SA Repairs and Painting Pty Ltd v Trenxa Pty Ltd No. SCGRG 93/526 Judgment No. 4037 Number of Pages 5 Inferior Courts

[1993] SASC 4037

COURT IN THE SUPREME COURT OF SOUTH AUSTRALIA MULLIGHAN J

CWDS
Inferior courts - South Australia - local courts practice - Appeal against dismissal of application to set aside judgments obtained in default of appearance at trial - no dispute as to arguable case on the merit but dispute as to reasonable excuse for not attending at the trial - reasonable excuse established - appeal allowed - judgment set aside - consideration of R.87 of Magistrates Court Rules - judgment in default not a final judgment.
T.R.A.M.S. Pty Ltd v The Grand Hotel Pty Ltd (Full Court, unreported, 13.5.93, No. 3925), Becker v. Corporation of the City of Marion and Anor (No. 2) (1974) SASR 560 and Carr and Anor v Finance Corporation of Australia Ltd
(1981) 147 CLR 246 and Watson v Anderson (1976) 13 SASR 329 referred to. Magistrates Courts Rules R.85 and R.87.

HRNG ADELAIDE, 8 July 1993 #DATE 15:7:1993
Counsel for appellant:     Mr I Polson
Solicitors for appellant:    Carabelas and Co
Counsel for respondent:     Mr D Black
Solicitors for respondent: David Black and Co

ORDER
Appeal allowed.

JUDGE1 MULLIGHAN J This is an appeal against the order made by a learned Special Magistrate sitting in the Civil (Minor Claims) Division of the Magistrates Court of South Australia on 19th March 1993 dismissing the application of the appellant to set aside the judgments entered in favour of the respondent on the claim and the counterclaim in an action between the parties. The judgments were entered in default of the attendance of the appellant at the trial of the action on 4th March 1993. The application to set them aside was filed on 11th March 1993. 2. The appellant carries on business as a painting contractor. He commenced the action on 4th February 1992 against the respondent for work and labour done and materials supplied in or about the month of October 1991 claiming $1,999. The respondent filed a defence and a counterclaim seeking $3,756.51. The basis of the counterclaim is of no significance for present purposes. The appellant had solicitors acting for it in relation to the matter, but because the action is a minor civil action as defined by s.3(2) of the MagistratesCourt Act 1991, neither party could have legal representation at the trial. 3. The history of the action has been unfortunate. On 1st April 1992 judgment was entered in favour of the respondent on the counterclaim in default of the appellant filing a defence to the counterclaim. On 24th April 1992 that judgment was set aside and the date for the trial was fixed at 10th September 1992. On that date the trial was adjourned upon the application of the appellant as Mr. Baroutas senior, a director of the appellant, was overseas. The trial was relisted on 27th November 1992. On that day the appellant did not appear and judgment was entered for the respondent, presumably on the claim and the counterclaim. Apparently, there had been some misunderstanding by the directors of the appellant, Mr. Baroutas senior and his son. They left the court when the action was not mentioned in a published list and it was called on in their absence. The judgments were set aside and the action was again listed for trial on 4th March 1993. The appellant did not appear on that occasion and once again judgment was entered for the respondent on both the claim and the counterclaim. When the application was made to set aside those judgments, it was refused and no reasons were given. 4. Mr. Baroutas, the son, set out in an affidavit which was before the learned Special Magistrate on 19th March 1993, the reasons for the non-appearance of the appellant at the trial of the actions on 4th March 1993. He and his father are the directors, and he is the secretary, of the appellant which carries on the business of a painting contractor and has about twenty-eight employees. He supervises most of the activities of the appellant, including the administration, although his father attends to most of the work in obtaining and performing the painting work undertaken by the appellant. 5. The reason advanced in the affidavit for the appellant failing to attend the trial on 4th March 1993 is set out in an affidavit of the son. It was necessary for both the father and the son to give evidence should the trial proceed. They had agreed that the son would attend the trial and present the appellant's case. On the previous day the son was involved in a domestic upheaval with the woman with whom he was living in consequence of which proceedings were taken against her pursuant to the Summary Procedure Act 1921 for an order of restraint. He was told by police that he had to attend at the Magistrates Court at Angas Street, Adelaide on 4th March 1993 at 10.00 am to give evidence and that he would be required only for a brief period of time. The Criminal Division of the Magistrates Court sits in Adelaide at Angas Street and the Civil Divsion, including the Civil (Minor Claims) Division, sits at Flinders Street. The son expected to be able to give evidence and be at Flinders Street in time for the trial. However, the hearing of the application for an order of restraint was not completed until about 1.00 pm. He then went to the courtroom where the civil action was to be heard in Flinders Street only to discover that once again judgments had been entered against the appellant on both the claim and the counterclaim. The father did not attend as he had not heard from the son and assumed that the action had been resolved by the son. There was some argument on the hearing of the appeal as to the true meaning of passages of the son's affidavit as to the reason for the absence of the father from the trial, but what I have recounted is a reasonable interpretation. 6. The first question on this appeal is whether the learned Special Magistrate had power to set aside the judgments. The Magistrates Court Rules 1992 came into operation on 6th July 1992. R.87 provides:-
    "(1) The Court may set aside or vary a judgment (not being a final
    judgment).
    (2) The Court must not set aside such a judgment unless the party
    seeking to set it aside establishes that he or she -
    (a) has an arguable case on the merits; and
    (b) has a reasonable excuse for not having complied with these
    rules, or an order of the Court, or any time limit fixed by these
    rules or order of the Court, in respect of the action or
    proceeding.
    (3) When setting aside a judgment the Court may order -
    (a) payment to the other party of costs thrown away;
    (b) payment or security under rule 81." 7. It may be seen that there is no power to set aside a "final judgment". The authors of the Rules did not include the specific power which was to be found in s.25(1)v(b) of the Local and District Criminal Courts Act 1926 and is contained in R.75.15 of the Supreme Court Rules and the District Court Rules, namely that any judgment by default of appearing at trial may be set aside in the exercize of discretion. So, it is necessary to decide whether the judgments on the claim and the counterclaim are final judgments within the meaning of that expression in the Magistrates Court Rules. The principles for determining whether or not a judgment is a final judgment has received considerable judicial attention in many cases without consistency in approach: see the discussion by Bollen J in T.R.A.M.S. Pty. Ltd. v. The Grand Hotel Pty.Ltd. (Full Court, unreported, 13.5.93, judg no S3925); Becker v. Corporation of the City of Marion and Anor. (No.2) (1974) 9 SASR 560 and in Carr and Anor. v. Finance Corporation of Australia Ltd. (1981) 147 CLR 246. The definition of "final judgment" in the Magistrates Court Rules supports the view that such a meaning is to be given to those words in R.87(1). R.2(1) provides that "final judgment" means any final judgment under the Rules and includes a judgment made with the consent of the parties, a judgment given at the conclusion of a contested hearing or a judgment made upon acceptance of an offer to consent to judgment. That definition acknowledges that, in each situation, the rights of the parties have been finally determined but it also provides in the circumstances where there has not been default. In a sense a judgment in default finally determines the rights of the parties but the definition of "judgment" in R.2(1) acknowledges that there may be a judgment which does dispose of an action but is not a final judgment. That definition is:
    "'judgment' means a judgment, declaration, decree, decision or
    order of the Court disposing of an action, and includes an
    interlocutory judgment or order". 8. The true interpretation of these provisions is that a judgment in default of pleading or appearance at trial, whilst disposing of the action, is not a final judgment and by virtue of R.87 does not finally dispose of the rights of the parties because the party in default may apply to have the judgment set aside: Carr and Anor. v. Finance Corporation of Australia Ltd. (supra) and T.R.A.M.S. Pty. Ltd. v. The Grand Hotel Pty. Ltd. (supra). Such an interpretation also accords with common sense as there may be circumstances in which there is judgment in default without any culpability on the part of the party against whom the judgment is entered. It must have been intended that R.87 would apply in such circumstances. 9. However, the discretion to set aside a judgment as provided by R.87(1) cannot be exercised in that way unless the party making the application has passed both of the threshold tests set out in R.87(2). Upon doing so, the Court must then exercise the discretion. In Watson v. Anderson (1976) 13 SASR
329, the Full Court was concerned with the exercise of the discretion under s.25v(b) of the Local and District Criminal Courts Act and, upon reviewing the authorities, identified four matters of importance; whether there is a reasonable explanation for the default, whether there has been undue delay in applying to have the judgment set aside, what prejudice the other party would sustain if the judgment were set aside and whether the party making the application has an arguable case on the merits: see Bray CJ at pp 333-334. The first and last of these matters are, by virtue of R.87(2), no longer matters to be considered in the scales along with other relevant matters when exercising the discretion, but are now conditions precedent to the exercise of the discretion and must be clearly established by the party making the application. So, the Court must first turn its attention to these two matters. 10. It is not disputed that the appellant has an arguable case on the merits. However, the respondent contends that the evidence before the learned Special Magistrate did not establish that the appellant had a reasonable excuse for not attending the trial. Mr. Black contended that the explanation must be evaluated against the history of the action. Both the father and the son had first-hand knowledge of the likely consequences of failing to appear. Furthermore, they had received a Notice of Hearing in which was printed that if the appellant failed to attend the hearing within fifteen minutes of the appointed time, the action may be determined in the absence of the appellant. R.85 provides that judgment may be given in those circumstances. Mr. Black also contended that the evidence before the learned Special Magistrate did not establish why the son did not contact the office of the Court in Flinders Street by telephone to explain his position when he knew he could not get there in time or why he did not contact his father to have him attend. 11. No doubt the son could have made such telephone calls or have explained the problem to the Magistrate or some court official at Angas Street, if he had thought to do so. His failure to take such steps must be evaluated in light of all of the circumstances. He could not be in two places at once. He was in the unfamiliar circumstances of being required at court as a witness in a case involving the police. His failure to take steps which, with hindsight, he could have taken, does not prevent the excuse from being categorized as reasonable. 12. As I have said, the learned Special Magistrate did not give reasons for his decision. It is possible that he concluded that the excuse of the appellant was not reasonable. If that is so, such a judgment would, in the circumstances, be unduly harsh. It is also possible that he took the view that because of the history of the action, the appellant could not have yet another chance. Such an approach would be wrong in principle. Each application to set aside the judgments entered in default had to be considered on its merits although it is appropriate to have regard to the history for the reasons I have mentioned. In my view, it has been established that the appellant had a reasonable, although unusual, excuse for not attending at the trial and both of the threshold tests have been passed. That being so, there were sufficient grounds for exercising the discretion in favour of the appellant. There was no undue delay in bringing the application and there is no prejudice, in the relevant sense, to the respondent in setting aside the judgments. In exercising the discretion, it is important to bear in mind the observations of Lord Wright in Evans v. Bartlam (1937) 2 All ER 646 at p 656, cited by Bray CJ in Watson v. Anderson (supra) at p 334: "In a case like the present, there is a judgment, which, though by default, is a regular judgment, and the applicant must show grounds why the discretion to set it aside should be exercised in his favour. The primary consideration is whether he has merits, to which the court should pay heed; if merits are shown, the court will not prima facie desire to let pass a judgment on which there has been no proper adjudication." 13. The appeal is allowed and the judgments entered in default are set aside. I shall hear the parties as to any consequential orders which should be made.