McKay v Barker

[2014] VCC 2266

IN THE COUNTY COURT OF VICTORIA Revised
Not Restricted
Suitable for Publication

AT MELBOURNE

COMMERCIAL LIST
GENERAL CASES DIVISION

Case No. CI-10-00904

PETER WALTER McKAY

(AND OTHERS ACCORDING TO SCHEDULE ATTACHED)

Plaintiffs

v

MERVYN JAMES BARKER

Defendant

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JUDGE:	His Honour Judge Cosgrave
WHERE HELD:	Melbourne
DATE OF HEARING:	10 and 15 December 2014
DATE OF JUDGMENT:	15 December 2014
CASE MAY BE CITED AS:	McKay & Ors v Barker
MEDIUM NEUTRAL CITATION:	[2014] VCC 2266

REASONS FOR JUDGMENT

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Legislation Cited:     Civil Procedure Act 2010 (Vic)

Cases Cited:Alexander v Ajax Insurance Co Limited [1956] VLR 436; Lau v Citic Australia Commodity Trading Pty Ltd [1999] VSCA 34; Kostokanellis v Allen [1974] VLR 596; Rosing v Ben Shemesh (1960) VLR 173.

Judgment:The default judgment entered by the plaintiffs against the defendant on 15 October 2010 be set aside.

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APPEARANCES:	Counsel	Solicitors
For the Plaintiffs	Mr S Dyrenfurth	Rothwell Lawyers
For the Defendant	Mr M Pirrie	Trueman Dawson

HIS HONOUR:

1   This application is brought by the defendant to set aside judgment entered against him on 15 October 2010 by the plaintiffs.  The judgment was entered in default of defence.

2   The judgment was entered in the following terms:

(a) Judgment be entered against the defendant in the sum of $283,534.40 inclusive of interest;

(b)Interlocutory judgment be entered by the first and fourth plaintiffs against the defendant for damages to be assessed;

(c)       The defendant pay the plaintiffs’ costs to be taxed on scale D.

3   The certificate of judgment subsequently issued by the court indicated that judgment was entered in default of appearance.  This factual error is one of the grounds relied upon by the defendant in its submission that the judgment was irregularly entered.  Whilst the certificate contained an error, I do not regard it as matter of critical significance.  The error is not of sufficient magnitude to warrant setting aside the judgment.

4   The defendant relies upon his affidavit sworn 27 November 2014.  The exhibits are extensive because they include documents filed in the Federal Circuit Court in respect of a bankruptcy notice filed against the defendant by the four plaintiffs in this proceeding.  In circumstances where there are issues regarding the propriety of the judgment against the defendant, I regard the plaintiffs’ conduct as a matter of real concern.  The defendant says in his affidavit, inter alia:

(a) he never received a copy of the writ or Statement of Claim and he first saw these documents in November this year after examining the court file;

(b) he did not know about the notice of appearance lodged on his behalf by Mirabelli, D’Ortenzio & Co (“Mirabelli”) solicitors;

(c) Mirabelli did not speak to the defendant or his wife about the writ or  Statement of Claim or the allegations in the documents.

5   The defendant also contests the allegations made in the affidavit of Ian Jackson sworn 12 August 2010 on behalf of the plaintiffs.  He denies non-compliance with the deed of settlement entered into with the plaintiffs and maintains that his interest obligations to the plaintiffs were complied with at the time the default judgment was entered.  Indeed, he says that the interest payments were in credit (and not default) at the relevant time.  The defendant has set out an exhaustive history of the matter with an affidavit exceeding 30 pages.  In addition, there are many pages of exhibits.  The defendant contends the judgment entered against him was irregularly entered and should be set aside as of right. Further, the defendant contends that if the judgment were regular, it should be set aside in the exercise of the court’s discretion.

6   The defendant maintains that the judgment was irregular.  I have already referred to the first ground advanced and find that complaint was not made good.

7   The other reason advanced by the defendant is that the terms of the judgment are inconsistent with the Statement of Claim.  The order awards a judgment apparently in favour of all the plaintiffs for a specific monetary sum of $283,534.40. This is said to be an error for two reasons.

8   First, the second plaintiff sought no relief in the proceedings and therefore is not entitled to judgment. Secondly, the first and fourth plaintiffs sued for damages.  It was only the third plaintiff who claimed a liquidated sum.  The amount sought by that party was $355,340 plus interest.  This was a different and higher amount than that for which judgment was entered.  Accordingly, the defendant maintains there is a serious question about the propriety of the plaintiffs obtaining a judgment in the terms in which they did.

9   In the commentary on the Supreme Court Rules, the author notes that entering final judgment under Order 21 for a liquidated amount is irregular where the claim is for damages and not debt.  This matter was examined at length by Sholl J in Alexander v Ajax Insurance Co Limited.[1]  It seems to me that His Honour’s conclusions regarding the law are applicable in the present context, at least as concerns the first and fourth plaintiffs.

[1] [1956] VLR 436

10    The court has historically considered an irregular judgment should not be maintained on its records.  However, as the plaintiffs pointed out, not every irregularity will necessarily allow a defendant to have a default judgment set aside.  A technical error can be disregarded if the circumstances warrant it.  This might happen, for example, where the irregularity causes no prejudice to the defendant, with the defendant not having been induced to change his or her position in any way.  One example of circumstances in which technical difficulties have not enabled a defendant to set aside a default judgment is where a County Court proceeding was headed “In the Supreme Court of Victoria at Melbourne”.  Another case is where there was no proceeding number appearing on the face of the copy of the originating process served on the defendant.  In neither instance did the court set aside the default judgment.

11    In this case, I consider it is irregular that the second plaintiff should have any order for judgment given that it sought no relief.  In addition, it is not appropriate that the first and fourth plaintiffs have judgment for a liquidated amount when they claimed damages.  In my view, these irregularities are not merely technical or insignificant.  The only party claiming a liquidated amount was the third plaintiff and it has obtained a judgment for an amount less than that which it was claiming in the prayer for relief.  The judgment for that plaintiff is not irregular.

12    I note that it behoves the court and parties in litigation generally to act carefully regarding the making of orders because of the ramifications which they can have.  It is important that the court orders reflect the reasons given in the judgment and are justified by the facts found in the judgment.  This in turn should properly reflect what is alleged in the litigation.  It has probably always been the case that practitioners have been obliged to assist the court in framing orders, especially when seeking default judgment.  Since the Civil Procedure Act 2010 (Vic), the obligation is more explicit to assist the court in achieving the overarching purpose. A part of that purpose relates to court orders and the need for accuracy.

13    If I am found to be wrong in the conclusions already reached regarding irregularity, I shall also consider the alternate scenario of assuming the judgment was regularly entered, and deciding whether it is appropriate for the court to set aside the judgment.

14    With respect to the third plaintiff, where I am satisfied it was a regular judgment for a lesser amount, the issue raised by the defendant seems to be how the deed of settlement ought be interpreted.  On the defendant’s version of events and having regard to his evidence, he contends that it is enough that the interest which was due to be paid in the event that the principal amount was not paid by a certain date was up to date when the judgment was entered.  The defendant contends that the payment of the $100,000 not only covered the interest outstanding at the particular time, but also contained a ‘cushion’, if I could use that description, being a sum to cover future interest.  Accordingly, the defendant says there was no breach at the time when the plaintiffs entered judgment.

15    The defendant points to the fact that the terms of the deed of settlement did not address in the usual way a failure to pay by the paying party.  Terms of settlement usually provide that the party who is expecting to be paid, if it does not receive money by the due date, is entitled to enter judgment for a fixed amount plus interest and costs.  The terms often provide for reliance upon an affidavit, the defendant accepting that relevant matters can be proved that way, and the judgment effectively (if not explicitly) being by consent.  The defendant contends in this case that the terms were different and that, because of the way the terms were framed and as they were understood by the defendant, there was no breach.

16    The defendant’s evidence has been extensive on the matter.  The defendant also makes much of the fact that none of his evidence was challenged by contrary affidavit evidence from the plaintiffs or by cross-examination.  The plaintiffs contend that it was sufficient for their purposes to refer to documents which were already in evidence and that the court should draw the appropriate inference from those documents and be sceptical as to the defendant’s defence.

17    One of the difficulties the court has in applications of this sort is that, because it is not a full trial, the threshold for the defendant to satisfy is relatively low and a judge sitting in my position cannot make any determinative findings on contested matters of fact or credit.[2]

[2]Lau v Citic Australia Commodity Trading Pty Ltd [1999] VSCA 34, at [5]-[6]

18    If the judgment were regularly entered, the court is required to consider the proper exercise of its discretion in accordance with the principles articulated by the Full Court of this State in cases such as Rosing v Ben Shemesh[3]  and Kostokanellis v Allen.[4]   When considering the criteria referred to in those decisions and how they apply in this case, I accept that the defendant has provided an explanation for his failure to lodge a defence.  He has sworn of his ignorance of the claim and the notice of appearance and he was unaware of the relevant details of the proceeding.  That may ultimately be shown to be incorrect but at this stage, and in this sort of application, I cannot make any contrary findings based on arguments relating to contested evidence.

[3] (1960) VLR 173

[4] [1974] VLR 596

19    If the defendant only became aware of the judgment entered against him in November this year as he swears, there has been no substantial delay in moving to set aside the default judgment.  Especially in the absence of any sworn evidence from the plaintiffs, for example as to witnesses having died or become incapacitated in some way, I am satisfied that there is no prejudice to the plaintiffs which cannot be adequately compensated by an order for costs.

20    A major factor in these applications is whether the defendant has what might be described as an arguable defence or a defence on the merits.  It is not for this court to assess whether a defence will succeed.  On this point with respect to the third plaintiff, the defendant’s defence seems to relate to the issue of the drafting of the deed of settlement discussed above and how the deed should be interpreted.  I am satisfied that the defendant’s position is arguable.

21    Further, in relation to the first and fourth plaintiffs, the issue raised by the defendant seems to be the alleged disconformity or inconsistency between the deed of settlement and the Statement of Claim.  They appear to offer different bases for the claim made against the defendant.  One refers to a guarantee in the context of a Westpac Banking Corporation (“Westpac”) loan in excess of $3 million while the other refers to a guarantee in the context of a loan from Westpac of $1.5 million.  On the face of it, the two figures are substantially different and do not sit comfortably together.  There is no explanation from the plaintiffs as to how I should make better sense of the matter.  The factual issues raised should be explored at trial.

22    In dealing with this application I have not overlooked the orders made by the court on 17 September 2010.  They create an issue of concern especially as to the state of the relationship between the former solicitor for the defendant and the defendant.  However, having regard to some of the sworn evidence of the defendant, it seems to me it is possible that there was a breakdown in communication between the solicitor and the client.  This would explain why the defendant client swears to being ignorant of matters one would normally expect to be discussed between solicitor and client.

23    In summary, I consider that the judgment was irregular, at least in respect of the first, second and fourth plaintiffs.  But even if I am wrong about that, I consider that if the judgment were regularly entered, then as a matter of discretion, the judgment should be set aside in respect of all four plaintiffs.  To the extent that prejudice in a general sense is relevant when exercising the discretion, as I have noted, the plaintiffs have not referred to matters beyond financial matters and the usual inconvenience that comes with litigation and some additional delay.  There is no particular prejudice such as, for example, missing or dead witnesses. From the defendant’s perspective, he faces the imminent threat of bankruptcy.

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SCHEDULE

PETER WALTER McKAY

First Plaintiff

and

DIRECT MORTGAGE FUNDING PTY LTD
(ACN 050 230 405)

Second Plaintiff

and

FLORA AVE PTY LTD
(ACN 127 917 588)

Third Plaintiff

and

ACN 116 072 872 PTY LTD

Fourth Plaintiff

and

MERVYN JAMES BARKER

Defendant