Osum Pty Ltd as Trustee for the RN Smyth Family Trust v Ferri
[2018] WADC 102
•23 AUGUST 2018
JURISDICTION : DISTRICT COURT OF WESTERN AUSTRALIA
IN CIVIL
LOCATION: PERTH
CITATION: OSUM PTY LTD as Trustee for THE RN SMYTH FAMILY TRUST -v- FERRI [2018] WADC 102
CORAM: DEPUTY REGISTRAR HEWITT
HEARD: 9 AUGUST 2018
DELIVERED : 23 AUGUST 2018
FILE NO/S: CIV 480 of 2018
BETWEEN: OSUM PTY LTD as Trustee for THE RN SMYTH FAMILY TRUST
Plaintiff
AND
JONATHAN FERRI
First Defendant
DEAN BRIAN EICHHORN
Second Defendant
Catchwords:
Practice and procedure - Application to set aside regular judgment - discussion of applicable principles - Turns on own facts
Legislation:
Nil
Result:
Judgment set aside
Representation:
Counsel:
| Plaintiff | : | Ms D P H Engelter |
| First Defendant | : | In person |
| Second Defendant | : | Mr C S Gough |
Solicitors:
| Plaintiff | : | Williams & Hughes |
| First Defendant | : | Not applicable |
| Second Defendant | : | Mills Oakley |
Case(s) referred to in decision(s):
Evans v Bartlam [1937] AC 473
Parker v Transfield Pty Ltd & Anor [2000] WASCA 382
DEPUTY REGISTRAR HEWITT:
In this matter the plaintiff issued a writ on 9 February 2018 having obtained the leave of the court to issue the proceedings since the second defendant was ordinarily a resident outside the jurisdiction. The writ was served on the second defendant on 1 March 2018 as appears from an affidavit of service sworn 26 March 2018. No appearance was filed to the writ and a default judgment was entered against the second defendant on 10 April 2018. By a chamber summons filed 15 June 2018 the second defendant has applied to set aside the default judgment so entered.
As a prelude to dealing with that application it is appropriate to set out the basis of the claim which has been brought against the second defendant. The second defendant alleges that in the series of transactions the first defendant contracted both on his own behalf and on behalf of the second defendant in regard to two contracts which involved the sale of shares. In respect of these contracts the plaintiff paid two sums of money as directed by the first defendant but notwithstanding those payments the shares the subject of the purchase agreements have not been transferred to the plaintiff. The cause of action pursued by the plaintiff is for the damages which it has suffered by virtue of the failure of the parties involved to transfer the shares to it as was allegedly agreed.
There are many cases dealing with applications of this kind and a number have been cited to me in argument. The principles of such an application are well understood and in the case of an application to set aside judgment which has been regularly entered requires the applicant to demonstrate that he has a credible defence. There are many authorities supporting those propositions. The West Australian case of Parker v Transfield Pty Ltd & Anor [2000] WASCA 382 is illustrative of those general propositions and that of the House of Lords in Evans v Bartlam [1937] AC 473 has long been regarded as a leading authority on the point. At (480) Lord Atkin made these observations.
The Courts, however, have laid down for themselves rules to guide them in the normal exercise of their discretion. One is that where the judgment was obtained regularly there must be an affidavit of merits, meaning that the applicant must produce to the Court evidence that he has a prima facie defence. It was suggest in argument that there is another rule that the applicant must satisfy the Court that there is a reasonable explanation why judgment was allowed to go by default, such as mistake, accident, fraud or the like. I do not think that any such rule exists, though obviously the reason, if any, for allowing judgment and thereafter applying to set it aside is one of the matters to which the Court will have regard in exercising its discretion.
The reasons for the failure of the second defendant to file an appearance to the writ is summarised in pars 26 – 31 of his affidavit sworn 13 June 2018. The gist of the propositions advanced by the second defendant are, notwithstanding the previous correspondence concerning the matter he took the view that in some way the documentation with which he had been served was some kind of a scam and that the claims which were being made against him were frivolous and without a basis and could not possibly support an action against him. In essence the second defendant considered that in some way the papers were part of some scheme to extort monies from him. Such a conclusion in my view was at the very least unwise because the second defendant had been copied into correspondence in which the nature of the dispute and the claim by the plaintiff was made perfectly clear and he would have well known that the plaintiff was represented by Messrs Williams and Hughes and that litigation was being contemplated since the chain of emails made it clear that instructions had been given to commence proceedings and enquires made as to service of those proceedings.
The kindest manner in which I can characterise the second defendant's actions upon receiving the writ is that he chose to bury his head in the sand.
Even though I have characterised the explanation for the failure to file an appearance as unsatisfactory nonetheless the cases establish that the primary obligation of the court on an application of this kind is to do justice between the parties.
The entire case mounted by the plaintiff against the second defendant is that the first defendant was his agent and as such concluded a contract between the plaintiff and the second defendant which was binding on the second defendant.
Notwithstanding my misgivings over the explanation for the failure to file an appearance the primary function of the court is to justice between the parties and to end I shall consider the strength of the defence which is offered by the second defendant. In that regard the second defendant states on oath that he did not authorise the first defendant to act as his agent or make any representations to the plaintiffs that he was such an agent nor made any agreement for the sale of any shares of which he may have possessed or over which he might have control, to the plaintiff. That proposition is attacked by the plaintiff as a bald statement, but it is under oath and it is notoriously difficult to support a proposition that a certain state of affairs did not exist by documentary evidence and matters of that kind. What is clear is that throughout the material there is no direct evidence that the first defendant was the agent of the second defendant or that he had the authority of the second defendant to bind him in to a contract with the plaintiff. The first defendant has filed a defence in which he alleges that the second defendant was not involved in the transaction the subject of the plaintiff's claim and an email from the first defendant is to the same effect. He also says that such agreement as he entered was on his own behalf and was with Mr Brad Smyth not the plaintiff. It is clear that the plaintiff inferred that the first defendant was acting as an agent of the second defendant from his communications with the first defendant. Nothing in the way of correspondence or email exchanges suggest otherwise. There was no direct communication from the second defendant to the plaintiff authorising the first defendant to act as his agent in the transaction being contemplated. The best that can be derived from the evidence is a rather shaky inference that the second defendant was aware of the negotiations between the plaintiff and the first defendant, and it should be inferred that his knowledge was such that the existence of actual authority to enter a binding contract on his behalf by the first defendant should also be inferred. In my view the evidence is weak. On the one hand I have the sworn testimony of the second defendant saying that no such authority as is relied upon by the plaintiff existed. Against that I have very vague and insubstantial inferences which may be drawn which suggest that perhaps such authority might have existed. Additionally it appears that the funds which were paid by the plaintiff as the purchase price for the shares went to a company Thought Pty Ltd and whilst I am not fully informed as to composition of that company it is clear that the first-named defendant was a director of that company and there is no evidence to suggest that the second-named defendant had any interest in that company.
When I weigh up all these factors I come to the conclusion that even though the explanation for failing to file an appearance by the second defendant is unsatisfactory. Nonetheless the quality of the case pursued by the plaintiff against the second defendant is extremely poor, entirely inferential and unlikely to displace the sworn testimony of the second defendant as to his relationship with the first defendant. As a consequence of this reasoning I am of the view that the application to set aside the default judgment should succeed.
I further am of the view that the actions of the second defendant to effectively ignore the writ in the circumstances which prevailed when he was served with it suggest that the second defendant should bear the costs thrown away by entering the judgment and the costs of the application to set that judgment aside.
I certify that the preceding paragraph(s) comprise the reasons for decision of the District Court of Western Australia.
JC
COURT OFFICER17 AUGUST 2018
0