Lampson (Australia) Pty Ltd v Fortescue Metals Group Ltd - [2009] WASC 10

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CHAMBERS

CITATION: LAMPSON (AUSTRALIA) PTY LTD -v- FORTESCUE METALS GROUP LTD [2009] WASC 10

CORAM: TEMPLEMAN J

HEARD: 16 DECEMBER 2008

DELIVERED : 16 DECEMBER 2008

PUBLISHED : 27 JANUARY 2009

FILE NO/S: CIV 1658 of 2008

BETWEEN: LAMPSON (AUSTRALIA) PTY LTD (ACN 003 919 051)
Plaintiff
AND
FORTESCUE METALS GROUP LTD (ACN 002 594 872)
Defendant

Catchwords:

Practice and procedure - Application to set aside judgment in default of defence - Defendant initiates conferral on directions for filing of defence after unsuccessful attempt to strike out statement of claim - Plaintiff files judgment instead of conferring - Whether appropriate action by plaintiff

Costs - Judgment in default of defence set aside - Unreasonable conduct - Result ought to have been known - Indemnity costs awarded

Legislation:

Rules of the Supreme Court 1971 (WA)

Result:

Application granted
Indemnity costs against plaintiff

Category: A

Representation:

Counsel:

Plaintiff: Mr G E Underwood
Defendant: Mr C L Zelestis QC & Mr S Vandongen

Solicitors:

Plaintiff: Hewitts Commercial Lawyers
Defendant: Jackson McDonald

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

Perpetual Trustees Victoria Ltd v Pilcher (2005) VSC 244

TEMPLEMAN J: This is a chamber summons to set aside a judgment entered by the plaintiff in default of defence. The defendant seeks other relief also, particularly in relation to costs, which I will come to in a moment.
The writ endorsed with a statement of claim was filed on 11 June 2008. It was served on 20 June and an appearance was filed on that day. Under the Rules of the Supreme Court 1971 (WA), a defence would have been due on 14 July. However, no defence was then filed.
By letter of 23 June to the plaintiff's solicitors, the defendant's solicitors requested particulars of the statement of claim. They were provided by letter on 1 July.
On 14 July, a case management registrar ordered the defendant, by 4 August, either to file a defence or to apply to strike out the statement of claim. The defendant did not comply with that order. However, it applied to strike out the statement of claim on 15 August, some 11 days out of time.
The application came before Master Sanderson on 2 October. It was preceded by an application to extend time. That application was refused. The master then entered the matter into the Commercial and Managed Cases (CMC) List.
There was a discussion before the master as to when the first return date in the CMC List should be. It was fixed at 3 November at the request, and for the convenience, of the plaintiff's counsel and instructing solicitor. They were to be in Perth on another matter on that date.
I note that a delay of a month between entry into the CMC List and the first return date is much longer than usual. Normally, the first return date is within about a week of the date of entry.
The matter having been entered into the CMC List, Practice Direction Number 4 of 2006 applied. Paragraph 3 of that practice direction refers to some standard directions that might be made when a matter enters the list. The practice direction then says:
It is emphasised that the standard direction should be regarded as a guide only and should be customised to suit the circumstances of the particular case.
The standard directions start by setting out a timetable for pleadings. However, the parties have an obligation to confer for the purpose of agreeing the directions to be made in the particular case.
On 31 October, despite the fact that the matter was listed for 3 November, the plaintiff's solicitor Mr Phillip Hewitt (who practises principally in New South Wales) sent to his Perth office a judgment in default of defence. This was filed on 4 November. Mr Hewitt did so without any prior notification either to the defendant's solicitors or to me, as the case manager, of his intention to take that course.
Nor was anything said about a default judgment in telephone conversations between the solicitor having the conduct of the matter on behalf of the defendant, Ms Bree Rosenthal, and Mr Hewitt and an employee of his, on 31 October and 3 November.
Ms Rosenthal refers to those conversations in an affidavit sworn on 14 November. She says that on Friday 31 October at approximately 3.10 pm, she telephoned the plaintiff's solicitors to discuss programming orders ahead of the directions hearing listed for 10.00 am on Monday, 3 November. She says she spoke to a Mr Cockburn in the absence of Mr Hewitt, having been told by Mr Cockburn that Mr Hewitt had already left the office and would not be returning.
Ms Rosenthal says that during her conversation she told Mr Cockburn there was a directions hearing listed for Monday, 3 November at 10.00 am and that she wanted to speak with Mr Hewitt about agreeing on some programming orders for the hearing; that the defendant would be seeking usual orders and would be requesting 21 days to file its defence. She suggested that discovery follow 28 days thereafter.
Ms Rosenthal says that Mr Cockburn told her that Mr Hewitt would telephone her on the Monday morning before the directions hearing to discuss the programming orders as he (Mr Cockburn) was not in a position to do so.
Ms Rosenthal has exhibited a file note she made of the conversation. The note refers to a request for standard directions; 21 days for defence and discovery 28 days thereafter.
Mr Cockburn has filed an affidavit in which there is a certain amount of agreement with what Ms Rosenthal said. According to Mr Cockburn, Ms Rosenthal said:
We want to propose the usual orders such as discovery within 28 days besides the usual orders such as discovery.
Mr Cockburn has exhibited a file note of the conversation, in which he wrote 'Bree' (that is, Ms Rosenthal) 'wanted to propose some order with respect to discovery et cetera.' Having regard to the use of the term 'et cetera', I have no reason to doubt Ms Rosenthal's evidence that she referred to directions generally, including the filing of a defence, as indeed one would expect in relation to a matter which had been entered into the CMC List.
Pausing there, I assume from the fact that Mr Hewitt had left the office by the time Ms Rosenthal telephoned, and from his evidence that he forwarded the application for a default judgment on 31 October, that he must have done so before Ms Rosenthal telephoned. It is not clear whether Mr Cockburn knew that the application had been made.
Ms Rosenthal's evidence is that on 3 November she telephoned the court - it is not clear to whom she spoke - and was told that the directions hearing had been vacated in order to allow the matter to be placed before a judge in the CMC List, and that the parties would be advised in writing about the directions hearing.
Ms Rosenthal then says that, immediately following the conversation, she telephoned Mr Hewitt and told him she had spoken to the Supreme Court; that the directions hearing had been vacated and that it would be relisted before a judge shortly, at which point the parties should confer in regard to programming directions. According to Ms Rosenthal, Mr Hewitt said he was aware that the matter had been vacated.
Mr Hewitt did not telephone Ms Rosenthal before this conversation took place: nor did he tell her that he had sent the default judgment to Perth on 31 October. Mr Hewitt does not depose to the 3 November conversation with Ms Rosenthal. I therefore assume that he accepts Ms Rosenthal's evidence.
Mr Hewitt says in his affidavit that on 30 October, he became aware, after a conversation with my associate, that I had withdrawn the matter from the CMC List. This is incorrect. And as I said in the course of argument, with the greatest respect to Mr Hewitt, I cannot see how he could reasonably have thought that the matter had been withdrawn from the CMC List, it having been entered by the master, and no subsequent order or direction having been made.
Indeed, on Ms Rosenthal's evidence about the conversation on 3 November, Mr Hewitt said only that the directions hearing had been vacated; not that the matter had been removed from the CMC List.
In my view, in the circumstances set out above, it was unacceptable for Mr Hewitt not to have alerted the defendant's solicitors (or my associate) to the plaintiff's intention to enter a default judgment.
The plaintiff's submissions refer, in paragraph 9, to the fact that Master Sanderson had entered the matter into the list on 2 October. The submissions contain the proposition that it was contingent upon the defendant to put in its defence as the next step in the proceedings. I do not accept that submission. In my view, there was no contingency at that stage. Nothing was said by the master or by anybody appearing before the master, about filing a defence before any programming orders were made for that purpose in the CMC List.
It seems to me therefore, that although the plaintiff complains about the long delay of several months in the filing of a defence, the delay is explained by the history as I have recounted it. Most particularly, the delay between 2 October and 4 November is explained, in my view, by the fact that the matter had been entered into the CMC List and that directions could be expected to be made in due course.
As I said in the course of argument, this is not a case in which the plaintiff could reasonably have assumed that the defendant was being dilatory for some tactical purpose, when it appeared to have no defence to the action. The defendant has always maintained, and maintained before the master, that the plaintiff had sued the wrong party. Indeed, counsel for the plaintiff said himself before the master that there was a triable issue in relation to that, both at page 2 of the transcript of that day (that is the second page numbered 2) and at page 4 of the transcript.
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 say 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 has 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 [15] - [16].
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 circumstance 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.
If I am wrong about that, then it seems to me there is ample evidence to demonstrate, without going into the matter in detail (which would be inappropriate at this stage, in this list) that the defendant has what the plaintiff has already accepted to be an arguable case as to whether the plaintiff has sued the correct defendant.
It is true, as counsel for the plaintiff says, that there is no affidavit from an officer of the defendant, deposing to the fact that the defendant is not liable, but that would be as much a matter of law as a matter of fact.
The evidence from Steven Tregea, who dealt with the plaintiff, and indeed the evidence of Philip Lunn, who is the plaintiff's managing director, supports the argument - about which I express no concluded view - that the plaintiff was not requested by the defendant to carry out the works in respect of which it sues, but by a group or a team called Team 45, which is not a legal entity, but which was acting as an agent for others.
There is also evidence from officers of the defendant which supports the defendant's contention that even if it was liable, there is a substantial dispute about the extent of its liability, such that the matter could properly be defended on that basis as well.
For all these reasons, I will order that the default judgment be set aside. I then turn to the question of costs.
The defendant applies for indemnity costs and an order that the plaintiff's solicitors or the plaintiff, as the court thinks fit, pay those costs on that basis.
The basis on which indemnity costs are awarded are conveniently set out in Seaman, Civil Procedure - Western Australia [66.1.16A] where it is said:
There is discretion with respect to making orders of that kind, although the authorities establish that, in general, that discretion will not be exercised unless there is something in the conduct of the party against whom the order is sought that makes it appropriate for the court to take the unusual step of ordering indemnity costs.
There is then reference to a number of authorities. The passage continues:
An example of such conduct would be where the conduct of that party has been unreasonable, for example where there is no substantive ground for opposition to a grant of probate in solemn form, where that unreasonable conduct has magnified the costs of the proceedings, or where there is something in the conduct of the party that merits censure or reproof, or the defence or the claim has been pursued for some collateral or improper purpose.
A little later in the paragraph it is said:
Furthermore, whenever it appears that an action has been commenced or continued in circumstances where the applicant, properly advised, should have known that he or she had no chance of success, the action must be presumed to have been commenced or continued for some ulterior motive or because of some wilful disregard of known facts or the clearly established law, and in those circumstances an award of solicitor and client or 'indemnity costs' should be considered.
I have accepted that there was no misconduct on the part of the plaintiff or its solicitors in this case. But as the passage to which I have referred makes clear, unreasonable conduct can justify an order for indemnity costs: and I have held that the conduct of the plaintiff was unreasonable.
In my view, the last of the passages I have quoted is of general application. And I consider that, in all the circumstances, the plaintiff or its solicitors should have known that the judgment would be set aside if an application such as this was made by the defendant.
I therefore think it appropriate to make an order for indemnity costs against the plaintiff.
As far as the plaintiff's solicitors are concerned, O 66 r 5(1) provides:
Where in any proceedings costs are incurred by a party -
(a)as a result of any improper, unreasonable, or negligent act or omission; or
(b)which, in the light of any such act or omission occurring after they were incurred, the Court considers it is unreasonable to expect that party to pay,
the Court may order any practitioner whom it considers to be responsible (whether personally or through a servant or agent) -
(c)to pay those costs personally or to indemnify any party who has been ordered to pay those costs;
(d)not to claim any relevant costs or fees; or
(e)to refund any relevant costs or fees which may have been paid already.
Subparagraph (2) provides:
No order under this rule shall be made against a practitioner unless he has been given a reasonable opportunity to appear before the court and show cause why the order should not be made …
In all circumstances, I think it appropriate to require Mr Hewitt to show cause why he should not pay the costs personally. Of course I do not know what passed between Mr Hewitt and his client: whether he gave any advice about the merits of obtaining a default judgment and the likelihood of the outcome of any subsequent application. Those matters are privileged. They are not Mr Hewitt's privilege; they are his client's privilege. I will therefore direct Mr Hewitt to serve a copy of my reasons (which will be transcribed, edited and published in due course) on his client so that he and his client together can consider his position. If there is any conflict of interest between them, appropriate arrangements will have to be made for separate representation.