Jansen v Salisbury Wrought Iron Works Pty Ltd - [2007] SASC 73

SUPREME COURT OF SOUTH AUSTRALIA
(Magistrates Appeals: Civil)
JANSEN & ANOR v SALISBURY WROUGHT IRON WORKS PTY LTD & ANOR
[2007] SASC 73
Judgment of The Honourable Justice Anderson
8 March 2007
MAGISTRATES - JURISDICTION AND PROCEDURE GENERALLY - PROCEDURE - ORDERS AND CONVICTIONS - SETTING ASIDE AND AMENDMENT
Appeal against a decision of a Magistrate to set aside a default judgment - whether the judgment had been entered - whether Magistrates Court (Civil) Rules 1992 (SA) r 87 applies irrespective of who was the defaulting party - whether Magistrates Court (Civil) Rules 1992 (SA) r 104 can be used to set aside a default judgment.
Held: judgment had been entered onto the Court record - r 87 not available to first respondent - r 104(1)(b)(ii) applicable - matter remitted to Magistrate for further consideration.
Acts Interpretation Act 1915 (SA) s 3, s 19; Worker's Liens Act 1893 (SA), s 7(2); Magistrates Court (Civil) Rules 1992 (SA), rr 2, 87, 104; Magistrates Court Rules 1992 (SA), r 3.03; Magistrates Court Act 1983 (SA), referred to.
Driver v Driver [1950] SASR 8; Cavanagh-Lang v O'Callaghan [2000] SASC 187, applied.
SA Repairs & Painting Pty Ltd v Trenka Pty Ltd (1993) 171 LSJS 300; Harrison v Harrison [1955] Ch 260, considered.

JANSEN & ANOR v SALISBURY WROUGHT IRON WORKS PTY LTD & ANOR
[2007] SASC 73
Background Facts

Salisbury Wrought Iron Works Pty Ltd (Salisbury) issued proceedings in the Magistrates Court against Jacobus and Barbara Jansen and Tony Quinlan trading as Quinlan Clay. Salisbury sued for money due and owing for the supply and erection of “Structural Steel Super Structure” at 1 Davey Crescent Seaview Downs.
Tony Quinlan is the first defendant in the Magistrates Court action. He was allegedly the Project Manager and designer of the project or alternatively a building contractor in his own right. He denies any indebtedness to Salisbury and says that the second and third defendants are liable to pay Salisbury direct.
The Jansens are the second and third defendants in the action in the Magistrates Court. They were the registered owners of the land at 1 Davey Crescent Seaview Downs and it is alleged that they entered into a contract for the provision of services and materials from Salisbury.
Fabricated steel was supplied by Salisbury, at the request of Quinlan for the purpose of construction on the land. The steel was not paid for. The value of the steel supplied was $26, 590.30.
On 7 March 2006 Salisbury served each of the defendants with Notices of Demand pursuant to s7(2) of the Worker's Liens Act 1893 (SA).
On 14 March 2006 Salisbury registered a lien over the land as security for the payment of the sum of $26, 590.30.
On 29 March 2006 the Jansens entered a defence denying indebtedness to the plaintiff.
On 30 March, Tony Quinlan provided by way of letter, a denial of his indebtedness on the basis that the Jansens were to pay the plaintiff direct.
On 16 June 2006 default judgment was entered against Quinlan in the Magistrates Court. The judgment was entered on the basis that Quinlan had not attended the Conciliation Conference held on that day as required by Magistrates Court (Civil) Rules 1992 (SA) rule 101("MCR r 101"). Appearances were recorded for Salisbury and also for the Jansens.
On that day the Magistrate made an order in these terms:
Plaintiff to have default judgment as against the first defendant in the sum of $26, 590.30 plus $149 court fees, $1169.97 solicitor’s fees plus today’s attendance and that on 24/4/06 at $80 each. As between plaintiff and second defendant and third defendant, second and third defendants to have leave to file an amended defence and counterclaim within 21 days. Upon completion of those proceedings parties to complete discovery as between themselves within 21 days thereafter. Adjourned to conciliation conference on Friday, 28 July 2006 at 10:15am. As between the plaintiff, the second defendant and the third defendant, costs in the cause. As between the plaintiff and the first defendant order plaintiff is at liberty to enforce the statutory charge. (My underlining.)
The Jansens filed a further defence on 28 July 2006. At a later date further particulars of defence and particulars of set-off and counterclaim were also filed. Trial dates were confirmed at this point in time.
A further document entitled “Further Amended Defence and Counterclaim of the Second and Third Defendants” is on the Magistrates Court file. It is referred to in an affidavit of Mr Cleland who acted for the Jansens, sworn on 13 October 2006. In the Further Amended Defence and Counterclaim it is asserted at [12]:
On 16 December 2006 His Honour Mr Kleinig SM granted judgment to the plaintiff against the first defendant in the within action for the entire amount of the plaintiff’s claim plus costs on 16 December 2006.
That judgment was recorded by the Court on 16 June 2006:
As a result of the entry of judgment by the plaintiff against the first defendant the plaintiffs cannot, as a matter of law, proceed with its claim against the second and third defendants.
On 13 October 2006 the Jansens filed a further application seeking leave to further amend their defence, and that Salisbury's claim be dismissed and an order cancelling the lien over the property owned by the Jansens and other ancillary orders. This was made specifically returnable for 25 October 2006. On 25 October 2006, before Magistrate Kleinig, Counsel for Salisbury handed up submissions and foreshadowed an oral application to have the default judgment set aside. The Magistrate ordered that the Jansens' further application and Salisbury's oral application should be heard by a different Magistrate on 31 October 2006.
The application to set aside judgment
The learned Magistrate appealed from heard the Jansens' further application and also heard Salisbury's oral application. At the conclusion of submissions, the Magistrate indicated that he preferred the argument advanced on behalf of Salisbury. He ordered that the default judgment which Salisbury obtained against the first defendant, be set aside. The learned Magistrate later published his reasons on 3 November 2006.
The Magistrate appealed from found that he had jurisdiction to order that the default judgment be set aside on the basis that MCR r 87(1) gave him power to do so. The learned Magistrate appealed from said at [15]:
Rule 87(1) gives the court power to set aside or vary a judgment (not being a final judgment). With respect, I disagree with Mr Jenner’s submission that Rule 87 in its terms is clearly directed to an application by a party against whom judgment has been obtained. In making that submission he relies upon the mandatory requirements in Rule 87(2). The provisions of that sub-section are obviously directed towards the defendant against whom a judgment has been entered. In my view, however, there is no reason to read down the more general provisions of Rule 87(1) because of this. The important thing to remember is that this was not a final judgment. As such, it enlivens the discretion vested in the court by Rule 87(1). It is also probably the case that the court as a court of record has an inherent jurisdiction to set aside a judgment, which is not a final judgment. This is one of those rare cases where the party in whose favour the judgment was entered seeks to set it aside. The principle envisaged by Rule 87(1), however remains the same.
The learned Magistrate went on at [19] to state:
I find that I have the jurisdiction to set aside the judgment should the circumstances demand that in the exercise of discretion. I find that the circumstances clearly demand that the judgment be set aside. Mr Winter freely admits that he was at fault in not realising the ramifications of obtaining a judgment against one defendant.
MCR r 87 provides that:
(1) The Court may set aside or vary a judgment (not being a final judgment).
(2)The Court must not set aside such a judgment unless the party seeking to set it aside establishes that he or she-
(a) has an arguable case on the merits; and
(b) has a reasonable excuse for not having complied with these rules, or an order of the Court, or any time limit fixed by these rules, or an order of the Court, in respect of the action or proceeding.
(3) When setting aside a judgment the Court may order –
(a) payment to the other party of costs thrown away
(b) payment or security under rule 81.

In essence the judgment precludes Salisbury from obtaining judgment against the Jansens as the default judgment awarded against the first defendant was for the entirety of the monetary sum claimed. If the action was to proceed, the statement of claim would need to be amended to plead joint or several liability and it has been foreshadowed that the Jansens would seek to amend their defence to plead merger.
The Appeal
The Jansens are appealing the decision to set aside the default judgment. The Magistrate appealed from refused to grant leave. However, Sulan J granted leave on 3 November 2006 and ordered that a notice of appeal be filed. The grounds of appeal were later amended to include additional grounds, as the reasons of the Magistrate appealed from had not been published at the time when the leave to appeal application was heard.
The notice of appeal was filed on 8 November 2006. I heard argument on 31 January. Mr Jenner appeared on behalf of the Jansens. Mr Winter appeared on behalf of Salisbury and Mr Quinlan appeared in person. Mr Quinlan, until this point, had not had any active role in this matter, either in the Magistrates Court or in the Supreme Court.
The appeal raises three important matters in the context of the practice and procedure in the civil division of the Magistrates Court. They are contained within the various grounds of appeal.
They are:
1.Whether Magistrates Court (Civil) Rules 1992 (SA) rule 87 (“MCR r 87”) applies irrespective of who was the defaulting party?
2. What is the status of the default judgment?
3.Whether Magistrates Court (Civil) Rules 1992 (SA) rule 104 (“MCR r 104”) can be used to set aside the default judgment?
Magistrates Court (Civil) Rule 87
The Jansens argue that the Magistrate erred as a matter of law, in finding that Salisbury could succeed in its application under MCR r 87 and set aside the default judgment entered. The Jansens submit that MCR r 87(2) has codified two elements to be considered by the Court when deciding an application to set aside a default judgment. In particular, it is submitted that MCR r 87 (2) makes it clear that the rule is applicable to any party against whom default judgment has been obtained. The terms of MCR r 87(3) give a similar indication.
Mr Winter submitted that the relevant issue in relation to MCR r 87 is effectively whether, as a matter of interpretation, MCR r 87(1) can stand on its own or whether MCR r 87(1) must be read in the context of MCR r 87(2). Mr Winter conceded that is probable that the correct approach to the interpretation of the rules is to consider the various sub-rules and to interpret MCR87 in its entirety. Mr Winter submitted that whereas the Magistrate found that MCR87 (1) was sufficiently broad to allow him to set aside the judgment, the proper interpretation is a question of law yet, to be determined.
MCR r 87 applies to judgments, which are not final. It is conceded that the default judgment in this case is not a final judgment. In SA Repairs & Painting Pty Ltd v Trenka Pty Ltd (1993) 171 LSJS 300, the question to be decided was whether a default judgment obtained as a result of one party’s failure to appear at trial was a final judgment. Mulligan J considered the application of MCR r 87. In his reasons, Mulligan J observed, at 302, that:
However, the discretion to set aside a judgment as provided by R.87 cannot be exercised in that way unless the party making the application has passed both of the threshold tests set out in R87 (2). Upon doing so, the Court must exercise its discretion.
It appears that MCR r 87 is limited in its application by MCR r 87(2) which sets out the conditions which must be made out before the Court may exercise its power pursuant to MCR87 (1). As I see it, the difficulty, which Salisbury faced in its application to have the default judgment set aside, is contained within MCR87 (2)(b). The wording of the sub-rule is such that it appears that only a party against whom a default judgment has been entered, would be able to show “reasonable excuse for not having complied with the rules". The learned Magistrate appealed from, in his reasons stated that he did not believe that there was a reason to read down the more general provisions of MCR r 87(1) because of MCR r 87(2). He stated at [15] that:
The important thing to remember was that this was not a final judgment. As such, it enlivens the discretion vested in the court by Rule 87(1).
I do not agree with this analysis. The criteria set out in MCR r 87(2) are conditions precedent to the exercise of the discretion. They must be clearly established by the party making the application. I do not believe that Salisbury can succeed in its application pursuant to this rule. That is because Salisbury is not in a position where it can possibly argue that it has a reasonable cause for not having complied with the rules. It was Mr Quinlan who was in that position. In my opinion, the Magistrate erred in ordering that the default judgment be set aside pursuant to MCR r 87. Salisbury, to use the words of Mulligan J, cannot pass the “threshold test” of MCR r 87(2)(b).
What is the status of the default judgment?
Mr Jenner submitted that the learned Magistrate had correctly found at [18], of his reasons, that the judgment ordered on 16 June 2006 had been entered into the record of the Court. This issue arose in the context of the oral application to set aside the default judgment under MCR r 104(1)(a). He submitted, that for all relevant purposes in the Magistrates Court, entry of judgment is the same as affecting it in the Supreme Court or District Court and thus, it could not be set aside.
The judgment of 16 June 2006 was pronounced by the learned Magistrate, recorded on the pink slip on the file, signed by the Magistrate and then finally entered onto the Court electronic record by registry staff. A Copy of Record was provided and exhibited to the affidavit of Mr Cleland. It is certified a true and correct copy of the record of the court. Mr Winter submits that the learned Magistrate erred in finding that the judgment had been entered. He submits that, as his client, Salisbury, has taken no action in relation to the judgment since it was pronounced, the judgment cannot be considered to have been entered. In essence, he submits that some further act should have taken place if the judgment is to be deemed to have been entered. In particular, he argues that the judgment has not been sealed and no Certificate of Judgment has been requested or issued. Mr Winter relies on the commentary in Lunn’s Civil Procedure South Australia, which observes, at 84,165, that traditionally a judgment or order is entered when it is sealed in the Registry in the form settled by the Registrar.
In general, an order pronounced by a judge, whether in open court or in chambers, can always be withdrawn, altered or modified by the judge, either on his or her own initiative or on the application of a party, until such time as the order has been drawn up, passed and entered. (See Harrison v Harrison [1955] Ch 260). This principle has been adopted by this Court in Driver v Driver [1950] SASR 8 and more recently in Cavanagh-Lang v O’Callaghan [2000] SASC 187. In Driver, Napier CJ pointed out that pronouncing a judgment is not entering it. Something must be done which will constitute the Court record, although the judgment will take effect from when it was passed and entered.
The Magistrates Court procedure for entering judgments should be distinguished from that of the District Court and the Supreme Court of South Australia. There is no obligation pursuant to either the Magistrates Court Act 1983 (SA), Magistrates Court (Civil) Rules 1992 (SA) or the Magistrates Court Rules 1992 (SA) for a default judgment to be sealed. The Magistrates Court Rules 1992 (SA) are rules, which provide for the general practice and procedure in the Magistrates Court. These should be distinguished from the Rules, which provide specifically for the procedure in the civil division of the Magistrates Court. Rule 3, in the general rules, provides that the Court shall have a seal and further r 3.03 provides that it shall be fixed on such processes or orders issued out of the Court as the Chief Magistrate shall direct.
The appellant submitted that no such direction has been given by the Chief Magistrate in respect of the sealing of judgments. Indeed, the commentary in Lunn's Civil Procedure South Australia, at 80,076, suggests that the Chief Magistrate may in fact direct that documents be authenticated by specified electronic means in lieu of the seal. In the alternative, Mr Jenner submits that MCR r 4 acts as the default position, and provides that it is not necessary to draw up an order “unless the Court orders otherwise.
I agree with the Magistrate in his finding that the judgment had been entered. The Magistrates Court is a Court of record. There is no obligation for the default judgment to have been sealed or drawn up. The appellant produced a copy of the electronic record, which indicates that default judgment was entered against the first Defendant. The pink slip contained on the Magistrates Court file, contains the orders made and is signed by the Magistrate. It is my opinion that the judgment was recorded on the Court records either, when it that was entered and recorded on the endorsement/pink slip or onto the electronic record. If a Certificate of Judgment was obtained, by either of the parties, it would simply “perfect” the judgment obtained and allow for it to be enforced. The fact that a Certificate of Judgment was not obtained does not affect the entry of judgment.
Magistrates Court (Civil) Rule 104
In the oral application made by the plaintiff before the Magistrate appealed from, much of the debate centred on the question of whether the default judgment could be set aside pursuant to MCR r 104(1)(a). In the reasons given the learned Magistrate appealed from stated at [18] that:
I therefore find that judgment has been entered in this matter. That, however, is not the point. The crucial point is that it was never and could never become a final judgment because it does not fit the definition of that term. It may be arguable that the judgment is not ‘entered’ in the Magistrates Court until such time as the party seeking to enforce it asks for a certified copy of the judgment from the registry. On balance, I think that this is not the case and that on the facts of this case the judgment has been entered here. Therefore Rule 104(1)(a) is of no assistance to the plaintiff.
I agree with learned Magistrate that judgment had been entered. However, I believe that the judgment can be set aside on the basis of MCR r 104 (1)(b)(ii). Mr Jenner submitted that MCR 104 is limited to the setting aside of final judgments. The judgment, in this case, was obtained by the default of appearance of Tony Quinlan and as a result is not a final judgment. At the time that judgment was pronounced, Counsel for Salisbury did not appreciate the relevant implications, namely, that the entry of judgment may have foreclosed any ability to further proceed against the Jansens.

Mr Jenner, in his submissions, acknowledged that section headings do not form part of an Act, subject to any express provision to the contrary. (See s 19(2)(a) of the Acts Interpretation Act 1915 (SA)). Further, for the purpose of interpretation, the Magistrates Court (Civil) Rules 1992 (SA) should be interpreted consistently with the Acts Interpretation Act 1915 (SA) (See s 3A of the Acts Interpretation Act 1915 (SA)).
The rule itself does not make use of the words "final judgment". It provides:
104 (1) The Court may vary or set aside a judgment –
(a) before it is entered; or
(b) after it is entered –
(i) if the judgment was obtained by fraud;
(ii) if the judgment does not reflect the intention of the Court;
(iii) if the parties consent; or
(iv) if it was obtained consequent upon any irregularity.
(2) clerical mistake in a judgment, or an error arising in it from a slip or omission may at any time be corrected by the Court, or the Registrar at the direction of the Court.
MCR r 2 provides definitions for the Magistrates Court (Civil) Rules 1992. Judgment is defined within this rule as “a judgment, declaration, decree, decision or order of the Court disposing of an action, and includes an interlocutory judgment or order". On its face, it would seem that there is an inconsistency between the section heading and the words used in the rule itself.
Looking at both MCR r 87 and MCR r 104 it seems that MCR87 was intended to operate specifically for the purpose of setting aside default judgments, which are not final judgments. However, I interpret MCR r 104 (1)(b)(ii) and MCR r 2 as allowing the rule to be used to set aside a judgment, including an interlocutory judgment, if it does not reflect the intention of the Court. It is accepted that interlocutory judgments are more likely to be set aside than others.
CONCLUSION
It seems to be obvious from the order made by the learned Magistrate that the default judgment was not meant to finally dispose of the action even though the judgment entered was for the total monetary amount claimed. In addition to ordering that default judgment be entered against Tony Quinlan, the Magistrate ordered that the second and third defendant’s have leave to file an amended defence and counterclaim within 21 days. This is inconsistent with an intention to finally dispose of the action. It was not the intention of the Court to achieve the result contended for by Mr Jenner, namely, that the entry of judgment against Quinlan should prevent Salisbury proceeding against the Jansens.
I consider that the argument put to me by Mr Jenner is to a large extent hypothetical. I say this because it appears that Mr Quinlan, through an affidavit which he filed and which was tendered in the appeal, has the ability to make an application under MCR r 87.
If Mr Quinlan makes such an application then the interpretation of MCR r 104 in the circumstances of this matter will become an academic exercise.
I believe that justice would be achieved by referring the matter back to the learned Magistrate to deal with according to my reasons. I would give Mr Quinlan 21 days from the date of these reasons to apply to set aside the judgment. As I have indicated he has intimated through his affidavit that he has a genuine defence because he says he was acting as the agent of the Jansens. On the face of it that would seem to give him an arguable case and, moreover, he puts forward an excuse which again, on the face of it appears reasonable. This would enable him to qualify, to apply to set aside the judgment under MCR r 87.
I am therefore allowing Mr Quinlan the opportunity of taking out an application under MCR r 87 which should be heard and determined by the Magistrate.
If Mr Quinlan does not apply under MCR r 87 then I indicate that the Magistrate has the power to deal with this matter pursuant to MCR r 104 for the reasons which I have given. The matter is therefore remitted to the Magistrate for further hearing and determination.
I will hear the parties as to the cost of the appeal.