Ion v Danutz

[2012] NSWSC 941

Supreme Court

New South Wales

Medium Neutral Citation:

Ion v Danutz [2012] NSWSC 941

Hearing dates:

7/8/2012

Decision date:

21 August 2012

Before:

Harrison AsJ

Decision:

(1) An extension of time to file this appeal is granted.

(2) Leave to appeal is granted.

(3) The appeal is upheld.

(4) The decision of his Honour Magistrate Hiatt dated 19 January 2012 is set aside.

(5) The matter is remitted to the Local Court at Campbelltown to be determined according to law.

(6) The defendant is to pay the plaintiff's costs of this appeal.

Catchwords:

APPEAL FROM LOCAL COURT - summary judgment in Local Court - application for leave to appeal and for extension of time to apply for leave to appeal - defendant in Local Court did not appear but had filed affidavit supporting his defence - extension of time granted - appeal upheld

Legislation Cited:

Civil Procedure Act 2005
Local Court Act 2007
Uniform Civil Procedure Rules 2005

Cases Cited:

Arnold v Forsythe [2012] NSWCA 18
Be Financial Pty Ltd as Trustee for Be Financial Operations Trust v Das [2012] NSWCA 164
Cassar v Hans Pet Constructions Pty Ltd [2008] NSWSC 1386
Commonwealth of Australia v Griffiths [2007] NSWCA 370; [2007] 70 NSWLR 268
General Steel v Commissioner for Railways (1964) 112 CLR 125
House v King (1936) 55 CLR 499
Gregory's Transport Pty Ltd v Ray's Haulage Pty Ltd [2008] NSWCA 333
Short v Burn [2012] NSWSC 695

Category:

Principal judgment

Parties:

Gheorghe Ion (Plaintiff)
Radu Danutz (Defendant)

Representation:

A L Connolly (Plaintiff)
D Accoto (Defendant)
Aron I Mucsnik (Plaintiff)
Placanica Lawyers (Defendant)

File Number(s):

2012/57530

 Decision under appeal 

Date of Decision:

2012-01-19 00:00:00

Before:

Hiatt LCM

Judgment

1. HER HONOUR: This is an appeal from the Local Court. By further amended summons filed 7 August 2012, the plaintiff appeals from the following parts of the Magistrate's decision: firstly, the Magistrate's order striking out the plaintiff's defence and, secondly, the Magistrate's order that default judgment be entered in favour of the defendant (the plaintiff below) and, thirdly, the costs order made in favour of the defendant (the plaintiff below). The plaintiff seeks that an extension of time and leave to appeal be granted and that the appeal be allowed.

1. The plaintiff in these proceedings is Gheorghe Ion. The defendant in these proceedings is Radu Danutz. As the plaintiff in these proceedings was the defendant in the Local Court and the defendant in these proceedings was plaintiff in the Local Court, I shall for convenience refer to the parties by name.

1. Mr Ion relied on his affidavits affirmed on 21 February 2012, 14 March 2012 and 4 May 2012. He also relied upon the affidavits of his solicitor Aron Mucsnik sworn 15 March 2012 and 6 August 2012. The defendant did not rely upon any affidavit evidence.

1. The grounds of appeal fall into two main areas, firstly, the striking out of the defence and secondly, the entry of default judgment. I shall refer to them in turn.

1. On 19 January 2012 the Magistrate made an order that Mr Ion's defence be struck out, default judgement for Mr Danutz be entered in the amount of $47,868 and an order that Mr Ion pay the costs of Mr Danutz in the amount of $7570 (19/1/2012, T9).

1. Mr Ion seeks to have the above orders set aside and replaced with orders that Mr Danutz's notice of motion be dismissed and that Mr Danutz pay Mr Ion's cost of the notice of motion and the cost of this appeal.

Appeals from the Local Court

1. Mr Ion accepted that leave was required to appeal because the order striking out his defence and the default judgment are interlocutory. See also Cassar v Hans Pet Constructions Pty Ltd [2008] NSWSC 1386; Short v Burn [2012] NSWSC 695 at [23] - [24].

1. Section 40(2) of the Local Court Act 2007 relevantly provides that a party who is dissatisfied with an interlocutory judgment of the Local Court may appeal to the Supreme Court, but only by leave of the Supreme Court.

1. Section 41 of the Local Court Act provides that this Court may determine an appeal by either (a) varying the terms of the judgment or order, or (b) setting aside the judgment or order, or (c) setting aside the judgment or order and remitting the matter to the Local Court for determination in accordance with the Supreme Court's directions, or (d) dismissing the appeal.

Extension of time to appeal

1. The first issue that has to be addressed is whether an extension of time to appeal should be granted. The defendant opposes the order sought.

1. Pursuant to the Uniform Civil Procedure Rules 2005 (UCPR), rule 50.12, a summons seeking leave to appeal must be filed within 28 days after the Magistrate's decision. The Magistrate's decision was handed down on 19 January 2012. Mr Ion's original summons was filed on 21 February 2012, five days out of time.

1. Mr Ion submitted that an extension of time to appeal should be granted because the summons was filed only a few days out of time, the delay in commencing proceedings has been fully explained, the delay was not occasioned by any delinquency on the part of the plaintiff, the defendant has not suffered any prejudice and the application for leave to appeal and the appeal have good prospects of success. Mr Ion's explanation for delay is that the solicitor who appeared for him in the Local Court did not wish to conduct the appeal to this Court. That meant that Mr Ion had to instruct new solicitors to act for him and obtain Counsel's advice. He acted promptly in obtaining new legal representation and filing his appeal. Mr Danutz has not suffered prejudice. In these circumstances it is my view that an extension of time to appeal should be granted.

Whether leave to appeal should be granted

1. The second issue to be determined is whether leave to appeal should be granted. The defendant opposed leave being granted.

1. Recently in Be Financial Pty Ltd as Trustee for Be Financial Operations Trust v Das [2012] NSWCA 164, the Court of Appeal set out the principles to be considered in deciding whether leave to appeal should be granted. At [32], [33] and [35] Basten JA stated:

"32The principles governing cases such as these have recently been restated in Zelden v Sewell; Henamast Pty Ltd v Sewell [2011] NSWCA 56. As Campbell JA noted (with the agreement of Young JA) at [22]:

'It is of some importance to reiterate the principles that were stated in Carolan v AMF Bowling Pty Limited [1995] NSWCA 69, where Sheller JA said that an applicant for leave must demonstrate something more than that the trial judge was arguably wrong in the conclusion arrived at. Cole JA relied on a principle that where small claims are involved, it is important that there be early finality in determination of litigation, otherwise the costs that will be involved are likely to swamp the money sum involved in the dispute.'

33In Jaycar Pty Ltd v Lombardo [2011] NSWCA 284 Campbell JA, with the agreement of Young and Meagher JJA, expanded on his summary of Carolan, noting that Kirby P had recognised "that ordinarily it was appropriate to grant leave to appeal only concerning matters that involve issues of principle, questions of general public importance or an injustice which is reasonably clear, in the sense of going beyond [what is] merely arguable": at [46].

...

35In Coulter v The Queen [1988] HCA 3; 164 CLR 350, dealing with a challenge to a refusal of the South Australian Full Court to grant leave to appeal in a criminal matter, the majority noted that a leave requirement was a preliminary procedure 'recognised by the legislature as a means of enabling the court to control in some measure the volume of appellate work requiring its attention': at 356 (Mason CJ, Wilson and Brennan JJ). That statement is clearly applicable to civil, as well as criminal, appellate jurisdiction."

1. Hence it is important to keep in mind that the purpose of a requirement of leave to appeal is that it is intended to act as a filter to ensure that unsuitable appellate proceedings are not able to be brought with the demands which that places upon the resources of the court and the burden which it places upon other parties and the delays which it causes to other litigants.

1. In order to determine whether I should grant leave to appeal, I will consider whether Mr Ion has demonstrated something more than that the trial judge was arguably wrong, whether it involves a question of principle, questions of general public importance, and whether there would be a substantial injustice if leave were refused. I will also take into account that the claim is for the sum of $45,000. In order to consider the above factors, it is necessary for this Court to examine the Magistrate's decision.

The Local Court proceedings

1. In the Local Court Mr Danutz filed a statement of claim. He alleged that he had lent Mr Ion the total sum of $45,000 in September and October 2010 and that Mr Ion had failed to repay this amount by the due date of 31 December 2010. Mr Danutz claimed the sum of $45,000 and interest pursuant to s 100 of the Civil Procedure Act 2005.

1. On 30 August 2011, Mr Ion filed a defence. It is a simple document and pleads as follows.

"1The Defendant denies paragraph 1 of the Statement of claim.

2.The Defendant denies paragraph 2 of the Statement of Claim.

3.The defendant denies paragraph 3 of the Statement of Claim.

4.The defendant denies paragraph 4 of the Statement of Claim.

5.The defendant denies paragraph 5 of the Statement of Claim."

1. Prior to the hearing Mr Ion filed and served his affidavit affirmed on 14 October 2011. It seems that Mr Danutz did not file an affidavit. There is no affidavit by him in the documents tendered to this Court. On 19 January 2012 the matter was listed for hearing at Campbelltown Local Court. On 16 January 2012, Mr Danutz filed a notice of motion seeking leave to proceed on the notice of motion at the hearing, that the defence in these proceedings be struck out and judgment be entered for the plaintiff. This motion was supported by an affidavit of Mr Placanica, the solicitor for Mr Danutz. The solicitor, in essence, deposed that the defendant had not pleaded a proper defence, the defence is a blanket denial, it does not provide particulars and that the defendant does not have a viable defence to the claim.

The hearing in the Local Court

1. At the hearing on 19 January 2012, Mr Danutz was represented by Mr Accoto of counsel. Mr Ion was represented by Mr Kumar, a solicitor. Mr Ion did not appear. His solicitor informed the Court that his client was in Romania and that he was ill and could not fly home. No medical evidence was tendered to support these assertions.

1. It is not clear from the transcript if Mr Ion's solicitor made an application for an adjournment. In any event, the Magistrate was entitled to proceed to hearing on that day and that part of the Magistrate's decision is not the subject of challenge in this appeal.

1. At the hearing there was dispute about whether sufficient time had elapsed between the service of the notice of motion and the hearing date but that does not form part of the appeal (T2). The motion also sought an order to correct the spelling of Mr Ion's first name. That order was made by consent.

1. Counsel for Mr Danutz handed up written submissions on the issue of summary judgment to the Magistrate. Mr Danutz relied on the UCPR, rules 14.28 (summary judgment), 14.7, 14.14 and 15.1 (pleading issues) (AB 19).

1. According to counsel for Mr Danutz, in his written submissions to the Magistrate, a pleading should set out all such material facts as are necessary to understand a party's case. The Local Court is a court of pleading and no party ought to be left to surmise the case that the party intends to bring against them. Counsel for Mr Danutz, in his submissions, referred to Mr Ion's affidavit and stated that on its face the affidavit set out the following version of events: Mr Ion and Mr Danutz entered into a commercial venture to acquire a boat together. Mr Ion alleges that Mr Danutz was the owner of the boat and that Mr Danutz may have some residual obligation to recompense Mr Ion for the money advanced towards the acquisition of the boat. Counsel for Mr Danutz submitted that these allegations would be more properly raised in a cross claim. At the hearing, he also argued that leave should not be granted to Mr Ion to file an amended defence on the basis that there was ample time prior to the hearing for the defence to be amended (T4).

1. So far as the complaint about no particulars being supplied, Mr Kumar informed the Magistrate no request had been made by Mr Danutz to supply particulars. The first they heard of it was when the notice of motion was served (T4).

1. Mr Kumar submitted firstly, that so far as UCPR 14.14 was concerned, it was not the intention of the defendant to take the plaintiff by surprise in any manner; and secondly, Mr Ion had set out his case that there was no agreement as alleged by the Mr Danutz. The evidence he sought to rely on was in his affidavit (T4).

The Magistrate's extempore judgment

1. The Magistrate stated (T6-7):

"I note when one looks at the particular defence, in the context of the pleadings before the Court, it is the Court's view, and there can be no other view taken insofar as the defence is concerned, that it is a mere traversal of the pleading, or a mere denial. I note insofar as the pleadings of the plaintiff are concerned, that they set out a number of matters within each of those particular paragraphs. Quite clearly, the plaintiff submits to the Court today that the defendant pleads a defence that is unsatisfactory in its terms. It is constituted by mere denials of all allegations and without more particulars, the Court is left to surmise the basis of the defendant's true defence. What it is really saying is a basis to oppose the plaintiff's relief as set out in the statement of claim. The plaintiff relies upon the provisions of part 14 sub-rule (28) of the UCPR, that provides that the Court may strike out proceedings but only in clear cases, and the test to be applied is the test in General Steel Industries Inc v The Commissioner for Railways. It makes it quite apparent that the power should only be used sparingly and only in the clearest of cases."

1. The Magistrate quoted UCPR rule 14.28 and continued (T7):

"I note insofar as that particular aspect is concerned, what is contained in so far as the defence is concerned, the mere denial of the paragraph, itself, or the paragraph outlines in the statement of claim. I note insofar as the statement of claim is concerned, that as I have earlier indicated, each of the paragraphs contain more than just a blanket or one particular proposition. There is a number of other factual matters contained within the particular pleading.

It is the Court's view insofar as the notice of motion is concerned that I would be more than satisfied, insofar as the matter is concerned, that it is a clear case in which the Court should exercise its power to strike the defence out. I take the view that pursuant to the provisions of part 14 sub-rule 28 that insofar as the matter is concerned that it does not - there is tendency to cause prejudice insofar as the manner in which the defence is pleaded - and a likelihood, when one considers the provisions of part 14 rule 14, that matters raised by the defendant are not specifically pleaded, and there is a strong probability that the opposing party, being the plaintiff, is likely to be taken by surprise.

IN ALL THE CIRCUMSTANCES, INSOFAR AS ORDER 3 OF THE NOTICE OF MOTION IS CONCERNED, THE COURT PROPOSES TO EXERCISE ITS POWER AND TO STRIKE THE DEFENCE OUT."

1. Mr Accoto then sought the entry of default judgment in accordance with UCPR 16.2. The Magistrate did so. His Honour stated (T8):

"PURSUANT TO THE PROVISIONS OF PART 16.2, I ENTER JUDGMENT IN FAVOUR OF THE PLAINTIFF IN THE SUM OF $45,000 TOGETHER WITH INTEREST, WHICH IS SAID TO BE PRE-JUDGMENT INTEREST, WAS $2868."

The order to strike out Mr Ion's defence

1. In relation to the order to strike out his defence, Mr Ion's grounds of appeal are firstly, that the Magistrate erred on a question of law in striking out the defence because (a) the pleadings in the defence constituted a defence to the claim; (b) the facts deposed to by Mr Ion in his affidavit affirmed 14 October 2011 disclosed that he has a reasonable defence; and (c) if there was defect in the pleading of the defence the Magistrate ought to have given Mr Ion an opportunity to amend his defence.

1. As previously stated, Mr Danutz relied on UCPR 14.28. This rule provides that the Court may at any stage of the proceedings order that the whole or any part of a pleading be struck out if the pleading firstly, discloses no reasonable cause of action or defence or other case appropriate to the nature of the pleading, or secondly, has a tendency to cause prejudice, embarrassment or delay in the proceedings, or thirdly, is otherwise an abuse of the process of the Court. UCPR 14.28(2) provides that the Court may receive evidence on the hearing of an application for an order under subrule (1).

1. In Commonwealth of Australia v Griffiths [2007] NSWCA 370; (2007) 70 NSWLR 268 Beazley JA (with whom Mason P agreed) said:

"11The general principles relating to the summary disposal of proceedings are well-known: see General Steel Industries Inc v Commissioner for Railways (NSW) & Ors [1964] HCA 69; (1964) 112 CLR 125 at 129. If it is demonstrated that there is a real question to be tried, the matter is inappropriate for the entry of summary judgment: Dey v Victorian Railway Commissioners [1949] HCA 1; (1949) 78 CLR 62. The tests stated in the authorities as to whether it is appropriate that a case be disposed of by the entry of summary judgment include statements such as that the matter is "so obviously untenable that it cannot possibly succeed"; "manifestly groundless" or "would involve useless expense": see General Steel Industries at 129.

12The summary disposal of proceedings or part thereof deprives a party of the right to a contested hearing. For that reason it is said that the requirement for establishing that there is no triable issue is demanding: Air Services Australia v Zarb (Court of Appeal, 26 August 1998, unreported). In Webster & Anor v Lampard [1993] HCA 57; (1993) 177 CLR 598, Mason CJ, Deane and Dawson JJ said at 602:

'... the issue before the learned Master on the application for summary judgment was not whether [the plaintiffs] would probably succeed in their action against [the defendant]. It was whether the material before the Master demonstrated that that action should not be permitted to go to trial in the ordinary way because it was apparent that it must fail. The power to order summary judgment must be exercised with 'exceptional caution' and 'should never be exercised unless it is clear that there is no real question to be tried.' (Citations omitted)"

1. When deciding whether summary judgment should be entered, Mr Ion's case should have been taken at its highest. Counsel for Mr Danutz submitted that the Court could not look to Mr Ion's evidence over and above his pleading and that the Local Court is a court of pleading and the distinction between pleadings and evidence is sufficiently defined. Counsel for Mr Danutz submitted that proceedings are struck out on the basis of pleadings and whether they disclose a cause of action (or defence). He submitted that it is not right to say that recourse could be had to the evidence and, even if Mr Ion's affidavit were admitted into evidence, it would not have solved the problem because the affidavit did not disclose a defence. I disagree. While the Local Court is a Court of pleading, the same UCPR, rule 14.28 applies to that Court, the District Court and to this Court.

1. In the Local Court both parties had referred to the contents of Mr Ion's affidavit. While it is not clear whether the Magistrate read its contents, where both parties referred to it, the Magistrate should have taken it into account in accordance with UCPR 14.28(2)(1). As the court emphasised in General Steelv Commissioner for Railways (1964) 112 CLR 125, a pleading should be only struck out in the clearest of cases. There is good reason for this. It is because if a pleading is struck out, a party is denied a hearing on its merits.

1. As previously stated, Mr Ion in his defence traversed the plaintiff's allegations. He was entitled to do so. The pleading in the defence would not have caught Mr Danutz by surprise. Mr Ion denied (a) that there was an agreement between the parties; (b) that the loan was to be repaid by 31 December 2010; (c) that the debt had not been repaid; and (d) that he owed the amount outstanding. In these circumstances, the pleading in the defence was all that was required. In any event, Mr Ion's detailed affidavit made it clear what his case was. Even if Mr Danutz still did not understand the case it had to meet, he could have requested particulars. He did not do so. What that pleading meant was that Mr Danutz was to be put to proof on his pleading in the statement of claim.

1. Mr Ion's affidavit detailed various agreements between the parties. At [8] Mr Ion set out a conversation he says took place via internet in 2010 between himself and Mr Danutz, while Mr Danutz was overseas. In that conversation, they reached an agreement to purchase a boat, each as to 50 per cent of the purchase price, and Mr Ion was to drive the boat because Mr Danutz did not have a boat licence. During that conversation Mr Ion told Mr Danutz that "I have no money", but in the following paragraphs Mr Ion described how his half share of the purchase price was to be paid by way of his contributions to the acquisition of the boat, including travel costs he incurred in going to view the boat and buying a wireless broadband connection so that he could show Mr Danutz the boat over the internet.

1. Mr Ion described the acquisition of the boat in some detail:

"[15]I paid all the expenses to Queensland including of petrol, oil, etc. with my credit cards as we discussed which was part of my 50% of the boat and if not be reimbursed by Radu [Danutz].

[16]On 21st September 2010 whilst Radu [Danutz] was in Romania I arrived on Bribe Island in Queensland where I met Mr Mumford, the owner of the boat. I introduced myself to Mr Mumford and told him that my business partner Radu, who was in Romania and the person who was financing the boat purchase and wanted to see the boat before we bought it. I then saw the boat and I started the webcam so Radu could see the boat.

[17]I then told Radu on yahoo messenger the boat is an old boat. Radu saw the boat on the webcam and said he liked it. He said that it was okay to give the holding deposit of (sic) because he wanted to renovate the boat anyway. Radu told me to ask Mr Mumford that we would pay the balance amount when Radu returns from Romania. The asking price of the boat was $52,000.00.

[18]... I offered Mr Mumford $40,000 for the boat and he accepted $42,500...

[19]Because I didn't know the exact personal details about Radu, meaning Radu's full name and address and he was not available in Queensland Mr Mumford and I were deciding whose name to put the receipt under... I knew Radu to have different names in the past few years, so I told Mr Mumford to make the receipts in my name so if we have to lodge the registration of the boat in Sydney we will have no problems. I am familiar with boats and I know that to be able to get moorings from the maritime services board we had to register the boat in NSW."

1. In his affidavit Mr Ion alleges that once he and Mr Danutz took possession of the boat in Queensland in October 2010, Mr Danutz claimed full ownership of the boat. Mr Danutz told him "I just changed the agreement and when we will get to Sydney I will pay all your expenses".

1. Mr Ion's affidavit attached various documents including email correspondence, and bank and telephone records that demonstrated he had made payments towards obtaining the boat from Queensland and that the arrangements between them were changed unilaterally by Mr Danutz. These matters are not properly raised in a cross claim.

1. At paragraph [53], the concluding paragraph of his affidavit, Mr Ion deposed:

"I have never borrowed money from Radu to buy a boat. I have never taken a loan from Radu to buy a boat either. I was always of the believe (sic) that the boat we were buying was going to be 50%/50% share. My contribution was the work I was doing to inspect the boat, to negotiate the price and to purchase it when Radu was overseas. I was going to incur some expenses which was going to be my contribution. At worst case if Radu was going to pay for my expenses I would be paying for half of my share. But when Radu told me from the minute he got in the boat that the boat was his. I accepted that and did not have anything to do with the boat, its ownership etc. It was because of my understanding that Radu was owning the whole boat that I helped him drop the 2 large motors to his place in Canely Vale."

1. In my view the Magistrate erred in the exercise of his discretion to strike out the defence as the defence was properly pleaded and there was evidence to support this defence. This constitutes an error at law - see the well known case of House v King (1936) 55 CLR 499 at 504-505.

1. As Mr Ion did not appear, the Magistrate could have, in the exercise of his discretion, proceeded with the hearing. His Honour would have then been entitled to reject Mr Ion's affidavit on the basis he could not be cross examined and put the plaintiff to proof on the issues pleaded in the statement of claim. There was no affidavit evidence filed by Mr Danutz to prove these allegations. His Honour did not take that course. It is my view that the Magistrate erred in law.

The entry of default judgment

1. The second ground of appeal is that the Magistrate erred in law in giving default judgment against Mr Ion as the application for default judgment was not supported by an affidavit in support that complied with UCPR 16.6(2).

1. Counsel for Mr Ion submitted that there was no proper basis for the Magistrate to enter default judgment. Counsel for Mr Danutz does not address this issue in his written submissions.

1. By reason of UCPR 16.3(2)(b), it was necessary for Mr Danutz's application to be accompanied by "the affidavit in support", unless the court ordered otherwise. The Court did not make an order otherwise.

1. UCPR 16.6(2) sets out the requirements for the affidavit in support when the plaintiff's claim is for a debt:

"(2)The relevant affidavit in support:

(a)must state the amount due to the plaintiff, in respect of the cause of action for which the proceedings were commenced, as at the time the originating process was filed, and

(b)must give particulars of any reduction of that amount, and costs, as a consequence of any payments made, or credits accrued, since the time the originating process was filed, and

(c)must state the source of the deponent's knowledge of the matters stated in the affidavit concerning the debt or debts, and

(d)must state the amount claimed by way of interest, and

(e)must state whether costs are claimed and, if so, how much is claimed for costs, indicating:

(i)how much is claimed on account of professional costs (not exceeding the amount fixed by the regulations made for the purposes of section 329 of the Legal Profession Act 2004), and

(ii)how much is claimed on account of filing fees, and

(iii)how much is claimed on account of the costs of serving the originating process, and

(f)must state when and how the originating process was served on the defendant."

1. Hence, if there is no affidavit in support of an application for judgment under UCPR rule 16, a court is not empowered to give judgment, unless it has ordered otherwise pursuant to UCPR rule 16.3(2). Counsel for Mr Ion referred to Gregory's Transport Pty Ltd v Ray's Haulage Pty Ltd [2008] NSWCA 333 at [23]-[24] per Macfarlan JA (Allsop P and Campbell JA agreeing) and Arnold v Forsythe [2012] NSWCA 18 at [88] per Sackville AJA (McColl JA and Young JA agreeing).

1. The affidavit accompanying Mr Danutz's application for default judgment was that of his solicitor, Mr Placanica, sworn 16 January 2012.

1. Counsel for Mr Ion submitted that Mr Placanica's affidavit did not comply with the requirements of UCPR 16.6(2). It was defective in the following respects:

"(a)it did not state the amount due to the plaintiff, in respect of which the cause of action for which the proceedings were commenced, as at the time the Statement of Claim was filed (rule 16.6(2)(a));

(b)it did not state any matters concerning the alleged debt and therefore did not state the source of Mr Placanica's knowledge of such matters (rule 16.6(2)(c));

(c)it did not state the amount claimed by way of interest (rule 16.6(2)(d));

(d)it did not state whether costs were claimed and therefore did not state how much was claimed for costs, nor indicate any of the matters set out in rule 16.6(2)(e);

(e)it did not state when and how the originating process was served on the defendant (rule 16.6(2)(f))."

1. There was no evidence before the Magistrate by which he could have been satisfied that there ever had been a loan by Mr Danutz to Mr Ion. Nor was there any evidence that there was still a debt owing to Mr Danutz. There was no evidence provided by Mr Danutz that supported the quantum of the judgment he sought.

1. It is my view that without an affidavit that satisfied the terms of UCPR 16.6(2) default judgment could not be entered. Most importantly there was no evidence that proved there was a loan, the amount of the loan and that the loan had not been repaid.

1. Mr Danutz's applications to have Mr Ion's defence struck out and for default judgment were misconceived. It is my view that the Magistrate should not have struck out Mr Ion's defence on a summary basis, for two reasons. Firstly, the defendant was entitled to deny the allegations pleaded in the statement of claim; and secondly, there was evidence to support Mr Ion's claim that he had a defence. In doing so the Magistrate erred in exercising his discretion and this constitutes an error at law. The Magistrate should not have granted default judgment and in so doing he also erred in law.

1. Leave to appeal is not granted lightly. However, this is one such case where it should be granted. It is my view that leave to appeal should be granted because Mr Ion suffered a substantial injustice when he lost the opportunity to be afforded a trial on its merits. Further, judgment was entered against him in circumstances where there was no evidence that proved the case against him. These issues raise questions of principle as litigants should only be shut out of defending proceedings in the clearest of cases and litigants asserting a case have to prove it.

1. The appeal should be upheld. I set aside the decision of his Honour Magistrate Hiatt dated 19 January 2012. This matter is remitted to the Local Court at Campbelltown to be determined according to law.

1. Costs are discretionary. Costs normally follow the event. The plaintiff has been successful and should have a costs order in his favour. The defendant is to pay the plaintiff's costs of this appeal.

The Court orders that:

(1)An extension of time to file this appeal is granted.

(2)Leave to appeal is granted.

(3)The appeal is upheld.

(4)The decision of his Honour Magistrate Hiatt dated 19 January 2012 is set aside.

(5)The matter is remitted to the Local Court at Campbelltown to be determined according to law.

(6)The defendant is to pay the plaintiff's costs of this appeal.

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Decision last updated: 05 September 2012