Sandery v Kowalski

Case [2016] SASC 175

Supreme Court of South Australia

(Magistrates Appeals: Civil)

SANDERY v KOWALSKI & ANOR

[2016] SASC 175

Judgment of The Honourable Justice Doyle (ex tempore)

4 November 2016

MAGISTRATES - JURISDICTION AND PROCEDURE GENERALLY - PROCEDURE - ORDERS AND CONVICTIONS - SETTING ASIDE AND AMENDMENT

MAGISTRATES - APPEAL AND REVIEW - SOUTH AUSTRALIA - APPEAL TO SUPREME COURT

The plaintiff appellant  filed a claim in the Magistrates Court against the first and second defendant respondents, who are husband and wife. The defendants did not file a defence within the 21 day period prescribed by the rules and the plaintiff obtained a default judgment. The first defendant filed an application to set aside the judgment. The Magistrate allowed the application to set aside.

The plaintiff appealed on the grounds that the Magistrate erred in failing to apply the principles applicable to a set aside application; erred in entertaining the application by the second defendant on the basis that he never filed any application to set aside or affidavit material; and erred in concluding that the preconditions to the exercise of her discretion to set aside had been satisfied.

Held per Doyle J, allowing the appeal:

1.       The Magistrate erred in concluding that the preconditions to the exercise of her discretion to set aside the default judgment had been satisfied.

2.       The application to set aside the default judgment is dismissed.

Magistrates Court (Civil) Rules 2013 (SA) r 3(1)(a), r 52, r 87, referred to.
Cubelic v T & D Lock Pty Ltd [2009] SASC 397, discussed.
House v The King (1936) 55 CLR 499; Watson v Anderson (1976) 13 SASR 329; Aon Risk Services Australia Ltd v Australian National University (2009) 239 CLR 175, considered.

SANDERY v KOWALSKI & ANOR
[2016] SASC 175

Magistrates Appeal

DOYLE J (ex tempore):

  1. On 27 July 2016, a Magistrate set aside a default judgment in favour of the plaintiff against the first and second defendants.  This is an appeal by the plaintiff against that decision.

    Background

  2. On 3 May 2016, the plaintiff filed a claim in the Magistrates Court against the first and second defendants, who are husband and wife. 

  3. The claim alleged that the plaintiff and defendants entered into an oral agreement in December 2014 involving the sale of the plaintiff’s massage business, operated from premises in Klemzig, to the defendants for the sum of $30,000.  The claim also alleged that the plaintiff and defendants at the same time entered into an oral agreement to become 50 per cent partners with the plaintiff in a second massage business, to be established and operated from a premises in Birkenhead.  According to the plaintiff, he thereafter incurred various expenses in assisting the defendants to operate the Klemzig business, and in establishing the Birkenhead business. 

  4. The plaintiff’s claim then alleged that the defendants failed to pay the amounts owing by them under these agreements.  It sought an amount of $30,000 for the sale of the Klemzig business, and a further…

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Sandery v Kowalski [2016] SASC 175
Case
[2016] SASC 175
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CaseChat Overview and Summary

In the case of Sandery v Kowalski, the plaintiff, Sandery, filed a claim against the first and second defendants, Kowalski, alleging breach of oral agreements concerning the sale of a massage business and a partnership in a second massage business. Sandery sought a total of $38,409 in damages and legal fees. The defendants did not file a defence within the prescribed period, leading to a default judgment in favour of Sandery. The first defendant subsequently applied to set aside the default judgment, which the Magistrate allowed, leading to Sandery's appeal to the Supreme Court of South Australia.

The central legal issue in this case was whether the Magistrate correctly exercised her discretion under rule 87(2) of the Magistrates Court (Civil) Rules 2013 (SA) to set aside the default judgment. The first limb of r 87(2) requires the court to be satisfied that the defendant has a bona fide defence to the plaintiff's claim. The second limb requires the court to be satisfied that there is a satisfactory explanation for the defendant's failure to file a defence. Sandery contended that the Magistrate erred in concluding that both limbs of r 87(2) were satisfied, and that the appeal should therefore be allowed.

The Court of Appeal held that the Magistrate erred in setting aside the default judgment. The Court found that the first defendant did not provide a satisfactory explanation for the failure to file a defence within the prescribed period, nor did she offer a proposed defence. The Court further found that the second defendant's assertion that he had attempted to file a defence but was informed by the Registry that the time to do so had expired was not sufficient. Consequently, the second limb of r 87(2) was not satisfied. The Court concluded that the Magistrate erred in setting aside the default judgment, and allowed the appeal, dismissing the defendants' application to set aside the default judgment.

Orders

Orders of the court

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Background

Background to the litigation

On 27 July 2016, a Magistrate set aside a default judgment in favour of the plaintiff against the first and second defendants. This is an appeal by the plaintiff against that decision.Background On 3 May 2016, the plaintiff filed a claim in the Magistrates Court against the first and second defendants, who are husband and wife. The claim alleged that the plaintiff and defendants entered into an oral agreement in December 2014 involving the sale of the plaintiff’s massage business, operated from premises in Klemzig, to the defendants for the sum of $30,000. The claim also alleged that the plaintiff and defendants at the same time entered into an oral agreement to become 50 per cent partners with the plaintiff in a second massage business, to be established and operated from a premises in Birkenhead. According to the plaintiff, he thereafter incurred various expenses in assisting the defendants to operate the Klemzig business, and in establishing the Birkenhead business. The plaintiff’s claim then alleged that the defendants failed to pay the amounts owing by them under these agreements. It sought an amount of $30,000 for the sale of the Klemzig business, and a further $7,000 in respect of the Birkenhead business (being 50 per cent of the amount outlaid by the plaintiff in establishing that business). It also sought an amount of $1,409 by way of legal fees and disbursements, taking the total claim to $38,409. The claim was endorsed as having been served by ordinary post on 3 May 2016. Invoking the ordinary presumption as to service, service would have been effected 4 days later.[1][1] Magistrates Court (Civil) Rules 2013 (SA), r 52(1)(d). No defence was filed within the 21 day period prescribed by the Magistrates Court (Civil) Rules 2013 (SA). On 31 May 2016, the plaintiff obtained a default judgment against the defendants in the amount of $38,409. On 6 June 2016, the first defendant filed an application to set aside the judgment obtained against her. She did so without legal assistance. The application was supported by an affidavit that said only “This claim is false. The plaintiff was paid. No money is owed.” The application came on for hearing on 22 June 2016. Both defendants appeared in person. The plaintiff was represented by his solicitor. I do not have the benefit of transcript of that hearing, but according to the plaintiff’s solicitor the first defendant informed the Court that the defendants had been served with the claim, albeit after the four days assumed in the case of service by post, and that this delay may have been because the defendants’ neighbour took the statement of claim from their post box by mistake. The first defendant did not give any further detail as to the neighbour in question, or identify precisely when the defendants did receive the statement of claim. No further submission was made to explain the failure to file a defence. The second defendant asserted that he had attempted to file a defence, but was told by the Registry of the Magistrates Court that the time to file a defence had expired and default judgment had been entered. However, no proposed defence was provided to the plaintiff or the Magistrate at this hearing.

Evidence

Evidence Before The Court

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Decision

Reasons for decision

DOYLE J
In my view, the Magistrate erred in not concluding that the second limb of r 87(2) was not made out.Conclusion For the reasons set out, I have concluded that the Magistrate erred in concluding that the preconditions to the exercise of her discretion to set aside the default judgment had been satisfied. It follows that her Honour erred in setting aside that judgment. I order that the appeal be allowed, and that the first and second defendants’ application to set aside the default judgment be dismissed.

Ratio Decidendi

Legal Principle Established

Established by: DOYLE J

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