Medical Solutions Australia Pty Ltd v Qureshi
[2018] WADC 153
•13 NOVEMBER 2018
JURISDICTION : DISTRICT COURT OF WESTERN AUSTRALIA
IN CIVIL
LOCATION: PERTH
CITATION: MEDICAL SOLUTIONS AUSTRALIA PTY LTD -v- QURESHI [2018] WADC 153
CORAM: LONSDALE DCJ
HEARD: 21 SEPTEMBER 2018
DELIVERED : 13 NOVEMBER 2018
FILE NO/S: APP 33 of 2018
BETWEEN: MEDICAL SOLUTIONS AUSTRALIA PTY LTD
Appellant
AND
MOHAMMAD AAMIR QURESHI
Respondent
ON APPEAL FROM:
Jurisdiction : MAGISTRATES COURT OF WESTERN AUSTRALIA
Coram: MAGISTRATE HUSTON
File Number : PE/GCLM/10454 of 2017
Catchwords:
Application to set aside default judgment - Effect of delay - Whether failure to adequately explain delay is fatal
Legislation:
Nil
Result:
Appeal allowed
Representation:
Counsel:
| Appellant | : | Mr J Jacobson |
| Respondent | : | In person |
Solicitors:
| Appellant | : | Jacobson and Associates |
| Respondent | : | Not applicable |
Case(s) referred to in decision(s):
Allesch v Maunz [2000] HCA 40
Crayden v Ottaviano [2003] WASCA 20
Hall v Hall [2007] WASC 198
Khosa v Legal Profession Complaints Committee [2017] WASCA 192
Kostokanellis v Allen [1974] VR 596
Legal Profession Complaints Committee v Khosa [2015] WASAT 107
National Australia Bank Ltd v Singh [1995] 1 Qd R 377
National Mutual Life Association of Australasia Ltd v Oasis Developments Pty Ltd [1983] 2 Qd R 441
Parker v Transfield Pty Ltd [2000] WASCA 382
LONSDALE DCJ:
Introduction
On 3 July 2017 the respondent lodged general procedure claim 10454 of 2017 against the appellant for unpaid salary, IT services and repayment of a loan totalling $22,674.57. The respondent's claim is said to be related to his employment and/or a business relationship with the appellant.
The claim was served by the bailiff. The bailiff's certificate of proof of service sworn on 22 August 2017 relevantly contains the following:
I did on the 11 Jul [sic], 2017 at 10.35 at Unit 2/7 Hector Street West, OSBORNE PARK, WA 6017 duly serve Medical Solutions Australia Pty Ltd, the defendant in this case by:
Leaving the document at the unattended registered office during office hours (Section 109X(1)(a) Corporations Act 2001 Commonwealth).
On 7 September 2017, the respondent obtained default judgment against the appellant in the amount of $23,058.67.
The appellant brought an application in the Magistrates Court to have the judgment set aside claiming that it had not received notice of the respondent's claim.
The matter came on for hearing on 2 March 2018 before his Honour Magistrate Huston who declined the application to set aside default judgment. The appellant appeals now against that decision.
In support of the application to have default judgment set aside the appellant had filed a number of affidavits sworn by its state manager, Omair Adam Chodhry.
In an affidavit dated 27 October 2017, Mr Chodhry deposed that he was a director of the appellant between 8 February 2016 and 16 January 2017 and then again from 25 April 2017 to 11 July 2017. He sought to explain the likely reason for the appellant failing to receive notice of the respondent's claim in this way:
6.In or around July 2917 [sic] One Hour IP Pty Ltd (''Buyer'') bought all of the ordinary shares of the Defendant from the then shareholders with the purchase being settled that month.
7.During the period when the Buyer was conducting its due diligence, I cannot recall that the defendant had received the Summons from the Claimant.
8.The first I was made aware of the default judgment in these proceedings was when the Defendant received the default judgment orders made [by] this Honourable Court in or around the middle of September 2017.[1]
[1] Affidavit of Omair Adam Choudhry dated 27 October 2017 at pars 7 – 8.
In a supplementary affidavit sworn on 10 November 2017, Mr Chodhry deposed that he was made aware of the default judgment when he received the orders in or around the middle of September 2017.[2] He did not explain why there was a delay between being made aware of the default judgment and the filing of the application to have that judgment set aside. He did say, however, that he instructed the appellant's solicitor to obtain a copy of the original summons from the court registry, which his solicitor received on the morning of 9 November 2017.[3]
[2] Affidavit of Omair Adam Choudhry dated 10 November 2017 at par 10.
[3] Affidavit of Omair Adam Choudhry dated 10 November 2017 at pars 11 and 12.
In that supplementary affidavit Mr Chodhry also outlined a defence to the respondent's claim. He denied that the appellant had any obligation to pay the respondent any wages, salary or fees or that the respondent was owed money pursuant to an agreement to repay a loan.[4]
[4] Affidavit of Omair Adam Choudhry dated 10 November 2017 at pars 15 – 29.
In a further supplementary affidavit dated 18 December 2017, Mr Chodhry sought to proffer an additional explanation for why the appellant had failed to receive notice of the claim. He said:
18.I have reviewed the affidavit of service annexed to the Claimant's Affidavit at MAQ15. At the time that the General Procedure Claim was served neither I nor any of my staff were present at the registered office. Additionally, around the time that the Claim was served the business of the Defendant was in the process of being purchased by One Hour IP and this was an extremely busy time for me, hence my absence at the office.
19.As deposed in my First Affidavit, I never saw the Claim and it is not clear from the affidavit of service where the process server left the Claim. If it was left at the letterbox, I note that [sic] following:
(a)the letterbox has 8 individual letterboxes;
(b)it is suspected that at the time of the defendant's letterbox did not have 'number 2' on it.
It is therefore quite possible that the process server inadvertently posted the claim into the wrong letterbox.
20.If the Defendant had received the Claim, I would have engaged solicitors immediately to deal with the claim, including entering a Notice of Intention to Defend before the time period to do so expired.[5]
[5] Affidavit of Omair Adam Choudhry dated 18 December 2017.
The learned magistrate's reasons for refusing the application to set aside default judgement
In delivering his reasons, the learned magistrate said that he had reviewed all of the material, including Mr Choudhry's affidavits. His Honour found that the evidence and the submissions of counsel involved speculation as to the appellant's previous solicitor's explanation for the delay and that this had not been adequately explained by the appellant.[6]His Honour described the delay between default judgement being granted and the application to have it set aside as being a 'long delay'.[7]
[6] ts 9 (2 March 2018).
[7] ts 10 (2 March 2018).
His Honour then referred to the factors he was required to consider in the exercise of his discretion:
The requirements for the court is discretionary in terms of whether or not to grant an application to set aside a default judgement. It does require me to take into consideration the factors that Mr Jacobson has taken me to today, but the only matter that really seems to be addressed in the defendant's affidavits is the possibility of there being a defence. And that's not what's required only in terms of an application to set aside the other features of the application to set aside must be present.
That is, an explanation as to why it was that the response wasn't provided to the court within the required time, having been served. And it is an independent server; it's the assistant bailiff. It's not someone connected to the claimant; it's the assistant bailiff that effected service at the registered office of the company. It's an important document when a general procedure claim is served. But even that issue of not having lodged the response to the claim within the required time hasn't been addressed, nor has the two month gap – more than two months between when it obviously became known to the defendant that there was the default judgement.[8]
…
It is a balancing exercise between the interests of justice and ensuring that a defendant be given an opportunity to defend, but the other two requirements for a successful application haven't been addressed within the application; that is, not responding to the claim in the appropriate manner; or, secondly, explaining the long delay between when it became aware of the judgement sometime prior to 10 December and ultimately lodging the application.[9]
[8] ts 10 (2 March 2018).
[9] ts 11 (2 March 2018).
After the learned magistrate had given his ruling, counsel for the appellant sought to address him further. After hearing further submissions, his Honour made the following comments:
The three essential characteristics of an application to set aside a default judgement haven't been a feature of the application today. The defence issues have been addressed, to some extent as the possibility of there being an arguable defence, and it might have been that that issue has been traversed, but that, in itself, isn't what's required.
The two month delay, or the more than two month delay, becoming aware of the default judgement and doing something about it in a formal sense, hasn't been explained … [10]
[10] ts 13 (2 March 2018).
The issue on this appeal
An appeal from a decision of a magistrate to the District Court is by way of a reconsideration of the evidence before the magistrate.
In order to succeed the appellant must establish that the learned magistrate erred in fact, law or in the exercise of his discretion: Allesch v Maunz [2000] HCA 40 [14], [23].
The grounds of appeal
The appellant's notice of appeal contains five grounds which read:
1.The trial judge erred in failing to give sufficient weight to the explanation advanced by the appellant for the delay in bringing its application to set aside default judgment.
2.The trial judge erred by placing all emphasis on the appellants delay in bringing the application as fatal to the appellants application to set aside default judgment without giving consideration to any of the other grounds of the application sought to be advanced by the appellant.
3.The trial judge erred in finding that the bailiff's evidence of service was unimpeachable and failed to consider the evidence advanced on behalf of the appellant that it did not receive the summons.
4.The trial judge erred in not providing the appellant with an opportunity to advance submissions that if the default judgment was set aside and the matter was argued on its merits, the appellant would have a real prospect of success in defending the claim against it.
5.The trial judge failed to accord procedural fairness and natural justice by failing to allow the appellant to advance a fulsome argument on the merits and stating at the outset of the hearing that time was limited for the hearing, as staff needed to go lunch, notwithstanding that an hour had been allocated for the hearing.
At the hearing of the appeal, the appellant abandoned reliance on ground 5 but sought to address me in relation to the remaining four grounds.
The discretion to set aside default judgement.
The court has an unfettered discretion to set aside default judgment. However, the appellant must show a credible argument that, if default judgment is set aside, it would have a real prospect of success. The purpose of the discretionary power is to avoid the injustice which would follow automatically on default. See: Parker v Transfield Pty Ltd [2000] WASCA 382 [3] ‑ [4] and Hall v Hall [2007] WASC 198 [61] ‑ [67].
In National Mutual Life Association of Australasia Ltd v Oasis Developments Pty Ltd [1983] 2 Qd R 441, 449 McPherson J said with respect to the effect of lengthy delay on the exercise of the discretion:
It is not often that a defendant who has an apparently good ground of defence would be refused the opportunity of defending, even though a lengthy interval of time had lapsed provided that no irreparable prejudice is thereby done to the plaintiff.
The absence of a satisfactory explanation for delay was considered in the case of National Australia Bank Ltd v Singh [1995] 1 Qd R 377. In that case, Pincus JA considered that the absence of a satisfactory explanation for the delay was a relevant factor but was not fatal in circumstances where there was at least some explanation for the delay, no prejudice to the plaintiff and a good defence on the merits.
A similar view was expressed by Templeman J in Crayden v Ottaviano [2003] WASCA 20 [29] – [30] where his Honour said:
… the question is whether the setting aside of the default judgment would cause irreparable prejudice to the appellant: again, assuming that the respondents have a good defence on the merits.
… I think, it could only be said that the appellant would suffer irreparable prejudice by the setting aside of the judgment, if he was thereby unable to prove his case.
Grounds 1 and 2
Grounds 1 and 2 can conveniently be dealt with together as they both deal with the issue of delay.
The appellant points to the fact that the appellant's former solicitor Mr Khosa had signed and dated the application to have default judgement set aside on 10 September 2017. Had it been filed then or shortly thereafter, it would have been filed well within time.
There was however no evidence by way of affidavit or otherwise before the learned magistrate as to why Mr Khosa had not filed the application immediately. Not surprisingly, given the absence of an explanation by Mr Khosa for why the application to set aside default judgement was not filed until 10 November 2017, the learned magistrate found the delay was unexplained.[11]
[11] ts 10 – 11 (2 March 2018).
However, at the hearing in the Magistrates Court and at the hearing of the appeal before me, counsel for the appellant sought to explain that, despite having made some effort to do so, he had been unable to contact Mr Khosa. He said that he believed Mr Khosa may have been 'having difficulties', rendering him unable to comply with his profession obligations.
I note that neither the appellant nor his solicitors have filed any affidavit evidence detailing the attempts made to contact Mr Khosa. Whilst it is desirable that there be some affidavit evidence on this subject, I am prepared to accept Mr Jacobson's explanations as an officer of the court that he made a genuine attempt to contact Mr Khosa without success. I also note that it is a matter of record that, not long after September 2017, Mr Khosa was subject to disciplinary action in the Legal Practice Board.[12]
[12] Legal Profession Complaints Committee v Khosa [2015] WASAT 107; Khosa vLegal Profession Complaints Committee [2017] WASCA 192.
In my view, Mr Choudhry gave a plausible account in his affidavits of not having seen the claim after it was served and proffered a reasonable possible explanation for why the summons did not come to his attention. Indeed, it is relevant that at the hearing of this appeal, the respondent did not dispute the appellant's account of not having been aware of the summons until after default judgment was entered.
The fact that an application to set aside the default judgment was signed on 10 September 2017 seems to me to evince a clear intention on the part of the appellant to defend the claim. It demonstrates that the appellant did take steps to have default judgement set aside. That is a matter which, in the interests of justice, I cannot simply ignore.
In the present case, the learned magistrate appeared to adopt the position that the absence of a satisfactory explanation for delay was not merely one factor to be considered but fatal to the exercise of the discretion. That in my view was, according to the authorities I have just cited, an error of law.
With all due respect to the learned magistrate, his Honour placed too much emphasis on the inadequate explanation for the delay without adequate consideration as to whether the respondent had been prejudiced and whether the appellant had an arguable defence to the claim.
I do not consider that the delay was overly long (52 days). Further in my view, there is no evidence to suggest that the respondent would be in any different position than had the application to set aside default judgment been filed on time. In that regard, I consider that the delay has not caused any prejudice to the respondent.
It is also relevant that the appellant has disclosed an arguable defence to the respondent's claim. The appellant denies that the respondent has any claim against it. It is unnecessary for me to express any view as to the merits of that claim given that proceedings are at the interlocutory stage. For the purposes of the present application, it is sufficient for me to observe that, if the appellant's version of events is accepted, he would have a good defence to the respondent's claim on the merits. As Harris J in Kostokanellis v Allen [1974] VR 596, 604 made plain:
The primary consideration is whether he has merits to which the court should pay heed; if the merits are shown the court will not prima facie desire to let a judgment pass on which there has been no proper adjudication.
Whilst the learned magistrate was entitled to conclude that there was no adequate explanation for the delay, that was not the only factor he was required to consider. My reading of the authorities would suggest that the issue of delay is a subordinate consideration unless it results in some prejudice to the other party.
I would therefore allow the appeal on grounds 1 and 2.
Ground 3
Ground 3 complains that the learned magistrate erred by finding that the certificate of service was clear and unimpeachable and failed to consider the appellant's evidence that he had not received notice of the claim.
The appellant contends, contrary to what the learned magistrate said in his reasons, that he was 'not making comments from the bar table' but was attempting to explain the evidence in Mr Chodhry's affidavit dated 10 November 2018 (which contained an explanation of why he had not received notice of the summons) before the court.
At the hearing of this appeal, the appellant did not submit that the summons was not validly served but submitted that the explanation proffered by Mr Chodhry was relevant to his explanation for the delay.
I do not consider that the error asserted in this ground of appeal is established. There was no evidence that the summons had not been validly served. Indeed, there was evidence from the bailiff to the contrary. At the hearing of the appeal the appellant did not seek to advance the proposition that the appellant had not been validly served.
With great respect to the learned magistrate, I do think his Honour was too dismissive of the appellant's explanation that he did not receive notice of the summons and the likely reason why. The appellant's explanation was, along with other factors, a relevant consideration in the exercise of the discretion and should have been given more weight. These are matters relevant to grounds 1 and 2. However, that is not what is pleaded in ground 3, and so I would not uphold this appeal on that ground.
Ground 4
Ground 4 complains that the learned magistrate did not provide the appellant with an opportunity to advance submissions that the appellant's defence had a real prospect of success.
I do not consider that this ground has merit. The learned magistrate had the affidavits of the appellant before him and had the benefit of submissions of counsel which clearly set out the basis of the appellant's contentions. Indeed, his Honour permitted counsel for the appellant to make further submissions after he had given his ruling.
I would not uphold the appeal on this ground.
Orders
1.The appeal is upheld.
2.The decision of his Honour Magistrate Huston of 2 March 2018 is set aside.
3.The order for default judgement is set aside.
4.I will hear the parties as to costs.
I certify that the preceding paragraph(s) comprise the reasons for decision of the District Court of Western Australia.
IG
ASSOCIATE TO JUDGE LONSDALE13 NOVEMBER 2018
0
6
1