RIEDT v Lam
[2012] WADC 15
•3 FEBRUARY 2012
JURISDICTION : DISTRICT COURT OF WESTERN AUSTRALIA
IN CIVIL
LOCATION: PERTH
CITATION: RIEDT -v- LAM [2012] WADC 15
CORAM: COMMISSIONER GETHING
HEARD: 16 JANUARY 2012
DELIVERED : 3 FEBRUARY 2012
FILE NO/S: CIV 2670 of 2011
BETWEEN: PETER GOTZ RIEDT
HUONG KIM RIEDT
PlaintiffsAND
CHAN THAI LAM
THI THU DANG
Defendants
Catchwords:
Practice and procedure - Default judgment - other claim - District Court - Equitable jurisdiction
Legislation:
District Court of Western Australia Act 1969 (WA) s 50, s 77
Result:
Appeal dismissed
Default judgment not granted
Action remitted to the Supreme Court
Representation:
Counsel:
Plaintiffs: In Person
Defendants: Mr H Reynoldson
Solicitors:
Plaintiffs: Not applicable
Defendants: Corser & Corser
Case(s) referred to in judgment(s):
Allesch v Maunz [2000] HCA 40; (2000) 203 CLR 172
Blomley v Ryan (1956) 99 CLR 362
Chianti Pty Ltd v Leume Pty Ltd (2007) 35 WAR 488
Coal and Allied Operations Pty Ltd v Australian Industrial Relations Commission [2000] HCA 47; (2000) 203 CLR 194
Commercial Bank of Australia Ltd v Amadio (1983) 151 CLR 447
Commercial Developments Pty Ltd v Mercantile Mutual Insurance Ltd (1991) 5 WAR 208
General Steel Industries Inc v Commissioner for Railways (NSW) (1964) 112 CLR 125
Hazart Pty Ltd v Rademaker (1993) 11 WAR 26
Hondros & Tholet v Chesson [1981] WAR 146
Jones v Moylan (2000) 23 WAR 65
Langman v Handover (1929) 43 CLR 334
Trimble v Piggott (1995) 14 WAR 329
COMMISSIONER GETHING: By writ of summons dated 16 August 2011, the plaintiffs sought an order against the defendants 'that the court discharges the Plaintiffs from the guarantee described above' and costs. It appears from the statement of claim endorsed on the writ, that on 22 April 2010 the plaintiffs signed a guarantee for an assignment of a lease for a shop owned by the defendants. The lease was assigned to a Mrs Chau Thi Kim Hinkley (the tenant) to be used by her for the business of a florist. The plaintiffs allege that the tenant is in arrears of her rent under the assigned lease. They further allege that:
The landlord Mr Lam released the tenant Mrs Hinkley from her obligation to pay rent and other monies due under the lease and agreed with her to operate her business without regard to the lease.
The plaintiffs allege that the prejudice that they will suffer as a result of this agreement is a potential claim by the defendants for $55,000 plus rent plus GST, outgoings, interests and other costs under the guarantee.
On 31 August 2011 the first named defendant entered a conditional appearance, denying the jurisdiction of the Court.
On 26 September 2011, the plaintiffs filed a default judgment for sealing by the court. Registry officers returned the unsealed default judgment to the plaintiffs and advised the plaintiffs that they would need to make an application for judgment.
The action was listed for a directions hearing in the Commercial List on 21 October 2011. The plaintiffs applied for default judgment by application dated 6 October 2011, which was listed for mention at the directions hearing on 21 October 2011. The plaintiffs filed an affidavit in support of their application dated 12 October 2011. In that affidavit, the first named plaintiff stated that the District Court registry had confirmed to him on 6 October 2011 that no defence had been filed by the defendants.
On 18 October 2011 the defendants filed an unconditional appearance through a firm of solicitors. On 20 October 2011 they filed a defence.
At the hearing on 21 October 2011, the registrar adjourned the directions hearing to 25 November 2011, and directed that any application brought by the defendants be returned at this hearing. The registrar did not grant the plaintiffs default judgment.
On 24 October 2011 the plaintiffs filed a notice of appeal. The orders sought on the notice of appeal are:
(a)The change from self representation to solicitor and the second appearance filed by Corser & Corser on 19/10/2011 and the defence filed by Corser & Corser on 20/10/11 be dismissed as invalid under the rules.
(b)The Plaintiffs not be allowed to make further applications to the court until this appeal has been heard and determined in order to preserve the status pro ante.
(c)The Plaintiffs be excluded from the costs of the chamber hearing held on 21/10/2011 and this appeal.
(d)The default judgement filed on 6/10/11 by the Plaintiffs be heard again before the appellate judge subject to the rules of the court.
At the directions hearing on 25 November 2011, the registrar listed the appeal for hearing. The appeal is the first application I need to determine.
The second application I need to determine is an application by the defendants dated 17 November 2011 to transfer the action to the Supreme Court pursuant to District Court of Western Australia Act 1969 (WA) s 77 (DCA). This application is made on the ground that the District Court does not have jurisdiction to hear the action, it being purely for equitable relief. This application was directed to be heard by a Judge in the first instance by the registrar at the directions hearing on 25 November 2011.
It is appropriate that I determine the issue of jurisdiction first as that underpins both matters before me for determination.
Jurisdiction
The jurisdiction of the District Court is set out in DCA s 50. It is well established that DCA s 50 does not confer on the District Court the jurisdiction to grant purely equitable relief, such as a declaration: Commercial Developments Pty Ltd v Mercantile Mutual Insurance Ltd (1991) 5 WAR 208, 218 – 221; Trimble v Piggott (1995) 14 WAR 329, 331 and 332; Jones v Moylan (2000) 23 WAR 65, 75, 78 - 80, Chianti Pty Ltd v Leume Pty Ltd (2007) 35 WAR 488, 492, 505 ‑ 506.
The District Court does have the power to grant equitable relief which is ancillary or auxiliary or incidental to a claim otherwise within the jurisdiction of the court: Commercial Developments (217 - 218, 221); Chianti Pty Ltd v Leume Pty Ltd (492, 505) 'Ancillary relief is relief subservient to principal relief in the sense that it serves and assists in the principal relief and makes it more effective': Commercial Developments (219, 221).
In the present case, the declaration sought is not ancillary or incidental to any other cause of action. It is the principal relief sought. The present case is similar to that in Commercial Developmentsin which a claim for equitable relief in the form of a declaration for an entitlement of indemnity was held to involve a claim for principal rather than ancillary relief: Commercial Developments (218, 221).
The plaintiffs submitted that the claim was within DCA s 50(1)(bb). That paragraph provides that the court has jurisdiction in relation to:
(bb)an action for specific performance of or for the rectifying, delivering up, or cancelling of any agreement whatever, where the amount in dispute or the value of the property affected is not more than the jurisdictional limit;
In particular, the plaintiffs submitted that the reference to the 'cancelling of any agreement' is wide enough to include the relief sought in the present case. In essence, the plaintiff submits that I should construe this reference in its ordinary English meaning.
Rectification, delivering up and cancelling of agreements are specific equitable remedies. The nature of the remedies of delivery up and cancellation are summarised in Meagher Gummow & Lehane's Equity Doctrines & Remedies, Meagher, Heydon and Leeming (4th ed 2002) in the following terms:
[27-005] There has always been a well-recognised head of equitable jurisdiction to order the delivery-up and cancellation of documents in circumstances where those documents have been avoided by the party entitled to avoid them. Thus, in cases of actual fraud, the party defrauded has always been able to maintain an action for delivery-up, under the inherent jurisdiction of the courts; and, similarly, in the case of constructive fraud (that is, where an instrument is voidable on the grounds of undue influence, drunkenness, unconscionable conduct, public policy or otherwise), and in the case of misrepresentation, the party impeaching the transaction in equity can, if necessary, obtain, as part of his relief, an order for the delivery-up of the document in question. The equity is founded upon the desirability of preventing the public being deceived by the free circulation of invalid documents.
…
[27,015] On these principles, courts of equity have ordered the cancellation and delivery-up of agreements, deeds, negotiable instruments, policies of assurance and annuities. In particular, they have ordered cancellation and delivery-up of documents which might form a cloud on a plaintiff's title to real estate. The cancellation and delivery-up of forged instruments is regularly decreed.
The nature of the remedies were explained in by Rich and Dixon JJ in Langman v Handover (1929) 43 CLR 334, 352 - 353:
The jurisdiction of Courts of equity to direct delivery up and cancellation of instruments which, although good on their face, are, in fact, void, is thoroughly established by decisions. "And these decisions are founded on the true principles of equity jurisprudence, which is not merely remedial, but is also preventive of injustice. If an instrument ought not to be used or enforced, it is against conscience for the party holding it to retain it; since he can only retain it for some sinister purpose" (Story, Equity Jurisprudence, sec. 700). But the equity to have the document recalled does not necessarily arise from the mere fact that the document is void and is outstanding considered without regard to the reason for its invalidity, and irrespective of the position occupied by the parties. It might well be supposed that a party who escaped from obligations, which he voluntarily incurred, because his contract was infected with illegality, although not himself the object of the legislative sanctions, might be confined to the remedies which the statute creating the illegality gave him; and that he had no equity to any further relief whether preventive or remedial. But when a party to a contract finds that it is void by reason of the unlawfulness of the other party's conduct, there is clear reason for a Court of equity intervening if he seeks to be rehabilitated in the position he occupied before the transaction took place.
The remedy thus focuses on the actual physical instrument. The delivery up of an instrument for cancellation removes the risk of further mischief being done by use of the physical instrument.
In the context of s 50(1)(bb), in particular with its initial reference to an action for specific performance, the references to 'rectifying, delivering up or cancelling of any agreement' should be interpreted as references to the specific equitable remedies. This is confirmed by reference to the second reading speech for the Acts Amendment (Jurisdiction of Courts) Act 1981 (WA) by which s 50(1)(bb) was introduced into the DCA. The second reading speech for the Bill of this Act states relevantly at page 6227 (25 November 1981):
There has been some doubt also as to whether an action seeking specific performance of a contract, or like remedies – where the amount in dispute is within the ordinary financial limit of the court's jurisdiction – is a personal action. This has lead to a number of actions of this nature being instituted in the Supreme Court, because of uncertainty whether the District Court can deal with the matter. The Bill will clarify the position.
The plaintiffs' claim as set out in the statement of claim is that the conduct of the defendants as landlords and the tenant, after the date on which the guarantee was entered into, is such that they ought not to be held bound by the guarantee. On the material before me, it is not apparent that the plaintiff's claims are such as would justify the remedy of delivering up and cancellation of the guarantee.
A key difficulty in the present case is that the statement of claim contains only broad and general allegations. There is some additional detail about the claim in the reply filed on 31 October 2011. In this document, the plaintiffs plead, among other things, that:
(a)the first named plaintiff gave the guarantee under the undue influence of the second named plaintiff;
(b)the second named plaintiff gave the guarantee speaking little English, or able to read or write English, or understand the meaning of the term 'guarantee';
(c)the tenant misrepresented the assets and the profitability of the business she wanted to run;
(d)the plaintiffs were not informed about the existence of the original lease, nor shown a copy of it until June 2011 (that is, after the guarantee was signed);
(e)the plaintiffs were given the assignment of lease documentation without explanation; and
(f)the husband of the tenant refused to give the first named plaintiff a proper examination of the assignment of lease by 'standing over him'.
The plaintiffs appear to be establishing the basis for a claim of unconscionable conduct as enunciated by the High Court in Commercial Bank of Australia Ltd v Amadio (1983) 151 CLR 447. In that case, Mason J stated (461):
Historically, courts have exercised jurisdiction to set aside contracts and other dealings on a variety of equitable grounds. They include fraud, misrepresentation, breach of fiduciary duty, undue influence and unconscionable conduct. In one sense they all constitute species of unconscionable conduct on the part of a party who stands to receive a benefit under a transaction which, in the eye of equity, cannot be enforced because to do so would be inconsistent with equity and good conscience. But relief on the ground of "unconscionable conduct" is usually taken to refer to the class of case in which a party makes unconscientious use of his superior position or bargaining power to the detriment of a party who suffers from some special disability or is placed in some special situation of disadvantage, e.g., a catching bargain with an expectant heir or an unfair contract made by taking advantage of a person who is seriously affected by intoxicating drink. Although unconscionable conduct in this narrow sense bears some resemblance to the doctrine of undue influence, there is a difference between the two. In the latter the will of the innocent party is not independent and voluntary because it is overborne. In the former the will of the innocent party, even if independent and voluntary, is the result of the disadvantageous position in which he is placed and of the other party unconscientiously taking advantage of that position.
Mason J went on to comment that it 'goes almost without saying that it is impossible to describe definitively all the situations in which relief will be granted on the ground of unconscionable conduct' (416). His Honour referred to the following comments of Fullagar J in Blomley v Ryan (1956) 99 CLR 362, 405:
The circumstances adversely affecting a party, which may induce a court of equity either to refuse its aid or to set a transaction aside, are of great variety and can hardly be satisfactorily classified. Among them are poverty or need of any kind, sickness, age, sex, infirmity of body or mind, drunkenness, illiteracy or lack of education, lack of assistance or explanation where assistance or explanation is necessary. The common characteristic seems to be that they have the effect of placing one party at a serious disadvantage vis-à-vis the other.
For the purposes of testing the jurisdictional issue, it is instructive to analyse whether the District Court would have jurisdiction to 'discharge the Plaintiffs from the guarantee' on the ground of unconscionable conduct. There is nothing in the materials before me to the effect that the defendants have called on the plaintiffs to make any payment pursuant to the guarantee. Rather, the plaintiffs are concerned that the conduct of the defendants is increasing the amount that they may well have to pay in the future, and are doing so in an improper manner.
The plaintiffs have not sought an order from the court for the delivery up and cancellation of the physical document embodying the guarantee. Rather, they have sought an order discharging them from the guarantee. It is unclear whether the catalyst for discharging the plaintiffs is the agreement set out in par 7 of the statement of claim or the circumstances in which it was entered into. In either case, it is the substance of the transaction that appears to be challenged, not the instrument by which it is recorded. The appropriate remedy in equity appears to be an order rescinding the guarantee, as to which see generally: Meagher Gummow & Lehane's Equity Doctrines & Remedies [24‑020]. This claim would be for equitable relief as principal relief. There is no claim for money to which the grant of equitable relief could be ancillary to. The claim is thus beyond the jurisdiction of the District Court, as it does not fall within DCA s 50(1): Commercial Developments (217); Chianti (505); Hondros & Tholet v Chesson [1981] WAR 146, 147.
The plaintiffs also sought to argue that DCA s 55 to support its argument that the District Court has jurisdiction. That section provides:
The Court or a District Court judge has, as regards any action or matter within its or his jurisdiction for the time being, power –
(a)to grant, and shall grant, in the action or matter such relief, redress or remedy, or combination of remedies, either absolute or conditional; and
(b)to make any order that could be made in regard to any action or matter, and shall in each such action or matter give such and the like effect to every ground of defence or counterclaim equitable or legal,
in a full and ample manner as might and ought to be done in the like case by the Supreme Court or a judge thereof.
The powers in DCA s 55 arise where an action is otherwise within the jurisdiction at the District Court. It is a statutory restatement of the ancillary jurisdiction of the court. For the reasons I have set out about, I do not consider that this action is within the jurisdiction of the District Court. Therefore, the ancillary jurisdiction does not arise.
For these reasons I am of the view that the plaintiffs claim, as presently pleaded, does not fall within DCA s 50(1)(bb) and that in order for the court to grant the relief sought it will be necessary for the court hearing the trial to make equitable orders beyond the jurisdiction of the District Court.
Remittal to the Supreme Court
The DCA s 77 gives to a District Court judge the power to remit an action to the Supreme Court even though the action is beyond the civil jurisdiction of the District Court: Trimble (331, 332).
As the plaintiffs claim is outside the jurisdiction of the District Court it is appropriate that it be transferred to the Supreme Court.
Default judgment
In order to obviate the need for the issue of the grant of a default judgment to be dealt with in the Supreme Court, it is appropriate that I deal with the appeal before me.
The hearing of the appeal is a hearing de novo: Hazart Pty Ltd v Rademaker (1993) 11 WAR 26, 28. It is not necessary for the plaintiff to establish any error on the part of the registrar: Hazart (28); Coal and Allied Operations Pty Ltd v Australian Industrial Relations Commission [2000] HCA 47 [13], [14]; (2000) 203 CLR 194, 203, 204; Allesch v Maunz [2000] HCA 40 [23]; (2000) 203 CLR 172, 181 - 182.
In the present case, the power to grant default judgment is contained in Rules of the Supreme Court 1971 (WA) (RSC) O 22 r 7(1) which is in the following terms:
7. Default of defence to other claims
(1)Where the plaintiff makes against a defendant or defendants a claim of a description not mentioned in rules 2 to 5, then, if the defendant or all the defendants (where there is more than one) fails or failed to serve a defence on the plaintiff, the plaintiff may, after the expiration of the period fixed by or under these rules for service of the defence, apply to the Court for judgment, and on the hearing of the application the Court shall give such judgment as the plaintiff appears entitled to on his statement of claim.
The application for default judgment was filed on 6 October 2010. The defence was not filed until 20 October 2010. The condition precedent to the plaintiff being able to make the application was satisfied.
The RSC O 22 r 7(1a) provides that 'on an application under subrule (1), the applicant or his solicitor must produce a certificate issued by the proper officer on the day of the hearing stating that no defence has been filed by the defendant against whom it is sought to enter judgment'. The first named plaintiff sought to obtain this certificate from the registry, but was essentially advised that the District Court registry does not provide a certificate of this kind. Instead, the plaintiffs filed an affidavit by the first named plaintiff in which he stated that the District Court registry had confirmed on 6 October 2011 that no defence had been entered by the defendants. Given the practice of the District Court registry, and the substantial compliance by way of affidavit, I do not consider that strict compliance with RSC O 22 r 7(1a) was required. In the hearing before me, counsel for the defendants did not object to me taking this course.
As I have determined that the District Court does not have jurisdiction in relation to the plaintiffs claim, the court does not have jurisdiction to grant a valid judgment in relation to the claim. I therefore decline to grant judgment to the plaintiffs pursuant to RSC O 22 r 7(1).
Even if the District Court did have jurisdiction in relation to the claim, I would not have considered it appropriate to grant a default judgment. This is for two reasons. The first is that a defence was ultimately filed on 20 October 2010. It was filed out of time, but that does not make it a nullity: RSC O 2 r 1(1).
The second reason is that RSC O 22 r 7(1) provides that 'the Court shall give such judgment as the plaintiff appears entitled to on his statement of claim'. On the limited information set out in the statement of claim, it does not appear to me that the defendant is entitled to the judgment sought, namely, to be discharged from the guarantee agreement. The facts contained in the statement of claim, if accepted, do not establish any cause of action by which the plaintiffs would be entitled to have the guarantee cancelled. Further, it is not clear from the facts in the statement of claim why the entitlement to be discharged from the guarantee, if it arises, should take effect from the date of the guarantee as opposed to the date of the conduct described in par 7 of the statement of claim, which I have quoted above. Accordingly, it does not appear to me that the plaintiff is entitled to the judgment sought on the facts set out in the statement of claim.
In the context of a summary judgment application, the case law directs that great care must be exercised to ensure that under the guise of achieving expeditious finality, a party is not improperly deprived of its opportunity for the trial of the case in the appointed manner by the court: General Steel Industries Inc v Commissioner for Railways (NSW) (1964) 112 CLR 125 [129] – [130]. This principle seems apposite in the present application where the plaintiffs' claim is not liquidated, is supported by only broad and general allegations in the statement of claim and a defence has been filed.
Determination
It follows from the reasons set out above the appropriate orders to determine the applications before me are:
(a)the plaintiffs' appeal be and is hereby dismissed;
(b)the action be remitted to the Supreme Court of Western Australia.
I will hear from the parties on the issue of costs. It is my intention to fix the costs to avoid the need for any further hearings in the District Court prior to the action being transferred to the Supreme Court.
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