Eli Eco Logic Australia Pty Ltd v Carroll - [2000] WADC 98

JURISDICTION : DISTRICT COURT OF WESTERN AUSTRALIA
IN CIVIL

LOCATION: PERTH

CITATION: ELI ECO LOGIC AUSTRALIA PTY LTD -v- CARROLL [2000] WADC 98

CORAM: MACKNAY DCJ

HEARD: 22 DECEMBER 1999

DELIVERED : 19 APRIL 2000

FILE NO/S: CIV 1247 of 1999

BETWEEN: ELI ECO LOGIC AUSTRALIA PTY LTD (071 329 765)
Plaintiff
AND
CRAIG CARROLL
Defendant

Catchwords:

Judgments and orders - Setting aside of default judgment - Delay in bringing application - Whether delay explained - Whether material put forward demonstrated real likelihood of success - Turns on own facts

Legislation:

Nil

Result:

Appeal against order of refusal to set aside default judgment allowed.

Representation:

Counsel:

Plaintiff: Mr P Mendelow
Defendant: Ms J E Bartlett

Solicitors:

Plaintiff: KPMG Legal
Defendant: Jackson McDonald

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

Alpine Bulk Transport Co Inc v. Saudi Eagle Shipping Co Inc [1986] 2 Lloyds Rep 221
Hazart Pty Ltd v Rademaker (1993) 11 WAR 26
Kostokanellis v Allen (1974) VR 596
Palmer v Prince (1980) WAR 61
Rolland & Ors v Bank of Western Australia [1998] FCt SCt of WA; Library No 980026A; 2 February 1998

Case(s) also cited:

Christmas Island Resort Pty Ltd v Geraldton Building Co Pty Ltd (No 5) (1997) 18 WAR 334
Evans v Bartlam [1937] AC 473
Say v Fitzpatrick, unreported; FCt SCt of WA; Library No 6865; 14 September 1987

MACKNAY DCJ:

Introduction

This is an appeal by the defendant from a refusal of a Registrar on 5 October 1999 to set aside a default judgment against the defendant.
On an appeal from a Registrar of the Court the application is to be reheard de novo, save that an appellant should begin: Hazart Pty Ltd v Rademaker (1993) 11 WAR 26.

Claim

The plaintiff's claim is for $28,672.50, together with interest thereon.
The claim is said to arise from a written agreement made between the parties, and dated 22 September 1998, in which the plaintiff agreed to provide waste treatment and disposal services for the destruction of toxic chemicals, at a cost of $7.50 per kilogram.
The plaintiff says that pursuant to that agreement it treated 3,823kg of PCB contaminated oil and solids.
The defendant is apparently a resident of Christmas Island, and the writ of summons was served on him there.
No appearance was entered by the defendant after service and as a result the plaintiff sought, and on 25 May 1999 obtained, a default judgment against him.
By an application of 29 July 1999 the defendant then sought to set the default judgment aside.
In an affidavit of the same date filed in support the defendant set out his reasons for not entering an appearance as follows:
"Following service of the Writ of Summons I was told by a friend and work associate that I did not need to take any action in relation to the Writ because no step could be taken whilst I was on Christmas Island. I have since received legal advice which I accept to the effect that this advice was wrong … ."
The defendant denied that he was liable to pay any part of the claim.
The dispute arose, the defendant said, from the carrying out by him and another person of high voltage electrical demolition on Christmas Island, that work including the disposal of a transformer which contained "oil which was said to contain polychlorinated biphenyls", the transformer being sent to the plaintiff in Perth.
The defendant said that once the transformer was in Perth he asked Ms Lois Christensen on behalf of the plaintiff to analysis a sample of the oil to ascertain the PCB content, and the subsequent report revealed "a negative result, that is to say less than 1 per cent PCBs or less than 50 parts per million". Oil was not considered toxic if it contained less than 50 parts of PCB per million, the defendant claimed.
That analysis result was discussed with Ms Christensen, the defendant said:
"She told me that I did not need to destroy the transformer and that I could arrange for an oil company to come and pick the transformer up. She acknowledged that the oil contained in the transformer was not toxic waste. I arranged for the transformer to be taken to a salvage yard."
The company which had managed the demolition work on Christmas Island did not accept the test results, the defendant said, and further tests were carried out by other laboratories.
The transformer was then returned to the plaintiff, the defendant said, with instructions that a further test be carried out. According to the defendant Ms Christensen was also told "that the transformer and its contents were not to be destroyed".
That, however, occurred, and the defendant said that Ms Christensen then told him that the plaintiff was obliged to destroy the transformer as "it had been placed in a contaminated area of the plaintiff's yard".
A subsequent affidavit was filed by the solicitor for the defendant to which was annexed a copy of a bankruptcy notice, served, according to advice from the defendant, it was said, on 12 July 1999, and the defendant becoming aware of the judgment only then.
Ms Christensen, in an affidavit of 31 August 1999 denied that she had said the transformer and its contents did not have to be destroyed, that it did not contain toxic waste, or that it could be collected.
The first sample of oil was provided by the defendant, Ms Christensen said, and the plaintiff had never agreed that had in fact come from the transformer.
An analysis of a second sample did show the PCB level was such that controlled disposal was required, Ms Christensen said, and she had never been instructed not to destroy it.
Further, no complaint was made by the defendant about what had occurred until the application to set aside the judgment was made, Ms Christensen said, and the defendant had, she was informed by the project manager, utilised the certificates of destruction that the plaintiff had issued to obtain payment of moneys under the demolition contract.
A copy of the contract between the parties was annexed to the affidavit of Ms Christensen, and described the relevant waste as "1 x Transformer", with an estimated weight of 3.3 tonnes.
The contract provided that the parties had agreed that the plaintiff would treat the waste, and "in consideration of (the plaintiff) providing the Services" the defendant would pay the fee as calculated.
Other documents were also annexed to the affidavit of Ms Christensen, from which it appeared that the defendant had an obligation to the Christmas Island Power Authority, the owner of the transformer, to ship it off the island and dispose of it"in accordance with correct environmental procedures".
It has been pursuant to that obligation that the defendant had in effect been obliged to enter into the contract with the plaintiff, after advice from the relevant environmental authority.
Counsel for the defendant agreed that the analyses of the oil carried out on behalf of the defendant were part of an attempt by him to avoid the expense of destruction of the waste by the plaintiff, it being his responsibility to meet that expense under the contract for demolition.
A copy of a PCB management plan, based on "The National Strategy for the Management of Scheduled Waste", endorsed by the Australian and New Zealand Environment and Conservation Council was also put forward, which treated a concentration of 50mg/kg as the threshold concentration for a need to dispose of material as "scheduled PCB waste".

Hearing before Registrar

At the hearing before the Registrar the solicitors for the defendant failed to appear. The solicitor with the relevant obligation later deposed that had occurred due to an oversight on her part.
Although there was no reason why a further application to a Registrar could not have been made, and that procedure ought to have been followed, no question of absence of jurisdiction arises as the matter would have been heard by a Registrar pursuant to a grant of delegated jurisdiction.

Issues

The defendant made a deliberate decision not to enter an appearance to the writ, based, it was said by him, on incorrect advice.
On becoming aware that the proceedings would not remain in abeyance because he was on Christmas Island the defendant, it was also said, applied promptly for the default judgment to be set aside.
Reference was made on behalf of the plaintiff to Alpine Bulk Transport Co Inc v. Saudi Eagle Shipping Co Inc [1986] 2 Lloyds Rep 221. In that case, which concerned an application to set aside a default judgment, the defendants had originally chosen not to defend the claim on the basis that they had no assets. The Judge at first instance said (223) the defendants had treated the Court "… with contempt and therefore, the defendants are not deserving of the Court's exercise of its discretion in their favour".
However, in the Court of Appeal it was said the decision could not be supported on that ground.
The relevance of the defendants' conduct was said to be, in the judgment of the Court (225):
"The conduct of the defendants in this respect and in deliberately deciding not to give notice of intention to defend because it suited the interests of the group to let the plaintiffs proceed against these defendants is a matter to be taken into account in assessing the justice of the case. While it does not amount to an estoppel in law, the Court can and must consider it. The principle of election and the maxim about approbating and reprobating are, in origin, rules of equity and as such give some indication of where the justice of a case may lie."
It is the case that there is nothing to indicate that any particular prejudice was suffered by the plaintiff, and that is also a relevant matter: Kostokanellis v Allen (1974) VR 596.
It must be said that the explanation put forward by the defendant here for his decision to do nothing is a poor one.
As to the test to be applied, in Palmer v Prince (1980) WAR 61, Jackson CJ (with whom Virtue SPJ agreed) said, at 62, in relation to the relevant rule as it then stood that:
"The general rule is that where a judgment has been regularly entered, it is not to be set aside unless the court is satisfied that there is a defence on the merits: Rubin v Eacott (1912) 14 WALR 162, following Farden v Richter (1889) 23 QBD 124. This rule has been approved by the House of Lords in Evans v Bartlam [1937] AC 473. At p 480 of the report Lord Atkin refers to the rule laid down by the courts to guide the normal exercise of their discretion in a case where the judgment was regularly obtained that 'there must be an affidavit of merits, meaning that the applicant must produce to the court evidence that he has a prima facie defence', although he concedes that in rare but appropriate cases the rule could be departed from. One instance where the rule was not insisted upon can be found in Collins Book Depot Pty Ltd v Bretherton [1938] VLR 40, where the failure to deliver a defence arose from a solicitor's clerk's error, and the defendant was an executor who sought and was given the opportunity to investigate, by his defence, circumstances of suspicion regarding a claim against his testator. But instances of departure from the rule are rare: see the cases referred to by Mr Neil Williams at p 390 of vol 1 of the Practice of the Supreme Court of Victoria."
The plaintiff also referred to Rolland & Ors v Bank of Western Australia [1998] FCt SCt of WA; Library No 980026A; 2 February 1998, where the following appears in the judgment of Ipp J (10-11):
"What is meant by a 'prima facie defence' or a 'good defence'? Helpful guidance in this regard is provided by Alpine Bulk Transport Co Inc v Saudi Eagle Shipping Co Inc ('The Saudi Eagle') [1986] 2 Lloyds Rep 221. In this case, Sir Roger Ormrod, in giving the judgment of the Court of Appeal, referred to Evans v Bartlam [1937] AC 473 (the decision relied on by Jackson CJ for his remarks in Palmer v Prince) and particularly to the observation of Lord Wright (at 489) to the effect that the 'primary consideration' in an application to set aside a regular judgment granted by default was whether the defendant 'has merits to which the court should pay heed'. His Lordship (at 223) discussed what this 'primary consideration' really meant. He referred to the phrase 'an arguable case' and said:
'This phrase is commonly used in relation to R.S.C., O14, to indicate the standard to be met by a defendant who is seeking leave to defend. If it is used in the same sense in relation to setting aside a default judgment, it does not accord in our judgment, with the standard indicated by each of their Lordships in Evans v Bartlam. All of them clearly contemplated that a defendant who is asking the court to exercise its discretion in his favour should show that he has a defence which has a real prospect of success. … Indeed it would be surprising if the standard required for obtaining leave to defend (which has only to displace the plaintiff's assertion that there is no defence) were the same as that required to displace a regular judgment of the court and with it the rights acquired by the plaintiff. In our opinion, therefore, to arrive at a reasoned assessment of the justice of the court, the court must form a provisional view of the probable outcome if the judgment were to be set aside and the defence developed. The "arguable" defence must carry some degree of conviction.'
As is stated in The Supreme Court Practice, 1997 edition, Volume 1 (The White Book) at 13/9/14, after making reference to The Saudi Eagle:
'The preferred view is that unless potentially credible affidavit evidence demonstrates a real likelihood that a defendant will succeed, in fact no "real prospect of success" is shown and relief should be refused.'
I would adopt this approach."
I would assume the reference to a "real likelihood" is one to a substantial likelihood, a real as opposed to a remote likelihood.
In the present case, in my view if the evidence of the defendant was accepted at any trial then it would be likely that the plaintiff's claim would fail, as what is alleged is tantamount to a mutual agreement to vary the contract and in particular the need for the plaintiff to treat the waste and hence the obligation of the defendant to pay for it. Alternatively it would be likely an estoppel would be said to have arisen.
It is common ground that a number of analyses were conducted in relation to oil and that there was discussion about whether or not any relevant PCB level was exceeded. It is not disputed that in the course of that activity the plaintiff was permitted to collect the transformer and that he then later returned it to the plaintiff.
In those circumstances, and given that the contract does not apparently contemplate activity of that kind, it seems to me that it must be said that there is a "real chance" that the defendant's version of what occurred might be preferred at any trial.
Therefore I consider that the defendant has established a prima facie defence on the merits.
That being the case, although as stated the defendant's reason for not initially entering an appearance is not a good one, I consider that the defendant ought have leave to defend the claim and that the default judgment ought be set aside.
As to costs, subject to hearing from the parties my view is that costs orders ought be made as follows:
1.the defendant pay the plaintiff's costs of the entry of judgment thrown away and of the hearing before the Registrar; such costs to be taxed and paid;
2.the costs of the appeal be reserved.
An order that the appeal be allowed and the defendant have leave to defend, and those costs orders will be made without the need for further appearance in the absence within 24 hours of advice from a party that the party wishes to be heard further.