application. What is said by Mr Clark can be summarised in the following way. On 2 October 1998 the defendant provided a quote to the plaintiff for certain work which involved fitting access walkways and safety handrails to airconditioning units located in Hamersley Iron's 7 mile locomotive workshop near Karratha. The quote was accepted by the plaintiff issuing a purchase order dated 5 October 1998 (annexure "B" to Mr Clark's affidavit). The purchase order apparently contained terms and conditions which, on the plaintiff's case, were incorporated into the contractual arrangement between the plaintiff and the defendant. Counsel for the defendant suggested that in fact these terms and conditions might not be included in the contract between the parties because the terms and conditions may not have been drawn to the defendant's attention. It is to be noted that annexure "B" is a copy of the purchase order and the terms and conditions. It would be surprising indeed if the defendant did not receive the terms and conditions with the purchase order but rather, for the purpose of preparing the affidavit, obtained a copy of these terms and conditions independent of the purchase order. Furthermore, there is nothing in Mr Clark's affidavit to suggest that the terms and conditions were not sent to the defendant with the purchase order. In my view there is nothing in the evidence filed in relation to this application which could lead to the conclusion that the terms and conditions did not form part of the agreement between the parties.
10 When the defendant came to prepare the work it was necessary for them to remove a section of airconditioning duct. Removal of the ducting was not part of the quote and was only necessary to allow the defendant access to the area where the access walkways were to be fitted. At the time the defendant provided the quote it was advised that Hamersley Iron required the airconditioning system to continue to operate while the defendant carried out the work. As the work the subject of the quote involved the use of oxyacetylene equipment, prior to the works commencing the defendant obtained from Hamersley Iron what is described as a "hot work permit". This permit permitted the use of cutting equipment if necessary.
11 When the defendant's workmen came to remove the bolts to allow the airconditioning ducting to be shifted, they found the bolts were corroded and could not be removed. They tried a number of different options and eventually decided that they would cut the bolts using oxyacetylene equipment. During the course of cutting the bolts a fire
(Page 6)
- broke out in the airconditioning system. It was immediately extinguished by the defendant's employees. It is clear from the evidence that the fire in the airconditioning system was started by a spark from the oxyacetylene equipment used by the defendant's employees.
12 Precisely how the fire started is unclear. However, according to Mr Clark's affidavit there was a hole an eighth of an inch diameter located approximately four inches from the joining angle on the apex side of the joint on which the defendant's employees were working. It is possible that a spark from the oxy equipment may have vortexed through that hole. Unknown to the defendant the airconditioning duct was lined with polystyrene. A spark which entered the airconditioning system through the hole may have caught on the polystyrene in the airconditioning system leading to the fire.
13 The plaintiff says on these facts the defendant is clearly liable to the plaintiff for the damage suffered and has no possible defence to the plaintiff's claim. The plaintiff submits that it was an implied term of the contract that the defendant would exercise reasonable care and skill in carrying out the work pursuant to the contract. It is submitted that the facts make it plain that reasonable care and skill was not used - the defendant's employees saw the hole in the airconditioning duct, knew that there was movement of air inside the duct, yet still used the oxy equipment to cut the bolt. It is said that this clear breach of contract renders the defendant liable to the plaintiff.
14 The plaintiff says that there was a further implied term that the defendant would obey the safety instructions prescribed by work permits issued to the defendant in relation to the work. The hot work permit (which is to be found as annexure "STR 1" to the affidavit of Stephen Thomas Rooney sworn 31 May 2001 and filed in support of the application, states that combustible materials within a 10 metre radius of the worksite were to be removed when oxy-cutting equipment was in use. Clearly that had not been done and this amounted to a breach of contract for which the defendant was liable to the plaintiff.
15 There was a further argument put by the plaintiff. It was submitted that the evidence clearly showed that there was negligence on the part of the defendant's employees. Once that was established, it was submitted, cl 9 of the standard conditions rendered the defendant liable to the full extent of any loss and damage suffered by the plaintiff. As a consequence of the fire in the airconditioning duct the plaintiff had paid to Hamersley Iron more than $350,000 in damages. Given that there was clear evidence
(Page 7)
- of the defendant's negligence the defendant was liable to indemnify the plaintiff and any questions of contributory negligence and quantum of the claim did not arise.
16 It is not entirely clear from the evidence adduced by the defendant what defence they put to the plaintiff's claim. The prime question appears to be this. Was it a breach of an implied term of the contract that the plaintiff's employees use all reasonable care and skill, or was it negligent for the defendant's employees to use the oxyacetylene equipment in the way they did, knowing that they were working on an airconditioning duct and when they had seen a hole in the duct not far from where they were working? This is a question of fact. It is also a question which might well depend on expert evidence. If I were to accept the plaintiff's argument I would, in essence, be making a finding of negligence against the defendant. While I appreciate that it is for the defendant to establish that it has an arguable case, I think the circumstances in which this loss occurred give rise to a real question as to whether there has been negligence or breach of contract on the part of the defendant. While I do think that the defendant could have produced a more detailed explanation of why it says it is not liable to the plaintiff, the factual material presented is sufficient to show that there is an arguable case.
17 In all the circumstances I am satisfied that the defendant has explained the reason for its failure to lodge an appearance and that it has an arguable case on the merits. I should therefore set the default judgment aside. I will hear the parties as to the precise form of order and as to costs.
0
4
0