Gregg and Gregg v Howard

[1996] QCA 7

IN THE COURT OF APPEAL	[1996] QCA 007
SUPREME COURT OF QUEENSLAND

Appeal No. 90 of 1995

Brisbane
[Gregg v. Howard]

BETWEEN:

PETER DAVID GREGG and
JOCELYN KAY GREGG

(Plaintiffs) Applicants

AND:

GRAHAM DAVID HOWARD

(First Defendant) Respondent

Pincus J.A.
Moynihan J.

Shepherdson J.

Judgment delivered 06/02/1996

Separate reasons for judgment by each member of the Court, Pincus J.A. and Moynihan J. concurring as to the orders made, Shepherdson J. dissenting.

APPLICATION FOR LEAVE TO APPEAL REFUSED WITH COSTS.

CATCHWORDS:	Correct principals for setting aside judgment entered under r.140 of District Court Rules.
Counsel:	Mr G. Newton for the plaintiffs/applicants. Mr H. Zillman for the first defendant/respondent.
Solicitors:	Sly & Weigall Cannan & Peterson for the plaintiffs/applicants. Grays for the first defendant/respondent.
Hearing date:	17 May 1995.

IN THE COURT OF APPEAL

SUPREME COURT OF QUEENSLAND

Appeal No. 90 of 1995

Brisbane

Before Pincus J.A.

Moynihan J.

Shepherdson J.

[Gregg v. Howard]

BETWEEN:

PETER DAVID GREGG and

JOCELYN KAY GREGG

(Plaintiffs) Applicants

AND:

GRAHAM DAVID HOWARD

(First Defendant) Respondent

IN THE COURT OF APPEAL

SUPREME COURT OF QUEENSLAND

Appeal No. 90 of 1995.

Brisbane

Before Pincus J.A.

Moynihan J.

Shepherdson J.

[Gregg v. Howard]

BETWEEN:

PETER DAVID GREGG and

JOCELYN KAY GREGG

(Plaintiffs) Applicants

AND:

GRAHAM DAVID HOWARD

(First Defendant) Respondent

REASONS FOR JUDGMENT - PINCUS J.A.

Judgment delivered 06/02/1996

I have read the reasons of Moynihan J and those of Shepherdson J. I note that their

Honours express different views as to the proper disposition of the case.

The basis on which the applicants argued the matter was that the important question,

justifying a grant of leave, is the identification of the correct principles on which the Court

should act in determining an application under r. 140 of the District Court Rules. Plainly that

is too broad; what must be meant is that the judgment sought to be attacked raises specific

questions, of importance, with respect to those principles. The problem confronting the

primary judge was that the material before him showed the existence of issues as to

whether, as between the parties, the applicants were entitled to file and obtain judgment on

the confession and admission of debt which the respondent had signed. His Honour

considered allowing the judgment to stand, but ordering a stay; but for reasons he explained,

the judge determined that the better course was to set the judgment aside.

It is implicit, although not express, in the reasons the primary judge gave, that the

existence of an issue between the parties as to whether their mutual dealings were such as

to deprive persons such as the applicants of a right to obtain judgment under r. 140 can be a

basis for setting such a judgment aside; that proposition was not contested. It cannot be the

case that, however complex such an issue may be, the judge must determine it in chambers,

if the matter is raised on an application to set the judgment aside. Of course, the

circumstances may make it clear that the sensible course is to reach a final conclusion on

the issue, before determining the fate of the application to set aside judgment; but the

primary judge did not think this to be appropriate in the present case and the matter was one

within his Honour’s discretion. Here, the parties reached an agreement a term of which was

to give the applicants a right, subject to conditions, to obtain judgment; the reason for the

judge’s decision was in essence that the question whether the applicants had a right to

judgment should be determined at the trial of the suit.

Counsel for the applicants suggested that the onus on a defendant seeking to set

aside a judgment under r. 140 is more onerous than that on a defendant seeking to set aside

a default judgment. That may be so, but the question of the correctness of that proposition is

not one we need to determine, in the present case.

I would add that it appears to me that the way in which the primary judge disposed of the

application before him was correct.

I can see no important question of law or justice involved in the matter. I therefore agree

with Moynihan J that the application for leave should be refused with costs.

REASONS FOR JUDGMENT - MOYNIHAN J.

Judgment delivered 06/02/1996

The applicants seek leave to appeal against an order by a Judge of District Courts setting aside a judgment they obtained against the respondent. It is submitted on their behalf that the important question of law or justice which arises is the identification of the correct principles for setting aside a judgment entered under r. 140 of the District Court Rules. That rule provides:-

"A defendant may, in the presence of the Registrar of the Court in which the plaint is filed, or in the presence of a solicitor or a justice, sign a statement confessing and admitting the amount of the debt or demand, or part of the amount of the debt or demand, for which the plaint is filed, together with an undertaking to pay the plaintiff's costs incurred up to receipt by the plaintiff of a notice of such statement or undertaking.

The defendant shall file such statement and undertaking in the court in which the plaint was filed and the Registrar shall as soon as conveniently may be after the filing of such statement and undertaking send notice thereof to the plaintiff.

The plaintiff may thereupon sign judgment for the amount admitted in the statement and may tax his costs incurred up to the time of receipt of notice of the statement and undertaking together with the costs of and incidental to signing judgment.

Such statement and execution upon it may be set aside by a Judge upon such terms and conditions as to costs giving security and otherwise as he thinks fit."

The circumstances in which the judgment came to be entered are as follows. The applicants sued the respondent and another man named Pahl as guarantors, pursuant to a deed of guarantee and indemnity dated 25 November 1991, of the liability of Lion Brewing Pty Ltd. The applicants, the respondent and Pahl (or a company controlled by them) were the shareholders of Lion which had entered into a business arrangement for the acquisition of a brewery in South Australia, the details of which it is unnecessary to canvass. The applicants, the respondent and Pahl were directors of Lion.

The respondent and Pahl disputed their liability under the guarantee, so far as the respondent is concerned essentially on the basis that he had no understanding of the true nature of the guarantee and that no explanation of his liability under it. He said he believed that the respondents would have to, in effect, exhaust their recourse to the assets of Lion before any action could be taken against him as guarantor. Under the terms of the guarantee that was not the case.

The applicants sued the respondent and Pahl to enforce their claim against the guarantors. As a consequence, the applicant, the respondent, Lion and the company controlled by the respondent and Pahl, signed a deed of compromise dated 30 May 1994. The deed recited that the parties had agreed to settle the action on the terms which it contained. Clause 2 of the deed provided in the following terms:-

"2.1	Howard and Pahl will each sign and deliver to the Greggs' solicitors a Confession of Claim and Consent to Judgement in respect of the Action, to be prepared by the Greggs' solicitors.
2.2	The Greggs will hold the Confession of Claim and Consent to Judgement but may file them in the Action if and only if:

1.      neither Corporate Objective One nor Corporate Objective Two is met: or

2.      Howard and Pahl default under Clause 8.3 or clause 9.1

without any liability on the Greggs to act if neither Corporate Objective One nor Corporate Objective Two is met or Howard and Pahl default under Clause 8.3 or Clause 9.1."

Clause 1 of the deed is an interpretation clause and it provided in respect of Corporate
Objectives One and Two in the following terms:-

"1.1 ...

4.      'Corporate Objective One' means the objective of procuring a Contract of Sale for the Business to be executed within thirteen weeks of the earlier of Friday, 6 May 1994 and the date of this Deed for a net price of at least $300,000.00.

5.      'Corporate Objective Two' means the objective of completion of a Contract of Sale for the Business within twenty five weeks of the earlier of Friday, 6 May 1994 and the date of this Deed for a net price of at least $300,000.00."

It may be accepted for present purposes that although the deed made no express provision the applicants, as a consequence of these provisions, became subjected to an implied obligation to further the Corporate Objectives.

On 30 May the respondent and Pahl signed an admission as contemplated by the deed of compromise in the following terms:-

"We, the First and Second Defendant, do hereby confess and admit that:-

(a)         the sum of $150,000.00

(b)         the sum of $43,150.30, interest pursuant to the loan for the period from 25 November 1991 to 25 November 1993 and

(c)         interest on the sum of $150,000.00 being the outstanding balance of the capital, for the period 26 November 1995 to the date of judgment, at the rate of 9.2 per cent per annum:

being the amount claimed is due to the plaintiffs from us.
We do hereby undertake to pay the proper costs of the plaintiffs."

The applicants filed this document and obtained the judgment pursuant to r. 140, which it is now sought to set aside.

The respondent swore an affidavit in the proceedings to set the judgment aside. In it he swore that the deed of settlement was entered into:-

"On the basis that all parties would use their best endeavours to obtain a purchaser of the business of Lion for a value of not less than $300,000.00 and thereby recoup to the plaintiffs (the applicants) any money which may have been secured by the fixed and floating charge."

He goes on to swear that at all relevant times his belief was that the confession and consent to judgment would not be relied on for obtaining a judgment prior to Lion being offered for sale and upon the applicants taking steps to ensure that the assets of the company were realised. He then goes on to depose that the plaintiffs made no real attempt to sell the business and took no action to effect a prospective sale. He attributed this failure to the wishing to keep the company going "to realise its full value for themselves and to prosecute a claim with respect to a nominated project". Those allegations are controverted by the applicants. The respondent says that he first knew that judgment had been entered when he was served with a bankruptcy notice. He then consulted his solicitor and an application to set the judgment aside was made some time later.

Both before this Court and below a good deal of material and attention was directed to the original guarantee, respondent's obligations under it and the applicant's prospects of enforcing it. Given the terms of the deed of compromise that would appear to be largely irrelevant.

When the respondent's application came to be determined, Pahl's had already succeeded in having a judgment against him founded on r.141 set aside although the judge in the present case referred to having material not before the judge who dealt with Pahl's application.

The discretion conferred by r.141 is a wide one although it must of course be exercised judicially. The principles upon which such discretion are to be exercised and reviewed are well settled although of course their application varies from case to case. It is for present purposes unnecessary to do more than refer to cases such as House v. The King (1936) 35 C.L.R. 499; Nobis v. Nobis (1986) 161 C.L.R., 513.

In the present case the judge below is to be taken as having accepted, for the limited purpose of the application with which he was dealing, that it was sufficiently made out that the consent to judgment was a product of the compromise and subject to whatever obligations that imposed. There was a triable issue raised that the use of the consent found the judgment set aside was not authorised. The proceedings below were not the place to resolve that issue. The judge below so concluded notwithstanding there was what the applicant contends before this Court a long delay between the interim judgment and the making of the application. That was however a matter for the judge below.

Put shortly, the present case is one of the particular application of a well established general principle in respect of the exercise of a discretion, rather than one asking a question of general principle. The material moreover does not demonstrate that the decision was attended by error to a degree appropriate to found the grounding of leave. The application should therefore be refused with costs.

IN THE COURT OF APPEAL

SUPREME COURT OF QUEENSLAND

Brisbane	Appeal No. 90 of 1995
Before	Pincus JA. Moynihan S.J.A. Shepherdson J.

[Gregg v. Howard]

BETWEEN

PETER DAVID GREGG

AND JOCELYN KAY GREGG

(Plaintiffs) Applicants

AND

GRAHAM DAVID HOWARD

(First Defendant) Respondent

REASONS FOR JUDGMENT - SHEPHERDSON J.

Judgment Delivered 06/02/1996

I have had the benefit of reading the reasons for judgment prepared by Moynihan J. and

I am grateful to accept the facts as stated by him.

This appeal concerns the interpretation of subrule 140(4) of the District Court Rules

1968 and more particularly the test to be applied by a Judge exercising the power contained

in that subrule.

Rule 140 appears in "PART 13 - CONFESSION OF CLAIM - DEFAULT". Rule 140

reads:-

"140.(1) A defendant may, in the presence of the registrar of the Court in which the plaint is filed, or in the presence of a solicitor or a justice, sign a statement confessing and admitting the amount of the debt or demand, statement confessing and admitting the amount of the debt or demand, or part of the amount of the debt or demand, for which the plaint is filed, together with an undertaking to pay the plaintiff's costs incurred up to receipt of (sic) by the plaintiff of notice of such statement and undertaking.

(2) The defendant shall file such statement and undertaking in the Court in which the plaint is filed and the registrar shall as soon as conveniently may be after the filing of such statement and undertaking send notice thereof to the plaintiff.

(3) The plaintiff may thereupon sign judgment for the amount admitted in the statement and may tax the plaintiff's costs incurred up to the time of receipt of notice of the statement and undertaking together with the costs of and incidental to signing judgment.

(4) Such judgment and execution upon it may be set aside by a Judge upon such terms and conditions as to costs, giving security and otherwise as the Judge thinks fit."

This rule appears to have been an adaptation from s.81 of the District Courts Act

1958-1965 which Act was repealed by the District Courts Act 1967.

Section 81 which appeared under "JUDGMENT UPON ADMISSION BY THE

DEFENDANT" read:-

"81. Confession of debt or part of debt and judgment thereon. Compare with 55 Vic. No.33, s.73. A defendant may, in the presence of the Registrar of the Court in which the plaint is entered or in the presence of a solicitor or a justice, sign a statement confessing and admitting the amount of the debt or demand, or part of the amount of the debt or demand, for which the plaint is entered, and the amount due for costs, and the Registrar shall, as soon as conveniently may be after receiving the statement, send notice of it to the plaintiff in manner aforesaid.

The plaintiff may, upon filing an affidavit verifying the signature of the defendant, sign judgment for the amount admitted in the statement and costs. When the signature of the defendant is made in the presence of the Registrar, the plaintiff may sign judgment without filing such affidavit.

Such judgment and execution upon it may be set aside by a Judge upon such terms and conditions as to costs, giving security and otherwise as he thinks."

Part 13 of the District Court Rules of 1968 deals with two major aspects - "Confession

of Claim" and "Default". Rule 140 which I have already set out deals with a confession by a

defendant of the debt or demand or part thereof. Rule 141 deals with a situation where the

defendant agrees with the plaintiff as to the amount of the debt or demand and the terms and

conditions upon which it is to be paid or satisfied. It provides that the parties may in the

presence of the registrar of the Court in which the plaint is filed or in the presence of a

solicitor or justice sign a statement of the amount so agreed upon and of the terms and

conditions upon which it is to be paid or satisfied together with an undertaking by the

defendant to pay the costs of the plaintiff incurred up to the receipt by the plaintiff of notice of

such statement and undertaking. Rule 141 contains provisions almost identical with subrules

140(2) and 140(3) but contains no provision such as exists in subrule 140(4). Rule 142

reads:-

"In all cases under rules 140 and 141 the defendant may confess the amount of the plaintiff's costs and judgment may be entered accordingly and the amount of such costs shall be stated separately in the judgement."

Rule 143 refers to "all confessions under rules 140 to 142".

In Rules 144 and 146 provision is made for cases where there is default by the

defendant. Rule 144 refers to a claim made in an action for pecuniary damages or in detinue

and the failure by the defendant or defendants (if more than one), to file an appearance and

defence. In such event the plaintiff may enter interlocutory judgment against the defaulting

defendant. Subrule 144(5) reads:-

"The Court may set aside or vary the interlocutory judgment and any execution consequent upon it upon such terms and conditions as to costs giving security and otherwise as it thinks fit."

Rule 146 deals with a situation where a defendant does not file an entry of appearance
and defence within the time limited, to a claim for a debt or liquidated demand with or without

interest. It provides machinery for the plaintiff to obtain judgment and concludes with the

words:-

"but a Judge may set aside or vary the judgement and execution upon it, upon such terms and conditions as to costs, giving security and otherwise as the Judge thinks fit."

Under Rules 144 and 146 the court is given express power to set aside a judgment

obtained under either of those rules. Neither of those rules is concerned with admissions or

confessions by the defendant of the amount or part of the amount of the debt or demand.

Rules 140 and 141 are concerned with confessions and admissions and in r.141 there is no

express power for the court to set aside a judgment obtained under that rule such as exists in

r.140(4).

Nevertheless, the power to set aside under r.140(4) appears in the statute and the

principles upon which a Judge exercises that power, fall to be now determined.

Before considering this aspect it is of more than passing interest to note that in the

Rules of Court under the Magistrates Court Act 1921 the following rule appeared:-

"JUDGMENT UPON ADMISSION BY DEFENDANT

90. A defendant may, in the presence of the registrar of the Court in which the plaint is entered or in the presence of a solicitor or a justice sign a statement confessing and admitting the amount of the debt or demand or part of the debt or demand, for which the plaint is entered, and the amount due for costs; and the defendant shall, as soon as may be thereafter, send notice of it to the plaintiff in the form of the Schedule.

The plaintiff may, upon filing an affidavit verifying the signature of the defendant, sign judgment for the amount admitted in the statement and costs. When the signature of the defendant is made in the presence of the registrar, the plaintiff may sign judgment without filing such affidavit.

All confessions under this Rule shall be delivered to the registrar four clear days before the return day of the summons: Provided that at anytime before the cause is called on the defendant may confess and admit the claim according to the form set forth in the Schedule, subject, however, to an order by the Court to pay such costs as the plaintiff has incurred in consequence of the defendant's not having delivered such confession, as herein before required. In the Brisbane District the time for delivering confessions under this Rule shall be three clear days before the return day of the summons."

This r.90, which is not dissimilar to the present r.140 of the District Court Rules

contains no power to set aside a judgment signed under r.90. A new r.90 was inserted into

the Magistrates Court Rules on 11 January 1941 (see Queensland Government Gazette

p.34); it too contained no power to set aside a judgment signed under r.90.

I pause to say that, given the topics of r.90, I should not have expected to have found in

that rule the power to set aside which exists in subrule 140(4).

To find such a power in subrule 140(4) is surprising considering:-

(a)      that under r.140 the execution by the defendant of the statement confessing the

amount of the debt or demand (or part of it) has attached to it a degree of

solemnity and seriousness - it must be signed in the presence of the registrar of

the Court or of a solicitor or a justice;

(b)      that under r.141 the agreement reached between the parties is to be signed in

the presence of the registrar of the Court or in the presence of a solicitor or a

Justice;

(c)       in r.141 there is no power to set aside such as exists in subrule 140(4).

Why the power to set aside the judgment was inserted in s.81 of the District Courts

Act 1958-1965 is not clear. It did not appear in s.73 of the District Courts Act 1891 (55 Vic

No.33 s.33) which dealt with the same subject matter as rule 140.

A Judge exercising the power given under subrule 140(4) has a discretion to set aside

a judgment signed under that rule. However, in my view, such a power is not to be exercised

as readily as the similar power found in rules 144 and 146.

If the judgment under r.140 was entered irregularly then in my view the defendant is

entitled ex debito justitiae to have it set aside (Anlaby v. Praetorius (1888) 20 QBD 764).

Such a situation may arise where the judgment is entered by the plaintiff in the absence of

the defendant and there has been a failure to comply with a requirement of r.140. Further,

when the court sets aside an irregular judgment it should impose no terms whatever on the defendant, not even contingent terms, such as that the costs should be costs in the cause

(see White v. Weston (1968) 2 QB 647).

If the judgment was regularly entered then, in my view, a defendant seeking to have the

judgment set aside has a heavy burden to discharge - much heavier than showing facts said

to constitute a good defence on the merits.

I say that because of the solemnity attached to a defendant signing the confession

referred to in r.140. I do not propose to attempt to give illustrations of matters which may

suffice to discharge the burden under subrule 140(4). The judicial discretion existing under

that rule cannot in my view be prescribed by fixed formulae (see Stollznow v. Calvert (1980) 2

NSWLR 749 at 751 and Appleton Papers Inc v. Tomasetti Paper Pty Ltd (1983) 3 NSWLR

208 at 215).

I expect that cases where a judge acts under subrule 140(4) to set aside a judgment

regularly entered under r.140 will be comparatively rare.

I turn now to the facts in the instant case.

The judgment against the respondent was expressly entered under r.140 and the

acting Deputy Registrar of the Court who actually signed the judgment had before him a

document styled "Admission of Claim or Part of Claim under Rule 140" signed by the

respondent and also David John Pahl and dated 30 May 1994. The respondent's signature

was witnessed by a Justice of the Peace and Pahl's signature was witnessed by another

Justice of the Peace who was also a Commissioner for taking affidavits in the Supreme

Court of South Australia.

This document was in accordance with form 19 of the Schedule of Forms in the

District Court Rules 1968 and in it the respondent and Pahl confessed and admitted that:-

(a)      the sum of $150,000;

(b)      the sum of $43,150.30 being interest for the period 25.11.91 to 25.11.93; and

(c)       interest on the sum of $150,000 for the period 26.11.93 to date of judgment at the rate of 9.2% per annum.

being the amount claimed was due to the plaintiffs from them and they further undertook to

pay the proper costs of the plaintiffs.

This document ("the confession") was not filed in the Court by the respondent as

defendant - it was filed by the plaintiff applicants' solicitors.

I would not treat that as an irregularity in this case although subrule 140(2) says "the

defendant shall file such statement and undertaking."

The confession came into existence pursuant to the provisions of the deed dated 30

May 1994 entered into after this action began against the respondent and Pahl. Clause 2 of

that deed read:-

"2. Consent to Judgment.

2.1 Howard and Pahl will each sign and deliver to the Greggs' solicitors a Confession of Claim and Consent to Judgment in respect of the Action, to be prepared by the Greggs' solicitors.

2.2 The Greggs will hold the Confession of Claim and Consent to Judgment but may file them in the Action if and only if;

(1) neither Corporate Objective One nor Corporate Objective Two is

met; or

(2) Howard and Pahl default under clause 8.3 or clause 9.1

without any liability on the Greggs to act if neither Corporate Objective One nor Corporate Objective Two is met or Howard and Pahl default under clause 8.3 or clause 9.1."

The confession did not, on its face disclose the conditions on which pursuant to cl.2.2

of the deed the applicants held it.

On the face of the confession as filed in the District Court, the requirements of r.140

must have appeared to the acting Deputy Registrar to have been met, although the

confession was not filed by the respondent as required by subrule 140(2). There is no

evidence that that omission excited any suspicion or concern in the acting Deputy Registrar.

It is true that, as between the respondent and the applicants who were bound by the
terms of the deed of 30 May 1994, the applicants, on the face of the confession filed, were

entitled to the judgment entered on 12 September 1994.

However, in my view, the solicitors acting for the applicants, considering that they were

proceeding in the absence of the respondent, were obliged to place before the acting Deputy

Registrar an affidavit or affidavits to satisfy the Court that one at least of the conditions

prescribed by cl.2.2 of the deed of 30 May 1994 had been satisfied.

This was not done. The result was that the judgment was in my view entered

irregularly in the sense that the true nature of the confession relied on by the acting Deputy

Registrar was not placed before him. Because the judgment was in my view irregularly

entered, it should have been set aside.

I add that I do not for one moment attribute or suggest any improper motives to the

solicitors acting for the applicants in signing judgment. They were carrying out the

requirements of the deed entered into between the parties. Apart from any aspect of

irregularity, the material from the respondents read by the learned District Court Judge

showed a strong case for setting aside the judgment. The respondent swears in effect that

the condition in paragraph 1 of cl.2.2 of the deed obliged the applicants to use their best

endeavours to meet the two corporate objectives and they failed to do so. The respondent

also swears that the applicants failure to do so was due in effect to their financial self interest

in Lion Brewing Pty Ltd including a claim to ownership of a certain marketable drink. The

applicants have failed to show that the learned judge erred in exercising his discretion with

the result that this Court is not entitled to interfere with his decision (House v. The King (1936)

55 CLR 499 at 504-5; Lovell v. Lovell (1950) 81 CLR 513)

I would grant leave to appeal. The interpretation of Rule 140(4) does involve an

important question of law or justice and I would dismiss the appeal.