Jade Holdings Pty Ltd v Allison

[2013] TASSC 68

[2013] TASSC 68

COURT:  SUPREME COURT OF TASMANIA

CITATION:              Jade Holdings Pty Ltd v Allison [2013] TASSC 68

PARTIES:  JADE HOLDINGS PTY LTD ACN 009534507
  v
  ALLISON, Paul Francis

FILE NO:  444/2013
DELIVERED ON:  18 November 2013
DELIVERED AT:  Hobart
HEARING DATES:  4, 6 and 7 November 2013
JUDGMENT OF:  Holt AsJ

CATCHWORDS:

Procedure – Supreme court procedure – Tasmania – Practice under rules of court – Default of pleading – Judgment by default – Power to set aside – Considerations – Defence on the merits.

Supreme Court Rules 2000 (Tas), r355.
Vacuum Oil Co Pty Ltd v Stockdale (1942) 42 SR (NSW) 239; Shocked v Goldschmidt (1998) 1 All ER 327; Grimshaw v Dunbar (1953) 1 QB 408; Adams v Kennick Trading (International) Ltd (1986) 4 NSWLR 503; Evans v Bartlam (1937) AC 473, followed.
Aust Dig Procedure [275]

REPRESENTATION:

Counsel:
             Plaintiff:  D J Gunson SC
             Defendant:  J P Murphy
Solicitors:
             Plaintiff:  Gunson Williams
             Defendant:  In person

Judgment Number:  [2013] TASSC 68
Number of paragraphs:  30

Serial No 68/2013
File No 444/2013

JADE HOLDINGS PTY LTD ACN 009534507 v PAUL FRANCIS ALLISON

REASONS FOR JUDGMENT  HOLT AsJ

18 November 2013

1. The defendant, Mr Paul Allison, has applied for an order setting aside a final judgment entered in default of the filing and delivery of a defence.

1. Rule 355 of the Supreme Court Rules 2000 is as follows:

"Any judgment by default under these rules may be set aside or varied by the Court or a judge either unconditionally or on any terms the Court or a judge considers appropriate."

1. On such an application: "The question is whether, upon the material that has been placed before (the court), there is a real likelihood that it would be unjust to the defendant to allow the judgment to stand", Vacuum Oil Co Pty Ltd v Stockdale (1942) 42 SR (NSW) 239 at 243 – 244, per Jordan CJ. The dominant consideration is usually whether there is a defence on the merits. Shocked v Goldschmidt (1998) 1 All ER 327 at 379. This is because, prima facie, a party to an action is entitled to have it heard in his presence, to dispute his opponent's case, cross-examine his opponent's witnesses, call his own witnesses and give his own evidence.  Grimshaw v Dunbar (1953) 1 QB 408 at 416. Although the defendant pledging his oath to facts which, if proved at trial, could constitute a defence, will usually be sufficient to show that it would be unjust to allow the judgment to stand, if the court concluded that the defendant was lying about the defence and was thus dishonest in raising it, there could be no conclusion that an injustice would result by allowing the judgment to remain. Adams v Kennick Trading (International) Ltd (1986) 4 NSWLR 503 at 507, per Hope JA. The defendant will usually be expected to explain the reason for the failure to take the procedural step which resulted in the judgment. Evans v Bartlam [1937] AC 473 at 482. This information may inform as to whether there is a bona fide defence on the merits and also would need to be taken into account in considering the impact of any prejudice to the plaintiff which may result if the judgment is set aside.

1. The background is as follows.

1. The plaintiff, Jade Holdings Pty Ltd, issued its writ on 16 May 2013.  The writ was endorsed with a claim for $52,270.31 for debt plus interest.  It had attached a statement of claim.

1. In brief summary the statement of claim was as follows:

·     On the following dates Jade Holdings lent to Mr Allison, at his request, the following amounts totalling $50,000:

12/8/12           $12,000

12/10/12         $8,000

3/12/12           $20,000

6/12/12           $10,000.

·     It was agreed that Mr Allison would pay interest at the National Australia Bank overdraft rate of 8.67% on the advances.

·     It was further agreed that the advances were repayable on demand. 

·     Jade Holdings demanded repayment but Mr Allison has not repaid any of the amounts, nor paid any interest.

·     The balance owing, including interest, as at 30/4/13, was $52,270.31.

1. The writ was personally served along with the statement of claim on 22 May.  Mr Allison entered an appearance on 27 May.  Pursuant to r266, he had 21 days from the time limited for appearance to file and deliver a defence.  The time limited for appearance was seven days from service and so the time for the filing and delivery of a defence expired on 19 June.  No defence having been filed and delivered, final judgment in default of defence was entered on 25 June for $52,270.31 plus interest at 8.67% per annum from 1 May 2013 to 24 June 2013.

1. On 16 July a writ of execution issued.  Shortly afterwards, on 22 July, Mr Allison filed his application for an order setting aside the judgment.

1. The evidence as to the failure to file and deliver a defence was not the subject of dispute.  Mr Allison, when he received the writ, attempted to contact his usual lawyer, Mr John White.  Mr White was overseas.  The writ advised that an appearance needed to be entered within seven days of service but contained no notation concerning the need for a defence.  Upon the filing of the notice of appearance Mr Allison believed that he had done all that was needed to protect his position.

1. The application to set aside the judgment promptly followed the issue of the writ of execution.  There was no assertion on behalf of Jade Holdings that an order setting aside the judgment would cause prejudice by reason of delay.

1. Mr Allison does not dispute that he received sums totalling $50,000 from Jade Holdings on or about the dates specified in the statement of claim.  However, he denies that payments to him were loans.

1. Set out below is a summary of Mr Allison's evidence explaining the payments.

1. Mr Ng of Jade Holdings had been involved in dealings with Mr Allison in respect of land at Athleen Avenue, Lenah Valley and land at Melville Street, Hobart.

1. The evidence of Mr Allison concerning the Lenah Valley land was as follows.  Mr Patrick Graham of Launceston owned a subdividable parcel of land at 62 Athleen Avenue.  The company Forest Gardens Estate Pty Ltd, Mr Peter Johnson and Mr Rodney Berry wished to acquire the land and subdivide it with the profits to be divided equally between the three.  There were two issued shares in Forest Gardens owned by the company C K Hill Pty Ltd.  Mr Allison was the trustee of a family trust which had a beneficial interest in one of the shares.  Mr Allison was to receive 50% of Forest Gardens' share of the profit as trustee of his family trust.  Forest Gardens, Mr Johnson and Mr Berry needed to borrow $500,000 to proceed with the project.  Mr Ng agreed to use assets owned by "Jade Superannuation Funds" to secure a loan of $500,000 from the National Australia Bank.  A form of agreement dated 16 April 2011 was prepared by which, for a commission of $10,000 to be paid to Mr Ng, Mr Ng would borrow $500,000 to fund the purchase and the project.  Security for the loan was to be provided by title to the land being put into the name of the entity holding assets for Jade Superannuation.  All outgoings, including mortgage payments, were to be paid by Forest Gardens, Mr Johnson and Mr Berry with the obligations of Forest Gardens guaranteed by Mr Christopher Hill and Mr Allison.  The agreement was signed by Mr Ng on behalf of Jade Superannuation and by Mr Hill and Mr Allison.  However, it was not signed by Mr Johnson or Mr Berry.  Notwithstanding this, Mr Ng remained involved with the proposed purchase and development and agreed to pay to Mr Allison $20,000 for his time and expense in pursuing a subdivision approval.  Mr Allison obtained from the owner of the unsubdivided parcel of land an instrument of transfer dated 20 November 2011 naming Jade Holdings as transferee and specifying that the consideration for the transfer was $375,000.  The transfer to Jade Holdings did not proceed.  By an instrument of transfer dated 22 November 2011, Mr Graham transferred the land to different purchasers for a consideration of $500,000.

1. Mr Allison said in his affidavit of 29 October, at par7:

"Mr Ng and I orally agreed that I would assist in the development by obtaining the necessary development approval and, in return, he (or the Plaintiff) would pay me $20,000 for my time and any expenses I incurred."

1. I now turn to Mr Allison's evidence concerning the Melville Street land.  Forest Gardens was the registered proprietor.  The land included a vacant lot used as a commercial car park.  Mr Allison claimed to be the beneficial owner of the car park.  He said he had lodged a caveat to protect his claimed interest.  He had undertaken work to secure an approval for the land to be developed with the construction of three town houses.  Mr Allison estimated the value of the car park lot to be $600,000.  Forest Gardens and Mr Hill were indebted to Mr Ng.  The debt was settled by Mr Ng acquiring the two issued shares in Forest Gardens from the company C K Hill Pty Ltd.  Mr Ng agreed to pay to Mr Allison $30,000 in part payment towards settling Mr Allison's claim that he was the equitable owner of the car park lot.  Mr Ng had agreed with Mr Allison that, upon the sale of the car park lot, Mr Allison would receive an amount equal to the amount by which the sale price of the allotment exceeded $450,000.  The payments by Jade Holdings to Mr Allison in December 2012 of $20,000 and $10,000 were made by direct credit from a bank account held by Jade Holdings.  The description accompanying the transfers was "Part Payment".

1. Mr Allison's affidavit of 29 October at pars35, 36, 38 and 39 is as follows:

"35Forest Gardens owned a house at 132 Melville Street New Town [sic] with a vacant lot behind it that was used as a paid car park for the public.

36I had an indirect claim to ownership of the car park under an agreement with Mr Hill (which was why I was originally a director), although Forest Gardens was the actual registered proprietor.

…

38Mr Ng agreed to pay me $30,000 to partly settle my indirect claim over Melville Street.

39As to the balance of my indirect claim, Mr Ng has agreed that if I succeed in selling the Melville Street land by November this year, he will give me all the net proceeds above $450,000.  Exhibit 'PFA-7' is a copy of a letter from Jade Holdings to me dated 13 August 2013 in which Mr Ng confirms that agreement."

1. Mr Allison's proposed defence to the claim is attached to his affidavit.  In the defence he denies that the payments by Jade Holdings to him were loans.  In respect of the payments of $12,000 and $8,000 made in October 2012, it is asserted that these were payments in satisfaction of the agreement to pay Mr Allison $20,000 for his time, trouble and expense in pursuing a subdivision approval for the Lenah Valley land.  In respect of the December payments totalling $30,000, the defence claims that these were to be applied to the settlement of Mr Allison's claim to be the beneficial owner of the Melville Street car park lot.

1. Mr Allison's version of events and proposed defence finds some support in the documentary evidence.  In relation to the Lenah Valley land, there is the written form of agreement dated 16 April 2011 and the signed transfer in favour of Jade Holdings dated 20 November 2011, referred to earlier in these reasons.  In relation to the Melville Street land, there is the description on Mr Allison's bank account "Part Payment" in respect of the two payments made by Jade Holdings in December 2012.  There is a letter from Jade Holdings signed by Mr Ng, addressed to Mr Allison, dated 16 August 2013.  The letter confirms that Mr Allison would be given the surplus above a sale price of $450,000 for the Melville Street land.  There is a letter from Forest Gardens' real estate agent, dated 3 October 2013, confirming that the agent would use best endeavours to achieve a selling price which would secure surplus funds for payment to Mr Allison. 

1. Counsel for Jade Holdings submitted that Mr Allison's evidence should be rejected as unintelligible and contrary to an admission he had made that he was indebted to Jade Holdings for the sum of $50,000.

1. It is common ground that Mr Allison's evidence under cross-examination was presented in a disordered and confusing fashion.  Mr Allison's counsel said in his closing submissions that Mr Allison "would have to be the most incoherent and inarticulate witness that anyone could ever have the misfortune to deal with".  This remark was a reference to Mr Allison's limited ability to clearly express himself, rather than a concession that the evidence presented was incapable of comprehension.  Although the way in which the evidence was presented made understanding difficult, it is apparent from the summary which I have given that the evidence was capable of being understood.  It follows that I reject the submission that the evidence should be disregarded as being unintelligible. 

1. The evidence of the admission of the debt relied upon by counsel for Jade Holdings is contained in an affidavit and oral evidence provided by Mr Allison's former solicitor, Mr John Walker.  Mr Walker said that prior to 11 September 2013, Mr Allison had never told him that he owed the money the subject of the claim or judgment to Mr Ng or Jade Holdings.  However, on 11 September, Mr Allison came to Mr Walker's office and said that he wanted to resolve the matter by negotiating time with Mr Ng to pay Jade Holdings.  Mr Allison then left Mr Walker's office.  He came back later that day and advised Mr Walker that the matter had been resolved.  Mr Ng rang Mr Allison while he was in Mr Walker's office.  At Mr Walker's request Mr Ng rang back on Mr Walker's office telephone so that the conversation could be put on speaker for both he and Mr Allison to hear.

1. Mr Ng's version of the conversation is contained in a letter which he sent by facsimile transmission to Mr Walker shortly afterwards on 11 September.  The letter is as follows:

"Mr John Walker,
1A Victoria Street,
HOBART, TAS 7000     (Fax)  September 11 2013

Dear Mr Walker,

Re:  Mr Paul Allison

I refer to our recent speaker phone call between you, Paul and I on the debt Paul Allison owes me.

I will honour the verbal agreement given for Paul to repay the debt within six months.

However, he needs to pay what is owing to my company as the debt stands today plus the legal costs incurred.  At this time I have not calculated the figure for settlement as of today.  I will no longer charge him any interest henceforth on the debt, plus legal costs provided the whole lot is paid within the six month period.

If this is acceptable, please reply to this fax urgently so that I can advise Mr David Gunson to cease acting for me henceforth as I have an appointment with him tomorrow afternoon and the Supreme Court hearing on Friday.

Kind regards,

…………………….

Eddie Yeow Chow Ng"

1. Mr Walker, without first settling the terms of the letter with Mr Ng, then wrote to the Court on 11 September purportedly confirming that the matter had been resolved on the basis that the set aside judgment application listed for hearing on 13 September would be removed from the list.  Mr Ng disputed that removing the set aside application from the list was any part of the agreement.  Presumably, he wanted the set aside application dismissed and the judgment to stand so that it could be enforced in the event that Mr Allison did not make the agreed payment within six months.  On 12 September Mr Ng, on Jade Holdings' letterhead, wrote to Mr Walker.  The letter included the following:

"I feel that it is extremely unreasonable and disappointing to me of your statement, and I quote 'the matter is to be withdrawn from the Supreme Court list on Friday'.  I reiterate that I have never either verbally or in writing that I will not proceed with the hearing tomorrow.  I believe it is wise for me now to rescind the agreement I made with your client in view of your comment quoted above and wait for legal advice I will seek from David Gunson.'  [typographical errors included]

1. Counsel for Jade Holdings submitted that there had been an acknowledgement of the existence of the debt inconsistent with Mr Allison's claim that he had a defence, and that accordingly the denial of the debt was not bona fide and that the matters raised by Mr Allison in support of his set aside application must be taken to have been dishonestly raised.

1. I am not prepared to conclude that Mr Allison was dishonest in the evidence which he gave.  He had a judgment against him for debt and wanted to resolve the matter.  An acknowledgement of the debt for the purpose of buying time to pay the judgment sum is not necessarily inconsistent with a defence being available to Mr Allison if the litigation continued.

1. I do not regard the disordered and confused way in which Mr Allison's evidence under cross-examination was given, combined with the agreement to pay the judgment sum in exchange for time, as justifying a conclusion that Mr Allison's evidence in support of his proposed defence was dishonestly given.  Accordingly, I will not disregard as dishonest Mr Allison's evidence as to the existence of a defence. 

1. The negotiation of 11 September was relied upon by counsel for Mr Allison to support a proposition that an agreement had been reached which amounted to an accord and satisfaction upon which Mr Allison could rely as a ground of defence to the claim.  I reject the submission.  The only non-executory satisfaction which could exist would be a promise to pay or a promise not to dispute the judgment. There is no evidence that Mr Allison promised to pay the judgment debt within six months.  The only evidence is that Mr Ng agreed to give six months for payment.  If there is evidence of an accord or satisfaction based upon a promise by Mr Allison not to dispute the judgment such an agreement would not provide a ground for setting aside the judgment. 

1. Upon the material placed before the Court, I am satisfied that there is a real likelihood of injustice to the defendant if the judgment is left to stand.  Mr Allison's failure to take the procedural step which resulted in the entry of the judgment was accidental.  He has shown that there is a chance that he might successfully resist the claim at trial.  It follows that Mr Allison would suffer an injustice if deprived of a trial because of his accidental failure to take the procedural step which resulted in the entry of the judgment.

1. There will be an order setting aside the judgment.