Fox Tucker Lawyers v Panda - [2018] SASC 197

SUPREME COURT OF SOUTH AUSTRALIA
(Magistrates Appeals: Civil)
FOX TUCKER LAWYERS v PANDA
[2018] SASC 197
Judgment of The Honourable Justice Parker
21 December 2018
PROCEDURE - CIVIL PROCEEDINGS IN STATE AND TERRITORY COURTS - ENDING PROCEEDINGS EARLY - DEFAULT JUDGMENT - JUDGMENT IN DEFAULT OF PLEADINGS OR PARTICULARS
PROCEDURE - CIVIL PROCEEDINGS IN STATE AND TERRITORY COURTS - ENDING PROCEEDINGS EARLY - DEFAULT JUDGMENT - SETTING ASIDE
PROCEDURE - CIVIL PROCEEDINGS IN STATE AND TERRITORY COURTS - JUDGMENTS AND ORDERS - AMENDING, VARYING AND SETTING ASIDE JUDGMENTS AND ORDERS - ACTIONS TO REVIEW OR SET ASIDE JUDGMENT OR ORDER
This is an appeal against an order of the Magistrates Court that set aside a default judgment awarded against the respondent on 23 December 2014. The default judgment concerned a claim for unpaid legal fees in respect of services provided by the appellant during 2012 and 2013.
The appellant was engaged to provide legal services to Amitbikram Pty Ltd (Amitbikram) and Dr Ranjit Panda (the respondent’s husband). The appellant was not, at any time, engaged by the respondent to provide services.
On 29 May 2014, the appellant filed a claim for unpaid legal costs in the Adelaide Magistrates Court against the respondent, her husband, and Amitbikram, on the basis that all three were liable to make payment. The respondent did not file a defence to the claim, and default judgment was consequently awarded against her on 23 December 2014. Although the claim was allegedly served on the respondent by post, the respondent gave affidavit evidence that she did not receive it, and only became aware of the existence of the claim upon being served with the default judgment.
On 15 February 2018, the respondent applied to have default judgment set aside. On 29 May 2018, the Magistrate set aside the default judgment by the power said to be enlivened under r 87 of the Magistrates Court (Civil) Rules 2013 (SA). That decision is the subject of this appeal.
Held, per Parker J, dismissing the appeal:
1. Delay in applying to set aside default judgment is not relevant when determining whether r 87(2)(b) has been satisfied (at [29]).
2. For the purpose of r 87(2)(b), “a reasonable excuse is one which in all circumstances the ordinary person would consider warrants forgiveness for non-compliance” (at [30]).
3. The ordinary person would not consider it reasonable that a person be expected to file a defence to a claim of which they are entirely unaware (at [30]).
4. To challenge affidavit evidence that a person had not received a claim by post, and was unaware of the existence of a claim until default judgment was served, it was necessary to seek permission from the Magistrate to cross-examine. Had such a request been made, the Magistrate would have been required to permit cross-examination as the person's credit was of central importance (at [34]).
5. Ordinarily a court cannot reject unchallenged affidavit evidence, but may do so where the facts asserted are "patently incredible" or "completely incredible" (at [43]).
6. In determining whether a Magistrate erred in exercising the discretion under r 87, the test to be applied is whether the Magistrate acted on a wrong principle, allowed extraneous or irrelevant matters to guide or affect them, mistook the facts or did not take into account some material consideration, or alternatively whether the result is unreasonable or plainly unjust (at [46]-[47], [60]).
7. A finding that a judicial officer gave insufficient weight to a particular matter when exercising a statutory discretion, including the discretion under r 87, cannot, of itself, result in a finding of invalidity (at [60]).
8. The existence of a meritorious defence carries particular weight when deciding whether to set aside a default judgment (at [65]).
Magistrates Court (Civil) Rules 2013 (SA) rr 3, 87; Legal Practitioners Act 1981 (SA) s 18(2) sch 3, referred to.
Marmanidis v Germein [2017] SASC 103 ; Southern Cross Commodities Pty Ltd (in liq) v Martin (1985) 123 LSJS 480; Watson v Anderson (1976) 13 SASR 329; Southern Cross Commodities Pty Ltd v Martin (1986) 126 LSJS 306; Adelaide (SA Pools & Spa) Manufacturing and Installation Pty Ltd v Westcourt General Insurance Brokers Pty Ltd [2016] SASC 60; House v The King (1936) 55 CLR 499; National Mutual Life Association of Australasia Ltd v Oasis Developments Pty Ltd [1983] 2 Qd R 441; Australian Securites and Investments Commission v Macks [2018] SASC 132, applied.
Cubelic v T & D Lock Pty Ltd [2009] SASC 397; Sandery v Kowalski [2016] SASC 175; Browne v Dunn (1894) 6 R 67; Reid v Kerr (1974) 9 SASR 367; Levinge v Director of Custodial Services (1987) 9 NSWLR 546; Cook v DA Manufacturing Co Pty Ltd [2004] QCA 52; Autorent Pty Ltd v Millar Seymour & Co [2004] TASSC 2; Police v Chilton (2014) 120 SASR 32; R v Lutze (2014) 121 SASR 144; Clone Pty Ltd v Players Pty Ltd (in liq) (recs & mgrs apptd) (2018) 353 ALR 24, discussed.

FOX TUCKER LAWYERS v PANDA
[2018] SASC 197
Magistrates Appeal: Civil

PARKER J: This is an appeal against an order of the Magistrates Court that set aside a default judgment awarded against the respondent on 23 December 2014. The default judgment concerned a claim for unpaid legal fees in respect of services provided by the appellant during 2012 and 2013.
Background
The appellant was engaged to provide legal services to Amitbikram Pty Ltd (Amitbikram) and Dr Ranjit Panda (the respondent’s husband). The appellant was not, at any time, engaged by the respondent to provide services, although the claim filed by the appellant in the Magistrates Court asserts that services were provided to her, her husband and Amitbikram.
On 6 February 2012, the respondent signed two agreements relating to the provision of legal services to Amitbikram. Both agreements had been drafted by the appellant and were forwarded in letters addressed to the respondent’s husband as a representative of Amitbikram. Each letter included the subject line “Client Agreement: Amitbikram Pty Ltd”.
One agreement had been forwarded in a letter dated 13 January 2012. The sole terms of this agreement are:
I agree to provide Fox Tucker Lawyers the right to register a charge over Amitbikram Pty Ltd’s assets and/or register a caveat over my property located at [the respondent’s address].
A letter dated 18 January 2012 sought agreement to two sets of terms and also enclosed the appellant’s Standard Conditions. The letter referred to the basis upon which “you and APT” will be charged for legal services and the terms on which “we will assist you and APT” (APT referred to Amitbikram Pty Ltd). The letter also included a statement that “[t]his letter, its attachments and the enclosed Standard Conditions form our offer to enter into a Client Agreement (including a costs agreement) with you and APT.”
The first set of terms forwarded with the letter dated 18 January 2012 were followed by a place for the respondent’s husband to affix his signature. The terms were:
I as sole director of Amitbikram Pty Ltd agree to be bound by this letter, the Standard Conditions, the Schedule of Expenses and any other attachments.
After you have issued me with an account, I authorise and direct you to recover your professional fees and expenses in relation to this matter out of any funds which you hold in your trust account on my behalf from time to time.
I consent to an external quality system accreditation authority accessing files in relation to my matter provided they do so on a confidential basis.
Neither the respondent’s husband, nor any other person, have signed to acknowledge agreement to these terms.
The second set of terms were followed by a place for an unnamed signatory to sign. The respondent signed so as to indicate her agreement to the terms, which provide as follows:
I agree as sole director of Amitbikram Pty Ltd to be bound by this letter, the Standard Conditions, the Schedule of Expenses and any other attachments together and separately with Dr Panda but acknowledge that the solicitor/client relationship will only exist between Dr Panda and Fox Tucker Lawyers.
There are several significant issues associated with this second set of terms. First, the respondent was not a director of Amitbikram. Secondly, the existence of a solicitor/client relationship between the appellant and the respondent has been specifically excluded. Thirdly, the two letters were addressed to the respondent’s husband as a representative of Amitbikram, rather than to the respondent.
Between 2012 and 2014, the respondent made payments to the appellant in respect of legal services provided to her husband and/or Amitbikram. Although the respondent does not have access to reliable records, she stated in an affidavit dated 27 March 2018 that she had paid more than $320,000. The respondent maintains that these payments were made to assist her husband. She denies having ever been the appellant’s client and asserts that only her husband and/or Amitbikram were its clients and liable to pay fees.
The respondent’s marriage has broken down and in 2016 her husband was imprisoned in Western Australia. She has deposed that she paid her husband’s legal fees arising from the criminal proceedings. Those fees were not paid to the appellant.
On 29 May 2014 the appellant filed a claim for unpaid legal costs in the Adelaide Magistrates Court against the respondent, her husband, and Amitbikram, on the basis that all three were liable to make payment. The claim was allegedly served on the respondent by post on 5 June 2014. She has stated in her affidavit of 27 March 2018 that she did not know whether the claim was served upon her by post but if it was, she had not received it. The Magistrate noted at [16] in her reasons that the respondent submitted that she had not received the claim because her husband opened her mail. However, there was no evidence given by the respondent to that effect. Apparently, this explanation for not receiving the claim was provided from the bar table.[1]
[1] Transcript is not available.
The respondent did not file a defence to the claim. On 23 December 2014, default judgment was awarded against her in the amount of $75,403.36. That comprised $72,789.36 in respect of legal fees together with costs and court fees. The default judgment was served by post on the respondent on the same day. She has deposed that she first became aware of the appellant’s claim when the default judgment was served. On 10 April 2015, the respondent was served personally with a bankruptcy notice in the amount of the default judgment.
Between April 2015 and October 2015, the respondent instructed Mr Shammi Batra, an Adelaide accountant, and a Melbourne law firm, PCL Lawyers, to negotiate with the appellant about payment of the default judgment debt. The respondent contends that PCL Lawyers did not give advice about applying to set aside the default judgment. On 14 November 2015, the respondent was served with a further bankruptcy notice in the amount of the default judgment, as the first notice had expired. The respondent began making regular payments to the appellant by instalments from February 2016. The respondent ceased making instalment payments in August 2016.
In late 2017, the respondent instructed a Canberra law firm, Concorde Legal. She had come into contact with that firm in connection with unrelated proceedings to which she was not a party.
On 31 January 2018 the respondent was served with another bankruptcy notice. She then commenced proceedings in the Federal jurisdiction to have the bankruptcy notice set aside. Those proceedings have been adjourned several times pending the outcome of both her application to set aside the default judgment and this appeal.
On 15 February 2018 the respondent applied to have the default judgment set aside. On 29 May 2018 the Magistrate held that the discretion to set aside the default judgment under r 87(2) of the Magistrates Court (Civil) Rules 2013 (SA) was enlivened as both limbs of r 87(2) were satisfied. Her Honour considered that in all the circumstances “it [was] in the interests of justice that [the respondent] be given the opportunity to defend this claim.” Her Honour set aside the default judgment and gave leave to the respondent to file a defence within 21 days. That decision is the subject of this appeal.
Grounds of appeal
The appellant has advanced five grounds of appeal, which can be paraphrased as follows:
1The Magistrate erred, in fact and law, in finding that her discretion under r 87 of the Magistrates Court (Civil) Rules was enlivened and that default judgment was liable to be set aside. It was not open to the Magistrate to conclude that the respondent had established a reasonable excuse for her delay in filing a defence.
2The Magistrate erred, as a matter of law, by failing to follow the reasons of Duggan J in Cubelic v T & D Lock Pty Ltd,[2] by giving inadequate weight to the second limb of r 87(2) and by failing to rigorously apply the rules.
3The Magistrate erred, as a matter of law, by not giving adequate weight to the Defendant’s delay in making an application to set aside the default judgment and by not having sufficient regard to the decisions of Duggan J in Cubelic and Doyle J in Sandery v Kowalski.[3]
4The Magistrate erred, in fact and law, by placing too much reliance on the respondent’s evidence that she was unaware that she could set aside the default judgment.
5The Magistrate erred in concluding that it was in the interests of justice that the respondent be given the opportunity to defend the claim. This finding was not open to the Magistrate.
[2] [2009] SASC 397.
[3] [2016] SASC 175.
The appellant seeks orders that the appeal be allowed, that the respondent’s application to set aside the default judgment be dismissed and that the respondent pay the appellant’s costs of this appeal.
Reasonable excuse for not having filed a defence — grounds 1 & 2
The power of the Magistrate to set aside a default judgment is governed by r 87 of the Magistrates Court (Civil) Rules 2013 (SA), which relevantly provides:
87.     (1)     The Court may set aside or vary a judgment (not being a final judgment).
(2)     The Court must not set aside such a judgment unless the party seeking to set it aside establishes that he or she –
(a)      has an arguable case on the merits; and
(b) has a reasonable excuse for not having complied with these Rules, or an order of the Court, or any time limit fixed by these Rules or order of the Court, in respect of the action or proceeding.
The appellant’s submissions
The appellant does not contend that the respondent does not have an arguable case on the merits. Thus, paragraph (a) of r 87(2) is taken to be satisfied. However, the appellant submits that it was not open to the Magistrate to conclude that the respondent had a reasonable excuse for her delay in filing a defence. Because the precondition in r 87(2)(b) was not satisfied, it was also not open to the Magistrate to find that the jurisdiction under r 87 was enlivened.
In support of this submission the appellant cites the decisions of Duggan J in Cubelic v T & D Lock Pty Ltd[4] and Doyle J in Sandery v Kowalski.[5] In Sandery Doyle J endorsed the approach adopted by Duggan J in Cubelic. Doyle J observed in Sandery:[6]
In respect of the second limb (which required that the defendant establish that he had a reasonable excuse for the default), Duggan J again relied upon Watson v Anderson. He referred in this context to a passage from the reasons of Bray CJ in that case in which his Honour referred to the words on the summons that made it plain that a response was necessary within a particular timeframe. Bray CJ held that if the defendant in that case had read those words, then he must have understood what was required; and that if he did not, then he was the author of his own misfortune. Either way, there was no reasonable excuse for the default.
…
Cubelic v T & D Lock Pty Ltd represents a relatively rigorous approach to the setting aside of judgments. However, that approach is required by r 87(2), particularly when interpreted in light of the overarching requirements of r 3(1)(a). In the case of commercial litigation, there is an imperative to ensure that the rules are interpreted and enforced in a manner conducive to the expeditious determination of proceedings. While this should not occur at the expense of doing justice to the parties and more generally, which remains the paramount concern of the courts, this does not mean that parties will be given unlimited opportunity to pursue or contest a claim. If they have not taken an earlier opportunity reasonably available to them to identify and pursue a proper basis for contesting a claim, then even achieving justice between the parties may not require that they be afforded a further opportunity. But certainly once regard is had to the interest in the just and expeditious administration of civil justice more generally, and in particular the need to ensure that the public’s confidence in the courts’ ability to efficiently determine matters is not undermined, it can readily be seen that there must be limits to the parties’ entitlement to contest claims where they have fallen into default in their conduct of the litigation.
(Citations omitted)
[4] [2009] SASC 397.
[5] [2016] SASC 175.
[6] Ibid at [27]-[29].
The appellant submits that, if the Magistrate had correctly applied these principles, she should have found that the respondent had not established a reasonable excuse for her delay in filing a defence. Her only explanation, proffered from the bar table, was that her husband opened her mail and assumed responsibility for dealing with debts. The respondent did not give evidence that her husband was dealing with her debts, nor did she give evidence that he had received the claim and had not informed her about it.
The appellant notes that after becoming aware of the claim and the default judgment the respondent took no steps to combat the claim or set aside the default judgment. That submission was supported by a detailed chronology. Instead, she engaged both Mr Batra and PCL Lawyers to negotiate payment of the default judgment debt. The appellant submits that the respondent’s assertion that PCL Lawyers did not consider or advise her about applying to set aside the default judgment is implausible. The respondent has not called evidence from PCL Lawyers, nor provided any evidence about her communications with that firm. Moreover, the respondent did not apply to set aside the judgment until she had defaulted on the payment arrangements and was served with the further bankruptcy notice.
The respondent’s submissions
The respondent submits that for the purposes of r 87(2)(b), “a reasonable excuse is one which in all circumstances the ordinary person would consider warrants forgiveness for non-compliance.”[7] The ordinary person could hardly be taken to consider it reasonable for a person to file a defence to a claim they did not know existed. Thus, her explanation should be accepted as giving rise to a reasonable excuse for the purpose of r 87(2)(b).
[7] Marmanidis v Germein [2017] SASC 103 at [83] (Hinton J).
The respondent also submits that the appellant’s contentions about her delay in applying to set aside judgment are not relevant to grounds 1 and 2. Rule 87(2)(b) is concerned with the delay in filing a defence prior to the entering of default judgment. Any subsequent delay in applying to set aside the judgment is relevant to the exercise of the discretion to set aside judgment but is not relevant when determining whether that discretion has been enlivened.

The respondent submits that the appellant’s contention that her evidence ought not be believed infringes the rule in Browne v Dunn.[8] If the evidence is not challenged, the court can be left uncertain as to which matters truly fall before it for determination.[9] The respondent relies upon the observation of McHugh JA (as he then was) in Levinge v Director of Custodial Services that “[t]he rule in Browne v Dunn (1893) 6 R 67 at 76-77 prevents a court from refusing to act on or disbelieving evidence which has not been the subject of cross-examination.”[10]
[8] (1894) 6 R 67.
[9] Reid v Kerr (1974) 9 SASR 367 at 373-374 (Wells J).
[10] (1987) 9 NSWLR 546 at 560; see also Precision Plastics Pty Ltd v Demir (1975) 132 CLR 362 at 370-371 (Gibbs J).
The respondent further submits that the appellant’s assertion that the respondent’s evidence in respect of her advice from PCL Lawyers is “implausible”, is also in breach of the rule in Browne v Dunn. There is nothing unlikely or implausible about her account of events. Having permitted the evidence of the respondent to go unchallenged in the Magistrates Court, it is disingenuous to challenge her credibility on appeal. Her evidence ought to be accepted.
Consideration – reasonable excuse
The issue is whether the Magistrate erred in finding that the respondent had a reasonable excuse for not having filed a defence within the time permitted under the Rules, i.e. was r 87(2)(b) was satisfied.
I accept the correctness of the respondent’s submission that her delay in applying to set aside the default judgment is not relevant when determining whether r 87(2)(b) has been satisfied. The substantial delay is relevant to the exercise of the discretion but it is not relevant to the preliminary question whether the discretion has been enlivened.
I agree with the observation of Hinton J in Marmanidis v Germein that “a reasonable excuse is one which in all circumstances the ordinary person would consider warrants forgiveness for non-compliance.”[11] I also agree with the respondent’s submission that no ordinary person could possibly consider it reasonable for her to be expected to file a defence to a claim of which she was entirely unaware. It is therefore necessary to consider the appellant’s contention that the Magistrate erred by accepting the respondent’s evidence that she had not received notice of the claim until after the default judgment was entered.
[11] [2017] SASC 103 at [83] (Hinton J).
The application for default judgment was an interlocutory proceeding. Thus, the appellant could only cross-examine the respondent on her affidavit evidence if permission was sought and granted. The appellant submits that the Court is ordinarily reluctant to grant permission. Thus, the usual practice in proceedings of this nature is to proceed solely on the affidavit evidence.
The respondent refers to her affidavit evidence that she was unaware of the existence of the claim until she was served with the default judgment. She also deposed that she retained PCL Lawyers in October 2015 to negotiate with the appellant. PCL Lawyers had advised her that her only option was to negotiate a payment plan. That firm did not advise her that she could try to have the default judgment set aside. Her affidavit evidence about this issue was not challenged in cross-examination and there is no contrary evidence.
While I accept that it is very common practice in proceedings of the present type to proceed solely on the affidavit evidence, in Southern Cross Commodities Pty Ltd (in liq) v Martin Lunn AJ held that the Court could permit cross‑examination on an affidavit sworn by a defendant who was seeking to set aside a default judgment.[12] His Honour also observed that unless the defendant was cross‑examined, he was unable to reject his affidavit evidence that he had not received notice of the claim until after the default judgment was entered.[13] On appeal the Full Court, comprising King CJ, Prior and Olsson JJ, held that there was no doubt as to the correctness of the reasons given and the orders made by Lunn AJ.[14]
[12] (1985) 123 LSJS 480.
[13] Ibid at 484.
[14] Southern Cross Commodities Pty Ltd v Martin (1986) 126 LSJS 306.
If the appellant intended to challenge the respondent’s affidavit evidence that she had not received the claim by post, and was unaware of the existence of the claim until the default judgment was served upon her, it was necessary to seek permission from the Magistrate to cross-examine her about this vital factual issue. If such a request had been made, the Magistrate would have been required to permit cross‑examination given that the respondent’s credit was of central importance.[15]
[15] Australian Securities and Investments Commission v Macks [2018] SASC 132 at [30] (Doyle J).
The Magistrate stated in her judgment that the respondent had submitted that at the relevant time she resided with her husband who “opened her mail and assumed responsibility for dealing with debts.” In fact, the respondent did not give any evidence about this conduct by her husband. The information referred to by the Magistrate was supplied to the Court in submissions from the bar table. Thus, the Magistrate was not entitled to take this information into account.
While the Magistrate erred by taking into account information that was not received as evidence, I do not consider that this error requires me to set aside her Honour’s decision. If the additional information that the respondent’s husband was opening her mail and had taken responsibility for dealing with debts had been properly received as evidence, it would have strengthened her denial that she knew of the claim before the default judgment was served upon her. However, the fact that this information was not in evidence must be considered in light of the appellant’s decision not to challenge the respondent’s denial that she had received notice of the claim. If the additional information is disregarded, as it must be, that leaves in place the respondent’s previously unchallenged denial that she was unaware of the claim’s existence until after the default judgment was entered.
The appellant further submits that the Court can and does analyse the veracity of affidavit evidence in the absence of cross-examination. In support of that contention the appellant notes that, in several of the authorities to which it refers, the Court assessed the credibility of affidavit evidence without that evidence having been challenged in cross-examination.
In Sandery the first defendant gave affidavit evidence as to why postal service had not been effective to inform him of the claim. His evidence was that “the documents may have been taken from [their] post box at the front of [their] home by [their] neighbour, who is intellectually disabled and has taken [their] mail on previous occasions and forgotten to pass it on to [them].”[16] Doyle J held that this explanation was “speculative and incomplete” and thus inadequate. His Honour remarked that:[17]
It is speculative because the explanation given for the apparent delay in receiving the document was in terms that their neighbour “may” have intercepted their mail. There is no reference to any steps taken by the defendants to ascertain whether that is what occurred. It is incomplete because they do not go on to say when and how they did ultimately receive the claim, and what steps, if any, they took to address the claim once they became aware of it. These gaps in the defendants’ evidence are critical. In my view they prevent the Court being satisfied that the defendants have a reasonable excuse for their delay.
[16] [2016] SASC 175 at [12] (emphasis added).
[17] Ibid at [48].
The appellant submits that a court can assess the credibility of affidavit evidence in the absence of cross-examination. In my view there is an important distinction between a court accepting the veracity of unchallenged affidavit evidence and the court finding that such evidence is not sufficient to satisfy it that the defendant has demonstrated a reasonable excuse for not filing a defence within the time permitted. Both Cubelic and Sandery were decided on the latter basis.
In Sandery, Doyle J accepted the truth of the unchallenged affidavit evidence but was not persuaded that this evidence established a reasonable excuse for not filing a defence within time.
Similarly, in Cubelic Duggan J concluded that unchallenged affidavit evidence lacked the particularity required for the Court to assess the genuineness of the defence and whether it was arguable on the merits.[18] His Honour also found in Cubelic that the reasons advanced by the appellant justified the Magistrate’s decision to find that there was no reasonable excuse for not filing a defence.[19] The important point is that, while Duggan J expressed reservations about the appellant’s evidence, his Honour did not reject it as untruthful, but found it inadequate and not persuasive.
[18] [2009] SASC 397 at [20]-[23].
[19] Ibid at [10]-[14].
In Watson v Anderson Bray CJ held that the court is not required to accept an assertion in the defendant’s affidavit that is “patently incredible” or, in the words of Walters J (with Mitchell J agreeing), a version of fact that is “completely incredible”.[20]
[20] (1976) 13 SASR 329 at 335 (Bray CJ), 341 (Walters J).
The decisions of the Full Court in Watson v Anderson and in Southern Cross Commodities can be reconciled on the basis that ordinarily a court cannot reject unchallenged affidavit evidence but may do so where the facts asserted are “patently incredible” or “completely incredible”.
I do not consider that the Magistrate erred by failing to find patently or completely incredible the claim by the respondent that she was unaware of the claim prior to service of the default judgment, nor the claim that she had not been advised of her right to apply to have the judgment set aside.
For the several reasons discussed above, I find that the magistrate did not err in finding that the facts deposed to by the respondent demonstrated a reasonable excuse for not filing a defence within time. I therefore dismiss the appeal on grounds 1 and 2.
Exercise of discretion — grounds 3 and 4
Both the appellant and respondent submit that in Adelaide (SA Pools & Spa) Manufacturing and Installation Pty Ltd v Westcourt General Insurance Brokers Pty Ltd Doyle J correctly stated the test to be applied in determining whether the Magistrate erred in exercising her discretion.[21] His Honour stated that:[22]
the appellant must establish that the Master acted on a wrong principle, allowed extraneous or irrelevant matters to guide or affect him, mistook the facts or did not take into account some material consideration. Alternatively, the appellant must establish that the result embodied in the orders made is, upon the facts, unreasonable or plainly unjust, such that it can be inferred that there has been a failure to properly exercise the relevant discretion despite the precise nature or source of the error not being identifiable.
[21] [2016] SASC 60.
[22] Ibid at [22].
The observations made by Doyle J mirror the principles in House v The King and are plainly correct.[23]
[23] (1936) 55 CLR 499 at 504-505 (Dixon, Evatt and McTiernan JJ)
The appellant’s submissions
The appellant submits that, if the jurisdiction conferred by r 87 was enlivened, the Magistrate erred in exercising that discretion to set aside the default judgment. The appellant contends that the Magistrate gave insufficient weight to the significant delay by the respondent in applying to set aside judgment.[24] The respondent’s own evidence established that she became aware of the judgment debt on 23 December 2014, when default judgment was entered and served upon her. She had also been personally served with three corresponding bankruptcy notices on 10 April 2015, 14 November 2015 and 31 January 2018.
[24] The respondent did not apply to set aside default judgment until approximately three years and eleven months after the entering of default judgment, and three years after service of the first bankruptcy notice.
The appellant also submits that it is insufficient for the respondent to say, without adequately proving, that PCL Lawyers did not advise her of the potential to apply to set aside the default judgment. If this assertion is treated as determinative, effective case flow management would become impossible. The appellant further submits that the respondent had previously been involved in proceedings that involved an application to set aside judgment.
The appellant contends that the Magistrate failed to consider several key matters. The respondent had engaged solicitors and an accountant to negotiate payment arrangements in satisfaction of the default judgment debt. She arranged to pay the default judgment debt by instalments and had made payments accordingly. Additionally, both the respondent’s accountant and PCL Lawyers had referred in correspondence to the basis for the respondent’s liability and had received a response. It is unlikely that that PCL Lawyers did not advise the respondent that an application could be made to set aside the default judgment.
The respondent’s submissions
The respondent submits that several of the appellant’s submissions relating to grounds 3 and 4 go beyond the scope of the notice of appeal. In particular, the respondent submits that the following matters are beyond the ambit of the notice of appeal:
a.the respondent having engaged solicitors and accountants to negotiate payment arrangements;
b.the respondent having entered into a payment arrangement;
c.the respondent having made some payment;
d.the respondent’s accountants and solicitors having advanced the topic of the basis of her liability in correspondence with the appellant, and having received a response.
The respondent submits that there has been no amendment to the notice of appeal to incorporate these additional matters, and submits that no such amendment ought now be contemplated.
The respondent concedes that her delay in applying to set aside the default judgment must be weighed against those considerations which support the exercise of the discretion in her favour. That was expressly recognised by the Magistrate. However, the respondent highlights the sequence of events leading up to the delayed application. During the period from 2013 to 2016, the respondent’s marriage collapsed and her husband was prosecuted and ultimately convicted and imprisoned on 25 September 2016. The respondent submits that:
That transformation in the relationship also explains some of the transformation in [the respondent]’s attitudes towards the debts. At the start she is loyal partner and is standing by her man. She is spending enormous amounts of money in his defence, presumably because she believes he’s innocent. The trial does not go well. He is ultimately convicted and she is left holding the consequences for that. It can hardly be surprising that in those circumstances she comes to hold a very different view about whether or not it’s her responsibility to pay for debts that he has racked up.
The respondent further highlights the sequence of events immediately prior to her application to set aside the default judgment. In late 2017, after coming into contact with Concorde Legal in relation to unrelated litigation to which she was not a party, the respondent engaged that firm to deal with the default judgment debt. Very soon after the appellant served a further bankruptcy notice on 31 January 2018, the respondent applied to set aside the default judgment on 15 February 2018. She did so upon the advice of Concorde Legal. In contrast, her previous solicitors, PCL Lawyers, had not given advice about applying to set aside the default judgment.
The respondent also submits that the previous payments of legal fees made to the appellant by the respondent must considered in context. She had been paying substantial legal fees to the appellant on behalf of her then husband. Although she does not possess records of the payments, she believes that from 2012 to 2014 the total payments exceeded $320,000. She submits that given this history of payments and with power clearly residing with the appellant, it is not surprising that she would continue to make additional payments.
The respondent further submits that upon the Magistrate finding that her discretion under r 87 was enlivened, her Honour was correct in observing that the proper course was to balance the competing considerations and determine what outcome would best advance the interests of justice. The most important consideration was that the respondent had a meritorious defence to the claim.[25]
[25] Cook v DA Manufacturing Co Pty Ltd [2004] QCA 52 at [19] (Williams JA, de Jersey CJ and McPherson JA agreeing); Autorent Pty Ltd v Millar Seymour & Co [2004] TASSC 2 at [3] (Master Holt).
The respondent submits that her defence to the claim is not merely arguable but robust. Should this appeal be dismissed, she will have a strong argument for summary dismissal of the claim. The proceedings for unpaid legal fees have been commenced against the respondent on the basis of a retainer agreement which identifies someone other than the respondent as the client, expressly excludes a solicitor/client relationship with the respondent and does not expressly indicate any obligation on the part of the respondent to pay legal fees. Even in isolation these considerations would be sufficiently compelling. However, they must also be considered in light of the fact that the agreement was drafted by the appellant. The appellant expressly excluded a solicitor/client relationship with the respondent and specified that someone other than the respondent would pay the fees. Moreover, in the absence of a proper costs agreement, the appellant cannot demonstrate that they have made proper costs disclosure in compliance with s 18(2) of sch 3 of the Legal Practitioners Act 1981 (SA).
Consideration – exercise of discretion
I will first address the respondent’s submission that the appellant advances submissions that go beyond the scope of the notice of appeal. In essence, the impugned submissions relate to the history of payments made by the respondent and her engagement of legal representation to negotiate payment arrangements.
In response, the appellant advances several contentions. First, the grounds of appeal are wide enough to cover its entire submissions. Secondly, the impugned submissions are within the ambit of predictable matters. Thirdly, the respondent cannot seriously contend that she is prejudiced by the appellant’s submissions.
The respondent is correct that the impugned submissions are not expressly raised by grounds 3 or 4 in the notice of appeal. However, the particulars of ground 5 refer to the respondent entering into payment arrangements with the appellant. It has therefore been clear from the outset of this appeal that the appellant would advance submissions about that matter and issues connected thereto. I will therefore consider the submissions of the appellant in their entirety.
The appellant has contended at several points in its submissions that the Magistrate failed to give sufficient weight to a particular matter, with the result that her Honour’s exercise of the discretion miscarried. A finding that a judicial officer gave insufficient weight to a particular matter when exercising a statutory discretion, including the discretion under r 87, cannot, of itself, result in a finding of invalidity.[26] In accordance with the very well-known judgement of the High Court in House v The King, if the Magistrate made a process error by acting on a wrong principle, allowing extraneous or irrelevant matters to guide or affect her, mistaking the facts or not taking into account some material consideration, then the exercise of the judicial discretion may be set aside on appeal.[27] An appellate court may also set aside an exercise of judicial discretion where the result is unreasonable or plainly unjust, i.e. where there has been an outcome error.
[26] Police v Chilton (2014) 120 SASR 32 at 38 [18] (Kourakis CJ); R v Lutze (2014) 121 SASR 144 at 152 [40] (Vanstone and Parker JJ).
[27] (1936) 55 CLR 499 at 504-505 (Dixon, Evatt and McTiernan JJ) and see also Adelaide (SA Pools & Spa) Manufacturing and Installation Pty Ltd v Westcourt General Insurance Brokers Pty Ltd [2016] SASC 60 at [22] (Doyle J).

For these reasons, the various contentions by the appellant that insufficient weight was given to particular matters when the Magistrate considered the exercise of her judicial discretion cannot, of themselves, demonstrate a process error. However, a failure to give adequate consideration to particular matters may, at least in some cases, serve to explain why an outcome error has occurred. I proceed on this basis when I refer to the contentions by the appellant that insufficient weight was given by the Magistrate to a particular matter.
I do not accept the appellant’s submission that the Magistrate gave inadequate weight to the delay by the respondent in applying to set aside the default judgment. Certainly, the delay of the respondent was substantial — the application was made some three years and eleven months after default judgment was entered.
The Magistrate made a minor error as to when the respondent became aware of the claim. Her Honour held that the respondent was aware of the claim from 10 April 2015, i.e. when she was served with the first bankruptcy notice. However, the respondent conceded that she had become aware of the claim on 23 December 2014, i.e. when she was served with the default judgement.
In my view, nothing turns on this error. The Magistrate was clearly alert to the protracted delay. Her Honour expressly, and in my view correctly, concluded that the respondent’s “very significant delay” was a factor weighing against the exercise of the discretion in her favour. Given the very long delay, the error of three to four months made by the Magistrate was relatively insignificant. In any event, it can be inferred from the Magistrate’s reasons that, despite placing significant weight on the length of the delay, the other relevant considerations persuaded her that the default judgment should be set aside.
I also do not accept that the Magistrate erred by giving insufficient weight to the fact that the respondent had been previously involved in unrelated proceedings involving an application to set aside a default judgment. As the Magistrate noted, this did not necessarily establish that the respondent (a layperson) was aware that such an application was possible in this case, particularly in light of her unchallenged evidence that PCL Lawyers did not advise her of this option. In the latter context I also note that, by giving evidence about the legal advice she claimed to have received, the respondent waived legal professional privilege over that advice. The appellant could have called for production of any written advice or file notes recording advice given to the respondent, but did not do so. As no request was made it is unnecessary to consider whether production should have been ordered given that the proceedings are interlocutory.[28]
[28] Australian Security and Investments Commission v Macks [2018] SASC 132.
I agree with the respondent’s submission that the existence of a meritorious defence carries particular weight when deciding whether to set aside a default judgment. As McPherson J remarked in National Mutual Life Association of Australasia Ltd v Oasis Developments Pty Ltd:[29]
It is not often that a defendant who has an apparently good ground of defence would be refused the opportunity of defending, even though a lengthy interval of time had elapsed provided that no irreparable prejudice is thereby done to the plaintiff.
(Citations omitted)
[29] [1983] 2 Qd R 441 at 449.
There are several considerations that combine to suggest that the respondent has a strong defence against the claim for unpaid legal fees. The agreement signed by the respondent specifically identifies a different legal entity as the client and expressly excludes a solicitor/client relationship with the respondent. Accordingly, there are clearly, at the very least, substantial grounds upon which the respondent may contend that she is not contractually liable for payment of the legal fees. That is a powerful consideration in favour of exercising the discretion to set aside default judgment. In those circumstances it was reasonably open to the Magistrate to conclude that the discretion under r 87 should be exercised in favour of the respondent. I do not consider that any process or outcome error has been demonstrated in relation to the exercise of her Honour’s discretion.
I therefore dismiss the appeal on grounds 3 and 4.
Interests of justice — ground 5
The appellant’s submissions
The appellant submits that the justice of the case requires a strict approach to finality.[30] The respondent had taken steps to satisfy the default judgment debt. Not only did the respondent not initially contest the claim, but she entered into arrangements to pay the default judgment debt and engaged both an accountant and lawyers for this purpose. There has been a very substantial delay by the respondent in applying to set aside the default judgment, despite repeated previous opportunities. A rigorous application of the rules is required to bring an end to this litigation.
[30] Clone Pty Ltd v Players Pty Ltd (in liq) (recs & mgrs apptd) (2018) 353 ALR 24 at 43 [70] (Kiefel CJ, Gageler, Keane, Gordon and Edelman JJ).
The respondent’s submissions
The respondent contends that the appellant’s submission that the justice of the case requires a strict approach to finality is not accurate. The appellant obtained default judgment in circumstances where the respondent was unaware of the existence of the proceedings. Not only does the respondent have an arguable defence to the appellant’s claim, but the claim against her is manifestly hopeless.
The respondent further submits that to overturn the Magistrate’s decision to set aside default judgment, would be to reward behaviour by a law firm that is contrary to public policy. The appellant firm’s behaviour is submitted to be contrary to public policy in that it:
a.   Did not obtain a signed costs agreement identifying the Respondent as the client;
b.   Consolidated multiple cases on behalf of multiple entities into a single costs agreement;
c.   Carried out work pursuant to other costs agreements which were never signed; and
d.   May have received cash payments of considerable sums without issuing receipts to the payee.
The respondent submits that the justice of the case requires consideration of both the undesirability of permitting a law firm to undertake legal proceedings on its own behalf without having met its obligations, and consideration of the strongly arguable defence.
Consideration – interests of justice
The respondent’s substantial delay in acting to combat the claim and her entry into arrangements to pay the debt provides some support for a finding that the finality principle should prevail. However, support for that conclusion is greatly diminished by the context. The unchallenged evidence is that the respondent was unaware of the claim prior to the default judgment, and that for the greater part of the time during which she failed to contest the judgment, she was unaware that she could do so. It was not until the respondent engaged Concorde Legal that she was advised of this possibility. Thereafter, she acted reasonably promptly to have the default judgment set aside.
The several allegations about the terms and effect of the agreement drafted by the appellant, and its conduct more generally, are relevant to the validity and enforceability of the claim for payment of fees made against the respondent. Those considerations add further weight to the conclusion of the Magistrate relating to the interests of justice and the exercise of the discretion.
Because the respondent apparently has a strong defence against the claim, combined with all the other circumstances to which I have referred, I consider that the Magistrate did not err in concluding that it is in the interests of justice for the respondent to be afforded an opportunity to defend the claim.
I dismiss the appeal on ground 5.
Conclusion
I dismiss the appeal on all grounds. I will hear the parties as to costs.