Retravision (WA) Ltd v Starrs - [2010] WASC 373

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CHAMBERS

CITATION: RETRAVISION (WA) LTD -v- STARRS [2010] WASC 373

CORAM: MASTER SANDERSON

HEARD: 21 OCTOBER 2010

DELIVERED : 13 DECEMBER 2010

FILE NO/S: CIV 2890 of 2009

BETWEEN: RETRAVISION (WA) LTD
Plaintiff
AND
CHRISTOPHER DAMIEN STARRS
First Defendant
JANINE RUTH STARRS
Second Defendant

Catchwords:

Application to set aside default judgment regularly entered - Turns on own facts

Legislation:

Nil

Result:

Application refused

Category: B

Representation:

Counsel:

Plaintiff:     Mr C F McLeod
First Defendant            :     In person
Second Defendant        :     In person

Solicitors:

Plaintiff:     Norton Rose Australia
First Defendant            :     In person
Second Defendant        :     In person

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

Crescendo Management Pty Ltd v Westpac Banking Corporation (1988) 19 NSWLR 40

MASTER SANDERSON: This is the defendants' application to set aside a judgment entered in default of appearance. The judgment was entered on 4 February 2010. The application to set aside the judgment was made on 3 June 2010.
Default judgment was entered in unfortunate circumstances. The defendants attempted to enter an appearance but the documents were rejected by the court. It is clear the documents should not have been rejected. Of course if the documents had been accepted no default judgment could have been entered. However, there being no appearance, the plaintiff was entitled to default judgment and that default judgment is to be regarded as regularly entered.
It is important to note this is a regular judgment. It is perhaps open to question to what extent there must be an irregularity in the way judgment is entered to warrant a judgment being set aside. For instance, if the statement of claim endorsed on the writ overstated the amount of the claim, then the judgment would be irregular and would be set aside. But if the statement of claim was poorly pleaded and might be struck out in whole or in part, but nonetheless conveyed the nature of the plaintiff's claim, such that the defendants knew the case they had to meet, then the judgment might be regarded as regular. But these issues do not arise in this case. Properly considered, the judgment is regular.
In determining if a regular judgment ought be set aside, at least three factors need to be considered. First, the length of the delay. Second the reasons for the delay. Thirdly, whether or not the defendants have an arguable defence.
In this case the first two of those questions need not be considered in any detail. Although the judgment was entered in February and the application to set aside the judgment was not brought until June, the delay is explained. The defendants were concerned their appearance documents had been rejected. Effectively, they attempted to have the judgment set aside administratively. In my view, their position was understandable and the delay is adequately explained. The remaining issue then is whether they have a defence on the merits.
In considering this question, the convenient starting point is the statement of claim. The second defendant is the sole director and secretary of Starrs & Co Pty Ltd. The first defendant is the sole shareholder in that company. On 20 November 2008, the plaintiff entered into what is described in the statement of claim as a finance agreement. Pursuant to the finance agreement the plaintiff made credit available to Starrs & Co. Both the first and second defendants signed guarantees as part of the finance agreement covering the obligations of Starrs & Co to the plaintiff.
The finance agreement contained a provision charging Starrs & Co interest in certain properties held by the company. The guarantees provided by the defendants was embodied in a document entitled 'Company Charge and Guarantee and Indemnity' and which is referred to in the statement of claim as 'Guarantee and Indemnity'.
The plaintiff pleads Starrs & Co defaulted under the finance agreement and is indebted to the plaintiff in an amount of just over $3 million. A default notice was sent to the second defendant as director of Starrs & Co on 16 June 2009. It was not complied with. A second default notice was issued on or around 26 October 2009 to the defendants in their capacity as guarantors of the finance agreement. There was no compliance with this notice. Proceedings were subsequently issued.
The claim is on its face straightforward. In opposition to this application, the plaintiff has filed an affidavit of Edwina Kam Foong Cheong sworn 1 October 2010. Appearing as annexure EKFC1 to that affidavit is a copy of the guarantee and indemnity. Also annexed are copies of the relevant default notices. The provisions relating to the guarantee and indemnity are found in cl 48 through to cl 55. These clauses are in what might be said to be a standard form. They are drafted to offer every advantage to the lender ‑ in this case the plaintiff. There is nothing wrong in that. The parties reached an agreement as embodied in the written document. The defendants signed the document and prima facie they are bound by its terms.
Each of the defendants has filed an affidavit dated 20 September 2010. The second defendant had also filed an earlier affidavit sworn 28 May 2010 attaching a bundle of correspondence dealing with the entry of judgment. I have taken that bundle of correspondence into account but it says nothing about the merits of the defendants' defence. Each of the two affidavits contains what might be referred to as a draft defence. It is appropriate to deal with these affidavits in some detail.
In his affidavit the first defendant says the plaintiff had credit insurance provided by an insurer. He says that the charge document did not reveal the existence of this insurance. As I understand his affidavit he says the failure to disclose the existence of this insurance was in some way misleading. He says the fact there was insurance meant not retrieving stock was in the plaintiff's best interests and to the defendants' detriment.
Following on from this, the first defendant says the plaintiff was asked to retrieve its goods but declined to do so. He then goes on to allege some of the stock was sold by the receiver at a discounted price to one of the plaintiff's stores in a transaction which may not have been at arms length. He says the plaintiff did not mitigate its losses. There is no documentation provided to support any of these allegations.
Further he alleges no reconciliation of any amount outstanding under the guarantee has been provided. A request was made to the receiver but nothing was provided. Again there is no documentation to support that allegation.
There then follows the draft defence in which he denies the demands pleaded by the plaintiff were actually made. Paragraph 3 of this draft defence pleads what I describe as 'special defences'. To do justice to the defendants' position I will quote this paragraph in full:
3.1The provision of the guarantee did not deliver any benefit to me as guarantor.
3.2There was no consideration, as supply had already been provided.
3.3The guarantee was signed under duress.
Alternative claims if charge is valid.
3.4The Plaintiff was in breach of its terms of supply in declining to retrieve its stock.
3.5The Plaintiff's Credit Policy states that title to goods delivered did not pass until payment was received and that goods would be recovered in the event of a default. In effect the goods were held by Starrs & Co on consignment. There was therefore no debt to be paid, and the Plaintiff had no right to appoint a Receiver. There was no act of default and there were no monies owing under the guarantee.
3.6The Plaintiff induced me to enter into the guarantee by representing that the stock would be retrieved and put back into the Plaintiff's stock if it was not paid for by Starrs & Co and thus there would not be a shortfall under the guarantee.
3.7The Plaintiff failed to apply its Credit Policy in its dealings with Starrs & Co, and so breached the terms of the guarantees.
Each of these claims is a bald allegation unsupported by any particulars. Furthermore in the body of the affidavit there is no reference to any documents, conversations or other material which might support these allegations. What is attached to the affidavit is a copy of the plaintiff's 'credit policy'. The status of this document is not entirely clear. However, given even a benign reading it could not be said to support the allegation made in 3.5 of the draft defence. Clause 2.6 of the credit policy is in the following terms:
The title to any goods supplied to the dealer by Retravision (WA) Ltd:
2.6.1is not transferred from Retravision (WA) Ltd to the dealer; and
2.6.2will remain with Retravision (WA) Ltd as legal and equitable owner,
until such time as all moneys due and payable by the dealer to Retravision (WA) Ltd have been paid.
Clause 2.7 of the credit policy allows the plaintiff to reclaim possession of goods even if the goods have been paid for in full if certain defined 'insolvency events' occurred. Paragraph 3.5 of the draft defence may be a reference to this provision. If it is, the clause in the credit policy does not accord with the prospective plea in par 3.5. There must have been some other independent representation made by the plaintiff to the defendants to warrant the defendants coming to the view as pleaded. There are two additional paragraphs dealing with the circumstances in which judgment was entered and stating he would seek to have the case moved to South Australia.
The affidavit of the second defendant is essentially in the same terms as the affidavit of her husband. The draft defence is in precisely the same terms as the defence of the first defendant save par 3.7 of his defence is missing from the second defendant's defence. That may be a simple slip. But there is nothing in her evidence which differs from the evidence of her husband.
The defendants also provided an outline of submissions dated 16 November 2010. When the matter was originally programmed for hearing no order for submissions was made. When they received the defendants' affidavits, the plaintiff did file a short outline of submissions. At the hearing of the matter I invited the defendants, lest they felt they have been prejudiced, to file written submissions. I have taken those submissions into account in reaching this decision.
In his written submissions, counsel for the plaintiff identified what he saw as being three broad areas which the defendants said provided a defence to the plaintiff's claim. First, it was said there was no demand made and therefore no debt had crystallised. Second, it was said the guarantee and indemnity was signed under duress and moreover was unenforceable for want of consideration. Finally it was said the plaintiff was in breach of its terms of supply in declining to retrieve its stock thus protecting the defendants from loss. In my view, counsel correctly identified what I understand to be the essence of the defendants' defence.
Based on the evidence of Ms Cheong, there is no doubt a demand was issued to the guarantors. There is reference in the defendants' defence to a notice of default issued to either Starrs & Co or the defendants on 30 June 2009. That is not the notice of default relied upon by the plaintiff. That notice is dated 26 October 2009. There is nothing in any of the evidence to suggest the default notice was improperly issued or not served. This does not provide the defendants with a ground of defence.
Nor is there any evidence the guarantee and indemnity was signed under duress. In par 3(e) of the defendants' submissions, they say the guarantees were entered into because an arrangement with an alternative supplier had been terminated and the plaintiff threatened to withhold supply of stock if the guarantees were not signed. The defendants say they were left with no alternative but to sign the guarantees. There is nothing in the affidavit material which provides any details of these allegations.
The circumstances in which a guarantee might be unenforceable by reason of duress was set out by McHugh JA in Crescendo Management Pty Ltd v Westpac Banking Corporation (1988) 19 NSWLR 40. His Honour said (46):
[T]he proper approach in my opinion is to ask whether any applied pressure induced the victim to enter into the contract and then ask whether that pressure went beyond what the law is prepared to countenance as legitimate? Pressure will be illegitimate if it consists of unlawful threats or amounts to unconscionable conduct. But the categories are not closed. Even overwhelming pressure, not amounting to unconscionable or unlawful conduct, however, will not necessarily constitute economic duress.
In the circumstances of this case there is nothing which would justify my concluding the defendants have any basis for alleging the guarantees were signed under duress.
Finally, I can see nothing in the plaintiff's credit policy which justifies the allegation the plaintiff acted in some way which amounted to a breach of contract and which might render the guarantee unenforceable. As I have indicated above, the rights the plaintiff has pursuant to the guarantee and indemnity are broad and largely unrestricted. The fact the plaintiff did not reclaim possession of its stock was not a breach of the terms of its supply. It was under no duty to take that step. Nothing in what is contained in the defendants' affidavits nor in their submissions can provide any ground of defence.
Leaving to one side the three areas it is possible to identify from the material lodged by the defendants, it might be said the defendants allege there was some form of misleading or deceptive conduct on the part of an officer of the plaintiff which might give rise to an estoppel or perhaps a claim under the Trade Practices Act 1974 (Cth). The fact is there is nothing in the evidence which could give rise to such a defence. Nothing is said about representations made by officers of the plaintiff. To possibly raise an arguable defence in this area much more would be needed than has presently been provided.
In all the circumstances then I am satisfied that the defendants do not have a defence on the merits. There would be no point in setting aside the default judgment. The application ought be dismissed with costs.