Jender Pty Ltd v Flood Emergency Services Group Pty Ltd

IN THE SUPREME COURT OF VICTORIA

Not Restricted

AT MELBOURNE

COMMON LAW DIVISION

JUDICIAL REVIEW AND APPEALS LIST

S ECI 2019 04873

JENDER PTY LTD (formerly known as DAVIS GLASS PTY LTD) (ACN 006 612 577)	Plaintiff
v
FLOOD EMERGENCY SERVICES GROUP PTY LTD (ACN 166 955 193)	First Defendant
MAGISTRATES’ COURT OF VICTORIA	Second Defendant

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JUDGE:	Daly AsJ
WHERE HELD:	Melbourne
DATE OF HEARING:	2 September 2020
DATE OF JUDGMENT:	29 April 2021
CASE MAY BE CITED AS:	Jender Pty Ltd v Flood Emergency Services Group Pty Ltd
MEDIUM NEUTRAL CITATION:	[2021] VSC 212

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JUDICIAL REVIEW – Application pursuant to Order 56 of the Supreme Court (General Civil Procedure) Rules 2015 (Vic) to quash a magistrate’s decision to dismiss an application for rehearing and to set aside default judgment – Whether there was an error on the face of the record – Whether the decision was unreasonable – Minister for Immigration and Citizenship v Li (2013) 249 CLR 332 referred to and applied; Minister for Immigration and Border Protection v Stretton (2016) 237 FCR 1 referred to; Gunns Finance Pty Ltd (R & M Appntd) (In Liq) v Storey [2014] VSC 260 referred to – Whether the magistrate failed to provide adequate reasons – Makeham v Sheppard [2020] VSCA 242 referred to – Application for judicial review granted.

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APPEARANCES:	Counsel	Solicitors
For the Plaintiff	Mr M Clarke QC with Mr J Lipinski	Wisewould Mahony
For the Defendants	Mr A Aleksov	Snowton Saje

HER HONOUR:

Introduction and Background

In 2017, the plaintiff in this proceeding (‘Jender’), then known as Davis Glass Pty Ltd, operated a wholesale glass products business (‘business’) out of premises located at 156 Melrose Drive, Tullamarine (‘premises’). The director of Jender at all relevant times was Mr Derek Clayton.

On or about 25 October 2017, Jender entered into an agreement to sell its business (‘business’), including the business name “Davis Glass” to Rick Saunders and Clint Milner or their nominee (‘sale agreement’).

Davis Glass 1 Pty Ltd (‘Davis Glass 1’) was incorporated on 19 January 2018. The directors and shareholders of Davis Glass 1 are Mr Saunders and Mr Milner.

On 18 March 2018, the sale was completed. Prior to settlement, Mr Saunders and Mr Milner nominated Davis Glass 1 as the purchaser under the sale agreement. Settlement was effected by Jender handing over the assets of the business to Davis Glass 1 and vacating the premises. Davis Glass 1 entered a new lease in respect of the premises commencing on 1 April 2018.

Following the settlement of the sale, neither Jender nor Mr Clayton had any involvement in the management of the business. Jender has no employees, and is, for present purposes, dormant.

On 22 November 2018, Ms Connie Budd, an employee of Davis Glass 1, engaged the defendant in this proceeding, Flood Emergency Services Group Pty Ltd (‘FES’), to attend the premises and perform flood restoration and remediation services. Ms Budd was an employee of Jender prior to the purchase of the business by Davis Glass 1.

On 22 November 2018, Ms Budd sent an email to Mr Bill Strong of FES, which stated as follows:

Hi Bill,
Further to our conversation please go ahead and get things organised for the drying of the carpet in the offices and hallways.
As discussed I will turn on the equipment tonight before I leave and will get Rick (the owner of the company) to give you a call tomorrow to advise which way he wants to go either through Insurance to get the carpets replaced or just hire the equipment until the carpets are fully dried.
Our office hours are 7.45 to 4.00pm Monday to Friday.
I appreciate your help.
Thanks
Connie Budd
Office Administrator
Davis Glass Pty Ltd

On 19 December 2018, Mr Strong sent an email to Ms Budd (’19 December email’), which stated, in part, as follows:

Hi Connie,
Please find attached reports and invoice for flood restoration works. We apologise for the delay, there have been many unexpected storm events these last 4 weeks and the office staff are working overtime.
Please email these to your insurance company immediately since you are the policy holder!
Payment is due in 30 days of this email, so please follow this up weekly with your insurance in order for it to get paid in time and avoid out of pocket costs to you.

The invoice attached to the 19 December email is not in evidence, but was in the amount of $3,908.36.

On 15 January 2019, Ms Budd forwarded the 19 December email to Mr Saunders at the email address [email protected].

On 15 January 2019, Mr Saunders sent an email to Mr Strong, which provides as follows (’15 January email’):

Hi Bill,
as stated, this job is not going through insurance.
please provide an invoice that covers the reasonable costs of the equipment used to evaporate water only.
Thanks,
Rick Saunders
Director
Davis Glass Pty Ltd

On 19 April 2019, Mr Strong sent an email to Mr Saunders stating that the invoice was overdue and that, if the amount due under the invoice was not paid within seven days, FES’s legal team would be engaged to recover the outstanding debt.

On 3 May 2019, a letter of demand addressed to Davis Glass Pty Ltd was apparently emailed to Ms Budd. Neither the letter of demand or any response was in evidence in this proceeding.

The Magistrates’ Court proceeding

On 27 May 2019, FES commenced a proceeding in the Magistrates’ Court at Melbourne,[1] seeking payment of $3,908.36 (‘Magistrates’ Court proceeding’).
[1]Proceeding No. K11346760.

On 3 June 2019, the complaint, FES’s statement of claim and two draft notices of defence[2] were served on Jender at its registered address.
[2]As required by r 8.03(1) of the Magistrates’ Court (General Civil Procedure) Rules 2010 (Vic) (‘Rules’).

On 5 June 2019, Mr Clayton sent an email to Mr Strong of FES, which stated as follows:

As per my recent call I would appreciate you informing your solicitor to issue proceedings against the correct companies and in the future to do his due diligence more thoroughly.
As Davis Glass P/L was sold in March last year to the new owners i.e. Davis Glass 1 P/L 156 Melrose Dr, Tullamarine, Director Rick Saunders.
Regards, Derek Clayton (former director)

On 5 June 2019, Mr Watson-Jones, a director and the principal of the solicitors for FES, Snowton Saje, sent an email to Mr Clayton, which stated as follows:

Looks like you have a problem champ
See the attached.
BTW
-Davis Glass Pty Ltd was not sold in March last year. The business may have been but the company was not.
-The records of ASIC have you as still being a director of Davis Glass Pty Ltd and not a former director as you claim below.

Have another go.

On 5 June 2019, Mr Clayton sent an email in reply to Mr Watson-Jones, which stated as follows:

You obviously have not read my email, the company that owes you the debt is DAVIS GLASS 1 P/L and not Davis Glass P/L – I would be looking for a new if [sic] I was you!! Do a search on Davis 1 you idiot

On 5 June 2019, Mr Watson-Jones sent a further email to Mr Clayton, as follows:

You obviously have not read the attachment to my last email.
We were engaged by Connie who identified herself as the Office Administrator at Davis Glass Pty Ltd.
The domain name of is still registered to Davis Glass Pty Ltd.
You can engage in name calling or you can sort out an issue that is going to cost you more than the invoice amount to sort out.
If I were you I’d start by calling the people you allegedly sold the business to and tell them to stop representing that the business is run by Davis Glass Pty Ltd (if that is true).
Otherwise, file a defence.

On 5 June 2019, Mr Clayton sent an email in reply to Mr Watson-Jones, as follows:

You still don’t get it, I am still a director in Davis Glass but not in Davis Glass 1 (one) a separate company and the one that hired Flood Emergency Services and owes you the money – wish you luck in getting me to pay their debts.

On 5 June 2019, Mr Watson-Jones replied to Mr Clayton, as follows:

Mate,
I get what you’re saying.
As I told your accountant this morning, you just need to prove it I.e. incur the costs of filing a defence and participating in the Court proceeding.
We had a proper basis to commence proceedings against Davis Glass Pty Ltd and you’re entitled to defend the claim.
It will come out in the wash but between you and Davis Glass 1 Pty Ltd someone is paying our client’s invoice and our client’s legal costs, which keep increasing with every dismissive email you send.

On 5 June 2019, Mr Clayton replied to Mr Watson-Jones, as follows:

I don’t have to prove anything, you have to prove that Davis Glass P/L owes you the money – just do your bloody job and stop wasting your time – and mine! Good luck

On 6 June 2019, Mr Watson-Jones sent an email to Mr Saunders (forwarding the 15 January email – see paragraph 11 above), which stated in part as follows:

Rick,
Your signature below and Connie’s signature below refer to Davis Glass Pty Ltd.
My client, Flood Emergency Services Group Pty Ltd has sued Davis Glass Pty Ltd for non-payment of its invoice.
Attached is the Magistrates’ Court of Victoria claim.
If your email signature is wrong then I think you owe Derek Clayton an apology and should quickly pay our client’s invoice and the legal costs before the legal costs exceed the amount of the invoice.
The amount to be paid is $4,895.16 comprised of $3,908.36 plus costs of $986.00.

On 6 June 2019, Mr Saunders sent an email to Mr Watson, which stated as follows:

Rawe [sic],
Your email thread with Derek was forwarded. I suggest you take responsibility for your actions and apologise to Derek yourself.
Per my email to your client, we believe the invoice does not reasonably reflect the level of work/service carried out.
The service/actions by your client are purely intended to over service/over charge to defraud insurance companies.
Their actions are not ethical and not legal.
If you wish to take legal action against the correct entity, you will receive a legal response immediately and we will forward all legal costs to your client.
If they wish to avoid this, provide a new invoice that covers the reasonable costs of the equipment hire.
Rick

On 1 July 2019, FES obtained judgment against Jender in the Magistrates’ Court proceeding for the sum of $5,024.11 (‘judgment’) in default of Jender filing a defence, and served a statutory demand for the amount of the judgment upon Jender.

On 17th July 2019, Jender’s solicitors, Wisewould Mahony, wrote to Snowton Saje setting out the background to the sale of the business and the history of the correspondence between the parties. This letter stated, among other things, as follows:

Notwithstanding the form or any signature used by Mr Saunders, in which he also purports to sign as a director, a proper search of company records before proceedings were issued would have shown that he is not a director of our client.
Moreover on 2 June 2019, he informed you that you have sued the wrong company, yet your client has proceeded to issue a statutory demand which bears your signature, on our client.
It is clear that the judgment entered against our client is irregular. Further it is evident that no reasonable steps were taken to identify the proper defendant. Mr Saunder's email signature is not conclusive as any search of our client would have shown that he is not a director. After you were made aware you proceeded to serve a statutory demand on our client. There can be no reasonable explanation for doing so. Indeed, your client ought to have notified our client of its mistake and have taken steps to remove the judgment.
As matters stand, your client has no justification for taking any steps against our client. As its solicitor, you may also be personally liable for the steps taken against our client. We refer to you to Gabelich v Donahey [2018] VSC 184 regarding a solicitors’ liability for costs for issuing a claim the client was not entitled to.
Unless, your client confirms by 4.00pm tomorrow that it withdraws the statutory demand and issues an application to the court to set aside the judgment and pay our client’s reasonable legal costs, our client will, itself, apply to the court and seek costs against your client and you as its practitioner on an indemnity basis pursuant to R63.23 and further seek a special order under the Civil Procedure Act for damages.

Subsequent correspondence failed to resolve the dispute between the parties, with FES maintaining its position that the judgment was regularly obtained, and as such, there was no genuine dispute about the existence and quantum of the debt referred to in the statutory demand.

The Supreme Court proceeding

As noted above, on 3 July 2019, FES served a creditor’s statutory demand upon Jender for the sum of $5,024.11 in reliance on the judgment (‘statutory demand’). FES refused to withdraw the statutory demand on the basis that the judgment had not been stayed or set aside, and Snowton Saje stated that any application to set aside the statutory demand would be vigorously opposed.

On 23 July 2019, Jender commenced a proceeding in this Court, seeking orders setting aside the statutory demand (‘Supreme Court proceeding’).[3]
[3]S ECI 2019 03315.

On 31 July 2019, Jender filed an application in the Magistrates’ Court to set aside the judgment and have the claim against Jender be dismissed or alternatively reheard (‘rehearing application’). By reason of the rehearing application, the operation of the judgment was stayed pursuant to s 110(4) of the Magistrates’ Court Act 1989 (Vic) (‘Magistrates’ Court Act’).

On 14 August 2019, Gardiner AsJ made orders in the Supreme Court proceeding to the effect that, provided that Jender paid the sum of $5,024.11 into Court, the statutory demand be set aside pursuant to s 459J(1)(b) of the Corporations Act 2001 (Cth). Jender subsequently paid that sum into Court.

At the hearing of the Supreme Court proceeding, his Honour had the following exchange with Mr Watson‑Jones:

HIS HONOUR: I agree that you have issued a proceeding relying on contemporaneous email headers, what else have you got to go from, and you’ve issued proceeding but along the time line you’ve been informed by a party who says that ‘We’re liable for this but, by the way, good luck, go jump’.
MR WATSON-JONES: Yes.
HIS HONOUR: The question is was it reasonable for you to enter that judgment in the knowledge of that intrigue without further investigating that issue?
MR WATSON-JONES: We say ---
HIS HONOUR: Instead, you enter the judgment, you don’t sort out the intrigue between Pty Ltd [Davis Glass] and No. 1 [Davis Glass 1], you proceed to enter the judgment.
MR WATSON-JONES: We say that’s not a matter for this Court to determine and ultimately it’s also not – it will be a matter for the Magistrates’ Court to determine.
HIS HONOUR: But, Mr Watson-Jones, it’s relevant on the question of costs.

His Honour said further:

HIS HONOUR: The Magistrate – I don’t want to do anything about, make any comment whatsoever as to what the outcome of the application in the Magistrates’ Court might be, but your friend has described the ingredients for an application to set aside the judgment, which, on their face, are plausible but I don’t make any more comment than that.
MR WATSON-JONES: What I would say is that point where we would have any basis to accept assertions from the now plaintiff would be when they filed their application to set aside the demand because prior to that stage there is no contract.
HIS HONOUR: But – I would agree with you except for the intervention of the director of No. 1 communicating with you.
MR WATSON-JONES: Yes. And so when you look at ---
HIS HONOUR: Because why should you accept the say so of the director of Pty Ltd to say ‘Well, don’t look at us’.
MR WATSON-JONES: Yes.
HIS HONOUR: ‘Look at No. 1’ because as a solicitor involved in collection of debts you would get that every day, people saying ‘Don’t look at me; look at someone else’.
MR WATSON-JONES: All the time.
HIS HONOUR: But this this different because you’ve been told by someone who’s against their interest to say so that ‘We’re liable for it and, by the way, you know, you sort it out’.

His Honour also said:

HIS HONOUR: Can I tell you the most powerful thing that the other side have got going for them, it’s the fact that you received a communication from Rick on June 6 which should have excited your curiosity in and caused you to have pause about whether you should have entered judgment and whether you should have issued a statutory demand. That’s what it really boils down to.

His Honour said further:

HIS HONOUR: Yes, but, see, the plaintiff bears the onus of establishing on the balance of probabilities that the debt is owing.
MR WATSON-JONES: Yes, and what we did is filed [sic] an application for default judgment.
HIS HONOUR: That’s right.
MR WATSON-JONES: Not a determination of the issues, but a default judgment.
HIS HONOUR: But with an awareness of being told things by this ungentlemanly fellow called ‘Rick’, who’s sending quite insulting communications and saying ‘Well, you’ll receive a legal response immediately if you take action against the correct party’. Now, that’s enough to give one reasonable pause I think, Mr Watson-Jones.
Now, what I’m presently dealing with is an application as to whether the demand should be set aside on a 469J(1)(b), and I don’t think, frankly – I think that the plaintiff has got a very strong case about that, but that doesn’t mean that’s the end of the matter because I won’t make such an order unless the money is paid into court to show their bona fides.

The rehearing application

On 28 August 2019, a magistrate heard and refused Jender’s rehearing application. At the start of the hearing, the learned magistrate stated, uncontroversially, that in order to have the judgment set aside, Jender had to establish that there was a good reason for not filing the defence in time, and the existence of a meritorious defence.

During the course of the hearing, the learned magistrate made the following observations:

(a) FES was not required to take at face value the statement of Mr Saunders to the effect that Davis Glass 1 was the proper defendant to the proceeding prior to entering judgment against Jender;

(b) there is no question that FES was entitled to enter judgment against Jender;

(c) he was probably prepared to accept that Mr Clayton acted under a reasonable misapprehension of what would occur if he failed to file a defence;

(d) the purported defence that the wrong party had been sued was a good defence and seemed to be arguable;

(e) it was not good enough that Mr Clayton simply told Mr Watson-Jones in his email dated 5 June 2019 that FES had sued the wrong party;

(f) Mr Saunders’ email to Mr Watson-Jones on 6 June 2019 contained an assertion that FES had sued the wrong party, and not an admission that FES had sued the wrong party; and

(g) FES was entitled to enter judgment against Jender, and it was not unreasonable for FES to enter judgment, as there was no basis for it to believe it should abandon its claim against Jender and sue Davis Glass 1.

The learned magistrate gave the following reasons for the refusal of the rehearing application:

You have not demonstrated the existence of the meritorious defence on the material I have been taken to and I don’t accept that there was a valid reason for not filing a defence. You were well and truly on notice that you should do so. It’s as simple as that.

The learned magistrate’s refusal of the rehearing application (thus allowing the judgment to stand) is the subject of Jender’s application for judicial review in this proceeding.

Further developments

On 13 September 2019, FES filed a complaint and statement of claim against Davis Glass 1 in the Magistrates’ Court at Melbourne,[4] seeking, among other things, damages pursuant to s 236 of the Australian Consumer Law. FES has made an application for summary judgment against Davis Glass 1, which has been adjourned pending the outcome of this proceeding.
[4]Proceeding No. K12415565.

On 30 September 2019, FES issued a summons for oral examination directed at Mr Clayton (‘summons for examination’), which was returnable before the Magistrates’ Court on 11 November 2019.

On 25 October 2019, Jender filed the originating motion in this proceeding.

On 13 November 2019, at a directions hearing in this proceeding, Clayton JR made orders referring this proceeding to judicial mediation. Following the directions hearing, the summons for examination was adjourned to 12 March 2020, to allow the parties to participate in the mediation.

On 20 January 2020, by consent, Costs Registrar Walton made an order that Jender’s costs incurred in the Supreme Court proceeding be taxed and allowed in the sum of $9,895.00 (‘costs order’). As a consequence of the costs order, FES owed Jender approximately $4,300.00 more than the amount held by the Court pursuant to the orders made by Gardiner AsJ on 14 August 2019.

On 18 February 2020, the parties attended a judicial mediation, which was unsuccessful.

On 3 March 2020, the parties by consent submitted a request to the Senior Master for the sum of $5,024.11 paid into Court pursuant to the orders of Gardiner AsJ in the Supreme Court proceeding be released to Jender in partial satisfaction of the costs order.

On 4 March 2020, Wisewould Mahony sent two letters to Snowton Saje, including an open offer which included terms that FES agree to set aside the judgment, that this proceeding and the Magistrates’ Court proceeding be dismissed, and FES pay Jender’s costs of both proceedings.

On 11 March 2020, Snowton Saje sent an email to Wisewould Mahony which advised that FES had paid into Wisewould Mahony’s trust account an amount of $10,030.18 in discharge of the costs order.

On 11 March 2020, Snowton Saje sent to Wisewould Mahony a further letter, making an open offer that FES would consent to orders:

(a) dismissing this proceeding with no orders as to costs; and

(b) setting aside the judgment, dismissing the Magistrates’ Court proceeding with no orders as to costs, and vacating the summons for examination.

Accordingly, as at 11 March 2020, the only issue upon which the parties were apart was who should bear the costs of the Magistrates’ Court proceeding and this proceeding, which no doubt far exceed the amount of the judgment debt.

On 12 March 2020, Snowton Saje and Wisewould Mahony exchanged further correspondence in relation to the offer made by Jender on 11 March 2020 and the summons for examination, which failed to resolve the outstanding matters in dispute between the parties.

On 12 March 2020, the summons for examination was adjourned to 20 April 2020.

On 9 April 2020, Jender filed a summons in this proceeding seeking a stay of execution of the judgment, and leave to amend its originating motion. On 16 April 2020, Jender’s application for a stay was refused by Keith JR.

On 10 June 2020, Keith JR delivered his reasons for dismissing Jender’s summons of 9 April 2020. In his ruling, which, among other things, summarised the progress of the dispute between the parties to date, Keith JR stated as follows:

The pleadings in the second Magistrates’ Court proceedings are exhibited to the affidavit of Mr Bateman filed on 9 April 2020. The claim against Davis Glass 1 Pty Ltd is for misleading conduct causing loss in the nature of costs incurred by FES in the several proceedings. The conduct is identified as communications in which the name of the company was incorrectly shown as Davis Glass Pty Ltd rather than Davis Glass 1 Pty Ltd.
It is clear diligent searches and use of the Australian Company Number would have identified the error. The proceedings have now reached the stage where significant costs have been incurred by each party and there is apparent acrimony and blame attribution between the parties and the legal representatives. That is regrettable. However this Court cannot resolve the issues and these proceedings do not provide a forum for consideration of responsibility for the current position.
…
In this context I observe that funds that were paid into Court as a result of orders to set aside the statutory demand have been returned to the plaintiff. There are no funds remaining in Court. The defendant FES has made payment of the costs ordered against it in the statutory demand proceeding. Those costs form part of the damages claimed in the second Magistrates’ Court proceeding against the other corporation.
Even if funds were recovered from the plaintiff in satisfaction of the default judgment there would not necessarily be prejudice to the plaintiff. The Court could order the defendant return such funds is relief sought on the originating motion were to be granted.
I consider there is no irreversible prejudice to the plaintiff consequent on the actions to enforce default judgment such as require the intervention of this Court or to warrant a grant of a stay in the discretion of the Court.
Although the defendant submitted that if the debt was paid this proceeding would have no utility, I do not accept that submission. The orders of the court if certiorari were to be issued could include orders to restore the parties to their respective positions and if need be require funds received be repaid. Or at least paid into the Magistrates’ Court pending the remittal of the rehearing application to that Court.
As matters stand, the defendant holds a judgment and is entitled to enforce it. The judgment was not obtained irregularly. The application for rehearing in the court below was heard and dismissed. If grounds for judicial review are established this Court is able to reverse any action taken in reliance upon that decision.

The Originating Motion

In its originating motion filed on 25 October 2019, Jender seeks the following relief;

(a) an order in the nature of certiorari quashing the order made by the Magistrates’ Court on 28 October 2019 dismissing the rehearing application;

(b) an order in the nature of mandamus remitting the rehearing application for determination by a different magistrate; and

(c) an order that FES pay Jender’s costs of this proceeding.

The originating motion contains the following grounds of review:

Ground 1: Inadequate reasons for decision
1.The Court failed to give an adequate statement of reasons with respect to the order made on 28 August 2019 (Order) with the consequence that:

(a) the Order was made without due procedural fairness; or alternatively
(b) the Order was unreasonable.
PARTICULARS
Magistrate Smith gave the following reasons on 28 August 2019:
“You have not demonstrated the existence of the meritorious defence on the material I have been taken to and I don’t accept that there was a valid reason for not filing a defence. You were well and truly on notice that you should do so. It’s as simple as that.”

Ground 2: Error on the face of the record
2.Further, or in the alternative, the Court stated in its reasons with respect to the Order that the plaintiff had not demonstrated the existence of a meritorious defence.
3.The statement in the reasons with respect to the Order that the plaintiff had not demonstrated the existence of a meritorious defence constitutes an error of the Court on the face of the record.

PARTICULARS
At the application on 28 August 2019, the plaintiff relied on the Affidavit of Derek Clayton sworn on 31 July 2019, which establishes an arguable defence on the merits: that the plaintiff had not incurred any debt to the first defendant. During the hearing Magistrate Smith stated:
“Meritorious defence is that you had sued the wrong party; it was the other party that was liable…That is the defence, it is a good defence, obviously. And given what you have told me it most certainly seems to be arguable doesn’t it…”
In his reasons, Magistrate Smith stated inter alia:
“You have not demonstrated the existence of a meritorious defence on the material I have been taken to…”
The statement in Magistrate Smith’s reasons that the plaintiff had not demonstrated the existence of a meritorious defence is an error on the face of the record.

Ground 3: Jurisdictional Error
4.Further, or in the alternative, the Court fell into legal error in failing to consider whether the Application ought to have been allowed on the grounds that the Default Judgment was entered in circumstances which were either unreasonable or constituted bad faith.

PARTICULARS
The Application included a ground that the Default Judgment be set aside on the basis that it was entered into in bad faith or an abuse of process. At the application on 28 August 2019, the plaintiff relied upon the Affidavit of Derek Clayton sworn 31 July 2019, which included evidence that on 5 June 2019, before the Default Judgment was entered, the first defendant and its solicitor were notified by Mr Clayton that the plaintiff was not the proper defendant and that the claim for the alleged debt ought to have been made against another entity known as Davis Glass 1 Pty ltd. The first defendant, through its solicitor, having then communicated with Davis Glass 1 Pty Ltd on 6 June 2019 and making a demand on Davis Glass 1 Pty Ltd to pay the alleged debt, proceeded to enter the Default Judgment without further warning to the plaintiff.

Ground 4: Unreasonableness
5.Further, or in the alternative, the Order was so unreasonable that no reasonable decision maker could have made it.

PARTICULARS
During the hearing of the Application on 28 August 2019, the plaintiff relied upon the Affidavit of Derek Clayton sworn 31 July 2019, which establishes an arguable defence on the merits: that the plaintiff had not incurred any debt to the first defendant, and a reasonable explanation for the failure to file a defence: that the plaintiff did not understand it needed to file a defence, and otherwise misapprehended that it was sufficient to inform the first defendant’s solicitor that the first defendant had sued the wrong entity. In those circumstances, the Default Judgment should have been set aside. The Order, and the refusal to set aside the default judgment, was so unreasonable that no reasonable decision maker could have made it. Further, the Plaintiff refers to the Particulars subjoined to paragraph 4 above.

The evidence

Jender relied on the affidavit of its solicitor, Mr Hayden Bateman of Wisewould Mahony, sworn on 25 October 2019. The exhibits to Mr Bateman’s affidavit included the evidence before the learned magistrate, along with the following documents:

(a) an ASIC search for Jender dated 18 October 2019;

(b) a copy of the complaint;

(c) a copy of the rehearing application;

(d) a copy of the order made by the learned magistrate on 28 August 2019;

(e) a copy of the transcript of the hearing before the learned magistrate on 28 August 2019, prepared by a legal assistant at Wisewould Mahony;

(f) a copy of the transcript of the hearing in the Supreme Court proceeding on 14 August 2019; and

(g) a copy of the orders made by Gardiner AsJ in the Supreme Court proceeding on 14 August 2019.

Also exhibited to Mr Bateman’s affidavit was an affidavit sworn by Mr Clayton on 31 July 2019 in support of the rehearing application. Mr Clayton deposed, in summary, as follows:

(a) the sale of the business to Davis Glass 1, and the consequent transfer of the assets of the business and the premises to Davis Glass 1;

(b) his receipt of the complaint on or about 5 June 2019 and his subsequent correspondence with Mr Watson-Jones of Snowton Saje (see paragraphs 15 to 22 above);

(c) he exhibited copies of e-mail correspondence between Mr Saunders of Davis Glass 1 and Mr Watson-Jones (see paragraphs 23 and 24 above), and went on to depose as follows:

Although it is apparent that Mr Watson-Jones communicated with Mr Saunders after my email to him on 5 June 2019, he never reverted to me prior to entering judgment to state that FES would proceed to enter judgment in default, if Davis Glass Pty Ltd did not provide a defence. Instead, FES proceeded to enter judgment on 1 July 2019 and then issued a statutory demand on the next day;

(d) he deposed as to the requests made by Wisewould Mahony to Snowton Saje to have the default judgment and the statutory demand set aside; and

(e) he deposed as follows:

It appears to me for the reasons set out in this affidavit that FES and its solicitors were on notice that Mr Saunders was a director of Davis Glass 1 Pty Ltd and that Davis Glass had no involvement in the Business, but have entered judgment in effort [sic] to enforce the debt by shifting the burden on Davis Glass Pty Ltd to compel Davis Glass 1 Pty Ltd to pay the alleged debt in circumstances where Mr Saunders for Davis Glass 1 Pty Ltd had disputed its claim.

Jender’s submissions

In its written submissions filed on 6 May 2020, Jender submitted that the Magistrates’ Court’s exercise of the discretion conferred by s 110 of the Magistrates’ Court Act was affected either by an error of law on the face of the record (being the learned magistrate’s reasons as delivered orally that day), or jurisdictional error, and as such should be quashed.

Jender submitted that the discretionary power conferred by s 110 of the Magistrates’ Court Act is subject to the Civil Procedure Act 2010 (Vic) (‘CPA’), and in particular s 8(1)(b) of the CPA, which requires the Magistrates’ Court, in the exercise of its powers, to seek to give effect to the overarching purpose of facilitating the just, efficient, timely and cost-effective resolution of the real issues in dispute.

Jender referred to the decision of the High Court in Minister for Immigration and Citizenship v Li[5] (‘Li’) and submitted as follows (citations omitted):
[5](2013) 249 CLR 332.

In Minister for Immigration and Citizenship v Li, Hayne, Kiefel and Bell JJ made the following observations:
(a)“[t]he legislature is taken to intend that a discretionary power, statutorily conferred, will be exercised reasonably”;
(b)“[I] Sharp v Wakefield, it was said that when something is to be done within the discretion of an authority, it is to be done according to the rules of reason and justice”;
(c)“there is an area within which a decision-maker has a genuinely free discretion. That area resides within the bounds of legal reasonableness”;
(d)“[t]he legal standard of reasonableness must be the standard indicated by the true construction of the statute”
(e)the legal standard of reasonableness incorporates “the requirement of the law that a decision-maker understand his or her statutory powers and obligations”, which includes the more specific “categories” of jurisdictional error, such as “misdirecting oneself as to the operation of the statute, taking into account irrelevant considerations”; after all “some decisions may be considered unreasonable in more than one sense and…all these things run into one another”;
(f)a court may infer that in some way there has been a failure to properly exercise the relevant discretion if, upon the facts, the result in unreasonable or plainly unjust; and
(g)“[e]ven where some reasons have been provided, it may nevertheless not be possible for a court to comprehend how the decision was arrived at. Unreasonableness is a conclusion which may be applied to a decision which lacks an evident and intelligible justification.

Jender submitted that the learned magistrate correctly stated the test which Jender had to satisfy to have the judgment set aside. Jender submitted, however, that the learned magistrate did not provide an intelligible justification for his conclusion that Jender had failed to satisfy this test in circumstances where Jender had a good reason for not filing a defence in time, and had a meritorious defence.

Jender submitted it was clear from the transcript of the rehearing application that the learned magistrate initially accepted that Jender’s defence that FES had sued the wrong company was a good defence, but then inexplicably proceeded to find that Jender had not demonstrated the existence of a meritorious defence. As such, the learned magistrate failed to provide an evident and intelligible justification for that finding.

In relation to the failure of Jender to file a defence, Jender observed that the learned magistrate stated it was “probably prepared to accept” that Mr Clayton acted under a reasonable misapprehension as to what would occur if he failed to file a defence, but then proceeded to conclude that he did not accept there was a valid reason for not filing a defence, as Mr Clayton was on notice that Jender should do so. Jender submitted that this amounted to a failure to provide an evident and intelligible justification for the finding that Jender did not have a good reason for not filing its defence in time.

Jender submitted the decision of the learned magistrate was plainly unjust and contrary to the requirements of the Magistrates’ Court Act and the CPA, as the effect of the refusal to set aside the judgment was to shut Jender out from advancing what was otherwise a meritorious defence.

Jender submitted further that the learned magistrate failed to provide adequate reasons and as such, did not afford Jender procedural fairness.

Jender noted that in Beale v GIO of New South Wales,[6] Meagher JA said there are three fundamental elements of a statement of reasons:
[6](1997) 48 NSWLR 430.

(a) a judge should refer to the relevant evidence;

(b) a judge should set out any material findings of fact and any conclusions reached; and

(c) a judge should provide reasons for making the relevant findings of fact and reasons in applying the law to the facts found.

Jender submitted that the learned magistrate’s reasons did not:

(a) refer to any of the evidence before him;

(b) make any findings of fact: rather, the reasons simply stated his conclusions; and

(c) provide reasons for making the findings of fact he made.

In its supplementary submissions, Jender submitted, in relation to ground 3 of the originating motion, that the judgment was entered in circumstances which were either unreasonable or constituted bad faith. Jender submitted that a finding that a party entering a default judgment has acted in bad faith is not limited to a situation where a default judgment is entered prematurely in breach of the Rules. In the present case, it is plain that the solicitor for FES was aware that Jender had a defence, namely that the wrong party had been sued.

At the rehearing application, Jender submitted that while FES was entitled to enter judgment against it, it was unreasonable for FES to enter judgment in circumstances where Mr Clayton had informed FES that Jender was the wrong defendant, and where Mr Saunders had informed FES that Davis Glass 1 was the correct defendant. Jender submitted that the learned magistrate failed to address this submission, and instead determined that it was not unreasonable for FES to enter judgment, apparently on the basis that there was no reason why FES should abandon its claim against Jender and sue Davis Glass 1 instead. Jender submitted that the learned magistrate’s reasoning misunderstood or disregarded its submission as to the bad faith and/or unreasonableness of the conduct of FES.

Jender referred to the decision of Templeman J in Lampson (Australia) Pty Ltd v Fortescue Metals Group Ltd,[7] in which his Honour considered an application to set aside a judgment entered in default of filing a defence, in circumstances where the defendant maintained prior to the entry of the default judgment that the plaintiff has sued the wrong party. His Honour stated as follows with respect to the reasonableness of the plaintiff’s conduct in such circumstances:
[7][2009] WASC 10.

I do not accept the defendant’s submission that the entry of the default judgment was improper. Under the rules, clearly, the plaintiff was entitled to enter judgment. But I do so that the entry of judgment was inappropriate. I note that in Perpetual Trustees Victoria Ltd v Pilcher (2005) VSC 244, Cummins J reached that conclusion. His Honour said:

A notice of appearance had been filed. The defendants did propose to defend the action. There was no overt or objective indication that this was merely a delaying tactic by formal utilisation of the Rules on behalf of the defendants. Further, the defendants’ solicitor informed the plaintiff’s solicitor that the defendants prepared to defend the action. In those holistic circumstances I consider it was inappropriate for the plaintiff’s solicitor to enter judgment, and on that count I conclude, as a matter of law, that the judgment had been irregularly obtained. Not improperly obtained, but irregularly obtained.
On the matter of substance, and it is unnecessary to proceed with finality to the issue of whether there is a substantive defence on the materials before me. Suffice it to say that I am certainly not persuaded there is no defence.

The facts in Pilcher were quite different from the facts in this case. However, I respectfully adopt the reference to the holistic circumstances. As I have attempted to explain, in the holistic circumstances of this case I consider it was unreasonable for the plaintiff to have acted as it did, and that the entry of the default judgment was therefore irregular. It follows, in my view, that the defendant is entitled to have the judgment set aside as of right, without going into the merits.[8]

[8]Ibid [28]-[29].

Jender also relied on the decision of Beach J in Microscience (International) Pty Ltd v Total Peripherals Pty Ltd,[9] as follows:
I should add that I consider that where, as here, a solicitor has entered an appearance, the practice of ‘snapping on’ a default judgment, without notice, immediately upon the expiration of a period prescribed by the rules, should be strongly deprecated. It serves no useful purpose. It increases the costs of litigation unnecessarily. It should form no part of the practice of the law in Darwin.
I simply add – nor should it be the practice in the State of Victoria.[10]
[9][1998] VSC 50.
[10]Ibid, 264.

Jender also referred to the decision of Bongiorno J in French v Triple M Melbourne Pty Ltd,[11] as follows:

In the circumstances of this case, the entry of a default judgment at the earliest possible opportunity without warning against parties known to the plaintiff’s solicitor to be represented constituted a precipitate and unwarranted, if nonetheless legal, attempt to advance his client’s case by taking advantage of what any reasonable and experienced solicitor should have realised was an oversight or perhaps several oversights by the defendants and their legal advisors. It would be contrary to justice for this Court to allow this tactic to be successful by refusing to set aside the judgment entered by default. Litigation is not a steeple chase nor even a bike race where a fall can determine the outcome. As the High Court made clear in Queensland v J L Holdings Pty Ltd “… the ultimate aim of a Court is the attainment of justice.”[12]

[11][2006] VSC 36.

[12]Ibid [23].

Jender submitted that the learned magistrate failed to consider whether the rehearing application should have been allowed on the grounds that the default judgment was entered in circumstances which were either unreasonable or in bad faith, being matters raised squarely by Jender in the affidavits in support of the rehearing application and at the rehearing application. Jender went on to submit that, as a result, the learned magistrate proceeded on the incorrect principle and, in so doing, misapprehended the nature of limits of his function. In this regard, Jender referred to the decision of the High Court in Craig v South Australia,[13] as follows:

An inferior Court falls into jurisdictional error if it mistakenly asserts or denies the existence of jurisdiction or if it misapprehends or disregards the nature or limits of its function or powers in a case where it correctly recognises that jurisdiction does exist. Such jurisdictional error can infect either a positive act or a refusal or failure to act. Since certiorari goes only to quash a decision or order, an inferior court will fall into jurisdictional error for the purpose of the writ where it makes an order or decision, including an order or decision to the effect that it lacks, or refuses to exercise, jurisdiction, which is based upon a mistaken assumption or denial of jurisdiction or misconception or disregard of the nature or limits of jurisdiction.[14]
[13](1995) 184 CLR 163.
[14]Ibid 177.

FES’s submissions

In relation to ground 1 of the originating motion (being the adequacy of the learned magistrate’s reasons), FES submitted that the learned magistrate did in fact provide adequate reasons for the refusal of the rehearing application, being that he was not satisfied that the asserted defence was meritorious, and that he was not satisfied that Jender had a valid reason for not filing a defence. FES submitted that the evidence as to the alleged sale of the business to Davis Glass 1 was deficient, and did not satisfactorily address the fact that Ms Budd was holding herself out to be an employee of “Davis Glass” as at 22 November 2018, and that Mr Saunders identified himself as a director of “Davis Glass” as at 19 April 2019. FES submitted that it was therefore open for the learned magistrate to conclude that Jender had not established that the asserted sale of the business took place, and consequently, that Jender did not have a meritorious defence on the material before the learned magistrate.

In relation to ground 2 of the originating motion (being whether the learned magistrate had made an error of law on the face of the record), FES noted that the learned magistrate made the following statement at the rehearing application:

Meritorious defence is that you sued the wrong party; it was the other party that was liable. That is the defence, it is a good defence obviously. And given what you have told me it certainly seems arguable doesn’t it…

FES submitted that ground 2 mischaracterises the above statement as a finding by the learned magistrate with respect to the merits of Jender’s defence. FES submitted that the above statement was essentially the learned magistrate summing up what had been put to him at the hearing, rather than making any finding, as that statement was made before FES made its submissions in the rehearing application. FES submitted that the learned magistrate was clearly not satisfied that a party other than Jender was liable to pay the outstanding debt, such that the alleged defence was meritorious, and as such there was no error on the face of the record.

In relation to ground 3 (being whether the learned magistrate failed to consider whether the judgment was entered unreasonably or in bad faith), FES submitted that the learned magistrate directly addressed Jender’s contention that the default judgment was entered in circumstances which were either unreasonable or constituted bad faith, and rejected this submission. FES submitted that it was clear that the learned magistrate’s view was that:

(a) FES was not obliged to accept the assertions of Mr Clayton with respect to which entity was liable for the debt;

(b) Jender ought to have protected its position by filing a defence; and

(c) the solicitor for FES was not obliged to advise Jender of the consequences of not filing a defence.

FES submitted further that Jender’s counsel was unable to point to any conduct that misled Mr Clayton as to the need for Jender to file a defence, and as such, the default judgment was not irregular.

In relation to ground 4 (being whether the learned magistrate acted unreasonably in rejecting the application to set aside the judgment), FES submitted that it cannot be correct that Mr Clayton misapprehended the need to file a defence in view of the repeated exhortations by the solicitor for FES that Jender should file a defence. The learned magistrate rejected Jender’s submission that Mr Clayton’s explanation for failing to file a defence was reasonable, and he was entitled to find that no meritorious defence existed on the material before him. FES submitted that it follows that the decision to refuse the rehearing application was not so unreasonable that no reasonable decision-maker could have made it.

In its supplementary submissions, FES submitted that there were four additional reasons why the relief sought by Jender from this Court should be refused.

First, FES submitted that the best outcome Jender could hope for from this proceeding is to have the matter remitted to the Magistrates’ Court to reconsider the rehearing application based on the materials that were then before the Court and subject to any further evidence Jender may wish to advance. FES submitted that, however, Jender has no prospect of success in having the judgment set aside, as Jender has satisfied the judgment in full by paying to FES to full amount that Jender was required to pay under the default judgment on 17 April 2020. In those circumstances, there is no utility in setting aside the judgment as there is no relevant controversy between the parties.[15]
[15]Counsel for FES resiled from this submission, at least in part, during the course of the hearing.

Secondly, even if there is some utility in setting aside the judgment, Jender does not require the relief sought to have its application to set aside the judgment reheard. FES submitted that, as the decision of the learned magistrate to dismiss the rehearing application was an interlocutory decision, Jender is entitled to bring a fresh application to set aside the judgment, and put on further evidence. FES submitted that the inadequacy of the material before the learned magistrate could be rectified by the filing of a fresh rehearing application, and FES has indicated that it would likely consent to the judgment being set aside if it was provided with proper evidence and a draft defence.

Thirdly, FES submitted that the learned magistrate did not, contrary to Jender’s submissions, accept that Jender had a good defence, but was merely adopting the Socratic method to ascertain Jender’s case during the course of the hearing. FES submitted that it was clear that the learned magistrate was later persuaded by FES’s submission that the asserted misunderstanding of Mr Clayton was not a valid basis for Jender to refrain from filing a defence.

Fourthly, FES submitted that it is unclear whether Jender’s submissions in relation to ground 1 allege the ground to be a failure to give reasons, a failure to give adequate reasons, or a failure to give an unintelligible justification for the outcome. In this regard, FES submitted:

(a) the learned magistrate plainly did give reasons;

(b) those reasons were adequate in the context of an interlocutory application, and plainly indicated to Jender why its application was unsuccessful; and

(c) the decision was not plainly unjust, given the learned magistrate found that the material did not establish a meritorious defence, and that Jender provided no satisfactory explanation for failing to file a defence.

FES submitted that, even if it were accepted that the learned magistrate failed to provide adequate reasons, this does not amount to jurisdictional error. FES submitted that, even if inadequate reasons might constitute an error of law on the face of the record, relief in the nature of certiorari would not lie unless it could be shown that the error made a difference to the outcome. FES submitted that the learned magistrate reached a decision based on his acceptance of FES’s submissions, which the learned magistrate was entitled to do.

FES referred to the decision of the High Court in Hossain v Minister for Immigration and Border Protection[16] as authority for the proposition that quashing a decision on the ground of jurisdictional error requires demonstration not only of a legal error, but a legal error which materially affected the outcome of the decision. FES submitted that if this Court were to find that the learned magistrate gave inadequate reasons for his decision, all that Jender would be entitled to by way of relief would be better reasons from the learned magistrate.
[16](2018) 264 CLR 123.

FES submitted that, in the correspondence between Mr Saunders and FES’s solicitors, Mr Saunders did not expressly say that Davis Glass 1 was the correct party to sue, and that, having regard to the fact that Mr Saunders’ email signature referred to Davis Glass and not Davis Glass 1, Mr Saunders’ communications were ambiguous.

FES went on to submit that, at the rehearing application, the learned magistrate asked counsel for Jender why a defence had not been filed, and counsel for Jender accepted that the highest it could be put is that Mr Clayton was under a misapprehension or misunderstanding about what needed to be done. FES submitted that it was clear that the learned magistrate accepted FES’s submission that Jender had not provided an acceptable explanation for why a defence had not been filed within time.

As for the propriety of FES entering judgment in default of a defence, FES submitted that the learned magistrate found that FES was entitled to doubt Mr Clayton’s statements that Jender was not the correct defendant to the Magistrates’ Court proceeding and, as such, FES was entitled to enter judgment. FES submitted that the learned magistrate clearly considered the propriety of FES having entered judgment, and it was incorrect for Jender to submit that the learned magistrate did not consider the arguments as to whether FES had acted unreasonably or in bad faith. FES submitted that the learned magistrate properly characterised Mr Saunders’ statement to the effect that FES had sued the wrong party as an assertion rather than an admission, that the learned magistrate carefully considered Jender’s explanation for not filing a defence, and the learned magistrate properly exercised a discretionary judgment in placing substantial weight to the lack of an adequate explanation from Jender as to why it had not filed a defence.

FES submitted that the learned magistrate did not accept that there was a valid reason for not filing a defence, and such finding was not challenged in this proceeding. FES submitted further that, while reasonable minds may have different views as to the quality of the defence presented to the learned magistrate, there is no misconception of the evidence before the learned magistrate which affected the conclusion that the existence of a meritorious defence was not demonstrated.

FES submitted further that none of the grounds of review could be sustained in light of a fair reading of the transcript of the rehearing application, in the relation to an interlocutory decision where one would not expect a standard of reasons comparable to what would be provided after a full trial.

Jender’s submissions in reply

In reply, Jender submitted that Jender’s failure to submit a draft defence before the rehearing application was not fatal to its prospects of success: rather, the critical issue was whether a meritorious defence was disclosed in either an affidavit or a draft defence.

In relation to FES’s submission that Jender ought to make a further application for a rehearing supported by better evidence, Jender submitted that the evidence before the Magistrates’ Court at the rehearing application was as good as it gets, and a further application could not be made on better material than what was available during the course of the rehearing application. Jender submitted that the circumstances in which a party can bring a fresh application to have a default judgment set aside are limited, and unless the application is made on material not available at the time of the earlier application, a further application is liable for be dismissed as an abuse of process.

As for FES’s submissions about the lack of utility in having the default judgment set aside, Jender submitted that setting aside a judgment by way of certiorari or otherwise can result in money being repaid, as alluded to by Keith JR in his reasons for refusing Jender’s stay application.

Discussion

The issues in this application for judicial review are not without some complexity, but the parties’ comprehensive and excellent submissions cannot obscure the fact that this is one of the most unfortunate pieces of litigation I have been involved in throughout my legal and judicial career. A case of mistaken identity which should have been resolved by a telephone call between solicitors in July 2019 at the latest has escalated into a number of contested applications in the Magistrates’ Court and this Court, with the parties having spent at least tens of thousands of dollars over an invoice of less than $4,000.00. To the extent that my delay in delivering these reasons have caused the final resolution of this dispute to be further delayed, I apologise.

I will grant the application for certiorari, and quash the decision of the learned magistrate to refuse the rehearing application, on the grounds that the decision to refuse the rehearing application was unreasonable, or, to use the language of the more recent authorities, the decision lacked an intelligible justification. I make that finding fully conscious of the very high threshold an applicant for judicial review upon this ground needs to clear before obtaining such relief.

The availability of relief in the nature of certiorari on the grounds that a decision is unreasonable, or as expressed more recently, irrational, is very limited, given that granting relief on such grounds runs the risk of straying into a review of the merits of a decision, as opposed to the legality of a decision.

It is clear from the decision of the High Court in Li[17] that a decision made in the exercise of a discretionary power is open to challenge on the grounds that it is unreasonable (in that no reasonable decision-maker could have arrived at that decision), or that the decision is irrational, arbitrary or capricious. As stated by Hayne, Kiefel and Bell JJ:

Even where some reasons have been provided, as is the case here, it may nevertheless not be possible for a court to comprehend how the decision was arrived at. Unreasonableness is a conclusion which may be applied to a decision which lacks an intelligible justification.[18]

[17](2013) 249 CLR 332.

[18]Ibid [76].

The decision in Li[19] has been taken to have represented a liberalisation of the test for what decisions may be challenged on the grounds of legal unreasonableness.[20] However, in Li,[21] Gageler J sounded the following caution, stating:

Judicial determination of Wednesbury unreasonableness in Australia has in practice been rare. Nothing in these reasons should be taken as encouragement to greater frequency.[22]

[19]Ibid.

[20]See, for example, the commentary by Theresa Baw in Illogicality, Irrationality and Unreasonableness in Judicial Review (Federation Press, 2014).

[21](2013) 249 CLR 332.

[22]Li [112]-[113].

More recently, in Minister for Immigration and Border Protection v SZVFW[23] (‘SZVFW’) the High Court emphasised the stringent nature of the test, with Kiefel CJ stating that:

… the courts will not lightly interfere with the exercise of a statutory power involving an area of discretion.[24]

[23](2018) 264 CLR 541.

[24]Ibid [11].

In Li,[25] the members of the Court stated that what amounted to unreasonableness was conditioned on the terms and purpose of the legislation which conferred the relevant discretion upon the decision-maker, with French CJ stating as follows:

As explained by Lord Greene MR [in Wednesbury], [unreasonableness] reflects a limitation imputed to the legislature on the basis of which courts can say that parliament never intended to authorise that kind of decision. After all the requirements of administrative justice have been met in the process and reasoning leading to the point of decision in the exercise of a discretion, there is generally an area of decisional freedom. Within that area reasonable minds may reach different conclusions about the correct or preferable decision. However, the freedom thus left by the statute cannot be construed as attracting a legislative sanction to be arbitrary or capricious or to abandon common sense.[26]

[25]Ibid.

[26]Ibid [28].

Further, the Court in SZVFW[27] emphasised the need to have regard to the relevant statutory instrument, with Edelman J stating that:

The precise content of an implication of reasonableness, where it is implied, will be based upon the context, including the scope, purpose, and real object of the statute.[28]

[27]Ibid.

[28]Ibid [134].

A helpful exposition of the approach to be taken whether a decision-maker has acted unreasonably is to be found in the judgment of Allsop P in Minister for Immigration and Border Protection v Stretton,[29] as follows:

The boundaries of power may be difficult to define. The evaluation of whether a decision was made within those boundaries is conducted by reference to the relevant statute, its terms, scope and purpose, such of the values to which I have referred as are relevant and any other values explicit or implicit in the statute. The weight and relevance of any relevant values will be approached by reference to the statutory source of the power in question. The task is not definitional, but one of characterisation: the decision is to be evaluated, and a conclusion reached as to whether it has the character of being unreasonable, in sufficiently lacking rational foundation, or an evident or intelligible justification, or in being plainly unjust, arbitrary, capricious, or lacking common sense having regard to the terms, scope and purpose of the statutory source of the power, such that it cannot be said to be within the range of possible lawful outcomes as an exercise of that power. The descriptions of the lack of quality used above are not exhaustive or definitional, they are explanations or explications of legal unreasonableness, of going beyond the source of power.
Crucial to remember, however, is that the task for the Court is not to assess what it thinks is reasonable and thereby conclude (as if in an appeal concerning breach of duty of care) that any other view displays error; rather, the task is to evaluate the quality of the decision, by reference to the statutory source of the power and thus, from its scope, purpose and objects to assess whether it is lawful. The undertaking of that task may see the decision characterised as legally unreasonable whether because of specific identifiable jurisdictional error, or the conclusion or outcome reached, or the reasoning process utilised.
The relationship between the conclusion or outcome and the reasoning process revealed by reasons to reach it is one that should not be rigidly set. Reasons may fail to disclose an evident and intelligible justification or may not be sufficient to outweigh the inference that the decision is so unjust as to be (in the context of the statutory source of the power) beyond a lawful exercise of the power.[30]

[29][2016] FCAFC 11.

[30]Ibid [11]-[13].

The authorities make it clear that the question of whether a decision is invalid by reason of unreasonableness is necessarily a fact-dependent inquiry.[31]
[31]SZVFW [84].

Further, where the decision-maker provides reasons, the justification for the decision should ordinarily be found in those reasons.[32] However, a reviewing court is not confined to the reasons provided, and the very outcome and effect of the decision may lead to a conclusion that the decision was unreasonable or irrational in the absence of reasons, or without recourse to the reasons.[33]
[32]Minister for Immigration and Border Protection v Singh (2014) 231 FCR 437.
[33]Li [76].

In ABT17 v Minister for Immigration and Border Protection,[34] the High Court made it clear that the implied condition of reasonableness governing the exercise of a statutorily conferred discretion applied to the decision-making process as well as the ultimate outcome of that process, with the plurality stating as follows:

Compliance with the implied condition of reasonableness … necessitates not only that the decision to which the Authority comes on the review has an “intelligible justification” but also that the Authority comes to that decision through an intelligible decision-making process.[35]

[34][2020] 94 ALJR 928.

[35]Ibid [20].

It is not necessary for present purposes to undertake a thorough survey of the occasions on which a reviewing court has found that the exercise of a discretionary power is unreasonable or irrational. However, I do observe that while the authorities do urge caution in interfering with the exercise of a discretionary power on the grounds of unreasonableness and/or irrationality, there are numerous examples where the courts, particularly following in the years after the decision of the High Court in Li,[36] have invalidated decisions involving the exercise of a discretion on that very ground. While such interference is not common, it is fair to say that it is not rare either.[37]
[36](2013) 249 CLR 332.
[37]See, for example, the decisions of this Court in Bayley v Nixon [2015] VSC 744; Mirboo Ridge Pty Ltd v Minister for Resources (2018) 61 VR 219; Bazouni v Victoria [2019] VSC 407; and Schmael v Leach [2020] VSC 562, along with numerous decisions of the Federal Court, primarily but not exclusively in the migration context.

Accordingly, applying the principles referred to above to the current case, the reasonableness of the decision of the learned magistrate to refuse Jender’s application to set aside the judgment must be viewed in the context of the enabling statute (being the Magistrates’ Court Act and the CPA), and the intelligibility of the justification for the decision. Further, in the current case, where the learned magistrate’s formal reasons were brief, regard may be had to the reasoning process (as evidenced by the transcript of the rehearing application) and the outcome itself, noting that the arbitrariness, or lack of logical connection between the evidence and the conclusion drawn by a decision-maker may lead to a conclusion that a decision is unreasonable or irrational.[38]
[38]Minister for Immigration and Citizenship v SZMDS (2010) 240 CLR 611.

Turning first to the empowering statute, s 1 of the Magistrates’ Court Act provides as follows:

Purposes
The main purposes of this Act are
(a)       to establish the Magistrates’ Court of Victoria; and
(b)to amend and consolidate for the purposes of the new Court the law relating to the jurisdiction and procedure of Magistrates’ Courts; and
(c)to provide for the fair and efficient operation of the Magistrates’ Court; and
(d)to abolish inefficient and unnecessary court process and procedures; and
(e)to allow for the Magistrates’ Court to be managed in a way that will ensure –
(i)        fairness to all parties to court proceedings; and
(ii)       the prompt resolution of court proceedings; and
(iii)      that optimum use is made of the Court’s resources.

Section 110 of the Magistrates’ Court Act provides as follows:

Re-hearing
(1)If a final order is made by the Court in a civil proceeding against a person who did not appear in the proceeding, that person may, subject to and in accordance with the Rules, apply to the Court for an order that the order be set aside and that the proceeding be re-heard.
(2)On an application under this section, the Court may set aside the order subject to any terms and conditions that it thinks just and re-hear the proceeding.
(3) Subject to subsection (4), an application under this section does not operate as a stay of the order unless the Court so orders.
(4)An application under this section with respect to an order for the payment of money operates as a stay of so much of the order as relates to the payment of money.
(5)If an applicant under this section fails to appear at the time fixed for the hearing of the application and the application is struck out, the applicant can re-apply only if the applicant first obtains the leave of the Court.

It is apparent from the objects of the Magistrates’ Court Act that justice and efficiency are the underpinning principles of the legislation. The setting of strict deadlines for compliance with procedural steps furthers the goal of efficiency: on the other hand, putting in place a process to apply for a rehearing provides a mechanism for avoiding or ameliorating the consequences of non-compliance for parties with meritorious claims or defences, which furthers the interest of justice.

Section 4 of the CPA provides that the CPA applies to all civil proceedings in Victoria. Section 1 of the CPA states, among other things, that the purpose of the CPA is to:

… provide for an overarching purpose in relation to the conduct of civil proceedings to facilitate the just, efficient, timely and cost-effective resolution of the real issues in dispute.

Section 8 of the CPA provides that all Victorian courts, in the exercise of their powers, must seek to give effect to the overarching purpose. For present purposes, the overarching purpose does not materially alter what is set out in s 1 of the Magistrates’ Court Act, or the observations in the relevant authorities regarding the balance which needs to be struck between justice and efficiency. Relevantly for present purposes, the “area of decisional freedom” conferred upon the learned magistrate in exercising his discretion as to whether to set aside the default judgment did not extend to the power to make a decision which was plainly unjust.

As for what is “just”, the merits of the potential defence loom large. As observed by Derham AsJ in Gunns Finance Pty Ltd (R & M Appntd) (In Liq) v Storey (‘Gunns’):[39]

The primary consideration is, therefore, whether the defendant has merits to which the Court should pay heed. If there are merits the Court will not usually let a judgment pass on which there has been no proper adjudication.[40]

[39][2014] VSC 260.

[40]Ibid [7].

The learned magistrate succinctly and correctly stated the relevant test for applications to set aside an otherwise regularly obtained judgment for default in delivering a defence.[41] I do not take issue with the submission that Mr Clayton’s explanation for failing to file a defence was less than compelling, and his intemperate communications with Snowton Saje may not have helped Jender’s cause in that regard. However, set against that explanation is the fact that, on the evidence available to the learned magistrate, Jender almost certainly had a complete defence to the claim. FES had sued the wrong party. Indeed, had Jender in fact filed a defence, and subsequently made an application for summary judgment in its favour on the basis of the evidence before the learned magistrate, one would expect that its prospects of success would have been very strong. By refusing to grant the rehearing application, Jender was exposed to a judgment (and the consequential risk of enforcement action being pursued) for a sum which it was not liable to pay, with no right of recourse save for bringing an application for judicial review. Such an outcome is necessarily unjust, and thus inconsistent with the purpose of both the Magistrates’ Court Act and the CPA.
[41]A further relevant consideration is whether the party with the benefit of judgment would be prejudiced by its setting aside in a manner which could be adequately addressed by orders for payment into court and/or costs, but the learned magistrate’s failure to refer to that aspect of the test is not material for present purposes.

In those circumstances, the meritorious defence available to Jender would have ordinarily overwhelmed any concerns that the learned magistrate may have had about the adequacy of the explanation provided by Mr Clayton for Jender’s failure to file a defence. Further, notwithstanding that the decision to set aside a default judgment which has been regularly obtained is a discretionary decision, all of the other matters relevant to that discretion fell Jender’s way. The application to set aside the judgment was made promptly after the judgment was entered, and Mr Clayton’s affidavit in support expressly stated that, if the proceeding was not summarily dismissed, Jender would instruct its solicitors to file and serve a defence. Further, while it is not clear from the transcript of the rehearing application whether the learned magistrate was aware of this, at the time of the rehearing application, Jender had already been ordered by Gardiner AsJ to pay the amount of the judgment debt into Court, such that any prejudice to FES occasioned by having the judgment set aside was minimal.

That the learned magistrate’s decision to refuse the rehearing application lacks an intelligible justification is apparent when one undertakes a close analysis of the transcript of the rehearing application. I accept, as far as it goes, the FES’s submission to the effect that the learned magistrate engaged in the “Socratic” method during the course of the rehearing application, and that his statement to the effect that Jender had a meritorious defence could be interpreted as merely paraphrasing Jender’s submissions, rather than being a statement of the conclusion he had reached in relation to that part of the applicable test. However, at no time during the course of the discussion between the learned magistrate and the legal representatives of the parties was it suggested, even by the solicitor for FES, that Jender’s defence to the claim, to the effect that FES had sued the wrong party, was not a valid defence that could be raised by Jender.

Rather, the discussion during the course of the hearing focussed upon whether Jender had a reasonable excuse for failing to file and serve a defence, and whether FES (or, more accurately, FES’s solicitor), was acting reasonably or otherwise in not taking Jender’s assertion that it was the wrong defendant at face value. Indeed, reviewing the transcript, it appears that where the decision-making process broke down was when the learned magistrate appeared to conflate the question of whether FES had reason not to believe Mr Clayton’s assertion that Jender was not the proper defendant with the issue of whether in fact Jender was not the proper defendant, or, at least for the purpose of the rehearing application, whether that defence was meritorious.

That which is evident from the following exchange between the learned magistrate and counsel for Jender, Mr Miller, extracted below:

Mr Miller:Your Honour, the evidence before this court is that the business was sold pursuant to a business sale agreement on 25 October 2017.

Your Honour: Is this before this contract?
Mr Miller:Yes Your Honour. Well before. Almost a year and a half. It settled on the 18th of March. This is in evidence before this court.

Mr W-Jones: It’s not in evidence that it’s settled.
Mr Miller: Yes it is. It’s in evidence Your Honour.
Your Honour: Well did you provide all this material to them before they got judgment?

Mr Miller: No Your Honour.
Your Honour: Well why not?
Mr Miller:Your Honour, Mr Clayton is a lay person and he asserted in the email correspondence that the wrong person had been sued. He didn’t put it higher than that Your Honour.
Your Honour: Well he has to put it higher than that, that’s just not good enough. If you say, yes, he doesn’t deny the existence of a contract per say does he? He doesn’t deny existence that the services were provided.
Mr Miller:He has no knowledge about the contract. It was sold and settled about a year prior to the contract between the plaintiff and the correct entity, Davis Glass 1.

Your Honour: All he does is say, you’ve sued the wrong party, that’s it.
Mr Miller: That’s all he says.
Your Honour: It’s not good enough. He was entitled to enter judgment on that basis, why wasn’t he?
Mr Miller:Your Honour, I don’t say the Plaintiff wasn’t entitled to enter judgment. That is not the submission. The submission is that it was unreasonable to enter judgment on those circumstances. That is the submission.
Your Honour: But it’s not. Because there is no basis for him to say I am going to abandon my claim against Davis Glass and sue the party you say is responsible even though I have no reason to believe what you say.

This exchange occurred immediately before the learned magistrate dismissed the rehearing application. Despite counsel for Jender referring to the evidence before the court regarding the sale of the business prior to Davis Glass 1 contracting with FES, it is apparent that the learned magistrate focussed not on the actual evidence of whether the business had been sold, but whether that evidence was available to FES and its solicitors prior to entering judgment against Jender. That question was relevant to the reasonableness of the parties’ conduct, but was of no particular relevance to the existence or otherwise of a meritorious defence.

In conclusion, in my view, the learned magistrate’s decision to refuse the rehearing application is an example of a case where, adopting the language of the plurality in Li,[42] “the result itself bespeaks error”.[43] Alternatively, having regard to the evidence before the learned magistrate, and the submissions of the parties, I cannot see how the learned magistrate’s conclusion that Jender did not have a meritorious defence could have been arrived at.[44] As observed by Derham AsJ in Gunns,[45] this is the primary, or paramount, consideration in such an application. The decision must be quashed, and the matter remitted to the Magistrates’ Court for determination according to law.
[42](2013) 249 CLR 332.
[43]Ibid [85].
[44]Minister for Immigration and Border Protection v Singh (2014) 231 FCR 437 [44].
[45][2014] VSC 260.

Turning briefly to the other grounds of review, in my view, the “record” does not expose any error of law on the part of the learned magistrate. He correctly stated the applicable legal test; rather, it was his application of that test to the facts before him which went awry. However, it is arguable that the learned magistrate’s undue focus upon whether FES acted reasonably in doubting the validity of Mr Clayton’s assertion that Jender was not the proper defendant amounted to the learned magistrate taking into account an irrelevant consideration. As noted above, the question of whether FES had acted reasonably in entering judgment is arguably only relevant to the question of whether the judgment had been regularly entered. Before the learned magistrate, and before this Court, Jender submitted that the conduct of FES in entering judgment when its solicitor had been informed by both Mr Clayton and Mr Saunders that the contracting party was Davis Glass 1, not Jender, meant that the judgment had not been regularly entered. Jender referred to the decisions of Beach J in Microscience (International) Pty Ltd v Total Peripherals Pty Ltd[46] and Bongiorno J in French v Triple M Pty Ltd[47] to the effect that in some circumstances, a judgment which has been “snapped on” without warning may be considered to be irregularly entered, such that the discretionary considerations applicable to applications to set aside default judgments do not apply, and the party against whom judgment has been entered is entitled to set aside the judgment as of right.
[46][1998] VSC 50.
[47][2006] VSC 36.

In the current case, Snowton Saje warned Mr Clayton that Jender should file a defence, and the form of the complaint in the Magistrates’ Court proceeding is clear in its terms that a defence should be filed within 21 days of service of the complaint. Accordingly, the current case is not on all fours with the snapping-on cases. As it is not necessary for present purposes to decide whether the circumstances of the current case are analogous with the snapping-on cases, I shall not embark upon that exercise. In any event, at the rehearing application, counsel for Jender at the outset conceded that the judgment was regular, and the contention that the judgment was irregular was only pressed in the course of the current proceeding.

Rather, the relevance of the learned magistrate’s focus upon the reasonableness or otherwise of FES’s conduct to the current application is that, in doing so, he was arguably taking into account of an irrelevant consideration, which may give rise to jurisdictional error. Again, what amounts to a relevant or an irrelevant consideration in the context of a discretionary decision is conditioned by the statutory framework, including, among other things, in the current context, the parties’ compliance with the overarching obligations of the CPA. Ordinarily, in an application to set aside a default judgment, the focus is on the conduct of the applicant, not the respondent to such an application, along with the merits of any defence. However, even before the enactment of the CPA, there is authority to support the proposition that the judgment‑holder’s conduct is relevant to the discretion to allow a rehearing application, as evidenced by the following passage from French v Triple M Pty Ltd.[48]

In the circumstances of this case, the entry of a default judgment at the earliest possible opportunity without warning against parties known to the plaintiff’s solicitor to be represented constituted a precipitate and unwarranted, if nonetheless legal, attempt to advance his client’s case by taking advantage of what any reasonable and experienced solicitor should have realised was an oversight or perhaps several oversights by the defendant and their legal advisors. It would be contrary to justice for this Court to allow this tactic to be successful by refusing to set aside the judgment entered by default. Litigation is not a steeple chase nor even a bike race where a fall can determine the outcome. As the High Court made clear in Queensland v J L Holdings Pty Ltd[49] “... the ultimate aim of a Court is the attainment of justice ...”.[50]

[48]Ibid.

[49](1997) 189 CLR 146 at 154 per Dawson, Gaudron and McHugh JJ.

[50]Ibid [22].

Accordingly, while it could be argued that the learned magistrate formed an overly generous view of FES’s conduct (compared with, say, the view taken by Gardiner AsJ in the Supreme Court proceeding, where he ordered that FES pay Jender’s costs of the application to set aside the statutory demand), and that his view of the reasonableness of FES’s conduct carried greater weight than it should have, it could not be said that the learned magistrate had regard to an irrelevant consideration such that his refusal of the rehearing application was tainted by jurisdictional error on that basis alone.

Given my findings that the learned magistrate’s decision to refuse the rehearing application was unreasonable, in the legal sense, then strictly speaking, it also is not necessary for me to determine the question as to whether the learned magistrate’s reasons were adequate. In cases of the current kind, when an interlocutory dispute is fully argued in a busy court, this Court should be cautious of imposing standards that are too exacting. Further, it is arguable that the learned magistrate’s reasons, albeit very brief, were sufficient to enable this Court to identify the error in the learned magistrate’s reasoning process. However, on balance, I do agree that the learned magistrate’s reasons do not disclose the path of reasoning the learned magistrate undertook in reaching the conclusion that Jender did not have a meritorious defence, or at least “an arguable defence which carried some degree of conviction”.[51]
[51]Day v RAC Motoring Services Pty Ltd [1999] 1 All ER 1007; Williams, Civil Procedure Victoria [21.07.20].

In Makeham v Sheppard,[52] a decision handed down by the Court of Appeal shortly after judgment in this proceeding had been reserved, the Court had occasion to restate the principles governing the standard of reasons required to be given by magistrates, as follows (omitting footnotes):

So far as the guiding principles are concerned - and presently putting to one side s 4A of the JDA - it has long been recognised in this State that officers of courts of summary jurisdiction are not exempt from the duty attaching to every judicial officer to provide adequate reasons for decision. As a matter of judicial duty, and as an ordinary incident of the judicial process, magistrates have an obligation to provide adequate reasons.
Of necessity, the content and extent of a magistrate’s reasons will be dictated by the nature of the matter under consideration, and the evidence and the issues raised. In a case such as the present, a magistrate must consider all of the relevant evidence; although, depending upon its importance to the ultimate resolution of the case, it may not be necessary for the magistrate to refer to every piece of it, or to indicate whether it is accepted or rejected. But a magistrate should refer to any evidence that is important or critical to the proper determination of the matter. And where there is conflicting evidence of a significant nature, each set of evidence should be referred to.
Plainly, the extent of the duty to set out the findings made from the evidence will depend upon the circumstances of the individual case. Indeed, having regard to the nature of the case and the issues to be determined, a magistrate’s reasons may not need to be elaborate. Quite obviously, the content of the obligation will not be the same for every decision, but will vary according to the circumstances of the particular case.
In any disputed case, a magistrate should set out material findings of fact, together with any ultimate conclusions or findings reached. He or she should provide reasons for arriving at the relevant findings of fact and the conclusions based on those findings, and should give reasons applying the law to the facts as so found. That is not to say that a magistrate necessarily must make explicit findings on each disputed piece of evidence, or make findings on every argument or submission made - particularly where they are numerous and of varying significance - but those that are important to the ultimate decision must be set out.[53]

[52][2020] VSCA 242.

[53]Ibid [35]-]38].

In this case, the Court of Appeal was concerned with reasons given by a magistrate in support of a conviction of a summary offence, not a decision to dismiss an interlocutory application in a civil matter. However, while the rehearing application was an interlocutory application, it was, if decided adversely to Jender (as it was) for all practical purposes, finally determinative of the rights of the parties, and the refusal of the rehearing application exposed Jender to a judgment debt and subsequent enforcement action. Accordingly, Jender was entitled to reasons which provided some explanation as to how and why the learned magistrate reached the rather extraordinary conclusion that Jender did not have a meritorious defence. If he did not accept the evidence in Mr Clayton’s affidavit regarding the sale of the business, he should have said so, and why. The reasons, expressed in such a conclusionary and truncated form, fail to illuminate either the parties or this Court as to how this conclusion, in relation to the most critical aspect of the test to be applied to the rehearing application, was arrived at. Jender ought to be able to comprehend why the learned magistrate made the decision that he did.

Accordingly, the reasons do not meet the relatively low standard appropriate to the nature of the application before the learned magistrate and the consequences of the decision made.

Finally, for completeness, I reject the submissions advanced on behalf of FES that no relief should be granted on discretionary grounds, in that Jender has available to it the option of making a further application for a rehearing on fresh material. First, I accept Jender’s submissions that there would be no fresh material to add, save for correspondence between the parties subsequent to the rehearing application.

Secondly, as identified by Keith JR in his reasons for refusing the stay application, if certiorari is granted, and the rehearing application is ultimately determined in Jender’s favour, it will be in fact possible to, in effect, put the parties back in the position they had been prior to the determination of the rehearing application. Finally, during the course of the hearing of this application, counsel for FES submitted that if Jender put forward a valid defence and appropriate evidence in support of its contention that Davis Glass 1, not Jender, was the proper defendant to FES’s claim, FES would look at the issue afresh. Assuming that submission was made on instructions, it could not be said that remitting the rehearing application to the Magistrates’ Court to be determined according to law will have no practical outcome for the parties.

In conclusion, the first and fourth grounds referred to in Jender’s originating motion are made out, and there is no good reason why relief in the nature of certiorari should not be granted.

I shall seek further submissions from the parties regarding the appropriate form of order and the question of costs.

[2021] VSC 212

29 April 2021