Mulric P/L v S D Myers P/L and 2 Ors

[2001] NSWSC 121

CITATION:

Mulric P/L v S D Myers P/L & 2 Ors [2001] NSWSC 121

CURRENT JURISDICTION:

Common Law

FILE NUMBER(S):

SC 20289/99

HEARING DATE(S):

6 March 2001

JUDGMENT DATE:

13 March 2001

PARTIES :

Mulric Pty Limited
(Plaintiff)

S D Myers Pty Limited
(First Defendant)

S D Myers Inc
(Second Defendant)

Dana Stanley Meyers
(Third Defendant)

JUDGMENT OF:

Master Harrison

COUNSEL :	Mr D Allen (Plaintiff) Mr F Kunc (Second and Third Defendants)
SOLICITORS:	Philip Parbury & Associates (Plaintiff) Andersen Legal (Second and Third Defendants)
CATCHWORDS:	Set aside default judgment against second defendants - costs
LEGISLATION CITED:	Supreme Court Rules
CASES CITED:	Evans v Bartlam (1937) AC 473 Vacuum Oil Pty Limited v Stockdale (1942) 42 SR 239 Cuttle v Brand (1947) 64 WN 96 Adams v Kennick Trading (Internationa;) Ltd & Ors (1986) 4 NSWLR Cohen v McWilliam (1995) 39 NSWLR 476 at 481 Pope v Abadeen Transport Co Pty Limited [1965] NSWR Wallace J at 551 Emibarb Pty Limited v Commonwealth Bank (NSWSC Master Greenwood, 2 March 1992 unreported) Black v Smallwood (1965) 117 CLR 52
DECISION:	(1) The judgments entered on 13 October 2000 and 1 November 2000 against the second defendant are set aside; (2) Each party (namely the plaintiff and second and third defendants) are to pay their own costs of the motion.

10

THE SUPREME COURT
OF NEW SOUTH WALES
COMMON LAW DIVISION

MASTER HARRISON

TUESDAY, 13 MARCH 2001

20289/99 - MULRIC PTY LTD v S D MYERS PTY LTD
& 2 ORS

JUDGMENT (Set aside default judgment

against the second defendant; costs)

1 MASTER: By notice of motion filed 30 November 2000 the second and third defendants seek an order that judgments entered 13 October 2000 and 1 November 2000 be set aside pursuant to Part 40 r 9 of the Supreme Court Rules. The first defendant is S D Myers Pty Limited (SDMPL). The second defendant is S D Myers Inc. The third defendant is Dana Stanley Meyers. The second and third defendants relied on two affidavits of Christopher David Thompson sworn 29 November 2000 and 7 December 2000 and affidavits of Philip Parbury sworn 28 September 2000 and Neil Richter sworn 12 October 2000. The plaintiff relied on the affidavit of Philip Parbury sworn 9 May 2000. By consent between the plaintiff and third defendant the judgments entered against the third defendant on 13 October 2000 and 1 November 2000 were set aside.

2   For the purposes of this application I find the following facts.

(1) On 25 June 1999 the plaintiff filed a statement of claim against the defendants seeking damages for breaches of two contracts. The second and third defendants are residents in the United States of America.

(2) On 29 June 1999 the plaintiff’s solicitors served the statement of claim on the registered address of the first defendant which is a company incorporated in Australia.

(3) On 27 July 1999 the first defendant filed and served its defence.

(4) On 16 August 1999 the first defendant wrote to the plaintiff requesting further and better particulars.

(5) On 22 September 1999 the plaintiff provided the first defendant with further and better particulars.

(6) On 10 May 2000 the plaintiff filed a notice of motion seeking orders that service on the second and third defendants be confirmed pursuant to Part 10 of the Supreme Court Rules . A copy of this motion was faxed to the second and third defendants address in Ohio, United States of America.

(7) On 22 May 2000 the application was made exparte and orders were made confirming service. Mr Christopher David Thomspon solicitor for the defendants attended the hearing as an observer. Hence from 22 May 2000 the solicitor was aware that the plaintiff could proceed to obtain judgment against the second and third defendants.

(8) The plaintiff did not file a DCM document within the prescribed period. No directions have been requested or made in this matter for any interlocutory matters including discovery.

(9) On 14 September 2000 the court issued a Not Ready Call-Over notice informing the parties that the matter was listed for a call over on 3 November 2000.

(10) On 15 September 2000 the plaintiff’s solicitor served the first defendant with a notice to set down for trial.

(11) Prior to the plaintiff entering default judgment against the second and third defendant its solicitors had corresponded both with Andersen Legal and with the second and third defendants directly. No mention was made in that correspondence of the application for default judgment being filed.

(12) On 19 October 2000 by fax the plaintiff’s solicitor advised the second and third defendants in Ohio that a subpoena had been issued. The notice referred to a subpoena directed to the first defendant but no subpoena was enclosed with the letter.

(13) By fax dated 24 October 2000 the second and third defendants solicitors wrote to the plaintiff’s solicitors seeking clarification as to why the plaintiff had issued a subpoena on the first defendant when no directions had been requested or made in this matter for discovery. On 25 October 2000 the plaintiff’s solicitors issued a fax in response.

(14) On 26 October 2000 by fax the second and third defendants solicitors sought clarification from the plaintiff’s solicitors as to why a subpoena directed to a third party had been served on the first defendant’s registered address, notwithstanding that Andersen Legal are the solicitors on the record for the first defendant.

(15) On 31 October 2000 the plaintiff’s solicitors by fax served Andersen Legal with a subpoena directed to the first defendant.

(16) On 1 November 2000 the court entered judgment that the second and third defendants pay to the plaintiff the sum of $144,876.30 plus costs.

(17) The plaintiff’s solicitor never advised the second and third defendant’s that default judgment had been entered on 13 October 2000 nor that damages had been assessed and judgment entered on 1 November 2000, despite corresponding with them on other issues.

(18) The defendants’ solicitor first learnt of the default judgment when the court declined an application to strike out the proceedings against the first defendant at the Not Ready Call Over on 3 November 2000. At the call over there was no appearance on behalf of the plaintiff. The court informed the second and third defendants’ solicitor that a default judgment had been entered against the second and third defendants. The defendants’ solicitor then applied for access to the court file and obtained details of the default judgment and then immediately briefed counsel to advise in relation to the position.

(19) On 17 November 2000 the defendants’ solicitors wrote to the plaintiff’s solicitors seeking by consent that the default judgment be set aside.

(20) On 30 November 2000 this notice of motion was filed seeking to set aside default judgment.

(21) On 22 December 2000, the plaintiff consented to the judgment being set aside against the third defendant.

The Law

3 Part 40 r 9(2) of the SCR provides:

“(2) The Court may set aside or vary a judgment -
…

(b) where the judgment has been entered after judgment has been given in the absence of a party, whether or not the absent party had notice of trial or of any motion for the judgment.”

4   From the cases of Evans v Bartlam (1937) AC 473, Vacuum Oil Pty Limited v Stockdale (1942) 42 SR 239, Cuttle v Brand (1947) 64 WN 96, Adams v Kennick Trading (International) Ltd & Ors (1986) 4 NSWLR 503, clear principles emerge: Bona fide defence on the merits, an adequate explanation of delay as matters relevant to, but the latter not finally determinant of, the exercise of the discretion which is conferred upon a court in determining whether or not to set aside a judgment.

5   In addition a further consideration to be taken into account when determining whether default judgment should be set aside was expressed by Priestley JA in Cohen v McWilliam (1995) 39 NSWLR 476 at 481:

“It is, however, another question whether concern about the extent of delays, either in a particular case or generally, should, in the absence of prejudice in the particular case, be taken into account in exercising a discretion to set aside default judgment. The fundamental duty of the court is to do justice between the parties. It is, in turn, fundamental to that duty that the parties should each be allowed a proper opportunity to put their cases upon the merits of the matter. Any limitation upon that opportunity will generally be justified only on the necessity to avoid prejudice to the interests of some other party, occasioned by misconduct.”

6   For the defendants to succeed in their application to set aside default judgment they must give an adequate explanation for the delay in filing their defence and show that they have a defence on its merits, or as often expressed a bona fide defence. However, as Priestley JA said in Cohen it is a fundamental duty of the court to do justice between the parties.

7   On 22 May 2000 the second defendant’s solicitor attended court as an observer when service of the statement of claim on the second and third defendants was confirmed by the court. The second and third defendant’s solicitor did not file a notice of appearance at this stage. The solicitor’s reasoning was that having regard to the dilatory way in which the plaintiff had prosecuted this matter, he had formed the view that it was not in the second and third defendants’ interest to file a notice of appearance and seek to defend this claim unless and until the second and third defendants received some further indication that the plaintiff was going to proceed against them. He stated that he was fortified in this view as the months passed after the May hearing because he believed it would be necessary for the plaintiff to formally notify the second and third defendants that service had been confirmed. He regarded such notification as being the necessary indication that the plaintiff in fact intended to proceed against the second and third defendants. No such notification was received and the only subsequent action taken by the plaintiff of which he was aware appeared to be in response when the court gave notice of a Not Ready Call over dated 14 September 2000.

8   The second and third defendants’ solicitor stated that it had always been his intention to advise the defendants to enter an appearance and move to defend this matter as soon as they were formally informed by the plaintiff that service had been confirmed. No such notification was ever given. Instead, the plaintiff failed to take any steps in these proceedings for four months after leave was given to the plaintiff to proceed against the second and third defendants. Despite further correspondence being exchanged between the party’s solicitors in October and November 2000, the plaintiff’s solicitors made no reference to the fact that the plaintiff had on 5 October 2000 filed a notice of motion for summary judgment against both the second and third defendants. Nor was there any mention that an application for default judgment was heard exparte on 13 October 2000 nor that an order was made that default judgment be entered and the assessment of damages and costs be stood over to 1 November 2000. Hence the second defendant did not receive notification that the plaintiff had made exparte applications for judgment. It was not until the not ready callover on 3 November 2000 that the second defendant’s solicitor became aware judgments had been entered against the second defendant. Upon hearing this the solicitor for the second and third defendants applied for access of the court file and obtained details of the default judgment then immediately briefed counsel to advise in relation to the position. On 30 November 2000 a notice of motion was filed seeking to set aside the default judgment. The explanation for delay is adequate.

9   It is customary for a solicitor to advise the other parties that it intends to apply for default judgment and if their is a failure to observe this practice it may result in the plaintiff being liable for costs incurred in setting aside the default judgment (see Pope v Abadeen Transport Co Pty Limited [1965] NSWR Wallace J at 551 and Emibarb Pty Limited v Commonwealth Bank (NSWSC Master Greenwood, 2 March 1992 unreported). This was not done despite numerous opportunities for it to have occurred.

Bonafide defence

10   The second defendant has filed a draft defence which will be refined once the answers to particulars have been supplied. The issues to be raised are that the 1991 contracts were superseded by the 6 October 1992 contract and under the 1992 contract it is the first defendant who is liable to pay the damages, if any (the contract is attached to Mr Thompson’s affidavit of 7 December 2000 at 18). In relation to the third defendant, the third defendant alleges he only signed the contract as a representative of the first defendant and is not personally responsible for any liability. It is my view that the second defendant has a bonafide defence.

11   An important factor for consideration is that both the first and third defendants have filed defences to the statement of claim. The first and third defendants will obtain a trial on its merits in any event. In these circumstances, the second defendant should not be deprived of its right to a trial on its merits. The plaintiff did not adduce any evidence of prejudice other than the loss of the exparte judgments.

12   Costs are discretionary. The second defendant has sought costs on an indemnity basis. Normally as the second defendant has defaulted in filing a defence within the time period it would pay the costs. In May 2000 the second defendant’s solicitor knew that service in the United States had been confirmed and yet did not take steps to file a notice of appearance. The second defendant submitted that when judgments were obtained against the second and third defendants, the plaintiff’s legal representative had a duty to the court to point out that the case against the third defendant was bad in law and contrary to the settled High Court authority Black v Smallwood (1965) 117 CLR 52. However, the plaintiff did not notify the second and third defendants of the judgments they had obtained and this failure can result in the plaintiff being liable for the costs in setting aside the default judgment. The plaintiff was given the opportunity to set aside judgment against the second defendant and refused to do so. In these circumstances it is my view that the appropriate order is that each party is to pay its own costs.

13   The orders I make are:

(1) The judgments entered on 13 October 2000 and 1 November 2000 against the second defendant are set aside.

(2) Each party (namely the plaintiff and second and third defendants) are to pay their own costs of the motion.
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Last Modified: 03/13/2001