Finder Earth Pty Ltd v BN and SK Pty Ltd (No 2)
[2018] VCC 288
•20 March 2018
| IN THE COUNTY COURT OF VICTORIA AT MELBOURNE COMMERCIAL DIVISION | Revised Not Restricted Suitable for Publication |
GENERAL LIST
Case No. CI-16-03351
| Finder Earth Pty Ltd and Ximei Luo | Plaintiffs |
| v | |
| BN & SK Pty Ltd & Ors | Defendants |
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JUDGE: | His Honour Judge Woodward | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 16 March 2018 | |
DATE OF RULING: | 20 March 2018 | |
CASE MAY BE CITED AS: | Finder Earth Pty Ltd v BN & SK Pty Ltd (No 2) | |
MEDIUM NEUTRAL CITATION: | [2018] VCC 288 | |
REASONS FOR RULING
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Subject: PRACTICE AND PROCEDURE
Catchwords: Error in default judgment – application to amend judgment – construction of the slip rule – effect of amendment would be to substitute party named as judgment creditor – disclosure of judicial subjective intention – concurrent second application to set aside default judgment – amendment of judgment allowed – application to set aside dismissed
Legislation Cited: County Court Civil Procedure Rules 2008
Cases Cited:Bridge Shipping v Grand Shipping (1991) 173 CLR 23; Sherpa v Anderson Unreported NSWSC, 14 October 1993 BC9302148; Ambulance Service of NSW v Daniel (No 2) [2004] NSWCA 406; Newmont Yandal Operations Pty Ltd v The J Aron Corporation and Goldman Sachs Group Inc (2007) 70 NSWLR 411; Tran v Ibrahim [2014] 264
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APPEARANCES: | Counsel | Solicitors |
| For the plaintiffs | Mr L Magowan | Canaan Lawyers |
| For the second and third defendants | Mr J Nixon | Nevile & Co |
HIS HONOUR:
Background to application
1 By reasons dated 7 December 2017, I rejected an application by the defendants to set aside judgment in default of defence made on 10 October 2016 (“default judgment”) consequent upon the defendants’ failure to comply with a self-executing order. The claims in the proceeding and the unhappy procedural history of the proceeding to that point, is each summarised in those reasons and I adopt (without repeating) those summaries for the purposes of this ruling. I noted in the reasons (as was the case) that the defendants did not allege on the hearing of the application that the default judgment was irregular.
2 By summons dated 1 February 2018, the second and third defendants seek in effect to re-agitate the question of whether the default judgment should be set aside, but this time relying on an argument that the judgment was irregular. The summons first came on for hearing before me on 23 February 2018. On that occasion, counsel for the second and third defendants in oral submissions, supported by a comprehensive written outline (among other things), identified that the principal ground of irregularity related to the party in respect of whom the judgment was made. More particularly, counsel argued that the default judgment purported to give judgment for a fixed sum in favour of the first plaintiff, where it was plain from the further amended statement of claim on behalf of the plaintiffs dated 5 September 2016 (“FASOC”) that the first plaintiff made no claim for a fixed sum against any of the defendants.
3 In response, plaintiffs’ counsel explained that on reviewing defendants’ counsel’s written outline that morning, it became apparent to him that there was an error in the draft judgment sent on behalf of the plaintiffs to the court, to be used as the template for the form of the default judgment. That error was that the reference in the draft to the first plaintiff should have been to the second plaintiff. Plaintiffs’ counsel submitted that this could be corrected under the so-called “slip rule”. Given the detailed arguments now being advanced on behalf of the defendants and the consequences for those arguments of acceding to the plaintiffs’ suggestion, I determined to adjourn the defendants’ summons to allow the plaintiffs (should they be so advised) to make a formal application on summons to amend the default judgment. I did so to ensure that both parties (and the court) had a sufficient opportunity to consider and respond to these latest developments. I ordered as follows:
“1.The hearing of the second and third defendants’ summons dated 1 February 2018 is adjourned to 16 March 2018 at 10am before His Honour Judge Woodward.
2.By 4pm on 7 March 2018, the plaintiffs file and serve any application as they may be advised to make to amend the general form of judgment and order made on 10 October 2017, together with any supporting material.
3.By 4pm on 7 March 2018, the plaintiffs file and serve any submissions in support of any application referred to in order 2 above.
4.By 4pm on 13 March 2018, the second and third defendants file and serve submissions in reply.
5.By 4pm on 15 March 2018, the plaintiffs file and serve any further submissions in response.
6. Costs reserved.”
4 The plaintiffs duly filed an application by summons dated 7 March 2018 to amend the default judgment pursuant to r36.07 of the County Court Civil Procedure Rules 2008 (“Rules”) by, in paragraph 1, substituting “second plaintiff” for “first plaintiff” and, in paragraph 2, substituting “first and second plaintiffs” for “first plaintiff”. The parties each filed written submissions in support of their respective applications, more or less in accordance with my orders set out above. Because an order in favour of the plaintiffs on its application to amend the default judgment will significantly narrow the issues in dispute in the proceeding, it is appropriate that I deal with that first.
Plaintiffs’ application to amend the default judgment
5 Rule 36.07 of the Rules provides that:
“The Court made any time correct a clerical mistake in a judgment or an order or an error arising in a judgment or an order from any accidental slip or omission.”
6 In Newmont Yandal Operations Pty Ltd v The J Aron Corporation and Goldman Sachs Group Inc (“Newmont Yandal”),[1] the New South Wales Court of Appeal held that the relevant intention for the purposes of determining whether an error arising from an accidental slip or omission has occurred, is the objective intention of the court, not the subjective intention of the judge, and that expressions of subjective intention are no more than evidentiary.[2] However, the Court of Appeal also held that, “the judge who made the orders is overwhelmingly the preferable person to make the corrections. That she or he may be influenced by, and even express, her or his subjective intention is not a ground for disqualification”.[3] While recognising that there is some tension in these two propositions, I am satisfied that as a matter of fairness to the parties, any subjective intention that may influence any correction that I determine to make to the default judgment should be disclosed.
[1]Newmont Yandal Operations Pty Ltd v The J Aron Corporation and Goldman Sachs Group Inc (2007) 70 NSWLR 411
[2]Newmont Yandal at [91], [95], [102], [185] and [194]
[3]Newmont Yandal per Spigelman CJ at [182]
7 Accordingly, at the commencement of the hearing of the application, I stated to the parties that since the hearing on 28 February 2018 I had revisited the matters that I had considered in settling and authenticating the default judgment on around 10 October 2017. Having done so, I was satisfied that when I reviewed the FASOC at that time, I had identified that it was the plaintiff Ximei Luo that had the relevant fixed money claims against the second and third defendants that were to be the subject of the default judgment. However, I overlooked the fact that Ximei Luo was not the first plaintiff, but the second, and that the draft of the default judgment provided to the court by the plaintiffs’ solicitors therefore named the wrong party. Had I noticed this at the time, I would (as a minimum) have sought clarification from the plaintiffs’ solicitors. I may even have determined to correct the draft judgment by substituting “second plaintiff” for “first plaintiff”, of my own motion.
8 I have again reviewed the FASOC and the affidavit affirmed by Ms Lee of Canaan Lawyers on 22 September 2017 on behalf of the plaintiffs seeking that the default judgment be entered. Doing so has reaffirmed that it is only the second plaintiff Ximei Luo that maintains the claims in the proceeding for fixed money sums against the second and third defendants (notably by paragraphs 15a, 19, 24, 30 and 31). In contrast, the claims by the first plaintiff against the second defendant are not for a fixed money sum (see paragraphs 28b and 29) and (as the defendants have submitted), the first plaintiff makes no claims directly against the third defendant.
9 I have also considered the affidavit of Derek Lo sworn 8 March 2018 in support of the plaintiffs’ application to amend the default judgment. It appears from this that counsel for the plaintiffs made a similar error to mine. The only difference is that counsel for the plaintiffs says in relation to paragraph 2 of the default judgment that he should have named the first and second plaintiff. However, as discussed above, I am not persuaded that the first plaintiff has a claim for a fixed money sum under the paragraphs of the FASOC referred to in the plaintiffs’ submissions. In particular, paragraph 28 refers to “a loss of the benefit of approximately $700,000” (emphasis added). Accordingly, I am not satisfied that (objectively ascertained) the error of the court in respect of paragraph 2 of the default judgment, was to omit a reference to the second plaintiff in addition to the first plaintiff.
10 The second and third defendants submitted that there was no error, because the default judgment was in the form requested by the plaintiff. I am nevertheless satisfied for the reasons above that the objective intention of the court as ascertained by reference primarily to the paragraphs of the FASOC, was to name the second and not the first plaintiff in paragraph 1 and 2 of the default judgment. I am reinforced in that view by the evidence of the error by counsel for the plaintiffs in wrongly naming the first plaintiff in the draft of the default judgment, and agree that the correction would have been made if the court’s attention had been directed to the matter at the time.[4]
[4]Plaintiffs’ outline of submissions at [5] to [7], see also Newmont Yandal per Spigelman CJ at [153]
11 The second and third defendants also submitted in their written outline that the making of the correction would have the effect of altering the identity of the judgment creditor and that this is beyond the scope of the slip rule, relying on the decision of Mukhtar AsJ in Tran v Ibrahim & Ors[5] (“Tran v Ibrahim”). In substance, this submission (as developed in oral submissions) was that, as a matter of construction, the slip rule did not permit a correction that resulted in substituting one party for another. Counsel for the second and third defendants said that, despite extensive searches, he had been unable to find a case where the slip rule had been used in this way and noted that the plaintiffs had likewise not cited any such cases.
[5][2014] VSC 264 at [24]
12 In Tran v Ibrahim, Mukhtar AsJ had before him an application for leave to appeal out of time from an order by VCAT in a residential tenancies dispute. The order had been made following an informal request by the tenants to amend the landlord’s name on the order. His Honour found that the VCAT Member “was induced — wrongly it seems to me — to think that such an order was called for under the slip rule as a ‘mistake in the description of any person’”.[6] Mukhtar AsJ went on to explain that the effect of the amendment was to substitute the landlord’s daughter (who was not a landlord and not a party to the VCAT proceeding), for the landlord (her mother). The tenants then sought to enforce the order against the daughter. Relevantly for present purposes, His Honour held that:
“What matters and what eventually informs the outcome of this state of affairs is that not only were the names wrong, but what was presumably received as an application under the slip rule to correct an error had far more serious and unwarranted effect. It was not an error in the description or mistake in the name of a party. The landlord was always the mother. That goes outside the slip rule or the amendment rule: see Bridge Shipping v Grand Shipping (1991) 173 CLR 231. It is not correcting a mistake or description; it is changing an identity.”
[6][2014] VSC 264 at [2]
13 In my view, His Honour’s finding in Tran v Ibrahim is not authority for the proposition that the slip rule does not permit an amendment that has the effect of substituting a party, whether as a matter of construction of the rule or otherwise. I say this for three reasons. First, I do not read His Honour’s finding as going that far. His Honour’s reference to “going outside the slip rule or the amendment rule” (emphasis added), and his citation of the decision of the High Court in Bridge Shipping, indicates to me that His Honour was not suggesting that an amendment under these two rules could never effect the substitution of a party. It is clear from both the “amendment rule” itself[7] and Bridge Shipping, that the correction of an error that has the effect of substituting a party is permissible, providing it was in truth an error, and not a deliberate decision that later turned out to be incorrect.
[7](see r36.01(4))
14 This distinction is discussed in circumstances not unlike the present in an unreported decision of Young J in the Supreme Court of New South Wales in Sherpa v Anderson.[8] In that case, the solicitors for the plaintiff (acting on the instructions of the plaintiff’s insurer) had brought proceedings in the name of the wrong party, believing it to be the proprietor of the insured’s business name. After noting that, “Deliberate errors rarely qualify for relief”, His Honour went on to find that the mistake came to the notice of the solicitors for the plaintiff at the time of the initial hearing and, at that stage, there could have been an application for leave to amend which would probably have been granted. His Honour continued:
[8]Unreported, 14 October 1993, 12163 of 1993; LexisNexis at BC9302148
“The plaintiff[’s]… solicitors did not take that course but rather were content to argue the matter and to take a judgment in the name of Anderson [the wrong party]. Having pursued that course, they could not allege that the judgment which was pronounced by the court deliberately on their invitation, was not intended by the court or was a mistake. Accordingly in my view the slip rule does not apply”.
Here (unlike in Sherpa v Anderson), there was in truth an accidental slip in thinking that Ximei Luo was the first plaintiff and thus, in my view, the discretion under r36.07 is validly engaged.
15 Second, it is well established that the purpose of the slip rule is to avoid injustice to litigants:
“As a provision intended to have the beneficial effect of avoiding injustice, its potential application should not be constrained by a narrow or restrictive approach to the circumstances in which it might be applied”.[9]
[9]Areva v Summit [No 2] [2008] WASC 10 (S), per Martin CJ at [7]
16 It is clear that in this case, if the discretion conferred by the rule is not exercised, the plaintiffs will suffer an injustice by being denied a default judgment resulting from the defendants’ failure to comply with the self-executing order, being the last in a very long line of procedural failures by the defendants. Were it not for the error (and subject to my further findings below), that judgment would now have effectively been unimpeachable, except by appeal. I am satisfied that it would be an overly narrow approach to the slip rule to wholly exclude circumstances where a genuine accidental slip has resulted in the wrong one of two existing parties to the proceeding being named as judgment creditor.
17 My final reason for rejecting the second and third defendant’s submission concerning the effect of the decision in Tran v Ibrahim, is that if it did stand for the proposition posited by the second and third defendant, it would be contrary to a decision of the New South Wales Court of Appeal that is directly on point. In Ambulance Service of NSW v Daniel (No 2),[10] the Court of Appeal was faced with a situation where it had made orders dismissing an appeal, including an order that the first respondent pay the appellant’s costs. The court stated:
“That costs order was plainly a slip, because the appeal raised only issues concerning whether it was the appellant or second respondent that should be liable to pay compensation to the first respondent. There was no issue concerning the first respondent’s entitlement to compensation or its amount, and the first respondent entered a submitting appearance. It was plain beyond argument that what the court intended was the second respondent should pay the appellant’s costs.”[11]
[10][2004] NSWCA 406
[11][2004] NSWCA 406 at [2]
18 After discussing the conduct of the parties in dealing with the error and criticising the solicitors for both parties for the delay in approaching the court, Hodgson JA held that: “the costs order should be varied under the slip rule by substituting the second respondent for the first respondent as the party liable for the appellant’s costs”.[12] Thus the Court of Appeal was in no way constrained by any limitation on the operation or construction of the slip rule in substituting one respondent for another as the party liable to pay the costs. Although the slip in on the facts of the case before me was perhaps not as obvious (and thus no criticism of the parties is warranted), I have found that it was an accidental slip. It is also worth noting that the effect of the Court of Appeal’s order was to substitute a judgment debtor which, on one view, could be said to be a more controversial result than substituting a judgment creditor.
[12][2004] NSWCA 406 at [10]
19 I therefore propose to order that the default judgment be amended pursuant to r36.07 of the Rules by substituting “second plaintiff” for “first plaintiff” in each of paragraphs 1 and 2 of the default judgment.
Default judgment irregular notwithstanding the amendment
20 The plaintiffs have not sought to argue that, having determined to amend the default judgment as proposed above, the court is now functus officio in relation to any further application by the second and third defendants to set aside the default judgment. I note in this context that at the time the second and third defendants last applied to set aside the default judgment, it was not argued that the judgment was irregular. However, in circumstances where the default judgment has been re-opened for the purposes of determining the plaintiffs’ application to amend pursuant to the slip rule, it is difficult to see (in the absence of submissions to the contrary) how such an argument could be maintained.
21 The second and third defendants have submitted that amending the default judgment in the manner proposed would be futile because, even if so amended, the default judgment would be irregular. The second and third defendants submit that:
“The second plaintiff does not plead a claim for recovery of a debt against the second or third defendant thereby entitling the entry of final judgment under Rule 21.03(1)(a)…Whilst it may have been open to the second plaintiff to plead a claim for a contractual debt for breach of a guarantee or indemnity given by the second defendant that is not how the second plaintiff’s claim is actually pleaded.”
22 The basis for this submission was that there is a disconnect between:
· on the one hand, paragraph F of the prayer for relief at page 24 of the FASOC which refers to the “$700,000 owing to the second plaintiff under the Finder Earth Loan Agreement and LL Loan Agreement”; and
· on the other, the fact that the second defendant is not a party to either of those loan agreements.
23 I agree that the drafting of paragraph F of the prayer for relief is incomplete. In particular, it is accurate as far as it goes (in the sense that the $700,000 is in fact pleaded as owing to the second plaintiff under the two loan agreements), but it omits the next step in the process that (on the pleading) would extend liability to the second defendant for that $700,000. This could have been done by, for example, adding at the end of the paragraph words to the effect of: “and payable by the second defendant under the Yang/Luo Guarantee and Indemnity”. However, in my view, the omission of words to that effect in the prayer for relief does not render the default judgment (as amended) irregular.
24 It is well-established that the main purposes of pleadings is to give notice to the other party of the case it has to meet, to avoid surprise to that party, to define the issues at trial, to thereby allow any relevant evidence to be admitted at trial and for the trial to be conducted efficiently within permissible bounds.[13] However, courts do not take an unduly technical or restrictive approach to pleadings such that, among other things, a party is strictly bound to the literal meaning of the case it has pleaded.[14] In particular, a court will not consider a pleading with the same degree of scrutiny which the courts are required to give to an Act of Parliament.[15]
[13]Dare v Pulham (1982) 148 CLR 658 at p664-5
[14]Thomson v STX Pan Ocean Co Ltd [2012] FCAFC 15
[15]Arthur Young v Tieco International (1995) 182 LSLJ 367, per Lander J at [370]
25 I am satisfied that, when read as a whole, it is sufficiently clear on the pleading that the second plaintiff’s case against the second defendant for a fixed money sum relies on the allegations that:
· the second defendant agreed as a part of the “Second Partnership Agreement” to “provide guarantee for the fund lent in advance by Luo and ensure the safety of the fund” (FASOC paragraph 14, clause 14.e.2.b);
· by this clause (among others) and by implication, the second defendant “guaranteed and indemnified Luo for the monies she advanced pursuant to her loans (see below)” (FASOC paragraph 15), defined as the “Yang/Luo Guarantee and Indemnity”;
· those loans comprised the loans totalling $700,000 under the Finder Earth Loan Agreement and the LL Loan Agreement;
· by reason of the breaches by the defendants of the Second Partnership Agreement and the termination of that agreement, the sums advanced by Luo under the Finder Earth Loan Agreement and the LL Loan Agreement are due and payable (FASOC paragraphs 22 to 25);
· by reason of the conduct alleged, Luo has suffered loss and damage including the $700,000 sums advanced by Luo under the Finder Earth Loan Agreement and the LL Loan Agreement (FASOC paragraph 30(a)); and
· Luo claims the $700,000 against the second defendant under the Yang/Luo Guarantee and Indemnity (FASOC paragraph 31).
26 The second and third defendants have argued that the relevant paragraphs of the FASOC (and notably paragraph 15) are “so embarrassing” that purporting to read them in the manner summarised above is tantamount to re-writing those paragraphs, which the court should not do. I agree that the FASOC is not drafted as coherently or consistently as it might have been, particularly if the proceeding were to go to trial on all issues. However, I am satisfied that a basis for a claim by the second plaintiff for the debts claimed in paragraphs 1 and 2 of the default judgment is sufficiently revealed on the current pleading read as a whole. In particular, the drafting deficiency in the prayer for relief in respect of this claim relied on by the second and third defendants, does not preclude the second plaintiff from pursuing judgment in default of defence in the form sought in the default judgment.
27 I am also satisfied for the reasons submitted by the plaintiffs,[16] that the sum of $700,000 so claimed is a “debt” within the meaning of r21.03.1(a) of the Rules. It is a fixed liquidated sum alleged to have been lent by the second plaintiff under the loan agreements referred to and payable by the second defendant as a debt due pursuant to the Yang/Luo Guarantee and Indemnity. Although the prayer for relief (notably in paragraph A, where it first appears on page 24 of the FASOC) on one view refers to the sum claimed as “loss and damage”, again when read with the FASOC as a whole, this expression can be seen as encompassing the $700,000 debt due under the Yang/Luo Guarantee and Indemnity. In other words, that debt is a sub-set of the broader claim for loss damage alleged to be owing by the second defendant to the second plaintiff for the various breaches alleged.
[16]Plaintiffs’ outline of submissions at [12]
28 Counsel for the second and third defendant conceded in argument that, if I found against his clients on the application of the slip rule and what I had described in oral submissions as his “disconnect argument”,[17] then that was the end of the matter. I have so found. It is therefore unnecessary for me to deal with the second and third defendants’ further submissions concerning the defects in the FASOC and their submission that the statement of claim should be struck out in its entirety.
[17]Being the argument addressed at [20] to [27] above
29 It is also unnecessary for me to deal with the plaintiffs’ arguments to the effect that I should not entertain the second and third defendants’ summons dated 1 February 2018 (in effect) because:
· having already applied unsuccessfully to set aside the default judgment, at which time they failed to advance any argument based on the default judgment being irregular, they are now “estopped” from making an application on that basis; and
· the summons amounts to a breach of the overarching obligation under the Civil Procedure Act 2010 (Vic).
Costs and orders
30 The renewed application by the second defendant to set aside the default judgment and the consequent application by the plaintiffs under the slip rule, came about primarily as a result of an admitted error by the plaintiffs’ legal advisers in the preparation of the draft default judgment. In those circumstances, my tentative view is that the appropriate order on costs is that the plaintiffs pay the second defendant’s costs of and incidental to the second defendant’s summons dated 1 February 2018 and the plaintiffs’ summons filed 8 March 2018, on the standard basis. I propose to fix those costs and order that that sum may be paid by the plaintiffs by being deducted from the sums due to the second plaintiff from the second and third defendants under the default judgment.
31 I tentatively propose to order that:
1. The second defendant’s application made by summons dated 1 February 2018 is dismissed.
2. The general form of judgment entered and order of this court made 10 October 2017 is amended pursuant to r36.07 of the Rules by deleting “first plaintiff” from paragraphs 1 and 2 thereof and substituting “second plaintiff”, and be reissued to take effect from 10 October 2017 accordingly.
3. The plaintiffs pay the second and third defendants’ costs of and incidental to the second defendant’s summons dated 1 February 2018 and the plaintiffs’ summons filed 8 March 2018, fixed in the sum of $[to be confirmed].
4. The costs payable by the plaintiffs under order 3 above may be paid by being deducted from the sums payable by the second and third defendants to the second plaintiff under the general form of judgment entered and order of this court made 10 October 2017, as amended by paragraph 2 above.
32 The parties will be invited by email to attempt to agree on the final form of orders (including the amount of the costs) or, failing agreement, to make brief submissions in writing (limited to 4 pages) and I will determine the final form of orders on the papers.
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Certificate
I certify that these 13 pages are a true copy of the reasons for Ruling of His Honour Judge Woodward delivered on 20 March 2018.
Dated: 20 March 2018
Simone Karmis
Associate to His Honour Judge Woodward
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