Greg Rowe Pty Ltd v Hill
[2012] WADC 104
•5 JULY 2012
JURISDICTION : DISTRICT COURT OF WESTERN AUSTRALIA
IN CIVIL
LOCATION: PERTH
CITATION: GREG ROWE PTY LTD -v- HILL [2012] WADC 104
CORAM: DAVIS DCJ
HEARD :23 MARCH 2012
DELIVERED : 5 JULY 2012
FILE NO/S: CIV 3520 of 2010
BETWEEN: GREG ROWE PTY LTD
Plaintiff
AND
CHRISTINA ISABELLE SARAH HILL
First DefendantJULIA LOUISE HILL in her capacity and as trustee for the Platill Trust
Second Defendant
Catchwords:
Practice and procedure - Application for extension of time within which to appeal - Appeal from deputy registrar - Setting aside default judgment - Turns on own facts
Legislation:
Civil Liability Act 2002
District Court Rules 2005
Result:
Extension of time within which to appeal granted
Appeal allowed
Default judgment set aside on conditions
Representation:
Counsel:
Plaintiff: Mr A Rowe
First Defendant : In person
Second Defendant : In person
Solicitors:
Plaintiff: Rowe Bristol Lawyers
First Defendant : Not applicable
Second Defendant : Not applicable
Case(s) referred to in judgment(s):
Air Tahiti Nui Pty Ltd v McKenzie [2009] NSWCA 429; (2009) 77 NSWLR 299
Batiste v Gilmour-Latham [2001] NSWCA 392
Brambles Holdings Ltd v Bathurst City Council (2001) 53 NSWLR 153
Cathedral Place Pty Ltd v Hyatt of Australia Ltd [2003] VSC 385
D Galambos & Son Pty Ltd v McIntyre (1974) 5 ACTR 10
Field Camp Services Pty Ltd v Site Accommodation Pty Ltd (No 2) [2012] WASCA 27
Gallo v Dawson (1990) 64 ALJR 458
Hall v Hall [2007] WASC 198
Hazart Pty Ltd v Rademaker (1993) 11 WAR 26
HJ Lyons & Sando Ltd v Houlson [1963] SASR 29
Lawrence v Slemko [2009] WASC 33
Lewis v Averay [1972] 1 QB 198
McDonnell and East Ltd v McGregor (1936) 56 CLR 50
Melbourne Glass Pty Ltd v Coby Constructions Pty Ltd (1998) 14 BCL 409
Murphy v Zamonex Pty Ltd (1993) 31 NSWLR 439
Parker v Transfield Pty Ltd [2000] WASCA 382
Pethybridge v Stedikas Holdings Pty Ltd [2007] NSWCA 154
Stanley v Layne Christensen Co [2006] WASCA 56
Tobin v Dodd [2004] WASCA 288
Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd (2004) 219 CLR 165
Tomko v Palasty [2007] NSWCA 258
DAVIS DCJ: On 10 January 2012, the defendants in this action, Christina Hill and her daughter Julia Hill, filed an appeal against a decision of the deputy registrar made on 3 October 2011 where he dismissed their application to set aside default judgment entered against them by the plaintiff, Greg Rowe Pty Ltd. The judgment was entered on 4 August 2011 in default of the filing of a defence. The judgment amount totals $105,000.88, made up of:
(a)$3,227.95 plus $275.92 interest; and
(b)$93,845.40 plus $7,651.61 interest.
While it is normally my practice to refer to the parties by name, because both defendants have the same surname and in order to avoid confusion, in this judgment I will be referring to them as the first defendant and the second defendant respectively and together as the defendants.
The notice of appeal filed by the defendants sought orders in the following terms:
1.The order of Deputy Registrar Hewitt of 3 October 2011 be set aside.
2.The judgment in default of defence for liquidated demand of 4 August 2011 be set aside.
3.The first defendant and second defendant file a defence within four weeks of these orders being made.
4.The costs of the hearing be in the appeal.
The appeal was brought three months out of time. It should have been brought within 10 days of the decision of the deputy registrar: see r 15(2) District Court Rules 2005. An extension of time to bring this appeal is therefore required. At a directions hearing on 31 January 2012 orders were made that the appeal be deemed to include an application to extend time and that the appeal and application be heard together. Directions were made for the filing of an affidavit by the defendants in support of the application to extend time and the filing of submissions by both parties.
The nature and hearing of the appeal
Pursuant to r 15(6) of the District Court Rules an appeal from a registrar is a new hearing. The matter is to be decided afresh or de novo and it is not necessary for the defendants to demonstrate any error of law or principle in the decision of the deputy registrar. Further, because it is a hearing de novo the court may exercise its discretion to admit additional evidence: Hazart Pty Ltd v Rademaker (1993) 11 WAR 26, 28 ‑ 29.
At the hearing of this appeal both defendants were unrepresented. I took this into account and attempted to ascertain, while not overlooking fairness to the plaintiff, what the true issues and grounds of appeal were and whether, notwithstanding poorly expressed grounds, there is any merit to them: Tobin v Dodd [2004] WASCA 288 [13] ‑ [18].
In support of the application to set aside the default judgment which was heard before the deputy registrar, the second defendant filed an affidavit on 28 September 2011. Since the filing of the appeal notice on 10 January 2012 the second defendant had filed two further affidavits, one of 23 February 2012 in support of the application to extend time, and a further affidavit of 15 March 2012. There were no submissions filed, however it seemed that the second defendant misunderstood what was required by the filing of submissions and her affidavit of 15 March 2012 was filed to comply with that direction. I received that affidavit without objection from the plaintiff. I also received submissions from the plaintiff which were handed up to me.
The second defendant's affidavits were lacking in particulars and contained little in the way of fact and much in the way of argument or submission. The affidavit of 15 March 2012 was mostly a repetition of what had been set out in her earlier affidavit of 28 September 2011. There were some documents annexed to both affidavits, mainly correspondence received from the plaintiff, but the correspondence provided to me was incomplete. The second defendant did not annex replies from the defendants to the plaintiff's correspondence, which I knew were in existence because of what had been pleaded in the statement of claim. I therefore requested these further documents which were handed up to me during the course of the hearing without objection from either party.
There was no affidavit sworn by the first defendant. As a result of certain statements the first defendant made to me from the bar table during the course of the hearing of this appeal, and because there had been no affidavit filed by her, I also heard evidence from the first defendant.
Finally, following the appeal hearing and upon reviewing again the statement of claim I requested two further items of correspondence, an email dated 25 July 2007 from the second defendant to the plaintiff and an email dated 1 August 2007 from the plaintiff to the second defendant. These emails were referred to in the statement of claim, were relevant to the contractual arrangements between the parties, and had not been provided to me. They were subsequently provided, without objection from either party, and both parties made further written submissions to me which I have taken into account.
The relevant facts
The following facts are taken from the statement of claim, the affidavits, the evidence led during the appeal hearing, and the emails provided to me after the hearing.
The plaintiff is a company carrying on town planning and project management. In 2006 and 2007 it carried out some professional planning and project management work for the defendants for a development application for property in Banksia Terrace, South Yunderup, near Mandurah, in the State of Western Australia. This development application was for the construction of an aged person's facility.
Initially the plaintiff was engaged by the defendants to provide town planning services. The proposal for the provision of the town planning services was set out in a letter written by the plaintiff to the first defendant dated 8 August 2006. The first defendant signed a copy of that letter on 9 August 2006, by which she agreed to the terms set out in the letter.
The plaintiff provided those town planning services and a subdivision for the property was approved by the Western Australian Planning Commission. There were then discussions between the plaintiff and the first defendant concerning the appointment of the plaintiff to undertake project management for the development of the subdivision. The plaintiff wrote a letter to both defendants dated 24 July 2007 setting out what the plaintiff proposed to undertake by way of project management. From the statement of claim filed in the action (par 11) there was an email from the second defendant sent to Mr Doug Smith of the plaintiff dated 25 July 2007 and another email in response from Mr Smith to the second defendant dated 1 August 2007. Those two items of correspondence along with the letter of 24 July 2007 constitute what is termed the 'Project Management Contract'.
The letter from the plaintiff dated 24 July 2007 contained an offer to provide project management services. The letter was addressed, and the offer was made, to both defendants. The letter set out what project management services would be provided and then gave options for fees to be paid either on a fixed fee per lot basis ($2,200) or a percentage of gross sales. The project management services were stated on page 1 of the letter (third paragraph) to be in order 'to ensure that all site works and development works in connection with the subdivision are undertaken in such a way as to ensure that conditions of subdivision are wholly met'. The plaintiff, acting as Project Manager, would supervise the actions of sub‑consultants, including civil engineers, surveyors and electrical engineers. On page 2 it was stated that as Project Managers the plaintiff would be responsible for a number tasks including:
(a)Engagement of consultants, including invitation of fee proposals and assessment of these fee proposals from other consultants.
(b)Negotiation of sub-consultant's fees (ie Engineer, Surveyor and others) and appointment of sub-consultants following recommendations to and agreement by the Client. Full consultant briefing and supervision is to be undertaken as is examination and vetting of sub-consultants' fee claims for subsequent payment by the Client.
(c)Design, development and coordination, including liaison with all sub-consultants in their document preparation to ensure Client's expectations and requirements are met. This task involves attendance at Project Meetings and examinations of all Surveyor's and Engineers' designs etc.
(d)Invitation of subdivision construction tenders in conjunction with the project Civil Engineer, evaluation of tenders and recommendations to the Client as to the most suitable contractor.
(e)Examination and assessment of contractors' progress claims for subdivision works, with recommendation to Client for payment and assessment of retentions, variations etc.
On 25 July 2007 Mr Smith from the plaintiff forwarded that letter by email to the second defendant. The covering email, with the subject line 'Quote for attending to conditions' said as follows:
Julia please find attached a fee proposal as discussed with Christina. Please note the scope of words was not entirely clear from the discussion as such the fee proposal provides a full Project Management Role for Greg Rowe and Associates and a scaled role (albeit with considerable liaison) at the end of the process to seek clearance of conditions.
On the same day, 25 July 2007, the second defendant wrote an email in response as follows:
Thanks for this. Your proposal is interesting so I thought I should update you on the status of the project as you may want to re-send another version based on the current status of the project:
·The civil and structural engineer has been engaged and has completed the engineering plans for the site works.
·We have had quotes from surveyors and have verbally chosen one – though not tied in.
·The engineering plans and bill of quantities are currently with several contractors for quote.
·We have chosen contractors who would be able to complete/project manage the entire development rather than us having to coordinate plumbers etc as well. [Three names are then provided] are the 3 local ones we were able to find that would do it all. [Another name] would not.
·The finance approval has been obtained albeit subject to the final quotes being obtained and with our estimated budget of $1.5m.
·Our finance conditions require that a quantity surveyor engaged by the bank (but paid for by us) assess the work at each stage prior to release of funds
·Marketing has been underway for a couple of months at this stage but we are stepping it up as we speak. We would not require any assistance with that as both Tom and Christina have a long history in real estate.
·We are currently getting quotes for the house plans to be put into CAD and the engineer will be starting on that aspect of the engineering plans soon.
It may be possible for the bank to agree to use Greg Rowes [as] quantity surveyors.
Based on the progress we have made to date I'd be interested to get your thoughts on what you would charge to take on the project management role from this point on ie upon submission of quotes from the contractors.
We will need to wait until the quotes start to come in to see how the budget is looking but if the budget also we may well be interest in engaging you [sic] services from that point on on a fixed fee per lot basis.
A revised proposal on this basis would be appreciated …
On 1 August 2007 Mr Smith of the plaintiff responded to the second defendant's email, by an email which read as follows:
Thanks Julia. Based on Project Management Works already undertaken for the site as outlined in your email we'd estimate the Project Management Fee for the balance of the subdivision works to the point of final clearance of all conditions to be of the order of $1,480 per lot. This would produce an all up cost of $28,120, which we would invoice on a monthly basis at hourly rates up to this amount. I point out that we are Town Planners and Project Managers and not Quantity Surveyors and the bank would need to acknowledge this. The project scope would be complete upon completion of subdivision works with the Certificates of Title being in Order for Dealings. Should you wish us to also Project Manage the construction of the buildings we could provide a separate fee proposal …
The 'Christina' referred to in the emails of 25 July and 1 August 2007 is, I find, the first defendant.
From my reading of the statement of claim, the affidavits and evidence led at the appeal hearing, I have concluded that the engineer's plans for the site works (referred to in the second defendant's email of 25 July 2007) related to earthworks required on the property for services such as water, power and sewerage. Once those earthworks were completed, the engineer was to prepare a further set of plans relating to the building of houses.
There is no dispute that after this correspondence, the plaintiff performed project management services relating to the development of the property. There were also some variations to the extent of the work required and the statement of claim (par 15 and 16) pleads that the scope of the project management services increased and a variation to the fee for the project management services was agreed. The additional services which the plaintiff agreed to perform (par 15 of the statement of claim) were:
(i)seeking revised civil contractor tenders capable of comparison as per the relevant bill of quantities;
(ii)seeking electrical engineer tenders;
(iii)resolving an Acid Sulphate Soils Management Plan;
(iv)re‑working and developing subcontractor contracts which would have ordinarily been performed by a civil engineer; and
(v)pursuing local government sign off of civil engineer's design drawings.
In about early June 2008 it was discovered that plans prepared by the engineer contained what the plaintiff in the statement of claim (par 17) described as 'a critical error' in relation to the finished levels of the development and that error required substantial rectification works to be performed to the works already completed.
What was discovered was that the engineer's plans failed to take into account the 1:100 year flood plain levels for the Murray River located approximately 100 m to the north of the defendants' development.
The second defendant's evidence in her affidavit of 28 September 2011 par 4 and 5, repeated in her affidavit of 15 March 2012 (par 10), was that in early June 2008 Mr Smith told her verbally by telephone that after reviewing a recent valuation he had noticed the reference to the 1:100 year flood levels for the property and when looking at the engineering plans realised the plans had not accounted for this. The second defendant's evidence in par 10 of her affidavit of 15 March 2012 was that Mr Smith admitted he had not been aware of the requirement to take into account such data, as this was his first time managing a project of this nature. The following day Mr Smith met with both the Shire and his employer to discuss 'this major oversight', after which an independent engineer was consulted.
The evidence from the first defendant was that the initial engineer's plans were for services underground, such as water, power and sewerage (what I have described as the plans for the earthworks). It was not until what the first defendant described as 'the final plans' were received, showing houses placed on each lot and finished floor levels, that she was alerted to something being wrong. The first defendant was not able to recall the exact date when those final plans were received, however, upon receiving these she promptly telephoned Mr Smith and (ts 62):
I pointed out that these couldn't possibly be developed in this way, because under the terms of our permission from the Shire to develop the site for aged persons, the - all of the ground had to be level and if there were any variance at all, there had to be a very minimal ramp. Now, the finished floor levels of the homes varied by up to half a metre, which meant that the ground could never be level, and if there were to be ramps they'd be very severe ramps, which would not be allowed for aged persons. I mean I knew that - the codes of the Aged Persons Act and back to front, because that's what we were dealing with …
I called Doug and said, 'Look have - you know - you seen these plans?' And he said, 'I'll just get them.' And he had a look. And I said, 'Look, this can never be developed like this, because its goes against all the rules. Look at the finished floor levels.' And of course when he looked at the figures on each house, he could see exactly what I meant. So he said, 'Look, I'll call you back. I'm just going to call Greg Rowe and I will call you back.'
He did within 10 minutes. And he said that he'd been told to put the plans in the car and drive up to Perth with them to Mr Rowe.
On 20 June 2008 Mr Smith wrote to both defendants referring to 'various conversations' he had had with them 'in relation to the levels reflected on the civil engineering "road centreline and drainage" plan' and the fact that the engineer's designs did not reflect the 1:100 year flood plain levels. The letter stated that the engineering design drawings 'do not reflect the finished level of some blocks and some sections of the internal accessways which would enable effective development of the land as per the planning approval for the Shire of Murray and the Survey Strata Subdivision Approval granted by the Western Australian Planning Commission for 55 years + housing'. The letter went on to describe contact which Mr Smith had with the engineer, the fact that the engineer had indicated the Murray River flood levels were not taken into account, meetings which Mr Smith had attended with the first defendant at the Shire of Murray and a discussion of what might be done to rectify the problems created by the engineer.
From the evidence before me I have gleaned, although it is not altogether clear, that the engineer's plans for the earthworks had not taken into account the 1:100 year flood plain levels for the blocks, that the discovery of this occurred once further plans relating to the building of houses were produced, and the only way in which the development could progress to comply with the approval for 55 years + housing was to re‑do the earthworks.
After this, as is pleaded in the statement of claim (par 18), the plaintiff and the defendants agreed to vary the terms of the Project Management Contract to include the plaintiff performing what has been described as 'project recovery and restart services for the rectification works'. Further, in about August 2008 (par 9 of the statement of claim) the Project Management Contract was varied again because it was agreed the plaintiff would assist the defendants' solicitors in preparing a claim by the defendants against the engineer.
The plaintiff did not immediately invoice the defendants for the work it had undertaken. A letter from the plaintiff to the second defendant dated 1 October 2009 referred to an arrangement for the plaintiff to defer invoicing for project management services following the cessation of works as a result of civil engineering design flaws, 'until such time as revenue had been generated by the sale of lots'. There was an agreement to defer invoicing to a 'post revenue' time to enable refinancing of the project and the project to proceed. However, in that letter of 1 October 2009 the plaintiff requested the second defendant to advise 'of your expected timing of payments'.
On 12 October 2009 the second defendant wrote a letter to the plaintiff in response:
Thank you for your letter of October 1 2009 seeking clarification on timing of payment for your outstanding bills.
Unfortunately the timing for a payout from our insurance claim cannot be guaranteed in any way and therefore it is better for all if we make arrangements which are not dependent on that.
As stated during our conversation my intention is to clear your debt by March 31st 2010. In the meantime I will endeavour to repay as much as possible as sales occur. Our ability to do this will depend on the amount the bank allows us to withhold following each settlement. As soon as I have clarification on this I will inform you.
It would help our planning greatly if we had your final costs as soon as possible.
We appreciate your dedication to and support during this project and look forward to working with you again at some stage in the future.
After receipt of this letter Mr Smith from the plaintiff contacted the second defendant again, suggesting that the plaintiff would issue an invoice for minor non project management costs in the sum of $2,700 plus GST, in response to which the second defendant sent the following email dated 16 October 2009:
Thanks Doug,
We should be able to pay the $2,700 plus GST within the next month so let that one come through.
On 4 November 2009 the plaintiff wrote to the second defendant about the rest of the project management fees which were due and owing, advising that its charges were $85,314 plus GST. According to the statement of claim (par 26(b)), that figure incorporated an amount of $6,997 for costs associated with the defendants' claim against the civil engineer.
Although the plaintiff had given notice in October and November 2009 respectively of these two amounts owing for its fees, it was some months before the plaintiff actually issued invoices. On 28 February 2010 a first invoice was issued in the sum of $3,227.95 for the non project management fees. On 24 March 2010 a second invoice was issued by the plaintiff for the project management services in the sum of $93,845.40. Both of those invoice amounts included GST.
In response to the invoices the second defendant wrote to the plaintiff by letter dated 18 May 2010 suggesting that the plaintiff had 'part liability' for the problems with the project and proposing that the defendants pay $45,000 by way of instalments of $15,000 following the sale of three subdivided lots. On 12 July 2010, after an exchange of emails, the plaintiff refused that offer. The plaintiff advised it required the accounts settled in full by 16 July 2010. No payments were made and the plaintiff then issued a writ to recover the amounts in the two outstanding invoices.
The background to the judgment by default and this appeal
The plaintiff issued the writ on 18 November 2010. The defendants entered an appearance on 14 December 2010.
The action was listed for a directions hearing on 23 February 2011. Orders were made for the filing of a statement of claim by 16 March 2011, with the defendants to file and serve a defence and any counter‑claim by 6 April 2011. There was to be a further directions hearing on 20 April 2011.
That hearing was adjourned, by consent, to 15 June 2011 and by a memorandum of consent orders the time for the filing of the statement of claim and defence were extended to 4 May 2011 and 1 June 2011 respectively.
The plaintiff filed its statement of claim on 10 June 2011. On 13 June 2011 consent orders were signed giving the defendants further time ‑ until 1 August 2011 - to file and serve a defence and any counter‑claim.
That defence was not filed. On 2 August 2011 the plaintiff filed judgment against both defendants and that judgment was entered on 4 August 2011.
On 10 August 2011 the defendants brought a chamber summons to set aside that judgment. This was accompanied by an affidavit sworn on 10 August 2011 by the second defendant explaining that since October 2010 she had been suffering major clinical depression and generalised anxiety, requiring hospitalisation. That condition, she said, had been 'exacerbated as a result of the issues we have in endured with the project for which Greg Rowe & Associates were engaged to manage' and also 'that major mistakes made throughout the project that Greg Rowe & Associates were engaged to manage has resulted in extreme financial hardship to the entire family. This has consequently resulted in our inability to engage a lawyer to represent us in this case'. The second defendant in her affidavit deposed that she had contacted the plaintiff's solicitors on 27 July 2011 explaining that she had been hospitalised for a month and requesting a further extension of time for the filing of the defence, however, that was not agreed to and she was electronically advised on 4 August that the plaintiff had been successful in judgment against her.
On 1 September 2011 the solicitor in the employ of the solicitors for the plaintiff, Mr Adam Rowe, swore an affidavit which attached the correspondence between the second defendant and the plaintiff's solicitors concerning the requested further extension of time within which to file a defence. The first item of correspondence annexed was an email which the second defendant had written to the court on 29 July 2011. The plaintiff's solicitors were copied into that email. There was attached to that email a letter from the second defendant to the court, a medical certificate from a Dr Peter Farnbach dated 27 July 2011 and a minute of consent orders to extend the time for the defendants to file a defence and counter‑claim to 3 October 2011. The medical certificate from Dr Farnbach confirmed that the second defendant was a patient of his and suffered from a mixed anxiety/depressive disorder that had recently required hospitalisation. Her condition was improving, however she was not yet in a fit state to be able to prepare documentation for a hearing scheduled on 1 August 2011 and he expected that to remain the case until early October. The second item of correspondence annexed to Mr Rowe's affidavit was the letter dated 29 July 2011 which he wrote to the second defendant, advising her that the plaintiff did not agree to further extend the time in which the defendants were required to file a defence and in the event that no defence was filed it was likely he would be instructed to apply for default judgment.
The defendants' application to set aside the default judgment was listed for a first hearing on 14 September 2011. Following a written request from the second defendant (who resides in Victoria), leave was given to her to appear via telephone (audio link). At the hearing of 14 September 2011 before the deputy registrar the hearing date for the defendants' application was fixed for 3 October 2011.
On 28 September 2011 the second defendant filed an affidavit giving reasons why she was seeking that the judgment be set aside. In that affidavit she explained that the plaintiff had been engaged to provide town planning and project management services for the development and subdivision at South Yunderup. She then deposed to the following facts (par 4 and 5):
… In June 2008 as the civil works were nearing completion the project manager, Mr Doug Smith, informed me by telephone that despite the property being 50 m from a river the 1:100 year flood levels had been overlooked. This meant that all of the infrastructure had to be removed, the land to be raised by up to 1.16 m with 17,300 tonnes of fill and all of the infrastructure needed to be replaced. A new engineer was engaged for the re-work.
This major oversight cost in the region of $750,000 to re-do, increased the length of the project by 18 months which resulted in increased interest costs, damage to the marketing image of the project and the consequent deterrence to sales. Two sales had been made by June 2008. Since that date no further sales have been made despite extensive marketing and advertising.
Her affidavit annexed a copy of the letter dated 20 June 2008 written by Mr Smith. The second defendant went on to explain in her affidavit that the project was no longer viable and the bank which had provided the finance for the development had now taken over the property.
The second defendant in her affidavit went on to discuss the original engineer who had been retained in relation to this project. She deposed to the fact that this engineer had originally been approached by 'ourselves' (meaning herself and the first defendant) around August 2007 regarding possible involvement in the project. She deposed that Mr Smith and the plaintiff had actually engaged the engineer and offered no suggestions of alternative engineers or any reasons why that particular engineer may not have been a good choice. Annexed to her affidavit was a letter written by the engineer on 5 October 2007 addressed to the first defendant, although it was also marked for the attention of 'Mrs (sic) Doug Smith – Greg Rowe & Associates', setting out his fees for his professional services.
The second defendant deposed that between October 2007 and June 2008 she had on several occasions requested a change in engineer because of a number of 'unsatisfactory incidences', details of which have not been provided. She deposed to the fact that Mr Smith of the plaintiff had argued it would be impossible to get someone to take the project over, however, after discovery of 'this mistake' the plaintiff was able to engage a new engineer whom it had previously worked with.
In par 10 of her affidavit of 28 September 2011 the second defendant submitted that 'three parties could possibly be considered to be responsible for competent reviewing of the engineering plans – these being the project managers, the engineer and the Shire. However as stated in an email from Mr Doug Smith, (Annexure D) the Shire engineer has consistently indicated that because the subdivision is survey strata and the access way is common property that the internal road design and drainage is 'private' not 'public infrastructure' and they are not interested and will not be signing off on the engineering design drawings'. The reference by the second defendant to what the Shire engineer had indicated relate to, however, discussions which were held in June 2008 between Mr Smith and the Shire's engineer, after the discovery of the failure of the engineer to take into account the flood levels. The annexure D which is referred to in par 10 of her affidavit is an email from Mr Smith dated 1 July 2008 on the subject 'Shire of Murray's role in dealing with [the engineer's] engineering design drawings'.
As to the arrangements for payment of the plaintiff's fees, in her affidavit of 28 September 2011 the second defendant made reference to and annexed the letter written by Mr Smith on 1 October 2009, stating it had been discussed and agreed that the plaintiff would defer invoicing until such time as revenues were generated by the sale of lots. She deposed to the fact that no revenues had been generated by the sale of lots since the major flaw in engineering designs was discovered. The second defendant then deposed as follows (par 14):
Following the final invoice pressure was placed on us to give a specific timing for payment rather than adhering to the initial arrangement proposed by Greg Rowe Pty Ltd that payments be deferred until cash flow is generated from sales of the land. No cash flow has occurred to this day.
At the hearing of the defendants' application to set aside the default judgment on 3 October 2011 there was no appearance by either of the defendants and the deputy registrar made orders dismissing the application and also that the defendants pay the plaintiff's costs to be taxed.
After the hearing of 3 October the second defendant wrote to the deputy registrar explaining that she had missed the hearing because she had thought that the hearing date was October 5 and not October 3. She requested another hearing to allow 'my side to be heard'. In response, the deputy registrar wrote by letter dated 19 October 2011 advising that he was not prepared to convene a further hearing of the matter for two reasons:
(a)the second defendant had been clearly told the correct date at the hearing on 14 September 2011; and
(b)the material she had filed disclosed at best a cross claim but not a defence.
The defendants then appointed solicitors for a brief period and on 10 January 2012 those solicitors filed the notice of appeal against the deputy registrar's decision, however, those solicitors were not on the record for very long. On 8 February 2012 each of the defendants filed a notice of intent to act in person.
A further affidavit of the second defendant was filed on 23 February 2012. She deposed to the fact that she was making the affidavit on behalf of both her and her mother (the first defendant) in support of the application for an extension of time. The reason she gave for having originally missed the hearing of the appeal listed for 3 October 2011 was that she was medically unwell. She said that she had been on sickness benefits since May 2011, under a psychiatrist and on significant medication. Although she agreed the hearing date had been discussed on 14 September 2011, her recollection of the conversation was that the date of the hearing was 5 October 2011. She annexed a further medical report from her treating psychiatrist Dr Farnbach dated 26 February 2012 and deposed that he had been treating her for a mixed anxiety depressive disorder which had required hospitalisation on a number of occasions. As a consequence of her condition she had impaired concentration, attention and memory. Her difficulties were of sufficient severity to require medical investigation and it was as a direct result of her difficulties that she had failed to lodge paperwork within required times. The second defendant explained further in her affidavit that due to her medical condition she was unable to put together an appeal within time as she was having difficulty functioning in everyday life and did not have the financial capacity or the state of mind to instruct a lawyer.
In relation to the first defendant, the second defendant deposed to the fact that her mother had 'authorised the second respondent to act on her behalf in the original proceedings'.
Principles on an application for extension of time
The court has a discretion to extend time to a party within which to bring an appeal. The discretion to extend time can only be exercised in favour of an applicant if strict compliance with the time limit would lead to an injustice, having regard to the history of the proceedings, the conduct of the parties, the nature of the litigation and the consequences for the parties if the extension of time was granted or refused. Whenever there is an application for an extension of time within which to file an appeal, it is always necessary to consider the prospects of the applicant succeeding in the appeal: Gallo v Dawson (1990) 64 ALJR 458, 459.
There is, in my view, an explanation for the delay in both defendants filing a defence and then this appeal. Both defendants have suffered ill health. The first defendant gave evidence at the hearing of the appeal that she had undergone major surgery this year and then two minor surgeries and had been unwell, although she was better at the time of the appeal hearing.
There being an explanation for the late filing of the appeal, I would be inclined to grant an extension of time if I were satisfied that there were prospects of the defendants succeeding in the appeal, subject of course to a consideration of the consequences if the extension of time was granted or refused.
When looking at the prospects of success of the appeal I must look at the relevant principles on an application to set aside default judgment.
Principles on an application to set aside default judgment
The defendant seeking to set aside a default judgment must first, provide a reasonable explanation as to how the judgment came to be entered and secondly, present a credible defence demonstrating that, if the default judgment was set aside and the matter was argued on its merits, the defendant would have a real prospect of success: Parker v Transfield Pty Ltd [2000] WASCA 382 per Malcolm CJ [3] and [4]; Hall v Hall [2007] WASC 198 [61] to [67] (Newnes J).
The primary consideration is whether the defendant has a defence on the merits. This is because there is no purpose served by setting aside a judgment if the defendant has no defence to the claim: Lawrence v Slemko [2009] WASC 33 [34] (Newnes J).
It must appear from the affidavit or other material before the court that the defendant's case is not inherently incredible and that if the defendant's evidence were to be accepted at trial, there would be a real prospect of success: Hall v Hall [67].
In cases where the default judgment is for a liquidated amount and the defendant seeks to argue that he or she has a counter-claim, the defendant seeking to set aside judgment must show that the defendant's claim for damages constitutes an equitable set-off by way of defence to the plaintiff's claim and subject of the judgment. It is well established that a counter-claim merely amounting to a cross action does not provide a defence to a plaintiff's claim: McDonnell and East Ltd v McGregor (1936) 56 CLR 50, 57 ‑ 58.
As to what is required to be shown in order for a counter-claim to constitute an equitable set-off, this was explained by Giles J in Murphy v Zamonex Pty Ltd (1993) 31 NSWLR 439, 465 as follows:
Equitable set-off is available where the defendant establishes an equitable ground for being protected from the plaintiff's claim. That has been expressed in language to the effect that the defendant’s set-off goes to the root of or impeaches the title of the plaintiff's claim, but also in language to the effect that the counter-claim is so directly connected with the claim that it would be unjust to allow the plaintiff to recover without taking into account the defendant’s counter-claim.
See also Cathedral Place Pty Ltd v Hyatt of Australia Ltd [2003] VSC 385 [39]; D Galambos & Son Pty Ltd v McIntyre (1974) 5 ACTR 10, 18; Hazart Pty Ltd v Rademaker (38).
Further, the defendant must not only show a creditable claim for unliquidated damages which constitutes an equitable set-off by way of defence, but must also put before the court sufficient evidence to enable the court to make some assessment of the likely quantum of the defendant's claim: see Melbourne Glass Pty Ltd v Coby Constructions Pty Ltd (1998) 14 BCL 409, 418 ‑ 419; Field Camp Services Pty Ltd v Site Accommodation Pty Ltd (No 2) [2012] WASCA 27 [7]. While these cases deal with a summary judgment application, the principles in my view are also valid in relation to an application to set aside default judgment.
The court has a discretion to set aside a default judgment. There are two fundamental principles relating to the exercise of the discretion. The first is that the discretion is unfettered and no hard and fast rules can be laid down as to how it is to be exercised. The second is that the discretion is to be exercised so as to do justice between the parties, having regard to the particular circumstances of the case: see Hall v Hall [63].
Merits of the appeal
In the notice of appeal the first ground of the appeal was a statement only that the deputy registrar erred in dismissing the application to set aside the default judgment because:
1.The First and Second Defendant have a reasonable defence and counter-claim to the plaintiff's claim.
The other grounds of appeal related to the fact that the second defendant was going to appear on behalf of the first defendant at the hearing before the deputy registrar, the second defendant was suffering from a mixed anxiety/depressive disorder at the time of the hearing and as a result of this disorder her memory suffered which caused her to confuse the date of the hearing and consequently not appear at the hearing, and the deputy registrar 'having known of the second defendant's disorder' ought to have adjourned the hearing. This explains, along with the other evidence from the second defendant as to how her mental health issues at the time affected her, the first aspect of what the defendants must show to set aside the default judgment, namely a reasonable explanation as to how the judgment came to be entered.
There was nothing in the appeal grounds to set out what the defendants' defence and counter‑claim was. No proposed defence and counter-claim was prepared or produced to show any arguable defence on the merits.
From the affidavits of the second defendant of 28 September 2011 and 15 March 2012 and the submissions made to me at the appeal hearing, there appears to be four possible bases for a defence and counter‑claim, which I will refer to as proposed Defence Grounds 1 to 4:
1.That the first defendant had been 'incorrectly involved' in the plaintiff's action. The correct defendant is the second defendant as the trustee of the Platill Trust, the registered proprietor of the land the subject of the subdivision.
2.There had been negligence by the plaintiff in carrying out the project management works because it did not review the initial engineer's plans for the earthworks.
3.Although the plaintiff carried out the project management services, it did so 'unprofessionally'. As I understand both the second defendant's affidavits and submissions, this relates to two matters. First, the numerous 'unsatisfactory incidences occurring', which in the context of her affidavits must refer to incidents involving the engineer. Secondly, that the plaintiff charged for, but did not provide to the defendants, notes from Mr Smith of his interactions with the engineer.
4.That no payment was due to the plaintiff because the plaintiff had agreed to defer invoicing for project management services until such time as revenue had been generated by the sale of lots.
Merits of the Defence Ground 1: Liability of the first defendant for the plaintiff's fees
The arguments concerning the first defendant's involvement raises an issue of the identity of who contracted with the plaintiff in relation to the Project Management Contract.
It was said that the dispute with the plaintiff referred to work done from 4 September 2007. Prior to this the land being worked on was jointly owned by the first and second defendants and all payments due to the plaintiff up to this date were paid in full. However, just before 4 September 2007 the land was owned only by the second defendant as the trustee of the Platill Trust and the first defendant was a beneficiary of that Trust. It was claimed that from September 2007 onwards any instructions given to the plaintiff by the first defendant 'were on the instruction of the second defendant'.
It is apparent that both defendants proceeded on an understanding, or subjective belief, that since the land the subject of the development was registered in the second defendant's name as trustee for the Platill Trust, only the second defendant would be liable for the project management fees. There are, however, two difficulties with this.
The first difficulty is that, having reviewed the correspondence which constitutes the Project Management Contract, which I have summarised at [14] to [19] above, that contract was entered into before the registration of the land in the name of the second defendant. The second defendant's affidavit of 15 March 2012 has annexed copies of two Certificates of Title for the land which shows the date of her registration as proprietor as 27 August 2007.
The second difficulty is that just because the first defendant was not the registered proprietor of the land does not mean that she could not contract with the plaintiff and agree to pay its fees. The reasons for this are as follows.
When a person requests or orders work to be done that person impliedly undertakes to pay for it. If the person desires to avoid the liability so undertaken by setting up that he or she was acting purely as agent for another person, he or she must have made that position clear to the other contracting party: HJ Lyons & Sando Ltd v Houlson [1963] SASR 29, 31. What matters is 'what each party by words and conduct would have led a reasonable person in the position of the other party to believe': Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd (2004) 219 CLR 165 [40].
Further, there is a presumption of fact that a person intends to contract with the person to whom he is addressing the words of the contract: Lewis v Averay [1972] 1 QB 198, 207, 208. The presumption is one of fact and so may be displaced by evidence of a contrary intention. Such an intention may be ascertained by an objective assessment of the words and deeds of the parties in the light of all the evidence, as well as the actual knowledge of the parties: Pethybridge v Stedikas Holdings Pty Ltd [2007] NSWCA 154 [35] ‑ [54] in particular [43], [54].
The identity of a contracting party is to be determined looking at the matter objectively, examining and construing any relevant documents in the factual matrix in which they were created and ascertaining between whom the parties objectively intended to contract: Air Tahiti Nui Pty Ltd v McKenzie [2009] NSWCA 429; (2009) 77 NSWLR 299 [28].
On the basis of the correspondence which constitutes the Project Management Contract I find that initial discussions concerning the plaintiff providing project management services took place with the first defendant. The letter of 24 July 2007 was addressed to both defendants. The second defendant responded referring to what 'we' had already done. The 'we' I find is the first and second defendant. Looking at the matter objectively, examining the documents in the factual matrix in which they were created, I find that the plaintiff intended to contract with both defendants and that the second defendant was responding on both her own and her mother's behalf. There was nothing stated in the email correspondence from the second defendant that only she would be entering into the contract, or that only the Platill Trust was liable for the plaintiff's fees.
The second defendant has submitted that the first defendant's involvement and any discussions she had with the plaintiff were always under the second defendant's instructions. The first defendant's physical proximity to the project manager while the second defendant was based in Melbourne and her working hours compared to the second defendant's, together with the time difference between WA and Victoria, made it more convenient for the first defendant to have direct discussions with the plaintiff under the second defendant's instruction. That may well have been the second defendant's intention but none of this, on the evidence I have, was conveyed to the plaintiff.
The first defendant conceded in the evidence she gave at the hearing of this appeal that she did not indicate to anyone from the plaintiff that she would not be personally liable for its accounts, although she did say she told them from the point of registration of the subdivision the entity was the Platill Trust. As the first defendant explained it, this occurred at an informal meeting in which she and Mr Smith and another person, Luke Montgomery, discussed that the land was now in the name of the Trust. The first defendant agreed that she did not ask the plaintiff 'take her out' of the agreement. She explained that she did not do this because the Trust deed explains that very carefully – her daughter is the trustee and her husband and herself are beneficiaries. There is no evidence, however, that a copy of the Trust deed was provided to the plaintiff. There is evidence, on the other hand, of a form 1A application for approval of freehold with a 'consent to apply' page completed and signed by both defendants on 18 January 2007. In the section completed by the first defendant, there is written underneath her full name, in a section for company/agency (if applicable) 'Platill Trust'. Further, in her evidence (ts 72) when she was asked whether or not in the meeting with Mr Smith and Mr Montgomery they had ever agreed that she would no longer be personally liable, she agreed this was something that had never been discussed.
There is no evidence which has been led in either the affidavits of the second defendant, or in the oral evidence given during the appeal by the first defendant, that the plaintiff was at any stage advised, by either of the defendants, that the only party responsible for payment of the plaintiff's project management fees would be the second defendant as the trustee of the Platill Trust. There is no evidence that the plaintiff was ever told that the first defendant was, in effect, acting only as the agent for the second defendant.
It is true, as the second defendant submitted, that there were two distinct periods of work, one for the initial town planning and subdivision of the property and the second in relation to project management services. However, there is no evidence that the contracting parties were anything other than both defendants for the second stage of the work. The fact that only one of the defendants was the registered proprietor of the land does not, in my view, affect the contractual liability of each defendant. While both defendants may have believed that the first defendant would no longer be liable for the fees incurred once the land was transferred into the name of the second defendant as trustee, there is no evidence that this was communicated to the plaintiff.
In these circumstances I am not satisfied that there is any merit to the claim that the first defendant is not personally liable for the plaintiff's fees. If the first defendant's evidence were to be accepted at trial, there would be no real prospect of success because both the contractual documents and the surrounding factual matrix establish that the first defendant was a contracting party.
Further, the first defendant continued to remain involved in the development of the project and had contact with the plaintiff from time to time. In 2010 when there was correspondence concerning the payment of the plaintiff's fees, the first defendant wrote to Trevor Jones of the plaintiff by email dated 1 July 2010 as follows:
The amount that Julia is suggesting as per her letter is $45,000. We consider this to be a very reasonable compromise given all that happened, the action that we would have taken against [the plaintiff] and the situation we have ended up in. As she states we can pay this as three lots of $15,000 as the next three lots sell.
As for the timeline for that happening we cannot state that. To date no further lots have sold since May 2008. We are hoping to rectify this soon with the involvement of the new builder who is prepared to build a display home.
The reference in that email correspondence to 'we' would confirm to a reasonable person in the plaintiff's position that the first defendant was, with the second defendant, responsible for the plaintiff's project management fees. It certainly does not communicate, as argued by the defendants in this appeal, that any dealings which the first defendant had with the plaintiff were only on instructions from the second defendant.
There is an issue on the authorities as to whether it is possible to look at post‑contractual conduct to ascertain the identity of the contracting parties to a contract. There is authority that post-contractual conduct is admissible on the question of formation of a contract or identification of its subject matter (as opposed to the question of what a written contract means): Brambles Holdings Ltd v Bathurst City Council (2001) 53 NSWLR 153, 163 – 164, [25], [26]. In Pethybridge v Stedikas Holdings Pty Ltd [2] and [59] the issue of whether it is permissible to consider subsequent conduct to identify the parties to a contract was left open. There is, however, subsequent authority that where, as here, an issue concerns the identity of the contracting parties, subsequent communications may legitimately be used against a party as an admission by conduct of the existence or non-existence, as the case may be, of a subsisting contract, where an issue concerns whether a particular person was a party to that contract: Tomko v Palasty [2007] NSWCA 258 [63] ‑ [68].
The subsequent communications from the first defendant may constitute an admission that she is a party to the Project Management Contract. Even without taking that into account, however, I am not persuaded that the first defendant has any reasonable prospect of success with a defence that she did not contract with the plaintiff for the provision of the project management services.
I would not set aside the judgment obtained by the plaintiff against the first defendant on this ground.
Merits of the Defence Ground 2 - Negligence of the plaintiff
If the defendants were able to establish a counter‑claim in negligence against the plaintiff I consider that it would, in the circumstances of this case, constitute an equitable set‑off by way of defence to the plaintiff's claim and subject of the judgment. That is because any negligence of the plaintiff in carrying out the project management services would be so directly connected with the claim for the project management fees, that it would be unjust to allow the plaintiff to recover without taking into account the defendants' counter‑claim.
The defendants' counter‑claim and equitable set-off turns on whether the plaintiff could, as put by the second defendant, be considered to be responsible for 'competent reviewing of the engineering plans', which relate of course to the plans for the earthworks and the failure to take into account the 1:100 year flood plain levels. The essence of the second defendant's argument (although not put in this way) is that the problems discovered in June 2008 should have been discovered by the plaintiff earlier.
The evidence from the email of 25 July 2007 from the second defendant to the plaintiff is that the defendants had already engaged the engineer, plans had been prepared and quotes were being obtained from contractors to carry out the works. In addition, after outlining all the work, the invitation to the plaintiff was to take on the project management role 'from this point on ie upon submission of quotes from contractors'.
Given that the engineering plans had been prepared and the project management role was to commence upon submission of quotes from the contractors, the question is whether the scope of the plaintiff's role extended to reviewing the engineering plans.
In my view it is arguable that the scope of the project management services extended to a review of those plans, given the specific provisions of the Project Management Contract as set out in [15] (c) above. The plaintiff was engaged before contractors were actually engaged to carry out earthworks. The plaintiff accepted the responsibility, and had a corresponding duty, to examine the engineer's plans when reviewing contracts for the works to be carried out and in 'liaison with all sub‑consultants in their document preparation to ensure client's expectations and requirements are met'. If the plaintiff was obliged to check contractor's quotes and document preparation, it needed to check those against the engineer's plans. The responsibility to examine the engineer's plans is confirmed, in my view, by what is pleaded in the statement of claim par 15 as to the additional services which the plaintiff agreed to perform, which included pursuing local government sign off of the engineer's design drawings.
The next issue is whether there is evidence of a breach of such a duty which is not inherently incredible and that this evidence, if accepted at trial, would mean the defendants would have a real prospect of success.
While the evidence before me is limited, I consider that there is enough material from the affidavits and the correspondence to show that the defendants would have that prospect of success. As town planners who had previously provided services for the subdivision approval, the plaintiff knew of the location of the property and its proximity to the Murray River. In holding itself out as able to carry out all of the project management services as set out in the letter of 24 July 2007, the plaintiff should have known about the 1:100 year flood plain levels and the need for plans for the development (including earthworks) to provide for those levels. As a project manager who was to supervise the construction works, the plaintiff would also be expected to know what steps should be taken to comply with the 1:100 year flood plain level and, at the very least, should have made inquiries with the engineer about compliance with those levels, before the earthworks commenced.
On the evidence which has been provided in this appeal and allowing for the fact that the defendants are litigants in person, there is an arguable counterclaim by the defendants against the plaintiff on the basis that it should have picked up the problems with the engineer's plans earlier.
There is, however, a difficulty with the assessment of the likely quantum of such a claim against the plaintiff for a number of reasons.
First, the evidence generally of the cost of rectification work is a statement that 'this major oversight cost in the region of $750,000'. No other details are provided.
Secondly, the suggestion of 'partial liability' in the second defendant's letter of 18 May 2010 and the nature of the claim both indicate that this claim would be governed by the proportionate liability provisions of Pt 1F of the Civil Liability Act 2002 (WA). The defendants on the counter-claim would accordingly be limited to recovery from the plaintiff of a fixed proportion of the defendants' loss, commensurate with the extent of the plaintiff's responsibility for that loss: see s 5AK of the Civil Liability Act. On the information provided to me the primary liability would have to rest with the engineer.
Thirdly, there is evidence of the defendants having made a claim against the engineer. The second defendant's letter to the plaintiff of 18 May 2010 suggests both an offer having been received from the engineer's insurer and a settlement. In this letter, after the second defendant referred to information which she required from the plaintiff (which I discuss in more detail at [110] below), she stated:
In our lawyers opinion the inability to provide the required information from project manager's files compromised the final offer of the insurance claim by at least $100k. The claim was already compromised severely by the questions of partial liability. This has resulted in us being several hundred thousand dollars out of pocket due to the oversight …
There has been no evidence provided by the defendants concerning the claim against the engineer, the amount of the claim made, what allowance has been made for what is termed the 'partial liability' and what, if any, offer has been received from or settlement reached with the engineer.
In these circumstances, the evidence concerning the quantum of the claim against the plaintiff is vague and lacking in substance and I am not satisfied that the defendants have made a full and frank disclosure or been open and transparent in the information they have provided to the court. As a result, I am not able to make any informed assessment of the likely quantum of the claim. This will affect the exercise of my discretion to set aside the default judgment.
Merits of the Defence Ground 3 – the allegations of carrying out the project management services 'unprofessionally'
The second defendant in her affidavits referred to numerous 'unsatisfactory incidences occurring', which in the context of her affidavits must involve the engineer, and that Mr Smith always argued that it would be impossible to get someone to take the project over in the building climate that existed at that time.
It must be remembered, as deposed to by the second defendant, that it was the defendants who initially approached the engineer. Further, as set out in the second defendant's email of 25 July 2007, (contrary to the second defendant's claim in her affidavit of 28 September 2011 as set out in [45]), the defendants had already engaged the engineer and obtained plans from him. There is no evidence that at the time of the appointment of the engineer or subsequently that either the defendants or the plaintiff considered the engineer to be anything other than an experienced and competent civil engineer.
The affidavits of the second defendant do not condescend to particulars of what the 'unsatisfactory incidences occurring' were and what resulted, if anything, from the incidents or if there was as a consequence any damages to the defendant, over and above the failure of the engineer to provide for the 1:100 year flood levels in his plans for the earthworks.
There is also the allegation of the plaintiff's failure to provide notes relating to Mr Smith's interactions with the engineer. Apart from what is stated in par 20 of the second defendant's affidavit of 15 March 2012, there are no other details provided in her affidavit. The details from the statement of claim (par 26(b)) is that only $6,997 of the plaintiff's second invoice relates to the costs associated with the defendants' claim against the engineer. There are no details of exactly what part of this amount relates to Mr Smith's collation of his notes of his interactions with the engineer.
There is nothing to suggest that the work done for which the plaintiff charged was not done. In fact, based on the letter from the plaintiff to the defendants dated 20 June 2008, it is apparent that Mr Smith did interact with the engineer and obtained an admission from the engineer concerning the problem with the plans.
The second defendant submitted the following (ts 11 and 14):
We did pursue the engineer to professional indemnity. Now, we weren't able to get as far with that as we could because the project manager was putting together all his notes of correspondence with the engineer for us to use in defence with the engineer's professional indemnity insurers. We never received those notes. We have been charged for them, I believe. We never received them.
…
They were the project managers, your Honour. They were put in charge of the entire project. And that's what they were being paid for. They were holding - supposed to be holding weekly meetings with the entire team. I know for a fact that that didn't happen. I also know for a fact that Mr Smith did not stick to his original agreement with me on the way that we received notes and minutes of meetings. They came very infrequently; they were supposed to be once a fortnight. And then, as I've mentioned before, there are meeting minutes that are missing completely.
There are a number of issues in relation to these submissions which cause me concern and suggest to me that the second defendant has not been completely full and frank in her disclosures to the court.
The first is that there are no details provided of the claim against the engineer. I am not satisfied that the absence of notes from the plaintiff (even accepting that they were not provided) could have affected the progress of the claim against the engineer.
The second issue is that the submissions which were made by the second defendant are not consistent with what she wrote to the plaintiff in her letter of 18 May 2010. The second defendant set out the following information requested by lawyers in the process of the claim made against the engineer, most of which relates to the rectification work after June 2008 and not, as submitted to me, notes of correspondence with the engineer:
1.All site meeting minutes prepared by [the plaintiff] (these notes may provide answers to some of the date queries below;
2.The date site works stopped on or about June 2008 and why the work stopped (including supporting documentation);
3.The date site works recommenced;
4.The date works were reinstated to a similar state as that when the works stopped in June 2008 albeit at a higher fill level;
5.What, if any, works were undertaken between June 2008 and the date in 4) above that were critical path (other than the reinstatement works); and
6.How many days delay would have resulted from the rains in June 2008 had the design been correctly implemented from the commencement of the Project.
Finally, there is no evidence to enable me to make any assessment of the likely quantum of the defendants' claim on the basis that the plaintiff carried out the project management services 'unprofessionally'.
I cannot see any merit in either of these aspects of the Defence Ground 3. I am not satisfied that any claim against the plaintiff on the ground that it carried out the project management services 'unprofessionally' would have any prospect of success at trial.
Merits of the Defence Ground 4: Postponement of payment of the plaintiff's fees
For this ground the second defendant relied on the letter written on 1 October 2009 by the plaintiff to the second defendant. That letter did refer to a previous discussion and agreement by the plaintiff to defer invoicing the defendants until such time as revenues had been generated by the sale of lots. That had been done gratuitously by the plaintiff. However, it is apparent from what else is set out in this letter that the purpose of this correspondence was to review this arrangement. As I have noted at [29] in that letter of 1 October 2009 the plaintiff requested the defendants to advise when they would be expected to be in a position to pay the fees.
Following this letter of 1 October 2009 there was the correspondence between the parties as I have set out in [30] and [31]. The second defendant agreed that invoices could be rendered by the plaintiff.
The suggestion was made in the second defendant's affidavit of 28 September 2011, (par 14 as I have set out in [48] above) that there was some pressure placed on the defendants to change the arrangements, after the plaintiff's final invoice. I am unable to accept this. It is contrary to the correspondence written before the plaintiff actually rendered its invoices, as I have set out in [29] – [31]. In particular in the letter of 12 October 2009, written before any invoice, the second defendant indicated a willingness to enter into arrangements which were not dependent on the timing of any payout of the defendants' claim against the engineer, expressed the intention to clear the debt by 31 March 2010, and in fact asked the plaintiff to provide its final costs.
In my view there is no merit to this Defence Ground 4.
Conclusions and orders
Based on the findings I have made of the merits, I now have to consider whether I am prepared to exercise my discretion to set aside the default judgment.
In this case I am satisfied that there is a prospect of the defendants succeeding in only one of their Defence Grounds, Defence Ground 2, relating to the negligence of the plaintiff in failing to properly review the engineer's plans for the earthworks. I do, however, have considerable concerns about the quantum of the counterclaim and the failure of the defendants to fully particularise the situation concerning their claim against the engineer. The second defendant has not, in my view, been open and transparent about the insurance claim and has not been forthcoming with details about any settlement that may have been reached with the engineer.
In addition, in the particular circumstances of this case if the extension of time within which to appeal is granted and the default judgment set aside, I consider there will be some injustice to the plaintiff. Since the judgment was entered and because of the delay, considerable costs have been incurred by the plaintiff in proceedings it has taken against the defendants to enforce its judgment. A bankruptcy notice was issued and served in November 2011, well before this appeal was commenced. The bankruptcy proceedings have progressed to a creditor's petition which has been adjourned pending the outcome of this appeal.
The court has the power to set aside default judgment on conditions which could include security to be given or payment into court of the judgment sum (as to which see Hazart Pty Ltd v Rademaker (31 ‑ 32) and Batiste v Gilmour-Latham [2001] NSWCA 392 [16]) and also strict time limits with which the defendants would need to comply for the filing of a defence and counterclaim.
In the circumstances of this matter I consider it just in the exercise of my discretion to set aside the default judgment, but given the history of the proceedings and in order to do justice to the plaintiff, the default judgment will be set aside only if two conditions are met by the defendants.
First, a defence and counterclaim must be filed by the defendants by 3 August 2012. I am mindful of the medical evidence produced by the second defendant relating to her health, however, apart from one instance when she had a brief concentration lapse, over the course of the appeal hearing before me she appeared able to function very well. She made meaningful and well expressed submissions, without any difficulty. Before the hearing, on 15 March 2012, she had produced her affidavit. After the hearing she produced cogent written submissions concerning costs. The first defendant is also well and was able to speak for herself during the appeal hearing. Both defendants are obviously intelligent and well educated. There is evidence from the email of 25 July 2007 (in par [17] above) that the first defendant has a long history in real estate. There is evidence from the medical certificates of Dr Peter Farnbach, that the second defendant is a doctor. The second defendant appears to be taking the principal responsibility for legal matters for both her and her mother, the first defendant, however I see no reason why that should be so. Working together, and particularly if they retain lawyers to assist, I consider this will be more than adequate time within which to prepare a defence and counterclaim.
While the second defendant claimed she did not have the financial capacity to engage a lawyer, she provided no evidence concerning her financial capacity. Apart from the evidence I have mentioned that she is a doctor, it is also apparent from the court record that the second defendant has the financial capacity to travel overseas. Her affidavit of 23 February 2012 was affirmed at Bangalore, India. After I requested the emails of 25 July and 1 August 2007 there was a delay in the second defendant's response because she was overseas. In my view this is another area where the second defendant has not been completely frank in her disclosures to the court.
Secondly, the defendants must also pay the judgment sum of $105,000.88 into court. In my view this condition is necessary because of the fact that the defendants have not been open and transparent in their application to the court, having regard to the matters I have outlined at [99] to [101], [108] to [110], [118] and [123], and I have been unable to properly assess the likely quantum of their claim.
I have given consideration to whether the making of an order on this condition of making payment of the judgment sum into court is tantamount to not setting aside the judgment at all. There are no hard and fast rules as to how my discretion is to be exercised and I must have regard to justice between the parties, in the particular circumstances of this case. As was stated by Newnes J in Hall v Hall at [64]:
It is obvious that the weight or emphasis to be given to the various factors that fall for consideration in the exercise of the discretion will vary from case to case, as the circumstances differ. And the circumstances may differ very widely; for example, from cases where there is a serious question as to the defendant's bona fides through to cases of a simple oversight by the defendant, or its agent, which it promptly seeks to remedy.
In the NSW Court of Appeal in Batiste v Gilmour‑Latham [16] (Giles JA with whom Heydon JA and Hodgson JA agreed) stated:
…Power is given to set aside a judgment on terms, and no express fetter is placed on the nature or extent of the terms. It must depend on the circumstances of the particular case. Commonly in cases such as this, the plaintiff will suffer because the plaintiff will lose a judgment, will incur more costs, and will be delayed in achieving whatever success in the proceedings will ultimately be achieved. I do not see why that is not prejudice capable of pecuniary remedy by a term. But there is more than that. Default judgments and applications to set aside default judgments are not uncommonly accompanied by doubt about the bona fides of the proffered defence. It may well be proper to let a defendant in to defend notwithstanding some doubt about the bona fides of the defence, but where that is the case, in my opinion there is no reason why the terms available to the judge in the exercise of his discretion should not include that the defendant provide security for some or all of the amount at stake.
In the particular and unusual circumstances of this case I consider, in the exercise of my discretion, that the defendants should pay the judgment amount into court. That is not, of course, the total amount owing to the plaintiff, since interest on the judgment sum has been accruing on judgment interest rates since 4 August 2011.
I will, however, give liberty to the defendants to apply to vary the sum which is to be paid into court if their financial positions do not permit the payment of the whole of the judgment sum. This liberty to apply will also be subject to a strict time limit. Any application to vary the sum to be paid into court must be made well before the date by which I will order the judgment sum to be paid into court. I consider it is very important that any payment, whether it is the whole of the judgment sum or only part of it (if the court is prepared to vary the sum), should be paid by a fixed date. There must be no further delay on the part of the defendants in this action.
Further, if the defendants wish to apply to vary the sum to be paid into court, they must provide, through a detailed affidavit in support of the application, cogent evidence of the details of the rectification work carried out on the property after 20 June 2008 together with details of any consequential loss. (There should be no difficulty with this given that this must have been prepared for the claim against the engineer.) They must also provide evidence concerning the claim against the engineer or as the defendants have put it, the claim against his professional indemnity – the amount of the claim made, what allowance was made for what is termed the 'partial liability' and what, if any, offer was received from or settlement reached with the engineer. Finally, the defendants must also make a full and frank disclosure, with supporting documentation, of their individual financial situations and also the financial situation of the Platill Trust, to explain why there would be a real hardship (as opposed to a difficulty or inconvenience) for them to comply with the financial condition I have set: Hazart Pty Ltd v Rademaker (32).
On the issues of costs of this appeal, the parties have provided written submissions to me, which I have read and considered. There are two aspects in relation to costs – first the costs occasioned by the entry of the judgment which are now wasted, and secondly, the costs of the defendants' applications and this appeal.
Upon the setting aside of a default judgment the usual order is that all the costs of and occasioned by the entry and setting aside of the judgment shall be the plaintiff's in any event: LexisNexis Butterworths, Seaman: Civil Procedure: Western Australia, vol 1 [13.10.7]. This means that whatever the outcome of the trial and even if the defendants are successful in their defence and counterclaim, at the end of the day they are responsible for the costs incurred by the plaintiff relating to the judgment which will be set aside (if the conditions are met). I see no reason why those orders should not be made in this case.
Where a party seeks a dispensation or indulgence of the court, the usual order is that party pay the other party's costs of the application, whether or not it succeeds. However, the court will also have regard to the extent to which it might be said that costs were unnecessarily incurred by a party, and will have regard to the reasonableness of a party's conduct in determining how costs should be awarded. In particular, where a contested application, even for an indulgence, is unnecessary because a party acting reasonably would have consented to appropriate orders, the party who has caused the costs to be unnecessarily incurred will not obtain its costs of such a proceeding merely because the application is for some indulgence. For example, an unreasonable withholding of consent might form an appropriate basis for a ruling on costs which departed from the 'normal rule' relating to indulgences: Stanley v Layne Christensen Co[2006] WASCA 56, [52].
In this case we have a situation where the defendants sought an extension of time from the plaintiff for the filing of a defence and counterclaim, which the plaintiff refused. The seeking of the extension of time was made with good reason and, in fact, as I have set out at [41], the second defendant produced a medical certificate confirming her condition and inability to deal with the filing of a defence. The plaintiff was unwilling to agree to the proposed orders extending the deadline for the defence to be filed to 3 October 2011. The plaintiff took the view, (as set out in the letter from the plaintiff's solicitors to the defendants dated 29 July 2011) that the second defendant's reasons for a further extension did not relate to the first defendant, the defendants had no good defence to the plaintiff's claim and the requested extension was unreasonable and a dilatory tactic. In light of the medical certificate and given that the second defendant had been the spokesperson for both defendants, the stance taken by the plaintiff was not entirely reasonable. On the other hand, however, the defendants were put on notice that if they did not file their defence by 1 August 2011, the plaintiff would be entering judgment in default. They could have, but did not, make an application to the court in the usual way for a further extension of time. In order to do justice in this situation I consider that the appropriate order in relation to the costs of the defendants' applications to set aside the judgment, to extend the time within which to appeal, and this appeal, should be that each party bears its or her own costs.
The orders I propose to make are:
1.The time within which the defendants have to bring this appeal be extended to 10 January 2012.
2.The appeal is allowed and the orders of Deputy Registrar Hewitt made 3 October 2011 are set aside.
3.The judgment against the first and second defendants in default of defence entered on 4 August 2011 be set aside upon the defendants' compliance with the following conditions:
(a)the defendants file and serve a defence and counterclaim on or before 4pm Friday 3 August 2012; and
(b)the defendants pay the sum of $105,000.88 into court on or before 4pm Friday 31 August 2012.
4.The defendants have liberty to apply, on or before Friday 3 August 2012, to vary the sum to be paid into court pursuant to Order 3(b). Any such application is to be supported by affidavit providing full particulars of:
(a)the actual rectification costs for the property at South Yunderup, Western Australia, as project managed by the plaintiff;
(b)each defendant's current financial position;
(c)the current financial position of the Platill Trust;
(d)the claim which was made against the engineer, J R Bradley Consulting, and what efforts the defendants made to pursue that claim;
(e)the proceeds of judgment or settlement (if any) received by either or both of the defendants (either in their personal capacity or on behalf of the Platill Trust) from the engineer, and the terms of any settlement reached with that engineer including any proportionate liability agreed with the engineer.
5.The costs of and occasioned by the entry and setting aside of the judgment be the plaintiff's costs in any event.
6.Each party is to bear its or her own costs of the application to set aside default judgment, the application to extend time within which to appeal, and the appeal, including any reserved costs.
Finally, I need to make it abundantly clear to the defendants that while on the information before me I have been prepared to exercise my discretion and set aside the default judgment (albeit on conditions) on the basis of what I have described as Defence Ground 2, this should not be treated by the defendants as an indication that their claim in negligence against the plaintiff will succeed at the end of the day. I have considered only the minimum facts and made considerable allowance for the defendants who are acting in person. It is not for me to determine the merits of their defence and counterclaim with any finality and whether they do ultimately succeed at trial will depend on all of the evidence which is led by both parties. The findings I have made in relation to Defence Ground 2 do not mean, and the defendants should not regard it as meaning, that they will succeed at trial or survive other procedural challenges which the plaintiff may bring before trial. For example, should the defendants comply with the conditions so that the judgment is set aside, but the defence and counterclaim is not properly pleaded, there will no doubt be an application by the plaintiff to strike out the pleadings and have judgment entered in favour of the plaintiff on that basis.
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