Partners Wealth Group Pty Ltd v Armstrong - [2024] WASC 462

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CHAMBERS

CITATION:   PARTNERS WEALTH GROUP PTY LTD -v- ARMSTRONG [2024] WASC 462
CORAM:   HOWARD J
HEARD:   28 NOVEMBER 2024
DELIVERED          :   4 DECEMBER 2024
FILE NO/S:   CIV 1304 of 2024
BETWEEN:   PARTNERS WEALTH GROUP PTY LTD
Plaintiff
AND
BENJAMIN ARMSTRONG
Defendant

Catchwords:

Practice and procedure - Application to set aside default judgment - Default judgment sought without notification or conferral - Defendant attempting to rely on proposed defence - Turns on own facts

Legislation:

Rules of the Supreme Court 1971 (WA), O 13 r 14

Result:

Default judgment set aside

Category: B

Representation:

Counsel:

Plaintiff	:	Ms R O'Brien
Defendant	:	Mr J Jo

Solicitors:

Plaintiff	:	Partners Legal Solutions
Defendant	:	DFG Legal

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

Smith v Nomad Modular Building [2007] WASCA 169
Starrs v Retravision (WA) Ltd [2012] WASCA 67

HOWARD J:

(These reasons were delivered extemporaneously and have been lightly edited from the transcript.)

By a writ of summons endorsed with a statement of claim, the plaintiff commenced these proceedings against the defendant on 18 March 2024.
In outline, the plaintiff pleaded:
1.the defendant was employed by it as a financial advisor from about 22 April 2014 until about 23 January 2024;
2.the defendant was employed pursuant to a written employment agreement;
3.the defendant owed the plaintiff equitable duties;
4.in January 2024, the defendant joined a direct competitor of the plaintiff in a similar role as his position with the plaintiff;
5.on dates not precisely known in 2023 and 2024, the defendant solicited, encouraged or otherwise took steps to induce the plaintiff's clients away from the plaintiff;
6.the defendant, in so doing, breached the employment agreement and his equitable duties; and
7.as a result, the plaintiff had suffered loss or damage.
By its Prayer for Relief, the plaintiff seeks:
1.damages;
2.equitable compensation;
3.account of profits;
4.an injunction restraining the defendant from continuing to breach the employment agreement and his equitable duties; and
5.other ancillary relief.
The defendant did not enter an appearance.
By application dated 2 April 2024, the plaintiff sought default judgment with damages to be assessed. It is accepted that that application was made by the plaintiff without notice to the defendant's solicitors, or without conferral on the same, and was made very close in time to the earliest opportunity on which it could be made.[1]
[1] Affidavit of M O Ferguson sworn 2 April 2024 (Mr Ferguson's first affidavit) [5].
It seems to me that if the plaintiff's solicitors had extended what is sometimes said to be a 'courtesy' to the defendant's solicitors, then the overall matters in dispute might have been able to be progressed more expeditiously than they have been.
Nonetheless, the application for default judgment was supported by an affidavit of its solicitor made 2 April 2024, deposing to service of the writ on the defendant. After correspondence between the Court and the plaintiff's solicitors, there was a further affidavit of the plaintiff's solicitor filed 18 April 2024.
The two affidavits depose to the plaintiff's solicitor making enquiries of the defendant's solicitor as to whether they had instructions to accept service, that had been confirmed at least, by email.
On 11 March 2024 at 6.24 pm AEDT, the plaintiff's solicitors wrote to the defendant's solicitors' 'admin' email address asking whether they had instructions to accept service of a writ addressed to Mr Armstrong.[2]
[2] Mr Ferguson's first affidavit [5].
On 12 March 2024 at 1.14 pm AEDT, an email was sent from the defendant's solicitors' generic email address ([email protected]) and was copied to Damian Gordon at his email address. The email stated:[3]
Good afternoon, Mr Ferguson
We have taken our client's instructions and we can accept service of the Writ addressed to Mr Armstrong.
Kind regards,
Chris Gordon
[3] Mr Ferguson's first affidavit [5].
The plaintiff's solicitor deposed that on 18 March 2024 at 5.00 pm AEDT, he telephoned the defendant's solicitors to confirm their instructions to accept the writ had not changed and deposed to being told that the instructions had not changed.[4]
[4] Mr Ferguson's first affidavit [7].
The plaintiff's solicitor further deposed to that conversation as follows:[5]
On 18 March 2024, I had a telephone call with the Defendant's solicitors (as deposed at paragraph 7 of [Mr Ferguson's first affidavit]. After introducing myself and referring to previous correspondence, I said, "I'm about to send you an email attaching a Writ for Mr. Armstrong. I just wanted to check that that was still okay." My interlocutor replied, "let me check with Damian [Gordon]." I heard muted conversation, and then my interlocutor said "Yes, that's fine. Send it across".
[5] Affidavit of M O Ferguson sworn 18 April 2024 (Mr Ferguson's second affidavit) [4].
That conversation (or lack of conversation, on the defendant's solicitor's evidence), provoked much of the affidavit material which is before the Court today. It was submitted, from the defendant's solicitor's evidence, that it was not possible that the telephone call had occurred in the way deposed to by Mr Ferguson.[6]
[6] Affidavit of D F Gordon sworn 9 September 2024 (Mr Gordon's first affidavit) [9] - [20].
I am not persuaded that the evidence travels to that height. The plaintiff's submissions identify some gaps in the evidence, and I have put the contested question to one side. It seems to me that it is not relevant to the question of whether service was regularly effected, and, at its highest, would go to the question of discretion.
On 18 March 2024 at 5.38 pm AEDT, the plaintiff's solicitors sent an email to the email address of the defendant's solicitors' 'admin' email address and attached, by way of service, the sealed writ of summons.[7]
[7] Mr Ferguson's first affidavit [8].
On 18 March 2024, the plaintiff's solicitor deposed to having indorsed by hand on a copy of the writ with the Court filed stamp the following:[8]
Today SERVED on Mr. C. Gordon, solicitor for the Defendant. By email: [email protected].
Monday, 18 March 2024. (emphasis in original)
[8] Mr Ferguson's first affidavit [6] and Attach 'MF-1-04'.
What is plain, however, is that the defendant's solicitors did not become aware, because of their own internal processes, until much later, that the writ, endorsed with the statement of claim, had been served.
On 22 April 2024, a Registrar of this Court granted the plaintiff leave to enter judgment in default of appearance and ordered the damages to be assessed.
That assessment for damages was the subject of programming orders I made on 16 August 2024.
Pursuant to those Orders, the plaintiff filed an affidavit made by a director of the plaintiff on 23 August 2024 and, by an application filed 26 August 2024, sought certain restrictions on public access to one of the annexures to the director's affidavit.
The plaintiff does not oppose those restrictions and I will make orders to that effect.
By chamber summons filed 4 September 2024, the defendant applied to set aside the default judgment. That application was supported by an affidavit made by the defendant and filed 4 September 2024.
The defendant's first affidavit of 4 September 2024 did not address key matters in the affidavit of service.
The bulk of the defendant's first affidavit deposed to the relevant facts, as he saw them, and also annexed a defence in which he deposed that he was intending to file and serve if the default judgment was set aside.
The defendant's solicitor deposed to having investigated the matter and that:
1.the plaintiff's solicitors' email of 18 March 2024, with the attached writ of summons, was received by the defendant's solicitors' firm;[9] and
2.he was not aware 'nor were any of the solicitors in my employ or any other paralegal' that the writ of summons had been received.[10]
[9] Mr Gordon's first affidavit [5] ‑ [6].
[10] Mr Gordon's first affidavit [8].
The defendant contends by submissions, and I accept, that:
1.the 'Defendant and its [sic] solicitors were unaware that the Writ was served on them';[11]
2.the 'unawareness [sic]' of being served with the writ was explained by affidavit evidence;[12] and
3.the defendant filed the application to set aside default judgment with minimal delay once it was known that judgment was entered and the plaintiff would not consent to the judgment being set aside.[13]
[11] Defendant's written submissions [24].
[12] Defendant's written submissions [25] ‑ [26].
[13] Defendant's written submissions [27].
There does not appear to be any contention made by the defendant that the default judgment was other than regularly entered.
It is unclear whether the defendant's solicitor, in his first affidavit, was seeking to draw a distinction between 'any other paralegal' and his wife who 'has assisted me as my clerk'.

Applicable law

Order 13 r 14 provides as follows:
14.Setting aside or varying default judgment
The Court may, on whatever terms it thinks just, set aside or vary any default judgment entered under this Order.
The Court of Appeal in Starrs v Retravision (WA) Ltd[14] stated:
Whether judgment was regularly or irregularly entered may be significant. Under O 13 r 10 of the Rules of the Supreme Court 1971 (WA)[15] the court may set aside or vary a judgment entered in default of appearance, on such terms as it thinks just. That discretion is not qualified. But as a general rule, a judgment regularly entered will not be set aside unless the court is satisfied that there is a defence on the merits. That rule may be departed from in "rare but appropriate cases". A judgment irregularly entered, however, "ought not be on the records of the court and therefore if a judgment in default of appearance or pleading has been entered irregularly, it will be set aside ex debito justitiae". Not every irregularity in the means by which a judgment in default is obtained will necessarily entitle the defendants to have the judgment set aside as of right. In an appropriate case, the court may amend an irregularly entered judgment rather than set it aside. (citations omitted)
[14] Starrs v Retravision (WA) Ltd [2012] WASCA 67 [36] (Allanson J, with whom Pullin & Murphy JJA agreed).
[15] This was the equivalent provision to the current O 13 r 14.

Merits of proposed defence

The proposed defence pleads:
1.that the plaintiff and defendant agreed that if the defendant left the plaintiff's business, he could take with him those clients which he had brought to the business;[16]
2.the restraint period and restraint areas sought to be enforced were unfair, unreasonable and unenforceable; and
3.a denial that, factually, he solicited, encouraged or induced any clients away from the plaintiff in breach of his obligations.[17]
[16] In argument in Court on 28 November 2024, that was referred to as the contractual defence, or interpretation issue, ts 12 and 16 - 17.
[17] Affidavit of B Armstrong sworn 4 September 2024 (Mr Armstrong's first affidavit) [54] and Attach 'BA‑11'; ts 12 and 20.
The first matter of defence, the contractual defence, was, as I said in the course of argument, weak.
On 26 February 2014, the plaintiff sent a letter of offer to the defendant.[18] The letter of offer included the following:
EQUITY OPPORTUNITY
Subject to meeting your KPI's within the first 2‑3 years, we will consider an option for you to acquire equity in a division of the PWG WA business. This will result in a transfer of equity for the value of the client book you bring to PWA WA.
In the event you depart the business, these clients will be quarantined for you.
[18] Mr Armstrong's first affidavit, Attach 'BA-1'.
There was then a later written employment agreement entered into in 2014.[19]
[19] Mr Armstrong's first affidavit, Attach 'BA‑2'.
Relevantly, the written agreement contained cl 36 as follows:
36.ENTIRE AGREEMENT
36.1To the extent where permitted by law, this Agreement:
(a)embodies the entire understanding between the parties, and constitutes the entire terms agreed between the parties; and
(b)supercedes any prior written or other agreement between the parties.
There is no equivalent provision to that quoted from the Letter of Offer in the written agreement.
Although the proposed defence in this respect, is not a model of clarity, the proposed defence asserts that the defendant was employed on the terms of both the written agreement and the Letter of Offer. Given the entire agreement clause in the written agreement and the complete absence of an equivalent provision to that in the Letter of Offer, that part of the proposed defence, as I have said, does not appear to be strong.
And, in any event, on my first reading of the Letter of Offer, the reference to the clients being able to be taken by the defendant seems linked to his acquiring an equity share, rather than operating more generally.
The second part of the proposed defence pleads that the restraints period and areas are unenforceable as going beyond that which would be considered fair and reasonable.[20]
[20] Mr Armstrong's first affidavit [54] and Attach 'BA-11'.
Counsel for the plaintiff has entirely and appropriately (unfavourably) compared the contractual restraint provisions with the proposed pleading. However, given that employment restraints are presumed to be void at law as being against public policy, Smith v Nomad Modular Building [2007] WASCA 169 at [6] - [8] and the cases cited therein (McLure JA) and at [35] (Pullin J), that presumption must be overcome by the plaintiff.
In those circumstances, it is not plain to me that this part of the defence is unsustainable. It appears to me to be arguable and as normally requiring a trial. Of course, in making that observation, I am not dealing with the plaintiff's allegations that there may have been breaches prior to the defendant leaving the plaintiff's employ, which would not depend on the enforceability of the restraints post-employment.
Turning to the third part of the proposed defence: it pleads, and again it is not completely plain in the pleading, that any former clients of the plaintiff which have joined the defendant at his new employer did so without being solicited or encouraged by the defendant.[21]
[21] Mr Armstrong's first affidavit [54] and Attach 'BA-11'.
Again, while perhaps not being overwhelming, the proposed third defence does, in my assessment, raises matters which may provide a factual defence to the defendant.

Disposition

In all of the circumstances, I consider it just to set aside the default judgment and allow the defendant to defend the proceeding.
I have reached that conclusion having regard to:
1.although the service was effected regularly, the failure to respond was the fault of the defendant's solicitor and should not be visited on the defendant;
2.the period of time between the defendant becoming aware of the default judgment and the application to set it aside is short;
3.the plaintiff's solicitor chose not to bring the default to the plaintiff's solicitors attention before making the default application, nor did they seek to confer on it;
4.the defendant has, to my preliminary assessment, at least two arguable matters of defence on the merits; and
5.there is no identified prejudice to the plaintiff in the judgment being set aside, other than that which would normally follow from a default judgment being set aside.

Costs

In the course of the hearing I enquired from the defendant's solicitors as to whether they intended to charge the defendant for the application to set aside the default judgment. Very appropriately, in my view, the defendant's solicitors indicated that they would not charge the defendant for correcting, in effect, their own error.[22]
[22] ts 32.
Further, I ordered that there would be no party/party costs awarded for the application.
If the plaintiff's solicitors had not sought to 'snap' judgment without notice or conferral, then the application would not have been necessary and the parties would be many months further advanced in these proceedings.
And, I observed that if both the plaintiff's and defendant's solicitors had been more focused on advancing their respective client's true interests (to expeditiously and cost effectively advance the litigation to a decision point) then much of the affidavit material about whether and what the content was of the telephone conversation on 18 March 2024 could have been avoided.
In all of the circumstances, it appeared to me that there should be no order as to costs.
Hopefully, the matter can now progress with more emphasis on bringing the matter to an expeditious resolution or determination.
None of the observations I have made about the respective solicitors for the parties is directed to counsel who appeared on the application. They conducted the hearing entirely appropriately and efficiently.

I certify that the preceding paragraph(s) comprise the reasons for decision of the Supreme Court of Western Australia.
TM
Associate to Justice Howard
4 DECEMBER 2024