Kelly v Rooney - [2008] WASC 126

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CHAMBERS

CITATION: KELLY -v- ROONEY [2008] WASC 126

CORAM: MASTER SANDERSON

HEARD: 22 MAY 2008

DELIVERED : 3 JULY 2008

FILE NO/S: CIV 2022 of 2005

BETWEEN: MATTHEW ALEXANDER KELLY
JOYCE KELLY
Plaintiffs
AND
NIGEL JOHN ROONEY
LINDA ANN ROONEY
Defendants

Catchwords:

Practice and procedure - Application to extend time for compliance with springing order - Turns on own facts

Legislation:

Nil

Result:

Time extended
Judgment set aside

Category: B

Representation:

Counsel:

Plaintiffs: Mr G K Paull
Defendants: Mr S R Sirett

Solicitors:

Plaintiffs: Butcher Paull & Calder
Defendants: Downings Legal

Case(s) referred to in judgment(s):

Brocx v Hughes [2008] WASC 34
MTQ Holdings Pty Ltd v Lynch [2007] WASC 49
The State of Queensland v J L Holdings Pty Ltd [1997] HCA 1

MASTER SANDERSON: By chamber summons filed 19 March 2008, the defendants sought to set aside a default judgment entered against them on 4 May 2007. In fact, judgment was not entered by default. What happened is that the defendants failed to comply with a springing order and as a consequence of that failure judgment was entered against them. The order that should have been sought in the chamber summons was an order extending the time within which the defendants could comply with the springing order. Although no application was made for leave to amend the chamber summons, the parties approached the matter on the basis that an extension of time was being sought. It is on that basis that I will deal with the matter.
This matter was commenced on 25 August 2005. On that same day, the plaintiffs sought an interlocutory injunction against the defendants. On 30 August 2005, I made the following orders:
1.Until after judgment in this action, or further order, the Defendants or either of them take all such steps as are necessary to forthwith restore or cause to be reinstated the Plaintiff's [sic] access and entitlements to, and the use of the Telstra Priority 13 Number, 13 14 79, and further, the Defendants or either of them by themselves, their servants, agents or otherwise, be restrained and an injunction be granted restraining the Defendants or either of them, from any act or omission which might directly or indirectly cause the Plaintiffs' access, entitlements to and/or use of the said number to be withdrawn, suspended, revoked or in any way restricted.
2.Not later than 5.00 pm on 30 August, 2005 the Plaintiffs do serve on the Defendants copies of this order and of the Affidavit and exhibits filed in support of the application.
3.The Plaintiffs do have leave to serve copies of this order, the Affidavit and exhibits filed in support of the application on the Defendants care of Post Office Box 12029 George Street, Brisbane, Queensland, 4003.
4.The Plaintiffs have liberty to serve with the order and Affidavit a summons returnable at 9.15 am on 27 September 2005 to continue this injunction.
5.The Defendants have liberty to apply on 72 hours notice to the Plaintiffs to dissolve or vary this injunction.
6.The costs of the application be reserved.
When the application for the injunction was brought, it was supported by an affidavit of Matthew Alexander Kelly (Mr Kelly) sworn 23 August 2005. Mr Kelly explained that the plaintiffs were franchisees in a business known as 'Seal‑A‑Fridge'. The defendants were franchisors. The parties had entered into a written agreement dated 23 November 1997. As part of the grant of the franchise, the plaintiffs were connected to what is described in the agreement as the 'Telstra 13 14 79' telephone number. The franchise agreement contained the following clause (see annexure MAK 1, page 40):
Special Conditions
4ALL ADVERTISING ON TELEVISION, AND YELLOW PAGES IS TO DISPLAY THE 13 14 79 PHONE NUMBER AND EACH FRANCHISEE IS TO MEET THEIR RESPECTIVE COSTS RE: SUCH ADVERTISING (50% each).
5EACH FRANCHISEE IS TO PAY THEIR OWN COSTS RELATING TO THE TELSTRA 13 14 79 PHONE NUMBER.
Mr Kelly says that prior to entering into the franchise agreement he made enquiries as to what the cost of the Telstra connection would be. He says that he was advised by the first‑named defendant that the cost would be about $30 per week and that this figure would decrease as additional franchisees signed up. After the plaintiffs and the defendants entered into the franchise agreement, a dispute arose as to the amount to be paid for the Telstra number. Without going into details, Mr Kelly alleges the plaintiffs were charged about three times the amount that the defendants had represented they would have to pay. Correspondence passed between the plaintiffs and the defendants and their respective solicitors without the matter being resolved. Mr Kelly says that on 9 August 2005, he was advised by the first‑named defendant that the plaintiffs' rights in respect of the telephone number would be suspended by Telstra 'within days'. Correspondence failed to elicit an assurance that the plaintiffs' access to the Telstra number would be preserved. That led to the issue of the writ and the application for the injunction.
The amounts involved in relation to the Telstra number are relatively modest. But the effect on the plaintiffs' business of their being denied access to that number would be significant. Mr Kelly says that for the financial year ending 30 June 2004, the income from the franchise business was over $157,000. He says that the vast majority of the income was generated by enquiries via the Telstra number. So loss of the number would have been catastrophic for his business.
The matter came back before me on 27 September 2005. As at that date no appearance had been entered by the defendants. I extended the injunction until 11 October 2005. The defendants, through solicitors, entered an appearance on 29 September 2005. The matter came back before me on a number of occasions. On 15 November 2005, I ordered that the interlocutory injunction be continued until further order. I granted the parties liberty to apply on 72 hours' notice.
The statement of claim was filed on 24 November 2005. Essentially, it recites as material facts what was set out in Mr Kelly's affidavit. It is alleged that the defendants' conduct in threatening to withdraw access to the Telstra number was unconscionable and claims that as a consequence of that unconscionable conduct the plaintiffs have suffered loss and damage. The damages claim is unliquidated, but is put at an amount of $24,662. By way of relief, the plaintiffs sought a permanent injunction restraining the defendants from denying the plaintiffs access to the Telstra number.
The defence was filed on 3 January 2006. Inter alia, it alleges that on 2 January 2002, the plaintiffs and the defendants entered into an agreement whereby the plaintiffs would pay the sum of $75 per week to the defendants in respect of the plaintiffs' continued access to the Telstra number. It is then alleged that for the months of January through to May 2005, the agreed amounts were not paid. It is said that failure to pay these amounts by the plaintiffs led to the defendants threatening to suspend access to the Telstra number. Although it is not clear from the pleading on what basis it is alleged the defendants could have suspended access to the number, it is at least implicit that failure on the part of the plaintiffs to comply with the agreement as to payment justified the threat made by the defendants. There is then a counterclaim. Essentially, the defendants say that the plaintiffs were in breach of their agreement to pay for access to the Telstra number and damages are sought. As I have said, the amounts involved are modest.
The plaintiffs filed a reply to the defence and counterclaim on 3 February 2006. Essentially, they denied the January 2002 agreement. That being so, it appears that the plaintiffs' position is that they were not obliged to pay $75 per week for access to the telephone number. But it is clear from Mr Kelly's affidavit in support of the injunction application that they concede they must pay something for access to the number. It was represented to them prior to their entering into the franchise agreement that they would have to pay around $30 per week for access to the number. The end result then is that no matter which version of the facts was eventually accepted by the court, the plaintiffs would end up being indebted to the defendants. That would be so even if the perpetual injunction were granted.
The action then proceeded at a leisurely pace. On 8 May 2006, Registrar Powell ordered that the defendants give discovery. They did not comply with that order. On 8 August 2006, I made a springing order requiring the defendants to provide discovery. The defendants complied with that order. The plaintiffs then sought further and better discovery. On 2 November 2006, Master Newnes made an order requiring the defendants to give further and better discovery. The defendants did not comply with that order. On 22 January 2007, Master Newnes made a springing order giving the defendants 14 days within which to comply with his earlier order that further and better discovery be provided. An affidavit which purported to comply with that order was filed on 5 February 2007. It is common ground between the parties that the affidavit did not comply with the order of Master Newnes. Judgment in default of compliance with that order was entered on 7 May 2007.
It is necessary to say something further about the events which took place between the making of the springing order by Master Newnes and the entry of judgment. On 29 May 2006, the defendants' then solicitors applied to get off the record. On 24 July 2006, Registrar Powell made that order. On 5 February 2007, the defendants lodged a notice of intention to act in person.
The O 59 r 9(1) memorandum filed 19 September 2006 when the first application for the springing order was made discloses that the plaintiffs' solicitors first approached the defendants on 13 September 2006 requesting further and better discovery. On 20 September 2006, the defendants requested clarification of precisely what documents were to be discovered. On 26 September 2006, the plaintiffs advised the defendants what documents they were after. That correspondence did not draw a reply. On 4 October 2006, the plaintiffs' solicitors again wrote to the defendants seeking that the documents be discovered by 9 October 2006. In this letter they advised the defendants that failure to discover the documents would result in an application to the court. Again, this did not draw a response and the application was brought.
After the defendants filed what purported to be an affidavit of further and better discovery, the plaintiffs' solicitors wrote to them pointing out that the document was inadequate and offering the defendants a further 14 days to comply. That letter was dated 23 March 2007. On 26 March 2007, the defendants wrote seeking clarification of what were alleged to be the deficiencies in the affidavit. The plaintiffs' solicitors responded on 28 March 2007 pointing out the deficiencies. On 3 May 2007, the defendants purported to serve a further affidavit on the plaintiffs' solicitors in compliance with the springing order (see affidavit of Nigel John Rooney (Mr Rooney) sworn 17 March 2008). Again, it is common ground that this affidavit did not comply with the order made by Master Newnes. It was after receipt of this second affidavit that judgment was entered.
Between 1 June 2007 and 18 January 2008, correspondence passed between the plaintiffs' solicitors and the defendants dealing with the assessment of damages. That correspondence was inconclusive. It is to be noted, however, that there is nothing in the correspondence which suggests the defendants would take steps to have the judgment set aside. On 19 February 2008, the plaintiffs filed a chamber summons seeking an assessment of damages. On 22 February 2008, solicitors who had apparently been recently appointed by the defendants wrote to the plaintiffs' solicitors saying that they had 'preliminary instructions' to set aside judgment. In fact, that application was not made until 19 March 2008.
The circumstances in which time will be extended for compliance with a springing order were examined in some detail in two recent cases. The first of these is MTQ Holdings Pty Ltd v Lynch [2007] WASC 49. That is a decision of Master Newnes. The second case is Brocx v Hughes [2008] WASC 34. That was a decision of Johnson J. Both cases reached the same conclusion as to the applicable principles on an application such as this. The factors to be considered are:
1.the circumstances in which the springing order came to be made;
2.the reason for the non‑compliance with the springing order;
3.the prejudice to the defaulting party if time is not extended;
4.the prejudice to the other party if the time were extended.
In both judgments it is accepted that some consideration of the merits of the case is required, but only to the extent necessary to determine that the case put by the party seeking the extension of time is not hopeless. If that were so, there would be no purpose in extending the time. Further, both decisions acknowledge that determination of the issues involves a consideration of case flow management issues. To that end, the interests of justice must always be borne in mind: see The State of Queensland v J L Holdings Pty Ltd [1997] HCA 1.
Turning then to a consideration of the guidelines, I have outlined the circumstances in which the springing order came to be made. The defendants had failed to comply with an initial order for discovery and that had led to the making of a springing order. An order for further and better discovery was then made - meaning of course that the discovery provided was inadequate and that the defendants had failed to discharge their clear obligations. It is not as though the documents which were being sought by the plaintiffs were peripheral to the issues between the parties. In fact, they were the records relating to the Telstra account. It should have been apparent to the defendants, whether represented or not, that these documents were central to the dispute between the parties. Yet they were not discovered either in the initial affidavit of discovery or in the failed attempt to comply with the order for further and better discovery. Taking all these matters into account, the circumstances in which the springing order came to be made weigh heavily against extending the time for compliance.
In support of the defendants' application, reliance was placed on an affidavit of Mr Rooney sworn 19 March 2008. In pars 4 through to 12 of that affidavit, Mr Rooney offers some explanation as to why it was that there was no compliance with the springing order of Master Newnes. With respect, the explanation is unconvincing. While I accept that Mr Rooney has no legal training and that fact put him at something of a disadvantage, compliance with the order was not a complicated matter. One affidavit of discovery - albeit inadequate - had already been lodged. A reference to that document would have shown what was necessary for a proper affidavit and list of documents so as to comply with the order. Furthermore, to reiterate what I have said above, it must have been plain to Mr Rooney that the documents the plaintiffs were seeking to have discovered were central to the dispute between the parties. It may well be, as Mr Rooney said, that he handed to a solicitor for the plaintiffs a bundle of documents which were the accounts or some of the accounts the plaintiffs were seeking to have discovered. But it must have been clear to Mr Rooney that he still needed to comply with the order made by the master.
In my view, the reasons for non‑compliance with the springing order are inadequate and this factor weighs heavily against time being extended.
That leaves then the two questions of the relative prejudice to the parties. It is here that the difficulty in this case arises. It is obvious that if the judgment is not set aside, there will be prejudice to the defendants - they will be liable in damages to the plaintiffs. But there is a question as to whether they would be subjected to the perpetual injunction requiring them to pay for and maintain the Telstra number. The judgment entered in favour of the plaintiffs was in the following terms:
The defence be struck out and judgment be entered for the plaintiffs with damages to be assessed.
In the course of submissions, I asked counsel for the plaintiffs whether he maintained that the nature of the judgment entered meant that the perpetual injunction would run. He indicated that he did not believe that was the case. In making that concession, he appeared to concede that equitable relief such as an injunction is always discretionary and the mere fact that a defence is struck out does not necessarily mean that injunctive relief would be granted.
The position is further complicated by the fact that on the pleadings the plaintiffs must have an ongoing obligation to the defendants to pay something for the maintenance of the Telstra number. At present, the plaintiffs are contributing nothing towards maintenance of the number. Whether in that circumstance an injunction would be granted is an open question.
There is a further complication in this matter. Although the defence of the defendants was struck out, there was no order that the counterclaim should be struck out. It is at least arguable that the counterclaim remains on foot. That leads to an extraordinary situation. Having obtained judgment, the plaintiffs would be entitled to have an assessment of damages based upon their claim that there was a representation they would only be charged a certain amount for the Telstra line. The defendants maintaining their counterclaim would seek to establish that they were entitled to a greater amount on a different basis. The two could not sit together. Counsel for the plaintiffs was unable to explain how that impasse could be resolved.
In my view, it is in the interests of justice in this case that the time be extended for compliance with the order. Not to do so is bound to lead to further complications in a matter where the financial stakes are not high and where the essential question - the maintenance of the Telstra number - is likely to be left unresolved. However, extending the time ought be on conditions - particularly a condition that the defendants be responsible for the costs thrown away as a consequence of the time being extended.
I will hear the parties as to the precise form of orders and as to costs.