Northerly Group Australia Pty Ltd v Tan

[2021] WADC 44

JURISDICTION     :   DISTRICT COURT OF WESTERN AUSTRALIA

IN CHAMBERS

LOCATION:   PERTH

CITATION:   NORTHERLY GROUP AUSTRALIA PTY LTD -v- TAN [2021] WADC 44

CORAM:   DEPUTY REGISTRAR HEWITT

HEARD:   14 MAY 2021

DELIVERED          :   27 MAY 2021

FILE NO/S:   CIV 4753 of 2020

BETWEEN:   NORTHERLY GROUP AUSTRALIA PTY LTD

Plaintiff

AND

MARILYN MEIYIN TAN

Defendant

Catchwords:

Practice and procedure - Application to set aside default judgment - Reason for allowing default to be entered - Defence on the merits - Turns on its own facts

Legislation:

Nil

Result:

Judgment set aside

Representation:

Counsel:

Plaintiff	:	Mr J R Marzec
Defendant	:	Mr H Healy

Solicitors:

Plaintiff	:	Zafra Legal
Defendant	:	Hotchkin Hanly

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

Nil

DEPUTY REGISTRAR HEWITT:

1. In this matter a pleaded writ of summons was filed on 23 December 2020 and a judgment in default of appearance was entered against the defendant on 26 February 2021.  There followed a chamber summons for directions as to assessment of damages supported by the affidavit of Mr M J Lawson sworn 3 March 2021.  By chamber summons filed 18 March 2021 the defendant applied to set aside the default judgment and that is the application with which I must deal.  The law in regard to such an application has been long established and the essentials are that the applicant must give an explanation as to why he or she or it failed to file an appearance within the time fixed by the rules and secondly, provide evidence indicating that there is a defence to the claim. 

2. By affidavit sworn 18 March 2021 the defendant offered an explanation as to why she failed to file an appearance.  Taking the explanation at its highest the failure was due to carelessness in not troubling to read the writ with sufficient care to realise what it was and what was required of her to defend it.  The applicant reached conclusions which could not reasonably have been given by the materials contained in the pleaded writ.  Put shortly, I find the explanation to be thin.  However, even if a thin explanation for failing to file an appearance is given, if the merits of the proposed defence are sufficiently strong it will justify the court to intervene and set aside the judgment, and to that end I come to an examination of the materials relied upon by the defendant. 

3. The contract upon which the plaintiff sues is a building contract in which it was the builder and the defendant the client.  The judgment which has been obtained is for damages to be assessed.  The assessment is based upon the contractual terms in the building contract and in particular the procedures which must be adopted under that contract to entitle the plaintiff to payment.  An actor in this scenario is an architect appointed by the defendant.  The contractual scheme upon which the plaintiff relies relies on certain of the provisions in the contract and in particular Clause N1, this is the basis upon which the plaintiff relied to issue a notice to the defendant seeking what is described in the contract and the pleading as a 'final certificate'.  The provisions of the contract require the certificate to be issued within five days of the date the notice was given, failing which the amount claimed by the notice becomes payable.  Additionally, the plaintiff sues for the return of a guarantee which it was required to give in the sum of $34,552.20 which secured the due performance by the plaintiff on those items requiring rectification of the works undertaken by the plaintiff on behalf of the defendant.

4. It can be seen therefore that the entire basis of the claim raised by the plaintiff against the defendant depends on the efficacy of the notice which it served, the failure by the architect to certify the payment and the effluxion of five days since the notice was given.  At least for that part of the claim it is clear that it entirely relies upon the provisions of the contract and the relevant terms.

5. The chain of logic relied upon by the plaintiff in the statement of claim harks back to earlier actions undertaken by the plaintiff and a clause identified as Clause Q11.1.  That clause notified the defendant of what the plaintiff claimed was a default and requiring that default to be rectified within 10 working days after receipt of the notice.  It is also pleaded that in the event that the default was not rectified the plaintiff would be entitled to proceed to suspend the works under the contract.  It is said that upon receiving the notice the defendant failed to rectify the default or to show reasonable cause why it could not be remedied within time, leaving the way open for the plaintiff to suspend the works pursuant to Clause 12.1 under the contract.  The default complained of was not rectified within the time nor was any reasonable cause proffered as to why that was not done, consequently the plaintiff gave the defendant written notice of suspending the works under the contract by a written notice issued pursuant to the provisions of Clause Q12.1 of the contract. 

6. The statement of claim goes on to allege that having given a notice under Clause Q12.1 the plaintiff could terminate its engagement under the contract by notice of termination pursuant to Clause Q13.1 which it did.  Having done so the plaintiff was required within a reasonable time of terminating its engagement under Clause Q13.1 to submit to the architect a claim setting out the plaintiff's entitlement calculated on the basis that the defendant had wrongly repudiated the contract.  That claim was submitted under Clause Q16.1.

7. On receipt of the claim the architect was required to assess any claim made by the plaintiff and to issue to the plaintiff and to the defendant a certificate specifying the amount for payment by or to the plaintiff and the defendant as may be required.  If pursuant to Clause Q17.1 a notice was issued it took the place of a final certificate under the contract requiring the defendant to release to the plaintiff any remaining security or the amount of that security less any amount which might have been owing to the defendant.  Failing the issue of a certificate Clause N8.1 allowed the plaintiff to issue a notice in writing to the defendant requesting her to ensure that the architect issued the certificate within five working days after the notice was delivered, and in the event that the architect failed to issue the certificate the plaintiff became entitled, pursuant to Clause N8.2 to the full amount of the progress claim within seven days of the date the notice was delivered. 

8. It is next pleaded that the architect was required within a reasonable time not exceeding 10 business days after receiving the final claim with such information as the architect might request, to issue to the plaintiff and defendant a final certificate setting out the amount due for payment.  That provision is contained in Clause N11.1 of the contract.  Clause N15.1 made provision for interest to be payable at 10% per annum on monies due under the contract.  It is pleaded that practical completion of the contract was achieved on 10 April 2018 and it submitted progress payment 10 to the architect who issued a certificate for payment which it is alleged contained deductions for various items and variations and extension of time. 

9. On 5 October 2020 the plaintiff served a notice pursuant to Clause Q11.1 raising certain complaints of the defendant's failure to meet her obligations under the terms of the contract and requiring her to remedy those defaults within 10 working days.  Those alleged defaults were not remedied within the time specified leading the plaintiff to issue a notice suspending works under the contract and terminating the engagements under Clauses Q12.1 and Q13.1 respectively.  On 13 November 2020 the plaintiff served a notice on the architect pursuant to Clause Q16.1 requiring the architect to issue a final progress certificate and setting out the plaintiff's entitlement being $94,941.46 underpayment.  Clause Q17.1 required the architect to assess the plaintiff's final claim and issue a certificate specifying the amount of payment due.  The architect failed to make the assessment required within 10 business days being that fixed by the clause and thereafter the plaintiff served the notice on the defendant pursuant to Clause N8.1 requesting her to ensure that the architect issued the final certificate within five working days.  That did not eventuate and the plaintiff claims that after the lapse of five working days from the date the notice was provided to the defendant, the plaintiff became entitled to payment of the full amount of the progress claim pursuant to Clause N8.2 together with interest.  Additionally, the plaintiff claims return of the surety.  On that score it is to be noted that the date of final completion has been reached and the plaintiff has satisfied its obligations in regard to the maintenance period. 

10. Having outlined the nature of the claim I now turn to the defence which is relied upon by the defendant in her application.  That defence entirely relies upon the proper meaning of the various clauses upon which the plaintiff relies and whether or not they provide a proper basis for the claim which is pursued.  The beginning of the defendant's submissions starts with an analysis of Clause Q11.1.  In essence the allegation is that the works were complete and that there was therefore no necessary work as defined in the clause which could be suspended pursuant to Clause Q12 or to subsequently terminate the contract pursuant to Clause Q13.  The argument advanced is that the ability to suspend available to the plaintiff pursuant to Clause Q12 is work necessary to complete the works including defective work.  It is argued that the right to terminate the contract pursuant to Clause Q13 is dependent upon the application of Clause Q12.  The argument is that there is no necessary work and there is nothing to suspend and there is no basis upon which Clause Q13 can be brought in to terminate the contract.  The argument advanced by the defendant is a cascading one and is as follows:

    (a)there was no ongoing work at the time the Clause Q11.1 notice was given and the notice accordingly was invalid and incapable of triggering the operation of Clauses Q12 and Q13; 

    (b)consequently, the termination was not a valid termination and the Clause Q16 post-termination claim was likewise invalid and the architect was not required to certify the Clause Q16.1 claim; and

    (c)it is further argued that insofar as the plaintiff relies on Clause N11.1 that notice was invalid because that only was able to be relied upon in respect of a progress claim which the plaintiff's claim was not. 

11. Absent from the scenario I have described are a number of relevant events.  According to the statement of claim, practical completion was achieved on 12 April 2018.  Upon the architect certifying that to be the case the owner is entitled to possession.  That certificate was dated 29 May 2018.  On 31 May 2018 the plaintiff submitted a progress claim 10.  That was assessed by the architect and assessed at $94,941.46 lower than claimed and allowed at $14,360.41 which has been paid. 

12. On 5 July 2018 the plaintiff issued a notice of dispute which was not proceeded with.  The dispute related to the deduction of $94,941.46 and that is the sum claimed by the writ which has been issued. 

13. Stepping back one can see a clear strategy adopted by the plaintiff.  Its real complaint was the deduction of the sum from the progress payment notice but its complaint in this writ is that she improperly influenced the architect so to do.  The notice which underpins this writ is that which was issued 5 November 2020 (over 2 years later) requiring her to rectify the situation.  In the circumstance the notice meant no more than to pay the claim.  That did not happen.  The step taken on 10 November 2020 to suspend the work was based on the purely fictional basis that there remained works to be performed. 

14. As has been noted practical completion had been achieved about 2 ½ years previously and the defects liability period had expired and the architect had certified any defects had been attended to. 

15. Relying on the suspension the plaintiff purported to terminate the contract and since the architect did not approve the certification of the claimed amount the plaintiff contends it is due and payable under the contract.  In my opinion the course of conduct suggests that the plaintiff was unwilling to address the issues which led to the deduction in either the dispute process initiated or this court.  It is in short a contrivance to divert attention from whether its claim is justified, to the process of automatic quantification as claimed. 

16. Additionally, the whole of the claim rests on the interpretation of the various contractual clauses which form the jigsaw which comprises the claim and that process itself deserves judicial scrutiny.

17. For these reasons I consider that notwithstanding the weak explanation for failing to appear; the default judgment should be set aside.  I do note however that although this application is not the appropriate vehicle within which to do so, there is no reason for the plaintiff to continue to retain the guarantee which secured due performance of the plaintiff's obligations under the defects liability period.  To order that she do so would amount to an injunction for which I lack jurisdiction. 

18. I consider that the defendant has demonstrated that she has a defence on the merits and accordingly I shall order that the judgment be set aside.

I certify that the preceding paragraph(s) comprise the reasons for decision of the District Court of Western Australia.

LF

Court Officer

27 MAY 2021